Are You Self Employed? Check Out These IRS Tax Tips

Many people who carry on a trade or business are self-employed. Sole proprietors and independent contractors are two examples of self-employment. If this applies to you, there are a few basic things you should know about how your income affects your federal tax return. Here are six important tips about income from self-employment:
• SE Income. Self-employment can include income you received for part-time work. This is in addition to income from your regular job.
• Schedule C or C-EZ. There are two forms to report self-employment income. You must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with your Form 1040. You may use Schedule C-EZ if you had expenses less than $5,000 and meet other conditions. See the form instructions to find out if you can use the form.
• SE Tax. You may have to pay self-employment tax as well as income tax if you made a profit. Self-employment tax includes Social Security and Medicare taxes. Use Schedule SE, Self-Employment Tax, to figure the tax. If you owe this tax, make sure you file the schedule with your federal tax return.
• Estimated Tax. You may need to make estimated tax payments. People typically make these payments on income that is not subject to withholding. You usually pay this tax in four installments for each year. If you do not pay enough tax throughout the year, you may owe a penalty.
• Allowable Deductions. You can deduct expenses you paid to run your business that are both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and proper for your trade or business.
• When to Deduct. In most cases, you can deduct expenses in the same year you paid for them, or incurred them. However, you must ‘capitalize’ some costs. This means you can deduct part of the cost over a number of years.
Visit the Small Business and Self-Employed Tax Center on for all your federal tax needs. You can also get IRS tax forms on anytime.
If you found this Tax Tip helpful, please share it through your social media platforms. A great way to get tax information is to use IRS Social Media. You can also subscribe to IRS Tax Tips or any of our e-news subscriptions.

Six Tips on Who Should File a 2014 Tax Return

Most people file their tax return because they have to, but even if you don’t, there are times when you should. You may be eligible for a tax refund and not know it. This year, there are a few new rules for some who must file. Here are six tax tips to help you find out if you should file a tax return:

1. General Filing Rules. Whether you need to file a tax return depends on a few factors. In most cases, the amount of your income, your filing status and your age determine if you must file a tax return. For example, if you’re single and 28 years old you must file if your income was at least $10,150. Other rules may apply if you’re self-employed or if you’re a dependent of another person. There are also other cases when you must file. Go to to find out if you need to file.

2. New for 2014: Premium Tax Credit. If you bought health insurance through the Health Insurance Marketplace in 2014, you may be eligible for the new Premium Tax Credit. You will need to file a return to claim the credit. If you purchased coverage from the Marketplace in 2014 and chose to have advance payments of the premium tax credit sent directly to your insurer during the year you must file a federal tax return. You will reconcile any advance payments with the allowable Premium Tax Credit. Your Marketplace will provide Form 1095-A, Health Insurance Marketplace Statement, to you by Jan. 31, 2015, containing information that will help you file your tax return.

3. Tax Withheld or Paid. Did your employer withhold federal income tax from your pay? Did you make estimated tax payments? Did you overpay last year and have it applied to this year’s tax? If you answered “yes” to any of these questions, you could be due a refund. But you have to file a tax return to get it.

4. Earned Income Tax Credit. Did you work and earn less than $52,427 last year? You could receive EITC as a tax refund if you qualify with or without a qualifying child. You may be eligible for up to $6,143. Use the 2014 EITC Assistant tool on to find out if you qualify. If you do, file a tax return to claim it.

5. Additional Child Tax Credit. Do you have at least one child that qualifies for the Child Tax Credit? If you don’t get the full credit amount, you may qualify for the Additional Child Tax Credit.

6. American Opportunity Credit. The AOTC is available for four years of post secondary education and can be up to $2,500 per eligible student. You or your dependent must have been a student enrolled at least half time for at least one academic period. Even if you don’t owe any taxes, you still may qualify. However, you must complete Form 8863, Education Credits, and file a return to claim the credit. Use the Interactive Tax Assistant tool on to see if you can claim the credit. Learn more by visiting the IRS’ Education Credits Web page.

The instructions for Forms 1040, 1040A or 1040EZ list income tax filing requirements. You can also use the Interactive Tax Assistant tool on to see if you need to file. The tool is available 24/7 to answer many tax questions.

Top Five Reasons to E-file

Are you still using the old school method of doing your taxes? Do you still mail paper forms to the IRS? If so, make this the year you switch to a much faster and safer way of filing your taxes. Join the nearly 126 million taxpayers who used IRS e-file to file their taxes last year. Here are the top five reasons why you should file electronically too:

1. Accurate and easy. IRS e-file is the best way to file an accurate tax return. The tax software that you use to e-file helps avoid mistakes by doing the math for you. It guides you every step of the way as you do your taxes. IRS e-file can also help with the new health care law tax provisions. The bottom line is that e-file is much easier than doing your taxes by hand and mailing paper tax forms.

