IR35 - The 'Contractor Tax' Demystified

Contractors and freelancers who choose not to be permanent employees and work flexibly for many clients have been targeted by UK tax legislation called IR35. IR35 tax legislation is designed to tax as if they were 'disguised employees' workers providing their skilled and predominantly knowledge-based services to clients via their own limited company. IR35 can result in these workers losing up to 25% of their normal take-home pay in extra taxation.

Unfortunately, IR35 was poorly thought through and subsequent tax tribunals and court cases have made things so complex that prudent contractors pay professional advisers to ensure they are not caught by IR35.

Her Majesty's Revenue and Customs (HMRC) mounts IR35 investigations into many contractors' tax affairs every year, and is able to investigate contractors' tax returns and working practices up to six years in arrears. And many contractors end up in IR35 tax tribunals or court cases because they dispute having to pay the extra tax demanded.

When deciding on whether or not a contractor is inside IR35 and therefore must pay extra tax, HMRC inspectors - and later tax tribunals and courts - look at three key areas:

- The written contract between the contractor and the agency and end-user client
- The contractor's business as a whole
- The actual working relationship between the contractor and their client.

What tax inspectors want to prove is that the contractor is really a 'disguised employee', and if the contractor did not have an intermediary like their limited company between them and the client, they would be a permanent employee and should be taxed as such. This is why IR35 is also called the 'Intermediary's Legislation'.

HMRC uses key 'tests of employment' to check if a contractor is a disguised employee, including:

- Whether the contractor is controlled, or told how to work, by their end user client
- The ability of the contractor to use a substitute on the contract - Mutuality of obligation, or 'MOO'
- where an employer is obliged to provide work and an employee is obliged to do it.

Generally, if a contractor fails one of these tests, a tribunal or court will find that they are outside of IR35 and so do not have to pay extra tax as an employee. Unfortunately, though, tests of employment are rarely straightforward. So contractors can undergo long periods of stress during the course of an IR35 investigation, and still fall foul of IR35 legislation due to technicalities.

There are easy actions contractors should employ to reduce the chances of them being found within IR35, eg to invest in tax investigation insurance, to get contracts checked by an expert, and to get clients to confirm the contractor's working arrangements.

Contractor organisations have tried to abolish IR35 for many years, but it is likely that the legislation, or something very similar to IR35, will remain on the statue books for the foreseeable future. Therefore, contractors should always ensure they manage their contracting careers so that they never fall foul of IR35.

http://ezinearticles.com/?IR35---The-Contractor-Tax-Demystified&id=2618922

Do You Know Which Work-Related Expenses You Are Eligible to Claim This Financial Year?

Work-related expenses are usually one of the most commonly claimed deductions on individual taxpayers returns. It is for this reason that these claims are also the most closely scrutinized by the Tax Office.

The Tax Office regularly finds that this particular part of the return is often riddled with false claims or claims that cannot be positively verified as well as claims for expenses that are not even work-related at all!

Some of the most commonly claimed work-related expenses include car and travel, uniform and self-education.

Each year the Tax Office closely reviews tax returns from the previous year and will identify specific occupations where:

* average amounts of claims are high
* there is an increase in the number of people making claims, and
* there are a lot of people making claims for the first time.

Those occupations identified from last years returns as having particularly inconsistent claims for work-related expenses include truck drivers, sales and marketing managers, sales representatives and electricians.
The Tax Office has identified some of the errors from employees in those areas of employment to include:

Truck drivers - claiming motor vehicle expenses associated with transporting bulky tools, including travel to and from work; claiming travel allowances they are not entitled to; and, not keeping adequate records to support claims for internet and mobile phone use.

Sales representatives, sales and marketing managers - over-claiming home office expenses such as rent, rates and electricity; failing to keep appropriate records for mobile phone and internet use as well as not adjusting claims to account for the proportion of private use; and, not keeping an up-to-date log book when claiming motor vehicle expenses.

Electricians - claiming motor vehicle expenses for carrying bulky equipment even though their employer has advised there is no requirement to carry the equipment or the equipment does not meet the bulky provisions; claiming the living away from home allowance when they are not entitled to it; and, not to keep a log book for expenses related to a one tonne vehicle when it is used for both business and private use.

This year the Tax Office will contact employees in the identified occupations to outline the common mistakes that are made and to provide advice on how to avoid these mistakes in future tax returns.

Whether or not you are employed in the nominated occupations to be targeted this financial year it is important to be diligent in your tax reporting and the deductions that you claim. There are a few simple things to remember when claiming work related expenses that, if followed, will ensure that you are legally compliant with your tax obligations whilst legally maximising your return.

Remember:

* you must have incurred the expense in the year you are claiming it
* the expense must be work-related and not private if the expense has been reimbursed by your employer it can't be claimed
* receiving an allowance from your employer does not automatically entitle you to a deduction, and
* if your claims total more than $300 you need to keep written evidence.

