FREQUENTLY ASKED QUESTIONS REGARDING TAX RELATED MATTERS

Steve Cuong Luong has been a licensed Certified Public Account for over 20 years. After graduating from Texas A&M University and prior to having his own Tax Practice and Financial Services Business, he worked for many Fortune 500 Companies in various roles and capacity. In addition, he served as a Financial Controller for a Billionaire’s Family Office for over 14 years. A long with being a licensed Certified Public Accountant, he’s also working in the Life Insurance Industry and offering personal Financial Services.

Q: What is the difference between 1099s and W-2s?
A: 1099s and W-2s are two separate tax forms for two different types of workers. If you’re an independent contractor, you get a 1099 form. If you’re an employee, you receive a W-2. As a W-2 employee, payroll taxes are automatically deducted from your paycheck and then paid to the government through your employer. If you’re a contractor, you are responsible for calculating your own payroll taxes (self-employment taxes). This is normally done when filing your tax return.

Q: Do I have to issue a 1099?
A: You are required to file Form 1099-MISC, Miscellaneous Income, for an independent contractor or unincorporated business if you paid that independent contractor or business $600 or more. You add up all payments made to a payee during the year, and if the amount is $600 or more for the year, you must issue a 1099-MISC for that payee.

Q: What is the difference between Form W-4 and Form W-9?
A: Form W-4 is used to inform your employer how much money to withhold from your paychecks during the year to cover your tax obligation. You can choose to have more money withheld (which might results in a refund at the end of the year). If you don’t, you might end up owing money to the IRS.

Form W-9 is normally used by an Independent Contractor or Business to share identification information (name, social security number or EIN, etc.) with their clients. When a client pays a person or business more than $600 during the year, they’ll have to fill out a Form 1099-MISC with the exact amount that were paid and send a copy to that person or business and the IRS. Since one copy has to go to the IRS, the client needs their identification information, so that the IRS knows the payment went to the right person. The W-9 is the official way to provide this information to their client.

Q: Will I pay tax on the sale of my home?
A: A person can generally exclude up to $250,000 of gain or $500,000 for a married couple filing jointly on the sale of a home. To qualify for the exclusion, you must meet both the ownership test and the use test. To meet the tests, you must owned and used your home as your main home for a period aggregating at least two years out of the five years prior to the sale date.

Q&A tax

Q: What is the new law regarding taxes for alimony?
A: The new tax law reverses the rules for alimony, so that the payer no longer gets to deduct payments and the recipient no longer has to pay tax on alimony received. The new rule does not go into effect until 2019, and only for divorces executed or modified after 2018. For divorces after December 31, 2018, alimony payments are no longer deductible nor must the recipient declare the amount as taxable income. The law specifically permits ex-spouses to modify an earlier divorce agreement to adopt the new rule after it goes into effect in 2019. Of course, both you and your ex would have to agree to such a change. If a pre-2019 divorce is not modified, the old rules apply: the payer can deduct payments and the recipient must pay tax on them.

Q: Does Child support affect my taxes?
A: Child support payments are not deductible by the payer and are not taxable to the payee.

Q: What to do before changing an Accountant or CPA?
A: Before informing the current Accountant or CPA that you’re going with a different Accountant or CPA, request all applicable documents, such as Tax Returns, documents that you don’t have a copy of, or anything thing that might be useful for the next Accountant or CPA. Your current CPA is obligated to comply with your request but some will not due to various reasons.

Q: What are the new 2018 Tax Changes?
A: President Trump signed the tax reform bill into law, and it makes major revisions to the U.S. tax code for both individuals and businesses. The bill represents the most significant tax changes in the United States in more than 30 years. It changes the tax brackets for individual and corporation, standard deduction and personal exemption, expanded the Child Tax Credit, mortgage interest deduction, SALT (state and local taxes) deduction, business income deductions, and many other changes.

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