Over the last handful of years, it has become clear that more people are open to working for themselves, even if it is just a side gig. Technology has helped this happen, since there are more ways to connect those looking for services to those who provide them. Just how much younger people are weighing the value of being your own boss seems higher than was imagined, though. Recent research found that seven in ten young adult job seekers say being your own boss is more valuable than the security of working for someone else.

A lot of that generation is planning on putting that feeling into action. The same research also found that 53 percent of recent graduates said they are likely to start their own business. And sure, the number that actually goes ahead with that in their working lives is going to be smaller, but it is still important to appreciate how that number is growing from previous generations.

No matter what generation you are from, there is a lot that goes into starting a new business. A recent article from Accounting Today looks at these numbers and then passes along some advice and pointers from the American Institute of CPAs for those looking into starting a business. So if this is something you are thinking about, take a look.

Coincidentally, The IRS also recently released some tips for people who are looking to start a business, a little more of the nitty-gritty stuff that needs to be thought about than the AICPA’s big-picture view. Both of these looks are important.  You need to think big to have your general finances and mindset in a position where you can experience future success. These IRS tips are also important, though, to make sure you do the correct things in the beginning to make sure you are set up legally.

I think a lot of those seemingly smaller things are important to know about because of where a lot of these potential new business owners come from. A lot of this younger mindset comes from the gig economy where you are nominally working for yourself because you are a contractor with no set hours, You are benefiting from a business setup, though, that was done elsewhere by others. If you want to really own your own business, those become steps you must personally take.

Like when you see that LLC at the end of a business name, it means something. You may want one of those with your business, but then again, you may not. When it comes time to pay taxes, are you going to use the calendar year or a fiscal year? Do you have an employer identification number? Do you know what needs to be done when you hire employees?

Some of these may be things you only have to think about once, but you definitely have to think about them. We love working with new businesses, to see the passions that drive people to take the chance on themselves. We also love making sure they do everything right. So if these are things you are thinking about, but could use a little guidance, don’t hesitate to contact us and set up an appointment.

A few times over the summer I have written about looking toward the future. This has mostly come from the point of view of keeping a business moving forward, though. So this time, I wanted to spend some time thinking about your personal future and putting money aside for retirement.

First, this is obviously a good idea that everyone appreciates on some level. So if you have nothing put aside, start small. If you have some money siphoned out of your paycheck before it ever feels ‘real’ in your bank account, it is easier to get by without it than you think. You can then increase that amount every year (or more) and really start to build some momentum. This should be especially true if you get a raise of any sort. Add some of that increase to what you save. You then will be serving your future while still seeing more money in your paycheck.

For many, much of this future money is put into either a 401(k) or a Roth IRA. No matter which one you utilize and/or which one your job offers, the fact that it is a good idea to use it remains the case. They are not quite the same thing, though, when it comes to taxes.

From here on out, take everything in this article as generality and not as any sort of recommendation for your personal situation. Individual instances come with enough nuance that needs to be taken into account before making personal decisions. I still think this general information is good for when you start thinking your situation, though, and a lot of it is not always well known.

For instance, most people know that these types of accounts are meant for putting away money for the future, but that is about it. So the first thing I would you to take into consideration is if your employer offers any sort of match with that money. If they will also contribute money up to a certain percentage of your pay and you are not yet funding your account to that percentage, think about doing it. If you do not, that is essentially free money you are leaving on the table.

Next, the type of account you have comes with those differences in taxes I mentioned. If you are contributing to a 401(k), those funds are taken from your paycheck before incomes taxes are deducted. Essentially that means the money you put in there has not been taxed. This also means that the money will be subject to taxes when you take distributions from the account in retirement (or before, but that will come with a penalty for doing so).

In a Roth IRA, the funds placed in it come after your taxes have already been computed in your paycheck. That means the money placed in there has already been taxed, so you do not have to pay tax on it in the future when you start taking distributions. This is especially advantageous if you expect to be in a higher tax bracket when you retire than when you make the contributions.

That again tips off that the most advantageous way to use these accounts will vary on a person-by-person basis. So yes, use them, but if you are looking at how to use them best, don’t hesitate to set up a meeting with us to help discuss your situation.

