Nothing is at last sacred but the integrity of your own mind. Ralph Waldo Emerson
Small business accounting regulations and tax shelter implications
JOURNALOFACCOUNTANCY.COM
Small business accounting regulations and tax shelter implications
IRS Offers Final Regs for Tax Withholding for Retirement and Annuity Payments
CPAPRACTICEADVISOR.COM
IRS Offers Final Regs for Tax Withholding for Retirement and Annuity Payments
4 Free Tips to Get Your Business to Show Up on Google Maps
ENTREPRENEUR.COM
4 Free Tips to Get Your Business to Show Up on Google Maps
Safety of employees, customers ranks as top pandemic-related concern
JOURNALOFACCOUNTANCY.COM
Safety of employees, customers ranks as top pandemic-related concern
Final regs. govern CFC downward attribution
JOURNALOFACCOUNTANCY.COM
Final regs. govern CFC downward attribution
2020 Year-End Tax Planning Tips for Businesses and Individuals
CPAPRACTICEADVISOR.COM
2020 Year-End Tax Planning Tips for Businesses and Individuals
PPP forgiveness simplified for loans of $50,000 or less
JOURNALOFACCOUNTANCY.COM
PPP forgiveness simplified for loans of $50,000 or less
Just don't give up trying to do what you really want to do. Where there is love and inspiration, I don't think you can go wrong. -Ella Fitzgerald
Why Right Now Is the Best Time Ever to Start a Business
ENTREPRENEUR.COM
Why Right Now Is the Best Time Ever to Start a Business
IRS Extends Deadline for Coronavirus Stimulus Payments to Nov. 21, 2020
CPAPRACTICEADVISOR.COM
IRS Extends Deadline for Coronavirus Stimulus Payments to Nov. 21, 2020
Reminders for Extension Filers-Oct. 15
YOUTUBE.COM
Reminders for Extension Filers-Oct. 15
2021 Social Security wage base announced
JOURNALOFACCOUNTANCY.COM
2021 Social Security wage base announced
Several states provide one-month filing relief for corporate deadlines
JOURNALOFACCOUNTANCY.COM
Several states provide one-month filing relief for corporate deadlines
Find out about the Qualified Business Income Deduction.
YOUTUBE.COM
Qualified Business Income Deduction
79% of Americans Still Feeling Financial Stress Due to Covid
CPAPRACTICEADVISOR.COM
80% of Americans Still Feeling Financial Stress Due to Covid
If a man does not keep pace with his companions, perhaps it is because he hears a different drummer. Let him step to the music which he hears, however measured or far away. Henry David Thoreau
Unclaimed property distributions allowed as self-certified rollovers
JOURNALOFACCOUNTANCY.COM
Unclaimed property distributions allowed as self-certified rollovers
If you own a business, you probably own some form of general liability insurance to protect you in the event of a lawsuit due to negligence on your part. However, there may be situations where the limits of your general policy may not provide adequate protection. A commercial umbrella can provide you and your business with additional liability protection.
4 Crisis-Proofing Lessons for Small Business Owners
ENTREPRENEUR.COM
4 Crisis-Proofing Lessons for Small Business Owners
IRS Adds QR Codes to Balance Due Notices
CPAPRACTICEADVISOR.COM
IRS Adds QR Codes to Balance Due Notices
Inflation-adjusted income ranges for 2021 IRA and 401(k) plans
JOURNALOFACCOUNTANCY.COM
Inflation-adjusted income ranges for 2021 IRA and 401(k) plans
Open Enrollment Do’s & Don’ts That Can Help Americans Save in 2021
CPAPRACTICEADVISOR.COM
Open Enrollment Do’s & Don’ts That Can Help Americans Save in 2021
Inflation-adjusted income ranges for 2021 IRA and 401(k) plans
JOURNALOFACCOUNTANCY.COM
Inflation-adjusted income ranges for 2021 IRA and 401(k) plans
Tuesday Accounting Tip: Equity denotes the value left over after liabilities have been removed. Recall the equation Assets = Liabilities + Equity. If you take your Assets and subtract your Liabilities, you are left with Equity, which is the portion of the company that is owned by the investors and owners.
Fast Fact: What do they mean by Disposable Income? Personal income remaining after personal taxes and noncommercial government fees have been paid.
Tips for starting a new business: Once you start to develop your business idea, add up how much it will cost. You will need to factor in every business expense necessary to launch and operate. Some costs to keep in mind include your location, rent, supplies, marketing, and more.
Tips for starting a new business: Rather than starting your idea with what to sell, think about what it will solve. It’s a lot easier to gain a solid customer base when your business is fixing a problem. Your startup should fill a hole in a certain market or niche.
Limited partnerships have only one general partner with unlimited liability, and all other partners have limited liability. The partners with limited liability also tend to have limited control over the company, which is documented in a partnership agreement. Profits are passed through to personal tax returns, and the general partner — the partner without limited liability — must also pay self-employment taxes.
Setting up a business: LLCs protect you from personal liability in most instances, your personal assets — like your vehicle, house, and savings accounts — won't be at risk in case your LLC faces bankruptcy or lawsuits.
Sole proprietorships do not produce a separate business entity. This means your business assets and liabilities are not separate from your personal assets and liabilities. You can be held personally liable for the debts and obligations of the business. Sole proprietors are still able to get a trade name. It can also be hard to raise money because you can't sell stock, and banks are hesitant to lend to sole proprietorships.
An LLC is a limited liability company, a legal entity, also a business structure that's created by state law. An LLC can be used to run a business, or it can be used to hold assets such as real estate, vehicles, boats, or aircraft.
What is a Trust: A trust is a legal entity that holds assets for the benefit of another. You can place almost any kind of asset into a trust, including cash, stocks, bonds, insurance policies, real estate, and artwork.
What is a Split Refund? A split refund lets you divide your refund, in any proportion you want, and direct deposit the funds into up to three different accounts with U.S. financial institutions. Use Part I of Form 8888, Allocation of Refund (Including Savings Bond Purchases) to request to have your refund split. The accounts must be in your name. You may also use part or all of your refund to buy up to $5,000 in paper or electronic U.S. Series I Savings Bonds for yourself or someone else by using Part II of Form 8888.
"Taxation is the price which civilized communities pay for the opportunity of remaining civilized." - Albert Bushnell Hart
What Do They Mean By Accrual Accounting? The attempt to record the financial effects of transactions and other events in the periods in which those transactions or events occur rather than only in the periods in which cash is received or paid by the business, using all the techniques developed by accountants to apply the MATCHING PRINCIPLE.
What Do They Mean By Absorption Costing? An approach to product costing that assigns a representative portion of all types of manufacturing costs direct materials, direct labor, variable factory overhead, and fixed factory overhead to individual products.
End of The Year Tax Tips:
Maximize tax-exempt and tax-deferred Investments. The higher your tax bracket the more tax savings you’ll realize with tax-exempt and tax-deferred contributions such as employer-sponsored 401(k)s, IRA’s, tax-free municipal bonds, and Section 529 College Savings Plans.
Character is like a tree and reputation like a shadow. The shadow is what we think of it; the tree is the real thing. Abraham Lincoln
An LLC lets you take advantage of the benefits of both the corporation and partnership business structures.
LLCs protect you from personal liability in most instances, your personal assets — like your vehicle, house, and savings accounts — won't be at risk in case your LLC faces bankruptcy or lawsuits.
Thinking of starting your own business? Make sure you write a business plan first! It’s a roadmap for how to structure, run, and grow your new business. You’ll use it to convince people that working with you — or investing in your company — is a smart choice.
The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function. F. Scott Fitzgerald
Tips For Starting Your Own Business:
Write a business plan. This is a key step before starting your business, as it provides you with invaluable information. Creating a business plan will allow you to better understand both operational and financial goals, providing crucial budget and marketing strategies. The main reason for doing a business plan first when you're thinking of starting a business is that it can help you avoid pouring your time and money into something that will not succeed.
Tips For Starting Your Own Business:
Start your business while you're still employed. How long can most people live without money? Not long, and it may be a while before your new business actually makes any profits. Being employed while you're starting out means you will have money in your pocket to invest into the business, as well as to ensure you are able to keep up with your monthly living expenses.
End of The Year Tax Tips:
Fully funding Health Savings Accounts (HSA), and “Flex Benefits” accounts that allow using pre-tax earnings to pay for childcare and out-of-pocket medical costs. Remember, however, unlike HSAs it is important to use up any funds in your Flex health care accounts and dependent care accounts prior to the end of the plan year as any unused funds will be forfeited.
Tips for Starting a New Business in 2021: If you're not seeking investors or putting a huge sum of money into your business, you may not need an elaborate business plan, but you still do need a plan - one that specifies your goal – your destination – and then lays out at least a skeletal roadmap for how you'll get to where you want to go. The plan will change as you progress and learn more about your customers and competition, but it will still help you stay focused and headed in the right direction.
