Reading Between the Numbers . . . Providing Knowledge, Insight, Experience and Creativity for our Clients' Benefit.

Visit our blog frequently to read our take on developments and news about taxes, accounting, financial and retirement planning.

Important Dates In Colonial American Tax History

In the spirit of summer, we’re creating a series containing some of the important dates in US tax history.

blog dates in history

Credit: Matt Briney on Unsplash

Why is this something we talk about in July? Back on July 4, 1776, Congress adopted the Declaration of Independence, a document that stated the American colonies wouldn’t accept British rule — or taxation.

But that’s just one key date in the history of American taxes. Let’s look at critical years and dates that lead up to the adoption of the Declaration of Independence.

 1733 Molasses Act

This tax was imposed to keep the American colonies buying from the British West Indies and not the lower cost imported options. The imposition of this act was effective the first year then led to corruption.

 1764 Sugar Act

An extension of the Molasses Act, this act increased the tariff per gallon on molasses. It was enforced by prohibiting vessels from shipping directly to the colonies. Ships would have to unload their cargo, pay tariffs, then reload and proceed to the colonies. It also expanded what the Crown could tax.

 1765 Stamp Act

This act said that every official document in the colonies would need a stamp on it. This was done to solely to increase the revenue of the British government, which caused opposition to emerge.

 1766 Declaratory Act

This act repealed the Stamp Act while also declaring that the American colonies are subordinate to the British Government and so the government had the right to tax them. As you can imagine, this didn’t go over well.

 1767 Townshend Acts

This act taxed 72 addition imports including paint, tea, and paper. The revenue raised was to fund the salaries of colonial officers and its administration. The protests from this act eventually caused the Boston Massacre.

 March 5, 1770 – Boston Massacre

What started as a protest of angry American colonists harassing a single British soldier escalated to a bloody conflict where several colonists were shot and killed. This was used to fan the flames of anti-British sentiment.

 1773 Tea Act

This act established that only tea from the East India Trading Company could be sold in the American colonies. The new tea was cheaper, but it hurt independent shop owners, shippers, and smugglers, which is why it caused a backlash.

 December 16, 1773 – Boston Tea Party

Protesters dumped more than 300 chests of tea into the Boston Harbor in protest of the 1773 tea act.

 1774 Coercive Acts

The British pass a series of policies designed to reestablish authority over the American colonies. One of the provisions was Boston Harbor would remain closed until the colonist paid the East India Trading Company for the losses of the tea party.

 July 4, 1776

The Declaration of Independence is adopted after days of the discussions and 12 of 13 colonies agreeing to succeed. The actual signing of the Declaration didn’t occur until August 2.

 

Taxation is a large portion of why the American colonies felt it necessary to break away from England. Taxation continues to be a large part of America’s history, especially in the years immediately following the Revolution.

 

We’ll cover that time period next.

 

1099, W2, W4, W9 – what’s the difference?

income-tax-4097292_1920

Fill out this 1099 form. Did you get your W2 from your employer? Fill out this W4 form.

Keeping all the tax forms straight is a challenge. In today’s post, we go through the difference between the most commonly filled out tax forms. That way, you know what you’re signing and why.

Form W4

This is the form that you fill out at the beginning of most conventional employment. The purpose of this paper is to let your employer know how much tax money they should withhold from your paycheck. You can also use this form to adjust your withholdings throughout the year.

Form W2

This is the magical form most of us are waiting on to get started with our taxes. It shows your yearly income and how much was withheld – critical information for both you and your accountant.

Form 1099  

This is a form you receive in any non-conventional payment situation. Basically, if you make money as an independent contractor or self-employed taxpayer, you will receive a version of this form.

If you are working as a contractor, business, or have received money from the government, bank, etc, you will likely get one of these. There are a lot of versions of this form, including:

  • MISC, Miscellaneous Income

  • G, Certain Government Payments

  • K, Payment Card and Third Party Network Transactions

  • R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

  • DIV, Dividends and Distributions

  • INT, Interest Income

Form 1098

There are a few versions of this form from income or payments to institutions like universities and banks. The most common forms of these are:

  • 1098-E, Student Loan Interest Statement

  • 1098-T,  Tuition Statement

  • Mortgage Interest Statement

Schedule K-1

This form reports any income, deductions, or other tax items you might receive as part of a business partnership. You will usually have to wait until later in the tax season to receive this form.

Have a form that’s not covered here? Reach out to us.

Are you withholding enough from your taxes?

witholdings

In a prior article, we talk about how moonlighters (those with 1099s and a W2 job) might need to withhold more taxes from their W2 role to avoid owing for the 2019 year.

They aren’t the only ones. Retirees, those with dependents, and a handful of others will need to take a look at how much they’re withholding and adjust accordingly.

Basically, if you were surprised at how low your refund was this year, you might need to adjust your withholding amount. That means if your refund was low or you owed (and never did before) you need to prioritize your withholding amount.

The time to adjust is now, right after the April 15 tax preparation deadline. The longer you wait, the more likely it is that you’ll owe or get a low tax refund amount. This can mostly be done with the IRS withholding calculator, but you’ll likely need to talk to an accountant for proper withholding.

This is for two reasons:

  • State and local taxes aren’t calculated.
  • Without a full understanding of taxes, taxpayers may not fill out the calculator correctly.

Reach out to a tax professional. They’ll help you navigate the muddy waters that were caused by the latest tax bill change.

Additionally, the IRS is cooking up a new W4 form - the form you fill out at the beginning of conventional employment (where you’d receive a W2) or to adjust your withholding amount. It will be ready for the 2020 tax season and won’t affect this year’s taxes.

If you ended up owing in this year or had a small tax refund, reach out to us. We can help ensure you’re withholding enough.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.