Do You Participate in the gig economy?

 If you provide car rides or other shared services, what you earn may be taxable.  

If you use one of the many online platforms available to rent a spare bedroom, provide car rides, or to connect and provide a number of other goods or services, you’re involved in what is sometimes called the sharing economy.

An emerging area of activity in the past few years, the sharing economy has changed how people commute, travel, rent vacation accommodations and perform many other activities. Also referred to as the on-demand, gig or access economy, the sharing economy allows individuals and groups to utilize technology advancements to arrange transactions to generate revenue from assets they possess - (such as cars and homes) - or services they provide - (such as household chores or technology services). Although this is a developing area of the economy, there are tax implications for the companies that provide the services and the individuals who perform the services.

This means if you receive income from a sharing economy activity, it’s generally taxable even if you don’t receive a Form 1099-MISC, Miscellaneous Income, Form 1099-K, Payment Card and Third Party Network Transactions, Form W-2, Wage and Tax Statement, or some other income statement. This is true even if you do it as a side job or just as a part time business and even if you are paid in cash. On the other hand, depending upon the circumstances, some or all of your business expenses may be deductible, subject to the normal tax limitations and rules.

The IRS encourages taxpayers participating in the sharing economy to understand the potential tax issues affecting them. The IRS is providing additional information to help people, and many tax professionals can assist with tax issues and questions related to this emerging area. The tax software industry is also looking at this area, and many software programs can help when people prepare their taxes in 2017.

The following tax issues may apply to those participating in the sharing economy:

• Issues for Individuals Performing Services
  • Filing Requirements
  • Employee or Independent Contractor
  • Tax Payments, Including Estimated Tax Payments
  • Self-Employment Taxes
  • Depreciation
  • Rules for Home Rentals
  • Business Expenses
  • Receiving Form 1099-K, Payment Card and Third Party Network
• Issues for the Companies Providing Services
  • Determining Whether the Individuals Providing Services are Employees or Independent Contractors
  • Employer/Payer Employment Tax Obligations
  • Reporting on Form 1099-K, Payment Card and Third Party Network Transactions

Issues for Individuals Performing Services

The IRS reminds taxpayers in the sharing economy that there are several tax components they need to keep in mind throughout the year, not just when it comes time to file the tax return. Important areas include these:

Filing Requirements

Whether or not you participate in the sharing economy, if you received a payment during the calendar year as a self-employed individual, an employee or a small business, you may be required to file a tax return to report that income to the IRS. This includes payment received in the form of money, goods, property, or services.

Need help with your Blue Springs income taxes?  Contact Alliance Financial & Income Tax at 816-220-2001.  We are here to help.

Grain Valley Income Tax Record Retention Guide

Federal law requires you to maintain copies of your Grain Valley income tax returns and supporting documents for three years. This is called the "three-year law" and leads many people to believe they're safe provided they retain their documents for this period of time.

However, if the IRS believes you have significantly under reported your income (by 25 percent or more), or believes there may be indication of fraud, it may go back six years in an audit. To be safe, use the following guidelines.

Create a Backup Set of Records and Store Them Electronically. Keeping a backup set of records -- including, for example, bank statements, tax returns, insurance policies, etc. -- is easier than ever now that many financial institutions provide statements and documents electronically, and much financial information is available on the Internet.

Even if the original records are provided only on paper, they can be scanned and converted to a digital format. Once the documents are in electronic form, taxpayers can download them to a backup storage device, such as an external hard drive, or burn them onto a CD or DVD (don't forget to label it).

You might also consider online backup, which is the only way to ensure that data is fully protected. With online backup, files are stored in another region of the country, so that if a hurricane or other natural disaster occurs, documents remain safe.

Caution: Identity theft is a serious threat in today's world,  and it is important to take every precaution to avoid it. After  it is no longer necessary to retain your tax records, financial  statements, or any other documents with your personal  information, you should dispose of these records by shredding  them and not disposing of them by merely throwing them away  in the trash.

Business Documents To Keep For One Year

• Correspondence with Customers and Vendors
• Duplicate Deposit Slips
• Purchase Orders (other than Purchasing Department copy)
• Receiving Sheets
• Requisitions
• Stenographer's Notebooks
• Stockroom Withdrawal Forms

Business Documents To Keep For Three Years

• Employee Personnel Records (after termination)
• Employment Applications
• Expired Insurance Policies
• General Correspondence
• Internal Audit Reports
• Internal Reports
• Petty Cash Vouchers
• Physical Inventory Tags
• Savings Bond Registration Records of Employees
• Time Cards For Hourly Employees

Business Documents To Keep For Six Years

• Accident Reports, Claims
• Accounts Payable Ledgers and Schedules
• Accounts Receivable Ledgers and Schedules
• Bank Statements and Reconciliations
• Cancelled Checks
• Cancelled Stock and Bond Certificates
• Employment Tax Records
• Expense Analysis and Expense Distribution Schedules
• Expired Contracts, Leases
• Expired Option Records
• Inventories of Products, Materials, Supplies
• Invoices to Customers
• Notes Receivable Ledgers, Schedules
• Payroll Records and Summaries, including payment to pensioners
• Plant Cost Ledgers
• Purchasing Department Copies of Purchase Orders
• Sales Records
• Subsidiary Ledgers
• Time Books
• Travel and Entertainment Records
• Vouchers for Payments to Vendors, Employees, etc.
• Voucher Register, Schedules

Business Records To Keep Forever

While federal guidelines do not require you to keep tax records "forever," in many cases there will be other reasons you'll want to retain these documents indefinitely.

• Audit Reports from CPAs/Accountants
• Cancelled Checks for Important Payments (especially tax payments)
• Cash Books, Charts of Accounts
• Contracts, Leases Currently in Effect
• Corporate Documents (incorporation, charter, by-laws, etc.)
• Documents substantiating fixed asset additions
• Deeds
• Depreciation Schedules
• Financial Statements (Year End)
• General and Private Ledgers, Year End Trial Balances
• Insurance Records, Current Accident Reports, Claims, Policies
• Investment Trade Confirmations
• IRS Revenue Agents' Reports
• Journals
• Legal Records, Correspondence and Other Important Matters
• Minute Books of Directors and Stockholders
• Mortgages, Bills of Sale
• Property Appraisals by Outside Appraisers
• Property Records
• Retirement and Pension Records
• Tax Returns and Worksheets
• Trademark and Patent Registrations

Personal Documents To Keep For One Year

• Bank Statements
• Paycheck Stubs (reconcile with W-2)
• Canceled checks
• Monthly and quarterly mutual fund and retirement contribution statements (reconcile with year end statement)

Personal Documents To Keep For Three Years

• Credit Card Statements
• Medical Bills (in case of insurance disputes) 
• Utility Records
• Expired Insurance Policies 

Personal Documents To Keep For Six Years

• Supporting Documents For Tax Returns
• Accident Reports and Claims
• Medical Bills (if tax-related)
• Property Records / Improvement Receipts
• Sales Receipts
• Wage Garnishments
• Other Tax-Related Bills

Personal Records To Keep Forever

• Audit Reports
• Legal Records
• Important Correspondence
• Income Tax Returns
• Income Tax Payment Checks
• Investment Trade Confirmations
• Retirement and Pension Records

Special Circumstances

• Car Records (keep until the car is sold)
• Credit Card Receipts (keep with your credit card statement)
• Insurance Policies (keep for the life of the policy)
• Mortgages / Deeds / Leases (keep 6 years beyond the agreement)
• Pay Stubs (keep until reconciled with your W-2)
• Property Records / improvement receipts (keep until property sold)
• Sales Receipts (keep for life of the warranty)
• Stock and Bond Records (keep for 6 years beyond selling)
• Warranties and Instructions (keep for the life of the product)
• Other Bills (keep until payment is verified on the next bill)
• Depreciation Schedules and Other Capital Asset Records (keep for 3 years after the tax life of the asset)

Reviews for Alliance Financial & Income Tax of Blue Springs Missouri

Tax Forms to Expect from These 3 Common Sources

 True, filing your tax return may not be on your radar for another week or two at least, but knowing exactly which tax forms you need makes a huge difference when the time comes.So what records should you expect? That’s different for each taxpayer, but here are three common sources.

What tax forms do I need from my employer?

You’ll definitely need to look out for a Form W-2 if you’re an employee of a business. That W-2 will summarize the wages you received and taxes you paid over the course of the year.

If you participate in an employer-provided 401k retirement plan, the total amount you set aside is also reported on your W-2. Your 401k savings could qualify you for the Saver’s Credit, and, if you file with 1040.com, we’ll automatically check and see if you qualify.

Another statement you might receive based on your participation in employer-sponsored benefits programs is a Health Savings Account (HSA) statement – Form 1099-SA. Like with the 401k, you’ll only receive this form if you participate in the HSA plan.

What tax forms do I need if I do contract or freelance work for others?

If you're a self-employed freelancer or independent contractor, you should receive a Form 1099-MISC from each client who paid you more than $600 over the course of the year.

If you received payment through PayPal or other third-party payment sites (income from Uber or Lyft, for example), you may also receive a Form 1099-K. This form notifies the IRS how much income you made online from various clients if you had more than 200 transactions and earned more than $20,000 through the third-party payment processor.

Even if you don’t receive these statements from your clients or payment processors (whether it’s due to the threshold requirement or negligence), you’re still required to report all of your self-employment income to the IRS.

What tax forms do I need for healthcare?

As far as healthcare is concerned, the question is primarily whether you (and your household) were covered for the entire year. If you know that you were, you don’t have to worry about waiting for your 1095-B. Go ahead and file your return if you have the rest of your documentation.

Those who weren’t covered for the entire year, or aren’t sure, should wait for the 1095-B to make sure their personal records match the insurance provider’s records. You should also wait to file if your insurance is through the Health Insurance Marketplace (for which you’ll receive a 1095-A).

Tax time can become confusing.  Alliance Financial & Income Tax, your Grain Valley income tax preparation office, is available to assist you with any questions you might have.  Give them a call at 816-220-2001 or visit them on line at www.afitonline.com.

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