If you would like more advice on claiming work-related expenses for your specific occupation or for any tax time related queries please contact The Quinn Group on 1300 QUINNS or click here to submit an online enquiry.

http://ezinearticles.com/?Do-You-Know-Which-Work-Related-Expenses-You-Are-Eligible-to-Claim-This-Financial-Year?&id=2611051

Credit Cards For No Credit

When you are a student or have no credit history it may be a daunting task to figure out where to begin. Here a few pointers to help you establish credit and get your first credit card.

*Have a checking or savings account with a steady sum of money in it for at least 6 months.

*Your parents could help, buy asking for additional credit cards in your name. The parent does not have to actually give you the card. I found this out with my son-when he went to college, and applied for student loans he had established some credit with Sears card. I do not know which other cards this will work with.

*Try to get a department store card. I do not recommend using store cards because interest rates are high. For the purpose of establishing credit, you could get a store card, put a couple of purchases on them and pay them off. If you do not purchase anything with it, credit card companies can not recognize weather you pay responsibly.

* Employment history is a factor that is considered by most Credit Card Companies. You should have the same job for 6 months or longer. The longer the better.

* Utility bills, and cell phone bills on some occasions can some times help in determining your Credit worthiness.

Okay, above I have outlined what you need to do in order to establish credit in order to get a real unsecured credit card. But you may want to jump start the system and get a secure credit card.

* A secure card is often secured with money- more like a bank account.

* Some secure cards require a security deposit. If you do not pay, they take the deposit.

* Other secure cards only allow you to use them at certain stores.

* In most cases Secure Credit cards for no credit will require you to deposit your credit line on top of the security deposit. Say deposit $500 for a $500 credit line.

* There are also annual fees associated with secure credit cards for no credit.

* Before signing up for that secure credit card be sure to read the "Terms of Service", that should be somewhere on the application. It is very important that you understand all of the fees associated with a secure credit card.
http://ezinearticles.com/?Credit-Cards-For-No-Credit&id=2403915

How to Triumph Over Delinquent Property Taxes

If you have properties subject to property tax, then you are compelled to pay for it. However, tax is not your only concern here. There are other finances you have to pay. The most basic expenditures must come first in the budget such as the basics. In that case, you'll end up with delinquent property taxes. The bad thing about not paying is the chance of forfeiture or the worst, foreclosure of your property. Make an action now if you don't want your properties to be taken away from you. If you've been defaulting in the payments, you will surely receive notices from the government.

A tax collector might be knocking on your door for a reminder. It is better to establish good business relationship with collectors. Don't you dare run away from the collectors. There's no use in running away from your obligation. Even if you keep ignoring it, your liability to the government will remain to subsist. Instead, find easy ways on how you can solve your problem regarding delinquent property taxes. There are lots of remedies you can utilize in order to pay your taxes. First, you must inquire the total amount you are required to pay. It's not only the usual amount but including all the interest and penalties.

You might as well ask the tax collectors about some solution. They are more knowledgeable than you regarding tax matters and they might be of help. Better ask them about the interest imposed on your taxes- ask for the exact rate. If the interest rate is higher than the general loan rate, it's advisable to get a loan. Because you cannot pay the amount from your own money, you can borrow from private lenders. You can avail of a personal loan from lending institutions to pay off those delinquent property taxes. You will be saving a lot because you'll be paying for a much lower interest in the said loan.

The problem you are carrying right now will be lessened. Dealing with property taxes is never an easy thing- your properties are at risk here. After paying the said liability, your only obligation left is with regards to the loan. It will depend on you though- better pay on time or you'll end up with the same problem again. It's not very ideal to have so many liabilities because it will make you feel stressed. Aside from availing loans, there is another thing you can do to deal with your delinquent property taxes. You can pay your taxes on installment.

Just prove to the tax collector your determination to erase all your obligations. You can do that by saving a small amount from your salary. It can do wonders on your tax due, even in just a small amount. Maybe the tax collector will consider your effort and not consider selling your taxes at Delinquent Tax Lien Sale. The problem with the sale is the property will be at risk. Some buyers might be willing to pay your taxes and your property can go to the buyer. You won't even consider it of course- you will simply find a way to pay back delinquent property taxes.

So, you better think twice on what to do with your problem. You have the options to choose- just make the right decision.

Rental Property Deductions - Tremendous Tax Savings!

These tips on rental property deductions that we're going to share with you will provide you with an immense tax shelter. You'll see that there are several tax deductions that you can take by owning even one rental property.

I know this because I've owned rental properties for several years and have taken advantage of these tax savings.

Treating Real Estate As An Investment Instead Of A Small Business

You'll achieve the largest tax savings as a real estate investor; not a small business. Real estate used as a small business includes realtors, builders, contractors and people that buy property to sell it quickly (flip homes). They have a real estate "business" and are not considered investors.

On the other hand, a real estate investor buys a property as a long-term investment, which is greater than 1 year's time, to rent out to tenants.

Rental Property Deductions

You will take your rental property tax deductions on IRS Schedule E. This schedule is where you'll indicate your investment property income and expenses. As you can see, there are several expenses that can be taken as deductions, including "other" expenses (line item 18).

