Taxes to Consider When Dealing With Telecommuters

Tax Professionals' Resource
March 19, 2013 — 1,300 views  
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It is a time when uncertainty looms all around – a time to prepare for the tax season, the fiscal cliff negotiations, which culminated dramatically just moments before the deadline, have facilitated a number of tax changes to postpone what many were citing as an impending doomsday. Some of these tax changes target the telecommuters, and if you are one, there is a lot that you will need to learn about telecommuting taxation. Many changes were made regarding the self-employment tax, Medicare surtax, and so on. Here is a thing or two about the new taxes, which any employer, needs to consider when dealing with telecommuters for this year.

Self-Employment Tax

Prior to the fiscal cliff negotiations, the payroll tax holiday that was in place, the premium on self-employment tax was reduced. Post the negotiations, this facility no longer exists. In 2013, you may be expected to pay more in the form of self-employment tax. Self-employment tax is now equivalent to social security and Medicare that an employer would usually pay on behalf an employee.

Medicare Surtax

Changes have also been made to the 2010 Affordable Care Act Medicare Surtax. In 2013, if a self-employed professional's income exceeds $200,000 or is approximately $250,000 as a collective income of a couple, then the self-employed professional will have to contribute a Medicare surtax that amounts to about 0.9 percent. This provision can create problems to those individuals that are not married to a person who is not self-employed. If the spouse is employed conventionally, and is not making over $200,000, then the spouse's employer may not be able to withhold the tax. On the other hand, if the couple is self-employed and their total income exceeds $250,000, this could lead to problems during tax time.

Student Loans

Prior to fiscal cliff negotiations, an individual paying student loans could deduct up to $2,500 as student loan interest payments every year from his total income. This law has also changed post negotiations, and from this year, every individual paying a student loan can deduct loan interest from their income only up to the initial 5 years of loan repayment period. If you are a self-employed professional who has crossed this period, it is time to consult a tax professional to manage your payments.

Filing Estimated Taxes

The dates for filing estimated taxes have also been revised for this year. Be sure to comply with these dates strictly in order to avoid any form of penalties. You can file the estimated taxes through Electronic Federal Tax Payment System of the Internal Revenue Service or the IRS. This service allows you to make payments using either your phone or using online services. The revised deadline for filing estimated taxes are as follows:

  •  First quarter - 15th April
  •  Second quarter - 15th June
  •  Third quarter - 15th September
  •  Fourth quarter - 15th January of the year to follow

Protection from Taxes

The tax deductions to be calculated by self-employed and telecommuting professionals are complicated. While there are certain provisions in telecommuting taxation for deductions aimed at home offices, determining these deductions is very complex. Planning is the best way to tackle this situation. Be sure to consult the official IRS website to confirm any changes. Also, try to look into ways to offset telecommuting taxation through other provisions such as deductions for home office and so on. Therefore, it is always good to be prepared to face the tax season when it comes.

Tax Professionals' Resource