Posted by JAM/CA on 10/13/09 3:33pm
Msg #307178

Notary Exempt

Last minute tax filers for 2008 tax returns. If you are filing on 10-15-09, don't forget that your notary fees are exempt from self-employment tax.

Reply by Marian_in_CA on 10/13/09 3:48pm
Msg #307181

But also remember...

that you have to weigh the benefit of taking the exemption over the loss of Social Security credits for your own situation. If you don't fully understand the distinction and what that means, I wouldn't recommend taking the exemption.

I'm no tax advisor, obviously... I'm just saying that from personal experience with my husband and dealing with disability. If you become disabled, it could mean thousands and thousands of dollars in lost benefits. We lost over $15,000 in retroactive benefits because in one of his jobs he was exempt from paying in. We didn't know what that meant then, except for a few extra $$ in our pocket... but we do now. We saved less than $1000 through that exemption... but a few years later, when he had an accident and could no longer work -- that unawareness cost us over $15K, plus the extra headache of attorneys fees and multiple hearings.

If you KNOW you can afford to lose the benefits -- the exemption is good. But if you're not 100% certain, play it safe.

Reply by Glenn Strickler on 10/13/09 5:12pm
Msg #307191

Re: But also remember...

Hopefully, the job that was exempt was so because it had another retirement that was paid into. Example, many county employees pay into their retirement plan in lieu of FICA. Many teachers pay into a retirement rather

A person is far better off taking the money you were going to pay into Social Security and investing it yourself-- even considering what has happened in the stock market lately. Just putting it in to an interest bearing account returns more than it would in Social Security -- I have done the math. But you must save it and not spend it.

Reply by Marian_in_CA on 10/13/09 8:18pm
Msg #307218

Re: But also remember...

In our situation, that was not the case. He was working a student job at a land grant university. As a general rule, the university does not withhold SS taxes from student paychecks because they're exempt. They do not tell the students this... they simply don't withhold. That's great when you're a starving student.... but not so great if you have happen to have a tragic accident a few years later leaving you disabled, as happened with my husband.

I'm not even talking about retirement here... this is mostly for disability prior to retirement, which is something most of us never even think about. Fortunately, most of us never have to deal with it... but you never know when or if it could happen. My point is that if you aren't capable of fully supporting yourself in the event of disability, you should make sure you know what you're doing before you take the exemptions.

Of course, if you work a full-time job in addition to the notary stuff, that's likely different and won't have much of an impact. This is mostly for those who rely solely or mostly on their notary income to survive.

This isn't so much about retirement savings as it is disability benefits.

In our case, my husband was awarded the disability, but only back a short time, because SSDI uses a complicated formula based on work credits and contributing in to Social Security in order to calculate benefits. It's something I'd never heard about until we were in the middle of it and our lawyer kept delivering surprises.

Our judge even recognized that he was eligible and definitely disabled at a certain date... but because of that formula and the exemptions, he lost several years of credits, which equated to just over $15,000 of back benefits from the date of disability.

So we had two choices. Let the appeal judge toss his claim outright (again), or amend the claim to a more recent date of disability that would be approved right away. We chose to amend the claim rather than keep fighting. We'd been going on 3 years already trying to get an approval, we didn't want to wait anymore. The whole reason it took so long is because of the credits and the date of disability. There was never a question about his actual disability. Better that we get an assured benefit every month than keep fighting and paying a lawyer to fight the claim at a higher level.

I guess it's just one of those things you don't really understand until you go through it and you realize how little you actually knew about the system.

Reply by Susan Fischer on 10/13/09 10:04pm
Msg #307231

And, disability aside, ask anyone who's on SS if they'd

give it up, and I think you won't find any takers. I love mine.

And because I paid rather than claim the exemption these last five years, my benefit increased.

True, there are those who hate the idea of Social Security, but it sure comes in handy as a shirt on a pocket if you're not filthy rich.

Reply by Joe/NYC on 10/13/09 4:34pm
Msg #307187

Now does that include the "Travel Fee" for say a loan signing, which is higher the the state limited "Notary Fee" a Notary can charge.

Reply by Linda_H/FL on 10/13/09 4:37pm
Msg #307188

Re: Notary Exempt....No Joe

The fees you're allowed to charge for notarizations are exempt from SE tax - the full fee is subject to income tax....less any business deductions you take (which include the IRS mileage rate)..

