Extended Tax Returns, Estimated Payment and Hiring Contractors — Oh My!
We have finally hit the “ber” months, and I am so ready for some cozy, fall vibes. The kids have headed back to school, football season has kicked off, and it’s also a pretty important time tax wise! Grab a pumpkin spice latte (or a pumpkin cream cold brew *light cold foam*– my personal fave) and let’s go over what you need to do.
If you are part of a partnership or S-Corp and you extended your tax return, aka forms 1065 and 1120-2, your return was due September 16. Individuals and corporations should have made their third quarter estimated tax payments, if applicable. You might be wondering, how do I know if I need to make an estimated payment? Per the IRS, individual taxpayers who expect to owe $1,000 or more in taxes when they file their tax return generally need to make estimated tax payments. For September’s deadline, you should have made a payment covering the taxes due on your income from June 1 to August 31. Check with your accountant for payment vouchers if you aren’t sure how much you owe. Also – while federal taxes tend to be the hot topic when it comes to estimated payments, make sure you don’t forget about any state taxes.
Now, about hiring contractors. Contractors can be an incredibly helpful solution for business owners who are looking for help with a specialized job or don’t have the resources to commit to a new employee. However, you can get into A LOT of trouble if you don’t classify your new team member correctly. For example, Lyft settled for $27 million after a class action lawsuit for misclassifying their workers as contractors instead of employees. Whether you’re hiring a contractor (or working as an independent contractor yourself), use this info to help guide you!
Why exactly does the government care so much about whether you’re calling a worker a contractor or an employee? Employees are entitled to certain protections under the Fair Labor Standards Act (FLSA) like minimum wage and overtime pay. Incorrectly classifying an employee as a contractor removes those legal protections. Employees and contractors are also treated differently from a tax perspective. Generally, a business does not need to withhold any taxes from a contractor’s pay. Taxes become the contractor’s responsibility. Essentially, the more control you have over the worker, the more likely it is that they should be classified as an employee. And, remember to get a signed W-9 before you issue any payments to a new contractor.
I know I mentioned a few deadlines for this month, but there’s another huge deadline coming up in October. If you haven’t filed your individual tax return yet, you’ll have to do that next month! Now is the time to address what’s been holding you back from filing earlier. Are you missing a crucial tax document? Have you fallen behind on your bookkeeping? Now is the time to get these things squared away so you aren’t scrambling at the last minute. . Reach out to Moneta Accounting Solutions if you need help or have questions. Happy filing!
SEE ALSO: Moneta, The Roman Goddess of Money
