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sharing economy and taxesMore than seven million people will earn money in the sharing economy by 2020, according to expert forecasts. Though the term broadly refers to short-term, part-time and/or temporary shifts, tasks or projects workers can take on at will to generate income, it extends beyond tasks, to include renting out goods and property.

While the ability to work when, where and for how much a person feels their time or effort commands benefits workers, customers, and sharing economy providers, the tax implications of it can be more complex than many realize when they set out to earn some extra cash with a side gig.

Here are some tips and tools to ease the headache of tracking how much income you make from a side gig, how to track expenses you could claim relative to it, and what your role in the sharing economy means for your tax filing, payment and preparation.

Don’t rely on forms to track your income.  You may not consider yourself self-employed just for picking up a few Uber shifts in your downtime, but the Internal Revenue Service does. It expects you to report your income, document expenses you’ll claim, and pay estimated taxes like one.

Yet one of the most confusing parts about filing taxes in the sharing economy is that there aren’t “one size fits all” rules for workers, or employers. If you enter into a side gig directly with an employer as an independent contractor, for example, they’re supposed to send you a 1099 form reporting what they paid you at the end of the tax year—but that only applies if you made more than $599. If you don’t make more than that from one payor, the onus is on you to know what you made, from whom, and report it. (The same is true even if you do make more than $599 from an employer, and they fail to send you a 1099 form).

If you earn money through a third-party sharing economy service (like Uber), you might receive a 1099-K stating what you earned for the tax year. But those services are required to send a form only to workers who earn more than $20,000 and/or had more than 200 payment transactions throughout the tax year.  If they don’t issue a form, it’s up to you to know what you made, from whom, and to report it on your tax return. Cash payments or those issued by personal check must be tracked and reported (by you), too.

To make matters more complicated, there are some cases where you can earn income in the sharing economy—but not be taxed on it. If you rent a room in your house for fewer than 15 days a year on a site like AirBnB, for example, you may not pay tax on income earned. But that also means you’re not eligible to take the deductions associated with the rental, including costs for supplies (like fresh linens), or services you may have furnished for your renters.

The moral of the story in a sharing economy? Keep detailed records of what you earn, when you receive payment, how, and from whom.  Designate one bank account to receive payments from your sharing economy gigs; use it for any expenses related to it that you’ll claim when you file your tax return

Free sites like Wave make it easy to track what you earn, even if you have multiple sources of income, and are paid through a variety of methods, including cash, check, Paypal, and/or bank transfers.

Dedicate part of your earnings to estimated taxes. The IRS expects many workers who make money in the sharing economy to pay estimated taxes (in four equal installments) each quarter, based on what they expect to make over the course of the year. Missing the due date for estimated taxes and/or not paying enough tax relative to what you report could mean you owe underpayment penalties—even if you get a tax refund when you file your annual return.

Establish a bank account where you’ll save specifically for your estimated quarterly taxes. If you have no idea how much tax you should expect to pay, experts at Time recommend you set aside at least 15% of your monthly earnings for estimated tax payments.

Use professional tools to guide you. The IRS recently launched a Sharing Economy Tax Center to support the increasing number of taxpayers who earn income in the sharing economy. Consult the IRS’ official rules for clarification on any tax-related information you receive about side gigs, and to validate the tips you read online.

While the IRS reports that popular online tax preparation sites will be updated by 2017 to reflect the amount of taxpayers earning money in side hustles, it may be worth investing in a CPA who is well-versed in the tax rules for side gigs. He or she can help you maximize your potential deductions, and make sure you’re abreast of how to report your income, file supporting paperwork, and calculate estimated taxes if you continue to be part of the sharing economy in years to come.

irs louisiana tax relief smallAs the people of Louisiana continue to deal with the trials and struggles of some of the worst flooding that the state has ever faced, there is a bit of good news for thousands of taxpayers in the affected areas. So far, at least 40,000 homes have already been affected and at least eight people have lost their lives after 21 inches of rain fell in a 24-hour period, just under the state record of 22 inches back in 1962. According to authorities, more than 20,000 people have already been rescued from the floodwaters and 8,000 of those people were in Shelters. Authorities estimate that in the Livingston Parish alone about 80 percent of the residents will end up with a total loss when they are finally able to return homes and assess the damage.

