It seems hard to believe, but the holiday season is almost upon us, and that means that the 2020 tax preparation season will soon follow. With the end of the tax year just weeks away, it may be appropriate (especially this year, in light of the financial havoc created by COVID-19) to review some year-end tax issues that might reduce your tax bite for 2020 or provide long-term tax benefits.
Take Full Advantage of Your Deductions – Individuals can itemize their deductions or take the standard deduction, which is $12,400...
If you can’t wait for 2020 to be over, you’re certainly not alone. But don’t let the myriad terrible things about the year distract you from taking care of important end-of-year financial moves. We’ve all been guilty of falling short on the plans and promises we made for what we’d accomplish while locked down, but the good news is that when it comes to your financial checklist, there’s still time left to make sure that your money is working its hardest for you.
Not sure where to start? Here are four of the most important things you can do to make sure you’re in the strongest possible financial position as you head into 2021.
The economic news has reported that those who have been able to continue working in 2020 have actually increased their savings this year. There are lots of reasons for this: We’re not spending money on commuting, on lunches out, on dry cleaning and work...
If you are a small business owner, every penny of your income counts. This means that you not only want to optimize your revenue, but also minimize your expenses and your tax liability. Unfortunately, far too many entrepreneurs are not well-versed on the tricks and tools available to them and end up paying far more than they need to. You don’t need an accounting degree to take advantage of tax-cutting tips. Here are a few of our favorites.
THINK ABOUT CHANGING TO A DIFFERENT TYPE OF TAX STRUCTURE
When you started your business, one of the first decisions you needed to make was whether you wanted to operate as a sole proprietor, partnership, LLC, S corporation or C corporation. But as more time goes by, the initial reasons for structuring your business the way that you did may no longer be applicable, or in your best interest from a tax perspective. There is no requirement that you stick with the business structure you initially chose.
Ever since the Tax Cuts and Jobs Act...
To cope with inflation, the tax code requires the IRS to adjust the tax rates, standard deductions, and a variety of other tax related numbers each year. Due to the relatively low rate of inflation from 2020 to 2021 (at least according to the calculation method prescribed by law for this purpose), several categories had no or only a slight change. The following is a summary of the most commonly encountered items for 2021.
Standard Deductions – The standard deduction consists of a filing status-based basic amount and additional amounts for elderly and blind filers (and their spouses). The additional amounts do not apply to dependents. The 2020 and 2021 amounts are compared below.
|Married Filing Joint & Surviving Spouse||24,800||25,100|
|Head of Household||18,650||18,800|
|Single & Married Filing Separate||12,400||12,550|
|Added Amounts for Elderly and Blind||2020||2021|
|Married Filing Joint & Surviving Spouse||1,300||1,350|
To say COVID-19 has made 2020 a disastrous year for just about everyone would be an understatement. In response to the economic slowdown and losses of income, Congress passed several extensive laws to benefit individuals and businesses that suffered financial hardship because of COVID-19. However, 2020 has given rise to more than the usual tax-planning opportunities. Thus, you may find it appropriate to schedule a tax-planning appointment well before the close of the year to take advantage of the tax benefits and strategies available for 2020. Although everyone’s situation is unique, the following are examples of tax opportunities and strategies that may apply to your circumstances.
Individual Planning Opportunities
Not much going on in November from a personal tax perspective; below is the one date to be aware of:
November 10 - Report Tips to Employer
If you are an employee who works for tips and received more than $20 in tips during October, you are required to report them to your employer on IRS Form 4070 no later than November 12. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 12 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed.
November 2 - Social Security, Medicare and Withheld Income Tax
File Form 941 for the third quarter of 2020. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until November 10 to file the return.
November 2 - Certain Small Employers
Deposit any undeposited tax if your tax liability is $2,500 or more for 2020 but less than $2,500 for the third quarter.
November 2 - Federal Unemployment Tax
Deposit the tax owed through September if more than $500.
November 10 - Social Security, Medicare and Withheld Income Tax
File Form 941 for the third quarter of 2020. This due date applies only if you deposited the tax for the quarter in full and on time.
November 16 - Social Security, Medicare and Withheld Income Tax
If the monthly deposit rule applies, deposit the tax for payments in October.
November 16 - Nonpayroll...
Gambling is a recreational activity for many taxpayers, and as one might expect, the government takes a cut if you win and won’t allow you to claim a loss in excess of your winnings. In fact, there are far more tax issues related to gambling than you might expect, and they may impact your taxes in more ways than you might believe. Here is a rundown on the many issues, the so-called “gotchas,” that can affect you.
Reporting Winnings – Taxpayers must report the full amount of their gambling winnings for the year as income on their 1040 returns. Gambling income includes, but is not limited to, winnings from lotteries, raffles, lotto tickets and scratchers, horse and dog races, and casinos, as well as the fair market value of prizes such as cars, houses, trips, or other non-cash prizes. The full amount of the winnings must be reported, not the net after subtracting losses. The exception to the last statement is that the cost of the winning ticket or winning...
You have probably heard others discussing living trusts but may not understand the reasons for them or whether you should have one.
Living trusts are an estate-planning tool, and there is not a one-type-fits-all living trust. Each one is customized to suit the special circumstances of the individual for whom it was created. The vast majority of the population can get by without using a living trust, and a simple will is perfect for most people, unless their estate is large or there are some special circumstances to deal with.
There actually are two types of these trusts: revocable and irrevocable. As the names imply, an irrevocable trust generally cannot be undone once made, while the provisions of a revocable trust can be changed or rescinded as long as the grantor (the individual who established the trust) is still living. A living trust becomes irrevocable when the grantor passes.
Because an irrevocable trust would only be established under very special circumstances, they...