Category: Tax for Business

PriorTax keeps you current on the most recent tax for business news from the IRS. There’s no need to decipher confusing IRS lingo because we’ve got you covered when it comes to business taxes. Always check back here for information on new business deductions and credits that you should be claiming for your LLC or Partnership. From claiming deductions to filing your return, we handle your taxes while you handle your business.

If you have questions about your business tax, then leave a comment on our blog posts. Our tax experts will provide you with the answers that you need!

Archive for the ‘Tax for Business’ Category

Self Employment Tax Write Off

Posted by admin on March 30, 2023
Last modified: March 29, 2023

When you work for yourself, the need to plan for taxes can’t be overstated. Therefore, we always suggest that freelancers store away 20-30% of their income to pay what they owe in taxes. This should cover taxes due from both income and self-employment sources. The key is planning ahead of the IRS and keeping better track of income and expenses throughout the year. As a freelancer, you’ll likely be able to deduct typical household expenses from your taxable income. For example, you can deduct any work-related expenses you spend on business-related items such as cell phones, Internet service, software, and office supplies. You may also be able to benefit from self employment tax write off some home office expenses.

Why Do self-employed pay more in taxes?

Are the tax regulations different for self-employed individuals? The short answer is a resounding yes. The more extended response is that there isn’t a huge difference, but it can certainly seem like it. Self-employed people have to pay increased Social Security and Medicare taxes, yet they are also allowed certain write-offs to counterbalance this additional expenditure. However, due to the absence of tax deductions being taken out, their overall tax bill might appear excessive.

Self Employment Tax Write Off

Are Self-employed paying more in FICA taxes?

Individuals working for themselves are subject to a higher FICA tax rate than those employed by a company. Specifically, the total percentage of Social Security and Medicare taxes they must pay is 7.65% greater than that traditional W-2 employees are required to pay – an amount that can add up significantly over time.

Self-employed claim business tax write-offs.

One of the major benefits for those who are their boss is the ability to take advantage of beneficial business tax write-offs. These write-offs often mean that a person who works on their ends up owing less taxes than someone with a W2 job. Unfortunately, however, only some know how to utilize these deductions advantageously.

Self-employed do not get tax withholding.

One unexpected challenge for freelancers, gig workers, small business owners, or independent contractors is that their taxes are often much higher than traditional W-2 employees. This is because most workers in this category don’t have any tax withheld from their salaries. As a result, when filing their taxes, many are surprised at how much they need to pay the IRS. On the contrary, W-2 employees usually have Social Security, Medicare, and income taxes are taken out of each paycheck throughout the year. Therefore they generally receive a large refund once it’s time to file their returns.

Those freelancing or operating as independent contractors need an employer to take care of their taxes. It can be a nasty surprise when realizing how much they owe as they file their taxes. Those who were used to the W-2 lifestyle they’re now paying more in taxes; however, it’s just that they are paying all of it in one go.

So, what taxes do self-employed need to prepare?

When it comes to filing taxes, self-employed individuals face the dilemma of paying two distinct types: income and self-employment tax. But just how much will be levied on your earnings? Generally speaking, all incomes are subject to income tax.

Are you aware of the income tax expenses?

Income tax applies to wages, business income, interest, rent, and pensions – almost any type of income. As such, self-employed individuals will likely be in the 10-22% range for their tax bill. The average rate is usually 14%.

Why you shouldn’t use your effective tax rate to budget?

There may be better ways to budget than the effective tax rate because the calculator results show a much lower percentage regarding federal income taxes. To explain this further, an example will be used – say you earned $50,000 from self-employment. The top income tax rate for this amount is 22%. This does not provide the whole picture, though, as other factors must also be considered – such as your standard deduction, which will reduce what you owe at tax time.

This information needs to indicate what your actual tax rate will be. It is rather meant to show how much of your income must be put aside when filing taxes.

Important tax breaks that will lower your taxes‍

Knowing how much will be taken off your income taxes can provide beneficial information. However, to understand why two rates may not match up, one must first know what is subtracted from a person’s taxable income. These subtractions include a standard deduction of $12,950, half of the self-employment tax amounting to $3,672, and a qualified business income deduction equaling $9,600.

Your standard deduction ($12,950)
Half of your self-employment tax ($3,672)
Your qualified business income deduction ($9,600)

After subtracting the necessary amounts, your taxable income should be approximately $22,000. This will likely place you in the 12% tax bracket.
To ensure that you can pay your taxes, allotting 5% of your total earnings ($48,000) is recommended. Nevertheless, this doesn’t mean that it’s all there is to taxation.

What do you need to know about self-employment tax?

Two government programs, Social Security and Medicare, collect a self-employment tax from working individuals that don’t have an employer. In these cases, the tax is collectively known as “self-employment taxes,” with a combined rate of 15.3%. This type of tax differs from income taxes because it only applies to business income reported on a 1099 form. On the other hand, those people who do have employers are subject to “FICA taxes,” which are automatically deducted by their employer from their paychecks.

Why not all business income is subject to self-employment tax?

Not all business income is liable for self-employment tax – only net business income. This means that the remaining amount is subject to taxation after any relevant deductions, such as inventory purchases or phone bills. To this end, utilizing write-offs can be an excellent way to reduce total taxes due on income earned from a trade or profession.

For the most accurate prediction of your taxes, you must use the net monthly self-employment income in the corresponding calculator.

How to find tax write-offs with PriorTax?

Do you need help getting the most out of your tax write-off options? PriorTax offers a range of services to ensure self-employed workers take advantage of all available deductions. Our team provides an end-to-end solution so that you get everything when it comes to filing your taxes.

How to budget for self-employment taxes?

Creating a budget for self-employment taxes is essential in the United States. This is due to the “pay-as-you-go” tax system that requires taxes to be paid as money is earned, not when filing taxes. Therefore, to avoid penalties and interest, anybody expecting to owe more than $1,000 in taxes should make estimated payments during the year. Doing so ensures they are not fined when they file their final tax return.

Money management can often feel like a daunting task, especially when money is tight. Nevertheless, setting aside funds for tax payments can be achieved with the right strategies and avoiding certain financial pitfalls. Here we present some time-tested methods that have proven effective for keeping yourself on track financially.

