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Stores, shipping services and even manufacturers are looking for more urgent seasonal help this year than ever. A report found that retailers were looking to recruit 700,000 workers, which is less than last year’s 736,300. However, due to unusually high quit rates, more than a million retail positions are open – and retailers are offering incentives like never before to get people to work during the hectic holiday season.
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Walmart plans to hire more than 150,000 workers in its supply chain this holiday season, Kohl’s department store is looking for 90,000 workers, Dick’s Sporting Goods plans to hire 10,000 seasonal workers, and Michael’s craft store is in operation. recruiting 20,000 new workers, according to business newspapers. Meanwhile, UPS has 100,000 seasonal jobs and the US Postal Service is looking to ease shipping delays with 40,000 seasonal employees.
W-2 Seasonal Employee Tax Savings
Most positions at large retailers and other organizations will be for W-2 employees, which means your employer will take payroll deductions in the same way as for a permanent full-time position. This can help minimize tax headaches in April if your income for the year turns out to be higher than usual or higher than expected. However, if you think your tax status may change due to the additional income excluding you from benefits like the Early Childhood Tax Credit, experts say you’ll want to take action now.
“If your income is set to increase to a level where the monthly limits for the 2021 child tax credits conflict with your income, you may need to take action,” advised Charles H. Thomas II, planner. approved financier for Intrepid Aigle Finance. “The IRS offers an online portal to adjust your payment amounts. Denying the remaining payments for the rest of the year might be one way to avoid having to pay the IRS at tax time. (Note: The child tax credit withdrawal date is November 4.)
You can also adjust your payroll deductions to get more out of your paycheck if you’re worried about owing money in April. However, a better choice might be to put some money aside in a high yield online savings account.
Dana Ronald, President of the Fiscal Crisis Institute, recommends filing your taxes as soon as possible – as soon as you have the necessary documents in hand – so that you have time to save money in case your tax bill is higher than expected. “They may also want to look for ways to reduce their taxable income so that their final tax bill is not as high as it could be,” he said.
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Ronald suggested a few ways to do this: “One option is to put in a few extra hours at work in order to exceed the threshold and move to a new bracket,” he explained. “Another way is to work with an accountant and help them plan for your taxes to maximize deductions where possible. Some tax deductions for seasonal workers may include the cost of employer-sponsored insurance, smaller tax bills on itemized deductions, and the taxation of certain Social Security benefits.
Tax considerations for 1,099 entrepreneurs this holiday season
Gig workers, otherwise known as 1099 contractors, who don’t have payroll taxes deducted by their employer, will have a few additional considerations at tax time.
“If you are a 1099 contractor, you need to understand that you are responsible for the income taxes on your contract,” Ronald said. “The IRS says all 1099 contractors are responsible for paying taxes on their own. This means that they are required to determine which tax bracket they are in, pay taxes on that basis, and then report their income to the government to report their income.
With that in mind, entrepreneurs may want to find ways to reduce their taxable income through allowable deductions.
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“If you get paid through 1099, you may be able to lower taxes and save money for retirement at the same time,” Thomas said. “There are several types of retirement options that are suitable for entrepreneurs or the self-employed in the United States. Starting something like a SEP-IRA could be a way to save money for the future while lowering taxes here and now.
Should you declare taxes as a contractor?
Some independent entrepreneurs may not need to file a tax return for their ancillary income, especially if they have only worked as an entrepreneur for a short time, experts said.
“For people with seasonal work and those active in a working economy, it is important to look at qualifying income and deductions to determine if filing a tax return is even necessary,” said Adam P. Scherer, CFP, MS, IRS Enrolled Agent and Founder of Greenbeat Financial. “In 2021, the threshold at which self-employed workers must file an income tax return is $ 400 in net income (that is, income after deductions),” he continued.
However, taxpayers who are entitled to a tax refund or wish to claim refundable tax credits such as the Earned Income Credit, the U.S. Opportunity Tax Credit, or the CTC, will want to file a return in order to receive that money, Scherer pointed out.
To show the difference between your net income and your gross income, Scherer said, documentation is crucial. “One of the benefits of self-employment is the ability to deduct expenses deemed ‘ordinary and necessary’ to accomplish the tasks of your job. “
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Some of these deductions include mileage related to work, excise tax on vehicles (if applicable in your state), costs of office equipment, education and training for the job, and marketing costs. or advertising related to your small business or secondary activity.
“These deductions, if properly documented, can result in significant tax savings,” Scherer concluded.
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Last updated: October 22, 2021