Last week I wrote about the wonder of a summer holiday and how taking a break and thinking outside of normal work parameters can increase one’s overall happiness and translate to more productivity at work. That only referred to short mental breaks, though, for we cannot leave work completely behind in the summer.

In fact, there are some people who may do most of their work over the summer, as many students take on summer jobs to either earn extra money or save enough to get through the rest of the year. If you are in this position, or know someone who is, make that the tax implications of this work is understood.

For those who make the bulk of their income over these few warm months, they probably don’t have much to worry about when it comes to their tax burden, especially if they are working a regular job with a regular paycheck that  comes with a W-2 at the end of the year. Whatever they owe is likely covered through the withholding in their paycheck, and many can even expect a refund.

Of course, for those who have income of other sorts, this may not be the case, and answers about their taxes can be more difficult.  These answers get even trickier if one does not receive a regular paycheck and instead qualifies as self-employed. This is a growing situation across all age groups, as technology increasingly lets people work in different ways, but it seems to be even more prevalent amongst the youth who tend to be the most skilled in navigating that new world.

Now again, if one only works a few months and makes a nominal amount of money, your tax burden will be minimal.  But if you do make enough to owe some taxes at the end of the year, these people need to be extra cautious for none of that bill was already paid through paycheck withholding.

I would never claim that these youngsters present some of the tougher tax problems that come through my door. They do, however, present a different set of challenges, and some that are unfamiliar to many. What one pays for tuition, in student loan interest, or gets from ROTC pay are numbers that will end up affecting your tax picture.

And what about those who work in a job where they receive tips? Are they working on recording those correctly to make sure they can file a full tax return that will not come back to bite them in the future?

Again, the chances of these being large bills and giant problems are not huge. With a little knowledge and forethought, though, they can even be nonexistent. Also, there is probably no better time to start learning about the tax system than when it starts to affect you. So if there is anyone if your life in this position, don’t be afraid to have a little talk about this. And if you feel like you don’t know all the answers they need, don’t be afraid to reach out to someone who does.

It is one thing to say that no one ever wants to really have personal dealings with the IRS. Most of us send in our tax returns every year with the hope to never hear about them again. After all, if you do hear from the IRS after that point, it is not because they were so impressed with your organizational skills that they want to refund some more money.

If you do hear from the IRS, however, and are sure that your taxes were correctly handled, at least you won’t have to worry THAT much and can have confidence that things will be decided in your favor. There is still the aggravation of jumping through the hoops until it has been handled, though. Not only that, but with recent and seemingly ever-increasing funding cuts for the IRS, it is more difficult than ever to actually talk to an actual person at the IRS to get the situation handled.

One would then think that going to irs.gov would make sense as a way to personally find your way through their maze. After all, getting information from the same organization would actually cut down on the work they have to do if it is up to date and accurate, right? The IRS must love if someone does this to get information and makes its job easier, no?

Well, no.

I clearly have had many dealings with the IRS, and I can say that it is an EXTREMELY rare case when it happens smoothly. It is difficult to actually talk to someone, and even then it is no guarantee that the person you talk to will have the knowledge necessary to help move the process along. Even with that experience, though, I had to shake my head through this recent article by Forbes.com’s Robert W. Wood.

In that article, Wood states that there was a recent memo sent to the IRS Field Examination Area Directors telling them the FAQs and other items posted on IRS.gov are not legal authority unless they also appear in the Internal Revenue Bulletin. Now I can’t disagree with the idea that the IRS should have a collection of official rules and regulations, but why would it publicly print something, under its own name, that does not hold the weight of authority?

If you have any answer to this that makes sense, I would love to hear it for crafting one is completely evading me.

And even if you can come up with a real reason, this is unfair. It is not a policy that I am saying is being misused, but it is clearly one that could be misused. Any authority that says it has the real rules and its public statements do not necessarily follow them comes off as potentially tyrannical. Thankfully we have enough checks in this country that the IRS is not doing that, but just what can a taxpayer do to navigate their waters then?

First, and thankfully most of you reading this are already doing this, use a tax professional to handle your taxes. If you want to be sure that you are not going to have serious IRS problems, have someone serious on your side before submitting any information to the IRS. Second, continue using that professional help during any communication with the IRS. You may not know all the answers needed when it comes to handling IRS issues, but some people do.

I can’t claim that this is really fair, but I still pride myself on being more fair and open with my clients than apparently some other organizations.

It almost seems like a monthly rite of passage when the latest tax scam comes up that I have to cover in this spot. I almost can’t believe it sometimes, but as long as the IRS keeps putting out warnings, I feel it is my job to pass them along. At least with this latest one, it gives me the opportunity to highlight many of the things to look out for all at once.

First, the new scam starts with receiving a phone call claiming that you must make a payment through a prepaid debit card that is apparently linked to the Electronic Federal Tax Payment System (EFTPS). The system exists, and talking of it seems to lend credence to the scammer’s claim. The reality, though, is that it does not utilize this one magic mode of payment.

Second, there is a claim made that payment must be made immediately to avoid arrest. Although the process of working through a tax issue may never be fun, it is never that quick, and rarely that dire.

