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Finance & Accounting

Section 321 Probably isn’t Going Away Anytime Soon

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With the change of administration in the U.S. in 2021, many American domestic businesses—and some from throughout the world—watched to see if the U.S. imposed trade tariffs would be lifted on China. 

However, the tariffs remain in place which means that Section 321, a regulation that pertains to imports, is here to stay. On the bright side, this statute presents a money-saving opportunity for eCommerce business owners and a continued need for fulfillment companies in Canada and Mexico. 

What is Section 321?

The statute, Section 321, categorizes certain goods that can be cleared through customs without extra taxes or duties. This allows business owners to avoid additional shipping expenses that would usually force them to increase prices and/or gain very little profit.

Likewise, by invoking Section 321 on imports while employing the services of a Mexican or Canadian fulfillment company, businesses can also save time by improving the efficiency of their logistics strategy. 

What Has Prompted Frequent Use of Section 321?

China and the U.S. make up two of the largest economic powers in the world. In fact, as of 2019, trade between both countries equaled almost $559 billion in American dollars. This, in part, resulted from China’s induction into the World Trade Organization in 2001. Flash forward a little over a decade and half later, tariffs were imposed on Chinese goods to hold the economic power accountable for a rash of intellectual theft, unfair trade practices, and to leverage the playing field between the two nations.

While during the election of 2020, President Biden had disagreed with President Trump’s political or economic tactics in relation to dealing with China, he has not made any moves to lift the tariffs that were imposed by the previous administration. Rather, he has chosen to keep these measures in place that cover roughly $350 billion worth in goods imported from China. This decision stems from the first in-person meeting between President Biden and President Xi Jinping which did little to thaw the relationship between the two countries.

Thus, going with the bipartisan support of holding China accountable for its political missteps and for its unfair trade practices on the economic world stage, the tariffs remain in place for the time being. 

Why is Section 321 Here to Stay?

So, what does this mean for companies that have traded with China? 66% of goods that are exported from China to the U.S. carry a tariff at an average rate of 19%. According to the Peterson Institute for International Economics, that’s about 19% higher than before the trade war started. 

Since American importers bear the cost of those duties, prices on items like televisions, baseball hats, luggage, bikes, and sneakers have gone up. This means that consumers might have noticed a difference on the price tag compared to years ago or a higher shipping cost once they reach “cart” on an eCommerce site. 

Consequently, business owners have invoked Section 321 with the help of Canadian or Mexican fulfillment companies to cut the cost that’s triggered by these tariffs. 

How to Qualify for Section 321

While Section 321 enables businesses to avoid tariffs on some imported goods, you would have to make sure shipments do not exceed $800 in value. Additionally, you would have to remember that not all products fall under the eligibility of Section 321 coverage. These include:

  • Cosmetics
  • Dinnerware
  • Bio samples for lab analysis
  • Raw oysters

Plus, you would have your shipments to Canada or Mexico, where fulfillment companies will divide your goods into parcels that value $800 or less. They are then shipped to the U.S. but not all at the same time so as not to exceed the $800 limit. 

How to Apply Section 321 to Your Business Strategy?

Depending on where you’re located, you would partner with a fulfillment company in Canada or Mexico to come up with a plan of how to divide the shipment and schedule delivery. Furthermore, the fulfillment company would check the proper paperwork to ensure all necessary and correct information is given. With the shipments arriving in either of these two countries, you wouldn’t have to be concerned about the tariffs because the destination from China would be Canada or Mexico. Neither of these countries have to pay a tariff (or as high of a tariff). Plus, technically, your supplies are “arriving from” Canada or Mexico who have a trade agreement in place with the U.S. that doesn’t involve tariffs. So, this practice presents a mutually beneficial situation for your organization and the fulfillment company. 

Because Section 321 doesn’t appear to be going away anytime soon, you can ensure a timely delivery of your goods by securing the services of a Canadian or Mexican fulfillment company, depending on your location. These companies take care of the logistics and paperwork for you which saves time and money. They double check on the scheduling of the arrival of your imports to guarantee that they will meet the Section 321 criteria. All in all, this means that you won’t have to worry about paying the high tariffs, and your customers can count on reasonable prices and receiving their products on time.

