Every tax season has its own quirks. No matter the year, it’s important to understand what might impact your taxes and stay on top of the situation.
Tax season 2013 is underway, and it’s important that you realize that there have been some changes and delays to tax filing. On top of that, if you run a home business, you should be aware of the 1099-K form. This is a new form that can change the way you report your income, so you need to know what to expect.
Before you run out to file your taxes, realize that the IRS isn’t even accepting returns until January 30, 2013. And, if you have certain forms to fill out, and certain deductions and credits that you want to claim, you might not be able to file your tax return until even later.
This situation can occur no matter the year — not just for 2013. In fact, if there are tax extender issues to worry about (including retroactive tax breaks), you might need to put off filing for even longer. Also, pay attention to what Congress is up to because sometimes changes are made after the fact that can change your tax liability.
All taxpayers will see delayed filing this year. Those who are accustomed to filing early in January and then receiving a refund before February are going to be disappointed. Even if you decide to e-File, you can’t submit your tax return until January 30. The reason for this is due to the tax portion of the fiscal cliff deal that was passed at the beginning of this year.
With Congress wrangling over finances and other issues, it’s no surprise that the IRS isn’t really prepared for what’s coming. Additionally, with the makeup of Congress in recent years, and the current state of U.S. politics, it’s likely that more of these issues will be seen in the future. Tax break extenders tend to be limited, and come up for vote every couple of years. They are also often used as political bargaining chips, so you will probably see similar issues in future years.
There are also certain forms that are still being tested. As the tax code changes, new forms need to be tested. Additionally, the IRS also makes it a point to change forms so that they are easier to understand or easier to fill out. So, you might not be able to file until February or March, depending on what tax breaks you are trying to claim. Check with a trusted tax preparer to find out whether your tax filing will be delayed. Most filers will just be delayed until January 30, but others may see bigger delays.
For many home business owners, the 1099-K has been a source of consternation. The 1099-K was supposed to take effect for tax year 2011 (and many third-party processors sent the form out), but its implementation was delayed until tax year 2012. So, if you are an independent contractor working out of your home office, you might receive this tax form. The 1099-K is issued by credit card processors, banks, and services like PayPal that handle transactions between two parties.
If you have at least 200 transactions, and have done $20,000 in business with the help of payment processors, you have to be issued a 1099-K. Even if you did less than that, and a 1099-K isn’t necessary, the payment processor can choose to issue you one of these forms anyway, and report your income to the IRS.
It’s important to understand, though, that the 1099-K only shows your gross income. It doesn’t include expenses, fees, or chargebacks. You will need to keep good records so that you can demonstrate how various costs offset some of the income shown.
Additionally, many independent contractors might see some of their income double reported. If you have a client that pays via PayPal, you might receive a 1099-MISC from the client, and that income might also be reported as part of the 1099-K. Keep track of what income is double-reported. You might need to be able to supply records that cross-reference the income so that you can prove that it has already been reported. This can be tedious, but it’s important.
Still Time to Get Tax Deductions
Finally, you still have time to take some tax deductions. You can contribute to a Traditional IRA, and have it count for the previous year, up until April 15. Just make sure you are clear that you are making a previous year contribution. On top of that, you can also make previous year contributions to a Health Savings Account if you have one. If you are teetering on the edge of a tax bracket, or if another deduction might help you keep you income lower for another tax benefit, making an extra contribution can be a help.
Pay attention to the tax laws and potential changes so that you are prepared for what to expect. If you aren’t certain about what deductions and credits are available to you, ask a trusted tax professional for more information. Plan ahead for your taxes so that you know what you might be required to pay, as well as so that you can make a better tax plan for the coming year.