1099, Being Freelancer, Finances and Taxes, Freelancers, On Your Own, Self-Employed, Services, Taxes

3 Tips For Finding Tax Preparation Services

For an average taxpayer, completing taxes every season can be quite a challenge. If you’re part of the on-demand economy, you may also have added concerns, including more forms to file and many different streams of income to keep track of. Taxes for freelancers and independent contractors can be more complicated, especially if this is the first year that you are self-employed. It’s always a good idea to seek tax preparation services when doing your taxes. However, not everyone can afford it. If you are looking for tax services, there are many programs available at discounted prices to help low-income taxpayers. 3 Tips For Finding Tax Preparation Services:

Volunteer Income Tax Assistance

The Volunteer Income Tax Assistance or VITA is a tax preparation service provided by IRS certified professional volunteers. Their services are offered free of charge to those who earn less than $53,000 a year or are disabled, elderly, or not a native English speaker. They offer basic tax services, such as tax preparation and filing. They do not, however, help with Schedule C preparation, which means this service may not be for those in the on-demand society looking for help with self-employed taxes. Volunteers are usually found in local community centers and libraries. To find one near you, click here.

Myfreetaxes.com

Myfreetaxes.com is a free online tax preparation software for households earning $60,000 or less. This software will help you with tax preparation and filing for both your federal and state taxes. They can also help with 1099 taxes. Their software is provided by H&R Block, while the services are funded by Goodwill, the Walmart Foundation, and the United Way.

Additional Resources

Additionally, Myfreetaxes.com offers a tax help hotline, which you can reach by dialing 1-800-MY-TX-HELP. The IRS also has resources for help with your taxes on their website, which you can look into here.

If you are looking for help with issues after you have filed your taxes, you can reach out to the TaxPayers Advocate or Low Income Taxpayer Clinics. This is an independent group within the IRS that can assist with audits, collections issues, and appeals.

Lastly, you may also be able to find local resources within your community to help with your taxes.

1099, Being Freelancer, Freelancers, Future of Work, On Your Own, Self-Employed, Uber

The Five Faces of the On-Demand Economy

Originally published at Smallbizlabs.com

Last week Intuit released The Five Faces of the On-Demand Economy, which covers 5 common profiles of on-demand workers.

This is a follow on report to their On-Demand Workforce report from several weeks ago, which covers the motivations, attitudes and demographics of those working via on-demand economy (ODE) work intermediation platforms such as Uber, Upwork, Fiverr, etc.

The Five Faces and their percentage share of all on-demand economy workers are:

  • The Business Builders – Primarily driven by the desire to be their own boss, they represent 22 percent of on-demand workers.
  • The Career Freelancers – Happily building a career through independent work; 20 percent.
  • The Side Giggers – Seeking financial stability by supplementing existing income; 26 percent.
  • The Passionistas – Looking for the flexibility to do something they love; 14 percent.
  • The Substituters – Replacing a traditional job that is no longer available; 18 percent.

These profiles were developed using cluster analysis to group ODE workers who share similar motivations and attitudes.

As Intuit VP Alex Chriss points out in his article The Future of Work Doesn’t Look Like You Think it Does, these groups are not fixed. Key quote:

The data shows five different faces. But in meeting hundreds of our customers I have come to appreciate that these profiles are fluid and there are often several motivations that influence people’s decisions on how to own their own career.

This is an excellent point. These “faces” – much like the pirate’s code – should be seen “more as guideline than actual rules“.

The reason these faces are important is they show how differently ODE workers view ODE work.

Satisfaction is a good example. As the chart below shows, most Substituters are not sastified with ODE work while the vast majority of Business Builders and Career Freelancers are.

See the report for more differences and details by segment.

Emergent Research worked with Intuit on this study.

1099, Insurance, Retirement, Taxes

Retirement Saving Calculator

Whether you are a Gen Yer or on in years, it’s important to invest in your retirement. This could entail a Sep-IRA or other investment vehicle. This retirement calculator will help you figure out how you can meet your financial goals.