Discover how to maximize your income. For those starting as self-employed, a W-2 job often serves as the initial point of reference for what constitutes a competitive wage. Yet things can feel uncertain when they take the plunge and become their own boss.

One common mistake that is made is neglecting to consider things such as taxation, leading to an underestimate of their price and therefore undercharging for their services.

There is no doubt that it’s time to raise your rates. It is important to add a mark-up to every invoice you issue so that you can cover the self-employment taxes. Always underestimate yourself, and make sure you are paying attention to your services. Each time you submit an invoice, ensure that there is sufficient payment for the work performed.

Establishing a payment plan that suits you best

Surprising to some, there is no obligation to make estimated tax payments on the exact due date. Instead, paying as often as required is possible to stay on top of things.

Many individuals favor making regular biweekly or monthly payments to avoid holding onto their taxes for too long. Plus, with a set schedule, it becomes easier to become accustomed to the process and avoid relearning the procedure each quarter.

Gaining control with auto transfers

Like enrolling in a gym membership without much thought, taking advantage of auto transfers is an easy way to put money away for yourself. In addition, many banking institutions provide the opportunity to move funds from one account to another automatically – making saving for taxes effortless and stress-free.

Change it up with a new bank

Instead of making your savings account too easily accessible, why not open an account at a totally different bank? That way, you’ll need extra effort to transfer money. On the other hand, all it takes is a single click of the button, and funds are moving back and forth – so adding an extra layer might be desirable.

Self Employment Tax Filing in 7 Steps

Posted by admin on March 24, 2023
Last modified: March 25, 2023

Don’t let the thought of tax filing your self-employment tax gets you down – it’s actually easier than you think. Here are 7 simple steps to make sure your hard-earned money is going exactly where it needs to go. So, gather up your forms and keep those lips curved upwards as we walk through the process together!

Whether you’re a freelancer, gig worker, or independent contractor, understanding the correct way to calculate, pay and file your self-employment taxes is essential for anyone who has their own business. By following these steps, you’ll be able to make sure all of your IRS requirements are met with minimal stress involved!

self employment tax

Step 1. Self-Employment Tax Filing

It is important to determine when you need to pay self-employment tax. Individuals who are

– sole proprietors,

– independent contractors,

– freelancers,

– small business owners,

– gig workers or

– have a side hustle may all be liable for this type of tax.

This applies regardless of it being your primary source of income. For example, even though you are employed in a 9-to-5 role, any money earned from selling handmade jewelry on Grailed, eBay or Etsy still needs to be taxed accordingly. Ultimately, all forms of “earned income” – meaning money exchanged for goods and services – should be included in the self-employment tax payment plan.

Are you aware of the self-employment tax rate?

Self-employment taxes are necessary for those running their own businesses and include Social Security and Medicare. Normally, these payments would be withheld directly from W-2 employees’ wages. However, since freelancers don’t have employers, they need to take care of this themselves. So, unfortunately, it adds an extra 15.3% to your federal and state income taxes.

Step 2. How Much Have You Earned?

Before you can accurately calculate your taxes, having a well-recorded set of your income from the year is essential. Many customers and third-party platforms such as PayPal or Stripe will send out end-of-year tax forms that can provide helpful information.

Essential documents to review include 1099-NEC (for those who earned more than $600 from a single client) and 1099-K (for those in receipt of payments via a third-party payment processor). By January 31st, these should be sent out.

Additionally, it is prudent to thoroughly review bank statements to check for any income that may not have been reported on their end but is still taxable. This should include anything below the $600 reporting threshold.

Step 3. Gather and Add up Your Expenses

The third essential part of getting your taxes done right is to tally up all your business expenses. Again, it is highly recommended that you already have connected with a Tax Professional from PriorTax, to track your expenditures during the year. Therefore, while reviewing your banking information and credit card purchases, be sure to pick out any costs related to running your business.

Tax filing for self-employed workers may be daunting, but having a clear idea of your annual business expenses is key. In addition, knowing what to write off from your gross income simplifies the process – have no fear, though! Download our app and connect accounts for an easier tax season.

Some typical deductions are:

 – Your phone bill

 – Office Supplies

 – Computer and software

 – Continuing education costs

 – Auto expenses associated with business activities

 – Marketing and advertising charges necessary to secure new customers.

By determining how much you’ll actually be taxed on after reducing your gross income by all applicable business costs, you can ensure that everything has been calculated correctly and accurately as the end of the year draws near. So don’t feel bad about leaving things until the last minute – it’s a typical situation for freelancers and self-employed individuals!

Step 4. Calculating and Estimate your tax debt

As a freelancer, come tax season, you may be feeling the pressure, particularly because of the 15.3% self-employment tax that you are liable for. This can make your tax bill unexpectedly high compared to when you were previously employed with someone else.

W-2 employment has its advantages regarding taxes in one regard: less surprises at payment time. The IRS automatically withholds income and FICA taxes from employee earnings and remits them at the proper time. That kind of convenience is not available as easily to self-employed people, so they have to make extra effort to make sure everything is up-to-date and accurate to know how much they owe on their taxes.

Figuring the amount of your freelance tax

Do you remember taking on steps 2 and 3? You can now make use of all that work! To compute your SE tax, you must first figure out your net income. This means subtracting all your business expenditures from your total income.

For instance, you bring in gross revenue of $10,000 with $5,000 for business expenses. This would give you a net income of $5,000. Your SE tax will then be based on this amount: in this case, it would be about $765 ($5,000 x 15.3%).

Step 5. Understanding your tax schedule

It might come as a surprise to some, but taxes are not due on April 15th. Instead, the time of payment is determined by when income is earned. Employers consider this requirement by remitting their payroll taxes throughout the year.

Independent contractors and freelancers, however, need employers to process these payments for them. It is often incumbent upon them to submit estimated tax payments each quarter in order to keep up with tax requirements. These payments must be delivered no later than the fifteenth business day of the month following the end of a quarter:

Quarter 1 January-March, must be paid by April 15th;

Quarter 2 April-June – July 15th;

Quarter 3 July-September – October 15th; and

Quarter 4 October-December – January 15th.

Are you expecting to owe more than $1,000 in taxes to the IRS? Making quarterly payments is essential, or you could face underpayment penalties. It’s important to work out exactly how much should be paid by the due date. To this end, why not try our quarterly tax calculator – it can help clarify whether payment is even necessary for you.

