By now you most likely have seen tax documents starting to show up in your mailbox. It’s the time of year when they are unavoidable. Some look like good news, some look like bad news, but few come as surprises. Some people are surprised to find, though, that they themselves should have provided some tax forms to others.

This most often comes in the form of what is colloquially known as the “nanny tax.” It’s easy to see where the name comes from, since a nanny is someone a family provides a decent amount of money to over a year. The tax, however, covers anyone who could be seen as a household employee, be it a caregiver, housekeeper, etc.

The tax essentially comes down to the fact that if you paid a household employee more than $2,100 in the year, they owe 7.65% in Social Security and Medicare taxes on those wages. That seems like a decent chunk of money when you think of it on the whole. But this only breaks down to about $40 a week. That means it can even be reached by handing a babysitter some money after a weekly date with your spouse.

(Not that I’m going to tell you to go back and try to track down how much you paid the babysitter every week, but it is enlightening as to how easy this threshold could be to reach.)

Beyond what a household employee can personally owe, if you pay one of these employees more than $1,000 in any calendar quarter, you’re liable for paying federal and state unemployment taxes.

Granted, we aren’t talking about huge numbers here, but if this is something you were not aware of and you want to make sure that you are handling it correctly and legally going forward, contact us and we will work out a plan to make sure you have everything in order.

Keeping things in order is something to keep in mind all over the place when it comes to this time of year and those tax forms that you are starting to receive. The more you think now about getting stuff together, the less hectic the tax return process will feel.

A good starting point is knowing that whatever you needed to file last year’s return is going to be needed again. To move beyond that starting point, though, work by the mantra that you can never provide too much information.

If you come to your tax return appointment and bring some information, receipts, etc., that you aren’t sure if they’ll be applicable to your return or count as a deduction, the worst thing that can happen is you are told no. But it’s possible you find one or two that do count and then the little time it took to include that in your folder of forms will be worth it.

Then next year you’ll have an even better point at which to start from. Time is on your side for now, so get on these things and do not be afraid to make an early appointment to handle your return.

I wrote a couple weeks ago about the value of having someone knowledgeable guiding you through the tax return process. A lot of this value comes in knowing what you can deduct on a tax return. It is usually simpler to get that initial number of the amount of money you earned in a year than it is to properly use deductions to lower how much of that number will be taxed – and thus the amount of tax you have to actually pay.

A lot of these deduction misses come in simply not knowing that something is deductible. For example, you may know that having a home office is a potential deduction, but not understand that it doesn’t have to be a space with a separate entrance and your name on the door to count.

A lot of these deductions can also be difficult to know you are using correctly, though. For example, you may know that having a home office is a potential deduction, but not understand that doing some calculations on the family laptop at the dining room table twice a year for your Etsy shop is not going to count.

This is far from the only potential pitfall deduction, too. There are also weight loss programs, which are not deductible if you’ve entered one to look and feel better. They are deductible, however, if entering one was ordered by a doctor for a specific disease.

Are you looking forward to deducting some gambling losses this year? Well, then I hope you also kept track of how much you won.

Or are you one of the people who made a year-end charitable contribution with an eye to getting a little bump in your tax refund? Did you realize that this will only come into play if you are itemizing your tax deductions and not taking the standard one? And if you didn’t know that, are you then looking for ways to make the math work on the itemization side so that those contributions still came with the bonus you expected?

Hopefully by now you are starting to realize that doing that can be a difficult proposition and one that comes with potential serious consequences. You know all those scams that exist with people claiming to be from the IRS, that you better give them more money or face strict penalties? They work because we are scared and frightened of actually being in that position. So don’t put yourself in that situation.

And maybe it feels scary to meet with a professional because you don’t want to find out that you are in a worse position than you imagined. Sure, such a meeting may end in you finding that you cannot deduct all that you believed, but it will also probably help you find something you could deduct that you did not know about.

Finally, when it comes to facing such potential bits of bad news, remember the level of how bad it is can vary depending on how and when you receive it. Hearing it in February from someone who can help you from making a mistake on your tax return is going to be better than hearing it in August form an IRS agent.

We have made it to 2020 and you know what that means- enough jokes about vision that you’re already sick of them halfway through January!