Also, the scam caller claims that there were previous attempts to contact the taxpayer via certified mail that were returned as undeliverable. Never pay heed to such words, for you should always assume that the first word you get from the IRS about any potential problem will come in writing.

Finally, the call comes with warnings to not contact a tax preparer, attorney, or local IRS office before making the payment. That’s because those are the people who could lead you to finding out that the whole thing is not legitimate.

Those are the four prongs of the latest attack, which has been reported across the country, but they all share some things in common.

Scam artists are out to play on fear. Each piece of this scam tries to build on the fear of reprisals while offering a way to make it end as quickly as possible.

If anyone, for any reason, ever asks for payment in a form of currency that can’t be traced, there is something illegitimate going on. Even if it is to purchase an opportunity that seems too be good to be true, remember it is because it is too good to be true.  And why would the IRS not accept a check or a wire from your bank account? I mean, wouldn’t that direct payment from a bank account be faster than adding another middle-man transaction?

And if the federal government is able to track you down by phone, apparently has your legal information on a tax return, why couldn’t it get a letter into your hands first?

Finally, why would someone not want you to be in contact with the very people who are most knowledgeable about what is supposedly going on? If it was legitimate, wouldn’t they want to involve those who can help things reach an endpoint?

Listen to those questions that come up in your mind, and if you ever fear you may be becoming a potential victim of fraud, do contact someone, for we can help.

When it comes to writing about the various parts of how to "financially run your business" in this space, the bit I talk about the least is probably payroll.  This is most likely because it is an area that seems almost of the “set it and forget it” variety.  Even if you pay hourly employees, once their payroll profile is correctly established, paying them is often a matter of plugging in the correct hours and letting a payroll service take care of the rest.

This might be illogical, though, for how little front-of-mind space payroll takes up is in opposition to how important it is to make sure that employees are paid. And one needs to realize how critical it is when people are not paid correctly.

In a recent article posted on cpapracticeadvisor.com, it was found that, “nearly half of American workers will seek new employment after just two payroll mistakes, such as being paid late or incorrectly.” This number seems high on first look, but why would people stick around if they are not being paid correctly? Even the employees who are most committed to a company’s vision and purpose are not ONLY working for that. On some level, everyone is working to be compensated, and for many that occupies the highest level.

After all, the same article says that only seven percent of employees will not report the error at all. So if people are not being paid correctly, that is a lot of angst and complaints that must be dealt with.

I also recently read an article on Forbes.com that caught my eye with the headline “Worst Taxes? Paying Someone Else’s.” Even as someone who spends a large amount of time thinking about and researching tax issues, I was not immediately sure what that could be referring to.

Well, it turns out that author Robert W. Wood looked at “responsible persons” who could be held liable if an employer did not pay all their payroll taxes. Now don’t freak out if you’re an employee who has no idea how your employee handles those responsibilities. First, reputable payroll providers withhold the money for those payments automatically so that they are paid with every payroll run. Second, “responsible persons” only includes officers, directors, and anyone who makes decisions about who to pay or can sign checks.

But yes, although this does not include most regular employees, it does allow for some people to be held responsible who may not have had any idea about the infractions. And then, although no one ever really wants to pay taxes, I do have to agree that paying those very much could be the worst kind.

What these two articles speak to overall is that payroll can be dangerous when handled wrong. And although it is not an area that tends to draw much attention, you do want to spend enough time on it to ensure that it is being handled correctly, and get the peace of mind that comes with that. So if you have any questions about how you are handling your payroll or the tax obligations that go with it, please let us help.  Also keep in mind that we provide full - turnkey- payroll service, so you know it will be handled correctly.

I know it is a mantra that comes up often, even from my own lips (or fingers in this case), but it is said/typed so often because it is true – if you earn money, chances are REALLY good that the IRS wants to know about it. Even with this being the case, tips sometimes seem to be in a gray area for many.

To follow the mantra, yes, if you’re receiving tips in your job, chances are REALLY good that the IRS wants to know about it.  If you want a little more clarity and direction on this issue, though, the IRS actually has an Interactive Tax Assistant on the internet that will bring you through a series of questions to get a better answer on if your tips are taxable.

In this time when more people are using electronic forms of payment instead of cash, many tips are already being reported as part of a worker’s pay and being taxed accordingly. When it comes to cash, however, things get trickier.

It is not that the form of payment will cause tips to be taxed differently, but the fact that employers can let those go into that gray area. There are plenty of times when if you accept a tip, your employer may never know about it, and quite possibly doesn’t want to know about it. In that situation, well, I cannot necessarily encourage it, but it a client wants to keep it unreported and not want to worry about it, I have to shrug and move on.

I do, however, want to offers some, well, tips on how one can think about and track their tips if this is an area where you want better, and possibly more legal, record keeping.

First, it is not just cash and credit transactions that count as tips. If you receive items such as tickets or passes as tips, the value of those would also count as additional wages, and very likely unreported income. For any of these unreported tips, you will want to fill out a Form 1137 with your tax return.

