For federal taxes, some people don't know that Social Security can be taxable in retirement. How much is taxed depends on your provisional income, which is 50% of your Social Security plus all other income like pensions, IRA withdrawals, or rental income. Depending on your provisional income, 0%, 50%, or up to 85% of your Social Security may count as taxable income. It's important to keep track of this.

Usually, people who are self-employed, earn rental income, or have high interest or dividend income need to pay taxes every three months. This is because they don’t have taxes taken out like a regular paycheck. If they don’t prepay, they may get fined by the IRS or state. To figure out how much to pay, we estimate your yearly income, calculate the taxes, then split that amount into four payments due throughout the year.

A tax deduction reduces the income that is taxed, like donations or mortgage interest. This lowers your taxable income.

A tax credit lowers the actual taxes you owe, which is usually more helpful. For example, the child tax credit cuts your taxes directly, dollar for dollar.

You can generally invest in anything you want in these accounts. A traditional IRA lets you deduct your contributions on taxes, the money grows tax-free, but when you withdraw, you pay taxes on both the original amount and the growth. A Roth IRA doesn’t give you a tax deduction when you contribute because you use after-tax money. However, the growth and withdrawals are tax-free.

In short:

Traditional IRA = tax break when you put money in, taxed when you take it out.

Roth IRA = no tax break when you put money in, but tax-free growth and withdrawals.

The IRS offers two choices for your tax return. You can take the standard deduction, which is about $14,000 to $15,000 if you file alone, or around $29,000 to $30,000 if you file jointly as a married couple. This deduction lowers your taxable income.

If you have high costs like mortgage interest, medical bills, property taxes, or charitable donations, you might choose to itemize these expenses instead. Itemizing helps if these costs add up to more than the standard deduction, giving you a bigger tax deduction and reducing your taxable income.

When do you need to issue a 1099 for subcontractors?

If you pay a subcontractor $600 or more, you must send them a 1099 form. This applies only if they are an individual, a single-member LLC, or a partnership. Corporations do not need to receive a 1099.

The subcontractor must have provided services to you.

If you pay them by check, card, or cash, you need to report it with a 1099. But if you pay them through payment services like PayPal, and they meet the new 1099-K rules, you do not need to issue a 1099.