2. Convenient options. You can buy commercial tax software to e-file or ask your tax preparer to e-file your tax return. You can also e-file through IRS Free File, the free tax preparation and e-file program available only on You may qualify to have your taxes filed through the IRS Volunteer Income Tax Assistance or Tax Counseling for the Elderly programs. In general, VITA offers free tax preparation and e-file if you earned $53,000 or less. TCE offers help primarily to people who are age 60 or older.

3. Safe and secure. IRS e-file meets strict security guidelines. It uses secure encryption technology to protect your tax return. The IRS has safely and securely processed more than 1.3 billion e-filed tax returns from individuals since the program began.

4. Faster refunds. In most cases you get your refund faster when you e-file. That’s because there is nothing to mail and your return is virtually free of mistakes. The fastest way to get your refund is to combine e-file with direct deposit into your bank account. The IRS issues most refunds in less than 21 days.

5. Payment flexibility. If you owe taxes, you can e-file early and set up an automatic payment on any day until the April 15 due date. You can pay electronically from your bank account. You can also pay by check, money order, debit or credit card. Visit for more information.

Want to Start a Company? 5 Things to Consider First

Bel Air payroll firm sued for allegedly keeping clients’ tax payments

If you are effected by this and need help, we are familiar with cases like this. We helped several former NETPAY clients several years ago after they closed due to similar situation. Contact us today.


By Jamie Smith Hopkins and Lorraine Mirabella, The Baltimore Sun

8:12 p.m. EST, March 1, 2013
A Bel Air company that handled payrolls for many employers in the area is being sued by clients for allegedly stealing years of tax payments rather than sending them on to the tax collectors as required — leaving the companies on the hook.
Plaintiffs include DuClaw Brewing Co. and Animal Emergency Hospital, both of Harford County, which are each claiming losses of tens of thousands of dollars in separate lawsuits against payroll firm AccuPay. Stuart Levine, a Towson attorney who represents other businesses that used AccuPay, said he believes the payroll company had as many as 600 clients, most of them in Harford.
“Every one of them is at risk,” Levine said.

The Bel Air Police Department said Friday that it is investigating “suspected criminal activity” at AccuPay after receiving “numerous” complaints about unpaid federal income tax withholdings. Police urged AccuPay clients to call the Internal Revenue Service to determine if their taxes had been paid.

Bel Air police blocked access to AccuPay’s Churchville Road office on Friday while investigators went through boxes of paperwork. Yellow police tape was strung across the property, a converted home.

AccuPay officials, including Kieran and Beverly Carden, could not be reached for comment. The company’s phones were answered Friday first by voice mail and later not at all. A notice on the front door Thursday said only, “Payrolls were mailed or are in the back mailbox. Thank you.”

George S. Robinson IV, DuClaw’s attorney, said AccuPay handled taxes for many local companies, and he’s hearing from some of them. “It could have a tremendous … economic impact on the area, depending on how large the scope is,” he said.

A Bel Air competitor said Friday that it has been swamped by AccuPay clients since the company — officially or not — closed its doors this week. George Heidelmaier, president of It’s PayDay, said that “there’s a lot of people who are going to get hurt” by the AccuPay fallout — and business owners don’t know whom to rely on now.

“One of the first questions out of people’s mouths is, ‘How do I know I can trust you?’ ” Heidelmaier said.

Dennis Brager, a California tax lawyer and former trial attorney for the IRS, said it’s not an unusual problem for payroll taxes to go unsent without the employer’s knowledge. Sometimes the fault lies with a payroll services firm, sometimes with an employee. The problem for employers, he said, is that the taxes must be paid — again.

And while the IRS might forgo penalties, it probably won’t waive interest payments, he said.

“The employer’s ultimately responsible for making sure those taxes get paid,” said Brager, of Brager Tax Law Group. “While all this is going on, it’s not unusual for the IRS to file a tax lien, which will impact the business’ credit rating and could cause the bank to pull the credit line. I mean, it’s just a nightmare.”

DuClaw’s lawsuit was filed last summer in Harford County Circuit Court. The company alleged that AccuPay took more than $306,000 in tax payments over multiple years that it failed to pass on to the IRS and the state, paying only after the brewing company discovered the problem last year — and leaving DuClaw with the accrued penalties and interest.

In its complaint, DuClaw asked for about $58,000 in compensation for losses from the “vile fraud,” plus punitive damages. The company accused AccuPay of perpetrating a Ponzi scheme in which clients’ taxes were diverted for personal uses and to cover the payroll taxes of other client companies.

