Taxes

[master.caregiver]

ok here is another question that ive been hearing alot if ure a caregiver are u self employed and required to fill out a 1099 "pay taxes help the state see if leo still comes knocking" this is my opinian whats yours

[westmich]

1099's are for individuals working on a contract basis with a company. All you HAVE to do is claim all of your income on your personal income taxes. As long as you claim the income, you are legal as far as I know. You can make it more complicated than that, I am sure there are pros and cons at all levels, but as long you are claiming your income and not laundering it, you should be fine.

[+Dizledot]

Get yourself an accountant!!!! You don't have to tell them exactly what you grow and sell, its just herbs for herbal medicine as far as they are concerned. Save yourself a big headache dealing with the IRS and State. Let the accountant do it for you so you don't have to answer to them if you make some little mistake or fill out the wrong form.

[master.caregiver]

!!!! 2 replys ? every ones clear on this i guess

[Captain Obvious]

Get yourself an accountant!!!! You don't have to tell them exactly what you grow and sell, its just herbs for herbal medicine as far as they are concerned. Save yourself a big headache dealing with the IRS and State. Let the accountant do it for you so you don't have to answer to them if you make some little mistake or fill out the wrong form.

 

A good accountaint is worth their weight in High Quality Cannabis. Wish I could find one who accepts Chewing Gum as payment.

 

This pretty much covers it, not much else to say.

[lkline300]

You would fill out income from self employment & self employment tax forms. the income form schedule c, is where you state income & deduct expenses. On the other you calculate your self employment tax liability.

 

I have heard that some are exploring using some aspect of the right to farm act.

 

I don't know about adding it to your income as it is income from self employment & even if you show no profit you will still have a tax liability just for being self employed.

 

If you are generating a good income, If your patients pay with check or claim in any way their expenses then you probably want to do this right. If you do your own taxes now you will have no problem with the self employment forms.

[Chaplain]

Business or Hobby? Answer Has Implications for Deductions

FS-2007-18, April 2007

http://www.irs.gov/newsroom/article/0,,id=169490,00.html

 

The Internal Revenue Service reminds taxpayers to follow appropriate guidelines when determining whether an activity is a business or a hobby, an activity not engaged in for profit.

 

In order to educate taxpayers regarding their filing obligations, this fact sheet, the eleventh in a series, explains the rules for determining if an activity qualifies as a business and what limitations apply if the activity is not a business. Incorrect deduction of hobby expenses account for a portion of the overstated adjustments, deductions, exemptions and credits that add up to $30 billion per year in unpaid taxes, according to IRS estimates.

 

In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business. An ordinary expense is an expense that is common and accepted in the taxpayer’s trade or business. A necessary expense is one that is appropriate for the business. Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit.

 

In order to make this determination, taxpayers should consider the following factors:

 

Does the time and effort put into the activity indicate an intention to make a profit?

 

Does the taxpayer depend on income from the activity?

 

If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?

 

Has the taxpayer changed methods of operation to improve profitability?

 

Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?

 

Has the taxpayer made a profit in similar activities in the past?

 

Does the activity make a profit in some years?

 

Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?

 

The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year — at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.

 

If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.

 

Deductions for hobby activities are claimed as itemized deductions on Schedule A (Form 1040). These deductions must be taken in the following order and only to the extent stated in each of three categories:

 

Deductions that a taxpayer may take for personal as well as business activities, such as home mortgage interest and taxes, may be taken in full.

 

Deductions that don’t result in an adjustment to basis, such as advertising, insurance premiums and wages, may be taken next, to the extent gross income for the activity is more than the deductions from the first category.

 

Business deductions that reduce the basis of property, such as depreciation and amortization, are taken last, but only to the extent gross income for the activity is more than the deductions taken in the first two categories.

 

Link: http://www.irs.gov/pub/irs-pdf/p535.pdf

 

Further information is available in IRS Publication 535, Business Expenses

[Captain Obvious]

Business or Hobby? Answer Has Implications for Deductions

 

 

Correct, However I wouldn't bother with the Hobby aspect as it brings up too many Red Flags for audits.

[Glyphia]

If you are self employed, depending upon your tax structure, don't you have to file and pay quarterly estimated taxes federally and if you file the first year and have not paid the quarterly estimated taxes you get whacked for a lot of fines, interest and penalties?????

 

I remember my dad ran into this scenario one year. Never, ever wanted to make the mistake again. It was pretty painful.

 

I also seem to remember that when you filed your estimated taxes you wanted to make sure you estimated very closely to what you made but you definitely wanted to slightly over pay the estimates and get the refund in the end. If you failed to estimate enough you also received strong penalties.

 

Not a tax guru by any means. Just beware.

[westmich]

If you are self employed, depending upon your tax structure, don't you have to file and pay quarterly estimated taxes federally and if you file the first year and have not paid the quarterly estimated taxes you get whacked for a lot of fines, interest and penalties?????

 

I remember my dad ran into this scenario one year. Never, ever wanted to make the mistake again. It was pretty painful.

 

I also seem to remember that when you filed your estimated taxes you wanted to make sure you estimated very closely to what you made but you definitely wanted to slightly over pay the estimates and get the refund in the end. If you failed to estimate enough you also received strong penalties.

 

Not a tax guru by any means. Just beware.

 

Good point. I was under a 1099 for a year or so and got a letter from the IRS. The IRS wants to see money coming in on a regular basis, because most people can't afford to write a single check to cover the full year of taxes. If you work for an employer with a W-2 like most, the taxes come out automatically. If you are working for yourself in some way, you are supposed to estimate and pay your taxes quarterly. You would still fill out your tax returns by April 15 and either get a refund or make another payment.

[Captain Obvious]

If you are self employed, depending upon your tax structure, don't you have to file and pay quarterly estimated taxes federally and if you file the first year and have not paid the quarterly estimated taxes you get whacked for a lot of fines, interest and penalties?????I remember my dad ran into this scenario one year. Never, ever wanted to make the mistake again. It was pretty painful.I also seem to remember that when you filed your estimated taxes you wanted to make sure you estimated very closely to what you made but you definitely wanted to slightly over pay the estimates and get the refund in the end. If you failed to estimate enough you also received strong penalties.Not a tax guru by any means. Just beware.

 

Yes you have to pay quarterly estimated taxes, this is where a Good Accountaint comes in handy.

 

Good point. I was under a 1099 for a year or so and got a letter from the IRS. The IRS wants to see money coming in on a regular basis, because most people can't afford to write a single check to cover the full year of taxes. If you work for an employer with a W-2 like most, the taxes come out automatically. If you are working for yourself in some way, you are supposed to estimate and pay your taxes quarterly. You would still fill out your tax returns by April 15 and either get a refund or make another payment.

 

Always a Good Idea to send in just a little extra so you don't short change yourself and have to pay penalties.

[davidaram]

If you are claiming some just put it down as extra income at a one year sum. Pay tax on that year sum.

[Mr CPA]

A good accountaint is worth their weight in High Quality Cannabis. Wish I could find one who accepts Chewing Gum as payment.

 

This pretty much covers it, not much else to say.

 

Call me at NUMBERS Professional Accounting Services, 248-794-0798. I'm a new business but I'm a licensed CPA. There's a lot of bad or half information on this forum, including that posting copied from the IRS Website about Business or Hobby activities (it's out of context.) In general all of the discussion about 1099's too is moot since all of you will be reporting income on a Schedule C. The people who run into tax problems are the people who don't plan.

 

I've been formulating some business strategies around the MMA and want to provide my services to the emerging community.I will accept chewing gum in exchange for my services as my wife is a patient.

[solabeirtan]

You're doing pretty good if your showing profit on a bussiness start up, especially the first year!

 

I know I'll be running at a loss for a while, trying to get it all up and running. Then finding patients that can spend more than $150/z, in this state and time.

[master.caregiver]

thats better we need to show are state there are other ways to make money then encarceration

[MIMEDGROW]

why would I pay taxes on a cash income that barely covers my costs?