Tips for Starting a New Business in 2021: Start on a small scale before going all out. Some people believe that entrepreneurs are risk-takers. But for the most part, successful entrepreneurs don't like walking blindfolded on a limb. Instead, they take controlled risks. They test an idea on a small scale, then build on what works well, tweak what shows promise, and discard the disasters.
Tips for Starting a New Business in 2021: The old formula – find a need and fill it – still works. It will always work. The key to success is finding needs that you can fill, that you want to fill, and that will produce enough income to build a profitable business.
End of the year tax strategy:
You may not want to accelerate expenses into the present year.
For example, if you had a rough year, with underwhelming profits, but you anticipate a future uptick in business, it may be shrewd to defer the maximum amount of expenses to the next calendar year.
IRS Reminds Taxpayers of Special $300 Charity Deduction without Itemizing.
The CARES Act includes several temporary tax changes helping charities, including the special $300 deduction designed especially for people who choose to take the standard deduction, rather than itemizing their deductions.
Limited partnerships have only one general partner with unlimited liability, and all other partners have limited liability. The partners with limited liability also tend to have limited control over the company, which is documented in a partnership agreement. Profits are passed through to personal tax returns, and the general partner — the partner without limited liability — must also pay self-employment taxes.
An LLC lets you take advantage of the benefits of both the corporation and partnership business structures. LLCs protect you from personal liability in most instances, your personal assets — like your vehicle, house, and savings accounts — won't be at risk in case your LLC faces bankruptcy or lawsuits.
Sole proprietorships do not produce a separate business entity. This means your business assets and liabilities are not separate from your personal assets and liabilities. You can be held personally liable for the debts and obligations of the business. Sole proprietors are still able to get a trade name. It can also be hard to raise money because you can't sell stock, and banks are hesitant to lend to sole proprietorships.
What is the Alternative Minimum Tax? Tax imposed to back up the regular income tax imposed on CORPORATION and individuals to assure that taxpayers with economically measured income exceeding certain thresholds pay at least some income tax.
Understanding Accrual Accounting: The attempt to record the financial effects of transactions and other events in the periods in which those transactions or events occur rather than only in the periods in which cash is received or paid by the business, using all the techniques developed by accountants to apply the MATCHING PRINCIPLE.
End of the year tax tips: Give a gift: If you have an estate to pass on to beneficiaries, remember you can gift up to $15,000 to as many of them as you’d like this year without paying a gift tax or reducing your lifetime estate tax exclusion amount. Make these gifts by December 31.
End of the year tax tips:
Donate to charity: If you can afford to give, the need has never been greater, and what’s good for others is good for your taxes. A CARES Act provision allows individual taxpayers to receive up to a $300 tax deduction, even if they claim the standard deduction, for making a cash donation of up to $300 to a qualified charity by December 31.
Required minimum distribution age raised from 70½ to 72.
Prior to 2020, participants in employer-sponsored retirement plans (for example, 401(k) plans), traditional IRAs, and individual retirement annuities needed to begin taking required minimum distributions (RMDs) from their plans by April 1 of the year following the year they turned 70½ years old. Under the SECURE Act and for distributions required to be made after Dec. 31, 2019, the age at which individuals must start taking distributions from these retirement plans has been increased from 70½ to 72. The RMD rules try to get taxpayers to spend retirement savings during their lifetimes instead of transferring wealth to beneficiaries.
The Internal Revenue Service has started sending letters to taxpayers that may need to take additional actions related to Qualified Opportunity Funds (QOF). Taxpayers who attached or indicated they attached a Form 8996 to their return may receive Letter 6250, Self-certifying as Qualified Opportunity Fund (QOF). This letter lets them know that if they intended to self-certify as a QOF they may need to take additional action to meet the annual self-certification requirement.
Limited partnerships have only one general partner with unlimited liability, and all other partners have limited liability. The partners with limited liability also tend to have limited control over the company, which is documented in a partnership agreement. Profits are passed through to personal tax returns, and the general partner — the partner without limited liability — must also pay self-employment taxes.
An LLC lets you take advantage of the benefits of both the corporation and partnership business structures. LLCs protect you from personal liability in most instances, your personal assets — like your vehicle, house, and savings accounts — won't be at risk in case your LLC faces bankruptcy or lawsuits.
