Tax Filing Season is Here! Free Organizers & Discounts from NFS!

by NFS | Jan 19, 2016 | Archives

WRENTHAM, MA – Tax Season is HERE!! Some people hire a tax professional and some people choose to do it themselves – either way – NFS has an option for you!!

No matter where in the world you are, NFS can help you to prepare your US Federal and State Income Tax Returns. In person, by mail or email, we are here to help! With pricing less than most national chains, we can prepare your taxes and maximize your refund or minimize your balance due if you are one of those folks who has to pay.

All new clients receive a $30 DISCOUNT and existing clients should inquire about other discounts that may be available to them. NFS also offers free Income Tax Organizers for you to save time & money!

For those deciding to do it themselves, we offer an option to prepare your own returns directly from our Do It Yourself Online Tax Prep Website with FREE (1040EZ) & Affordable options & in most cases less than the “Boxed Software” or other popular online tax prep websites!!

Do-It-Yourself Tax Filing

If you have any questions or want to set up an appointment, feel free to drop me an email jeff@nfsnet.com or give me a call toll free at 800-560-4NFS x 14.

Employee or Independent Contractor – Which Is It?

by NFS | Jan 14, 2016 | Archives

If you hire someone for a long-term, full-time project or a series of projects that are likely to last for an extended period, you must pay special attention to the difference between independent contractors and employees.

Why It Matters

The Internal Revenue Service and state regulators scrutinize the distinction between employees and independent contractors because many business owners try to categorize as many of their workers as possible as independent contractors rather than as employees. They do this because independent contractors are not covered by unemployment and workers’ compensation, or by federal and state wage, hour, anti-discrimination, and labor laws. In addition, businesses do not have to pay federal payroll taxes on amounts paid to independent contractors. 

Caution: If you incorrectly classify an employee as an independent contractor, you can be held liable for employment taxes for that worker, plus a penalty.

The Difference Between Employees and Independent Contractors

Independent Contractors are individuals who contract with a business to perform a specific project or set of projects. You, the payer, have the right to control or direct only the result of the work done by an independent contractor, and not the means and methods of accomplishing the result.

Example: Sam Smith, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours. He is to receive $1,280 every 2 weeks for the next 10 weeks. This is not considered payment by the hour. Even if he works more or less than 400 hours to complete the work, Sam will receive $6,400. He also performs additional electrical installations under contracts with other companies that he obtained through advertisements. Sam Smith is an independent contractor.
Employees provide work in an ongoing, structured basis. In general, anyone who performs services for you is your employee if you can control what will be done and how it will be done. A worker is still considered an employee even when you give them freedom of action. What matters is that you have the right to control the details of how the services are performed.

Example: Sally Jones is a salesperson employed on a full-time basis by Rob Robinson, an auto dealer. She works 6 days a week and is on duty in Rob’s showroom on certain assigned days and times. She appraises trade-ins, but her appraisals are subject to the sales manager’s approval. Lists of prospective customers belong to the dealer. She has to develop leads and report results to the sales manager. Because of her experience, she requires only minimal assistance in closing and financing sales and in other phases of her work. She is paid a commission and is eligible for prizes and bonuses offered by Rob. Rob also pays the cost of health insurance and group term life insurance for Sally. Sally Jones is an employee of Rob Robinson.

Independent Contractor Qualification Checklist

The IRS, workers’ compensation boards, unemployment compensation boards, federal agencies, and even courts all have slightly different definitions of what an independent contractor is though their means of categorizing workers as independent contractors are similar.

