It's the season for tornadoes, hurricanes, flooding and devastating winds.  So, I thought it would be a good time to review the rules for taking money out of your retirement accounts to get you through the storms. 

The IRS has just released a new set of FAQs on the provisions that the SECURE Act 2.0 provides for relief of individuals impacted by federally declared disasters. The SECURE 2.0 Act allows for:

On March 11, 2024, the new rules that the U.S. Department of Labor created to clarify the classifications between independent contractors and employees went into effect. Many employers and freelance contractors have wanted a better distinction between what constitutes the difference and this document is the final rule on that issue.

Some employers preferred classifying contractors as non-employees because it would save them a lot of money since they would not have to pay them overtime or minimum wages, give employee benefits, withhold taxes, pay for half of their social security/medicare and they would enable them to let them go without any reason.

Congress passed a law requiring the IRS to use private collection agencies (PCA). These agencies assist the IRS in collecting certain overdue tax accounts.  So, if you are approached, how to you know it is legit and not a scam?  Read on...

They will place your account with a PCA for collection of your unpaid tax liability because you met one of the following criteria:

The main function of all the activities at Seagull Technologies Inc is to education the small business community.  Here is an example of just hiring someone to take care of some of your business functions and not knowing if they are doing it right can cost you big time:

In Taylor v. Comm’r, T.C. Memo. 2024-33 (March 25, 2024), the Tax Court upheld the Trust Fund Recovery Penalty (TFRP) against Rodney Taylor for willful failure to pay employment taxes.

A lot of small businesses hire independent contractors to do projects that don't require a regular full or part time employee. Part of that process can be have that person fill out a W-9 form so that you have the proper information to give them a 1099-NEC form the next January showing how much you paid them.

That said, do you have to have every person you hire fill out a W-9? The simple answer is no.  The complex answer is maybe.  If you are hiring another business to do a single task for you, then probably not providing they give you invoices for the work.  However, if you are sub-contracting work out to another person or business, then you probably should.  

The IRS tax brackets are probably the misunderstood part of the tax code.  Most people think that all of their income is taxed at the highest percentage that their income throws them into.  This is not true.  The income tax system in the United States is a progressive tax system. That means that different parts of your income is taxed at different rates.

One of the questions I often get is how will it affect my taxes if I take this much taxable income from a retirement account?  Or how much in taxes will it cost me if I bring in this extra income?  That is where understanding the tax tables come into play.  It all starts with your filing status, because the first thing you have to do is figure out your taxable income.

When working on people's taxes and have them have a balance due after starting that new job, I have to have a conversation explaining how the new W-4 form works.  You know, that form you have to fill out to tell your employer how much money to withhold from your paycheck to cover your tax liability.

If you don't like owning taxes at the end of the year, then here are some things you should know:

1. When you have to fill out a W-4 form

You are not required to file a W-4 form with your employer each year, but a lot of people don't realize that you are allowed to fill out a new form any time your situation changes.  Like you get a second income coming into the household, get married or you have a new child.

Those who make more than $400,000 aren't the only people the IRS is looking at regardless of what you hear in the media.

The IRS believes that sole proprietors' underreporting of income and overreporting of expenses cost the government about $182 billion of projected lost revenue not paid voluntarily in tax year 2021 alone.  This figure doesn't even take into consideration underpaid or unpaid self-employment taxes.

Here are some of the suggestions that government auditors are looking at to lower noncompliance: