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Frequently Asked Questions
Yes, you can pay your federal taxes online on the IRS website. You may use either a debit or credit card, or bank account (Direct Pay).
Yes, you can pay your California taxes online on the California Franchise Tax Board website. You may pay using a credit card, bank account, or enroll in a payment plan.
If you hire an independent contractor, or self-employed freelancer, to do work for your business, you must ask them to complete the Form W-9 – Request for Taxpayer Identification Number and Certification –which can be downloaded from the IRS website.
If you are a business owner and made payments in excess of $600 to an individual or unincorporated business entity, then you are required to report those payments by issuing the Form 1099 to the IRS and the recipient. An exception to this rule is payments made to an attorney. All payments to attorneys, whether incorporated or not, must evidenced by a Form 1099.
California Assembly Bill (AB) 5 outlines the ABC test, which determines whether a worker is an employee or an independent contractor. Businesses are required to classify all workers as employees unless they meet ALL of the following conditions of the ABC test:
- The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
- The person performs work that is outside the usual course of the hiring entity’s business.
- The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
It is critical that businesses follow the ABC test and classify workers correctly. If they do not, the business owner can be personally liable for “unpaid” payroll taxes because the Employment Development Department (EDD) determined that they believe these workers are actually employees.
Generally, you should keep tax returns and supporting documents for the length of time that a tax return can be amended, or for the amount of time the IRS could audit you and assess an additional fee. That time depends on various factors, but a good rule to follow is to keep tax returns and records for a period of seven years. Be sure to check the guidelineson the IRS websiteas to how long to keep records for various scenarios.
You are allowed to deduct 50% of business meals with clients. Office snacks and office meals are also 50% deductible (they were previously 100%). However, the expense of a company-wide party is 100% deductible.
Entertainment expenses such as concert tickets, sporting events, and club dues are not deductible. If your company has paid for such things in the past, make sure to check which expenses that were deductible are no longer eligible.
Individuals who are self-employed and use their vehicle for work purposes may deduct auto expenses. However, if you use your car for both work and personal use, the expenses must be split and the deduction is based on the portion of mileage used for business. To determine auto expenses, you will want to track all mileage driven for business, gas and oil, tires, maintenance costs, repairs, lease payments, insurance, and registration fees. Taxpayers can use the standard mileage deduction, which gives you the tax-deductible amount based on your actual miles driven. However, if your auto expenses are more than miles driven, you can deduct that amount.
Employees are not eligible to deduct auto expenses. However, they may be eligible for mileage reimbursement, parking and travel fees from their employers.
You must keep detailed records for your auto expenses in order to deduct them on your tax return. These records include the date you started using the vehicle for business, mileage and dates for each driving trip, receipts for the cost of each separate expense, and the total miles driven for the year. We recommend using a spreadsheet or app to track the dates, destination, mileage and purposes for each work-related drive.
We understand the needs of a growing business and can help set up or take over your financial and accounting work. This allows you to focus on what you do best without having to incur the costs of a full-time employee.
All Certified Public Accountants (CPA) are accountants. However, not all accountants are CPAs. A CPA is licensed by the state and needs specific experience and education that a general accountant does not have. Both accountants and CPAs are able to prepare tax returns; however, due to education requirements, many CPAs are more knowledgeable about tax codes and are better able to support a client with an IRS audit. Additionally, CPAs must follow a strict code of ethics and meet high industry standards.
If you are a business owner, a CPA can assist you in your accounting and help relieve the stress and burden of finances so you can focus on what you do best. They can also serve as advisors and assist with cash flow projections, budgeting and forensic accounting.
If you are an individual, a CPA can assist with the burden of tax preparation. So instead of you spending hours of your time reviewing tax law and tracking deductions, you can devote that time to earning more income or spending time with family and friends.
The deadline to file Forms 1099-Misc is January 31 (previously it was February 28). Beginning with tax year 2020, Form 1099-NEC (nonemployee compensation) must be used to report nonemployee compensation. The deadline to file Form 1099-NEC is January 31.