While you’ve been going through that trial, you may have missed that a new W-4 form has come into play this year. You may have heard that this was coming, well now it is here. If you are curious to see the final product, just click here.

You definitely want to click there if you employ anyone or plan to in the future. Any hires you make should now be filling out this form and not an older form. Those of you who are familiar with these things won’t make an error of mistaking one for the other, for the new one does look quite a bit different.

That different look comes because there are a lot more spaces for information than there were on old versions of the form. It now allows you to adjust for dependents (instead of just claiming a number of exemptions) and account for other income or deductions. So even for your current employees, it might be worth letting them know that this exists and give them the chance to fill out a new form and alter how taxes are being withheld from their paychecks.

I’m going to be honest that although it is a great idea to have a form that allows an employee to look at their total tax picture, it is not going to be crystal clear to everyone how to navigate the form to their best advantage - even after reading all the instructions attached. This is not a real criticism of the form itself, but is more the nature of the tax system itself. After all, things becomes muddled on the form if you’re in as simple a situation as being married, filing a joint tax return with your spouse, and both be working full-time jobs.

So if you still have some questions on the form itself, click here for the full guidance offered by the IRS.

Another easy situation that complicates one’s tax situation is if you earn some or all of your income from being self-employed. This includes something as simple as occasionally driving an Uber. If you get a 1099 form (and they are coming to your mailbox soon), then that is money you have yet to be taxed on and will increase your burden when it comes time to file your return.

So if you have some questions on how to navigate the gig economy, click here for the IRS’s guidance in that area.

At this point, I feel like I may be putting too much information out there at once. So let’s loop back around to the beginning where the new W-4 form is allowing taxpayers to figure out their tax picture better than before. This means that answers about taxes are possible even if they sometimes feel elusive. When it feels overwhelming, though, know that you need not take on this battle alone and we are always happy to help you navigate the system and make it work for you. Now that does sound simple.

You can always count on seeing certain ads this time of year – diet plans, gym memberships, stop-smoking aids, and tax services. When it comes to that last one, more and more of them in recent years focus on do-it-yourself solutions. Or maybe those are the ones that stick out to me because, of course, I’m going to tell you that using them is often not the best choice.

Many of the ads you see harp on the fact that you simply can file taxes yourself without help. Many even say you can do your federal taxes for free (which really just means they’re going to get you to pay when it comes time to file the state forms). I am certainly not going to say that it is impossible for people to file taxes on their own. You could follow a program’s questionnaire and end up with a legal tax return at the end of the process. I will, however, say that it is very difficult to file the most beneficial tax return on your own.

The thing with taxes is that for many people it is easy to report your taxable income. Most of it even comes on forms you will receive over the next month or so. You will plug in the numbers from the appropriate boxes and eventually come up to a final number that the IRS will tax you on. Much more difficult (and this is kind of by design) is knowing all the deductions and credits you may qualify for to lower your tax burden.

You see, with those pieces, you don’t always get a form that lets you know how it fits onto your tax return. And if there are pieces you don’t know about, how will you know to include them when filing? Or maybe you heard from someone else that there are some things you can claim on your taxes. Do you know where they will be included? Do you know if all of the amount is allowed to be deducted?

My view when it comes to who can file their own taxes is that it never hurts, and can immensely help, to have a professional’s hands on it. Even when it comes to very simple returns there can be issues, such as if a child and a parent are making sure they stay consistent with their status as a dependent. These are problems that software can’t always foresee, for it will just use the answer you give it. A live person can urge you to make a one-minute phone call or get the paperwork to make sure everything is correct.

A live person will also listen to your story of who you are. To software, you are just the answers to its questions. You are not only the story of what you do for work, what your family looks like, and how you earn and spend your money. Someone who seeks to understand your whole picture, not just where you’ve been but also where you’re going, gives you the comfort that someone cares, and it also gives you the confidence that they are helping you use your situation to your greatest advantage.

Taxes aren’t simple and people aren’t simple. That complexity deserves to be appreciated and we are proud to do our part to be better than computerized forms when it comes to getting you all that you deserve this time of year.

