Posted by John_NorCal on 11/13/06 10:28pm
Msg #159756

Did some one say taxes? Well anyway...

Since tax time is not too far away, I just want to share something from a tax seminar that I am attending for the next 2 days.

The IRS has determined that there is a $345 billion tax gap in the country, and $265 billion comes from sched C filers. Typical areas of concern are; understatement of income, depreciation, supplies, office at home deductions. They are hiring more agents and will be auditing more returns. Key is to keep accurate records and be able to substantiate your deductions. Don't be a Wesley Snipes.

Reply by Michelle/AL on 11/13/06 10:34pm
Msg #159759

Wesley isn't running from Uncle Sam

.....he's just preparing for a film overseas (wink). I definitely appreciate the reminder and will make sure I don't get an accountant who is too deduction-happy. I used an accountant one year (personal taxes) and I had to tell her where to draw the line in claiming deductions for me. I'm of the opinion...if I don't have a receipt and can't prove I spent the money...then I won't claim it.

Reply by Larry/Ca on 11/13/06 10:43pm
Msg #159762

I total the number of signatures ....

I notarize for the year and multiply that number by $10 (California) place it on line 2 or 3 of the schedule C and write 'notary public exempt'. This amount is then deducted from my total sales. It is usually a little less than 50% of the gross income from this gig. I'm not a tax guy nor do I use a tax guy. Is this how and where the rest of you guys write off this exempt portion of our income.?

Reply by Roger_OH on 11/13/06 11:32pm
Msg #159774

Wrong exemption, Larry!

All, repeat ALL. notary income is subject to federal, and if applicable, state and local taxes, and must be declared regardless if you receive a 1099 from a company or not.

The only tax area that actual notarial act fees are exempt from is SELF-EMPLOYMENT taxes.

If you are writing off nearly half your income as being exempt because it's for notary fees, see John NorCal's opening post about the IRS crackdown - it appears you are just what they are after!

Strongly suggest you consult with John before you get into some serious trouble.

Reply by Larry/Ca on 11/13/06 11:44pm
Msg #159779

Re: Wrong exemption, Larry!

I was given this information from the IRS, I called their help line specifically asking them where on the schedule C I was to account for this tax exempt amount. I will look for John NorCal's post and the tax related law.

Thanks for the info Roger.

Reply by JanetK_CA on 11/13/06 11:50pm
Msg #159780

Re: I total the number of signatures ....

Even for the Self Employment part, I don't think this would be considered adquate documentation. By way of illustration, if you do a signing that has 5 signatures and you get paid $100 for it, you are allowed to deduct from SE tax the $50 dollars. No problem. However, if you do an assignment with 14 signatures and get paid $100, you can't exclude $140, which is more than you were paid.

Reply by Kate/CA on 11/14/06 12:15am
Msg #159782

Something is wrong with that method.

Larry, you can't just total all notary signatures and multiply by $10.00. If you only make $50.00 on a signing, but did 10 notarizations, you still only have a $50.00 deduction, not $100.00. You can't claim more than what you were paid, just to have a write off. On notarizations like this in my book, I show I only made $5.00 per notarization.
My book matches my total deductions. If I make $100.00 for a signing, and only have 5 notarizations, then yes, I claim $10.00 for each notarization for a total of $50.00 and show $50.00 as a signing fee that I am going to pay SS tax on.

Reply by Larry/Ca on 11/14/06 1:02am
Msg #159790

I do take into account ..

the total fee for the job and realize that I cannot deduct as exempt more than the total fee. My confusion was where those exempt fees were put into the tax mix and didn't realize that they were only exempt on the SE schedule and not on Schedule C. After reading the SE Tax Publication as it refers to notary income I now understand that what I understood after talking to the IRS guy on the answer line was incorrect. Glad I asked the question here as I thought I had the taxes on this gig figured out. I was thinking that I was not going to be paying much with all the deductions however I now think my taxes will be more significant.

Thanks fr the input, Larry

Reply by Joan Bergstrom on 11/14/06 1:47am
Msg #159792

Be sure to point out the "Self Emp Tax exemption"

I don't think many tax preparers understand this exemption?
I wonder if many notaries understand our exemption?

Reply by Kate/CA on 11/14/06 8:11am
Msg #159805

Re: Be sure to point out the "Self Emp Tax exemption"

I agree Joan, I printed it out years agon and gave it to my tax preparer. I again print it out every year and give it to her, just as a reminder.

Reply by Kate/CA on 11/14/06 8:09am
Msg #159804

Re: I do take into account ..

We were worried about you. Don't want the IRS after any of us. You are in a remote area also, my mileage really helps me.