Posted by Roger_OH on 10/25/06 7:59pm
Msg #155045

IRS cracking down on the self-employed...

Noted an article that stated the IRS is losing $100 billion (with a B) to sole proprietors improperly doing their taxes, and they will be more heavily scrutinized in the future. It mentions the poorest decision most SPs make is not paying their quarterly taxes to the IRS.

This brings to mind several things we have mentioned on the board in past years that bear repeating as we approach the end of the year:

If you are a sole proprietor (likely most of us), be sure you file a Schedule C form that separates your notary business income/expenses from any other income.

Get an EIN for your business (takes 2 minutes on the IRS site); you don't have to be incorporated or have any employees (other than yourself) to get one. Don't use your SSN for any aspect of your notary business, and especially don't give it out to companies.

Have a name for your business, and register it with the business section of your SOS (also county/city as appropriate) so no one else can copy it.

The portion of your income that is derived from notarial acts only, is exempt from federal self-employment taxes (programs such as TurboTax have this built in), but you have to separate it out from the overall signing fees.

Importantly, ALL your notary income is taxable. Don't think that just because a company doesn't send you a 1099 form, you don't have to report that income. You can be sure that the company is.

Pay your federal taxes quarterly (as well as state and local, if applicable).

Finally, it's always a good idea to have a good CPA at your disposal. There are a lot of deductions available to sole proprietor owners for your business; make sure you take advantage of all of them.

I'm sure there will be other tips from our accounting/tax prep bretheren, these were just all I could think of right now.

Reply by LIZ/VA on 10/25/06 9:06pm
Msg #155055

Good advice.Thanks. n/m

Reply by LIZ/VA on 10/25/06 9:08pm
Msg #155056

Ops.. I should have said Good advice.Thanks.:) n/m

Reply by Geselle Archie on 10/25/06 9:33pm
Msg #155061

Thanks for that information. I often worry about these type of things.

Reply by Teddog/CO on 10/25/06 9:10pm
Msg #155057

Roger that's the reason I use a CPA. Taxes can get rather involved so I'll do the signing and let the CPA do the taxes. I pay on a quarterly basis. God help the low ball notaries if the IRS ever goes the extra mile and starts tracking them. I'm sure they don't even report 1/2 the money they are making. Let alone the whole amount. When dealing with reporting taxes I would suggest that "honesty is the best policy."

Reply by John_NorCal on 10/25/06 10:13pm
Msg #155068

Good advice. We have started doing some work shops in our office for Sched C filers. You would be surprised at the people I see whose sole method of bookkeeping is a shoe box and a paper bag! Everyone should make use of a good bookkeeping program or a bookkeeper. I use Quick Books, but there a are others out there that are probably more user friendly.

Reply by Stuart Posner on 10/25/06 10:15pm
Msg #155069

Incorporation...the best way to go....(at least that's the

way I do it)

Reply by John_NorCal on 10/25/06 10:26pm
Msg #155074

Re: Incorporation...the best way to go....(at least that's the

There are many reason to incorporate or not incorporate. It all depends on the particular situation. But in any case, every business person needs to keep complete and accurate records. I believe one of our tax newsletters said there was $8 billion dollars that the IRS says they are losing due to fraudulent Sched C filings. They want the money back and they don't care who they get it from. Don't think for a moment that being incorporated will protect you from audits, etc., you're just faced with even more record keeping. And last but not least, are the everyday Sched C filers, keep good records and maintain your receipts in case you should ever get a letter from your friendly IRS man who wants to chat with you.

Reply by Roger_OH on 10/25/06 10:35pm
Msg #155075

Agree John...

My sense is that many folks on the boards are SPs running a small business of less than $50K or so (especially part-timers), and judging from some of the posts, likely just deposit their SS checks in their personal account, which is OK as an SP but not as a corp.There are also additional tax issues to deal with as a corp that SPs don't have, as well as the level of personal liability. As said, check in with a CPA to see what's best for your situation at this point in time.

Reply by Joan Bergstrom on 10/26/06 2:35am
Msg #155110

I filed with Turbo Tax this year

I might have actually gotten more deductions my using Turbo Tax because of the questions it asked about my expenses!! Of course if I get audited ...............

Because of the Calif Ack & Jurat fees at $10 per signature we need to be very careful in every loan signing we do that we account separately the number of these we do so we can account for them as Federal Self Employment Tax on our IRS Federal Return.

I wonder if most Tax Preparers actually know that notaries don't pay Self Employment Taxes on the dollar amount of each Ack & Jurat in a loan package. In Calif this can be significant!