Last week I wrote about how the complications inherent in the tax system made it impossible for the IRS to release a promised postcard-sized tax return. Since then, the agency has unveiled a draft of a new, more complicated W-4 form and a redesign of their online tax withholding tool.

The first bit of evidence as to how these are attempting to help one through a difficult system is how the online tax withholding estimator is a rebranding of the withholding calculator. A strict calculation was possible when more people worked one W2 job and their tax picture was more straightforward because of it. That situation has become rarer, though, so the numbers are now more honestly labeled estimates.

These estimates are better, though, for they take into account things left out in the past. One thing that was simple but not always taken into account through older forms and calculation was if a spouse earned money, too. Now, the IRS is trying to accommodate that situation. 

One of the biggest pieces left off people’s calculations that is now being handled is money one makes as a contractor. The gig economy is not only inhabited by those who work full-time in those gigs, but by those working on the side for some extra money. Often, those people can be under the impression that the money begin taken out of their paychecks at those primary jobs is going to cover their tax obligation. If you have not personally taken into account that you are going to make that money, though, then chances are good it is not being covered. These new tools allow you to put that money into the calculations and keep surprises from happening come tax time.

Unfortunately, many people do not make these adjustments until it is too late. I can’t always fault people for this either. If you’re only working these side gigs to make a few hundred dollars a month, that amount of money helps pay the household bills, but it does not seem like a giant amount that’s wildly going to affect your taxes. When at the end of the year, though, those months add up to a few thousand dollars – well, now you’re looking at a tax hit that could be enough to cause an issue.

So let this stand as a warning/recommendation/compulsion to put these more advanced calculations/estimations to work for you. This way you can make sure that when you file your taxes you don’t’ have to worry about getting an extra bill with it. Or maybe you even want to make sure that you keep getting a refund with it (although let’s also talk about how you can get some money automatically put into an account that will get you some interest and give you access to it for emergencies instead of waiting for a government payout). No matter what, staying on top of things will help you know what’s going on, and that knowledge can be powerful. And as always, we are here to help you arrive at the answers you want to find.

I do suppose I’ve been too nice towards the IRS lately.

(Oh no, did I just get myself on some list by saying that?)

The agency has made moves recently that seemed more taxpayer-friendly.  One of these was its working toward a postcard-sized 1040 form. And if this was really possible, it could be seen as a friendly act. But then there was the fact that the draft wasn’t quite postcard-sized, other forms likely would have had to be involved for a full return, and of course it didn’t actually make the tax rules any easier. This all came out of rhetoric in the wake of the passage of the Tax Cuts and Jobs Act. No matter how you feel about the content of that act, its claim that it was going to help make tax returns easier takes a big hit now that the plans for this postcard-sized form have been scrapped.

A few weeks ago I wrote about the fact that a new 1040 form was in draft form, but didn’t quite realize at the time that meant the quiet death of that postcard sound bite. My point when writing then, though, was that the tax landscape did not suddenly become simple, and this just confirms that point.

And since things aren’t simple, let this be a reminder for those whose 2018 tax return is on an extension that you are starting to run low on time. I know that most of you in this situation are groaning and saying you still have a couple months left. I’ll counter in a clearer voice, though, to say that if you take it back to February, you’ve had six months to get it done and still haven’t, so two more isn’t that much.

It is not a bad time to remember how difficult the system can be for those looking toward next year, too. It is easy to groan in that situation, too. You filed your tax return months ago and are glad that you don’t have to think about it for months more. But do you know what your tax return is going to look like when it does come time to file again?

If you do, and you are happy with what is going to look like, great, you do get the chance to sit for a few months and not give any more thought to the topic. If you do, and you are not happy with what the return is going to look like, then this is the time when you can still put some plans in place to make it look a little bit better.

And for those who do not know what their tax return is going to look like, maybe it is time to make an appointment and see whether or not you will be happy with what it is going to look like. This is especially important if you have had any life changes that are will affect the return (change in marital status, new job, new salary, new child, etc.).

For this road is never simple, but we can help you travel down