Step 6. Which Taxes Do You Have to File?

It is important to assess whether you need to file taxes or not. Individuals with solely W-2 income and earnings of less than the standard deduction ($12,400 for 2021) do not have to worry about filing a tax return.

Those who are self-employed, however, may be less fortunate. The IRS calls for those with net earnings of $400 or more to file a tax return as a way to collect their self-employment tax – even though there may be no income tax due at this rate.

Step 7. Start Tax Filing with PriorTax 

Completing your tax forms is an important part of filing your annual return. Here are the documents to be aware of:

The 1040 Tax Document

This is a document that will be familiar to many people. The Tax Form 1040 is the structure that individual taxpayers use in order to identify all their taxable income and figure out what taxes they owe accordingly.

Schedule C

Those who report self-employment income are obligated to submit a form known as “Schedule C.” With this document, individuals must provide documentation of both their gross business earnings and expenditures.

As part of filing federal taxes, you’ll attach a Schedule C to Form 1040. This form can contain categories that can be tough to comprehend, but don’t worry! Instead, let’s look at some of these head-scratchers and consider our comprehensive guide for completing Schedule C for a step-by-step breakdown.

Schedule SE

Computing Your Self-Employment Tax. Calculating your self-employment tax is made easy with the help of a special form – the IRS’s own, Form 1040, Schedule SE.

Do you feel overwhelmed with tax forms and categorizing expenses? 

PriorTax can offer relief. Our Tax Professionals will do the work for you so that filing your tax return doesn’t have to add to the stress of owing self-employment taxes. Reach out to us and allow us to take care of everything from filing to preparing your returns.

How Truck Driver can File Taxes 2023

Posted by admin on March 16, 2023
Last modified: March 17, 2023

How to write off meals away from home when Truck drivers file taxes

Tax season can be stressful for truck drivers filing tax, especially when figuring out the best way to write off meals away from home. Here are two options that you should consider.

The actual expenses method for meals allows you to deduct up to 80% of the cost of each meal, with the 2021 and 2022 tax years providing an increased deduction rate of 100% for restaurant meals.

For self-employed individuals, typically only 50% of business meals can be deducted on taxes. However, transportation workers like truckers are eligible for more generous tax break regulations due to their obligations under federal hours-of-service limits. It is unnecessary to drive a certain number of consecutive hours before taking a meal break to receive the 80% deduction; being subject to the rules is enough for eligibility. To use the actual expenses method, an accurate record must be kept that tracks all costs related to each meal, including taxes and tips.

Truck Driver Tax

The per diem allowance for Commercial Truck Drivers

In addition to actual meal expenses, truckers may also opt for a standard per diem allowance. Again, 80% of this can be used as a tax write-off.

When deciding which rate to go with, there are two options available; one is slightly more generous than another.

When it comes to per diem allowances, travelers have two options. First, the general federal set of rates can be looked up on the General Services Administration website.

Additionally, those in the transportation industry have access to special per diem rates that simplify their journey as they no longer need to search for specific rates each time they make a stop.

Unfortunately, travelers cannot switch between these two options, thus requiring them to choose between either the general federal rate or the transportation rate.

Do you want to know the special transportation per diem rate for 2022?

When considering travel expenses in 2022, you may ask whether to use actual expenses or a per diem rate. Regarding transportation for full days on-site away from home, a per diem rate is available in the Continental US, which grants an allowance of $69 and tax write off amount of $55.20 per day. However, for partial days away working, it drops to 75% of that full-day rate with a corresponding 80% tax deduction write off – allowing for a daily allowance at $51.75 and tax write off amount per day at $41.40.

Rather than using the easier per diem method, you should focus on the one that saves you the most money. Therefore, it is advisable always to be mindful of how much you are spending on meals. With this in mind, you can easily compare your write-off amount with each method and determine which offers more cost savings.

Calculating these savings with some help may seem tedious and time-consuming. Fortunately, PriorTax simplifies the process by tracking all meal transactions for ease of comparison. This takes away the need to rely solely on convenience when opting for the per diem approach – allowing for more efficient decision-making based on accurate figures.

Can you use a per diem rate for anything other than meals?

Do you know that you are allowed to write off more than just meal expenses through per diem rates? It’s true – a so-called per diem for “incidental expenses” allows travelers to deduct $5 in travel-related service fees and tips. This fee is not restricted by the 80% cap imposed on meals, it stands at a flat rate of $5 per day.

It might seem insignificant, but this allowance allows individuals to pack their own food from home without needing to search for specific amounts on hotel invoices. In addition, the amount of paperwork involved with self-employment tax filing is already time-consuming; services like PriorTax and its Tax Professionals offer help sorting out the details.

On What Taxes can PriorTax Help Independent Truck Drivers with?

PriorTax can help independent truckers understand the taxes they are responsible for. There are typically three or four types of taxes truckers must pay: Federal income tax, state income tax (depending on where you live), self-employment taxes (Social Security and Medicare taxes), and/or International Fuel Tax Agreement, or “mileage” taxes. In addition, truckers usually need to make payments to the IRS on a quarterly basis, with deadlines falling on April 15th, June 15th, September 15th, and January 15th of the next year. To get an idea of how much in quarterly taxes may be owed, our free calculator is always available for your convenience.

Federal Income Tax for Commercial Truck Drivers

When it comes to paying your taxes, one of the most important things you need to know is the current rate for your bracket. Depending on how much you make annually, this could range from 10% all the way up to 37%.

State income tax for Commercial Truck Drivers

The individual’s residing location determines income tax. Certain states do not implement this type of taxation at all, while others offer two strategies: progressive and flat tax rates. The former levies a percentage of an individual’s annual income, ranging from 0-11%, whereas the latter imposes one fixed rate that applies to all inhabitants in the area.

Progressive tax: Rates based on your income level, with typical ranges from 0% to 11%
Flat tax: The same rate for everyone in the state

Self-Employment Tax for Commercial Truck Drivers

As an owner-operator, you are uniquely positioned to cover the full 15.3% obligation for FICA taxes (used to fund Medicare and Social Security). On the other hand, traditional employees only pay 7.65%, with their employers covering the remaining half. This is why it’s referred to as “the hardworking taxpayer’s tax”, or simply “the friendly ‘you have to do it all by yourself’ tax”.

