It’s Time for a Mid-Year Tax Check-Up

It’s Time for a Mid-Year Tax Check-Up

T ax season was over in April, so you’re good until next year, right? Well, ignoring your financial situation for another six months may not be such a good idea. If you take a little time to plan ahead now, you can spot surprises before they become an issue, make things more manageable next tax season, and maybe even save some money.

That’s where a mid-year tax check-up comes in. Make an appointment with us now to review your projected tax responsibilities, and you’ll still have time to put together a plan and adapt. This is especially important if you encounter some big changes in 2022 — marriage, divorce, death, job change, move, etc. Own your own business? A mid-year review also makes sense for your company, too.

Mid-Year To-Do List

Take your time conducting a thorough examination of your personal and/or business finances. Here are some items to consider:

1. Check Your Withholding

Make sure you’re paying the correct amount of taxes as you go. If you don’t make sufficient income tax payments throughout the year, you may get hit with significant penalties on your tax return next year. So if your income, job or life situation has changed, it’s time to take a look at the amount of taxes your employer is withholding … and update that amount if needed.

If you are self-employed, pay your own taxes or earn additional income through gig work or hobbies, you may also need to make quarterly estimated tax payments. Keep in mind that late or insufficient payments may lead to fines, so calculating the right amount for your quarterly payments depends on accurately predicting your annual income.

2. Review Your Bookkeeping

Good bookkeeping practices are essential, whether for personal or business purposes. Did you categorize that donation as a charitable deduction? Make payments to a college for your child? Take some time to review your personal bookkeeping records now to ensure they are accurate.

Businesses also need clear income and expense records for calculating total income for tax liability and for claiming tax deductions. Be sure to record tax-deductible business expenses as you go so that you don’t forget any.

If you use QuickBooks, you can request us to conduct an audit and clean-up of your accounts to be sure financial records are accurate and correct (see sidebar).

3. Make Name & Address Changes

If you’re getting married (divorced) or moving this summer, you’ll need to report the changes. Report name changes to the Social Security Administration as soon as possible. The name on your tax return next year must match what is on file at the SSA. If it doesn’t, it could delay any tax refund. To update your information, file Form SS-5, Application for a Social Security Card (available at SSA.gov), call 800-772-1213 or visit your local SSA office.

To change your address, you probably already filed a forwarding order with the U.S. Postal Service. However, you should also change your address with the IRS by filing Form 8822, Change of Address.

4. Plan Ahead for Year’s End

Now is the time to think ahead and plan accordingly. Are you worried about being on the edge of two tax brackets? Do you need to make a required minimum distribution from a retirement account? Will you need to spend down an HSA by the end of the year? Start scheduling these items early so you don’t have to rush come December.

5. Make an Appointment Today

You don’t have to spend your summer working on taxes instead of going to the beach. But you should consider taking just a little time to review your financial situation. We’re taking appointments now for mid-year tax planning if you’re ready to plan ahead. Call our office at 706-632-7850 to make your appointment today.

Do Your QuickBooks Need a Clean Up?

You may use QuickBooks on a regular basis, and never think twice about entering transactions. But there’s probably a good chance you’ve made an error or two without realizing it … and that can lead to problems down the road.

If you’ve never done a QuickBooks audit, or it’s been awhile, now’s a good time to schedule one. We can go over your accounts to:

  • Look for coding errors.
  • Adjust balance sheet totals to actual.
  • Record any depreciation of assets.
  • Confirm payroll and sales match reports.
  • Correct any general input issues.

Once completed, we’ll print financial reports, review everything with you and go over any errors we corrected. Call our office today at 706-632-7850 to schedule your QuickBooks audit today.

2020 Census Update

According to the 2020 Census, Georgia’s population increased 10.6% from 2010 to 2020, with a total population of 10,711,908 in 2020. For Fannin County, the 2020 Census details include:

  • 25,319 = total population (up 6.9% from 2010)
  • 65.4 = population density (people per square mile)
  • 83.7% = residents age 18+ (29.1% are 65+)
  • 52.3 = median age
  • $46,028 = median household income
  • 77.8% = homeownership rate

For the city of Blue Ridge, the total population is 1,253 with a median age of 52.1. In the city of McCaysville, the population is 1,149 with a median age of 43.8.

IRS Video Tax Tip

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

Plan Ahead: Consider These 8 Smart Tax Tips for Year-end 2021

Plan Ahead: Consider These 8 Smart Tax Tips for Year-end 2021

With only a few weeks left until the new year, it’s time to take a look at your year-end finances. There are a few things you can do before the calendar changes to get ready for the 2022 tax-filing season.