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Finance & Accounting

Tax Article: Tax Guide for Self-Employed

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Self-employed workers have a lot on their plate. Taxes, paperwork, and other administrative tasks can be complicated to navigate. If you’re looking for a tax guide for self-employed workers, this blog post is your one-stop shop. We’ll cover everything from what the IRS considers self-employment income to tips for filing taxes as an independent contractor. It’s time to simplify your life with our guide.

Are You a Self-Employed Individual?

Many businesses hire workers on a contract basis to perform specific types of labor. Instead of getting a W-2 with taxes withheld, these individuals receive a 1099-MISC or 1099-NEC for their work for the company. In some cases, independent contractors are hired to perform specific tasks such as grocery shopping and delivery, transportation of passengers, and picking up food orders on behalf of other individuals or businesses. Additionally, those who conduct freelance labor are typically required to work under the terms of a written agreement. Consequently, you may be eligible to deduct expenses such as home office expenses, gas expenses, and mileage charges from your tax return.

If you work for yourself and are not an employee, you will pay taxes in a slightly different manner from that of an employee. In your capacity as a self-employed individual, you are responsible for paying federal income taxes and Social Security and Medicare taxes on your own time, either through quarterly anticipated tax payments or when you file your annual tax return. If your estimated tax payments are excessive, you will be entitled to a refund; if they are too small, you will be liable to pay tax on the difference.

Taxes on income must be paid at the time of earning it. If you do not pay enough tax during the year, you may be assessed fines. If your total self-employment income is at least $400, you must file a tax return with the IRS. Comparatively speaking, if you are an employee, you will have these payments routinely deducted from your income and partially paid for you by your employer.

You are essentially self if you carry on a trade or business or own and operate your own business, whether full-time or part-time, for-profit or profit-sharing. A self-employed individual can work as a sole proprietorship, an independent contractor, or a freelancer in their field of expertise. It does not matter whether you are paid in cash and do not receive a 1099-MISC or 1099-NEC; you are still deemed self-employed.

1. Sole Proprietor

As a sole proprietor, your business income and costs should be reported on your tax return Schedule C. Taxes on your self-employment earnings, such as Social Security and Medicare, will be your responsibility.

2. Partnerships and Corporations

If you have a business partner, you would most likely register as a partnership or corporation, depending on your circumstances. A partnership must submit an information return, but it is not required to pay federal income tax in most cases. Information returns are tax forms (the most common of which is Form W-2) that businesses and taxpayers must file with the Internal Revenue Service to record certain business transactions to the agency. Typically, Form K-1 is used to submit to the federal government an individual’s share of the partnership and S-corporation revenue that they received.

Unlike a sole proprietorship or a partnership, a C-corporation is considered an independent tax-paying business for federal tax reasons. That implies the company may be able to take advantage of particular tax benefits. It also means that the profit it makes is taxed at the corporate level, then taxed again on the recipient’s tax return if handed to shareholders as a dividend.

S-corporations are similar to partnerships in that their profits are usually reported on your tax return. However, they are identical to C-corporations in that the owner is generally paid a salary, and payroll taxes are withheld at the corporate level. At the end of the year, you may receive a Form W-2 detailing some or all of your earnings.

One of the benefits of being an S-corporation is that the taxpayer can set their remuneration, as long as the criteria are followed. However, because wages are subject to payroll taxes, there might be significant financial consequences if a person underpays himself when the business is profitable.

How to File Self Employment Taxes

Individuals who work for themselves are subject to the self-employment tax, which comprises Social Security and Medicare levies. It’s comparable to how most wage earners’ Social Security and Medicare taxes are deducted from their salary.

Schedule SE is used to calculate self-employment tax (SE tax) (Form 1040 or 1040-SR). Most wage earners’ Social Security and Medicare taxes are calculated by their employers. Also, when calculating your adjusted gross income, you can deduct the employer-equivalent share of your SE tax. Wage workers cannot remove taxes on Social Security and Medicare.