Fortunately, when you file your taxes at the end of year, this amount will be accounted for in adjustments to your taxable income – ultimately lowering your income taxes! With PriorTax makes this process much easier and stress free. Our dedicated Tax Professionals will calculate these deductions for you from start to finish.

IFTA tax

The International Fuel Tax Agreement (or more commonly known as “IFTTA”) tax is a form of taxation applicable to individuals operating motor vehicles for the purpose of transporting cargo and/or people between different states or Canadian provinces. Specifically, those who drive trucks with three or more axles, two axles weighing at least 26,000 pounds, or with a trailer with a combined weight of more than 26,000 pounds must comply.

This tax on motor fuel applies to drivers who do any of the following:

Drive cargo (or people) between different states or Canadian provinces
Drive a commercial truck with three or more axles
Drive a commercial truck with two axles that weigh at least 26,000 pounds
Drive a commercial truck with a trailer, where their combined weight is over 26,000 pounds
How to pay your IFTA taxes

When filing your International Fuel Tax Agreement (IFTAs) taxes, many states make it easy for you by providing an online portal. Just do a quick Google search for “[state] file IFA taxes online,” and you can get started right away. To use this hassle-free method, you must gather the total miles traveled and gallons of gas purchased in each state – the portal will take care of the rest!

Those who cannot take advantage of the convenience of an online filing option in their state must take two additional steps to complete the process. Firstly, they must calculate the fuel mileage across all states that have been driven during the quarter. This can be easily done by dividing the total miles traveled in all states by the number of gallons purchased in each state-information which can be obtained from completing steps one and two. Secondly, they need to determine how many gallons were burned while traveling through each individual state in that same time frame; this is achieved by dividing the total miles driven through that particular place by their overall fuel mileage.

How IFTA taxes work for Commercial Truck Drivers

Since 1983, the International Fuel Tax Agreement (known as “TFA”) has allowed truckers to only pay fuel taxes in their home state. Before this, drivers were required to file separate returns and pay taxes in each jurisdiction where they operated. With TFA, all that hassle is gone!

Truck drivers who need to pay fuel taxes can benefit from the International Fuel Tax Agreement (EITA). This tax applies in all 48 states across the continental US, plus all 10 Canadian provinces. Luckily, drivers can write off EIRA payments as a business expense on their Schedule C – list it under box 23.

Conveniently, truckers have access to automated accounting software that helps manage the full range of responsibilities associated with independent driving. Not only will this software simplify your taxes, but it also has the potential to help you save money.

Business Computer Tax Deduction

Posted by admin on March 8, 2023
Last modified: March 8, 2023

When it comes to technology, we are often torn in deciding on a device. Computers grace our homes, offices, and classrooms, but can you deduct them from your taxes? The answer is yes! If the computer is used for business purposes, it is classified as a legitimate tax deduction on your return.

The Tax Cuts and Jobs Act (TCJA) states that W-2 employees can no longer claim tax deductions for business expenses – including computers for work. However, self-employed individuals and freelancers still can! Before committing to a purchase, take a closer look at the details. For those employed by an organization, make sure to ask your employer to reimburse you instead.

When running a business from home, laptop expenses can be tax-deductible – but there’s one condition. You are allowed to write off the portion of the laptop pertinent to your business activities. Remember, this doesn’t need to be pinpoint and accurate; reasonable estimations work too.

Computers are no longer “listed property.” by the IRS

It is worth noting that the Internal Revenue Service (IRS) has decided to cease classifying computer systems as ‘listed property’. Items such as cars, which have a dual purpose for personal and professional use, previously came under this designation. The IRS currently has special protocols in place when it comes to dealing with these types of items.

By taking computers out of the equation, two outcomes have been created:

Gone is the need for taxpayers to monitor their use for tax deduction purposes: This crucial record-keeping requirement has been abolished.

Furthermore, it conforms with typical depreciation regulations: With these rules offering more flexibility, let’s delve into the meaning fully.

business computer tax deduction

Computer Depreciation for Tax Deduction

Now that you’re familiar with how to figure out what your business owes let’s dive into the details.

Generally, computers are classified as capital assets, and their value is reduced over a period of time dictated by the IRS – in this particular instance, it’s five years. Therefore, depreciation is an effective way to recognize the depreciating worth of a specific asset.

When you purchase something, like a car or a computer, its value and performance are expected to decline over time. This concept is known as depreciation. Why does this happen? Simply put, with more use comes more wear and tear on the item, thus rendering it less able to compete with newer models.

To better reflect this decline in quality, depreciation divides the item’s original cost by its estimated “useful life” to give us an idea of how much it has depreciated over time.

When to tax deduct the entire cost of your computer

Do you know the right time to deduct the whole cost of your computer? You may be surprised that you can actually claim it on your taxes. Let me explain why this is beneficial.

The IRS has come up with a few procedures to help people obtain depreciation tax deductions more quickly, making it simpler and faster to get the write-offs they are entitled to. As long as certain requirements are fulfilled, these procedures mean that there is no need for calculating depreciation when it comes to purchases of computers.

Deducting computers costing less than $2,500 

Taxpayers who purchase computers that cost less than $2,500 can benefit from the de minimis safe harbor election. When taking advantage of this IRS rule, note that it applies only to the business-use share of the computer’s cost. So, for example, a $2,500 machine used for work 80% of the time would qualify for a write-off of $2,000.

There is no need to classify it as a depreciable or fixed asset. It should simply be treated like any other business expense. However, the selection must be included in your yearly return without fail; since it isn’t transferrable from year to year, you have to make the election every 12 months.

Making the most of Section 179 for computer purchases

Under Section 179, business owners have the ability to deduct qualified machinery and equipment – including computers – from their taxes in an advantageous way. This enticing tax benefit offers lots of flexibility, allowing up to $1,040,000 to be written off in a single year. It also provides strategic planning benefits since you can choose whether or not to depreciate your purchase depending on what best suits your circumstances.

There are two major caveats for taking 179:

When it comes to taking 179, it’s important to know that a loss disqualifies you from claiming, and the tax deduction is only available for computers used 50% or more for business purposes. However, de minimis or bonus depreciation are still viable options should your computer be used for work less than half the time. We will explore these alternatives further in the following section.

