Hobby or Business? IRS Offers Tips to Decide

The following article was published by the IRS.

guitarMillions of people enjoy hobbies that are also a source of income. From catering to cupcake baking, crafting homemade jewelry to glass blowing — no matter what a person’s passion, the Internal Revenue Service offers some tips on hobbies.

Taxpayers must report on their tax return the income earned from hobbies. The rules for how to report the income and expenses depend on whether the activity is a hobby or a business. There are special rules and limits for deductions taxpayers can claim for hobbies. Here are four tax tips to consider: Continue reading

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Money Moves to Make in Your 50s

When you are in the first few decades of adulthood, time is always on your side financially, so you have time to recover from mistakes and poor planning. But as the years go by, it is easy to wonder if you will have enough.

The best way to answer this question is by sitting down with a fee-based financial planner. One of the most critical pieces of advice you will get at this point is to focus on retirement, which is only a decade or so away for many. Maxing out all retirement plans as well as taking advantage of any catch-up contribution rules is essential.

The benefit of this age is that it is typically in your peak earning years. In addition, kids are often out of the house by this point, so expenses may start to go down. This combination of factors should, in many cases, free up some funds to be distributed into retirement plans up to the allowable limits. Continue reading

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Work Opportunity Tax Credit can Help Employers Hiring New Workers; Key Certification Requirement Applies

The following article was published by the IRS.

employeeThe Internal Revenue Service today reminded employers planning to hire new workers that there’s a valuable tax credit available to those who hire long-term unemployment recipients and others certified by their state workforce agency.

The Work Opportunity Tax Credit (WOTC) is a long-standing income tax benefit that encourages employers to hire designated categories of workers who face significant barriers to employment. The credit, usually claimed on Form 5884, is generally based on wages paid to eligible workers during the first two years of employment.

To qualify for the credit, an employer must first request certification by filing IRS Form 8850 with the state workforce agency within 28 days after the eligible worker begins work. Other requirements and further details can be found in the instructions to Form 8850. Continue reading

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Money Moves to Make in Your 40s

With two decades of adulthood behind you, the 40s should be a time when your financial plans are in full swing. But that is not always the case. Either way, it is not uncommon to be fearful of your financial future even at this point. But there is sound advice for this season of life.

The number one area most financial advisers would tell someone in this age group to focus on is retirement. These are prime earning years, so make the most of it and sock away as much as possible.

The best way to do this is by maximizing your company’s retirement plan, especially if you get a company match. It is essentially free money and not taking advantage if this would literally be leaving money on the table. Once you have maximized your workplace 401k, look to outside investments like IRAs and contribute as much as possible.

Continue reading

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Tips for Taxpayers Who Owe Taxes

The following article was published by the IRS.

officeThe 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 device 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.

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Money Moves to Make in Your 30s

The 30s take the simplicity of the 20s and replace it with multiple moving parts. Newer, clearer goals come into place, such as when you want to retire, and planning for a family. None of this has to be complicated, but you do need an idea of where you want to arrive and a road map to get you there.

If you don’t know where to begin, start by educating yourself with the wealth of information you can find online or in various self-help financial books. You could also look at a fee-based financial planer who offers advice specific to your situation. Some of the advice they might offer could include:

  • When you are in your 30s, you are still young so you are able to be more aggressive with your long-term savings.
  • Make sure you are maximizing your 401(k) contributions, especially up to your employer match, which is essentially free money you would otherwise be leaving on the table.

Continue reading

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IRS Offers Tips to Taxpayers Preparing for Hurricanes, Floods and Other Natural Disasters

The following article was published by the IRS.

hurricaneWith Hurricane Preparedness Week, May 7 to 13, now in progress and the start of the Atlantic hurricane season looming on June 1, the Internal Revenue Service today offered advice to taxpayers who may be affected by these types of storms, as well as other natural disasters. The IRS also wants taxpayers to know that the agency is here to help, including offering a special toll-free hotline to people in federally declared disaster areas, staffed with IRS specialists trained to handle disaster-related issues. Continue reading

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