Thursday, September 27, 2007

Jury Duty

June --

I've just received a summons for Jury duty. Can I deduct any lost income due to my Jury service?


Hi Steve,

No, you can not take any deduction. In a way you are donating your time and services to the public. Here's three posts that help explain why you can't:
No deduction for billed but unpaid fees.
Deducting an Attorney's Time
No deduction for donated work or services



Canadian working in USA


I've been an entrepreneur for one year. I really need help about filling out a W-8BEN tax form correctly. I am a Canadian citizen living in Canada and I have a website about travelling. I recently applied to an online affiliate program Commission Junction (CJ) that is located in the U.S. and they sent me this form (W-8BEN) to fill out. Do I have to fill out lines 7, 10, and check off 11? I really don't know. I'm really confused about lines 10 and 11 and don't know if I should just leave it blank.

Hope you can help me.
Best Regards, Jay B.

Hello Jay,

My policy is not to give online instruction on preparation of specific tax forms. I suggest you read this post: When your subcontractors are in India . In it there are phone numbers for instruction on Form W-8BEN.

Best regards,

Monday, September 24, 2007

I'm an LLC?????

June --

How do I dissolve from an LLC and re-organize as a sole proprietor?

Bill from Camas, Washington

Bill --

I think you are something but you don't know what that something is. So many people form an LLC without a clue as to what they are doing. Read this post Sole Proprietor as an LLC on my blog -- and also read the raleted links which give more info on LLCs. . An LLC can be a sole proprietorship.

-- June

Housekeeper: Self-employed or Employee

Hi June,

Great website!

I stumbled upon your site while looking for cases similar to the one my mother-in-law is currently undergoing with the Social Security Administration.

She is a 71-year-old widow, who after losing her job in 2003 started to provide cleaning and cooking services to households in our neighborhood to earn (profit) and to pay self-employment taxes, in part, needed to earn the remaining eight credits to avail of her social security benefits.

Social Security has denied her benefits because they've stated that her tax returns (2004-2006) should've been filed as a wage earner instead of self employed.

My question: what constitutes a self employed person? Surely you cannot expect (as in her case) to request a W-2 from each household she services. I've pointed out to them that the IRS didn't seem to have a problem with her filing status. Is there a clear-cut definition of a self employed person? Please advise.

Thank you, Vic (Helpful Son-in-law)

Hello Vic,

Glad you like my site. Thanks for letting me know.

Whether your mother-in-law was an employee or self-employed is determined by who controlled the work she did.

If she --
1. offered her services to the public -- not one family only
2. determined the hours and/or days she worked
3. could quit customer whenever she wanted and not suffer financial ruin -- --meaning she could get another client very easily
4. generally used her own cleaning supplies and equipment.
5. had a business card that she handed out to potential clients
-- then she is well on her way to proving that she was self-employed.

There is more info in my website column: It's all about relationships: Are you an employee or are you self-employed? And there is even more info in my book, Self-employed Tax Solutions.

You don't say what state you are in, but here's a a good recap that Pennsylvania has on household workers.

After you've done some reading and you determine that she was an indie rather than an employee then start making calls --- to your state department of labor, the IRS, and a different person or office at the Social Security administration.

Also, be aware that if someone works as a housekeeper or nanny for a family an hourly fee or weekly wage, that person is an employee of the family. The family must set up a payroll, pay payroll taxes, and file all payroll forms including a W-2. You may have heard of the "nanny tax" and all the trouble it has caused many people.

I wish you the best!

A kind of reimbursement

June --

I am getting ready to split a commission with an ex partner. The commission is about $2000. If I turn around and write her a check for half, how much tax will I be responsible for come April?

Jill from Toms River, NJ

Jill --

At the end of 2007 you will need to prepare a Form 1099-MISC stating the amount you paid to your ex-partner. That form gets sent to the government and your partner.

The amount paid the partner will be a business deduction. On your tax return the total received will be part of your gross income. You subtract as a business expense the amount paid your partner. That will leave you with net income. You will pay tax on your net income, that means, on your 1/2 of the payment.

-- June

Wednesday, September 19, 2007

Tax Return Filing Deadline: October 15

Hi June,

Is there another extension after Oct 15?

Melvin from Houston

So sorry, Melvin. There is not. That is why my readers haven't heard from me in a while ... been working on tax returns.

Please note that if you are going to get a refund there should be no problem if you miss the October 15 deadline.