Various computer costs you can subtract from your taxes

Tax deductions don’t stop with the cost of a computer. You should also be aware of additional related expenses which are eligible to claim, such as:

Your internet bill, any anti-virus and firewall software, business programs, fixes or upkeep on the machine, input devices like keyboards and mice and mousepads, monitors, cables (like power and HDMI), printers/scanners, external microphones & cameras, ports for laptops & tablets – all these items can be deducted from your taxes.

Fortunately, with PriorTax, it’s easy to keep track of deductible costs like these. In addition, the app will instantly detect any write-offs when you make purchases at places like Apple stores – so that you’ll have accounted for every possible tax deduction during tax time.

Business Meal Tax Deduction for Freelancers and Small Business Owners

Posted by admin on March 1, 2023
Last modified: February 28, 2023

A Quick Overview of Business Meal Tax Deduction for Freelancers and Small Business Owners

For many freelancers and small business owners, there is a common misconception that lunch must include fancy things like white tablecloths and French waitpersons in order to be eligible for a meal tax deduction. This is simply not true.

Consultants and salespeople are just some of the self-employed folks who can claim business lunches. Understanding what is and isn’t acceptable to tax deduct will help you get the most out of meal tax deductions from your expenses. To that end, this guide offers a comprehensive look at what’s allowed when it comes to meals and how to document them properly.

What meal is eligible as a “Business Meal”?

Are you unsure about the definition of a “business meal” regarding tax deductions? Since the Tax Cuts and Jobs Act was passed in 2017, many have been left questioning this topic. Fortunately, there have been no alterations to business meals when deducting them from taxes. The only thing that has changed is that client entertainment expenses, such as concert tickets or golf games, cannot be tax deducted anymore. You can locate your dedicated tax professional to guide you through step by step.

Having discussed the tax deduction process, let’s delve into what exactly constitutes a valid business meal for a tax deduction. According to IRS instruction, “the food and beverages” must be “provided to a current or potential business customer, client, consultant, or similar business contact.” This leaves room for interpretation regarding the term “similar business contact.” To clear up any confusion, let’s review who falls under that category and who does not.

meal tax

Treating your Clients to Business Meal Luncheon

Lunching with a client can be an excellent opportunity to chat about work topics. While it is polite to pay for the meal, that isn’t strictly necessary. Instead, grab the chance to have a meaningful and productive conversation.

Engaging your Prospective Clients Over a Business Meal

In order to sustain your business, cultivating and preserving your connections is important. For example, alumni from previous jobs and colleagues in relevant industries could all eventually turn into possible buyers – or point you toward one.

When it comes to enticing a prospective client, there is no need for the lunch meeting to be concluded with paperwork or a signed agreement.

Business Meals with Colleagues and Coworkers

Getting together for a bite to eat with someone in your field can benefit entrepreneurs. Not only is it an opportunity to network with business prospects, but you can also discuss industry updates and learn about the newest trends in your business. Plus, it’s all tax deductible.

Business Meal Over a Meeting with a Potential Referral

Networking for referrals can be rewarding in many ways. Freelance work platforms such as Upwork, Uber, and others may offer up to $500 per referral, a great financial incentive.

Moreover, grabbing lunch or coffee with someone who could be interested in your referral program can be considered a tax deduction.

Business Meal for a Networking Opportunity with Anyone

Networking with the right individuals is essential for your business’s success. With that in mind, it’s important to ensure that you stay informed about the latest industry news and developments. In addition, connecting with other professionals to gain insight or exchange advice can greatly expand your reach. Remember, many people get referrals from those they have existing relationships with – so take advantage of this opportunity! This could be someone you know personally, such as friends, family members, or even neighbors.

Which Meals are not Considered Business Expenses and Meal Tax Deduction?

It’s important to be aware of the types of food that cannot be claimed as a tax deduction. Here are some examples that may come as a surprise. Unfortunately, these purchases are not allowed deductions even though they seem like they should be.

Nibbling on Snacks During Work

Generally speaking, any food consumed while employed that is not required for your job is not tax-deductible. For example, imagine you are a security guard contracted on a 1099 and unable to move from your post for the full day – those snacks would be eligible for a deduction. However, with the average busy professional just trying to save time between meetings, these items should be considered personal expenses.

Buying Up Groceries for your Home Office

Outfitting a home office does not necessarily mean you can write off the groceries on your tax return. Unfortunately, the chances of deducting grocery expenses from your taxes are slim to none.

Eating Alone During Business Hours

Even though you may be taking a break from the office to grab a bite to eat, eating alone doesn’t necessarily qualify as an expense that can be deducted. This goes for any solo purchase, even buying coffee while working away from the office at a cafe.

Temporary 100% Tax Deduction for Business Meals at Restaurants

Ready to wine and dine with your clients? Here’s one special consideration to remember: In the 2022 tax year, any business meals you get at restaurants are 100% tax-deductible.

Everyone’s calling this the “three-martini lunch” tax break. It’s actually part of the Consolidated Appropriations Act of 2021, which bundled together a number of COVID relief measures. The thinking was this tax break would help restaurants gutted by the pandemic. Before, business meal deductions were capped at 50%.

Tips for Keeping Receipts for Tax in 2023

Posted by admin on February 23, 2023
Last modified: February 22, 2023

Say Goodbye to Paper Receipts for Tax

Instead of stuffing their wallets and glove compartments with paper receipts for tax, 1099 contractors and freelancers we can now experience a sense of liberation. Keeping track of these paper receipts is no longer necessary. We all know how easy it is to misplace them, tear, or smudge them. And by tax time, much of what was once written on those pieces of paper has likely faded away anyway.

But dealing with this problem isn’t just about convenience – it’s about accuracy too.

receipts tax

There is an enormous focus on receipts when dealing with taxes, as they are one of the only documents the IRS considers to be a good supporting record. 

Knowing which deductions you are eligible to claim on your tax returns, even when you do not have any associated receipts, is crucial if you want the largest tax refund. Knowing what receipts to keep and what ones to throw away can help you maximize your tax refund while also minimizing the amount of paperwork you need to save for tax time every year. 

But you do not need to submit your receipts when filing a tax return, and you only sometimes need them for calculating deductions. In addition, at the time of filing your taxes, you do not need any documentation or receipts to show evidence of tax deductions. 

