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Self-Employed Tax Obligations

There are a few tax considerations to consider when you work for yourself. Generally, you’re required to file and pay estimated taxes every quarter.

Determine if you are subject to tax: Subtract your business expenses from your income. If your expenses are less than your income, the difference is part of your income. If your expenses are more than your income, the difference is a net loss.

Make quarterly payments if you’ve determined you need to make quarterly payments using Form 11040-ES.

Filing annually: If you’re filing annually, you’ll need to use Schedule C to report income or loss. To file your Social Security and Medicare taxes, you should file Schedule SE Form 1040.

Deductions: If you’re using part of your home for business, you may be able to make certain deductions, such as for your office or a portion of your home’s square footage used for business purposes.

* This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁷

Footnotes and Sources

7. ^{IRS.gov, September 15, 2021}

Stocks spent last week digesting the sharp gains of previous weeks as investors assessed a tightening yield curve, the war in Ukraine, and an uncertain outlook for economic growth and inflation.

The Dow Jones Industrial Average slipped 0.12%, while the Standard & Poor’s 500 was flat (+0.06%). The Nasdaq Composite index led, picking up 0.65% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose 1.02%.^1,2,3

Stocks Pause

Stock prices bounced around following strong gains in two previous weeks as money managers appeared to reposition their portfolios ahead of the first-quarter close. Oil was under pressure all week as prices fell on news that Shanghai imposed a strict lockdown due to COVID infections. President Biden announced a sustained release of oil from the country’s strategic petroleum reserve.

Bond yields reversed their recent climb. The flattening in the yield curve triggered some concerns about economic growth and the possibility of a recession.

Labor Market

With economic growth worries overhanging the market, last week’s employment reports showed continued strong demand for workers. The Job Openings and Labor Turnover Survey reported the number of open positions remained near record highs, with job openings exceeding the number of available workers by a record five million. Afterward, the Automated Data Processing employment report saw private payrolls grow by 455,000 in March, slightly above consensus expectations.^4,5

Finally, the government’s monthly jobs report showed that employers added 431,000 jobs in March, lowering the unemployment rate to 3.6%. That’s approaching the 50-year low of 3.5% reached in February 2020.⁶

Footnotes and Sources

1. ^{The Wall Street Journal, April 1, 2022}
2. ^{The Wall Street Journal, April 1, 2022}
3. ^{The Wall Street Journal, April 1, 2022}
4. ^{CNBC, March 29, 2022}
5. ^{CNBC, March 30, 2022}

As you prepare to file your tax return, the first step is to ensure that your records are in order. Good recordkeeping throughout the year will make filing your taxes easier.

Here are some recordkeeping tips:

• Identify all sources of income.
• Keep track of expenses.
• Prepare your tax returns quickly and accurately. Add tax records to your files as you receive them to make filing easier.
• Organize support items that you may need to provide more clarity into your tax return.

* This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁶

Footnotes and Sources

6. ^{IRS.gov, June 22, 2021}

With growing confidence in the economy’s resilience, stocks posted another week of solid gains.

The Dow Jones Industrial Average rose 0.31%, while the Standard & Poor’s 500 advanced 1.79%. The Nasdaq Composite index picked up 1.98% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, added 0.27%.^1,2,3

Stocks Extend Gains

Markets bounced around all week as investors grappled with the crosswinds of rising yields, continued hostilities in Ukraine, and hawkish comments from Fed Chair Jerome Powell. After suffering declines in two of the first three trading sessions of the week, stocks turned higher on a good jobless claims number that investors interpreted as continuing economic strength.

Stocks drifted higher as the week came to a close amid rising bond yields, which on Friday saw the 10-year Treasury yield rise for the 13th time in 16 trading sessions.⁴

Labor Market

Many economists speculated that the invasion of Ukraine would likely shave economic growth in the short term as hostilities worsened supply chains and increased inflationary pressures. The impact, so far, has not been seen in the labor market.

Last week’s initial jobless claims fell by 28,000 to 187,000, the lowest level since December 1969. The number of people on state unemployment rolls fell to 1.35 million, from 1.42 million the previous week, while open jobs are at a near-record high of 11.3 million. Employers’ need for workers suggests that the demand for products and services has remained resilient despite the events in Eastern Europe.⁵

Footnotes and Sources

1. ^{The Wall Street Journal, March 25, 2022}
2. ^{The Wall Street Journal, March 25, 2022}
3. ^{The Wall Street Journal, March 25, 2022}
4. ^{The Wall Street Journal, March 25, 2022}
5. ^{The Wall Street Journal, March 24, 2022}

Whether you picked up embroidering, dog grooming, or making your jewelry, a side hobby may or may not require paying taxes. Here are some things to consider when determining whether your activity is a hobby or business:

• Is your hobby carried out in a businesslike manner?
• Do you maintain complete and accurate books and records for your hobby?
• Is the effort you put into your hobby intended to make a profit?
• Do you depend on the income from your hobby for your livelihood?
• Do you have the knowledge needed to carry out your hobby as a successful business?
• Have you made a profit from your hobby?

If you receive income from your hobby with no intention of making a profit, you may have to report the income to the IRS.

* This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁷

Footnotes and Sources

7. ^{IRS.gov, June 30, 2021}

With the Fed embarking on a new course of monetary tightening amid continued fighting in Ukraine, stocks staged a powerful, broad-based rally last week.

The Dow Jones Industrial Average jumped 5.49%, while the Standard & Poor’s 500 gained 6.16%. The Nasdaq Composite index soared 8.18% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, advanced 5.17%.^1,2,3

Stocks Roar

After surrendering gains on Monday, stocks surged higher for four consecutive days. The rally was propelled by strong economic data, the outcome of last week’s Federal Open Market Committee (FOMC) meeting, and reports that Russia made interest payments on its sovereign debt, avoiding technical default.

The uptrend began with a drop in oil prices and a lighter-than-expected wholesale inflation report. Stock prices initially buckled following Wednesday’s hawkish FOMC announcement, but turned higher as investors interpreted the Fed’s news as a welcome plan to combat inflation. Stocks extended their gains into the final two trading sessions, cementing their best weekly performance since November 2020.⁴

The Fed’s Plan

For the first time since 2018, the Federal Reserve hiked the federal funds rate, increasing it by 0.25% and signaling that it expected to raise rates at a faster pace than originally outlined in December. Based on its projections of future fed fund rates, the Fed may implement seven quarter-point rate hikes this year and another three to four next year.⁵

In a statement following the FOMC meeting, Fed officials expressed rising concerns over inflationary pressures made more acute by the war in Ukraine. Members also indicated that they would soon announce a plan to reduce the Fed’s $9 trillion balance sheet.⁶

Footnotes and Sources

1. ^{The Wall Street Journal, March 18, 2022}
2. ^{The Wall Street Journal, March 18, 2022}
3. ^{The Wall Street Journal, March 18, 2022}
4. ^{CNBC, March 18, 2022}
5. ^{The Wall Street Journal, March 16, 2022}

The Lifetime Learning Credit (LLC) is a tax credit for qualified tuition and related expenses. It can help pay for undergraduate or graduate studies, as well as courses to acquire or improve your job skills. The credit is worth up to $2,000 per tax return.

Another good thing about this tax credit is that it’s available for an unlimited number of tax years, unlike the American opportunity tax credit that is only for the first four years at an eligible institution.

To claim the LLC, you must be paying qualified education expenses for a higher education and be enrolled at an eligible educational institution. Check out the IRS guidelines for more details and whether or not you may qualify.

* This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁵

Footnotes and Sources

5. ^{IRS.gov, January 26, 2021}

War in Ukraine weighed on stocks as investors assessed the economic impact of continued hostilities, expanding economic sanctions, and potentially higher inflation due to rising oil prices and new stresses on the global supply chain.

