I’m Self-Employed. Do I Have to File a Tax Return?

There’s plenty of amazing benefits to being your own boss; you can usually control your own schedule and to a degree, you can control your income.

But anyone that has ever been self-employed knows that there are plenty of disadvantages as well. Your income can vary throughout the year and you have to control your own schedule.

Another downside for the self-employed is the less than straightforward way in which they have to track their income and expenses and also pay taxes.

Whereas most people have their employer withhold taxes from their paycheck and then receive a W-2 at the end of the year and then they can easily input it into the tax software to check their refund, self-employed persons have to track every little piece of income they receive manually to report it to the IRS.


How Do Self-Employed Persons Pay Taxes?

The IRS does not like to receive their money all in one chunk at the end of the year so self-employed persons must estimate their income for the year.

If their estimated income leaves them owing by the end of the year more than $1,000 in income taxes or they expect that their federal income tax withholding will be less than 90% of the tax they will owe by the end of the year or they expect their income tax withholding will be less than 100% of the total tax shown on the previous year’s tax return, then they must pay estimated taxes throughout the year.


So Do I Have to File a Tax Return If I’m Self-Employed?

Just like any other taxpayer, if you are self-employed and would like a refund of the amounts you paid in estimated taxes throughout the year, then yes, you would have to file a tax return.

Aside from this, there are rules in which you have to file a tax return regardless of it is just for a refund of amounts paid over the tax liability.

The rule for self-employed persons is that they must file a tax return if their gross income is at least as much as the filing requirement for their age and filing status.

In general, the filing requirement for those under 65 and that are filing Single will be gross income of at least $10,400 (indexed for inflation) and for those filing married filing jointly $20,800 (indexed for inflation) of gross income.

Click here and go to Table 1-1 in Filing Information to review the tables if you do not match the criteria above.


This article does not constitute financial advice. For help with your particular situation, please contact your local specialist.



How Do I Know If I’m Someone’s Dependent in 2019?

While dependency exemption amounts were reduced to $0 for the 2018 tax year, that does not mean that dependencies themselves are necessarily gone. Depending on whether or not you have dependents or you yourself are a dependent will help to determine if there are still benefits for you or your family available.

Because of this, it’s important to determine who is a dependent and who is not. If you are wondering whether or not someone else can claim you on their taxes, it’s important to review the different tests available.

So, what are these tests? The three basic ones that apply to both qualifying relatives and qualifying children are as follows:


Dependent Taxpayer Test

The first step is making sure that the person in question is not able to claim anyone else as a dependent on their tax return. If you are able to claim someone else, then you yourself cannot be a dependent of someone else.


Citizen or Resident Test

If you are a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico, then you meet the citizen or resident test.


Joint Return Test

If you file a joint return with a spouse, then you are not eligible to be claimed as a dependent of someone else. The exception to this rule is if you are filing a joint return only to claim a refund of withheld income tax or estimated taxes that were paid throughout the year.


For qualifying children, the four additional tests are below:



If you are younger than 19 or younger than 24 and a full time student or permanently and totally disabled and you are any age, then you meet the age test for child dependents.



For the relationship test to be met, the child must have been the son or daughter, a foster child, or a descendent of any of them. Other options could be the sibling, step-sibling, half-sibling, or any descendent of these.



For the residency test, the child is required to have lived with the taxpayer for more than half of the year.



If a child provides more than half of his or her own support for the year, then they are not considered a dependent of anyone.

For specifics about support and a worksheet, click here.


To claim qualifying relatives, the four tests are below:


Not a Qualifying Child Test

To meet this test, the dependent in question must not be the taxpayer’s qualifying child or anyone else’s qualifying child.


Member of Household or Relationship Test

For this test to be met, the potential dependent must either live as a member of the household of the taxpayer all year or be related to the taxpayer as either a child, sibling, parent, or any other way listed here.


Gross Income Test

To meet this test, the dependent cannot have gross income that is more than the personal exemption amount for the year.


Support Test

Again, this test is met by the taxpayer providing more than 50% of the total support for the dependent for the year.


This article does not constitute financial advice. For help regarding your specific situation, please contact your local specialist.



Can I Claim the Earned Income Tax Credit?

