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45 Replies Last post: Mar 12, 2008 9:35 AM by clnshirtz

Jan 8, 2009 10:24 AM

SBOCTeam 194 posts since
Jul 27, 2007

Community Members,

Please join us in welcoming Barbara Weltman to your Small Business Online Community. Barbara is one of the nation's leading authorities on taxes and small business and she is here today to answer your questions about business taxes. Today Barbara will be using the screen name bigideas4biz

About Barbara:

Barbara Weltman is a contributing writer for Inc.com, PINK magazine and New York Enterprise Report, and is a sought-after media commentator who has been featured in The New York Times, The Wall Street Journal, The Washington Post, Reuters, Forbes.com, Marketwatch.com, WABC-TV, Fox News, CNNRadio and CNBC. Barbara is also a top selling author and has written the titles "The Rational Guide to Building Small Business Credit" which features a foreword by Dun & Bradstreet, "J.K. Lasser's Small Business Taxes" and "The Complete Idiot's Guide to Starting a Home-Based Business."

Barbara's also publishes the highly-popular newsletter, "Big Ideas for Small Business". The online publication addresses the unique needs and interests of the small business community and explores market-impact issues such as health insurance, energy costs, and employee retention. For more information about Barbara log on to http://www.barbaraweltman.com/

Logistics for events:

Please start posting tax related questions to Barbara Weltman. Remember the community guidelines; stay on topic and be professional.

The event will be moderated to queue the questions for our guest. After a question is posted it may be delayed and/or moved into a queue. You do not need to repost. Your question has been received but is in a queue waiting for the guest to respond to.

Barbara will attempt to answer as many questions as possible; however she may not get to all questions.

We will start with a few of the advance questions that many of you have posted, along with tax questions posted in the last week.

Prior to relying on any legal, tax or financial advice or recommendations provided herein, you are advised to consult with your attorney, financial adviser and/or tax professional to verify the information provided and to determine the applicability of any federal, state or industry specific laws and/or regulations that may apply to you. Bank of America or Barbara Weltman shall have no liability for legal, investment, finance and/or tax decisions based on the information provided.

Tags: barbara_weltman, small_business_taxes, taxes Report as inappropriate

SBOCTeam 194 posts since
Jul 27, 2007

1. Re: Live Q&A with Barbara Weltman from 2-5PM Going On Now Mar 5, 2008 9:51 PM

Our first question comes from user Noel Building and the user asks:

I don't currently provide health insurance for my employees but I'd like to give my employees a monthly stipend to help them go to the doctor or pay medical cost but I don't want them to pay taxes on the money. A colleague of mine told me that if I could somehow pay into an HSA for these employees, they would not have to pay taxes on the stipend. Is this true? If not how do I get my employees money for health care without them paying taxes on the money?

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BigIdeas4Biz 19 posts since
Feb 7, 2008

2. Re: Live Q&A with Barbara Weltman from 2-5PM Going On Now Mar 5, 2008 2:04 PM

in response to: SBOCTeam

You might consider using a health savings account (HSA), which is an arrangement that combines a high-deductible (low cost) health plan with a savings-type account. The employer can pay the cost of the insurance and/or make contributions to the HSA; whatever the employer pays is deductible and not taxable to the employees. Alternatively, the employer can arrange for the insurance, with the employees paying for it themselves via an arrangement that lets them use pre-tax dollars for this purpose. To learn more, see IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, at http://www.irs.gov/.

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SBOCTeam 194 posts since
Jul 27, 2007

3. Re: Live Q&A with Barbara Weltman from 2-5PM Going On Now Mar 5, 2008 9:51 PM

Barbara, the next question comes from user BDS INC and the he asks:

I own a property management company and I have had tenants break their leases on home rentals. Since my business expected full revenues from those rental agreements, can I write off the rent I didn't collect as bad debt?

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BigIdeas4Biz 19 posts since
Feb 7, 2008

4. Re: Live Q&A with Barbara Weltman from 2-5PM Going On Now Mar 5, 2008 2:06 PM

in response to: SBOCTeam

Whether you can claim a bad debt deduction depends on your method of accounting. If you use the accrual method to report your income and expenses, you can claim a bad debt deduction, which acts as an offset to the rental income you have already accrued but haven't collected; no deduction can be claimed for future rents you will never see. If you're on the cash basis, no bad debt deduction is allowed in this case. For more information, see IRS Publication 535, Business Expenses, at http://www.irs.gov/. Of course, you can consult an attorney to pursue legal action to enforce the lease terms and collect the rental income that is owed to you.

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SBOCTeam 194 posts since
Jul 27, 2007

5. Re: Live Q&A with Barbara Weltman from 2-5PM Going On Now Mar 5, 2008 9:53 PM

Great answers Barbara,

User MagPublisher asks:

I volunteer my services to a local non profit organization, designing and writing their monthly newsletter. I know I can declare expense I incur like image fees, etc. to create the newsletter, but is their anyway to "bill" my time, so that I can declare my time as a donation?

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BigIdeas4Biz 19 posts since
Feb 7, 2008

6. Re: Live Q&A with Barbara Weltman from 2-5PM Going On Now Mar 5, 2008 2:11 PM

in response to: SBOCTeam

Unfortunately, you can't claim a charitable contribution deduction for the value of your time spent in charitable endeavors. You can, however, deduct all of your out-of-pocket expenses, such as telephone calls, office supplies, and use of your car (actual costs or 14 cents per mile). For more information about charitable giving, see IRS Publication 526, Charitable Contributions, at www.irs.gov.