The Dow Jones Industrial Average fell 1.30%, while the Standard & Poor’s 500 lost 1.27%. The Nasdaq Composite index slid 2.78% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, dropped 3.21%.^1,2,3

Another Volatile Week

The uncertainty introduced from Russia’s invasion continued to whipsaw the financial markets last week. Intensifying hostilities early in the week sent stocks sharply lower as oil prices surged and a flight to safety drove investors to buy bonds.

Stocks rebounded mid-week following the release of positive economic data and Congressional testimony by Fed Chair Jerome Powell, who said the Fed is likely to move forward on rate hikes, but would proceed cautiously. Investor enthusiasm was short-lived, however, as stocks resumed their decline on Thursday into Friday despite a strong employment report.

Powell Testifies

Fed Chair Powell told Congress on Wednesday that he would propose a 25 basis point increase in the federal funds rate when the Federal Open Market Committee meets in mid-March. He conceded that the invasion of Ukraine and the economic sanctions against Russia introduced a level of uncertainty and that the Fed would proceed carefully with monetary tightening.

Powell also testified that he would not have the Fed’s strategy to shrink its balance sheet finalized before the mid-March meeting. Alluding to the urgency of fighting inflation, Powell left the door open to more aggressive rate hikes later in the year.⁴

Footnotes and Sources

1. ^{The Wall Street Journal, March 4, 2022}
2. ^{The Wall Street Journal, March 4, 2022}
3. ^{The Wall Street Journal, March 4, 2022}
4. ^{The Wall Street Journal, March 2, 2022}

Stocks managed to gain ground last week as investors turned their focus to corporate earnings.

The Dow Jones Industrial Average rose 1.05%, while the Standard & Poor’s 500 gained 1.55%. The Nasdaq Composite index picked up 2.38% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, tacked on 2.73%.^1,2,3

Earnings in Focus

At the start of the week, stocks extended the previous week’s rally with some high-growth companies leading the move higher. Strong company profits fueled the market the middle of the week, until an earnings disappointment from a mega-cap company took investors by surprise. The earnings miss deflated sentiment as it heightened worries of what it may portend for other technology companies yet to report. These anxieties led to a sell-off that reverberated across the market.

Subsequent earnings beats from several technology and social media names, and an above-consensus rise in new payrolls on Friday, helped the market close with week with a solid gain.

Omicron and Unemployment

A string of employment reports pointed to a generally healthy labor market, despite the Omicron surge late last year. The Job Openings and Turnover Survey (JOLTS) showed a hiring slowdown, with near-record high job openings and worker resignations. The ADP (Automated Data Processing) employment report saw private payrolls shrink by 301,000. That was the first monthly decline since December 2020.^4,5

More encouragingly, initial jobless claims declined, while continuing jobless claims reached their lowest level since 1973. A strong January employment report showed 467,000 jobs added during the month, with upward revisions to previously released November and December.^6,7

Footnotes and Sources

1. ^{The Wall Street Journal, February 4, 2022}
2. ^{The Wall Street Journal, February 4, 2022}
3. ^{The Wall Street Journal, February 4, 2022}
4. ^{The Wall Street Journal, February 1, 2022}
5. ^{CNBC, February 2, 2022}
6. ^{CNBC, February 3, 2022}
7. ^{CNBC, February 4, 2022}

No one likes to think of natural disasters and what might happen, but it’s always good to be prepared. A few things may happen after a disaster when it comes to taxpayer relief.

The first is that the IRS may give taxpayers more time to file and pay. If your address is in an area qualifying for IRS disaster relief, you will automatically receive more time to file your return and pay taxes.

In addition, taxpayers may qualify for a casualty loss tax deduction for people who have damaged or lost property due to a federally declared disaster.

* This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov⁷

 

Footnotes and Sources

7. ^{IRS.gov, September 7, 2021}