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.

8 Top Tax Tips for Year-end 2020

8 Top Tax Tips for Year-end 2020

I think most of us will be glad when 2020 is finally over so we can look forward to a new start in 2021. As the year winds down in the next four weeks, take some time to look over your finances. There may be a few things you can do before the end of the year to get ready for the 2021 tax-filing season.

Check Your Financial To-Do List

#1  Report changes — If you moved in 2020, 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 anymore, the CARES Act passed earlier this year allows you to take a charitable deduction of up to $300 for cash contributions made to qualifying charities. The Coronavirus Aid, Relief, and Economic Security Act also temporarily suspends limits on charitable contributions and temporarily increases limits on contributions of food inventory.

#4 Check your EIP — If you received an Economic Impact Payment (EIP), you should have also received a Notice 1444, Your Economic Impact Payment, which you’ll need to give to your tax preparer. If you did NOT receive an EIP, you may be able to claim the Recovery Rebate Credit if you meet certain criteria. For additional information, visit the Economic Impact Payment Information Center.

If you received interest of at least $10 on a delayed federal tax refund for your 2019 return, you will receive a Form 1099-INT from the IRS. In true IRS fashion, this interest payment is taxable, and must be included on your federal tax return for 2020.

#5 Verify retirement plan distributions — The CARES Act waived required minimum distributions (RMDs) during 2020 for IRA or retirement plan accounts, and allowed eligible individuals to take a coronavirus-related distribution of up to $100,000 by December 30, 2020. Ask us for more details, or visit the IRS’s page on retirement plan relief.

#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 eligible contributions to your IRA or employer-sponsored retirement plan. While the total salary deferral limit for 2020 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.

Also note that the Setting Every Community Up for Retirement Enhancement (SECURE) Act repealed the 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. The SECURE Act also increased the minimum RMD age from 70½ to 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 2020. Everything from reams of paper to a new computer or desk can qualify as an eligible business expense.

Also note that the CARES Act fixed a technical issue with bonus depreciation, a provision that allows businesses to immediately deduct the full cost of many types of investments. The legislation expands bonus depreciation to qualified improvement property (QIP), which applies to almost any improvement to the interior of a building that is either owned or leased. The fix is retroactive, so businesses can deduct qualified improvements dating back to January 1, 2018, either by amending their 2018/2019 returns, or by employing an accounting method change.

Prepare Now for a Smooth Tax-Filing Season

With so many changes affecting tax filing for 2020, we expect there could be confusion and delays. 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: Feb. 1, 2021, Deadlines

Wage and tax statements normally due on January 31 of each year will be due on Monday, February 1, 2021, because January 31 falls on a Sunday next year. Keep this in mind and plan ahead 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: IRS Interest Rates

Interest rates charged by the IRS will remain the same for the first quarter of 2021:

  • 3% for overpayments (2% in the case of a corporation);
  • 5% for the portion of a corporate overpayment exceeding $10,000;
  • 3% for underpayments; and
  • 5% for large corporate underpayments.

Money Brief: Newly Marrieds

If you got married in 2020, consider this quick checklist:

  • Name and Address Changes — If you plan to change your name, be sure to notify the Social Security Administration. The name on your tax return must match the one on file with the SSA to avoid refund delays. To update your information, file Form SS-5, Application for a Social Security Card, available at SSA.gov, by phone at 800-772-1213 or at your local SSA office. If you changed your address, send the IRS Form 8822, Change of Address.
  • Withholding Taxes — Ask your employer for a new Form W-4, Employee’s Withholding Allowance. Depending on how you choose to file, you may want to adjust your withholding amount. Check the IRS Withholding Estimator or give us a call to help you complete a new Form W-4.
  • Filing Status — If you are married as of December 31, you are considered married for the whole year for tax purposes. And as a newly married couple, you can choose to file your federal income taxes jointly or separately next year. In most cases, filing jointly is typically more beneficial. But we can help you determine the best method for your personal situation.
Year-End Checklist for Your Personal Finances

Year-End Checklist for Your Personal Finances

With just a few weeks left, take a look at this checklist to make sure you’re ready for the new year:

1 — Take Your RMDs: If you’re 70½ or older, you’ll need to take required minimum distributions from your qualified retirement accounts by December 31 — or face a penalty equal to 50% of the sum you failed to withdraw. If you turned 70½ this year, you have until April 1, 2020, to take your first RMD.

2 — Fund Your HSA: For 2019, you can sock away as much as $3,500 before taxes in a Health Savings Account. For families, the figure is $7,000, and those age 55 and older can contribute an additional $1,000 as a catch-up contribution.

3 — Spend Your Flex Money: Unused funds in a Flexible Spending Account are typically forfeited at year’s end, so make sure to tap them for eligible health and medical expenses by December 31. Check whether your plan offers a grace period or allows you to carry over some funds to the following year.

4 — Contribute to a 529: If you’re using a 529 for education savings, make your allowable contributions by December 31 in order to take advantage of any Georgia income tax benefits or to be eligible for the federal gift-tax exclusion.

5 — Max Out Your 401(k): Take a look at your current 401(k), and make sure you’re contributing the maximum amount possible … or at least matching the amount your employer is putting in for you. Not only will you save on your taxes, you’ll be generating retirement income for the future.

6 — Consider Capital Gains: Any capital losses you realize before December 31 can be used to offset any gains. If your net losses exceed your gains, you can offset an additional $3,000 of ordinary income — any losses beyond that limit can be carried forward to future tax years.