Your Year-End To-Do List

#1  Report changes — If you moved in 2021, notify the IRS of your new address. Name changes should be updated with the Social Security Administration.

#2 Renew expiring ITINs — If your Individual Taxpayer Identification Number is set to expire at the end of this year, be sure to renew it now. Visit the ITIN page for more details.

#3 Donate to charity — Even if you don’t itemize your deductions, the law now permits you to claim a limited deduction on your federal income tax returns for cash contributions made to certain qualifying charities. Singles and marrieds filing separate returns can claim a deduction of up to $300, while marrieds filing jointly can claim a maximum deduction of $600. 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.

#4 Track Advance Child Tax Credit Payments — If you received advance payments in 2021, you will need to compare the amount of payments you received with the amount of the Child Tax Credit that you can claim on your tax return. If you received less than the amount that you’re eligible for, you’ll claim a credit for the remaining amount of Child Tax Credit. If you received more than you’re eligible for, you may need to repay some or all of that excess payment when you file. The IRS will send you Letter 6419 in January, which will provide the total amount of Advance Child Tax Credit payments that you received in 2021. Provide this letter to your tax preparer when you file.

#5 Check your Recovery Rebate Creidt — If you didn’t qualify for a third Economic Impact Payment (EIP) or did not receive the full amount, you may be eligible for the Recovery Rebate Credit. The IRS will send you Letter 6475 in January, which will provide the total amount of the third EIP and any Plus-Up payments that you received in 2021. You’ll need to provide this letter to your tax preparer when you file. Note that if you received the full amount of your third Economic Impact Payment, you don’t need to include any information about it when you file your 2021 tax return.

#6 Contribute to your retirement plan — Depending on your AGI, you may be able to take a tax credit of 50%, 20% or 10% of:

  • Contributions you make to a traditional or Roth IRA;
  • Elective salary deferral contributions to a 401(k), 403(b), governmental 457(b), SARSEP, or SIMPLE plan;
  • Voluntary after-tax employee contributions made to a qualified retirement plan (including the federal Thrift Savings Plan) or 403(b) plan;
  • Contributions to a 501(c)(18)(D) plan; or
  • Contributions made to an ABLE account for which you are the designated beneficiary.

Rollover contributions do not qualify for the credit. Also, your eligible contributions may be reduced by any recent distributions you received from a retirement plan or IRA, or from an ABLE account.

While the total salary deferral limit for 2021 is $19,500 ($26,000 if you’re 50+), only contributions of up to $2,000 qualify for the credit ($4,000 if married filing jointly), making the maximum credit $1,000 ($2,000 if married filing jointly). See the chart below for details.

There is not a maximum age for traditional IRA contributions, so you can continue to contribute to a traditional IRA at any age as long as you earn compensation. Also, the minimum required minimum distribution (RMD) age is now 72.

#7 Verify your withholding — Use the IRS’s tax withholding estimator to make sure your withholding and estimated taxes align with what you actually expect to pay. Keep in mind that most income is taxable, including unemployment compensation. If you received non-wage income like self-employment income, investment income, taxable Social Security benefits and, in some instances, pension and annuity income, you may be in danger of underpaying your taxes, which could result in penalties. In this case, you can make an end-of-the-quarter estimated tax payment or have additional taxes withheld from your next few paychecks.

#8 Make business purchases — If you own a business, consider purchasing some business supplies now to take the deduction in 2021. Everything from printer ink to a new laptop or desk can qualify as an eligible business expense. Also make sure to keep your receipts related to the temporary 100% business deduction for food or beverages from restaurants. The Taxpayer Certainty and Disaster Relief Act of 2020 added a temporary exception to the 50% limit on the amount that businesses may deduct for food or beverages. The temporary exception allows a 100% deduction for food or beverages from restaurants, as long as the expense is paid or incurred in 2021 or 2022.

Prep Now for a Smoother Tax-Filing Season

While 2021 was not as crazy as 2020, there are still many changes that will affect next year’s tax filing. Start gathering your paperwork now, so you’re ready to go when your Forms W-2, Forms 1099-Misc and other income documents start arriving in the mail. If you have any questions, we’re here to help — just call 706-632-7850 or email us.

