Posted by jonpa on 1/22/09 2:11pm
Msg #275313

Do I have to pay taxes?

I read on H & R Block website that Notary earnings do not have to be claimed on income taxes. Is this true?

Reply by Linda_H/FL on 1/22/09 2:19pm
Msg #275314

Yes they have to be claimed...

All of your income is taxable as income for federal tax purposes - notary fees are exempt from Self-Employment taxes only (the equivalent of employer contributions to Social Security),...you can make it all taxable so you pay SE taxes on all your income, thereby "padding" your future social security benefits if your choose.

Do a search here - this is discussed in depth every year.

Reply by PAW on 1/22/09 2:22pm
Msg #275317

Great minds think alike! n/m

Reply by Linda_H/FL on 1/22/09 2:26pm
Msg #275318

LOL...:) n/m

Reply by PAW on 1/22/09 2:19pm
Msg #275315

Yes, you pay income tax on ALL income ...

Even fees earned as a Notary Public is taxable as income. However, **notary fees** are not subject to self-employment tax. That is, you can exclude the allowable notary fees on Schedule SE when calculating the self employment tax.

Please note that the fee you earn as a signing agent, is not necessarily a "notary fee". Only the fees associated with performing authorized notarial duties, such as taking an acknowledgment or giving an oath, is exempt.

Reply by Linda_H/FL on 1/22/09 2:20pm
Msg #275316

See?? I taught Paul everything he knows...hehe..:) n/m

Reply by Sylvia_FL on 1/23/09 11:37am
Msg #275384

Re: See?? I taught Paul everything he knows...hehe..:)

And I thought I was his mentor

Reply by Marian_in_CA on 1/22/09 3:20pm
Msg #275326

Re: Yes, you pay income tax on ALL income ...

One thing I was warned about, though, is that if you exempt some fees from the SE tax, you reduce the amount you pay in to Social Security -- which can come back to haunt you later if you become disabled before retirement and deed disability. It may also ultimately reduce the amount of your Social Security benefits when you do retire. And, if you've got a spouse and young children... if you die, it could affect SS survivor's benefits, too.

The accountant I was talking to about this said that if you choose to exercise the exemption, you should make sure that you are putting that "saved" tax money somewhere else and not simply relying on it to reduce your tax liability because you are otherwise broke.

I say this from first hand experience. My husband is disabled as the result of an accident and we have been working on a disability claim for 2.5 years. He finally had a hearing last month and the issue wasn't so much if he is disabled or not, but if he is even eligible because when we were in college and both working as students at the University, several years ago we were considered exempt for SS taxes and paid nothing in, even though we were working. So, it's an issue of credits during a specific time frame prior to his disability. It's a complicated formula that I don't entirely understand. Back then, we had no idea what the implications were of that exemption. Now, it's clear as day.

So, while actual fees are exempt from the tax, you need to weigh the impact of taking the exemption may be over simply paying the tax. If you're in CA and you've done 500 notarial acts in 2008, for example, that means that $5,000 of income would be exempt from the tax, so that's, what... just under $800 or so? Yeah, that's a big chunk of change to be sure... but as it was explained to me, that $800 shouldn't go back into your pocket to spend, but into another retirement plan or investment. If you can't afford to do that, he said, don't take the exemption, because if something DOES happen and you are then ineligible for or get reduced SS benefits? You're really in a world of hurt.

Reply by John_NorCal on 1/22/09 3:37pm
Msg #275328

That's right Marian. You need to pay the piper. n/m

Reply by MsM/CT on 1/22/09 3:38pm
Msg #275330

Depending on how old you are now...

you may never see that money anyway.
I'm not so sure that I will.

Also, I think it starts at age 25 that the SSA starts mailing out annual statements telling you that "If you died/retired/became disabled today...this is how much you/your family will earn".

Reply by Marian_in_CA on 1/22/09 4:04pm
Msg #275332

Re: Depending on how old you are now...

I'm in the same boat... I'm far too young and may never benefit from it myself. But, what those statements DON'T tell you about are actual eligibility for services. In my husband's case, we see that it says he would X amount each month if he became disabled. Great... except that SSDI takes in to account a certain number of years that you worked prior to being disabled as well as the total number. That's the pickle he's in right now. We're both far too young for retirement, but things like accidents and permanent disability tend to change the way you look at things.

Reply by MsM/CT on 1/22/09 5:21pm
Msg #275343

Re: Depending on how old you are now...

"permanent disability tend to change the way you look at things. "

I am young and reckless so I will continue to be oblivious to anything like that ever happening to me (or so my mother says)!

Reply by MW/VA on 1/22/09 3:15pm
Msg #275324

Yes, unless you want the IRS at your doorstep.

Reply by Glenn Strickler on 1/22/09 4:23pm
Msg #275336

Re-read the Block website slowly ..

It says that income from notary acts are not subject to self-employment taxes. You still pay income tax. If you are not sure about the difference, then you will need to use a tax professional.

Reply by DebbieT on 1/22/09 8:11pm
Msg #275357

Re I don't think I will see any Social Security benefits

either. I am investing in Roth. Invest your money for retirement.

Reply by sn/oh on 1/23/09 10:44am
Msg #275376

Re: Do I need to pay taxes?

Not if your name is Geithner!

Reply by Sylvia_FL on 1/23/09 11:38am
Msg #275385

Re: Do I need to pay taxes? ROFL sn/oh n/m

Reply by Todd/OH on 1/23/09 7:19pm
Msg #275460

Remember that W-9 you sent to them?

Now you have to report the income they sent you.