Micro Business for Teens in Greenville, SC

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I’ll be in Greenville, SC March 20-22, 2014 at the SouthEast Great Homeschool Convention helping teenagers start a micro business.

If you come to the convention stop by booth # 1404 and say hello!

 

Carol Topp, CPA

 

Tax tips and tricks for teen entrepreneuers

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Kenneth over at Teen Business Forum asked,

My name is Kenneth and at the moment I am a freshman in college. As you probably already know, tax season is here! I do plan on filing them soon, but I was wondering what tips and tricks I could do to increase the amount of the refund.

Kenneth,

Tips: Read all you can about tax deductions. My blogs at http://TeensAndTaxes.com and http://TaxesForWriters.com are a good place to start.

Buy my ebook Teens and Taxes at http://TeensAndTaxes.com. The $3 cost is a business deduction!

Keep good records. Consider using accounting software like Quickbooks, Outright.com, Freshbooks.com or Wave accounting.

Tricks: Keep track of mileage. It’s a bigger deduction than just gas.

If you travel out of town you can deduct a per diem amount for meals that is higher than actual meal expenses (unless you’re a really big eater!).

The standard rate of $46/day for meals is set by the General Service Administration which has higher per diem rate for high-cost cities. On the day of traveling to and from home, you can only deduct 75% of the per diem rate, but it still adds up.

For a trip to Orlando (with a per diem rate for meals of $56/day) my per diem totaled $196, a lot higher than my actual expenses of $94.97.

Hope that helps.

Money_small-259x300Money and Taxes in a Micro Business has several chapters devoted to federal , state and sales tax. There’s quite a bit to learn about taxes, but this book is written in clear English so a teenager easily can understand taxes in running a micro business.

 

Carol Topp, CPA

 

Get a 1099MISC? How the IRS will tax you.

Form 1099-MISC for 2010 with calculator and pencil on it

If you received a Form 1099MISC then you worked as an independent contractor sometime last year.

The IRS considers independent contractors as business owners.

You will need to file your own tax return. If you’re a teenager you need to prepare a separate tax return from your parents.

Tell your parents not to panic, they can probably still claim you as a dependent!

Report the income from the 1099MISC on Schedule C Business Profit or Loss.

You may not owe federal income tax (if your total income is under $6,100 on 2013), but will owe self-employment tax at 15.3% of your net income.Ouch!

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I cover this in detail in my ebook Teens and Taxes including an example with the forms filled out.

It’s worth the $3 to do it right. Buy a copy here.

And read this blog post from another parent whose son received a Form 1099MISC.

 

Carol Topp, CPA

P.S. If you think you should have been treated as an employee and not an independent contractor, you can complain to the IRS. I cover all that in the Teens and Taxes ebook. Here’s an excerpt.

Do teenage babysitters owe taxes?

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A lot of teenagers make money by babysitting for neighbors. Babysitting is a terrific micro business for a teenager and there are tax advantages that you may not know about.

Babysitters are Considered Household Employees
Babysitters are considered household employees . They are an employee of the family hiring them. A babysitter usually owes income tax on her income from babysitting.The employer also have to pay Social Security and Medicare taxes on their employees behalf. This tax is nicknamed the “nanny tax.”

But, there is a huge exception to the nanny tax for teenagers!

An employer does not have to pay employer taxes if these three conditions exist:

  • the employee is under age 18 at any time during the year and
  • the work is in or around a private residence as an employee and
  • the employee’s main occupation is not providing house hold services. (For a teenager, their primary occupation is to be a student, not a babysitter.)

All three things must be true to be exempt from employer and self-employment taxes.

Example:Sarah, age 16, goes to a neighbor’s house and babysits their three children several times a month. In one month she makes $75. She is a teenage household employee. Sarah will not owe self- employment tax on her babysitting income. If she earns less than $5,700 (in 2009), she will not owe federal income tax either.

If Sarah decides to run a day care service during the summer from her home, she is not be a household employee, but rather a business owner. She will then owe self-employment tax (and perhaps federal income tax) on her profit.

Read more about household employees and the nanny tax in IRS Publication 926 Household Employer’s Tax Guide at http://www.irs.gov/pub/irs-pdf/p926.pdf.

ebookcoverIn my book, Teens and Taxes, I devote an entire chapter to babysitters and other household employee jobs including examples, forms and instructions on how to fill in the tax forms correctly.For $3.00, you’ll get accurate information that’s easy to understand..

Pdf version (easy to read on your computer) $3.00

Kindle version $2.99

Nook/ other ereader versions $2.99

Read more here.

Carol Topp, CPA

Celebrate National Entreprenuership Week! Sale on ebooks

EntrepWeekSaleEbooks

Order your ebooks here.

What’s new in taxes for teenagers?

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Teens and taxes ebook available at TeensAndTaxes.com

Not a lot changed in the US tax code for teenagers for 2013, except a few thresholds:

Income tax is paid on earned income greater than $6,100 in 2013 (up from $5,950 on 2012)

Income tax is due on unearned income (usually investment income like interest and dividends) over $1,000 in 2013 (up from $950 in 2012).

