The 2024 tax season is here. To expedite your refund, file early and electronically, opting for direct deposit. One of the best ways to file your returns is to setup an online taxpayer account with the IRS at www.IRS.gov/account to get data from previously filed returns, sign authorizations and make payments, or view account transcripts.
Independent Contractors
If you are working as an independent contractor, you will receive a form 1099 from each
vendor that paid you at least $600 during the year. Your income as an independent contractor is subject to self-employment taxes. These taxes are equivalent to the total Medicare and Social Security taxes that are paid equally in the employee and employer relationship.
As a self-employed person you pay both parts totaling a 15.3% tax. Additionally, self-employed persons need to be aware that no estimated tax payments are being withheld for them automatically. You should be making estimated tax payments on your own each quarter to avoid underpayment penalties and to lighten your tax bill upon filing. On the bright side, being the owner of an LLC or S-Corp allows you to deduct 20% of qualified business income if your business qualifies as specified service trade or business.
Digital Assets
Beginning in 2023, returns for partnerships, corporations and estates will inquire about digital asset transactions. Previously, this question was only asked on individual returns, but now will cover the aforementioned entities. If any sales or disposals of digital assets were made in 2023 they must be reported to the IRS. However, if you only held onto your digital assets or transferred them between accounts you own, you will not need to report any activity and can answer “No” on the returns. Additionally, if you were paid with digital assets for services, you must report those payments as income based upon their value at the time you received them. Any change in value between the time you received the assets and when you disposed of them would be a capital gain or loss.
ERTC Amnesty Program
Many taxpayers were plagued by scams from company’s claiming to file an Employee Retention Credit application on the taxpayer’s behalf. The issue was that these taxpayers were not entitled to the ERTC credit, but were misled to believe they were. In this case, if a taxpayer comes clean to the IRS about their situation and which preparers or promoters they used to apply for the credit, they would only be required to repay 80% of the credit they improperly received. The amnesty program would also protect taxpayers from underpayment interest and civil penalties for fraudulent reporting. Taxpayers have until March 22 of this year to opt into this voluntary disclosure program.
