Income: the typical brackets we hear about – calculated based on your adjusted gross income less your deduction (standard or itemized). Our current brackets are 10%, 12%, 22%, 24%, 32%, 35%, and 37%

Employment Tax:

                Social Security: 12.4%

                Medicare: 2.9%

Net Investment tax: 3.8% on income over 200,000 for an individual

 When an individual is an employee and receives a W-2, the employer pays ½ of the employment taxes

                The Employee pays 6.2% of their wages for social security and 1.45% for medicare through their withholding on their paychecks

                The Employer pays the same

When an individual is self employed (schedule C or partnership), the individual pays all of the employment taxes (total of 15.3% of the business net income).

 As an employee, you complete a W-4 which determines the withholding. Sometimes it’s enough and sometimes it’s not. When it’s not, you can adjust your withholding by filling out the W-4 again and requesting a specific dollar amount of additional withholding.

When you are self-employed, no taxes are withheld. That means that you are responsible for submitting all the employment and income tax amounts yourself. This is done through estimated payments.  These can be submitted quarterly (at a minimum to avoid IRS penalties), or, if it’s easier to remember, monthly.

 Individuals with W-2 income from more than one job or with substantial investment income (interest, dividends or stock sales) may need to either adjust their withholding via the W-4 or make estimated payments.

If the surge in gas prices is cutting into your bottom line, there’s some tax relief available.. The IRS has adjusted the mileage rate you can claim for business vehicle use. As of July 1, 2022 the rate you can claim is 62.5 cents per mile for your vehicles. As always you should be tracking business miles driven as a part of the overall miles driven during the year. In addition, with this mid-year rate change, you need to track the business miles driven between Jan 1 and Jun 30 separately from the miles driven between Jul 1 and Dec 31.

Questions: Give us a call or send an email.

If you are a shareholder/officer of an S-Corporation, it is critical that you understand the IRS expectation on paying yourself as an employee. Many people form S-Corporations with the idea that they will save money on employment taxes by taking most of their income as distributions instead of salary. Needless to say, the IRS frowns on this idea.

Much like visualizing the desired outcome when we’re training our dogs (sit, down, heel etc.), we need to visualize some tough questions in regards to our finances – and be honest in our answers.

For many people, taxes are frightening, much like a blizzard. When viewed from the perspective of far off in the future, they are like watching a snowstorm from inside your warm house. But it’s time to go out in the snow… it’s 2019 now and we need to be prepared. Let’s see how we can avoid being buried.

How to determine if you are an independent contract worker and what to do if you’re an independent contractor

On August 8th, the IRS issued their proposed regulations for the 20% deduction for businesses. This new tax deduction will benefit many small business owners. es as business

There are several questions embedded within this one, seemingly simple, question. 2018 will see some big changes.  The minimum filing requirement for a single individual will increase to $12,000 in 2018 and for a married couple filing together, $24,000.

Use this checklist to gather all of the information needed to report income and expenses for one or more rental properties.