The Federal government allows for two types of credits that are able to be claimed on one’s tax return, either refundable or non-refundable. A refundable credit means that you can receive money over the amount of your tax liability, whereas non-refundable credits merely reduce your tax liability.

The Earned Income Credit came about during the Tax Reduction Act of 1975 and was meant to offset the Social Security payroll tax. It was originally signed in as a temporary credit but was made permanent by the Revenue Act of 1978.

How Much Will It Give Me?

The maximum you can receive from the Earned Income Credit is $6,431, and that amount is able to be claimed if you have 3 or more qualifying children and your adjusted gross income is less than $49,194 ($54,884 for married filing jointly).

Smaller amounts can be claimed for fewer qualifying children and lower adjusted gross incomes, all the way down to no qualifying children and earned income of $15,270 ($20,950 for married filing jointly) being able to claim $519.

For the full list of amounts, click here.

How Do I Know If I Can Claim It?

If you do not have a qualifying child and still would like to claim the Earned Income Credit, then you must meet a few rules:

  • You and your spouse cannot be claimed as a dependent on someone else’s return
  • You and your spouse have to be between ages 25 and 65 years old at the end of the tax year
  • You cannot file married filing separately
  • You have earned income and adjusted gross income within the limits (for the limits, click here)
  • You and your spouse must have lived in the United States for at least half of the year

If you are claiming the Earned Income Credit and have qualifying children, then you must meet additional rules below to claim them:

  • Relationship test- must be: your child, adopted or biological; stepchild or foster child; or a descendent of any of these (grandchild). Additional: siblings, whether half or fully biological, step-sibling, or a descendent of any of these
  • Age test- The child must be younger than you and your spouse at the end of the year and younger than 19. Another option is if the child is younger than 24 and a full-time student. With this option, the child must still be younger than you. And finally, the child could have been any age but was permanently and totally disabled.
  • Residency test- The child must have lived with you or your spouse for at least half of the year in the United States
  • Joint Return test- The child could not have filed a joint return for the tax year. The only exception for this rule is if the child only filed a joint return to claim a refund and the child’s spouse did not have a separate filing requirement.


This article does not constitute financial advice. For information regarding your specific situation, please consult your local financial advisor.

finance retirement

What Is a Qualified Retirement Plan?

The Federal government has outlined what are referred to as “Qualified” plans, meaning they are earmarked for retirement. Everyone has access to a Traditional IRA, most people have access to a Roth IRA, and depending on who you work for, you may have access to a 401(k), a 403(b), or a 457. We will touch on each of those options in a future post.

But what happens if you don’t work for anyone and you feel like you’ve lost out on potential tax savings because of the low contribution limits on IRAs? After all, the contribution limit for employer-sponsored plans for most people is $18,500 annually and the contribution limit for Traditional and Roth IRAs is $5,500 annually for most people.

If you are self-employed, IRS publications outline different options for you. There are a few easy to implement and cheaper options in the form of a SEP plan and a SIMPLE plan.

We will go over the specifics of each of these plans in future updates, but here we will specifically be discussing what these plans all have in common.

These plans are all meant for retirement and are often implemented by financial institutions such as banks, insurance companies, or brokerage firms.

When Can I Draw Money Out of the Accounts?

All of the accounts have a stipulation that you cannot begin drawing money out in the form of distributions until age 59 ½. If you are to take money out early, you will incur not only normal income tax payments but also a 10% penalty on the money that is withdrawn.

Why Would I Put Money Into One of These Plans?

Qualified plans are tax-favored, meaning that the money put in is either exempt from tax when it is contributed into the plan or distributed from it, but not both. Traditional plans provide for tax savings upfront, but are tax-deferred, meaning they are taxed as ordinary income when distributed.

Roth plans are taxed upfront in the year contributed, however they allow for tax-free growth.

So Should I Save Into Roth Plans or Traditional Plans?

It may depend on what is available to you and what strategy you are pursuing. Employer-sponsored plans allow for greater contribution rates but it may be harder to find an employer that sponsors a Roth 401(k), 403(b), or 457.

Because of this, you may want to pursue a mixed strategy where you save into a Roth IRA outside of your employer and then save into a pre-tax account with your employer.

Why Would I Save Into One Plan Over the Other?