Reply by Joe/NYC on 10/13/09 4:41pm
Msg #307189

Re: Notary Exempt....No Joe

That's what I thought, hmm, so I'm wondering if you could reduce the "travel fee"/taxable income by the amount of documents notarized in a package x the allowable "Notary fee", in addtion to the related expenses...Have to knock this one around a bit

Reply by Linda_H/FL on 10/13/09 4:45pm
Msg #307190

Re: Notary Exempt....No Joe

Remember - the fees for your notarizations ONLY are exempt from SE tax ONLY - the entire fee is subject to income tax.

Reply by John Schenk on 10/13/09 6:05pm
Msg #307204

Re: Notary Exempt....No Joe

Hope my CPA did it right. I remember discussing it with him before. I'll have to check on that. hmmmm I'm pretty sure he exempted the statutory notary fees, but don't know if he just did that for SE or also for income tax. Probably need to verify that. Hope to hell I don't have to amend. To be honest, I actually thought the exemption was for SE and income tax so that's why I have to go back and see what we did. Thanks for pointing that out. Haven't thought about that in a while. Better to catch it now than to get caught on it in some audit in the future. That would totally suck! Thanks again!

As for the mileage deduction, I attach a Mapquest to every confirmation portal to portal so I always have the exact mileage and also record that mileage in my Journal, just so it's easier to find come tax times. Even if they're just a dozen miles round trip they add up over a year.

JJ

Reply by BrendaTx on 10/13/09 7:01pm
Msg #307208

I do the same, John...but I don't know if the IRS

is very happy with that come audit time....they want a log. What does your accountant say? I'm very careful with mileage expense because of the flagging it can do on a return.

Reply by Jim/AL on 10/13/09 8:08pm
Msg #307215

Re: I do the same, John...but I don't know if the IRS

I keep an excel ss for mileage, appts. and payments. I also use paper map and enter mileage into ss, then the ss doubles it (round trip) and totals it for every month and then also a yearly. I also have a column for dropping package mileage.

Every mile/penny helps.

Reply by John Schenk on 10/13/09 8:10pm
Msg #307216

Re: I do the same, John...but I don't know if the IRS

I have no problem with an audit on any expenses whatsoever. I have them all totally documented. I don't really worry about mileage expense, because I'm going to take it for notary work, as well as the other things I do as it's a nice deduction. I have every single trip documented, and what it's related to for business. A little hotel expense and dinners for business are included in that, but totally documented. That doesn't scare me a bit.

JJ

Reply by BrendaTx on 10/13/09 8:52pm
Msg #307221

I was kinda just askin' about the log. Curious. n/m

Reply by John Schenk on 10/13/09 9:48pm
Msg #307229

Re: I was kinda just askin' about the log. Curious.

For Notary Work, I put it ALL in the log, and have the receipts to back it up. Not sure what you're asking? Please expound on your question and I'll get back to you this week. :-)

JJ

Reply by Linda_H/FL on 10/13/09 9:54pm
Msg #307230

Re: I was kinda just askin' about the log. Curious.

I understand documenting everything in your journal, but I'm curious how you use your journal for tax prep- or why you'd even do that - isn't that a breach of client confidentiality? That journal should only be disclosed under certain circumstances and under strict, controlled requests - I'd never turn my journal over to my accountant so they can prepare my tax return - that's what Quicken and hard copy files are for.

MHO - and if I misunderstood I apologize.

Reply by SharonMN on 10/14/09 1:10pm
Msg #307279

Re: I was kinda just askin' about the log. Curious.

I have a small notebook that lives in my vehicle. Every time I drive for business purposes, I write the date, starting and ending mileage from the odometer, starting and ending location, and the business purpose for the trip. Then I use that to do my taxes at the end of the year. Better than Mapquest because then you also get to deduct the mileage from being lost trying to find the borrower's house, side trip to FedEx box, etc.!

Reply by BrendaTx on 10/14/09 7:13am
Msg #307238

John, Janet's response in this thread explains what I meant.

No criticism, just discussing.

Tracking the consecutive mileage is indisputable. I like your method and I use it, but unless the mileage REALLY makes a difference I don't bother the IRS with mileage deductions because I don't want to slow down my life with an audit, and mileage deductions are one that I have read cause flags.

