Graduation Season Reminder: Save Money with Tax Credits & a 529 Savings Plan

Graduation Season Reminder: Save Money with Tax Credits & a 529 Savings Plan

If your child is graduating from high school this year, congratulations! You’re obviously very proud. But you may also be more than a little worried about how to pay for higher education. Whether it’s specialized job training or an advanced degree, there are a lot of costs associated with higher education.

Thankfully, there are two education tax credits designed to help offset these costs: the American Opportunity Tax Credit and the Lifetime Learning Credit. These credits can reduce the amount of tax you owe. To be eligible to claim either of these credits, you or your dependent must receive a Form 1098-T from an eligible educational institution.

The American Opportunity Tax Credit Is:

  • Worth a maximum benefit of up to $2,500 per eligible student.
  • Only available for the first four years at an eligible college or vocational school.
  • For students pursuing a degree or other recognized education credential.
  • Partially refundable (up to $1,000 back).

The Lifetime Learning Credit Is:

  • Worth a maximum benefit of up to $2,000 per tax return, per year, no matter how many students qualify.
  • Available for all years of postsecondary education and for courses to acquire or improve job skills.
  • Available for an unlimited number of tax years.

Open a 529 Plan, Too

If you still have a few years before your child graduates, consider opening a 529 plan — a tax-advantaged savings plan designed to help you save for future education costs. Any contributions you make to Georgia’s official college savings plan, called Path2College 529 Plan, are eligible for up to an $8,000 state income deduction on your 2022 Georgia income tax return (when filing jointly). What’s more, any earnings on those contributions are federal and Georgia income tax deferred.

When it’s time to use your savings, withdrawals for qualified higher education expenses — such as tuition, books, supplies and many other items — are federal and Georgia income tax-free. And that applies to schools in the United States and abroad for eligible education-related expenses.

 If you have any questions about the education tax credits or 529 plan, contact us for details. We’re here to help you make the most of your money.

If You Get Mail from the IRS …

Now that you’ve filed your federal income taxes, you could receive a letter or notice from the IRS for any one of a variety of reasons, including:

  • You have a balance due.
  • You are due a larger or smaller refund.
  • The IRS has a question about your tax return.
  • The IRS needs to verify your identity.
  • The IRS needs additional information.
  • The IRS made a change to your return.

What Should You Do?

If you receive an IRS letter or notice, you should respond accordingly.

  • Do NOT ignore it. Most IRS letters and notices are about your federal tax return or tax account. Read the notice to learn the reason for the contact and find out the instructions on what to do (if anything). Most of the time, you simply need to read the letter and take the appropriate action.
  • Read it carefully. If the IRS made changes to your tax return, you should compare the information provided in the notice or letter with the information in your original return. In general, there is no need to contact the IRS if you agree with the change.
  • Respond in a timely manner. If the notice or letter requires a response by a specific date, be sure to reply quickly to avoid delays in processing your tax return, minimize interest and penalty charges, and preserve your rights to an appeal.
  • Pay any amount due. If there is an additional tax due, you should pay as much as you can, even if you can’t pay the full amount. You can pay online or apply for a payment agreement (i.e., installment agreement) or an offer in compromise.
  • Keep a copy. It’s important to retain copies of all notices or letters with your other tax records.
  • Do not call the IRS unless requested to do so. If you must contact the IRS by phone, use the number in the upper right-hand corner of the notice. You should have a copy of your related tax return and letter when calling. Generally, however, it’s better to write to the IRS to respond to any requests so you have a written history.

Contact Us First

If we prepared your tax return, we are prepared to help you with any notices you receive from the IRS. Please send us a copy of the notice and we’ll draft any letters and supply any necessary information you may need. If you’re unsure, show us the letter and we can help you determine your best course of action.

Also keep in mind that the IRS will never contact you via social media or text message. The first contact from the IRS usually comes in the mail, so be alert to possible scams asking you for money.

Educator Deduction Increases to $300

For the first time in 20 years, teachers will now be able to deduct up to $300 of out-of-pocket classroom expenses beginning with their 2022 tax return. Previously, the limit was $250; it will now rise in $50 increments in future years based on inflation. Married teachers who file jointly with another eligible educator can deduct up to $600.

Eligible educators include anyone who is a K-12 teacher, instructor, counselor, principal or aide in a public or private school for at least 900 hours during the school year. Eligible expenses include:

  • Books, supplies and other materials used in the classroom.
  • Equipment, including computer equipment, software and services.
  • COVID-19 protective supplies.
  • Professional development courses (not claimed via the lifetime learning credit).

IRS Video Tax Tip

See if money you pay for day camp or other child care expenses can help you claim the Child and Dependent Care Tax Credit.

Tax Matters: Report Those “Miscellaneous” Types of Income & Assets

Tax Matters: Report Those “Miscellaneous” Types of Income & Assets

 

When you earn several types of income throughout the year, it’s easy to lose track and forget to report some. The IRS does not forget, however. So be sure to report:

Gig Work

This is income earned providing on-demand work, services or goods, often through a digital platform (e.g., Uber or Fiverr). This applies even if the work is part-time or temporary, not reported on Form 1099 or W-2, or is received via cash, property, goods or virtual currency.

Virtual Currency

If you received any virtual currency as compensation or disposed of any virtual currency in a trade or business, you must report the income (or loss). This includes receiving virtual currency as payment for goods or services provided, as a result of mining and staking activities, or even exchanging for another virtual currency.

Foreign Income & Assets

You must report unearned income, such as interest, dividends, and pensions, from sources outside the United States unless exempt by law or a tax treaty. You must also report foreign-earned income and assets, such as wages and tips. You are allowed an automatic two-month extension to June 15 if you serve in the military, or both your tax home and abode are outside the U.S. and Puerto Rico, though any tax due must still be paid by April 18, 2022.

Have You Taken Your RMD?

A Required Minimum Distribution (RMD) is the minimum amount that you must withdraw from your IRA or retirement plan account each year AFTER you reach age 72 (or 70½ if you were 70½ before January 1, 2020). In a workplace retirement plan, you can delay taking your RMD if you continue working and you’re not a 5% owner. However, you are still required to take RMDs from your traditional IRAs, and SEP, SIMPLE and SARSEP IRAs even if you continue working.

If you altered taking your RMDs in 2020 due to the CARES Act or SECURE Act, you may need to consider your current status.

If you reached age 70½ in 2019, you may have waived your RMDs due in 2020. However, you did have a 2021 RMD due by December 31, 2021, based on your account balance on December 31, 2020.

If you reached age 72 in 2021 (and didn’t reach 70½ in 2019), your 2021 RMD is due by April 1, 2022, and is based on your account balance on December 31, 2020. Your 2022 RMD is due by December 31, 2022, based on your account balance on Dec. 31, 2021.

If you left your job in 2021 and rolled over your workplace retirement plan into your IRA, the RMD from your IRAs for 2021 won’t be affected by the rollover, but you may have an RMD due from the retirement plan.

  • Amounts rolled over to your IRA from a workplace retirement plan in 2021 don’t affect your IRA RMD calculation since 2021 RMDs are based on your IRA account balances on December 31, 2020.
  • If you have a 2021 RMD due from your workplace retirement plan, it cannot be rolled over to your IRA.

Beneficiaries of IRA accounts must follow special distribution rules, which can be confusing. The SECURE Act changed how and when beneficiaries must take distributions when the account holder dies after 2019. If you’re unsure of your status, please contact us today. Missing deadlines can be costly, but we’re here to help.

Are Your Social Security Benefits Taxable?

If you receive Social Security benefits — monthly retirement, survivor and disability benefits — you may need to pay taxes on some of those benefits depending on your income and filing status. To determine if your benefits are taxable, take half of the Social Security benefits you received and add it to your other income, including pensions, wages, interest, dividends and capital gains.

50% of your benefits may be taxable if you are:

  • Filing single, head of household or qualifying widow or widower with $25,000 – $34,000 income.
  • Married filing separately and lived apart from your spouse with $25,000 – $34,000 income.
  • Married filing jointly with $32,000 – $44,000 income.

Up to 85% of your benefits may be taxable if you are:

  • Filing single, head of household or qualifying widow or widower with more than $34,000 income.
  • Married filing jointly with more than $44,000 income.
  • Married filing separately and lived apart from your spouse with more than $34,000 income.
  • Married filing separately and lived with your spouse at any time during 2021.

 

Do You Need More Time to File?

If you’re not ready to file your federal tax return by this year’s April 18 deadline, you can easily request an automatic six-month extension — to October 17. An extension allows for extra time to gather, prepare and file paperwork with the IRS. However, keep in mind that:

  • You must file an extension by April 18.
  • An extension to file does NOT grant you an extension to pay.
  • You should estimate and pay any tax owed by April 18 to avoid possible penalties.

Just let us know if you’d like us to request an extension for you. Or you can e-file an extension yourself using IRS Free File.

To get the extension, you must estimate your tax liability on Form 4868 and pay any amount due by April 18. You may also request an extension by using IRS Direct Pay, the Electronic Federal Tax Payment System or by paying with a credit or debit card or digital wallet. There’s no need to file a separate Form 4868 when making an electronic payment and indicating it’s for an extension. The IRS will automatically count it as an extension.

1st Quarter Estimated Tax Payments Due April 18

If you don’t pay taxes through withholding from your paycheck, pension or government benefits, then you may need to pay estimated taxes each quarter. This typically applies if you’re self-employed, retired, an investor, or have a business or corporation. If you have a side-gig, such as driving an Uber, you may need to make additional tax payments each quarter. Other income generally not subject to regular withholding includes interest, dividends, capital gains, alimony and rental income. By paying quarterly estimated taxes, however, you can typically lessen or eliminate any underpayment penalties.

You can make payments online at IRS.gov/payments. When you set up an account, you can view your payment history, any pending payments and other useful tax information.

Other important reminders for Monday, April 18:

  • File your 2021 federal tax return and pay any tax due, or request a 6-month extension.
  • Contribute to your IRA for 2021.
  • Contribute to your HSA for 2021.
  • Contribute to your 401(k) or SEP for 2021 if self-employed.
Parental Custody & Tax Credits: What You Need to Know

Parental Custody & Tax Credits: What You Need to Know

Do you have a legal agreement with your child’s other parent about who claims the child on their taxes? If so, you may have some questions about how to handle the Child Tax Credit and the 2021 Recovery Rebate Credit when filing your tax return.

Economic Impact Payments and the Recovery Rebate Credit

The third Economic Impact Payment (EIP) was an advance payment of the 2021 Recovery Rebate Credit. The IRS used your 2020 or 2019 tax information to determine eligibility and amounts. Here’s what that means for you:

  • If you did NOT receive a third-round EIP for a child you will be claiming on your tax return, you can claim the Recovery Rebate Credit, regardless of any EIP the other parent received.
  • If you DID receive a third-round EIP for a child you will NOT be claiming on your tax return, you are NOT required to pay back the EIP if, based on the information reported on your 2021 tax return, you should have received less.

Child Tax Credit

The IRS determined who received 2021 Advance Child Tax Credit payments based on the information on your prior-year’s tax return. So if you claimed the Child Tax Credit on your 2020 return, you would have received the Advance Child Tax Credit payments in 2021. Here’s what that means for you: 

  • If you knew you would not claim a child on your 2021 return, you had the option to unenroll from receiving monthly payments. If you did NOT unenroll and received monthly payments last year for a child you won’t be claiming on your 2021 tax return, you may have to repay those payments when you file. You may be excused from repaying some or all of the excess amount if you qualify for repayment protection.
  • If you were an eligible parent who did NOT receive advance payments for your child, you will be able to claim the full amount of the Child Tax Credit on your 2021 tax return — even if the other parent received Advance Child Tax Credit payments.

Where Do You Stand?

The rules on economic impact and child tax credit payments can be confusing. If we’re preparing your taxes for you, we’ll make sure to take advantage of every tax credit available to you. Please don’t hesitate to call us at 706-632-7850 with any questions.

 

Start 2022 Off Right by Checking Your Withholding

If you’re getting back a large tax refund, that only means that you’ve been giving the IRS more money from each paycheck than you should. Since you don’t earn interest on that money, you should not be using that as a way to save. It’s often smarter to have less money withheld from your paycheck and sock it away in a savings account that pays you interest.

On the other hand, if you owe a lot on your taxes, then you should be having more money taken out of your paycheck, or you should be making quarterly estimated payments. Not paying enough taxes throughout the year can incur fees and penalties, adding to your tax bill.

Get the new year off to a good start by checking your federal income tax withholding and adjusting it if necessary. You can use the IRS’ Tax Withholding Estimator to help you figure the right amount of tax to withhold, whether you’re an employee or self-employed. To use the tool, you’ll need to estimate:

  • Your 2022 income.
  • The number of children you will claim for the child tax credit and earned income tax credit.
  • Other items that will affect your 2022 tax return.

If you have more complicated income and expenses, such as pension income or long-term capital gains, you will not get a valid result using the Tax Withholding Estimator. Instead, contact us for help determining the appropriate withholding for your situation.

Tax Checklists & Deadlines

Please note the following deadlines for providing your materials to us:

  • March 1: Corporate/Partnership Tax Returns to file by March 15 (without extension).
  • March 25: Personal Tax Returns to file by April 18 (without extension).

You may bring your paperwork to our office during regular business hours, or drop it off in our after-hours dropbox. To make sure you provide everything we need, please use our 2021 Tax Preparation Checklist (Personal and/or Business):

IRS Video Tax Tip

Don’t have all the documents needed to file your return? Watch this tax tip for information on what to do.

Mark Your Calendar for Tax Prep Deadlines

Mark Your Calendar for Tax Prep Deadlines

Please note the following deadlines for providing your materials to us in time for the tax-filing deadline:

  • March 1: Corporate/Partnership Tax Returns to file by March 15 (without extension).
  • March 25: Personal Tax Returns to file by April 18 (without extension).

You may bring in your paperwork to our office during regular business hours, or drop it off in our after-hours dropbox out front. To make sure you provide everything we need, please use our 2021 Tax Preparation Checklist (Personal and/or Business). Just click here to download and print out:

Please note that most financial advisor companies are not issuing 1099 forms until February 15 or later. It’s OK to drop off everything else and just send us any lagging paperwork as soon as you receive it.

If you have any questions, please contact us at 706-632-7850 or email our office manager, Kimberly Mortimer, at kimberly@premiercpaservices.com.

 

Don’t Forget to Report Gig Economy Earnings

Whether it’s a full-time job or just a side-hustle, those extra earnings you make need to be reported on your tax return. Here are some things to keep in mind:

  • You should receive a Form 1099-K for any gig or freelance work that exceeds $600 total. The IRS expects you to report it even if you don’t receive a Form 1099-K, though.
  • If you are an independent contractor, you may be able to deduct some of your business expenses. Be sure to keep good records.
  • As an employee, your employer typically withholds income taxes for you. As a freelancer or gig worker, however, you are responsible for your own taxes. If you also have a job that takes out taxes, you can submit a new Form W-4 to your employer to have additional taxes withheld from your paycheck to help cover the difference. Otherwise, you’ll need to make quarterly estimated income tax payments throughout the year, as well as Social Security and Medicare taxes. (We can help you with this.)

If you’re not sure about your status as a worker in the gig economy, let us help. We can help you figure out whether you should be paying additional taxes and how to best set that up. And be sure to provide us with any Form 1099-Ks you receive when you drop off your tax-preparation materials.

Money Minute: Reporting Tips

If you receive tips while working, then you must report them as part of your gross income. Here are some “tips” for reporting your tips. Tips include:

  • Cash tips received directly from customers.
  • Non-cash tips added using credit, debit or gift cards.
  • Tips from a tip-splitting arrangement with other employees.
  • Non-cash items, such as tickets, passes or other items of value.

To help keep track of your tips:

  • Keep a daily tip record.
  • Report tips of less than $20 a month on your income tax return.
  • Report tips of more than $20 a month to your employer by the 10th day of the following month. Your employer must withhold taxes on those reported tips (so you don’t have to).

IRS Video Tax Tip

If you have taxable income from any payer that doesn’t withhold tax for you, check out this IRS video to see if you need to make estimated tax payments.

Don’t Forget to Take Your RMD by Dec. 31

Don’t Forget to Take Your RMD by Dec. 31

December 31 is the deadline to take your required minimum distribution (RMD) for 2021. The RMD is the minimum amount you must withdraw from your retirement plan account annually starting with the year you reach 72 (in most cases). RMD amounts not withdrawn on time may be subject to penalties.

If you reached age 70½ in 2019 (your 70th birthday was June 30, 2019, or earlier), you did not have an RMD due for 2020, but you will have to take one by December 31, 2021. If you reached age 72 in 2021 (and your 70th birthday was July 1, 2019, or later), your first RMD is due by April 1, 2022.

The RMD is based on your account balance and life expectancy, which is calculated based on Uniform Lifetime Table III in Publication 590-B, Distributions from IRAs. You can also use the IRS’s online worksheets to figure your RMD.

RMD Rules Apply If You:

  • Have a traditional IRA,
  • Have a traditional SEP IRA,
  • Have a SIMPLE IRA, or
  • Participate in a workplace retirement plan, including a 401(k), Roth 401(k), 403(b) or 457(b) plan.

(Note that Roth IRAs do NOT require distributions while the original owner is alive.)

An IRA trustee or plan administrator will report the amount of the RMD to you, typically using Form 5498. As the IRA owner, you must calculate the RMD separately for each IRA you have. However, you can choose to withdraw the total amount from one or more of the IRAs. In contrast, RMDs required from workplace retirement plans must be taken separately from each plan. Not taking an RMD, or not withdrawing enough, could result in a 50% excise tax on the amount not distributed.

Did you know that you can make a qualified charitable distribution up to $100,000 directly from your IRA (other than a SEP or SIMPLE IRA) to a qualified charitable organization? It’s generally a nontaxable distribution made by the IRA trustee directly to a charitable organization. A qualifying deduction may also count toward your RMD requirement for the year.

2020 RMD Rules

Due to Covid tax law changes, an IRA owner or beneficiary who received an RMD in 2020 had the option of returning it to their account or other qualified plan to avoid paying taxes on that distribution. A 2020 RMD that qualified as a coronavirus-related distribution may be repaid over a 3-year period or have the taxes due on the distribution spread over three years. A 2020 withdrawal from an inherited IRA could not be repaid to the inherited IRA but may be spread over three years for income inclusion.

Tax Checklist Coming Soon

With the many tax changes over the past year, we expect another challenging tax season. So look for our checklist — coming next year — to help you gather your files and paperwork for us to prepare your taxes.

We’re taking tax appointments now if you’re a new client or have major changes to your taxes. Plan ahead and call 706-632-7850 to reserve your spot. Note that you do NOT need an appointment for us to handle your tax preparation — you can just drop off your files when you’re ready.

Money Brief: Out-of-pocket Classroom Expenses May Be Deductible

If you’re a teacher, chances are you dip into your own pocket to buy classroom supplies. And those expenses can add up fast. Fortunately, you may be able to deduct $250 of unreimbursed expenses ($500 for two educators filing jointly) on your federal tax return.

You qualify for the deduction if you:

  • Are a teacher (K-12), instructor, counselor, principal or aide.
  • Work at least 900 hours during the school year.
  • Work in a school that provides elementary or secondary education.

Qualified expenses include:

  • Professional development courses.
  • Books, supplies and supplementary materials.
  • Computer equipment and software.
  • Athletic supplies for health and physical education.
  • Personal protective equipment, disinfectant and other supplies used for the prevention of the spread of coronavirus.

IRS Video Tip:

Find out if you need to fill out a new Form W-4 to make sure you’re having enough federal tax withheld from your paycheck. For more information, go to https://www.irs.gov/withholding.

Retirement and Taxes: Understanding Your IRA

Retirement and Taxes: Understanding Your IRA

Retirement may be closer than you think — especially if you’re saving money now just for that purpose. An Individual Retirement Arrangement (IRA) can be a smart way to save because it provides tax incentives to help you on your path. And IRAs are easy to set up with a bank or other financial institution, a life insurance company, a mutual fund or a stockbroker.

What You Need to Know About IRAs

If you have a Traditional IRA, you may be able to deduct your contributions from your taxes. Also, the interest and dividends earned in a Traditional IRA are not taxed until you withdraw them, typically when you’re retired and in a lower tax bracket.

If you have a Roth IRA, you are subject to similar restrictions as with a Traditional IRA. However, you cannot deduct your contributions. But qualified distributions from a Roth IRA are typically tax-free. And Roth IRAs do not require withdrawals until after the death of the owner.

 A SIMPLE (Savings Incentive Match Plan for Employees) IRA or SEP (Simplified Employee Pension ) IRA can be set up for employees and employers to make contributions. These are often popular with smaller businesses. Ask your employer if one is available.

A CONTRIBUTION is the money that you put into your IRA. There are annual limits to the amount you can contribute depending on your age, income and type of IRA (see below for new 2022 limits).

A DISTRIBUTION is the amount you withdraw from your IRA. Keep in mind that you may face a 10% penalty and a tax bill if you withdraw money from your IRA before you turn 59½, unless you qualify for an exception. There are also required distributions from an IRA — in most cases, you generally must start taking withdrawals when you reach age 70½.

If you have one or more IRAs, you’ll need to let us know how much you contributed and/or withdrew during the year when we file your taxes next spring. Be sure to keep all the important paperwork related to your accounts. If you have any questions, we’ll be happy to help — just contact us here.

Retirement Plan Limits Increase for 2022

Due to cost-of-living adjustments, retirement plan contributions are increasing for tax year 2022. For example, the amount you can contribute to your 401(k) plan for 2022 will increase to $20,500, up from $19,500 for 2020 and 2021. This also includes 403(b), most 457 plans, and the federal government’s Thrift Savings Plan. The amount you can contribute to a SIMPLE retirement account increased to $14,000, up from $13,500.

The income phase-out ranges for deductible Traditional IRA contributions are increasing for 2022:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range increases to $68,000-$78,000, up from $66,000-$76,000.
  • For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, to $109,000-$129,000, up from $105,000-$125,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, to $204,000-$214,000, up from $198,000-$208,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, it remains $0-$10,000.

The income phase-out range for Roth IRA contributions is increasing:

  • For singles and heads of household, to $129,000-$144,000 up from $125,000-$140,000.
  • For married couples filing jointly, to $204,000-$214,000, up from $198,000-$208,000.
  • For a married individual filing a separate return, it remains $0-$10,000.

The income limit for the Saver’s Credit (Retirement Savings Contributions Credit) for low- and moderate-income workers is increasing:

  • To $68,000 for married couples filing jointly (up from $66,000).
  • To $51,000 for heads of household (up from $49,500).
  • To $34,000 for singles and married individuals filing separately (up from $33,000).

Know Your Contribution Limits

The limit on the amount you can contribute annually to your IRA remains unchanged at $6,000. The IRA catch-up contribution limit for those age 50+ also remains at $1,000. The catch-up contribution limit for employees age 50+ for 401(k), 403(b), most 457 plans, and the Thrift Savings Plan remains unchanged at $6,500. Therefore, those 50+ can contribute up to $27,000 starting in 2022. The catch-up contribution limit for employees age 50+ and for SIMPLE plans also remains unchanged at $3,000.

Are You Eligible for the ODC?

The Credit for Other Dependents (ODC) is a tax credit for qualifying dependents who can’t be claimed for the Child Tax Credit. The maximum credit amount is $500 for dependents who meet these conditions:

  • Age 17 or older.
  • Have individual taxpayer identification numbers or Social Security numbers.
  • Are dependent parents or other qualifying relatives you support.
  • Are living with you but are not related to you.

You can claim this credit if:

  • You claim the person as a dependent on your tax return.
  • You cannot use the dependent to claim the Child Tax Credit or Additional Child Tax Credit.
  • The dependent is a U.S. citizen, national or resident alien.

You can claim the Credit for Other Dependents in addition to the Child and Dependent Care Credit and the Earned Income Credit. Note that the credit begins to phase out, however, when your income is more than $200,000 ($400,000 for married filing jointly).

Let us know if you support other dependents in your household, and we’ll help you determine which credits apply on your next tax return.

IRS Video Tax Tip

If you have taxable income from any payer that doesn’t withhold tax for you, check out this IRS video to see if you need to make estimated tax payments.

Year-End Tax Tip: Check Your Income Tax Withholding

Year-End Tax Tip: Check Your Income Tax Withholding

Life moves quickly — events like marriage, divorce, a new child or a home purchase are all good reasons to check your tax withholding before the end of the year and make any necessary adjustments.

The IRS’s Tax Withholding Estimator can help you determine if you are having too much or too little withheld, and how to make an adjustment to:

  • Withhold less and put more cash into your pocket now,
  • Withhold more to make up for a small deficiency, or
  • Make an estimated tax payment to avoid a tax bill or penalty when you file your tax return next year.

Pay as You Go

You pay taxes generally throughout the year, whether through salary withholding, quarterly estimated tax payments or a combination of both. If you had one or more major life events happen during the past year, then your withholding may need to be adjusted to compensate for the changes.

About 70% of taxpayers over-withhold their taxes every year, which typically results in a refund. (The average refund in 2021 was more than $2,700.) By using the IRS’s Tax Withholding Estimator, you can determine the right amount of tax to have withheld. The tool provides a user-friendly, step-by-step method for effectively tailoring the amount of income tax you have withheld from wages and pension payments.

If you need to make additional tax payments, you can pay online, by phone or from the IRS2Go app. You can schedule payments for future dates, for payment plan payments or for estimated tax payments. You can also log into your IRS.gov/account to view amounts you owe, payment plan details and options, payment history, any scheduled or pending payments, and key tax return information from your most recent tax return.

Contact Us for Help

If you have questions about adjusting your withholding, don’t hesitate to contact us. We’ll be happy to help you determine the best amount for your situation.

Are Your Marketing Costs Tax Deductible?

In most cases, the answer is YES! You can deduct expenses that help you bring in new customers and keep existing ones, including costs for advertising and marketing.

Keep in mind that advertising and marketing costs must be ordinary and necessary to be tax deductible:

  • An ordinary expense is one that is common and accepted in the industry.
  • A necessary expense is one that is helpful and appropriate for the trade or business (it does not have to be indispensable to be considered necessary).

Consider these advertising expenses that are usually deductible:

  • Costs directly related to business activities, such as print brochures, online ads and billboards.
  • Expenses for institutional or goodwill advertising to keep the business name before the public (e.g., advertising that encourages people to donate blood or that supports the local high school football team).
  • Cost of providing meals, entertainment or recreational facilities to the public as a means of advertising or promoting goodwill in the community. (Note that this generally does NOT include funds paid to influence legislation, such as advertising in a convention program of a political party or candidate.

IRS Video Tax Tip

Check out this IRS video to learn about the difference between taxable and nontaxable income.

Do You Qualify for a Home Office Deduction?

Do You Qualify for a Home Office Deduction?

While you may be working from home due to the pandemic, you do not automatically qualify for a home office deduction. For example, if you work as an employee for a company (that’s not yours), you generally cannot claim the home office deduction.

What You Need to Know

  • The home office deduction can be taken whether you own or rent your home.
  • The term “home” includes:
    • A house, apartment, condominium, mobile home, boat or similar property that provides basic living accommodations.
    • A separate structure on the property such as an unattached garage, studio, barn or greenhouse.
  • Any portion of a home used exclusively as a hotel, motel, inn or similar establishment does NOT qualify as a “home” for purposes of the home office deduction.
  • Generally, your home must meet two basic requirements to qualify:
    • A portion of the home must be used exclusively for conducting business on a regular basis. For example, if you use an extra room to run your business, you can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business.
    • The home (or room) must be your principal place of business. You can meet this requirement if administrative or management activities are conducted, and there is no other location to perform these duties. So if you conduct business outside of your home but also use your home to conduct business, you may still qualify for a home office deduction.
  • Certain expenses can be deducted, including mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent.

If you qualify for a home office deduction, you may choose one of two methods to calculate your deduction:

  1. Simplified Method. This allows a flat rate of $5 per square foot, which is limited to a maximum size of 300 square feet and a maximum deduction $1,500.
  2. Regular Method. This provides for a deductions of indirect expenses based on the percentage of the home devoted to business use, while direct expenses are deducted in full.

If you’re unsure of your situation, contact us. We can help you determine if your home office and related expenses are deductible or not.

2022 Social Security Benefits Increase 5.9%

More than 72 million Social Security and Supplemental Security Income (SSI) recipients will receive a 5.9% cost-of-living adjustment (COLA) for 2022 — the largest increase in nearly 40 years. The annual Social Security COLA is tied to the Consumer Price Index. Also in 2022, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $147,000 from $142,800. Click here for a detailed 2022 Social Security Fact Sheet.

U.S. Inflation Accelerates

The Labor Department reported last month’s consumer-price index — which measures what consumers pay for goods and services — rose by 5.4% from a year earlier. Price increases from pandemic-related labor and materials shortages, including disrupted supply chains, have been pushing the increase. What’s more, spending jumped 11.9% in the second quarter as demand surged due to more people receiving Covid-19 vaccinations, businesses reopening and trillions of dollars in federal aid entering the economy.

IRS Video Tax Tip

Check out this IRS video to learn about the special tax benefits that apply to members of the Armed Forces. You can also get a copy of the IRS’ Armed Forces’ Tax Guide.

Tax Benefits Expanded for Your 2021 Charitable Donations

Tax Benefits Expanded for Your 2021 Charitable Donations

T he Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted last December, provides several deductions for individuals and businesses who give to charity. The law generally extends — through the end of 2021 — temporary tax changes originally enacted by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Here’s what you need to know:

Deductions If You Do NOT Itemize

Generally, if you take the standard deduction, you cannot deduct your charitable contributions. The law change, however, allows you to claim a deduction of up to $300 ($600 for married filing jointly) for cash contributions made to qualifying charitable organizations.

Most cash donations qualify, except those:

  • Made to a supporting organization.
  • Intended to help establish or maintain a donor advised fund.
  • Carried forward from prior years.
  • Made to most private foundations.
  • Made to charitable remainder trusts.

(These exceptions also apply to taxpayers who itemize their deductions.)

Cash contributions include those made by check, credit card or debit card, as well as unreimbursed out-of-pocket expenses in connection with volunteer services to a qualifying charitable organization. Cash contributions do NOT include the value of volunteer services, securities, household items or other property.

Deductions If You DO Itemize

If you itemize, you can generally deduct your charitable contributions, but are limited to 20% to 60% of your adjusted gross income, and by type of contribution and charity. The law change now allows you to apply up to 100% of your AGI for qualifying 2021 contributions.

This 100% limit is not automatic, however. You must choose to take the new limit; otherwise, the usual limit applies. And your other charitable contribution deductions reduce the maximum amount allowed under this election.

Deductions for Corporations

The law now permits C-Corps to apply an increased limit of 25% of taxable income for charitable cash contributions made to eligible charities during calendar year 2021. Again, the increased limit is not automatic — C-Corps must choose the increased corporate limit on a contribution-by-contribution basis.

Deductions for Food Inventory

If you own a business that donates food inventory, you may qualify for increased deduction limits. For contributions made in 2021, the limit is increased to 25%. For C-Corps, the 25% limit is based on taxable income. For other businesses (i.e., Sole Proprietorships, Partnerships and S-Corps), the limit is based on total net income for the year. A special method for computing the enhanced deduction continues to apply, as do food quality standards and other requirements.

Keep Good Records

Note that special record-keeping rules apply when claiming a charitable contribution deduction. Usually, this includes obtaining an acknowledgment letter from the charity, and retaining a cancelled check or credit card receipt for contributions of cash. For donations of property, additional record-keeping rules may include filing a Form 8283 and obtaining a qualified appraisal in some cases.

For more details on how to apply the percentage limits and what records you need to keep, contact us today.

Set a Calendar Reminder

Need help remembering when payments are due to the IRS? You can subscribe to the IRS’ Small Business Calendar using Outlook 2007, Outlook 2010 or Mac iCal. Outlook 2003 does not have the ability to subscribe, but you can download the tax events from the calendar. Visit this link for more details.

Are Your Social Security Benefits Taxable?

If you earn income from pensions, wages, interest and more, you may have to pay federal income tax on a portion of your Social Security benefits. Social Security benefits include monthly retirement, survivor and disability benefits. They do NOT include supplemental security income payments, which are not taxable.

The portion of your Social Security benefits that are taxable depends on your income and filing status. To determine if your benefits are taxable, add half of the Social Security you collected during the year to your other income.

Up to 50% of your benefits may be taxable if the total equals:

  • $25,000-$34,000, and you are single/head of household/widow.
  • $32,000-$44,000, and you are married filing jointly.

Up to 85% of your benefits may be taxable if the total is more than:

  • $34,000, and you are single/head of household/widow.
  • $44,000, and you are married filing jointly.

We’re happy to help you determine whether your benefits are taxable or not. Just give us a call to set up an appointment.

Video Tax Tip

Check out this IRS video for details on claiming the Home Office Deduction: What’s Allowable?

What to Consider When Choosing a Payroll Service Provider

What to Consider When Choosing a Payroll Service Provider

Payroll is just one checkbox on an often-overwhelming to-do list. But it’s an important task nonetheless. Your employees will be unhappy if they’re not paid correctly and on time. And you’ll be unhappy if you have to spend hours each week adding up timesheets, calculating pay and filing forms for each employee.

If it’s just yourself and one or two employees, it might not take that much time. But what else could you be doing to further your business instead of pushing paperwork? Maybe it’s time to do a quick time-cost analysis to determine whether the time you spend processing payroll can be better spent ordering, marketing and selling your products.

 5 Things to Consider

If you’re thinking of outsourcing your payroll processing, consider all your options in order to make a smart decision.

1. Payroll Services

What services do you need? Most payroll providers offer a basic set of services. These often include:

  • Processing payroll
  • Time tracking options
  • Generating payroll records and pay stubs
  • Handling tax filing and compliance

Some payroll providers offer additional services that can further streamline your payroll process, including:

  • Tax filing on your behalf
  • New-hire reporting services
  • Vacation time and sick leave management
  • Software integration
  • Management of employee benefits and retirement plans

2. Software Integration

Chance are, your company uses a variety of software programs like QuickBooks, Gusto, BambooHR, Zendesk, Salesforce and others. If so, you’ll want to make sure your payroll system can integrate with your other software, if necessary. This can streamline the payroll process, making things more convenient and efficient.

3. Processing Costs

The costs for payroll processing services will vary depending on the features and price structures. Most processors charge a flat rate every month or pay period, plus a small fee for each employee. Be sure to ask about any additional charges for tax filing, direct deposit or HR services. Cost should not be the only deciding factor when choosing a payroll provider, however. The best payroll service will save you time and effort at a cost-effective price point.

4. Tax Compliance & Updates

An important part of payroll processing is handling tax services, such as calculating and filing Social Security and withholding taxes. Because tax laws are constantly changing, you’ll want to make sure your payroll processor is up to date on laws and forms — to avoid errors and to help you stay in compliance. You might also want to ask whether they provide penalty protection in case of a filing mistake.

5. Customer Support

It’s bound to happen … so what will you do when something goes wrong? If you’re using simple online payroll software, you might have a hard time tracking down customer service. Or you may have a question, but can’t find the answer in the many FAQs and online forums. When you’re shopping for a payroll processor, be sure to find out about customer support options, as well as ease of use.

Premier Payroll Services Handled Locally

Premier CPA Services uses myPay Solutions, a service of Thomas Reuters. With myPay Solutions, you’re ensured of accurate and timely payroll services for your business. What’s more, you have a dedicated team you can contact directly with any payroll questions — whether simple or complex — right here in Blue Ridge, Georgia.

We can provide you with complete payroll processing, including federal tax services and state tax filing, direct deposit and integration with a variety of software. When you need a payroll report, just send us a quick email and we’ll pull it together for you.

We guarantee that your taxes will be paid accurately and on time; and if the IRS or your local tax agency should ever contact you, our tax experts will handle the matter for you. You’ll have no more worries about ever-changing payroll tax rates, policies or potential penalties with our payroll tax services.

It’s time to hit “delete” on time-consuming payroll tasks. Call us at (706) 632-7850 or email Jackie at jackie@premiercpaservices.com to request more details on how our payroll services can help you and your business.

Premier CPA Services 10 year anniversary logo

May 31 was the 10-Year Anniversary of Premier CPA Services! Over the next few months, we will be offering some great giveaways to our clients and Facebook friends to celebrate! Be sure to follow us and stay tuned!

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Back-to-School: Some Teacher Expenses Are Deductible

If you are a teacher or administrator, the Educator Expense Deduction allows you to deduct up to $250* from your taxes. You can only claim this deduction for expenses that were not reimbursed by your employer, a grant or other source.

To be eligible, you must be a K-12 teacher, instructor, counselor, principal or aide. You must also work at least 900 hours a school year.

Be sure to keep your receipts for purchases including:

  • Professional development course fees
  • Books
  • Supplies
  • Computer equipment, including related software and services
  • Other equipment and materials used in the classroom

*The deduction is $500 if you and your spouse are both educators and file jointly.

Online Access Keeps You In-Touch

Did you know that you can set up an Online Account with the IRS? It’s a safe and easy way to view specific details about your federal tax account.

What You Can Access:

  • Your federal tax payoff amount, if any (updated each day).
  • The balance for each tax year for which you owe taxes.
  • Your tax payment history.
  • Key information from your most current tax return.
  • Payment plan details (if you have one).
  • Digital copies of select IRS notices.
  • Economic Impact Payments you have received, if any.
  • Your current address on file with the IRS.

What You Can Do:

  • Select an electronic payment option.
  • Set up an online payment agreement.
  • Request a 1040 transcript.
  • Authorize who can represent you before the IRS or view your tax records.
  • Approve and electronically sign Power of Attorney and Tax Information Authorization requests from your tax professional.

To access your information online, you must register through Secure Access, the IRS’ two-factor authentication process that protects your personal information.

Good Recordkeeping Leads to Smart Tax Planning

Good Recordkeeping Leads to Smart Tax Planning

While it may seem mundane, recordkeeping is an important chore. Gathering your tax documents throughout the year makes it easier to file your tax return the following year. And having an organized recordkeeping system overall makes it easier to understand any letters you may receive from the IRS.

 

Good Records Help:

  • Identify sources of income. You may receive money or property from a variety of sources. The records can identify the sources of income and help separate business from nonbusiness income, and taxable from nontaxable income.
  • Keep track of expenses. You can use records to identify expenses for deductions you claim. This will help determine whether to itemize deductions at filing. It may also help you discover potentially overlooked deductions or credits.
  • Prepare tax returns. Good records help you file your tax return quickly and accurately. Throughout the year, you should add tax records to your files as they are received to make preparing your tax return easier.
  • Support items reported on tax returns. Well-organized records make it easier to prepare your tax return and help provide answers if you are audited or receive an IRS notice.

In general, the IRS suggests that you keep records for three years from the date you filed the tax return. You should use a system that keeps all your important information together. You can use computer software for electronic recordkeeping and/or store paper documents in labeled folders.

 

Records to Keep Include:

  • Tax-related records. This includes wage and earning statements from all employers or payers, interest and dividend statements from banks, certain government payments like unemployment compensation, other income documents and records of virtual currency transactions. You should also keep receipts, canceled checks and other documents — electronic or paper — that support income, deductions, or credits reported on your tax return.
  • IRS letters, notices and prior year tax returns. You should keep copies of prior year tax returns, and any notices or letters you receive from the IRS. These include adjustment notices when an action is taken on your account, Economic Impact Payment notices, and letters about advance payments of the 2021 child tax credit. If you receive 2021 advance child tax credit payments, you will receive a letter early next year that provides the amount of payments you received in 2021. You’ll need this information to prepare your 2021 tax return in 2022.
  • Property records. You should also keep records relating to any property you buy or sell. These records are important for figuring the basis for gain or loss.
  • Health insurance. You should keep records of your and your family members’ healthcare insurance coverage. If you’re claiming the premium tax credit, you’ll need information about any advance credit payments received through the Health Insurance Marketplace and the premiums you paid.

If you have any questions on what paperwork you should keep, we’re happy to provide the answers you need! Contact us today or call (706) 632-7850.

Child Tax Credit Portal Available

The IRS recently upgraded its Child Tax Credit Update Portal so you can update your financial situation. You can use the portal to:

  • Confirm your eligibility for payments.
  • Update your bank account information for direct deposit of payments.
  • Unenroll from the advance payments if you don’t want to receive them. Note that BOTH taxpayers must unenroll individually if you file jointly. (You will still receive the rest of your child tax credit as a lump sum when you file your 2021 federal income tax return next year.)

Any updates made by August 2 will apply to the August 13 and subsequent payments. You should have received your first payment on Thursday, July 15, via direct deposit or check.

Premier CPA Services 10 year anniversary logo

May 31 was the 10-Year Anniversary of Premier CPA Services! Over the next few months, we will be offering some great giveaways to our clients and Facebook friends to celebrate! Be sure to follow us and stay tuned!

Overpayments Refunded Due to Unemployment Compensation

If you received unemployment compensation in 2020, you may receive a refund from the IRS. The American Rescue Plan Act of 2021 excludes up to $10,200 in 2020 unemployment compensation from taxable income calculations (for individuals and married couples with modified AGIs less than $150,000).

Refunds began in May and will continue throughout the summer. Instead of requiring amended returns, the IRS has been reviewing Forms 1040 filed prior to the law’s enactment to identify those people who are due an adjustment. The refund average is $1,265.

In most cases, you do not need to take any action. However, if, as a result of the excluded unemployment compensation, you are now eligible for deductions or credits not claimed on your original return, you should file a Form 1040-X, Amended U.S. Individual Income Tax Return.

If you receive a refund notice and you’re not sure of your situation, please feel free to call us at (706) 632-7850.

I

Do You Rent Your Home?

Do you have a rental home? Watch this short video from the IRS to learn about when and how to report rental income from a vacation home, such as a house, condominium, mobile home or boat.

Selling Your Home? Here’s How It May Affect Your Taxes

Selling Your Home? Here’s How It May Affect Your Taxes

In this current seller’s market, you may be considering selling your first or second home. If so, keep in mind how selling your home may affect your tax return. When filing your taxes, you may qualify to exclude all or part of any gain from the sale from your income.

What You Need to Know

Ownership & Use — To claim the exclusion, you must meet ownership and use tests. During a five-year period ending on the date of the sale, you must have owned the home and lived in it as your main home for at least two years.

Gains — If you sell your main home and have a gain from the sale, you may be able to exclude up to $250,000 of that gain from your income. If you file jointly, you may be able to exclude up to $500,000. If you can exclude all the gain, you do not need to report the sale on your tax return.

Losses — If you experience a loss when you sell your main home (e.g., it sells for less than what you paid for it), you cannot deduct the loss from your taxes.

Multiple Homes — If you own more than one home, you can only exclude the gain on the sale of your main home. You must pay taxes on any gain you receive from selling any other home.

Reported Sale — If you do not qualify to exclude all the taxable gain from your income, you must report the gain from the sale of your home when you file your tax return. This is why it’s important to keep all of the paperwork related to the purchase and sale of your home, including any Form 1099-S, Proceeds from Real Estate Transactions, you receive.

Run the Numbers

Of course, there are exceptions to the rules for some individuals, including persons with a disability, certain members of the military, intelligence community and Peace Corps workers. If you’re wondering how a home sale will affect your taxes, feel free to contact us. We’ll be happy to help you work through the numbers to determine any financial impact. Please contact us to schedule an appointment.

Are You Paying Enough Tax Throughout the Year?

Federal taxes are pay-as-you-go — meaning you need to pay most of your federal income taxes during the year as you earn income. This is handled either through withholding by your employer in your regular paycheck or by making estimated tax payments yourself.

If the amount of income tax withheld from your salary or pension is not enough, or if you receive interest, dividends, alimony, capital gains, prizes, awards or other income, you may need to adjust your withholding or make estimated tax payments. (This also applies if you are self-employed.) If you don’t pay enough taxes throughout the year, you may be penalized when you file your federal income tax forms next year.

Adjust Your Withholding

If your employer withholds your taxes, you should review the amount taken out each paycheck to make sure you’re having enough tax withheld (but not too much). We can help you determine how much to withhold, or you can use the IRS Tax Withholding Estimator available online. You can then update this amount with your employer by submitting a new Form W-4, Employee’s Withholding Certificate.

Make Estimated Tax Payments

Estimated payments are due on June 15th, September 15th and January 15th of each year. We can make these payments for you, or you may do so electronically on the IRS website.

Premier CPA Services 10 year anniversary logo

May 31 was the 10-Year Anniversary of Premier CPA Services! Over the next few months, we will be offering some great giveaways to our clients and Facebook friends to celebrate! Be sure to follow us and stay tuned!

Yes, We Can Handle Your Bookkeeping

As a business owner, you have more important things to do every day than spend valuable time maintaining your books. Whether you just need some guidance, a bit of QuickBooks training, or complete service from A to Z, we can help. Our services include:

  • Day-to-day entry
  • Bank deposits & reconciling
  • Invoicing & check writing
  • Generating statements
  • Consultations
  • And much more!

Let us take the weight off your shoulders so you can get back to the job of running your business and generating profits. Call us today at (706) 632-7850 for more details.

Do You Have Children? You May Start Receiving Monthly Child Tax Credit Payments in July

Do You Have Children? You May Start Receiving Monthly Child Tax Credit Payments in July

If you have one or more children age 17 or under, you may automatically begin receiving advance payments of the Child Tax Credit on July 15th. Roughly 39 million households — covering 88% of children in the United States — will begin receiving the payments as part of The American Rescue Plan Act, which was passed in March.

The new law increased the maximum Child Tax Credit (for 2021 only) to $3,600 for children under age 6 and to $3,000 for children between 6 and 17. As a result, eligible families will receive a payment of up to $300 per month for each child under age 6 and up to $250 per month for each child age 6 to 17. Payments will continue monthly on the 15th of each month — via direct deposit, paper check or debit card — through the end of the year.

Other Details Include:

  • The payments are an advance of any credit due on your 2021 tax return. (Keep in mind this may reduce the amount of your tax refund next year, or even trigger the need to pay back some of the funds if your financial situation changes significantly.)
  • The credit for qualifying children is fully refundable, which means you can benefit from the credit even if you don’t have earned income or don’t owe income taxes.
  • The credit will include children who turn age 17 in 2021.
  • The amount of the CTC was previously up to $2,000 annually per qualifying child under the age of 17.
  • The increased amounts are phased out if your income is over $150,000 (married filing jointly or qualifying widow/widower), $112,500 (head of household) or $75,000 (all others).
  • The advance payments will be made monthly from July through December as long as you live in the U.S. for more than half the year. The total of the advance payments will equal up to 50% of the full Child Tax Credit, and will be estimated from your 2020 tax return (or 2019 return if 2020 is not yet filed).

More to Come

The IRS is sending out letters to families it believes qualifies for the credit. If you qualify, you do not need to take any action to get your payment.

Later this summer, the IRS will be adding a Child Tax Credit Update Portal to its website. You can use the portal to notify the IRS of changes in your income, filing status or number of qualifying children, or update your direct deposit information. You will also be able to unenroll from receiving the advance payments (and instead receive the full amount of the credit when you file your 2021 return next year) if you wish.

Additional information on how you can access the Child Tax Credit can be found on the IRS website at IRS.gov/childtaxcredit2021. Feel free to contact us if you have any questions about how the credit will affect your 2021 tax return.

Premier CPA Services 10 year anniversary logo

May 31 was the 10-Year Anniversary of Premier CPA Services! Over the next few months, we will be offering some great giveaways to our clients and Facebook friends to celebrate! Be sure to follow us and stay tuned!

Extension Date: Still October 15th

Please note that if you filed an extension with the IRS, the due date for your federal income tax return is still October 15. Although the original tax deadline was moved from April 15th to May 17th, the extension deadline has NOT changed. In order to complete your taxes to meet the October 15th deadline, we will need all your paperwork by Friday, September 24th.

Payroll & Accounting Services Available

You may count on Premier CPA Services to file your personal and/or business taxes each year. And for that, we say “Thank You!” But did you know that we also offer Payroll and Accounting Services?

We can handle your employee payroll through MyPay, as well as in-house live payroll, no matter how many employees you have (whether one or 100!). We can also handle your after-the-fact payroll — processing all the necessary forms, and relieving you of the burden of all that tedious paperwork.

For more details, contact Amber at amber@premiercpaservices.com or call (706) 632-7850. It’s easy to get started, and can save you a ton of time and effort.

Need to Know: New Lodging Tax Begins on July 1

Need to Know: New Lodging Tax Begins on July 1

Beginning July 1, 2021, owners of certain short-term rentals must begin paying hotel taxes under House Bill 317, which was signed into law by Governor Kemp last month. The law requires that home rental companies, such as Airbnb and VRBO, collect Georgia’s $5-per-night lodging tax as well as local excise taxes.

House Bill 317 imposes the $5 fee on all lodging facilities and rooms except those that do not provide shelter and extended-stay rentals (30+ days). The costs will be passed on to renters in their bills.

Lodging Tax Expanded

In short, House Bill 317 revised the state definition of “innkeeper” (used to calculate lodging excise taxes) to include Airbnb and other marketplace-based innkeepers. It adds a $5 nightly tax to short term rentals in addition to the sales tax, and Fannin County and City of Blue Ridge lodging taxes already levied. The county’s tax rate is currently 6%, while rentals within the city limits pay 8%.

Total lodging taxes for all local rentals are now:

  • 7% Sales Tax
  • 6% Fannin County Lodging Tax
  • 2% City of Blue Ridge Lodging Tax (if applicable)
  • $5-per-night Hotel Tax

More Money for Local Spending

The lodging tax is projected to raise $17 million for the state in 2022, while local governments could receive $20 to $30 million annually. In Fannin County, the hotel/motel tax is split 50/50 with the Chamber of Commerce, with the county funds spent mostly on public safety projects. The Chamber’s 50% is spent on marketing and tourism, which helped generate $273.3 million in direct visitor spending in 2020, including $65.6 million in lodging.

