The Gig Economy Just Got Much Tougher in New Jersey

New Jersey just made life very difficult for all employers in every industry, specifically small businesses. In New Jersey, business owners can now be criminally charged and fined up to $5,000.00 per day for misclassifying workers as independent contractors.

Running a small business can be very difficult. One of the issues that employers of all sizes struggle with is whether to classify workers as statutory employees or independent contractors. Statutory employees are paid on a W-2 basis, whereby the employer withholds federal and state payroll taxes. W2 employees have certain rights and remedies available to them under state and federal law. For example, the Pennsylvania Wage Payment and Collection Law is one of those laws.

Independent contractors, on the other hand, negotiate their work relationships with employers and have those relationships governed by contract. Those contracts can provide the worker with rights and remedies. That is one of the points under attack by this overreach in New Jersey- the freedom of contract.

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Capital Gains Tax, Explained

The tax filing deadline is approaching, and there are quite a few new wrinkles in the Tax Code for individuals to consider.  Recently, I have fielded quite a few questions about the recent changes in how capital gains tax is calculated.  Here are the basics you need to know this tax season:

A capital gain is realized when a capital asset is sold or exchanged at a price higher than the price paid for that asset (or its “basis”). Basis is defined as an asset’s purchase price, plus commissions and the cost of improvements (if any), minus depreciation. 

A capital loss happens when an asset is sold for less than its basis. Capital gains and losses are not adjusted for inflation. 

Long term capital gains and losses occur if the asset was held for more than one year.  

Short term capital gains and losses occur if the asset was held for less than one year.  

So what are the capital gains tax rates?

The Tax Cuts and Jobs Act of 2017 changes things up quite a bit from the prior methods of capital gains taxation.  

Let’s first address an easy concept:  Short term capital gains are taxed at the same rate as ordinary income.  If you have bought and sold a capital asset within one year, you just pay your normal federal income tax rate on that gain.  

For long term capital gains, however, it not that straightforward. The long term capital gains tax rate is either 0%, 15% or 20%, depending on your income level. This is most easily described by the following chart:

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Gains on the sale of artworks and collectibles are taxed as ordinary income up to a maximum 28 percent rate.