The tax for teenagers with both EARNED and UNEARNED income are more complex. The guidelines involve comparing a teen’s gross income (meaning their total income from all sources) to the greater of

  • $1,000 or
  • earned income plus $350 (up from $300 in 2012).

 

If you purchased the Kindle version of my ebook, Teens and Taxes, be aware that it is based on 2012 thresholds. Just keep in mind these 2013 thresholds when preparing a teenager’s tax return.

 

Carol Topp, CPA

 

I need a video editor!

I need to hire a video editor, so naturally I’m going to hire a teen micro business owner.

Here’s the job description.

Qualifications
Knowledge and experience in video editing
A portfolio of your work (Email me the links)
Three recommendations (name and email or phone)

Tasks
Edit a 60 minute video into several clips of 2-5 minutes. I’ll will provide approximate timings for the clips. Each 60 minute video may have 5 to 10 clips.
Intersperse Powerpoint slides I provide into the video clips
Add title and annotations
Submit the video to me for review. Make any corrections or edits I request.
After my approval, upload to my YouTube channel.

Rights to Completed Work
All files produced by you, the contractor, including video files, audio files, graphic images in the course of your work for me shall be the property of Carol Topp. You shall retain no ownership, interest or rights to them.
Any files including video, audio and images provided by Carol Topp to you remain the property of Carol Topp and you have no right to use, reproduce, or distribute them.
You may add  your name, and company name and website to the credits at the end of the video.

Compensation
Quote by the project with an estimate of the time frame to complete the project and your total fee.
If offering an initial discount, please inform me of what future projects will cost.
You are hired as an independent contractor. You will be required to fill out W-9 supplying me with your legal name, address and tax ID.
Payment will be by Paypal. Half at the signing of this contract and half at delivery of the video.

If you’re interested email me (Carol@MicroBusinessForTeens) a quote and your qualifications. A link to some of your video editing work and 3 references I can contact is required too.

 

Free tax software for teen business owners

 

 

There are several sources for you to file a teenager’s tax return for free:

 

Tax Act is the software I use. I use the package for professionals, but you can try their free version: https://www.taxact.com/

 

IRS Free File e-badge
The IRS partners with several software providers in the Free File program: http://www.freefile.irs.gov/

 

For more information on taxes for teenagers visit my other website TeensAndTaxes.com

 

Teenage Taxation Without Representation video

 

Here’s a short video produced by three teenagers on

Teenage Taxation Without Representation

http://vimeo.com/user24314218/teenagetaxation

Teenage Taxation Without Representation (C-SPAN Student Cam 2014) from lei on Vimeo.

You can jump to 4:00 min to see me explain that the self-employment tax threshold of $400 has not been adjusted since 1954!

If it had been adjusted it would be $6,000!

Imagine being able to earn $6,000 before you had to pay self-employment tax! Think that would encourage some teens to start a micro business?

Help me and these teenagers adjust the tax on teen entrepreneurs. Click on the link for a letter you can send to your Representative or Senator.

Eliminate tax on teen entrepreneurs

 

Carol Topp, CPA

What do I need to know about crowd funding and taxes?

crowd surfer © by Photos by Mavis

Question: I’m interested in accepting donations from a crowd funding website. What do I need to know about the taxes?

I’ll do my best to answer your questions, but I have to include this disclaimer:

The Internal Revenue Service hasn’t published specific guidance on the tax consequences of receiving money through crowd funding sites like Kickstarter.

I’ll also explain that I am a very conservative CPA. I do not take risky or unsupported positions. You may get a different answer from another CPA or tax professional.

As the term suggests, crowdfunding is funding from a crowd of people; that is, many people provide small amounts of money to finance something. Crowdfunding has its roots in charitable causes, including the advent of microfinancing to provide financial services to poor people, but has progressed to the online funding of creative and other projects via sites like Kickstarter and Rockethub.

Crowd funding income can be treated as the following:

  1. A donation to a 501c3 tax exempt charity.
  2. Investment in a business by an investor seeking a share of ownership (called equity owners)
  3. Gift given by an individual to an individual. Gifts are typical when no business or potential profit motive is evident. Examples of gifts include a wedding, funding an adoption, helping a family whose house was destroyed by fire or a person with a medical illness.
  4. Taxable income for a for-profit business. Most businesses give a reward in exchange for the income. This reward may be considered a sale of a good and subject to sales tax in your state (and you thought all you had to worry about was federal income tax!)

 

For a micro business owner, #1 and #2 do not apply. It is my opinion that #3 Gift does not apply to micro business owners either

#4 taxable income is the only option that applies to micro businesses launching a crowd funding campaign.

 

Carol Topp, CPA

Here is my disclaimer:

Nothing contained in this email was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code, as amended; (2) any written statement contained on this website relating to any federal tax transaction or matter may not be used by any person to support the promotion or marketing or to recommend any federal tax transaction or matter; and (3) any taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor with respect to any federal tax transaction or matter contained in this website. No one, without our express written permission, may use any part of this website in promoting, marketing or recommending an arrangement relating to any federal tax matter to one or more taxpayers.