End of the year tip: There are some gifts that remain tax-free even though they exceed the annual exclusion amount. Example: Gifts to cover someone’s medical expenses, if paid directly to the medical facility.
People who received a federal tax refund in 2020 may have been paid interest. The IRS sent interest payments to individual taxpayers who timely filed their 2019 federal income tax returns and received refunds. Most interest payments were received separately from tax refunds. Interest payments are taxable and must be reported on 2020 federal income tax returns. In January 2021, the IRS will send a Form 1099-INT, Interest Income, to anyone who received interest of at least $10.
Reminder: Employers use Form 941 to:
• Report income taxes, Social Security tax, Medicare tax and additional Medicare tax withheld from employee's wages, tips and other compensation.
• Claim employment tax credits and adjustments
• Report the amount of employment taxes owed or claim an overpayment of employment taxes.
End of the year tax tips: Max out your HSA: Another method for lowering your taxable income is to contribute the maximum allowed to a Health Savings Account (HAS), which is generally $3,550 for individuals or $7,100 for families; an additional $1,000 catch-up contribution is allowed if age 55 or older. HSA contributions can be deducted through payroll, or direct contributions can be made to ensure the maximum is met.
End of the year tax tips: Give a gift: If you have an estate to pass on to beneficiaries, remember you can gift up to $15,000 to as many of them as you’d like this year without paying a gift tax or reducing your lifetime estate tax exclusion amount. Make these gifts by December 31.
End of the year tax tips:
Donate to charity: If you can afford to give, the need has never been greater, and what’s good for others is good for your taxes. A CARES Act provision allows individual taxpayers to receive up to a $300 tax deduction, even if they claim the standard deduction, for making a cash donation of up to $300 to a qualified charity by December 31.
Quick End Of The Year Tax Tip! Estimate your tax liability and make any final estimated tax payments. This is especially important to small business owners that must pay taxes on any potential loan forgiveness.
Quick End Of The Year Tax Tip!
Review and maximize use of the $15,000 annual gift giving limit.
There are some gifts that remain tax-free even though they exceed the annual exclusion amount. Example: A gift to cover someone’s education tuition, if paid directly to the educational institution. Keep in mind this does not cover gifts to cover room and board, books or supplies.
Thinking of selling your business in 2021? Consider these 3 items. (1) Is the time right? (2) Is there a market for your business? (3) Are your books in order?
End of the year tip: There are some gifts that remain tax-free even though they exceed the annual exclusion amount. Example: Gifts to cover someone’s medical expenses, if paid directly to the medical facility.
People who received a federal tax refund in 2020 may have been paid interest. The IRS sent interest payments to individual taxpayers who timely filed their 2019 federal income tax returns and received refunds. Most interest payments were received separately from tax refunds. Interest payments are taxable and must be reported on 2020 federal income tax returns. In January 2021, the IRS will send a Form 1099-INT, Interest Income, to anyone who received interest of at least $10.
Mileage rates for travel are now set for 2021. The standard business mileage rate decreases by 1.5 cents to 56 cents per mile. The medical and moving mileage rates also decrease by 1 cent to 16 cents per mile. Charitable mileage rates remain unchanged at 14 cents per mile.
Common Deductions To Remember: Home office. If you have a qualified home office, it also creates a deductible expense. There is also a safe harbor home office simplified calculation that makes it easy to get this tax deduction.
Common Deductions To Remember: Property taxes. Your property taxes are also allowed as an itemized deduction. Current tax laws limit this deduction along with other taxes to $10,000 whether you are married or single.
Common Deductions To Remember: Interest deductibility. Mortgage interest is one of the few allowed deductible interest expenses. It is limited to the first $750,000 dollars in loans secured by your primary residence ($1 million for mortgages underwritten prior to 2018). You may also deduct points paid as an itemized deduction over the life of your mortgage.
Quick End Of The Year Tax Tip! Estimate your tax liability and make any final estimated tax payments. This is especially important to small business owners that must pay taxes on any potential loan forgiveness.
Quick End Of The Year Tax Tip!
Review and maximize use of the $15,000 annual gift giving limit.
If you donate a used vehicle to charity, you are allowed to take a tax deduction for your generosity, but only if you itemize deductions on your tax return. Here's the current rule governing donated vehicles. Tax law: The charity must inform the taxpayer of the price the donated vehicle sold for at auction. This is the amount the taxpayer can claim as a tax deduction. If the charity keeps the vehicle for its use, it must give the taxpayer an estimate of the value. This requirement applies when the claimed value of the vehicle exceeds $500.