7 — Convert Your IRA: If you want to convert a traditional IRA into a Roth IRA, it must be done by December 31. While you’ll have to pay tax on any income associated with the traditional IRA, you’ll be able to withdraw the funds tax-free at retirement. And, because a Roth IRS does not require RMDs, you can access the funds as you need them (after age 59½).

8 — Donate to Charity: If you itemize your deductions, you can still deduct your charitable donations. And if you don’t, you can still get that “feel good” feeling of helping out an organization in need!

If you have any questions about making these moves, don’t hesitate to contact us. We’ll be happy to help you work out the details.

Meet the Team: Jackie Self, CPA

Jackie Self is the owner of Premier CPA Services, which she started as Jackie Seabolt CPA in May 2011. Jackie was the sole CPA at the firm until hiring Donna Hills in 2018. Jackie received her CPA license in 2008 after earning an AA from Truett McConnell and a BS in Accounting from Kennesaw State University.

Before starting Premier CPA Services, Jackie worked as a CPA for Randy Kramer & Associates. She has more than 20 years of experience in tax, accounting, financial reviews and planning. She uses Quickbooks, Thompson Reuters Accounting & Tax, Microsoft Word and Excel.

Jackie enjoys speaking at events to inform the public about tax advantages and rules. She is the Past Chairman of the Fannin County Chamber of Commerce, the Past President & Treasurer of the Blue Ridge Rotary Club, and Treasurer of the Fannin County Scholarship Foundation.

Jackie currently lives on a small farm in the Dial community with her husband Jamie. She enjoys being a wife and mother of two boys and one girl (plus three dogs and two cats). She loves to travel, and her favorite book/movie is Gone with the Wind.

8 Year-end Tax Tips for Small Businesses

8 Year-end Tax Tips for Small Businesses

With December 31 only a few weeks away, now is your last opportunity to make some smart moves to benefit your April tax bill. Keep in mind that your tax rate for 2019 and 2020 will essentially be the same (with modest adjustments for inflation) under the Tax Cuts and Jobs Act (TCJA). Here are a few things to consider:

#1 – Review Year-end Reports

It’s hard to make any financial decisions if you don’t know where you’re at. If you haven’t already met with us to discuss your year-end situation, take the time to run a few reports now. Walk through them before taking any steps. You’ll also be more prepared when it’s time to close out your books for 2019 and get your paperwork ready for tax filing. This includes reviewing names and addresses for both W-2 and 1099 workers.

#2 – Defer Income & Accelerate Deductions

The advice to defer income into the new year while accelerating deductible expenditures for 2019 still applies, especially if you expect to be in the same or lower tax bracket for 2020. (The opposite advice applies if you expect to be in a higher tax bracket next year.) So stock up on supplies and inventory, for example, and pre-pay expenses like insurance, rent and subscriptions.

#3 – Buy Depreciable Assets

The TCJA increased the Section 179 limit in 2018, which provides for first-year depreciation on qualifying equipment. For the 2019 tax year, small businesses can write off up to $1 million PLUS a 100% bonus on both new and used equipment. So, consider making additional acquisitions by December 31 if you can take advantage of this tax break. (We previously wrote about Section 179 expensing here.)

#4 – Write off Bad Debts

Take a look at your aging collections before year-end. Do you have a customer who you expect will never pay? You may be able to remove the customer’s balance from your total sales to reduce income. Be sure you want to write off the debt now because you’ll have to add it back later if the customer ends up finally paying.

#5 – Write off Obsolete Equipment & Inventory

Pull a list of all your current equipment and inventory. Are there items that are obsolete, damaged or unusable? You may be able to write off their full or partial value.

#6 – Pay Bonuses Now

Year end is a great time to reward your employees and contractors with a bonus, gift and/or holiday party. Many of these expenses can be treated as a deductible business expense. Be sure to run any bonuses through your payroll system for proper accounting.

#7 – Save for Retirement

If you haven’t already set up a retirement account for you and/or your employees, now is a great time. While you typically have until April 15 to actually fund the plan, some types of plans must be established before the end of the year in order to take advantage of the tax deduction. Not sure about your situation? Give us a call!

#8 – Make Note of Tax Changes

If you pay Georgia sales taxes, you should have received a letter from the Department of Revenue indicating your filing status for 2020. It may be the same or it may have changed frequency, so be sure to make any adjustments for the new year as needed. Note that there are NO changes to sales tax amounts in any Georgia county for January 2020.

Give Us a Call: 706-632-7850

We’ll be happy to answer any questions you might have regarding your year-end tax situation. We’re also booking appointments for tax filing beginning in January, so call us if you’re ready to get started!

2020 Census Coming

The 2020 census aims to count the entire population of the U.S. at the location where each person usually lives. Census questions include how many people live or stay in each home, and the sex, age and race of each person.

Federal funds, grants and support to states, counties and communities are based on population totals and breakdowns by sex, age, race and other factors. So accurate census data is important for our community to get its fair share of the more than $675 billion per year in federal funds for schools, hospitals, roads, public works and other vital programs.

Businesses use census data to decide where to build factories, offices and stores, thus creating jobs. Developers use the census to build new homes and revitalize neighborhoods. Local governments use the census for public safety and emergency preparedness. Residents use the census to support community initiatives involving legislation, quality-of-life and consumer advocacy.

The original legal purpose of the decennial census is the apportionment of representatives among the states, which is mandated by the U.S. Constitution. Apportionment is the process of dividing the 435 seats in the U.S. House of Representatives among the 50 states based on the population counts that result from the census.

Click the image above for more census details.

Source: Census.gov

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.