One of the most prevalent approaches used to categorize a worker as either an employee or independent contractor is the analysis created by the IRS, which considers the following:

1. What instructions the employer gives the worker about when, where, and how to work. The more specific the instructions and the more control exercised, the more likely the worker will be considered an employee.
2. What training the employer gives the worker. Independent contractors generally do not receive training from an employer.
3. The extent to which the worker has business expenses that are not reimbursed. Independent contractors are more likely to have unreimbursed expenses.
4. The extent of the worker’s investment in the worker’s own business. Independent contractors typically invest their own money in equipment or facilities.
5. The extent to which the worker makes services available to other employers. Independent contractors are more likely to make their services available to other employers.
6. How the business pays the worker. An employee is generally paid by the hour, week, or month. An independent contractor is usually paid by the job.
7. The extent to which the worker can make a profit or incur a loss. An independent contractor can make a profit or loss, but an employee does not.
8. Whether there are written contracts describing the relationship the parties intended to create. Independent contractors generally sign written contracts stating that they are independent contractors and setting forth the terms of their employment.
9. Whether the business provides the worker with employee benefits, such as insurance, a pension plan, vacation pay, or sick pay. Independent contractors generally do not get benefits.
10. The terms of the working relationship. An employee generally is employed at will (meaning the relationship can be terminated by either party at any time). An independent contractor is usually hired for a set period.
11. Whether the worker’s services are a key aspect of the company’s regular business. If the services are necessary for regular business activity, it is more likely that the employer has the right to direct and control the worker’s activities. The more control an employer exerts over a worker, the more likely it is that the worker will be considered an employee.

Minimize the Risk of Misclassification

If you misclassify an employee as an independent contractor, you may end up before a state taxing authority or the IRS.

Sometimes the issue comes up when a terminated worker files for unemployment benefits and it’s unclear whether the worker was an independent contractor or employee. The filing can trigger state or federal investigations that can cost many thousands of dollars to defend, even if you successfully fight the challenge.

There are ways to reduce the risk of an investigation or challenge by a state or federal authority. At a minimum, you should:

• Familiarize yourself with the rules. Ignorance of the rules is not a legitimate defense. Knowledge of the rules will allow you to structure and carefully manage your relationships with your workers to minimize risk.
• Document relationships with your workers and vendors. Although it won’t always save you, it helps to have a written contract stating the terms of employment.

If you have any questions about how to classify workers, please contact our office.

Important Information Regarding Identity Protection (IP) Pins

by NFS | Jan 6, 2016 | Archives

We have been notified by the IRS that due to an error, taxpayers are receiving Identity Protection PIN letters with an incorrect year listed. Taxpayers and tax professionals should be advised the IP PIN listed on the CP 01A Notice dated January 4, 2016 is valid for use on all 2015 individual tax returns.

The notice incorrectly indicates the IP PIN issued is to be used for filing the 2014 tax return when the number is actually to be used for the 2015 tax return. The IRS emphasizes the IP PIN listed on the CP 01A notice is valid for the 2015 returns. Taxpayers and their tax professionals should use this PIN number for 2015 tax returns, which the IRS will begin accepting from taxpayers starting January 19, 2016.

The IRS apologizes for the confusion and any inconvenience.

Too Late for 2015 Tax Planning? Guess again.

by NFS | Jan 4, 2016 | Archives

2015 is done, so 2015 tax planning is done too, right? Guess again. Although it’s true that most tax planning strategies are limited after December 31st, there is still a lot you can do to make the tax-filing season cheaper and easier.

Maximize Your Retirement Contributions

If you haven’t already funded your retirement account for 2015, you still have time. Contributions to a Traditional IRA (whether deductible or not) and to a Roth IRA are available until April 15th, 2016 (***See paragraph below for more info on actual 2015 Due Dates). If you are self employed and have a Keogh or SEP-IRA, you have until October 15th, 2016, if you submit an extension of time to file your tax return. Not only will making a deductible contribution lower your tax bill, but your investment will compound tax-deferred. There are specific requirements and limits for each type of account so check with a qualified tax advisor on your specific situation.

Estimated Tax Payments

If you don’t pay enough to the IRS during the year, you may be looking at a hefty tax bill come April. It is possible that you might even owe penalties and interest on top of the tax.  You could avoid any 2015 fourth quarter penalties on underpayment of tax if you submit a payment by January 15th 2016. Try not to over pay the tax however, because the IRS does not pay you any interest on the borrowed money called your refund. It is your money so plan accordingly.