If you need assistance computing or filing lodging and excise taxes, please contact us at (706) 632-7850. We can help you update your systems for the new tax rates. 

Where’s My Refund?

Still waiting on your federal or state tax refund? You can start checking your federal refund status within 24 hours after an e-filed return is received by using the Where’s My Refund? tool on the IRS website. The tool provides a personalized refund date after the return is processed and a refund is approved.

The IRS updates the Where’s My Refund? tool once a day, usually overnight, so you don’t need to check the status more often. You will need to allow time for your financial institution to post the refund to your account or for it to be delivered by mail.

To Use the Tool, You Will Need:

  • Your Social Security number or Individual Taxpayer Identification number
  • Your tax filing status
  • The exact amount of the refund claimed on your tax return

Where’s My Refund? Links:

Reporting Tip Income

Generally, income you receive from any source, such as tips, is taxable. This includes:

  • Tips directly from customers.
  • Tips added using credit cards.
  • Tips from a tip-splitting arrangement with other employees.
  • Non-cash tips, such as tickets, passes or other items of value.

If you receive $20 or more in tips in any one month, you must report your tips for that month to your employer by the 10th day of the next month. Your employer must withhold federal income, Social Security and Medicare taxes on your reported tips.

Need to Know: 2021 Retirement Plan Income Ranges and Tax Brackets Adjusted for Inflation

Need to Know: 2021 Retirement Plan Income Ranges and Tax Brackets Adjusted for Inflation

Each year, the IRS adjusts income thresholds, deduction amounts and tax tables for inflation using the Chained Consumer Price Index (C-CPI) as the basis for its changes. The adjustments recently announced will affect your 2021 deduction limits and tax brackets (for returns filed by April 2022).

You can deduct contributions to a traditional IRA if you meet certain conditions, including income limitations and whether you or your spouse are covered by a retirement plan at work. For 2021, you will see a small increase in your income limits for IRAs and Saver’s Credits (retirement savings contributions credits). Most other employee retirement plan contribution limits will remain the same, however. Note that IRA contribution limits remain unchanged at $6,000, as does the additional catch-up contribution limit of $1,000 if you’re 50+.

Traditional IRA Income Phaseout Ranges for 2021:

  • $66,000-$76,000: Single taxpayers covered by a workplace retirement plan.
  • $105,000-$125,000: Married couples filing jointly (when the spouse making the IRA contribution is covered by a workplace retirement plan).
  • $198,000-$208,000: Married couples filing jointly (when the taxpayer not covered by a workplace retirement plan is married to someone who is covered).
  • $0-$10,000: Married filing a separate return (when covered by a workplace retirement plan).

Roth IRA Income Phaseout Ranges for 2021:

  • $125,000-$140,000: Single taxpayers and heads of household.
  • $198,000-$208,000: Married couples filing jointly.
  • $0-$10,000: Married filing separately.

Saver’s Credit Income Limits for 2021:

  • $66,000: Married couples filing jointly.
  • $49,500: Head of household.
  • $33,000: Singles and married individuals filing separately.

Other Contribution Limits Unchanged for 2021

If you participate in a 401(k), 403(b) or 457 plan, or a federal Thrift Savings Plan, your contribution limit remains unchanged from 2020 at $19,500. If you’re age 50+, your catch-up contribution limit also remains unchanged at $6,500.

The limits for SIMPLE retirement accounts also remain unchanged at $13,500.

Tax Tables Adjusted for Inflation

For 2021, the top marginal income tax rate of 37% will affect taxpayers with taxable incomes of $523,600 and higher for single filers and $628,300 and higher for married couples filing jointly (see table below). Meanwhile, the Standard Deduction will increase to $25,100 for married individuals filing jointly or surviving spouses, $18,800 for heads of household, and $12,550 for unmarried individuals and married individuals filing separately.

The maximum Earned Income Tax Credit in 2021 for single and joint filers is $543 if the filer has no children, $3,618 for one child, $5,980 for two children, and $6,728 for three or more children. The maximum amount of the adoption credit increases to $14,440 (up from $14,300).

Exemption amounts for the alternative minimum tax will be $114,600 for married individuals filing jointly and surviving spouses, $73,600 for unmarried individuals, $57,300 for married individuals filing separately, and $25,700 for estates and trusts (all increased from 2020).

The qualified business income threshold under Sec. 199A will increase to $329,800 for married individuals filing jointly, $164,925 for married individuals filing separately, and $164,900 for single individuals and heads of household.

The annual gift tax exclusion remains at $15,000. The basic exclusion amount for determining the unified credit against the estate tax will increase to $11,700,000 for decedents dying in calendar year 2021.

Make Your Appointment Now

We’re currently taking appointments — both in-person and virtually — for year-end tax planning assistance. Contact Amber today (see box above) to set up your appointment. We can help you get ready to file your 2020 taxes, as well as plan ahead for 2021.

Source: Tax Foundation

Make Your Appointment

Don’t miss your chance to make a year-end tax planning appointment. Choose an in-person meeting (limited availability), or a Zoom or phone meeting. Please call Amber at  706-632-7850 or email her to set up a date today.

Money Brief: Employee Social Security Tax Deferral

If you are an employer, did you take advantage of President Trump’s August 8th memorandum allowing you to defer your employees’ portion of Social Security tax from September 1 through December 31, 2020? If so, keep in mind:

  • To repay the deferred amount of the employee Social Security tax, you will need to withhold additional Social Security tax from your employees’ paychecks from January 1 through April 30, 2021.
  • At year-end, when you report total Social Security wages paid to your employees on Form W-2, Wage and Tax Statement, you should include any wages for which you deferred withholding and payment of Social Security tax in box 3, “Social Security Wages,” and/or box 7, “Social Security Tips.” Do NOT include in box 4, “Social Security Tax Withheld,” any amount of deferred employee Social Security tax that has not been withheld.
  • Any employee Social Security tax deferred in 2020 that is then withheld in 2021 and that was not reported on your 2020 Form W-2s should be reported in box 4, “Social Security Tax Withheld,” of Form W-2c, Corrected Wage and Tax Statement. On Form W-2c, you will enter tax year 2020 in box C and adjust the amount previously reported in box 4 of the Form W-2 to include the deferred amounts that were withheld in 2021. All Forms W-2c should be filed with the Social Security Administration, along with Form W-3c, Transmittal of Corrected Wage and Tax Statements, as soon as possible after you have finished withholding the deferred amounts.
  • You will also need to provide your employees with copies of Forms W-2c.
  • To report the amount of Social Security tax deferred, use lines 13b and 24 of 2020 Form 941, Employer’s Quarterly Federal Tax Return, which the IRS has revised. The instructions for the form have also been updated to explain these rules.

If you are an employee who had Social Security tax deferred, you should receive a Form W-2c from your employer(s). In some cases, you may need to file a Form 1040-X, Amended U.S. Individual Income Tax Return, to claim a credit for any excess Social Security tax withheld.

Please feel free to contact us with any questions you have regarding payroll tax deferrals.