In fact, saving tax filings and receipts for tax at least three years is recommended. Three years is a long time to store your tax records, so scanning the documents can make them easier for you to access in the future. You could store tax records in that location for 3 years, as the IRS recommends, or you can share directly with your accountant if needed. 

IRS stances on paper receipts

When it comes to paper receipts and tax deductions, freelancers often believe that retaining them is a must. However, the IRS has clarified its stance on this. To get the facts straight, we’re taking a closer look at the IRS regulations.

According to the IRS, you should keep records of business-related expenditures that specify the following:

-The item purchased

-The date of purchase

-How much was spent in total

Surprisingly enough, there’s no requirement for physical receipts. Instead, they encourage people to switch to electronic information management as it has become more standard in today’s tech-infused world rather than continuing with traditional paper methods. This directive from an organization not typically known for its progressive nature makes its message clearer to keep digital records instead of paper.

You will need receipts if you are audited (which can occur as long as 6 years after your taxes are filed). You should save your receipts as long as it takes an auditing body, such as the IRS or your state’s Department of Revenue, to review them. In addition, you should save receipts for tax anything that you plan to write off when filing taxes for your business. 

Remember, with PriorTax’s Dedicated Tax Professionals. You can keep track of receipts for tax and expenses in one place to be more prepared come tax time. 

Tips for keeping purchase records and receipts for tax deduction

When it comes to taxes, record-keeping is essential. You can provide the IRS with all the necessary documentation in a couple of ways: by using your credit card statements and bank statements. These two resources will give you crucial data such as what was purchased, when it was bought, and at what cost. Additionally, Keeper automatically scans accounts for tax deductions and creates records for users accordingly.

Depending on the transaction, IRS has several types of records considered valid evidence or receipts for tax. Only if there is an Internal Revenue Service (IRS) tax audit would you need proof for expenses reported on a tax return. 

Suppose those receipts are for business expenses, and you wish to claim those receipts as deductions when filing a tax return. In that case, those are considered business records and must always be available to be examined by the Internal Revenue Service (IRS). 

Your bank statements and voided checks are a great place to start, provided you can still access those documents. If you do not have the original receipts, other acceptable records include cancelled checks, credit card statements, written notes that you made, calendar notes, and photographs. 

The IRS is required by law to accept digital forms of evidence of your write-offs, including bank statements and credit card statements. The IRS accepts credit card statements as evidence for tax write-offs (here’s the best app for tracking taxi receipts).

What about cash purchase records for tax deduction

Interestingly, regarding cash purchases, it is not necessary to have a receipt as long as the amount purchased is “reasonable and ordinary.” This principle is called the “Cohan Rule” and derives its name from a famous court case. However, as a general guideline, keeping your receipt when spending more than $75 in cash is advisable. This would be particularly prudent in expense cases, such as taking multiple clients out for lunch at an upscale restaurant.

Recommendations in preparing for audits

In the event of an audit, don’t be alarmed. Even though you may have gone paperless, the IRS legally must accept digital forms of proof for your deductions, such as bank and credit card statements. So even when you neglect to record a cash expenditure over $75, digital sources, including emails and calendar entries, are alternative verification methods.

Small Business Tax Filing Tips for 2023

Posted by admin on February 10, 2023
Last modified: February 13, 2023

Small business tax deductions can reduce business income, which lowers the amount of tax owed. One advantage that the self-employed and small businesses have are various tax deductions and credits. Using PriorTax for your small business would also qualify as a tax deduction. For example, if you own a business property, you can claim the associated mortgage interest as a business expense and tax deduction. Sole proprietorships, LLCs, and partnerships can not deduct charitable contributions as a business expense. Still, the small business owner may be able to claim the deduction on the business owner’s personal tax return. Our dedicated tax professionals will know how to record these expenses in your books so they can be accurately reflected on your tax return as a business expense. In a nutshell, small business owners can maximize their tax refund by decreasing their business income and increasing their business deductions. Lowering your net business income will reduce the amount of income taxes due, thus improving your chances of getting a tax refund. It is vital to keep your business income as low as possible so that you can take advantage of all possible deductions.

small business tax

As a small business owner, it is vital to ensure you take every measure available to reduce your small business taxation. While much of your capital may be taken away each year, here are 10 deductions you should be aware of as you look back at your previous tax year and plan for the future. Keeping these tips in mind can help keep more money in the bank while still maintaining compliance with small business tax regulations.

To maximize your tax refund as a small business owner, you should familiarize yourself with the various tax deductions available to your business. Business owners who are employed and self-employed can qualify to use these deductions and credits to lower their taxable income. Here are our top 10 pieces of advice for maximizing your small business tax refund.

1. Record all service fees from legal, consulting, and professional services for small business taxes

Entrepreneurs need to ensure their legal and professional costs are properly documented. Although consulting with experts on tax issues and regulations is an essential part of running a successful business, the fees paid to these professionals can generally be deducted in the same year incurred. Furthermore, business owners may also be able to claim expenses incurred from purchasing books related to driving their company or practicing law.

2 Take advantage of upstarting costs and expenses when filing small business tax returns.

When launching a new business, one should use the deductions available for start-up costs and other expenditures. In the initial years of operations, many start-up costs can be written off when filing taxes. Furthermore, items such as office equipment and supplies, shipping fees, and utility bills may also be deducted from taxable income.

3. Keep track of new equipment or software purchases.

Keep tabs on the acquisitions of new tools or programs. Several small businesses are eligible for a deduction on the cost of certain assets in the same year it is bought. Meanwhile, software usually has to be subtracted gradually over an extended period.

4. Use your car for business purposes.

When running a business, it pays to consider using your car as a means of saving money. Whether you are utilizing your own vehicle or one owned by the enterprise, various costs associated with it can be deducted from taxes. This includes expenses such as the standard mileage rate, parking fees, tolls, and specific amounts of depreciation.

5. Deduct advertising expenses effectively from filing your small business tax.

One should pay attention to the potential deductions for marketing or advertising expenses. This could include spending on business cards, electronic and paper advertisements, and trade show participation costs. All of these can be claimed under current business expenses.

6. Include membership and educational expenses.

When it comes to business expenses, remember to factor in membership fees and educational costs. This includes the cost of joining a professional association related to your business or even fees associated with attending seminars such as CLEs (Continuing Legal Education).

