Are you really self-employed?

Many businesses mislabel their employees as "self-employed independent contractors" to get Social Security, Medicare, Unemployment, and income tax relief. Generally:

• an employee is anyone who performs services if the employer can control what will be done and how it will be done.
• a person is an independent contractor if the employer/supervisor has the right to control or direct only the result of the work and not the means and methods of accomplishing the result.

If you think your employer should treat you as an employee instead of a contractor, file a Form SS-8. If the IRS agrees, they will send to you a determination letter stating you are an employee of that organization. You can then report your wages on Form 8919 and you will only be responsible for your share of Social Security and Medicare taxes. The wages are carried over to line 7 of Form 1040 and the Social Security and Medicare taxes are reported on line 57 of Form 1040.

The IRS has general guidelines for more information.

What's New for your 2010 Income Tax Return

Due Date
Even though April 15 falls on a Friday this year, the deadline for your 2010 Form 1040 is Monday April 18. Emancipation Day is a District of Columbia holiday that falls on April 15 so the tax filing deadline for the whole nation is deferred to April 18 . If your return won't be ready by then, you can extend the deadline all the way out to October 17 by filing Form 4868 on or before April 18.

Personal exemption: $3,650 ($3,800 in 2012, $3,700 in 2011)

Standard deduction:
MFJ/QW $11,400 ($11,900 in 2012, $11,600 in 2011)
HH $8,400 ($8,700 in 2012, $8,500 in 2011, $8,350 in 2009)
Single / MFS $5,700 ($5,950 in 2012, $5,800 in 2011)

Maximum Earned Income Credit
$5,666 if 3 or more qualifying children ($5,891 in 2012, $5,751 in 2011, $5,657 in 2009)
$5,036 if 2 qualifying children (from $5,028 in 2009)
$3,050 if 1 qualifying child (from $3,043 in 2009)
$457 if no qualifying child (same)

Income Limits for Earned Income Credit

• Three or more qualifying children and earn less than $43,352 ($48,362 if MFJ)
• Two qualifying children and earn less than $40,363 ($45,373 if MFJ)
• One qualifying child and earn less than $35,535 ($40,545 if MFJ)
• No qualifying child and earn less than $13,460 ($18,470 if MFJ)

Wages Limit
The maximum amount of wages subject to social security tax is $106,800 (same as 2009).

Recovery Act Recap

The Obama stimulus plan, also known as ARRA - the 2009 American Recovery and Reinvestment Act, is over a year old. Here's a summary of all the tax code changes:

March 3 Did you receive an Economic Recovery Payment?
Feb. 8 You could owe the IRS this year
Jan. 24 Don't forget to take the Making Work Pay Credit
Dec. 28 Make home improvements & lower your tax bill
Dec. 26 Tax break for the unemployed
Dec. 24 Bought a car? Don't forget Sales Taxes
Dec. 22 More Eligible for Child Tax Credit
Dec. 20 Earned Income Tax Credit going up
Dec. 19 Higher credit for college students
Dec. 17 I'm a First-Time Homebuyer. What can I claim on my taxes?

In addition, the ARRA included:

• Extension of AMT relief for 2009
• Increased Transportation Subsidy
• Health Coverage Tax Credit

Tax break for the unemployed

Unemployment compensation includes benefits to unemployed taxpayers that a state paid from the Federal Unemployment Trust fund. These benefits are reported on Form 1099-G (pdf.) and must be included on line 19 of Form 1040.

For 2009, taxpayers are able to exclude the first $2,400 of these benefits when they file their tax return. For a married couple, the exclusion applies to each spouse separately. If both received unemployment income in 2009, each would be able to exclude the first $2,400 of their income.

Those who are currently receiving benefits can use Form W-4V (.pdf) to have federal taxes withheld.