Money Brief: Jan. 31, 2022, Deadline

Year-end wage and tax statements will be due on January 31, 2022. Mark your calendar if you are required to file:

  • Form W-2, Wage and Tax Statements;
  • Form W-3, Transmittal of Wage and Tax Statements;
  • Forms 1099-MISC, Miscellaneous Income; and
  • Forms 1099-NEC, Nonemployee Compensation.

Automatic extensions of time to file Forms W-2 are not available. If you need assistance filing any of these forms for your employees, please contact us as early in January as possible. You might want to get a head start now on verifying or updating employee information like names, addresses and Social Security numbers.

Money Brief: Inflation Adjustments for Tax Year 2022

The IRS recently announced inflation adjustments for the 2022 tax year (for returns filed in 2023).

Standard Deduction Increases:

  • To $25,900 for marrieds filing jointly (up $800).
  • To $12,950 for singles and marrieds filing separately (up $400).
  • To $19,400 for heads of household (up $600).

Marginal Rates:

  • 37% for singles with incomes greater than $539,900 ($647,850 for marrieds filing jointly);
  • 35% for singles over $215,950 ($431,900 for marrieds filing jointly);
  • 32% for singles over $170,050 ($340,100 for marrieds filing jointly);
  • 24% for singles over $89,075 ($178,150 for marrieds filing jointly);
  • 22% for singles over $41,775 ($83,550 for marrieds filing jointly);
  • 12% for singles over $10,275 ($20,550 for marrieds filing jointly).
  • 10% for singles at $10,275 or less ($20,550 for marrieds filing jointly).

IRS Video Tip:

With more taxpayers and tax preparers working remotely, identity thieves are trying to use COVID-19 to scare and scam people out of their identities or money. Everyone should remember to take basic steps to protect themselves.

Tax Planning vs. Tax Prep — There Is a Difference

Tax Planning vs. Tax Prep — There Is a Difference

Tax planning is not the same as tax preparation. Tax preparation is the process of preparing and filing your tax return each year. Unless you file an extension, this is typically a once-a-year event that must be completed by April 15. For most people, tax prep involves a trip or two to our office: first to drop off any necessary financial documents and then a second time to review and sign your return.

Tax planning, on the other hand, is a year-round process designed to help you make smart, tax-advantaged decisions that impact your personal and business finances. Whether you’re an individual or a business owner (or both), you can take advantage of the tax planning services that we provide here at Premier CPA Services. With two full-time CPAs on staff, we are uniquely qualified to provide you with in-depth experience and knowledge of tax law.

For example, we can help you maximize deductions, offset investment gains, determine your maximum retirement plan contribution, and help you decide the best time to make capital expenditures. By spending just a small amount of time with your CPA, you can minimize your tax liability on next year’s return when tax preparation comes into play!

It all starts with a phone call to set up a year-end meeting. Just call us at 706-632-7850. But please do it soon — we have limited appointment times and they fill up fast!

Tax Law Changes Simplify Accounting for Small Businesses

Tax law changes that were part of the Tax Cuts and Jobs Act (TCJA) now allow more small businesses to use the cash accounting method, which is the simplest approach. The cash accounting method is a more immediate recognition of revenue and expenses, while the accrual method focuses on anticipated revenue and expenses.

Prior to the TCJA, a “C” corporation wasn’t eligible to use the cash method of accounting unless it had average annual gross receipts for the previous three years of no more than $5 million. Beginning in 2018, the TCJA increased this threshold — to $25 million for 2018 and $26 million for 2019 — with inflation indexing in future years.

Of course, a few special rules apply:

  • Gross receipts are aggregated for a single employer.
  • A corporation less than three years old uses the gross receipts test for the period in which it’s been in business.
  • Gross receipts for a tax year of less than 12 months must be annualized using a specific formula.

If a small business meets the new gross receipts test, they can also take advantage of these other simplifications:

– Exemption from requirements to account for inventories, capitalize certain costs and account for long-term contracts using the percentage-of-completion method.

– Exemption from the requirement to keep inventories by now requiring the accounting for inventory as non-incidental materials and supplies, or by using an accounting method conforming to its financial accounting statement.

– Exemption from Section 263A uniform capitalization (UNICAP) rules.

– Extension of exception for “small construction” contracts to use a completed-contract method, the exempt-contract percentage-of-completion method or any other permissible method.

If you think your business can take advantage of these new rules, contact us today and we can help you make the change go more smoothly.

The information provided here by Premier CPA Services PC is for general information only. It does not constitute legal, accounting, tax or other professional advice or services, and is presented without any representation or warranty as to the accuracy or completeness of the information. Please contact us for information as it relates to your circumstances.