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Tax facts and fiction
Along with your birthday and a handful of other days on the calendar, April 15 sticks in your memory. Not exactly a happy anniversary for most, but an important one nonetheless. Here, then, are some tips, resources, and information that may come in handy as you prepare to pay your share.
Back to basics
by Marty Kramer
Celebrate April in August
If you can’t get your act together in time to fill out your return by April 15, send in Form 4868, which is an application for an automatic extension. The IRS also allows you to file an extension by phone (888/796-1074). You then can prolong your procrastination until Aug. 15. However, as noted in the form’s instructions, "Form 4868 does not extend the time to pay taxes. If you do not pay the amount due by the regular due date, you will owe interest. You may also be charged penalties."
Are you self-ish?
If you haven’t yet figured out if the IRS considers you self-employed, you’ll want to start there. The IRS defines licensed real estate agents as statutory nonemployees and treats them as self-employed if: "Substantially all payments for their services as real estate agents are directly related to sales or other output, rather than to the number of hours worked; and their services are performed under a written contract providing that they will not be treated as employees for Federal tax purposes." More information on determining the difference between an employee and an independent contractor can be found in IRS publication 15-A.
If you are self-employed, you are responsible for making quarterly estimated tax payments and for paying self-employment tax.
Good form counts
There’s a form for just about any kind of financial activity, it seems. If you need to know which ones apply to you or you want to get your hands on a few of them, go to the IRS Web site, www.irs.gov, and visit the Forms and Publications section.
Help, I need somebody
According to advice from CNN/Money.com, if you are self-employed, you should definitely hire a professional to assist you with your return, and if you file Schedule C, that somebody should be a CPA. The site suggests that any CPA you hire be a member of the American Institute of Certified Public Accountants (AICPA.org), who are bound by a strict code of ethics.
If you are brave and plan to go it alone, tax software can help you avoid mathematical mistakes and prevent other errors and omissions.
You can access additional resources in the Small Business section of the IRS Web site. You will even find a section devoted to issues for the real estate industry. Locate this section by typing the words small bus/self employed real estate into the search on the IRS home page.
Get a jump on next year
Though you have more than a year before the deadline to file a return for 2002, assessing your situation now can help you save taxes and maximize your investments. The Tax Relief Act of 2001 changed many provisions that may affect your retirement contributions, estate planning, and college savings. For more details on these changes, visit with a tax professional or see the article from the December 2001 REALTOR® magazine (www.realtormag.com/rmomag.nsf/pages/managemoneydec01) or the TaxPlanet.com summary at www.taxplanet.com/prez/prez.html.
Photo © Corbis Images.
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