Tuesday, May 30, 2017

Employee or Independent Contractor? Know the Rules

IRS Small Business Week Tax Tip 2017-02, May 1, 2017                                     
The IRS encourages all businesses and business owners to know the rules when it comes to classifying a worker as an employee or an independent contractor.
An employer must withhold income taxes and pay Social Security, Medicare taxes and unemployment tax on wages paid to an employee. Employers normally do not have to withhold or pay any taxes on payments to independent contractors.
Here are two key points for small business owners to keep in mind when it comes to classifying workers:
  1. Control. The relationship between a worker and a business is important. If the business controls what work is accomplished and directs how it is done, it exerts behavioral control. If the business directs or controls financial and certain relevant aspects of a worker’s job, it exercises financial control. This includes:
    • The extent of the worker's investment in the facilities or tools used in performing services
    • The extent to which the worker makes his or her services available to the relevant market
    • How the business pays the worker, and
    • The extent to which the worker can realize a profit or incur a loss
  2. Relationship. How the employer and worker perceive their relationship is also important for determining worker status. Key topics to think about include:
    • Written contracts describing the relationship the parties intended to create
    • Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation or sick pay
    • The permanency of the relationship, and
    • The extent to which services performed by the worker are a key aspect of the regular business of the company
    • The extent to which the worker has unreimbursed business expenses
The IRS can help employers determine the status of their workers by using form Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. IRS Publication 15-A, Employer's Supplemental Tax Guide, is also an excellent resource.

Monday, May 22, 2017

Do You Owe Taxes? IRS Has Tips For You

IRS Special Edition Tax Tip 2017-09 

The IRS offers a variety of payment options where taxpayers can pay immediately or arrange to pay in installments. Those who receive a bill from the IRS should not ignore it. A delay may cost more in the end. As more time passes, the more interest and penalties accumulate.

Here are some ways to make payments using IRS electronic payment options:

Direct Pay. Pay tax bills directly from a checking or savings account free with IRS Direct Pay. Taxpayers receive instant confirmation once they’ve made a payment. With Direct Pay, taxpayers can schedule payments up to 30 days in advance. Change or cancel a payment two business days before the scheduled payment date.

Credit or Debit Cards. Taxpayers can also pay their taxes by debit or credit card online, by phone or with a mobile device. A payment processor will process payments. The IRS does not charge a fee but convenience fees apply and vary by processor.

Those wishing to use a mobile devise can access the IRS2Go app to pay with either Direct Pay or debit or credit card. IRS2Go is the official mobile app of the IRS. Download IRS2Go from Google Play, the Apple App Store or the Amazon App Store.

Installment Agreement. Taxpayers, who are unable to pay their tax debt immediately, may be able to make monthly payments. Before applying for any payment agreement, taxpayers must file all required tax returns. Apply for an installment agreement with the Online Payment Agreement tool.

Who's eligible to apply for a monthly installment agreement online?

Individuals who owe $50,000 or less in combined tax, penalties and interest and have filed all required returns

Businesses that owe $25,000 or less in combined tax, penalties and interest for the current year or last year's liabilities and have filed all required returns

Those who owe taxes are reminded to pay as much as they can as soon as possible to minimize interest and penalties. Visit IRS.gov/payments for all payment options.

Monday, May 15, 2017

Tips from IRS for Disaster Preparedness

IRS Special Edition Tax Tip 2017-08

Hurricane Preparedness Week is May 7-13. The IRS wants to remind taxpayers to prepare for hurricanes and other natural disasters now. By taking a few steps before disaster strikes, taxpayers can reduce their stress when it comes time to file claims or rebuild after the catastrophic event.
Here are some things to consider:
  • Update Emergency Plans — Because a disaster can strike any time, be sure to review emergency plans annually. Personal and business situations change over time, as do preparedness needs. Make plans ahead of time and be sure to practice them.
  • Create Electronic Copies of Documents  — Taxpayers should keep a duplicate set of key documents. Keep documents including bank statements, tax returns and insurance policies in a safe place. Doing so is easier now that many financial institutions provide statements and documents electronically, available on the Internet. Even if original documents are available only on paper, scan them into an electronic format and store them on DVD, CD or cloud storage.
  • Document Valuables — It’s a good idea to photograph or videotape the contents of any home, especially items of higher value. Documenting these items ahead of time will make it easier to claim insurance and tax benefits after a disaster strikes. The IRS has a disaster loss workbook, Publication 584, which can help taxpayers compile a room-by-room list of belongings. Photographs can help prove the fair market value of items for insurance and casualty loss claims.
  • IRS Ready to Help  — In the case of a federally declared disaster, impacted taxpayers can call 866-562-5227 to speak with an IRS specialist trained to handle disaster-related issues. Taxpayers can request copies of previously filed tax returns and attachments, including Forms W-2, by filing Form 4506, Request for Copy of Tax Return.  Alternatively, order transcripts showing most line items through the Get Transcript link on IRS.gov, by calling 800-908-9946 or by using Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript or Form 4506-T, Request for Transcript of Tax Return.
Find other tips and more information about Hurricane Preparedness Week on the National Weather Service web site.
Additional IRS Resources:
IRS YouTube Videos:

Monday, May 8, 2017

Unemployment rate falls to 4.4 percent

By Lucia Mutikani | WASHINGTON | REUTERS

U.S. job growth rebounded sharply in April and the unemployment rate dropped to 4.4 percent, near a 10-year low, pointing to a tightening labor market that likely seals the case for an interest rate increase next month despite moderate wage growth.

Nonfarm payrolls surged by 211,000 jobs last month after a paltry gain of 79,000 in March, the Labor Department said on Friday. April's job growth, which was broad-based, surpassed this year's monthly average of 185,000.

There were hefty increases in leisure and hospitality, healthcare and social assistance as well as business and professional services payrolls.

The drop of one-tenth of a percentage point in the jobless rate took it to its lowest level since May 2007 and well below the most recent Federal Reserve median forecast for full employment.

"These developments should keep the Fed firmly on track to hike rates again in June and should motivate a hawkish shift in the interest rate forecasts they will release at that meeting," said Michael Feroli, an economist at JPMorgan in New York.

The hiring rebound supports the U.S. central bank's contention that the pedestrian 0.7 percent annualized economic growth pace in the first quarter was likely "transitory," and its optimism that economic activity would expand at a "moderate" pace.

The Fed on Wednesday kept its benchmark overnight interest rate unchanged and said it expected labor market conditions would "strengthen somewhat further." It raised rates by a quarter of a percentage point in March and has forecast two more increases this year.

Financial markets are pricing in a roughly 83 percent probability of a 25-basis-point rate increase at the Fed's June 13-14 policy meeting, according to CME Group's FedWatch program.















Prices of benchmark U.S. Treasuries rose modestly on Friday, while U.S. stocks closed higher, with the S&P 500 .SPX ending at a record high close. The dollar .DXY fell marginally against a basket of currencies as investors turned their attention to the second round of France's presidential election on Sunday.

WAGE GROWTH LAGS

The U.S. economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population.

Republican President Donald Trump, who inherited a strong job market from the Obama administration, has vowed to sharply boost economic growth and further strengthen the labor market by slashing taxes and cutting regulation.

Trump later hailed the numbers in a tweet: "Great jobs report today - It is all beginning to work!"

In April, average hourly earnings rose 7 cents, or 0.3 percent. However, downward revisions to previous months lowered the year-on-year increase to 2.5 percent, the smallest gain since August 2016, from 2.6 percent in March.

But there are signs wage growth is accelerating as labor market slack diminishes. A government report last week showed private-sector wages recorded their biggest gain in 10 years in the first quarter.

With the labor market expected to hit a level consistent with full employment this year, payroll gains could slow amid growing anecdotal evidence that firms are struggling to find qualified workers. That could also boost wages.

"While there is still some labor market slack, it is diminishing rapidly. This is likely to put upward pressure on wages," said David Berson, chief economist at Nationwide Insurance in Columbus, Ohio.

A broad measure of unemployment, which includes people whowant to work but have given up searching and those workingpart-time because they cannot find full-time employment, dropped three-tenths of a percentage point to 8.6 percent, the lowest level since November 2007.

The employment-to-population ratio rose one-tenth of percentage point to an eight-year high of 60.2 percent. This measure has risen for four straight months.

The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, fell to 62.9 percent from an 11-month high of 63 percent in March. It has rebounded from a multi-decade low of 62.4 percent in September 2015, and economists see limited room for further improvement as the pool of discouraged workers shrinks.

Construction payrolls rose by 5,000 last month and manufacturing payrolls increased by 6,000. Leisure and hospitality payrolls jumped by 55,000 in April. Professional and business services payrolls rose by 39,000. Healthcare and social assistance employment increased by 36,800.

Retail payrolls gained 6,300 after two straight months of declines. Retailers including J.C. Penney Co Inc (JCP.N), Macy's Inc (M.N) and Abercrombie & Fitch (ANF.N) have announced thousands of layoffs as they shift toward online sales and scale back on brick-and-mortar operations.

Government payrolls jumped by 17,000 last month as an increase in hiring by local governments offset a decline in federal government employment.

(Reporting by Lucia Mutikani; Editing by Paul Simao and Leslie Adler)