7. Don’t forget to make interest payments be part of tax filing.

Maximize the value of your interest. When buying items for business purposes, it is beneficial to use credit as this allows you to deduct the interest from your taxes. All expenses must be documented thoroughly in order to ensure eligibility for said deductions.

8. Keep receipts for entertainment expenses.

Make sure you hang onto your receipts when it comes to entertainment expenses. By taking meticulous records of coffee runs, dining out, and any other company-related outings, you can deduct such costs from your taxes.

9. See if charitable contributions and donations can be included.

Donating to charity can be beneficial in more ways than one. Unless the business is a corporation, most charitable contributions to suitable institutions are tax deductible. It is essential that individuals keep proof of their donations, such as receipts, canceled checks, or written acknowledgment from the organization. This will ensure they have records of their generous contributions.

10. Save your tax documents for at least 5 years.

Organizing your record is critical when it comes to tax records, and it’s important to hang on to them for at least 5 years. Not only will good record-keeping save you time, but it could also save you money. Maintain copies of your tax returns, receipts from expenses, mileage logs, licenses, and incorporation papers to verify deductions.

When to Expect Your Tax Refund in 2023

Posted by admin on January 18, 2023
Last modified: February 13, 2023

When will you get your 2023 tax refund? Here’s our annual chart with our best estimates. Keep in mind that the answer is never exact, but we can make some educated guesses based on a few factors.

Now is also an excellent time to begin applying your year-end tax filing strategies that can lower your tax bill with tax credits or increase your refund with tax deductions. So whether you’re planning for next year or want to lower your bill this year, these strategies can help you out.

Have you had any significant changes in your life this year, like a new job, getting married or divorced, having a baby, retiring, buying a house, or changing investments? These types of things can have a significant impact on your taxes. So it’s a good idea to reach out to PriorTax Tax Professional sooner rather than later. Our dedicated tax professionals can make sure you are taking full advantage of all the tax deductions and tax credits you’re entitled to for maximum tax refund.

Are you wondering whether the 2023 tax filing season is going to be normal? While it’s impossible to say for certain, it’s likely to be closer to normal than it has been since 2019. That was the last tax filing season before COVID-19 caused widespread office closures, even at the IRS. As a result, the 2020 tax filing deadline was delayed by several months.

Don’t worry, the vast majority of taxpayers won’t have any issues come tax season. Just to be clear, the weeks leading up to April 18 2023 is when Americans file their taxes for the income they received during the 2022 calendar year. Alternatively, you can file for an extension, giving you an extra six months to sort everything out.

2023 tax refund

April 18, 2023 is the Tax Deadline!

What is the reason for the 2023 tax deadline being on April 18 instead of the 15th? The standard deadline of April 15 falls on a Saturday, so when this happens, the tax filing deadline to the next business day. However, in 2023 this Monday happens to be Emancipation Day.

The tax filing deadline to file your federal income tax return (Form 1040) is Tuesday, a state holiday Patriot’s Day in Maine and Massachusetts. Most states usually follow the same calendar for state income tax returns. Depending on when you file your taxes, you may receive your tax refund payment within 2-3 weeks.

When to File Your Tax Returns and Expect your 2023 Tax Refund?

It’s that time of year again the tax filing season is around the corner. It is time to think about maximizing your tax refund!

For most people, tax season starts in late January or early February. However, this year may be different due to recent changes in tax law. So it’s important to stay up-to-date on any new developments.

Generally speaking, early filers who are due a refund can expect to see their money sometime in mid-to late February. However, those who claim certain credits like Earned Income Tax Credit or Child Tax Credit may have to wait a bit longer for their refunds – about one month.

Last year was impacted significantly by Covid-19, which caused both deadlines and procedures to change.

According to our projections, this is when you can expect to receive your income tax refund based on when you file your return. Keep in mind that this timeline is an estimate and may change depending on future events.

You can check on the tax filing status of your tax refund using the “Where’s My Refund” tracker from the IRS website or with your assigned PriorTax Tax Professionals. Just enter some basic information about yourself, and we’ll update you on where things stand.

It’s always a good idea to get your tax return in as soon as possible – and Efiling is the quickest, easiest way to do it. In general, you can expect to receive your refund via direct deposit within 2 weeks – although, during the busiest times of tax season (late March), it may take a bit longer. So gather up all your documents such as W2s, 1099s, mortgage, and student loan interest statements, etc.

There are a few important factors that can affect when you might get your 2023 tax refund, these include:

  • How early you file
  • Whether you’re claiming certain credits (especially EITC and CTC)
  • Whether your return is e-filed or sent by mail
  • Whether you have existing debts to the federal government

The IRS will delay processing by 2-3 weeks for income tax returns that claim the Earned Income Tax Credit (EITC) or Child Tax Credit (CTC), so they can verify that taxpayers qualify for the credits.

Keep in mind that this is just an estimate of when you can expect your refund – it’s not exact, since every taxpayer has different returns and situations. Also note that the first column is when the IRS accepts your return, which can be 2-3 days after you submit it electronically. Mailing in a tax return can result in extra delay at the beginning of the process since the IRS will need to manually enter it into their system. But don’t worry – we’ll keep this page updated in case the IRS changes tax season this year.

tax refund in 2023

Benefits to Efile taxes when online tax filing for 2022

Posted by admin on January 7, 2023
Last modified: February 13, 2023

Efiling your taxes has become increasingly popular in recent years. The majority of taxpayers now file their tax returns electronically, and it’s no wonder why. Filing electronically is quick, easy, and processed faster than mailing your return. Plus, the IRS recommends Efiling as the best way to file your taxes. Here’s a breakdown of the benefits of Efiling your taxes

In today’s digital world, electronic tax filing is expected to be an alternative to older, manual processes. Businesses can now do more than paper-based, laborious, time-consuming tax preparation or software-based filing with PriorTax. Online tax filing via Efile has brought greater flexibility in filing taxes and is much more convenient as one taxes can now be filed at one’s convenience, home or work.

PriorTax Assigned Tax Service Professionals 

You do not need to use expensive tax-prep software to file taxes electronically. Even if you are not fiscally competent and not in a straightforward situation, you can fill out tax forms with one of our assigned tax professionals step by step on the spot. Online tax filing with PriorTax will identify tax forms and documents you will need to start the filing process with confidence.

