No matter who you are or what you do, you’re going to have tax questions. Let’s take some time to go through the most frequently asked questions for filing taxes.
Are Unemployment Benefits Taxable?
In 2020, the unemployment rate reached 14.8%, which is the highest rate observed since data collection began in 1948. And many people had to include unemployment benefits in their 2020 (and possibly their 2021) tax returns.
Typically, unemployment income is taxable. If you collected unemployment payments, you will receive Form 1099-G which will show your total payments.
It is also worth noting that under the 2021 American Rescue Plan, the first $10,200 (or $20,400 if married filing jointly) of unemployment income was tax-free on your 2020 taxes. No word yet if those provisions will carry forward to the tax year 2021 returns.
What Is Self-Employment Tax?
Self-Employment tax is a separate tax from your typical personal returns. It is a self-employed person’s version of the FICA tax, in which the independent contractor is responsible for paying for Social Security and Medicare. This is important to remember because those who are self-employed are responsible for both the employer and employee portion of the tax.
Do I Need a FEIN for my Home Business?
If you run a business out of your home as a sole proprietor, you don’t need a Federal Employer Tax ID Number. You can use your personal Social Security number.
Any other business setup, however, will require you to set up a FEIN.
What Are the Tax Ramifications of Withdrawing Money from a Retirement Account?
Before the age of 59 1/2, withdrawing money early from a retirement account comes with a 10% tax penalty. The money may also bump you up into a higher tax bracket.
I Started My Own Business. Can I Take Advantage of Home Office Deductions?
Home office deductions are a little tricky. If you started a business and are looking into home office deductions, you’ll want to make sure everything you purchased for your office is used solely for business. If you use any of those things for personal reasons, they will no longer be eligible for deduction.
Are There Other Taxes – Besides Income and Social Security – That I Need to Know About if I’m Self-Employed?
Yes. Don’t forget about local and state taxes. You’ll still have to account for any local, state, school district or other applicable taxes.
How Much Money Do I Have to Make to File Taxes?
If you are an independent contractor, you will have to report any income of more than $600 per company that you do work for.
Do I Need to File My Taxes Quarterly?
Typically, independent contractors file their taxes quarterly. There are a few exceptions to this, however. If your total tax liability is less than $1,000, or if you have pre-paid 90% of your tax liability already, you don’t need to file quarterly.
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