The tax rate on self-employment is 15.3 percent. The rate is divided into 12.4% for social security (old-age, survivors, and disability insurance) and 2.9 percent for Medicare (hospital insurance).

For 2020, any combination of the Social Security part of self-employment tax, Social Security tax, or railroad retirement (tier 1) tax will apply to the first $137,700 of your total salary, tips, and net earnings. For 2021, the sum has been increased to $142,800. (For prior-year SE tax rates, see the Schedule SE for that year.)

All of your current year’s combined salaries, tips, and net profits are liable to the 2.9 percent Medicare portion of the Self-Employment tax, Social Security tax, or railroad retirement (tier 1) tax.

Do not pay the 12.4 percent social security component of the SE tax on any of your net profits if your salaries and tips are subject to either social security tax or the Tier 1 part of railroad retirement tax, or both, and total at least $137,700. However, the 2.9 percent Medicare portion of the SE tax must be paid on all of your net earnings.

How to Pay Self-Employment Tax

You must have a Social Security number (SSN) or an individual taxpayer identification number (ITIN) to pay self-employment tax (ITIN).

If you don’t have a Social Security number, fill out Form SS-5, Application for a Social Security Card. This form is available at any Social Security office or over the phone at (800) 772-1213. The form can be downloaded from the website for the Social Security Number and Card.

If you are a non-resident or resident alien who does not have or is not qualified for an SSN, the IRS will give you an ITIN. Fill out Form W-7, Application for IRS Individual Taxpayer Identification Number PDF, to apply for an ITIN.

As a self-employed person, you may be required to file Estimated quarterly Taxes. You can pay your self-employment tax with these predicted tax payments. For more information on paying your self-employment tax with Estimated taxes, see the Estimated Taxes page and Publication 505, Tax Withholding and Estimated Tax.

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Banking

What Are the Benefits of Online Banking?

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Many people these days turn to the internet for all sorts of purposes from doing their regular shopping to socializing, streaming movies, and much more. Another thing that a lot of people use internet technology for these days is to access financial services such as banking. Having to spend ages queueing up at banks and ATMs has become a thing of the past for many, as people now enjoy the many great benefits of online banking.

In years gone by, looking after your spending, saving, and checking accounts could be a challenge. You had to go through reams of paperwork, spend a lot of time at the bank to make transactions, spend hours glued to the phone, and more. These days, all you have to do is to logon, and you can choose from a wide range of online accounts such as a Chime spending account. In this article, we will look at some of the many benefits of online banking.

Some of the Main Benefits

There are many benefits that come with online banking, and this is why more and more people have turned to this solution over recent years. Some of the major benefits that you can look forward to when you opt for online banking are:

Avoiding Queues and Inconvenience

One of the major benefits for many people these days is that they can avoid the lengthy queues and inconvenience of having to go to the bank. If you have to visit the branch for various transactions, you could find yourself wasting a lot of time simply hanging around or having to travel to and from the bank to get your finances sorted out. When you have online banking, all you need to do is log into your account and you can sort out any transactions with ease and speed.

Saving Time and Hassle

Another of the benefits of doing your banking online is that you can save yourself a huge amount of time and hassle. This is something that many people are looking for, as they already have enough on their plates with work and family commitments. Rather than wasting time on lengthy phone calls where you are passed from pillar to post, you can just go online at your convenience to conduct transactions. In addition, you save yourself the time involved in going to a branch in order to deal with your banking.

Staying in Control of Finances

When you have access to online banking facilities, you will find it much easier to stay in control of your finances. You can see what is going on with your account at a glance, and this means that you can stay on top of your spending, transactions, income, and more. You can do this from the safety and privacy of your own home at a time that suits you.

These are some of the many benefits that you can look forward to when you turn to online banking. 

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Personal Finance

3 Times You Need Money Advice From a Human

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You can now manage most aspects of your money without ever consulting another human being. You can budget, borrow, save, invest, buy insurance, prepare your tax return and create a will — among many other tasks — by using apps, websites and software.

