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| The following Questions and Answers are provided by FreedomTAX Bookkeeping and Insurance to help you handle financial issues with a tax impact which may arise if you lose your job, receive a gift, sell bonds, or have any other tax related situation. For detailed information on your particular tax situation/question please call us at (817) 924-3829. COMMON QUESTIONS & ANSWERS - Yes, severance pay is taxable in the year that you receive it. Your employer will include this amount on your Form W-2 and will withhold appropriate federal and state taxes. Ask our income tax reps for more Information.
Yes, annual, or vacation pay, and sick pay are calculated as wages by the employer and are included in your W-2.
Yes, your state unemployment insurance benefits (up to 26 weeks) and your extended benefits (up to an additional 13 weeks) are taxable. You may choose to have 10% withheld for federal taxes by completing Form W-4V. The State will provide you with a Form 1099-G prior to January 31st of each year, showing the amount of taxable benefits paid in the prior year. Ask our income tax representatives for more information.
Generally, the person who receives the gift is not liable for any taxes on the gift. If the gift produces income like interest, dividends or rent payments, the receiver would be responsible for taxes on that produced income. Each year there is a specific maximum amount that may be given that will not create a taxable event to either the giver or the receiver. Gifts in excess of this maximum may be subject to gift taxes by the gift giver. Call (817) 924-3829 for additional information.
In either case the employer must file and report your wages and withholding on a Form W-2 at year’s end. If you do not receive your Form W-2, try to contact your employer or their representative. If you are unsuccessful, the IRS can assist you in filing a substitute Form W-2 using your records. A good precaution is to keep year-to-date records or pay stubs until you receive your Form W-2.
No. Individual income tax returns are based on a calendar year and cannot be filed and processed earlier than January 1st of the next calendar year.
Not necessarily, however the sale of such assets should be reported. If you have a gain on the sale, it may generate an income tax liability. You should review your overall tax situation and make sure you have paid your taxes as required to avoid any estimated tax penalty. Information on estimated tax is a phone call away! Call (817) 924-3829.
- Contact FreedomTAX Bookkeeping and Insurance as soon as possible to find out your options. Communication is the key to minimizing problems. You can call us at (817) 924-3829.
Generally speaking, if you withdraw the funds before you reach eligible age, and do not roll it over into another qualified retirement plan or Individual Retirement Account (IRA) within 60 days, that amount will be taxable income in the year in which it is withdrawn. You may also have to pay an additional 10% tax on those early distributions. There are special rules for computing tax on lump-sum distributions. Call us and request more information from our income tax specialists
Yes, this is called a "rollover" and the amount will not be taxed if you redeposit the amount withdrawn into another qualified retirement plan or traditional IRA within 60 days. See Publication 575 for additional information or Call Us to schedule a tax consultation.
Yes. If you are totally and permanently disabled or if you withdraw the money to pay medical expenses (these expenses must be more than 7.5% of your adjusted gross income) or to pay an alternate payee under a qualified domestic relations order. Other specific exceptions are detailed in Publication 575.
Yes. Contributions returned before the due date of the return can be withdrawn without penalty. You must take not only the contribution but any interest or dividend it may have earned. This is a tax-free event if (1) you do not take a deduction for the contribution and (2) you withdraw any income or interest the investment made while in the IRA and include that amount in your income. See Publication 590, Individual Retirement Arrangements or contact one of our tax specialists for more information.
- Yes. Under the tax law, you can be both an Employee and a Business Owner at the same time if you choose. The primary issue is to report all income on your return.
As a Sole Proprietor, you will need to file a Form 1040, Schedule C or C-EZ and Schedule SE. For more information, please see Publication 334, Tax Guide for Small Business.
Taxes due on net self-employment income (total business income minus expenses) include income tax and self-employment (Social Security and Medicare) taxes. Additional information is available in Publication 334, Tax Guide for Small Businesses. You may be responsible for Employment Taxes if you have employees working in your business, see Publication 15, Circular E, Employer’s Tax Guide for details. For an easier explanation please call us at (817) 924-3829 and speak with one of our income tax specialists.
Generally, you would pay using the 1040ES Estimated Tax process on a quarterly basis. Federal income taxes including Self-Employment tax use a pay-as-you-go system. You generally must make estimated tax payments if you expect to owe taxes of $1,000 or more when you file your return. For more information on Estimated Tax see Publication 505. Employment taxes are paid using Forms 941, Employer’s Quarterly Federal Tax Return, and Form 940, Employer’s Annual Federal Unemployment Tax Return. The filing requirements for each of these forms and instructions about how to pay taxes due are included in the Publication 15, Circular E, Employer’s Tax Guide.
Yes, you can deduct certain expenses for looking for a new job in your present occupation, even if you do not get a new job. For additional information, see Publication 529, Miscellaneous Deductions and Contact Us with any questions you may have.
If you travel to an area to look for work in your current occupation or attend an interview you can generally deduct the ordinary and necessary travel costs. The purpose of the trip must be considered. Trips that are primarily personal are not deductible. For more information on how to compute your travel expenses, see Publication 463, Travel, Entertainment, Gifts and Car Expense.
Certain moving costs are deductible if you meet the time and distance requirements. Generally, your move has to be closely related in time to the start of your new job and you must have moved at least 50 miles. For a detailed explanation of Moving expenses please Contact Us and speak with an income tax preparer.
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