Disaster Declaration

While paying taxes is probably not the first concern of many of the victims of the flooding at the moment, the Internal Revenue Service has announced that victims of the severe storms and flooding which took place beginning on August 11, 2016 in parts of Louisiana may qualify for tax relief. The news from the IRS comes on the heels of President Obama declaring a state of emergency in Louisiana. With the Federal Emergency Management Agency having issued a disaster declaration for individual assistance, the IRS announced that all affected taxpayers in four major state parishes would be eligible for tax relief. Those parishes include the aforementioned Livingston, as well as the Tangipahoa, East Baton Rouge and St. Helena parishes. In addition, anyone with a business in any of these parishes may also qualify for tax relief as well.

Several Tax Deadlines Pushed Back

So what does this declaration mean exactly for those affected? In essence, it allows the IRS to delay several deadlines for taxpayers who either live or own a business in the affected areas. Because so many individuals and business owners are likely to lose many of their important records necessary for filing taxes due to the flood damage, this declaration allows them more time to meet important tax deadlines. For example, according to the IRS’s announcement, “certain deadlines falling on or after August 11, 2016, and before January 17, 2017, are granted additional time to file through January 17, 2017. This includes individual returns on extension to October 17, the September 15 deadline for making quarterly estimated tax payments, the 2015 corporate and partnership returns on extension through September 15, and the October 31 deadlines for quarterly payroll and excise tax returns.”

Failure-to-Deposit Penalties Waived

Additionally, the IRS also announced that it will waive failure-to-deposit penalties for employment and excise tax deposits that were due on or after August 11, with the condition that the deposits were made by August 26, 2016. Despite the announcement there is the possibility that some taxpayers will still receive a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date that falls within the postponement period. If you do end up receiving one of these notices don’t ignore it. You should contact the IRS at the number listed on the notice to ensure that the penalty is retracted.

Relief May Be Available to Residents Outside Announced Areas

Also, if you live or own a business outside of one of the announced affected areas, but your home or business was still affected by the flooding damage, then you need to contact the IRS disaster hotline in order to request the same tax relief. That number is 886-562-5227. For those inside the announced affected areas the IRS will automatically apply filing and payment relief.

not getting married tax advantage smallWedding season is in full force—but if you’re not necessarily sold on the idea of marriage, some recent changes to tax policy as it pertains to unmarried couples who own property together could solidify your resolve to stay together—but legally single—for life.  Here’s a look at how our progressive tax system can work to the benefit or detriment of couples, based on their marital status, income, and the property they own together under the most recent iterations of tax law.

How Our Tax System Views Marriage

Though the experts at the Tax Policy Center say a “marriage bonus” (your tax liability is lower because of marriage compared to what you’ll owe as a single taxpayer) is more common under current tax law than a “marriage penalty” (you owe more tax married than  you would if you were single), whether marriage is better or worse for your tax bill depends on a number variables including your income, credits and deductions you’re able to claim as a result, and your taxable assets.    That’s because once you’re married, the United States tax system considers the household—not the individual—as the “unit of taxation,” explains the Tax Policy Center’s experts.

What You Earn (and Own) Impacts Whether Your Tax Bill Will Benefit from Marriage

Though married couples can opt to file their taxes separately as married couples rather than jointly, the Tax Policy Center says that approach rarely results in lower tax liability.  Of course, there are some exceptions: If both partners earn close to the same amount of income, for example, their combined income could push them into a higher tax bracket than they would be in as single married filers, and cause them to lose access to some credits and deductions.