But technology still has limitations, especially when you’re facing a money situation that’s complex or involves judgment calls. Consider consulting a human expert in the following situations:

1. You’re dropped by your homeowners insurance

Insurers typically can’t cancel a policy after 60 days unless you fail to pay premiums, commit fraud or make serious misrepresentations on your application, according to the Insurance Information Institute, a trade group. However, insurers can decide not to renew your policy when it expires.

With auto insurance, you often have many options after such a “non-renewal.” Even if you’ve had accidents or multiple claims, you typically can find coverage with companies that specialize in higher-risk drivers.

If a homeowners insurance company dumps you, however, you may have trouble finding coverage, says insurance consumer advocate Amy Bach. That’s especially true if you were dropped because you made too many claims, or your area is considered high risk because of wildfires, extreme weather or crime, for example.

How would other companies know? Insurers share such information in databases, and application forms typically ask if you’ve been “non-renewed” by another insurer, Bach says.

Bach’s nonprofit organization, United Policyholders, recommends seeking out an independent agent or broker who has relationships with several insurance companies. The agent or broker should know which insurers may be more receptive to your application and can put in a good word for you, Bach says. While most underwriting decisions are made by computers, there are still ways for human beings to override the algorithms.

“It will make a difference if [the agent or broker] can call an underwriter that they know and vouch for you as a good bet,” Bach says.

If your area has been labeled high risk, ask your neighbors for referrals to agents or brokers who helped them find coverage. Otherwise, you can ask an accountant, attorney or financial planner if they have recommendations. Friends and family may be able to provide leads as well.

2. You’re facing a “face-to-face” tax audit

Most IRS audits are conducted through the mail and are relatively routine. The IRS sends a letter requesting additional documentation to support a deduction or other tax break you’ve taken. If you mail back sufficient evidence, your case will be closed with no taxes owed. Otherwise, the IRS will mail you a bill.

However, if the IRS wants to meet with you, the stakes get much higher. In fiscal year 2020, the average amount of additional taxes recommended in face-to-face audits was nearly 10 times larger than the average for a correspondence audit: $72,210 versus $7,658, according to IRS statistics.

Even tax pros hire someone to represent them in face-to-face audits, says Leonard Wright, a San Diego certified public accountant and financial planner. Wright has plenty of experience: He was chief financial officer of a company that was audited, and his personal tax returns have been audited four times. In each case, he hired another CPA to represent him.

It’s all too easy to say something you shouldn’t when you’re under scrutiny, Wright says. You could volunteer information that might not be helpful to your case, or get defensive or confrontational.

“You don’t want it to become personal, and you don’t want to ruffle the feathers of the auditor,” Wright says.

If you used a tax preparer, you may assume that person can represent you in an audit, but that’s not always the case. Typically CPAs, attorneys and enrolled agents can represent clients in IRS audits, but other tax pros usually can’t. Your tax preparer may be able to refer you to someone who can represent you, or you can get referrals from friends, family or financial advisors.

3. You’re creating an estate plan

Will-making software and estate-planning sites can help you create essential legal documents if money is tight. Otherwise, you should probably consult an attorney, says Betsy Hannibal, senior legal editor for self-help legal site Nolo.

“Why not get personalized advice that’s tailored to your situation, if you can?” Hannibal says.

Getting help is particularly important if you need or want to do something complicated with your estate like putting conditions on a bequest, providing for someone with special needs or creating a trust, she says. You’ll also want an attorney’s help if you have a lot of debt, because there may be ways to protect your assets from creditors. Finally, consult an attorney if you think someone might contest your will. A lawyer can put additional protections into place and serve as a professional witness that you knew what you were doing, Bach says.

“If someone doesn’t think you were in your right mind, going through an attorney can help make sure that (a legal challenge) can’t go forward,” she says.

This article is meant to provide background information and should not be considered legal guidance.

This article was written by NerdWallet and was originally published by the Associated Press.

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