Your home. Your office. Are they one and the same? If so, you may be able to take a home-office deduction that can save income and self-employment taxes. The deduction gives you the opportunity to claim expenses related to the business use of your home, such as utilities, repairs, and insurance. Meet the requirements, and you're eligible whether you rent or own your home. Taxpayers who qualify may use a simplified deduction calculated at $5 a square foot for up to 300 square feet of an area in a home that is used regularly and exclusively for business. The deduction is capped at $1,500 a year.
2021 HSA contributions numbers for an individual with family coverage under a qualifying high-deductible health plan (deductible not less than $2,800) can contribute up to $7,200 — up $100 from 2020 — for the year. The maximum out-of-pocket has been capped at $14,000.
Getting Married Soon? Your tax liability will likely change when you marry, divorce, or become a widow. Newlyweds may face higher taxes due to the so-called marriage penalty. In either case, you may need to change your income tax withholding or estimated tax payments.
Mileage rates for travel are now set for 2021. The standard business mileage rate decreases by 1.5 cents to 56 cents per mile. The medical and moving mileage rates also decrease by 1 cent to 16 cents per mile. Charitable mileage rates remain unchanged at 14 cents per mile.
Common Deductions To Remember: Home office. If you have a qualified home office, it also creates a deductible expense. There is also a safe harbor home office simplified calculation that makes it easy to get this tax deduction.
If you have not already done so, now is the time to review your tax situation and make an estimated quarterly tax payment using Form 1040-ES.
One of the main benefits of turning your hobby into a business is deducting all your qualified business expenses, even if it results in a loss. However, if you don’t properly transition your hobby into a business in the eyes of the IRS, you could be waving a red flag that reads, “Audit Me!” The agency uses several criteria to distinguish whether an activity is a hobby or a business.
PPP Loan Expenses Are Now Tax Deductible. If you or your business received funds from the Paycheck Protection Program (PPP), the recently passed Emergency Coronavirus Relief Act of 2020 will help to dramatically cut your tax bill.
Quick Tip: A Promissory Note is evidence of a DEBT with specific amount due and interest rate. The note may specify a maturity date or it may be payable on demand. The promissory note may or may not accompany other instruments such as a MORTGAGE providing security for the payment thereof.
Fast Fact: Taxpayers that are married may file a JOINT RETURN, therefore combining their INCOME and expenses.
If you donate a used vehicle to charity, you are allowed to take a tax deduction for your generosity, but only if you itemize deductions on your tax return. Here's the current rule governing donated vehicles. Tax law: The charity must inform the taxpayer of the price the donated vehicle sold for at auction. This is the amount the taxpayer can claim as a tax deduction. If the charity keeps the vehicle for its use, it must give the taxpayer an estimate of the value. This requirement applies when the claimed value of the vehicle exceeds $500.
Businesses have until Feb. 1, 2021, to file the revised Form 1099-MISC, Miscellaneous Income, and the new Form 1099-NEC, Nonemployee Compensation, and provide copies to the recipients.
Remember if you are considering selling your business in 2021 you will need guidance to make tax-efficient decisions, and should be aware of investment vehicles like 1031 Exchanges you’re your buildings or Opportunity Zone funds that enable them to reduce and defer tax liabilities.
The Internal Revenue Service has announced that the nation's tax season will start on Friday, Feb. 12, 2021, when the tax agency will begin accepting and processing 2020 tax year returns.
S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.
A Limited liability company (LLC) is a business structure that offers limited liability protection and pass-through taxation. As with corporations, the LLC legally exists as a separate entity from its owners. Therefore, owners cannot typically be held personally responsible for the business debts and liabilities.
If you have not already done so, now is the time to review your tax situation and make an estimated quarterly tax payment using Form 1040-ES.
Quick Tip: It’s easier to take the standard deduction, but you may save a bundle if you itemize, especially if you are self-employed, own a home or live in a high-tax area.
What is a “Simple Trust?” This type of TRUST is required to distribute all its income currently, whether or not the TRUSTEE actually does so, and it has no provision in the trust instrument for charitable contributions. It is to be distinguished from a COMPLEX TRUST. A trust may be a simple trust in one year and a complex trust in another year. In the year in which the trust distributes its corpus, it loses its classification as a simple trust.
The Safe Harbor Rule: Concept in statutes and regulations whereby a person who meets listed requirements will be preserved from adverse legal action. Frequently, safe harbors are used where a legal requirement is somewhat ambiguous and carries a risk of punishment for an unintended violation.