Whether you’ll pay more or less tax as a married couple compounds further when you’re both high-earners: Forbes contributor Tony Nitti explains that once married taxpayers’ adjusted gross income exceeds $309,900, they lose access to 3% itemized deductions. Yet, single unmarried taxpayers can have up to $258, 250 AGI before they face the same limitations.  For unwed parents, the child tax credit starts to phase out when adjusted gross income exceeds $75,000. But for married parents filing jointly, the phase out begins at $110,000. Similarly, the AMT exemption in 2015 for joint filers was $83,400, but $53,600 for single unmarried filers.

If you’re a couple with a significant disparity in your individual incomes, howver, getting married could reduce your overall tax liability, allowing you to be eligible for more personal exemptions, to fall into lower tax brackets, and potentially, face reduced alternative minimum tax (AMT) liability.

How New Tax Laws Could Benefit Unmarried Co-Habitants

In early August, changes to tax laws for couples who own property together but aren’t married could make a strong case for not getting hitched, too.

Forbes contributor Tony Nitti explains the matter in great detail, but it essentially means cohabitants who aren’t married but co-own property can now take double the mortgage interest deduction than they were previously allowed. Nitti explains that Under Section 163(h)(3) the allowable deduction for a qualified residence caps at $1.1 million. Previously, couples who owned property together but weren’t married lost their ability to deduct mortgage interest beyond that cap—despite that each technically owned only half of the property, and filed taxes as individuals.  The cap pertained to the total value of the residence—not the amount each owner/taxpayer held in it.

Though Nitti explains that the tax law was essentially written to ensure that married couples filing separately could not game the system and claim twice the mortgage interest deduction compared married couples filing jointly, it wrongly penalized unmarried couples who co-own property. In light of the change, couples who are married—regardless of how they file—are limited to the $1.1 million cap. But couples who are unwed and co-own property are each eligible to claim an interest deduction of up to $1.1 million.

fight-irs-scam-2It was once a popular television show in the 60s and was later turned into one of the most popular and intense movies in the 90s. The Fugitive was a huge hit. The 1993 movie featured Harrison Ford in the starring role, as Dr. Richard Kimble, who was wrongly accused of killing his wife. All the evidence pointed to him, at least according to the police. However, he of course maintained his innocence and memorably proclaimed to his pursuer, “I didn’t kill my wife.” When a freak accident allowed him to escape prison he then set out to prove his innocence and bring the real killer to justice. In the end, he discovered that one of his closest friends was really behind the killing and eventually he was able to clear his name and win his freedom.

Long Road to Justice

While The Fugitive was a thrill ride for most moviegoers who saw it, for anyone who has ever been wrongly accused or even convicted of a crime the road to clearing one’s name is long and difficult and often ends in disappointing fashion. Such is the case for many people who end up being the victims of tax fraud. It can take months or even years to clear your name with the IRS and restore your good standing with the nation’s top tax agency. That fact makes being the victim of tax fraud a double whammy. Not only do victims often lose money when someone scams them, but they can also lose their good name, which means they have at least two battles to fight.

You Have to Fight for it

Many articles and blogs have been written and can be found all over the Internet on what to do to avoid being the victim of a tax scam. After all, these scams crop up every year and it seems as though they get more pervasive and sophisticated every year. These articles offer a lot of great advice for all taxpayers, but what if it’s too late and you’ve already been caught in a scammer’s snare? How do you restore your good name with the IRS? The overriding thing to remember is that you have to keep fighting. It will take time and effort and their will likely be several roadblocks to overcome. The first thing you will need to do is understand exactly what kind of fraud has occurred. There are typically three kinds of scams that take place: phone scams, Internet/email scams and preparer fraud. When you know the nature of the scam you need to report it to the IRS.

