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...
This is our annual reminder that if you use workers other than employees to perform services for your business and pay them $600 or more for the year, you are required to issue each one a Form 1099-NEC after the end of the year to avoid facing the loss of the deduction for their labor and expenses. The 1099s for 2020 must be provided to workers no later than February 1, 2021. The forms are normally due January 31, but since it falls on a Sunday in 2021, the due date is extended until February 1.
As you probably noticed, the IRS has switched forms for 2020 reporting. They have resurrected a form that hasn’t been used since the early 1980s—Form 1099-NEC, Nonemployee Compensation. The prior 1099-MISC form was used for reporting more than just nonemployee compensation; because 1099s reporting non-employee compensation need to be filed by January 31, and...
The holiday season is customarily a time of giving gifts, whether to your favorite charity, family members or others. Some gifts even provide a variety of tax benefits.
But be wary; during the holiday season, you may receive phone calls, emails, snail mail, or appeals on social networking sites for donations for various causes. However, some of these appeals may come from fraudsters and not legitimate charities. Unfortunately, this happens every holiday season.
So, before writing a check or giving your credit card number to a charity that you aren’t familiar with, check them out so you can be assured that your donation will end up in the right hands. Follow these tips to...
Some folks have been tapping or suspending their retirement savings to make ends meet during this COVID-19 pandemic, and although understandable, it is important that they continue making contributions to their savings as quickly as financially possible.
Still other people have simply been ignoring the need to save for their retirement, which can have an unpleasant result when it comes time to retire. That tends to be the case with younger individuals who perceive retirement to be far in the future and therefore believe they have plenty of time to save for it. Some will postpone the issue until late in life and then must scramble during their last few working years to fund their retirement. Other people ignore the issue altogether, thinking their Social Security income (assuming they qualify for it) will take care of their retirement...
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...
December 1 - Time for Year-End Tax Planning
December is the month to take final actions that can affect your tax result for 2020. Taxpayers with substantial increases or decreases in income, changes in marital status or dependent status, and those who sold property during 2020 should call for a tax planning consultation appointment.
December 10 - Report Tips to Employer
If you are an employee who works for tips and received more than $20 in tips during November, you are required to report them to your employer on IRS Form 4070 no later than December 10. 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.
December 31 - Last Day to...
There are few things that can send a chill down your spine more than mail from the IRS. Just seeing the agency’s name on an envelope’s return address creates anxiety. If you find yourself in that position and open the mail to find a CP2000 notice inside, you don’t need to panic — but you do need to know what to do.
What Is a CP2000 Notice?
The Internal Revenue Service sends out CP2000 notices to taxpayers whose submitted tax returns do not reflect what’s been submitted by employers and others that provide the agency with information on the income you’ve received over the course of the tax year. Though these forms are not notifications that you’re subject to an audit, they do carry the full weight of an IRS inquiry, and as such you are required to respond fully and promptly by the indicated deadline.
The CP2000 is not just a notice that something doesn’t look right. Also known as an underreporter inquiry, it is notification that the...
The IRS has warned taxpayers of a clever scheme by internet scammers to dupe taxpayers into revealing their bank account information under the guise of receiving the $1,200 Economic Impact Payment (EIP) that Congress authorized last Spring.
Criminals are relentlessly using COVID-19 and Economic Impact Payments as cover to try to trick taxpayers out of their money or identities. This new scam is a twist on those the IRS has been seeing much of this year, and the IRS urges people to remain alert to these types of scams.
The current scam is a text message that reads: “You have received a direct deposit of $1,200 from COVID-19 TREAS FUND. Further action is required to accept this payment into your account. Continue here to accept this payment ...” The text includes a link to a fake phishing web address.
This fake phishing URL, which appears to come from a state agency or relief organization, takes recipients to a fraudulent website that impersonates the IRS.gov...
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|