Businesses have until Feb. 1, 2021, to file the revised Form 1099-MISC, Miscellaneous Income, and the new Form 1099-NEC, Nonemployee Compensation, and provide copies to the recipients.
Remember if you are considering selling your business in 2021 you will need guidance to make tax-efficient decisions, and should be aware of investment vehicles like 1031 Exchanges you’re your buildings or Opportunity Zone funds that enable them to reduce and defer tax liabilities.
The Internal Revenue Service has announced that the nation's tax season will start on Friday, Feb. 12, 2021, when the tax agency will begin accepting and processing 2020 tax year returns.
Many individual taxpayers who received a refund on their 2019 tax returns also received interest from the IRS. The interest payments were largely the result of the postponed filing deadline of July 15 due to the COVID-19 pandemic.
This tax season the safest, most accurate and fastest way to get a refund is to electronically file and choose direct deposit. Direct deposit means any tax refund is electronically deposited for free into a taxpayer’s financial account.
The eligibility rules for claiming a home office deduction have been loosened to allow more self-employed filers to claim this break. People who have no fixed location for their businesses can claim a home office deduction if they use the space for administrative or management activities, even if they don’t meet clients there.
Be sure to plug in Taxpayer Identification Numbers (usually Social Security Numbers) for your children and other dependents on your return. Otherwise, the IRS will deny any dependent credits that you might be due, such as the Child Tax Credit.
Quick Tip: It’s easier to take the standard deduction, but you may save a bundle if you itemize, especially if you are self-employed, own a home or live in a high-tax area.
What is a “Simple Trust?” This type of TRUST is required to distribute all its income currently, whether or not the TRUSTEE actually does so, and it has no provision in the trust instrument for charitable contributions. It is to be distinguished from a COMPLEX TRUST. A trust may be a simple trust in one year and a complex trust in another year. In the year in which the trust distributes its corpus, it loses its classification as a simple trust.
Deduction Limit Increased for Corporate Contributions to Disaster Relief. The new Covid relief law, enacted Dec. 27, temporarily increased the limit, to up to 100% of a corporation’s taxable income, for contributions paid in cash for relief efforts in qualified disaster areas.
Understanding different 1099 forms: 1099 SA: This form captures distributions from health reimbursement accounts like HSA's and MSA's.
Understanding different 1099 forms: 1099 INT: This is the form you receive for interest earned. You should expect one of these for every bank account that pays interest, no matter the dollar amount of interest.
Many individual taxpayers who received a refund on their 2019 tax returns also received interest from the IRS. The interest payments were largely the result of the postponed filing deadline of July 15 due to the COVID-19 pandemic.
This tax season the safest, most accurate and fastest way to get a refund is to electronically file and choose direct deposit. Direct deposit means any tax refund is electronically deposited for free into a taxpayer’s financial account.
The eligibility rules for claiming a home office deduction have been loosened to allow more self-employed filers to claim this break. People who have no fixed location for their businesses can claim a home office deduction if they use the space for administrative or management activities, even if they don’t meet clients there.
Education is an ornament in prosperity and a refuge in adversity. Aristotle
Be careful of tax season phone scams: Callers impersonate IRS agents and claim that victims owe taxes that must be paid by wire transfer or prepaid credit cards. Using fake names and IRS badge numbers, fraudsters may even cite a portion of the victim's social security number. If the victim balks at divulging personal information - bank account numbers, passwords, birth dates, or complete social security numbers - the scammer may threaten arrest, jail time, or driver's license revocation. A co-conspirator may even call back, claiming to represent the local police or auto licensing bureau.
The IRS's IP PIN program is an additional layer of security to ensure your tax identity and withholdings are not stolen. When you register in the program, the IRS will mail you a six-digit numeric IP PIN. You must enter this number on your tax return or the return will be rejected. It is a one-time use IP PIN. In other words, you will receive a new number every year.
Be careful of online fraud! Over the last year, the coronavirus pandemic has changed almost every aspect of American life, including shopping habits. In fact, 56% of Americans reported an uptick in their online shopping between mid-March and December of last year, according to a new survey from the AICPA. But Americans may not be doing all they can to protect themselves from identity theft while shopping online.
Deduction Limit Increased for Corporate Contributions to Disaster Relief. The new Covid relief law, enacted Dec. 27, temporarily increased the limit, to up to 100% of a corporation’s taxable income, for contributions paid in cash for relief efforts in qualified disaster areas.
