The IRS has just announced a delay in the income reporting thresholds for third-party settlement organizations (TPSOs) such as PayPal, Venmo, and CashApp . This is a key change which may impact your 2022 tax filing. Until now, the IRS was set to start scrutinizing business-related transactions and the income derived from them on third-party payment platforms more closely in the 2022 tax year with a much lower reporting threshold of just $600 and a requirement that these companies report on a 1099-K Form. This change has been delayed until 2023. Currently, the reporting threshold applies when a ..read more

Last year the introduction of the Infrastructure Investment and Jobs Act clarified and expanded the rules for reporting of information on digital assets by brokers. The United States Treasury Department and the Internal Revenue Service (IRS) have just announced that brokers are not required to report additional information related to the dispositions of digital assets until final regulations are issued, likely in 2023. Brokers and taxpayers are still required to comply with existing laws and regulations despite this transitional guidance. Here are some key points to keep in mind when you are c ..read more

As the end of the year approaches, it’s key to make sure that you are keeping your records up to date in regard to all income and taxable revenue you are generating from any source. This includes hobby businesses.  Many freelancers have multiple streams of revenue, some of which may involve a special hobby that they try to monetize. If this applies to you, it is important to determine if your hobby is actually a business because the IRS will require you to pay taxes on the income derived from it. If you do not meet the qualifications for a genuine business, then you cannot deduct expenses ..read more

The Inflation Reduction Act (IRA) was passed by the U.S. senate and signed into law this month. When this happens, there will be some notable tax changes. Here is a summary of the ones with the most significance for freelance business owners: 1. Enhanced IRS enforcement could increase your risk of an audit. The IRA has big time funding for the IRS to the tune of a $3.1 billion to increase for IRS taxpayer services, $45.7 billion for IRS enforcement, $25 billion for IRS operations support and $4.7 billion for IRS technology upgrades. This means the IRS is going to have more resources than they ..read more

Did you run short of time last April when the regular tax filing deadline came? Hopefully, it was a rare occurrence and you took the smart step of filing an extension for your 2021 taxes. If so, the six-month window to get your taxes filed without additional failure to file and late payment penalties is rapidly closing. It will slam shut on October 17, 2022, so if you haven’t already, now is the time to make good on your commitment to filing by this date. Doing so will take it off your to-do list and reduce your tax penalty burden if you already have one to contend with.   Many taxpayers ..read more

The IRS just announced that it will automatically provide relief from failure-to-file penalties including a broad range of tax and information returns for 2019 and 2020 tax years. This could be good news if you did not file your taxes for these years. If you have already paid the penalties, the IRS will also automatically issue you a credit. Here are some answers to some common questions about the new IRS failure-to-file penalties: Which tax and information returns does the penalty abatement apply to?           The penalty abatement applies not ..read more

There has been lots of talk about student loan forgiveness recently, especially after the past two years of Covid chaos which had a negative financial impact on many taxpayers. Now with inflation rising, the government has finally pushed through the American Rescue Plan legislation including student loan debt relief which may help your financial situation as a freelancer. A key caveat: The net benefit of this new legislation may largely depend on where you live, according to how each state enacts it. Here are the details of how the American Rescue Plan may help individual taxpayers: If you ar ..read more

Business travel expenses can provide a freelancer with significant business expense deductions. However, deductible business expenses are subject to numerous rules which must be carefully followed, or you risk an unpleasant surprise if you are audited.  Let’s start with what qualifies as a business travel expense. The rules changed, temporarily, due to Covid and they will revert to the original IRS definition beginning January 1, 2023, for some business expenses. However, pre-Covid and post-Covid, business travel expenses must be ordinary and necessary expenses while traveling for your bu ..read more

If your freelance business is on a significant growth trajectory, congratulations! All of your hard work is paying off, and you may be considering switching your entity type from a sole proprietorship or limited liability company (LLC) to an S-corporation (S-corp) to take advantage of the payroll tax savings and other benefits (you can read about entity selection more fully here). The payroll tax savings related to S-corp entities are a key consideration when deciding whether to form or transition your existing entity to an S-corp. However, if you do so, you need to make sure to calculate ..read more

With all of the news coverage about inflation, it is hard not to think about where the economy is going and, for those of us who are self-employed, the perceived risks and threats may be amplified. Is this anxiety justified? Read on so you can judge for yourself and take the appropriate action to reduce your tax obligations as much as possible. First, consider the facts about inflation: Inflation is a loss of purchasing power over time. It’s not your imagination: right now a dollar will not go as today, as it may have previously. If you have noticed your expenses rising due to increased prices ..read more