Audit Protection with PriorTax

PriorTax can even provide an audit defense during the filing process should your tax return be selected for audit by the IRS.

efile taxes

Benefit 1. Filing Taxes Online or Efile tax is simply the easiest way

Taxes don’t have to be a pain. In the past, you had to make an appointment with your accounting office and wait around while they did the math. But now, you can file online from anywhere. All you need is an internet connection. You can even do it from your phone! With web-based tax programs, there’s no need to go to a physical office. And with locally downloaded programs, you can take your taxes with you wherever you go.

Filing your taxes online is quick, easy, and convenient. With step-by-step instructions, you can be confident that you’re completing everything correctly and won’t face any penalties for inaccuracy. You can even start filing, save your progress, and come back to it later. Online filing is simply more convenient.

Benefit 2. Efiling your tax gets your Tax Return through Direct Deposit

Choosing to file electronically and get your tax refund through direct deposit is the fastest way to get the money as soon as the IRS begins processing returns. Because Efiling reduces processing time, individuals and businesses receive their refunds faster (e.g., within three weeks of Efiling). In addition, you are more likely to get a refund more quickly if you file your return electronically instead of by mail, simply because doing so saves a trip to the post office and time spent in the mail. 

Benefit 3. Efile taxes for faster processing

There are many advantages to filing your taxes electronically. One of the biggest advantages is that you will receive confirmation almost immediately that IRS has received your tax return. Additionally, processing your refund will likely be faster since electronic filing means that IRS does not need to sort or transcribe your tax return at their service center. Everything related to your tax return will be processed faster when you file online. You won’t have to read confusing instructions for each form or try to figure out which number goes in which box. Instead, electronic filing asks simple and intuitive questions, clarifies where inputting information is required, and automatically fills out all necessary forms.

There’s no need to write your name a million times when you file with an electronically signed return. Instead, simply draw your signature on your device’s trackpad, copy and paste it when indicated, and submit your return. The information is sent directly to the IRS immediately, eliminating the wait for postal delivery, IRS mail room sorting, and eventual approval.

Efiling your taxes means receiving any refunds you are owed much faster. Direct deposit is automatically wired to your bank account once the IRS processes your information, rather than waiting for a physical check to come in the mail. This way, you don’t have to rely on the postal service for timely delivery. It usually takes 1-3 weeks to get your refund after you file your taxes electronically and request a direct deposit. But it can vary based on how you filed, what credits you claimed, and how you want to receive your refund. You can learn more about when to expect your refund here.

Benefit 4. Simple and secure electronic records of tax forms

Keeping records of your taxes for up to seven years is a best practice. After that, there is a risk of identity theft when old tax records are disposed of improperly. On the other hand, the stack of past taxes will grow larger each year and take up more space. Efile taxes provides a solution by storing years of history securely online without taking up physical space. This makes information easy to retrieve when needed.

Benefit 5. Accuracy of filing taxes online

Taxes can be confusing, but accuracy is key. Incomplete or incorrect information given to the IRS can result in big penalties – even jail time. PriorTax takes care of everything for you so you can feel confident that your taxes are done right.

Efile your taxes early.

Someone who files early on their taxes will be already in the system, either processing their return or receiving a refund. If you discover that you owe the IRS money, filing early gives you extra time to get back on the road to paying the tax. 

People who file early stand a better chance of discovering errors and fixing them before the deadline, which could result in larger tax refunds. People who tend to wait until later to file taxes are more likely to make mistakes, like missing out on valuable credits and deductions. 

If you filed in mid-January, you would only owe taxes due after filing. The good news is that if you submit your taxes early but then you make an error, you will have extra time to fix it and still be on track for your required filing deadline. For these reasons, if you are not in a state of mind where you can file your taxes properly early, opting for the Tax Extension is a good idea that will buy you some additional time.

2023 Tax Brackets and Tax Code

Posted by admin on December 9, 2022
Last modified: February 13, 2023

The 2023 tax year will see some changes to the limits and thresholds on some well-known tax provisions as a result of inflation adjustments announced by the IRS. These include increases to the income thresholds for the 2023 tax brackets, which could mean that many people may pay less in taxes in 2024.

As we head into another tax season, it’s important to be aware of the major changes made to the 2023 tax brackets and tax code. One of the most significant changes is how inflation is considered when determining your tax bracket. This change is known as “bracket creep,” and it can have a major impact on your taxes. In order to prevent bracket creep, the government makes annual adjustments to the tax code. This year, those adjustments will impact taxpayers’ incomes in 2023. Knowing about the changes now can help you plan ahead and ensure you’re prepared come tax time.

2023 Tax Brackets and Tax Rates

There are seven different tax brackets that the government imposes on citizens in the United States. The marginal rates for these brackets are 10%, 12%, 22%, 24%, 32%, 35%, and 37%. These rates will not change in 2022. However, the income thresholds that dictate which bracket a person falls into will be significantly adjusted for 2023.

The new tax brackets for 2023 have been released, and there are some changes that taxpayers need to be aware of. For example, the maximum income for a married couple filing jointly to remain in the 12% bracket has increased from $83,550 in 2022 to $89,450 in 2023. Toggle between the tabs in the chart below to explore how income thresholds will change across all filing statuses in 2023.

2023 Standard Tax Deduction

The IRS offers a deduction for 2023 taxpayers who do not itemize their taxes. This is known as the “standard deduction.” For the 2023 tax year, the amount of the deduction will increase by $900 for single filers and those married filing separately, $1,800 for married couples, and $1,400 for heads of household. In addition, the additional deduction for those over 65 or blind (up from $1,400 in 2022) and $1,850 higher for those also unmarried and not a surviving spouse (up from $1,750 in 2022).

2023 tax brackets

2023 Capital Gains Tax

Different types of taxes are assessed on different types of income. For example, a person’s earnings from their job are taxed as wage income, while the profits generated from selling an asset, such as a stock or cryptocurrency, are taxed as a “capital gain.”

Short-term gains (capital gains on assets held for less than one year) will be taxed in 2023 at the same tax rate as your other ordinary income. However, long-term gains (capital gains on your assets held for more than one year) get special tax rates: 0%, 15%, or 20%.