Organization of Your Records

Having your records organized may not save tax dollars, but will make your tax season less stressful. Start by keeping your prior year returns and tax documents in the same place. Collect all of your receipts and documents that may have piled up during the year (hopefully you already have a folder or file called “Taxes” to get you started). When your W2s, 1099s or other tax documents start arriving in the mail, put them all in the same folder and group them together in like categories.  When beginning to prepare your return, work off a checklist or worksheet so you don’t overlook anything.

Take Every Deduction You Are Entitled To

Often times, taxpayers overlook deductions or decide not to take certain deductions because they feel too they are being too aggressive. In order to minimize the amount of tax liability, take every deduction you are entitled to. If your qualified itemized deductions exceed your standard deduction, file with the higher amount. Some well known items that you can itemize are home mortgage interest, real estate taxes and charitable deductions. Other lesser known itemized deductions that you may be entitled to include job hunting expenses, unreimbursed employee expenses, and out of pocket medical expenses. If you are self employed, make sure you write off all of your expenses and be prepared to back these with receipts. One of the items self-employed individuals may be eligible for is the Office-In-Home Deduction. If you conduct business exclusively out of your home office, you may be eligible.

File & Pay On-Time

If you can’t finish your return on time, make sure you file Form 4868 by April 16th, 2015. You will get automatic six-month extension of the filing deadline until October 15th, 2016. On the form, you need to make a reasonable estimate of your tax liability for 2015 and pay any balance due with your request. Requesting an extension in a timely manner is especially important if you end up owing tax to the IRS. If you file and pay late, the IRS can slap you with a late-filing penalty of 4.5 percent per month of the tax owed and a late-payment penalty of 0.5 percent a month of the tax due. The maximum late filing penalty is 22.5 percent and the penalty tops out at 25 percent. By filing Form 4868, you stop the clock running on the costly late-filing penalty.

***A Note Regarding Tax Due Dates This Year

You get three extra days to gather your paperwork and file your federal tax return in 2016. The tax deadline is April 18, 2016.

You can thank Washington, D.C., for the gift. Washington will celebrate Emancipation Day on April 15. The day is treated as a federal holiday, so federal offices – read IRS – will be closed.

Emancipation Day typically is celebrated on April 16. It’s the day President Abraham Lincoln signed into law a bill ending slavery in Washington, D.C. April 16 falls on a Saturday in 2016, so Emancipation Day will be celebrated on April 15.

So…. Tax Day will be pushed back to April 18, 2016.

That doesn’t mean you have to wait until April 18 to visit our office, though.

In Massachusetts & Maine, Patriots’ Day is observed on April 18, 2016. Patriots’ Day is a civic holiday commemorating the anniversary of the Battles of Lexington and Concord, the first battles of the American Revolutionary War. It is observed on the third Monday in April in Massachusetts and Maine, and is a public school observance day in Wisconsin.

Since 1969, the holiday has been observed on the third Monday in April, providing a three-day long weekend, as well as being the first day of public school vacation week in Maine and Massachusetts. Previously, it had been designated as April 19, the actual anniversary of the battles.

Patriots’ Day is also a school holiday for many local colleges and universities, both public and private. In Maine and Massachusetts, when Patriots’ Day falls on a day where income tax returns would otherwise be due for the remainder of the country, residents of those states are given until midnight of the next day (Tuesday) to submit their state tax returns.

So…. Tax Day will be pushed back to April 19, 2016 in Massachusetts & Maine.

Seek Help, If You Need It

Low cost, affordable options to prepare and file your returns exist. If you are comfortable doing your own return, go for it. If you become uncomfortable or get in a jam, call a professional for added confidence and peace of mind. Our office is always available for assistance.

$30 Off Tax Prep – New Client Discount

Happy New Year From NFS

by NFS | Jan 1, 2016 | Archives