In that type of full reporting, it could include tips received as part of a sharing partnership with co-workers. This is a situation that may make you want to be extra cognizant about keeping track of your tips. If you have co-workers that are fully reporting what they receive, and you are not, that is a discrepancy that could stand out. In fact, this is something that if done as it should will even include names on IRS Publication 1244. On that sheet, one tracks daily tips through different forms, including what is paid out to other employees.

I do not often like to give such links to different forms and such in this space, because I know it is not that exciting and gets into the minutiae of taxes and record keeping that make many cringe. As the concept of a sharing economy grows, however, it is likely that more and more people will be receiving tips as part of their income, and it could be one of those areas not given enough attention when it comes to figuring out your tax responsibility.

Let this be a reminder then that you probably don’t want to just ignore the issue.

There have certainly been many times during my career when I have had people ask me about the “nanny tax.” Those people (not surprisingly) usually have nannies, and are aware that there are some tax responsibilities that come along with employing that person.

There have certainly been at least as many times in my career, though, when someone should have been asking me about this “nanny tax,” and were not. Those people (not surprisingly) did not have nannies, and were not aware of the responsibilities that come with having a household employee. Many of them, in fact, were not even aware that they technically had a household employee.

Although nannies are the occupation that have somehow been chosen to name and symbolize this issue, it essentially applies to anyone who works in your home to whom you pay more than $2,000 a year. Cooks, housekeepers, medical care givers, gardeners, and heck, even babysitters who don’t get the nanny tag could all fit under this umbrella.

So if you are reading this and realizing that there may be some legal and tax issues that you have not been properly addressing, please don’t hesitate to contact us and we can help make sure that you are meeting your obligations.

I wanted to spend a little more time here keying on the medical worker aspect of this, however. Many people who receive in-home care arrange it through a third party, meaning the caregiver is receiving their wages through an employer who is not the homeowner of where they work. If that is the case, there is no need to worry, for they already have an employer taking care of obligations on that end.

When a homeowner personally brings in someone, however, then they become the employer and as such have the tax obligations of any employer. Some believe that with the current, possibly in-flux state of medical insurance in our country that this could be a situation that grows in the coming years.

This may actually be the type of situation where it is most critical that one is aware of the “nanny tax,” even though these clearly are not nannies, and of other rules that could help ease one’s tax burden.

For example, a worker could qualify for a companionship exemption based on the type of care they provide, leading to possible exclusions from minimum wage and overtime rules. There are also sleep time exemptions for those who work certain extended hours if adequate sleeping facilities are provided, continuous sleep for at least five hours is possible, and the employee agrees to it in writing, so that those hours don’t count as working hours.

I realize that all of this may seem very vague, and that is by design.  I do not feel that this is the space to give any sort of specific instructions, recommendations, or advice, however, for so much of that is dependent on one’s personal situation. Instead, I just wanted to make you aware that such rules do exist and it is better to take care of them now than waiting for them to catch up with you.

And of course, as always, we would love the chance to help you figure out just how it applies in your personal situation. 

Last week I urged my business owner clients to ask themselves what they wanted to do next in their business and to think about the steps that could help move them toward that goal. It must have been contemplating that issue so much that got me to thinking about celebrity culture in a new way.

(Really, hold on, I think it will eventually make sense.)

It seems to me that almost everyone has at least one celebrity with whom they feel some connection. It also seems that those who make the deepest impression on the most lives are the ones who prove to have lasting careers that span time and, possibly more importantly, genre.

There is a reason that one-hit wonders and other flashes in the pan tend to become punchlines. They may inspire passion and quickly build huge fan bases, but if they never figure out what’s next, then those fans move on. I imagine that the reason many then become joke fodder is because we feel a bit taken in by something catchy or interesting, but then discover a lack of substance behind it.

I think this ties into the culture that grows around celebrity deaths. Of course, there is the curiosity factor just because these are people that we know about, but some of those deaths have impacts that many feel on a deeper level. I imagine we have all felt this at some time, and at times it may have even been unexpected.

So this past week I started to think of how all this was connected, and came to think that those whose deaths have the greatest effect are those we still wanted more from. We may not have known their answer to what was next for them, but we wanted to find out.

This is why there seems such power, and a bit of mystery, to the “27 Club,” a group of musicians who died at that age. It is a rather talented group that includes Jimi Hendrix, Janis Joplin, Jim Morrison, Kurt Cobain, and Amy Winehouse. They left behind a great body of work, but one can’t help but imagine what else they could have done.

Although this may seem a bit morbid, my thoughts did not end there, and I even thought one could find some inspiration in it.

For instead of thinking of what was taken away, spend some time thinking about performers who have inspired you in your life. Think of the ways that they had different works that touched you at different points, or maybe how the same work had enough depth to affect you in different ways at different points in your life. No matter who they are, or what they did, I would wager that you can see both evolution and depth in their work.

In there may be a little light into the key to success I was trying to hit upon last week. If these inspirations only ever did one thing, their appeal would have withered. Instead they did what they did well, but also built upon what they had done before. It would have been easy to sit on their laurels, but they kept moving and had answers to what they wanted to do next.

Here is to hoping you also have some of those answers.