Understanding different 1099 forms: 1099 SA: This form captures distributions from health reimbursement accounts like HSA's and MSA's.
If you provide gifts in excess of $15,000 ($30,000 for a couple) to any one person during the year, you must fill out a gift tax return.
If you receive a tax form at a casino for your winnings, that information is sent to the tax authorities. Since the form typically only contains the amount you won, save copies and records of any gambling losses.
Be careful with maturing CD’s in a retirement account that are rolled over into new CDs. Your financial institution may provide you with tax forms showing the distribution, but not the rollover. You will need to account for this on your tax return. In this case, there is not a taxable event, but the IRS may think there is!
If you run a business that was hit by the pandemic, you may find your estimated tax payments were either overpaid or underpaid compared to normal. Now that 2020 is in the books, run a quick projection to ensure you are not surprised with an unexpected tax bill when you file your tax return.
If you received unemployment benefits in 2020, you need to report these benefits on your tax return as taxable income. Check to see if either federal or state taxes were withheld from unemployment payments you received. If taxes were not withheld, you may need to write a check to the IRS when you file your tax return.
Education is an ornament in prosperity and a refuge in adversity. Aristotle
What is capital gains tax—and who pays it?
In a nutshell, capital gains tax is a tax levied on possessions and property—including your home—that you sell for a profit. If you sell it in one year or less, you have a short-term capital gain. If you sell the home after you hold it for longer than one year, you have a long-term capital gain. Unlike short-term gains, long-term gains are subject to preferential capital gains tax rates.
If you sell your home for more than what you paid for it, that's good news. The downside, however, is that you probably have a capital gain. And you may have to pay taxes on your capital gain in the form of capital gains tax. Just as you pay income tax and sales tax, gains from your home sale are subject to taxation.
Mileage rates for travel are now set for 2021. The standard business mileage rate decreases by 1.5 cents to 56 cents per mile. The medical and moving mileage rates also decrease by 1 cent to 16 cents per mile. Charitable mileage rates remain unchanged at 14 cents per mile.
With so many workers now in the contractor ranks, it is important to stay on top of your tax filing obligations. With 15.3 percent of your income due for FICA (Social Security and Medicare), forgetting to pay this can quickly become a financial nightmare.
If you provide gifts in excess of $15,000 ($30,000 for a couple) to any one person during the year, you must fill out a gift tax return.
If you receive a tax form at a casino for your winnings, that information is sent to the tax authorities. Since the form typically only contains the amount you won, save copies and records of any gambling losses.
Any divorce agreement effective after Dec. 31, 2018 will be subject to new rules for alimony, namely: (1) Alimony is no longer tax-deductible for the payer. (2) Alimony is no longer taxed as income for the recipient. That means that alimony will get much less affordable for those paying it, while those receiving alimony will not have to claim it as income.
You can rent out your home for up to two weeks and not claim the income. This is a great tax break if your home is located next to a popular landmark or a major event. Many taxpayers rent out their lake home for two weeks to help reduce the cost of their home away from home.
Common Deductions: Your property taxes are also allowed as an itemized deduction. Current tax laws limit this deduction along with other taxes to $10,000 whether you are married or single.
If you sell your home for more than what you paid for it, that's good news. The downside, however, is that you probably have a capital gain. And you may have to pay taxes on your capital gain in the form of capital gains tax. Just as you pay income tax and sales tax, gains from your home sale are subject to taxation.
What is capital gains tax—and who pays it?
In a nutshell, capital gains tax is a tax levied on possessions and property—including your home—that you sell for a profit. If you sell it in one year or less, you have a short-term capital gain. If you sell the home after you hold it for longer than one year, you have a long-term capital gain. Unlike short-term gains, long-term gains are subject to preferential capital gains tax rates.
If you sell your home for more than what you paid for it, that's good news. The downside, however, is that you probably have a capital gain. And you may have to pay taxes on your capital gain in the form of capital gains tax. Just as you pay income tax and sales tax, gains from your home sale are subject to taxation.
Limited partnerships require a formal agreement between the partners. They must also file a certificate of partnership with the state. Limited partnerships allow partners to limit their own liability for business debts according to their portion of ownership or investment.
A sole proprietorship is the simplest and most common form of business ownership, sole proprietorship is a business owned and run by someone for their own benefit. The business’ existence is entirely dependent on the owner’s decisions, so when the owner dies, so does the business.