Know Your Rights and Seek Help

Once you have reported the scam the real work begins. While the IRS and the FTC both want to fight tax scammers it is often left up to the individual who has been scammed to keep the process moving forward. That means you will have to follow up with the necessary agencies and continue pushing them to proceed. In fact, the IRS has admitted that it does not always succeed in its efforts to help victims. For that reason the Taxpayer Advocate Service (TAS) was set up in order to ensure that victims of fraud know their rights and are treated fairly. Therefore, if you aren’t getting the help you deserve from the IRS then contact the TAS for help.

You Can Clear Your Name

The bottom line is you need to act fast. Don’t sit back and wait for someone else to discover the problem and hope they’ll fix it. Contact the IRS right away and any other relevant agencies and let them know how you have been scammed. Keep pressing the issue and if you’re not having any luck then contact the Taxpayer Advocate Service. You can get any money back you are owed and you can clear your good name. Just as there was justice for Dr. Richard Kimble in The Fugitive, there can also be justice for you.

summer taxes and jobsYour kids whereabouts during the summer break can impact what tax credits or deductions you may be able to claim, and dictate whether they’re required to file a Federal tax return next Spring. Here’s a look at how your kids summer activities can impact your (and potentially, their) taxes.

Help your teen complete tax forms associated with a summer job. Got a teen who scored a legitimate summer job? Help him navigate tax paperwork an employer may require him or her to complete before he learns about taxes the hard way.

If your teen is classified on an employer’s payroll as an employee, he’ll be asked to complete a W-4 for tax withholding. Talk to your teen about the amount of work hours the employer has said he will work each pay period, the hourly rate he’ll be paid, and whether the job could extend beyond the summer.  Based on your conversation, run the numbers on how much you expect your teen to make at a summer job. If he’ll earn less than $6,300 in 2016, he may not be legally required to file a tax return—but may want to come April in order to claim any tax refund that is owed as a result of tax withholding.

If your teen will make well under $6,300 in 2016, filing a tax return isn’t necessary—but he may want to claim an exemption from Federal tax withholding (line 7 on a W-4) for a bigger summer paycheck.

Confirm how the employer classified your teen. Do not assume that your child is considered an employee, or a contractor based on the hours the job entails, or where and when work is performed. Employers commonly misunderstand the nuances between the IRS’ definition of an employee versus an independent contractor.  While there is a fine line between the two, particularly in an era where remote work arrangements are increasingly common, how your teen’s employer classifies their role has significant tax implications.

If your teen is considered a contractor, for example, he could be required to pay self employed taxes for earnings that exceed $400 for the year.  Though the IRS does offer some self employment exemptions for workers who are under 18, and perform “household jobs: like babysitting at someone’s home, or mowing lawns, confirm how the employer classifies your child’s work so you’re not surprised at tax time.

Explain taxes to your entrepreneurial teen.  Teens who own a for-profit business—whether it’s baking cookies, selling crafts, designing websites or teaching piano lessons –are considered self-employed; they’re subject to the same tax regulations as adult entrepreneurs. Explain to your teen how taxes work when you own and operate your own small business. When she understands the responsibility that comes with being the boss, she can set rates and prices that take tax liability into account, and develop an organized system to track expenses, income, and the supporting information she’ll need when it comes to prepare a Schedule C, and file 2016 self employment taxes.

As far as your own taxes, your teen’s summer job shouldn’t impact whether you can claim him or her as a dependent, assuming you fund at least half of your child’s living expenses during the course of the year and no one else claims him.

The tax benefits of summer child care

Have kids who are under the age of 13? You can still benefit from the potential tax advantages of where and how they spend summer break. You may be eligible to claim up to 35 percent of $3,000 you spend on each child for summer day care, or tattendance at a variety of summer camps (provided the camps do not involve overnight stays), under the  Child and Dependent Care Credit.  As long both parents send the child to camp or day care in order to work, the credit could reduce your tax liability, dollar for dollar.

Like any other expense you claim on taxes, make sure you have documentation supporting how much you paid, when and to whom, along with the care provider’s (or organization) name, address and EIN.  You can also reduce the overall cost of summer camp or day care by paying the fees directly from a dependent care spending account your workplace may offer.