If you believe you will be in a lower tax bracket when you retire, then it will be wisest to put money into a pre-tax account where you get the tax break upfront when your tax bracket is higher.

If you think your tax bracket will be higher when you retire, you will be better off saving into Roth plans where you can get the growth of your contributions tax free when you would otherwise have to pay more on earned income.


This article does not constitute financial advice. For information regarding your specific situation, please consult your local financial advisor.

finance Taxes

Can I Claim My Student Loan Interest As a Tax Deduction?

There are a few benefits post-college beyond hopefully an increase in earnings potential and a newfound confidence from higher education.

The Federal Government allows for certain tax provisions to those who are paying down their student loans. For years the tax code allowed a maximum deduction of $2,500 of student loan interest to be deducted from one’s income.

And although some had believed this provision was being eliminated in last year’s proposal in the form of the Tax Cuts and Jobs Act, the student loan interest deduction will remain intact.

So How Do I Know If I Can Claim The Deduction?

There are a few questions that need to be answered to determine if you are able to claim your interest on your student loans as a deduction; the first question being whether or not you are being claimed as a dependent. If you are, then you are not able to claim the deduction.

However, the person claiming you as a dependent may claim the student loan interest deduction if they both are legally obligated to repay the loan and actually made the payments.

If you are not being claimed as a dependent, then you are able to claim the student loan interest deduction if you are both legally obligated to repay the loans and you actually made the payments yourself.

Are There Any Other Restrictions?

If you were to have landed a good job after college, the amount you are able to deduct may be reduced even if you meet all of the other requirements. The phaseout for this deduction starts at a modified adjusted gross income of $60,000 for single filers and $125,000 for married filers.

Are There Any Other Caveats?

A nice feature of the student loan interest deduction is that it is what is referred to as an “above-the-line deduction,” meaning that it can be deducted regardless of whether a taxpayer itemizes their deduction or uses the standard deduction.

The student loan interest deduction therefore is deducted in addition to either the standard deduction or your itemized deductions.


This article does not constitute financial advice. For information regarding your specific situation, please consult your local financial advisor.

finance Taxes

Can I Claim My Parents on My 2019 Tax Return?

The world of tax is constantly changing and dependents and dependency exemptions are no exception. In the past, you were able to claim dependents on your tax return; these included either your children, your dependent parents, or others that we will go into in a more detailed post later.

Claiming your dependents in the past would lead to a dependency exemption that was indexed for inflation, but in 2017 the amount was $4,050 per dependent. Each dependency exemption would reduce your taxable income.

In 2018 however, dependency exemptions are no longer available. To make up for this, the standard deduction was nearly doubled from $6,300 in 2017 to $12,000 in 2018 for single filers. The ones likely to benefit from this change are single filers with no dependents and the ones likely not to benefit are those that are married and who would otherwise claim multiple dependents.

Because of this change, you may no longer claim your dependent parents for the dependency exemption in 2018. However, there are some caveats to this:

The Child and Dependent Care Credit

Just because you no longer get to claim the exemption amount does not mean that the government doesn’t want to give you some tax breaks for helping mom and dad.

The Child and Dependent Care Credit is available for those that have to pay for their parents’ care so they are able to work. The credit is available to cover between 20% to 35% of the amount up to $3000 that was paid to care for you parents or other dependents. The amount that is covered depends on the income of the taxpayer claiming the dependent.

Because this is a credit and not a deduction, this credit reduces your tax liability, not your taxable income.

For more information on the Child and Dependent Care Credit, please consult the IRS publications.

The Medical Expense Deduction

If you have paid qualified medical expenses for your parents, you may be able to deduct them on your tax return. There are complex guidelines for this deduction, however in general, you may deduct the amount over 7.5% of the amount that is over your adjusted gross income.

In order to receive this deduction, your parent that you have paid the medical expenses for must be your dependent on your tax return.

Again, because of the complex nature of these deductions and credits, please consult the IRS publications if you feel you may qualify for them.


This article does not constitute financial advice. For information regarding your specific situation, please consult your local financial advisor.

finance term life insurance

When Should You Buy Term Life Insurance?

Thinking about what kind of life insurance to buy can make your head spin. First you have to comprehend what the different kinds of life insurance are, and then you have to think of the applications of that policy and how it might affect you and your family.