Is Home Equity Loan Interest Still Deductible?
There is a lot of confusion about home equity loans following the passage of the Tax Cuts and Jobs Act (TCJA). The act changes the rules on whether the interest on these loans is deductible. So is it? The short answer: Not unless you’ve used the money to buy, build or substantially improve your home.
One of the tricky decisions you’ll make if enrolling for health insurance through the Marketplace is deciding to take the Premium Tax Credit to reduce your monthly health insurance premium payments or wait and receive the tax credit when you file your tax return.
Any divorce agreement effective after Dec. 31, 2018 will be subject to new rules for alimony, namely: (1) Alimony is no longer tax-deductible for the payer. (2) Alimony is no longer taxed as income for the recipient. That means that alimony will get much less affordable for those paying it, while those receiving alimony will not have to claim it as income.
You can rent out your home for up to two weeks and not claim the income. This is a great tax break if your home is located next to a popular landmark or a major event. Many taxpayers rent out their lake home for two weeks to help reduce the cost of their home away from home.
A tax shelter is an arrangement in which allowable tax deductions or EXCLUSIONS result in the deferral of tax on INCOME that would otherwise be payable currently.
Taxable income is generally equal to a taxpayer's ADJUSTED GROSS INCOME during the TAX YEAR less any allowable EXEMPTIONS and deductions.
A tangible asset our assets having a physical existence, such as cash, land, buildings, machinery, or claims on property, investments or goods in process.
Limited partnerships require a formal agreement between the partners. They must also file a certificate of partnership with the state. Limited partnerships allow partners to limit their own liability for business debts according to their portion of ownership or investment.
A sole proprietorship is the simplest and most common form of business ownership, sole proprietorship is a business owned and run by someone for their own benefit. The business’ existence is entirely dependent on the owner’s decisions, so when the owner dies, so does the business.
Is Home Equity Loan Interest Still Deductible?
There is a lot of confusion about home equity loans following the passage of the Tax Cuts and Jobs Act (TCJA). The act changes the rules on whether the interest on these loans is deductible. So is it? The short answer: Not unless you’ve used the money to buy, build or substantially improve your home.
Taxable income is generally equal to a taxpayer's ADJUSTED GROSS INCOME during the TAX YEAR less any allowable EXEMPTIONS and deductions.
The time value of money concept is that CASH FLOWS of equal dollar amounts separated by a time interval have different present values because of the effect of compound INTEREST.
A tax shelter is an arrangement in which allowable tax deductions or EXCLUSIONS result in the deferral of tax on INCOME that would otherwise be payable currently.
The IRS requires individuals who earn income that is not subject to withholding, such as earnings from sole proprietors, partnerships and S-corps, interest, dividends, rents, and alimony, to pay quarterly estimated tax payments, also known as “estimates.
A trust is a legal entity that holds assets for the benefit of another. You can place almost any kind of asset into a trust, including cash, stocks, bonds, insurance policies, real estate, and artwork.
A tax shelter is an arrangement in which allowable tax deductions or EXCLUSIONS result in the deferral of tax on INCOME that would otherwise be payable currently.
In this world nothing can be said to be certain, except death and taxes. Benjamin Franklin
Question: When is my hobby considered a business?
Answer: The IRS is suspicious of any business activity that looks like it provides personal enjoyment, such as antiques, photography, horse racing, etc. If you make a profit in any three out of five consecutive years (two out of seven years for horse activities), your activity is presumed to be a business, and any business losses are deductible.
You now have until May 17, 2021 to file your 2020 individual tax return and pay the tax. This move from the traditional April 15 filing deadline DOES NOT impact first quarter estimated tax payments or extended filing due dates in September and October 2021.
Question: Is my disability income taxable?
Answer: Money received from worker's compensation for sickness or illness is not subject to income tax. Amounts received under a private accident policy for which you pay the premiums are also nontaxable. To the extent your employer pays the insurance premiums, your benefits will be subject to tax.
The accrual method recognizes income when the services are rendered or the product is sold, despite the fact that you may not get paid for several months. You have "accounts receivable" in the form of money customers owe you. Expenses are handled the same way. If you buy something today, but don't pay for it until later, maybe even next year, you would deduct the cost now. What you owe for purchases you've made constitutes your "accounts payable."
Taxable income is generally equal to a taxpayer's ADJUSTED GROSS INCOME during the TAX YEAR less any allowable EXEMPTIONS and deductions.