[iframe src=”http://www.nase.org/business-help/calculators/retirement-savings-and-planning” width=”100%” height=”500″]

paypal 1099
1099, Being Freelancer, Finances and Taxes, Self-Employed, Taxes

Paypal and 1099s

Over the years, Paypal has become more and more popular as a payment processor between independent contractors and clients. As we approach tax season, many freelancers are faced with a new question: how do you handle income from Paypal? How do you handle 1099s if most of your transactions conducted via Paypal

Many independent contractors this year will receive a Paypal 1099. If it’s your first time dealing with this type of 1099, you’re in the right place. Here are 4 things you need to know about Paypal 1099s.

There are many types of 1099s

There are many different types of 1099s. All 1099s serve the same purpose of reporting income and earnings. A 1099-MISC is the most common for freelance income. You might also come across a 1099-INT for your bank interest. For income processed through Paypal, you will receive a 1099-K. A 1099-K is for income processed through “payment card and third party network transactions”.

You can learn more about the 1099-K on the IRS website here. You can also view a sample of the form here.

The Paypal 1099 is new

The Paypal 1099 or the 1099-K is a fairly new document. In the past, income from payment processors, such as Paypal, wasn’t being captured. However, the number of paypal users grew increasingly over the years, especially those who used the service to transfer business income. As this presented a problem in itself, the IRS set up the 1099-K specifically to capture this income.

You may not meet the requirements for a Paypal 1099

Even if you did receive income through Paypal, you might not receive a 1099-K. Paypal is only required to send a 1099 to users who earned more than $20,000 in income and had more than 200 transactions. Both requirements have to be met in order for you to receive a 1099-k.

If you don’t receive a 1099-K but did receive income through Paypal, you should still report these earnings on your Schedule C.

Don’t forget about Paypal commission

If you do receive a 1099-k, one thing you should take into account are Paypal commissions. The total listed on your 1099 may include commission. If so, Paypal should tell you specifically how much and give you a breakdown of the total. On your Schedule C, you should report this commission as both income and an expense. This would result in a net of $0 and therefore, you wouldn’t have to pay taxes on this commission.
If you have questions specifically regarding your Paypal 1099, you can reach out to their customer service directly for help.

1099, Finances and Taxes, Freelancers, Self-Employed, Taxes

Tips to Prevent a Tax Audit

Getting your 1099 taxes done is one hurdle. You still have to worry about getting audited. Once April 15th has passed, the IRS will begin the process of identifying individuals to be audited. No one wants to be a part of that list. So here are some power tips to prevent a tax audit.

As you do your taxes this season, it’s important to ask yourself the right questions to lower the chances of the IRS auditing you. Keep in mind this list to help you avoid an audit on your 1099 taxes:

Will you get audited?

There are two ways you may get audited. First, the IRS may choose you randomly. While the chances are low, it is possible. Anyone can be audited. Secondly, you have a higher chance of being audited if you have suspicious tax activity.

Does everything match up on your documents and taxes?

One of the most common mistakes people make is incorrectly inputting their income on their tax return. You should make sure that your income matches what is listed on your W-2s and 1099s. The IRS is sent a copy of these documents as well. If your numbers don’t match up, they will know and this will make you more likely to get audited.

Did you document your expenses?

Often times for independent contractors, your expenses can lead to you getting audited. It’s one area that many people tend to make mistakes. When you are completing your Schedule C, make sure you can document the expenses you list in the event you are asked to. Also, as you decide what business expenses to write-off, keep in mind that they should be reasonable. The IRS requires that business expenses be ‘ordinary and necessary’. Otherwise, you should exclude them.

Are you living within your means?

One red flag that could trigger an audit is if you are spending more than you make or if you aren’t living within your means. For example, if you live in a wealthy area but have a low income, that may raise suspicions that all your income isn’t being reported. Make sure you can back everything up.

Do you have business partners?

If your business partners get audited, you essentially will be too. You may not be formally audited but since your income is tied to theirs, the IRS may look into your taxes as well or ask you for certain documents. Speak to your business partners so that you are all on the same page and know your business’ tax rules.

For more information about IRS audits, visit their website.