And, while this isn’t the best forum to discuss what kind of life insurance to buy due to having a general audience, we will help to go over what some kinds of applications for term life insurance are and when buying it might be advantageous over buying a permanent policy.

So What Is Term Life Insurance?

We’re going to specifically be discussing level term life insurance. We have to specify because there are several types of term life.

Level term life insurance is a fixed premium insurance that insures a person’s life for a specific amount (death benefit). The term will usually be 10, 20, or 30 years. After that term is over, the insurance will expire and if the insured further wants to be covered by life insurance, they would have to reapply, at which point insurance coverage would likely be considerably more expensive.

So When Should I Buy Term Life Insurance?

The timing for when to buy term life insurance is usually triggered by a life-changing event: getting married, having children, etc. As soon as a person has others relying on them, that will generally be the best time to consider buying a term life insurance policy. The reason for this is because if that person is to pass away, their spouse, children, or whomever they name as beneficiary will receive the death benefit outlined in the policy.

In general, level term life insurance is best when coverage is only needed for a specific term. If a family believes that they only need coverage during their accumulation phase when they are saving for retirement, their kids’ college expenses, and any other expenses that come up during that time, term life insurance for a 20 or 30 year term might suffice.

Some people fail to save enough for retirement in time and as they approach it, and they may be scrambling to save everything they can. Without sufficient saving reserves at the moment, a term life policy for 10 years (although considerably more expensive due to age) might make sense for them.

You’ll want to own term life insurance when you need the coverage for a specific term and only the specific term. Otherwise, if you would need to be covered for your entire life, it might make sense to look at owning a permanent life insurance policy.

Another strategy that a family may use is to own a large term life insurance policy as well as a modest permanent life insurance policy during the accumulation phase. As retirement approaches and their savings are enough to cover them in event of a disaster, it may make sense to drop the term life insurance policy and keep the smaller permanent life insurance policy in force because they no longer have the need for a lot of coverage.

We will look at this strategy and many others in-depth in future posts.


This article does not constitute financial advice. For information regarding your specific situation, please consult your local financial advisor.

term life insurance

What is Level Term Life Insurance?

Wading through the world of life insurance can be a headache just waiting to happen, especially when you are wondering if the person on the other end of the table attempting to sell it to you has your best interests in mind.

There’s a few different types of temporary life insurance, and a whole world out there of permanent insurance; as a side note, make sure you know exactly what you’re getting if you decide to go the permanent route.

But here we’ll be discussing only one type of temporary life insurance so your head hopefully won’t be spinning after you’re done reading.

So What Is Level Term?

To make it as simple as possible, level term life insurance can be explained as working for your life as car insurance does for your car. You pay premiums to an insurance company that agrees to pay your beneficiaries the death benefit (face amount) if you are to pass in the allotted time that you had bought the insurance for.

There’s a Time Frame They Allow You to Die In?

Kind of. This is essentially where term life insurance and car insurance differ. The insurance companies knows that there is a chance you may never get into a car accident. However, there is a 100% chance that everyone will eventually die.

So what the insurance companies do in exchange is lock in premium rates for a certain amount of time (usually 10, 20, or 30 year increments). The premiums are guaranteed not to increase during this time as long as the policy does not lapse.

This is also why term life insurance is so much cheaper than permanent insurance; there is a good chance that you will not pass away in that 10-30 year period, so the cost of insurance is lower. However, a policy that covers your life permanently is guaranteeing to pay out, meaning the cost of insurance has to be high enough to pay a claim for an event that is supposed to be guaranteed to happen.

So What Does ‘Level Term’ Mean?

This is where the phrase ‘level term’ comes into play. Essentially, it is your premiums that are level throughout the life of the policy. The cost of insurance increases as a person gets older because statistically there is a higher chance of passing away at older ages. Level term life insurance has these cost of insurance changes already built into their premium costs over the term of the policy.

Because the cost of insurance is already built into the product, the longer the term that an insured locks in will cause the monthly premiums to be higher. This is of course because someone is more likely to die within the time period chosen if they choose to be covered for 30 years as opposed to 10 years.


This article does not constitute financial advice. For information regarding your specific situation, please consult your local financial advisor.