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Individual / Business Tax info

"Staying informed on your income type, deductions, and filing deadlines — whether you're a W-2 employee or a business owner — is key to reducing taxes and avoiding penalties."

✅ Individual Taxpayer Information (W-2, 1099, Credits, etc.)

📄 Income Types & Reporting

  • W-2 Income:

    • Reported by your employer. Includes wages, tips, bonuses.

    • Social Security, Medicare, and federal income tax are usually withheld.

  • 1099 Income (e.g., 1099-NEC, 1099-MISC, 1099-K):

    • For independent contractors, gig workers, or side hustles.

    • No taxes are withheld — you're responsible for paying federal/state income and self-employment taxes.

  • Unemployment Benefits:

    • Taxable and reported on Form 1099-G.

    • May result in a tax bill if you didn’t elect withholding.

  • Other Income:

    • Interest (1099-INT), Dividends (1099-DIV), Retirement (1099-R), Social Security (SSA-1099), Capital Gains (1099-B), etc.

📅 Other Must-Know Info

  • Tax Filing Deadline: April 15 (unless extended).

  • File even if no income (to claim credits like EITC or refunds).

  • Amendments: Use Form 1040-X to fix errors on past returns.

  • Withholding Check: Use IRS tool to avoid over/underpaying.

  • Estimated Taxes: Required if earning 1099/gig income or under-withheld W-2.

💵 Tax Credits (Reduce Tax Owed)

  • Earned Income Tax Credit (EITC):
    For low-to-moderate income earners with or without children.

  • Child Tax Credit:
    Up to $2,000 per qualifying child (subject to income phaseout).

  • Child and Dependent Care Credit:
    Helps cover childcare or dependent care while working.

  • Education Credits:

    • American Opportunity Credit (up to $2,500/student).

    • Lifetime Learning Credit (up to $2,000 per return).

  • Saver’s Credit:
    Credit for low-to-moderate income earners contributing to retirement plans (e.g., IRA, 401(k)).

🧾 Common Deductions (Reduce Taxable Income)

  • Standard Deduction (2024):

    • Single: $14,600

    • Married Filing Jointly: $29,200

    • Head of Household: $21,900

  • Itemized Deductions (if higher than standard):

    • Mortgage interest

    • Medical expenses (over 7.5% AGI)

    • State/local taxes (SALT limit: $10,000)

    • Charitable contributions

  • Student Loan Interest:
    Up to $2,500 deduction (income limits apply).

💼 Business Taxpayer Information (1040 Schedules, 1120S, etc.)

🧾 Business Entity Types & Filing

  • Sole Proprietor (Schedule C on 1040)

  • LLC (Single or Multi-Member)

    • Single-member LLC: Reports on Schedule C

    • Multi-member LLC: Files Form 1065 + K-1s

  • S-Corporation (1120S)

    • Income passes through to shareholders on K-1

    • Must file payroll if owner takes salary

  • C-Corporation (1120)

    • Pays corporate tax separately from owners

💡 Key Deductions for Business Owners

  • Home Office Deduction:
    Exclusive, regular use space for business.

  • Vehicle Use:
    Actual expenses or standard mileage (67 cents/mile in 2024).

  • Depreciation:
    Deduct cost of business equipment/assets over time (or via Section 179 for full-year deduction).

  • Business Meals:
    50% deductible when meeting with clients or team.

  • Startup Costs:
    Up to $5,000 can be deducted in the first year.

  • Health Insurance Premiums:
    Deductible for self-employed individuals.

  • Retirement Contributions:
    SEP IRA, Solo 401(k), SIMPLE IRA deductions.

💵 Business Tax Credits

  • R&D Credit

  • Work Opportunity Tax Credit

  • Employee Retention Credit (if applicable)

  • Disabled Access Credit

  • Energy Efficient Commercial Building Deduction

📝 Recordkeeping & Reporting

  • Track All Income & Expenses

    • Use accounting software (e.g., QuickBooks)

    • Keep receipts and bank statements

  • Form 1099-NEC:

    • Must be issued to contractors paid $600+ by Jan 31

  • Payroll:

    • File payroll taxes (Form 941/940) quarterly

    • W-2s to employees by Jan 31

  • Sales Tax:

    • File if selling taxable goods/services (varies by state)

  • Estimated Quarterly Taxes (Form 1040-ES):

    • Due April, June, September, and January

🔍 Audit Triggers to Avoid

  • Large deductions disproportionate to income

  • Home office misuse

  • Not filing required 1099s

  • Cash-based business underreporting income

  • Rounding numbers too perfectly

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