Often in this space I write about how you should envision what you want to change in your financial picture. This is because with a little reflection you can take the steps necessary to change and move to a position where you will have greater comfort and ideally an extra dose of happiness.

Those are ideas you’re going to hear a lot about as the calendar turns to 2020, and that is not a bad thing.

The start of a new year is a bit of a construct and is not necessarily some magic point in time where changes are easier to make or more liable to stick. It is, however, a time when one is inclined to take stock of where they are and where you want them to go.

No matter what changes you would like to make, they do require that bit of reflection, but then they also take a great deal of discipline and continued motivation. After all, if these were easy things for you to do, you would just do them instead of requiring a resolution to do so.

This can feel even more daunting when you see others having success where you struggle. They make it seem like it is so easy. First, keep in mind they have more internal struggles than you see. It is easier to see the successes from the outside than to appreciate the turmoil that someone combats. And second, people have strengths and weaknesses in different areas. When you are envious of someone’s success in one area, they probably envy you in another.

But through all of this, one thing to remember is that success can be had if you remain on the path to it. So here is a wish that you find that success in whatever battle you take on and reach your hoped-for destination.

And next week, we’ll turn back to more of those financial concerns.

I don’t know if you’ve realized this, but things aren’t the same as they used to be. You can see that a lot this time of year, for I imagine most of you did at least a portion of your holiday shopping online.

I also notice that our entertainment during this time of year is quite a bit different, too. The days when watching a holiday TV special was an appointment activity because that was the only time you had a chance to see it for a year are over. And yes, it is convenient when you can see essentially anything you want whenever you want, but it also leads to being able to push things off.  Then by the time the holiday is gone, you may not have watched everything you wanted. And that probably also means you didn’t sit down with your family as much as you had planned.

Is there something you used to always watch when you were younger that meant something to you? Well, share it with those who are close to you.

And it’s not just TV specials. Is there an old dish you used to eat around the holidays that you miss? Is there an old family recipe that you wish was still in circulation? Those modern conveniences mean you can even send that recipe to many people and share it with those with whom you aren’t sharing a table.

Many of the changes we are experiencing in our world have been wonderful and open many opportunities. That doesn’t mean we should lose tradition, though, so remember to share things and pass along the things that make us happy.

Happy Holidays!

Well, this is about it. By this time next week, it will be Christmas and a week after that brings us to New Year’s Day.  Well goodbye 2019, you were an interesting one.

This means that there isn’t much left to do when it comes to your 2019 financial year. There are a few things to watch out for, though. For instance, a few weeks ago I wrote about charitable contributions, and if you are in a position where another deduction can do your tax picture good, you can still do that. Even if you’re not in a position where it will do your tax picture good, remember it will still do good for others.

Beyond that, I write often about scams and they do start to ramp up at the beginning of the year. The more taxes (and their inherent fears) are on people’s minds, the easier it is for scammers to play off them.  So keep that in mind if you run into something that sounds fishy over the next couple of months.

And no one really wants to think TOO much about taxes yet, but it is time for you to start moving them up in your mind’s catalog a little bit. People don’t like thinking about taxes, because they aren’t fun, but giving them a little thought now can help spread out their pain. The pain intensifies if you don’t start preparing until the day before you have a meeting to prepare your return.

Most everyone will have a little extra time off over the next couple of weeks and I fully support spending most of it with the people you love. Once you get enough of them, though, maybe you have a couple hours that you don’t know what to do with.

Well first, take a nap. Naps are beautiful.

But when you wake up, you can do yourself some good by getting some financial documents in order. I’m not going to go into huge detail here about what you may need to prepare a full tax return (but fear not, I’m sure much more will be spoken of that in this space in the coming months). Instead, let’s institute a simple rule. If you needed it last year, you’ll need it this year.

So gather those things you needed for last year’s tax return that you already have. Beyond that, make a list of what you do not have yet. There will be some December statements that you won’t get for a few weeks and most of the tax forms you need will start arriving later in January. Putting a checklist of what you know you are expecting with what you already have will let you know when you are ready go make your appointment to prepare your return.

And wouldn’t it be great to get it out of the way as soon as possible?

We promise that we’re ready to see you when you’re ready. Consider us the family you see after the holidays.