“This deliberate and systematic fraudulent scheme of robbing Peter to pay Paul was tantamount to a game of musical chairs where at some point the music would stop and the AccuPay client without its payroll being covered would be liable to the IRS and the State Comptroller’s Office,” DuClaw said in its suit. Now, it added, “the music has stopped.”

DuClaw owner Dave Benfield said Friday that he discovered discrepancies in an internal audit, launched after one of his employees ran into an attorney working on a different case against AccuPay.

“It made me sick to my stomach,” he said.

The IRS waived some but not all of the penalties and fees, he added.

Benfield said the payroll company owners “were driving very nice cars,” including Jaguars and BMWs, and “had very nice houses.”

Animal Emergency Hospital said in its suit, filed Wednesday, that AccuPay “repeatedly and regularly” failed to pay or made only partial payments of federal and state withholding and unemployment taxes over the past five years, even though the payroll firm withdrew the full amounts from the hospital’s account.

Animal Emergency Hospital alleged that about $89,000 was not passed on, and said it owes “substantial” penalties and interest. An official at the veterinary hospital declined to comment Friday; its attorney did not return telephone calls.

Shortly after the case was filed this week, Harford County Circuit Judge William O. Carr ordered AccuPay to preserve all documents and records relating to its operations.

A third suit, filed Friday by the Towson law firm of Mark Van Bavel, seeks $30,000 in damages against AccuPay for allegedly underpaying the firm’s withheld taxes. Van Bavel said in an interview Friday that the amount is a placeholder — he doesn’t know how much he might be out, but he wanted to file the suit quickly “in case I have to get in line.”

He said an AccuPay employee called his three-person office in tears on Thursday to alert him that the payroll firm was closing.

Levine said his clients, including two restaurants and another animal hospital, might not file lawsuits because of a low likelihood of recovering the losses. But he said he expects additional lawsuits to be filed.

He said he hopes attorneys working on behalf of AccuPay clients can coordinate their efforts to try to put the company into receivership. Like DuClaw’s attorney, Levine is worried about a ripple effect if many business are forced to essentially pay taxes twice.

Both the IRS and state tax collectors said Friday that they’re legally unable to comment on individual tax matters. But the Maryland comptroller’s office and the state Department of Labor, Licensing and Regulation said they were aware of the situation and urged companies to call if they believe they have tax problems.

The comptroller handles income tax withholding, while the labor agency oversees unemployment-insurance taxes.

“We will work with any employer who has difficulty making the payments,” said Julie Ellen Squire, assistant secretary of the labor department’s unemployment insurance division.

The state can waive penalties and interest in some cases of unpaid unemployment-insurance taxes, and no-interest payment plans are available, she said.

In its suit against AccuPay, DuClaw said it had used the company for payroll services since 1995. DuClaw alleged that it received warnings of deficient or no payments from the IRS and the state in the last several years, but in each case AccuPay said the tax collectors “were at fault and that it would reconcile the account.”

AccuPay did not take care of the problem, but it did change its client’s address on file with tax collectors so the notices then went to the payroll company, DuClaw said in its lawsuit.

DuClaw alleged that AccuPay’s Ponzi scheme fell apart because it lost clients in the recession, “making it more difficult for Defendants to cover the payroll gap.”

AccuPay twice forfeited its state certification to operate in Maryland — in 1991 and 2006 — for failing to file property returns, according to Maryland Department of Assessments and Taxation records. In each case, the company was reinstated.

Its website, now offline, had earlier declared that the company delivered “peace of mind” to clients.

“If you process your own payroll, you owe it to yourself to see how AccuPay can save you time and expense, and free you from your payroll headaches,” the company website said.

William Seccurro, a retired Harford County Chamber of Commerce president, is a former client and said the allegations shocked him. He said he had no problems with the company in his 10 years at the chamber.

“I’m really sorry to hear this,” he said.

Brager, the former IRS trial attorney, suggests that employers check up on their payroll services provider by getting payment records from the tax collectors. It’s also a good idea to choose a firm in a financially strong position, he said.

Still, he doesn’t understand how a nonpayment and underpayment problem could have dragged on for years. Even if a payroll company manages to divert the delinquency notices, the IRS generally sends someone to the employer’s offices if large amounts of payroll taxes aren’t paid, he said.

“It’s disturbing that … that kind of liability could be sitting out there without literally a knock on the door,” he said.

Such liabilities can drive a company out of business, he said — “absolutely.”

Baltimore Sun Media Group reporters Jim Kennedy and Erika Butler contributed to this article.

Copyright © 2013, The Baltimore Sun


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