In some notaries' lives/biz this is an incredible deduction but in my part-time signing business where mileage is minimal it's simply not worth it to me to use the mileage deduction and risk an audit.

On another subject...I would also be careful of having too many business "loss" years so that extra taxes aren't paid.

What Janet said about mileage is below:

"One of the key things I was told many years ago is to track "consecutive" mileage. The idea being not only that you have total miles driven, but can show on an ongoing basis what the actual mileage was on your odometer as evidence that it wasn't just manufactured information. If you are tracking actual complete starting and ending mileage in your log, then you have what I was told was adequate documentation for an audit that they can't dispute. A Mapquest page can be printed up after the fact, but what was actually on your odometer on that day is pretty concrete documentation. I was told to write it into my Franklin, along with names, business purpose, etc. It can then be transferred onto an Excel spreadsheet, but the planner with date, etc. is much better proof."

Reply by JanetK_CA on 10/13/09 11:03pm
Msg #307234

I agree, Brenda.

One of the key things I was told many years ago is to track "consecutive" mileage. The idea being not only that you have total miles driven, but can show on an ongoing basis what the actual mileage was on your odometer as evidence that it wasn't just manufactured information. If you are tracking actual complete starting and ending mileage in your log, then you have what I was told was adequate documentation for an audit that they can't dispute. A Mapquest page can be printed up after the fact, but what was actually on your odometer on that day is pretty concrete documentation. I was told to write it into my Franklin, along with names, business purpose, etc. It can then be transferred onto an Excel spreadsheet, but the planner with date, etc. is much better proof.

Reply by parkerc/ME on 10/14/09 4:29pm
Msg #307352

Re: I disagree.

I don't enter beginning and ending odometer readings for each job. Do I ALWAYS go straight to the BO location and straight home? More often, no. Do I take a detour to the grocery store after signing and dropping the docs, or go on a shopping spree, take in a movie, etc. after . . often, yes. I'll do errands afterward before heading home, so beginning and ending mileage wouldn't cut it for me. (But I'm only doing this as part-time work.) I do maintain three records (1) the notary journal with only notarization information which includes the actual notarizations for each signing, which I keep secured (2) an MS Access database with a record for each signing to which I've given my own Job Control Number . . so that I don't have the BO's name on any records outside of my notary journal, and (3) an Excel spreadsheet someone mentioned in this thread containing the tax related figures, with my JCN as reference for each job. I keep a printout of the mapquest directions/mileage for each (with JCN on it instead of name) to back up my tax records. I do record car mileage at beginning and end of year, deduct the total business mileage from my Excel worksheet total to come up with personal vs. business use of my car. It's pretty much whatever works for you. The above combination works for my particular needs.

Reply by JanetK_CA on 10/14/09 5:22pm
Msg #307372

Re: I disagree.

Your explanation is precisely why you need a consecutive record of mileage. Technically, once you go from borrower's location to a stop that is a non-business related purpose, the mileage stops being deductible. So if you went from your home office to a signing, then from there to the grocery store, then home office again, the last segment would be disallowed in an audit, if they found out about it. They expect those types of activities to take place which is why they want you to show exact documentation of "consecutive" mileage. It's all about proper documentation.

I should add that I'm not a tax expert, but I learned these things from someone who was way back when. Ask your own tax preparer/CPA or research it yourself, but I recommend being careful about your systems. It sounds like what you do works for you, but I suspect the IRS might not find it sufficient as proof for mileage documentation in an audit. (Also BTW, keep in mind that the Mapquest pages that you keep do have the borrower's address on them...)

Reply by parkerc/ME on 10/14/09 6:38pm
Msg #307386

Re: I disagree.

Having been an auditor in a past life, I feel I have CMA up, down, over, and back pretty well with my system. Have been doing this method for many years with no problems. And although the address shows on the Mapquest printout, that's often not the BO address, but simply where the signing took place. They have no need to know whether I stopped at a grocery store a little out of the way on the way home or came straight home. I'm not going to micro-manage my mileage that way, particularly in this extremely rural area, where I often end up taking a wrong road (GPS loses signal, cell phone in dead area, and BO initial directions sketchy) and adding more to the odometer mileage than is considered valid mileage to/from a signing location, so I eat some of my mileage in those cases. It's simply unrealistic and less accurate for me to log odometer readings. But, like I said, it's whatever works for each person.