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SBOCTeam 194 posts since
Jul 27, 2007

7. Re: Live Q&A with Barbara Weltman from 2-5PM Going On Now Mar 5, 2008 9:57 PM

Barbara our next question comes from Luckiest, the community's top contributor and he asks:

Question. Social Security Benefits - If we (my wife and I) put our Social Security Benefits into an Individual Retirement Account (IRA), does that save us from being taxed on the Social Security?

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BigIdeas4Biz 19 posts since
Feb 7, 2008

8. Re: Live Q&A with Barbara Weltman from 2-5PM Going On Now Mar 5, 2008 2:16 PM

in response to: SBOCTeam

IRA contributions must be based on earned income--from a job or self-employment (there are some limited exceptions, such as for alimony). Social Security benefits are not viewed as earned income for this purpose. Also keep in mind that for traditional IRAs, contributions cannot be made once you reach age 70-1/2; there's no age limit for Roth IRA contributions. For more information, go to IRS Publication 590, Individual Retirement Arrangements, at www.irs.gov.

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SBOCTeam 194 posts since
Jul 27, 2007

9. Re: Live Q&A with Barbara Weltman from 2-5PM Going On Now Mar 5, 2008 2:19 PM

Our next question comes from username Joseph and he asks:

I want to find out how can I file my income tax this year if I don't have a 1099 from my last employer. Can I just claim the money I deposited in my bank account? How can I do this filings? What would be the ramification on my part without having a 1099?

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BigIdeas4Biz 19 posts since
Feb 7, 2008

10. Re: Live Q&A with Barbara Weltman from 2-5PM Going On Now Mar 5, 2008 2:23 PM

in response to: SBOCTeam

Are you an employee or an independent contractor? If you are an employee and did not receive a W-2 form from your employer, don't let this stop you from filing a return. You should know what your wages were for 2007 by your last pay stub for the year. However, you should contact the IRS; it will help you prepare a substitute W-2 form to attach to your paper return. If you are an independent contractor who didn't receive a Form 1099 for work performed, again don't let this stop you from filing a return. You should have been keeping records of the payments you've received. Always report the income you received.

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SBOCTeam 194 posts since
Jul 27, 2007

11. Re: Live Q&A with Barbara Weltman from 2-5PM Going On Now! Mar 5, 2008 9:56 PM

Barbara, our next question comes from another of our top contributors, Ed O'Gee and he asks:

This year we contracted two workers who were recently incarcerated, to do some manual work for our firm. These guys were paid as contractors, but my question is, I know what I paid them is included in our overall labor costs, but is my firm also eligible for a tax credit since we provided work to recently released ex-offenders?

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BigIdeas4Biz 19 posts since
Feb 7, 2008

12. Re: Live Q&A with Barbara Weltman from 2-5PM Going On Now! Mar 5, 2008 2:30 PM

in response to: SBOCTeam

A business may be eligible to claim a tax credit, called the work opportunity credit, if they hire people from certain disadvantaged groups (which includes ex-felons). The credit usually is a percentage of first-year wages for each eligible employee. However, in order to be able to claim the credit, you must receive certification from your state agency that the workers qualify. This is done by completing within a timely manner IRS Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit; without this form no credit is allowed. To learn more about this tax credit, see the instructions to IRS Form 5884, Work Opportunity Credit, at www.irs.gov.

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SBOCTeam 194 posts since
Jul 27, 2007

13. Re: Live Q&A with Barbara Weltman from 2-5PM Going On Now! Mar 5, 2008 9:55 PM

Barbara, the next question come from RenRankins9 and the user asks:

I recently started working for someone who owns his own business, but I'm considered independent contract labor, or a "sub-contractor." I have to file my own taxes quarterly, and I need to know what percentage of my checks I need to set aside to pay said taxes. I live in Texas, so only Federal and self-employment taxes apply. Could someone please tell me the rates?

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BigIdeas4Biz 19 posts since
Feb 7, 2008

14. Re: Live Q&A with Barbara Weltman from 2-5PM Going On Now! Mar 5, 2008 2:39 PM

in response to: SBOCTeam

You only pay federal income tax and self-employment tax on your net earnings from self-employment (not on the gross payments you receive). You need to figure your net earnings (essentially your profits) by subtracting allowable deductions from your fees and payments. You can learn about how to figure your net earnings from self-employment by going to IRS Publication 334, Tax Guide for Small Business, at www.irs.gov.
Then, once you know your net earnings, you'll have a better idea of how much money you'll need to set aside for taxes. The federal income tax rates range from a low of 10% to a high of 35%. In addition, self-employment tax is 15.3% on net earnings up to $97,500 in 2007 ($102,000 in 2008), plus 2.9% on net earnings over these limits; one half of the self-employment tax is deductible. Bottom line, there's no hard and fast way to know what percentage of your earnings that you need to set aside for taxes. Best bet: Read up on estimated taxes so you learn about the minimum payments to make in order to avoid penalties (see IRS Publication 505, Tax Withholding and Estimated Taxes).

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