Here is a comprehensive checklist of rental property tax deductions that you can take advantage of as an investor:

*Advertising

*Auto

You can deduct any mileage you drove to maintain and manage your property. For instance, you drive from your home based office (which you can set up as a landlord) to your rental property. You would be able to claim this mileage as an expense on your Schedule E.

You may notice the key words being "maintain and manage" your property. This means if you need to drive out to the property to check on how a repair is coming along, you can write off this mileage.

If you drive to your rental home to speak with your tenant about anything regarding the home or to collect rent, this is deductible mileage.

Managing your property can also include doing a drive by to look at the property to ensure it's in good standing. Just make sure you keep good mileage records including the purpose of the trip.

*Depreciation

Your residential rental property gets depreciated over 27.5 years. For example, if you pay $100,000 for the home, you can take a depreciation tax write-off of $3636 ($100,000/27.5 yrs) per year, which is taken as a "paper loss" against any gross income you make. This is a substantial tax deduction.

* Cleaning & Maintenance

* Homeowners insurance

* Mortgage Interest

* Property taxes

* Utilities (if you pay them instead of the tenant)

* Phone costs, PO Box, internet costs related to your rental property

* Repairs & Supplies

* Educational Expenses

* Real estate club dues

* Tenant credit report fees

* Professional fees

* Management Fees

*Homeowners association fees

There is no dispute that rental properties are one of the few best remaining tax shelters you can take advantage of to achieve big time tax savings.
http://ezinearticles.com/?Rental-Property-Deductions---Tremendous-Tax-Savings!&id=2162719

Making More Money - 'How To'

Making more money. Those three words sound so sweet for so many people. And as the economy continues to stay in the dumps right now, there are more and more people out there that would like to know how they can do this. And as a result there are more and more people making promises that will never happen. How can you really get to the point where you are in control of your financial situation and making more money?

It all has to start with your attitude. If you do not start here, you will not get anywhere. With the wrong attitude and the wrong out look, you will either never try a thing to make more money or you will fall for every single scam that comes your way. Why do you think these scams even exist? Because people fall for them.

WITH YOUR ATTITUDE YOU CREATE OPPORTUNITY...

Think about it like this. Would you do business or spend time with someone that had a negative attitude about you? No? Then why would money find its way to you if you have a negative outlook on it. Everyone likes to complain about their bills and to focus on their problems. But, you have to become solutions oriented. You have to look for the opportunity that is always present. This is how you learn to make more money.

It will not come to you overnight. But when it does, you will wonder where it has been for all of these years. And you will also see with the gift of hindsight just how important it is to change your attitude about money and how you see it in your life.
http://ezinearticles.com/?Making-More-Money---How-To&id=2123962

Best income buys: Wealth building and pre-retirement

This post is part of a 12-article feature that can be read here: Today's best income ideas.

"Assuming you want to invest a little more in the markets now, which ETF should be your first choice?" asks ETF expert Mark Salzinger.

In The Investors's ETF Report, he reveals his favorite picks from from two of his model portfolios -- a favorite for long-term wealth building and one investors still in their pre-retirement years.

"The credit turmoil of 2008 was unkind to most non-Treasury bonds, but none so much as high-yield bonds. iShares iBoxx $ High Yield Corporate Bond (NYSE: HYG) declined 17.6% in 2008, a rotten performance that would have been worse if not for a rebound of 22% off its November lows.

"Still, HYG is our favorite ETF for investors in the Wealth Builder Portfolio for three reasons. One, ields on these bonds (recently 15.8% for HYG) are near record highs relative to Treasuries of comparable maturities. High-yield bonds already discount widespread corporate failures.

"Two, part of President-elect Obama's stimulus actions may be to directly support corporate credit with government money. In response, high-yield spreads relative to Treasuries have been falling in early January after spiking throughout November and early December.

"Three, in order to capture the double-digit return implied in HYG's fat yield, investors don't need price appreciation from the bonds or earnings growth from the issuers. They need only for those companies to stay in business, a historically low hurdle to achieve such a return.

"Our favorite ETF for those who follow the Pre-Retirement Portfolio is Vanguard Dividend Appreciation Index (NYSE: VIG).

"Vanguard and index provider Mergent are mum on exactly how they pick the stocks that go into VIG, revealing only that they look at companies with a long history of dividend-payout growth that are likely to continue to increase dividends in the future.

"However they build this portfolio, they have managed to stay away from nowstunted or eliminated dividends from financial stocks, opting instead for big weightings in healthcare and consumer-staples companies, two of 2008's best-performing sectors. VIG lost only 26.7% in 2008, vs. 36.8% for the S&P500 Index.

"It is unlikely that consumer staples will continue to outperform as much this year after their resurgence in 2008. However, industrials, likely to gain from government stimulus spending, actually account for slightly more of the portfolio (14.6%) than consumer staples (13.9%).

"Energy stocks are a larger part of the portfolio now (10.8%) than they were at this time last year (9.7%), and with low valuations and strong resource values should perform better than in their 2008 collapse."

Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
http://www.bloggingstocks.com/2009/02/28/best-income-buys-wealth-building-and-pre-retirement/