Tax Basics – What 20 and 30 Somethings Need to Know

Tax and Financial News for February 2016

Tax Basics – What 20 and 30 Somethings Need to Know

Whether you prepare your tax return yourself or hire a professional, there are certain things you should know. Often it is not until a person reaches their mid- to late twenties that tax returns become more complex and they need to be more informed. Below are seven fundamental tax concepts that usually are not taught – but everyone should know

  1. You might not even need to file – Just because you have income does not mean you need to file a federal income tax return. There are many factors affecting your need to file – from how much you earned to the source of your income, filing status, age, etc. You can try to figure this out yourself, but it is best to check with a tax pro to confirm, especially given the next item discussed below.
  2. You might not need to file – but you probably will want to – While you may not need to file a federal income tax return, you might still want to in order to get the benefit of certain tax breaks and credits. One example is the American Opportunity Credit related to qualified educational expenses, which can yield a refundable credit even if you don’t owe any tax.
  3. Not all deductions require you to itemize – Most taxpayers do not itemize their deductions. This is because itemized deductions only benefit you to the extent that they exceed your standard deduction. Often, people do not have enough deductions to exceed this. But just because you do not itemize deductions doesn’t mean you should ignore deductions altogether. Certain deductions are allowed without itemizing on page one of Form 1040. Examples include student loan interest, IRA contributions and qualified moving expenses, among others.
  4. Can’t pay? File anyway – Different penalties apply for failure to file a return and failure to pay your tax. This means that even if you cannot pay some or all of your tax bill, make sure you still file your return. It also means that you need to make sure you file even if you are getting a refund or breaking even.
  5. Extensions to file are not the same as extensions to pay – If you cannot file in time, you may request an automatic extension for more time to file. To do so, complete and submit Form 4868 Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. As noted above, remember that an extension to file does not mean an extension of time to pay.
  6. Don’t mess with the IRS – If there is one organization you don’t want to mess around with, it is the IRS. This is not meant to scare you, but the IRS has extensive powers to go after taxpayers who fail to file, pay or both. For example, if you owe back taxes, the IRS can take it out of future refunds, garnish your wages or even revoke your passport. However, the agency also understands that sometimes things happen and people have trouble paying. There are various arrangements you can make with the IRS, such as payment plans, etc. The most important thing is to not bury your head and ignore the situation.
  7. There is no substitute for a good tax preparer – It might seem like a good idea to prepare your own taxes in order to save money or because you happen to be the rare breed that enjoys it, but it’s not always the best idea. Using a Certified Public Accountant (CPA) can help ensure that you save time, aggravation and best of all, money. Oftentimes the cost of hiring a professional preparer who stays current with the most recent tax law changes and has the experience of seeing many different situations can save you far more than it ends up costing.

 

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General Business News for February 2016

Offices: Choosing to Keep Doors or Go Without Doors

While collaboration is a cornerstone of any workplace, the timeless question of whether or not go to a completely open office space still exists. While open offices have their advantages, there are some drawbacks to consider.

With the open office trend gaining steam, more workers have little to no dividers between themselves and their coworkers. Should the trend to promote open offices continue or does it need to be balanced with the traditional closed office?

Advantages of an Open Office

From the employer perspective, open offices provide the ability to place employees in teams based on skill-sets. For example, a team of four or six workers can group their desks together into teams comprised of a computer coder and creative types, such as graphic designers and copywriters. Along with having workers within earshot of each other, employers are also able to monitor their employees’ Internet use, productivity and work habits.

Drawbacks

While workers have individual work styles, open offices commonly present employees with focus problems. They often complain about the lack of solitude, which can make them less productive compared to those who enjoy cubicles or offices. Another potential drawback pertains to generational preferences, which can further hinder productivity. Baby boomers may favor closed office setups, whereas millennials tend to prefer the open office layout.

Strategies to Make an Open Office Work

One way to determine if an open office is right for workers is to screen new hires to see if they have an aptitude for an open office. Using a multistep approach, interviewers can start off by interviewing a large group of candidates, pairing them and assigning a logic puzzle to solve to see how they work together. Observing how well they communicate and work on a problem together can be the first step to determining aptitude for open offices.

Some companies pay select candidates to work with their existing employees for a day or even a multi-week trial before hiring to gauge how well they work in an open space environment.

Open Office Workplace Compromises

However, this doesn’t mean current and new hires should be disregarded simply because they are less productive in an open work space. For skilled workers competent in their respective field but not well suited for open offices, there are alternative accommodations. Options include providing noise-cancellation/music headphones, portable desks with privacy walls, or partially enclosing corners of the office building to enable workers to focus on special projects.

While open offices offer the potential for increased collaboration and leverage the synergy of a group work, the pendulum from closed offices may have swung too far in the other direction. An individual business can work to discover an ideal combination of open and closed office spaces through trial and error.

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What’s New in Technology for February 2016

Technology: Leveraging the ‘Gig’ Economy

The so-called “gig” economy allows individual workers to freelance their skills to meet the on-demand needs of clients by using mobile technology. In 2015, the gig economy gained a significant foothold as businesses and consumers alike began to look beyond the transportation and hospitality sectors (think Uber and AirBnB) to take advantage of other apps and platforms that hook them up with on-demand services.

Here’s how the gig economy might affect your business.

  • The driving force behind this new on-demand economy is the proliferation of smartphones and other hand-held technology devices that offer computing power comparable to that of desktop computers in the ’90s. By connecting with each other and to cloud computing, mobile devices give people the freedom to find effective and efficient answers to business problems that previously would have been resolved within the structure of a traditional business firm or company. Workers are able to enjoy flexible hours, a greater choice of income-generating options, and the opportunity to gain work experience and boost their incomes.
  • The gig economy is no longer primarily comprised of younger people looking for supplemental income. Specialized platforms are competing with traditional providers of professional services, such as tutoring, legal services, business consulting and computer programming. Whether employers need specific professional talents for temporary situations or a few people to take on a short turn-key project, almost certainly there is an app that can identify suitable workers at competitive prices.
  • There are many on-demand apps. Some, like Handy,match service jobs with independent contractors for tasks that might include house cleaning, laundry services or travel booking. Also, there are sites like Amazon’s Turk, where customers can post any task requiring human intelligence, and where workers can review opportunities listed according to task and price. Highly specialized sites like Medicast allow patients to book a house call from a doctor using an app that records both the location and symptoms of the patient, while others are devoted to providing creative directors or commercial artists to businesses in the entertainment and advertising industries.
  • Though this brave new world offers great options to workers and business owners, it has not come about without creating issues for the public and private sector. Business owners face the significant challenge of managing and training an on-demand workforce in which workers may be scattered across different time zones. Quality control is another key concern. In response, on-demand platforms are adopting more extensive screening and vetting processes. Doing so requires them to pass on the costs of such research, diminishing the cost advantages that made these options attractive to their customers in the first place.

Perhaps the biggest challenge will be for governments – including the U.S. government – to re-think how workers are protected and how pensions and health care benefits are administered. Regulatory and social systems, developed when freelancers and contract workers were in the minority, will need to change to allow individual workers to take control of their health care and retirement needs in an on-demand economy.


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