Month: September 2022

Tax Deductions for Educators

School is back in session in most areas, and students and teachers are again returning to the classroom. It’s unfortunate, but many teachers find themselves having to pay for necessary classroom supplies our of their own pocket. The educator expense deduction allows these eligible teachers and administrators to deduct part of the cost of technology, supplies and training from their taxes. They can only claim this deduction for expenses that weren’t reimbursed by their employer, a grant or other source.

Eligible educators

To be eligible for the educator expense deduction, you must be a kindergarten through grade 12 teacher, instructor, counselor, principal or aide. You must also work at least 900 hours a school year in a school that provides elementary or secondary education as determined under state law.

Deduction limits

Starting on tax returns for 2022, educators can deduct up to $300 of trade or business expenses that weren’t reimbursed. If two married educators are filing a joint return, the limit rises to $600.

For 2021 returns, the limit is $250, or $500 for married educators filing jointly. If you are a teacher preparing for the school year, you should remember to keep receipts after making any purchase to support claiming this deduction.

Qualified expenses are amounts the educator paid himself or herself during the tax year.

Examples of expenses an educator can deduct include:

  • Professional development course fees
  • Books and supplies
  • COVID-19 protective items to stop the spread of the disease in the classroom
  • Computer equipment, including related software and services
  • Other equipment and materials used in the classroom

Is Your Worker a Contractor or an Employee?

As a business owner, you might pay an independent contractor and an employee for similar – or even the same – work, but there are key legal differences between the two. If you hire workers, it’s critical that you correctly determine whether these workers are employees or independent contractors. Here’s some information to help you avoid misclassifying workers and all the problems that can come from that.

An employee is generally considered anyone who performs services, if the business can control what will be done and how it will be done. What matters is that the business has the right to control the details of how the worker’s services are performed. Independent contractors are normally people in an independent trade, business or profession in which they offer their services to the public.

Independent contractor vs. employee

Whether your worker is an independent contractor, or an employee depends on the relationship between the worker and your business. Generally, there are three categories to consider:

  1. Behavioral control − Does your company control or have the right to control what the worker does and how the worker does the job?
  2. Financial control − Does your business direct or control the financial and business aspects of the worker’s job? Are the business aspects of the worker’s job controlled by you? Things like how the worker is paid, whether expenses are reimbursed, and who provides tools and supplies all influence this determination.
  3. Relationship of the parties − Does your worker have a written contracts or have employee type benefits such as pension plan, insurance, vacation pay? Is the work relationship ongoing? Is the work performed a key aspect of your business?

Misclassified worker

Misclassifying a worker as an independent contractor hurts the worker because the employer’s share of taxes is not paid, and the employee’s share is not withheld. If your business misclassifies an employee, you or your business can be held liable for employment taxes for that worker. Generally, an employer must withhold and pay income taxes, Social Security and Medicare taxes, as well as unemployment taxes.

Who is self-employed?

Generally, someone is self-employed if any of the following apply to them:

  • They carry on a trade or business as a sole proprietor or an independent contractor.
  • They are a member of a partnership that carries on a trade or business.
  • They are otherwise in business for themselves, including a part-time business.

People who are self-employed, including those who earn money from gig economy work, are generally required to file a tax return and make estimated quarterly tax payments. They also generally must pay self-employment tax which is social security and Medicare tax as well as income tax.

Sometimes it can be tricky to determine if your worker is your employee, or if the worker is a self-employed independent contractor. If you need help with this, please contact our office. We can help you evalate your circumstances, come into compliance (if necessary), and prevent misclassifying workers in the future.

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