Top Issues in Telecommuting TaxationTax Professionals' Resource
July 11, 2013 — 1,580 views
Telecommuting basically means working from home, or freelancing. An organization hires you, and you may opt to stay in the comfort of your house and use telephones, a fax machine, or emails through which you submit your work. Many people opt for the same due to various reasons, like having a child to take care of.
Advantages of Telecommuting Jobs
The advantages of telecommuting jobs are many. If you are unable to commute to an office due to reasons such as distance or medical ailments, a telecommuting job is the ideal job for you. These jobs pay you either a higher amount or lower amount as compared to a regular employee, which depends on the company you work for.
You are usually paid higher if you are specialized in a field of the company’s interest and are providing your services to them as a part time job. Unfortunately, there are a few difficulties that arise when it comes to telecommuting taxation in such scenarios.
What is Telecommuting Tax?
When a person works as a regular full time employee in any firm, he is liable to pay income tax which usually is a fraction of his salary. There are separate tax deductions based on the income you earn. The percentage of tax increases as your income increases.
Telecommuting taxation is simply the tax that you must pay as income tax when you are working from home or working as a freelancer. Though you may not fall under the same category as a regular employee, you are still liable to pay income tax as per the government policy.
Accounting for the tax is also important because if there is an investigation by the IRS, you need to show the right documents to prove that you are adhering to the country’s laws.
Telecommuting Taxation Issues
Unfortunately, telecommuting taxation brings with it various issues. Tax deductions, for example, are a little murky, as it is difficult to properly assess where the deductions must be made from for those whose expenses are not accounted for. Apart from just the deductions, there are many other discrepancies.
One of the major problems associated with telecommuting taxation is that you will not exactly know how much percentage of tax people working from home need to pay. This is because you have to follow quite a long paper trail to figure out if two different low income accounts belong to the same person or not.
Many organizations prefer to pay their work from home employees in liquid cash. This helps to avoid any bank transactions. This is not a very safe option though, as it is considered as tax evasion, and is illegal. It is best to manage the tedious work and stay away from unnecessary trouble.
If you are working from home, you may have certain expenses for things like office supplies, a telephone, and an Internet service. So the company should correctly specify what they are willing to provide. Anything over and above this should have properly documented bills.
Tax Professionals' Resource
Telecommuting basically means working from home, or freelancing. What many don't think about, however, is the issues in taxation when it comes to working from home. This article describes the top issues in telecommuting taxation.