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New Tax Rates Released by the IRS

     About this time the Internal Revenue Service ( IRS ) releases its new tax rates for the upcoming year. These will apply starting January 1, 2021 . They are a good way to estimate what your tax responsibility might be if you don’t plan on any changes in the coming year. However, if you are planning on major changes, like marriage or starting a business, this is the best time to adjust your withholding and avoid a tax surprise in 2022.      There will still be seven tax brackets and the rates will range from 10% to 37%. The only way taxes can change is by an act of Congress or a sunset clause in the law, whichever comes first. The Standard Deduction will increase to $12,550 for Single Taxpayers. The rules on deducting State and Local Taxes ( SALT ) put in place by the Tax Cuts and Jobs Act ( TCJA ) will remain at $10,000. Other adjustments have been made for 2021. Now is the time to reach out to your Qualified Tax Professional and prepare for next year.

The Changes in Charitable Deductions for 2020

     This is normally the time of year to reflect on what has happened during the previous months. There is much to consider on that topic if you choose to do so. For many, this is also a time to make donations, and perhaps use those donations as tax deductions.      The Internal Revenue Service ( IRS ) has changed some of those rules for 2020. This is due to the passage of the Coronavirus Aid, Relief and Economic Security ( CARES ) Act earlier this year. Taxpayers can now deduct charitable contributions even if they do not itemize their deductions. However, they must still go to qualifying organizations that are religious, charitable, educational, scientific, or literary in purpose. They need to meet certain requirements and Taxpayers need to have the right documentation to present to the IRS . Your Qualified Tax Professional can help you make sure that your valued gift goes to the right place.

Lost Wages Assistance is also Taxable

     Millions of Taxpayers have had to deal with unemployment for the first time in 2020. Some who were eligible in certain states qualified for Lost Wages Assistance ( LWA ) which added an extra $300 to $400 to unemployment benefits. This is provided by the Federal Emergency Management Agency ( FEMA ). However, the Department of Labor guidance clearly stated that LWA will be taxed, just like normal income.        This might come as a surprise since LWA is a new program that is under the direction of FEMA , which does not consider itself to be unemployment insurance. Historically, unemployment benefits have always been taxed by the Internal Revenue Service ( IRS ). LWA is still considered to be taxable income, as it does not meet the requirements for disaster relief. Qualified disaster relief does not include income to replace lost wages. This situation can create an unexpected tax surprise next year. You can choose to have Federal Tax withheld from your payments now to avoid that

One Last Chance to Register For Economic Impact Payments, Part 2

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     The Internal Revenue Service ( IRS ) is working very hard to make sure that as many as possible are able to receive their Economic Impact Payments ( EIP ). This would include Taxpayers who have not filed in the past 3 years. This is the primary way to determine eligibility for a payment. So many filed this year to make sure they received a payment.            However, there was a good chance that they owed some taxes to the IRS . When the bill is sent in the mail, it now comes with a QR code. It can simply be scanned with any mobile device. This process takes the Taxpayer securely to IRS.gov where they can find out the status of their EIP . In addition they will be able to create or access their account. While this is a step forward for the IRS , these tools are not available 24 hours.

One Last Chance to Register For Economic Impact Payments, Part 1

     The Internal Revenue Service ( IRS ) is working very hard to make sure that as many as possible are able to receive their Economic Impact Payments ( EIP ). This would include those in low-income and underserved communities. They often do not normally need to file Tax Returns and may not be aware that they can qualify for this payment. The deadline to register to receive this payment has been moved back to November 21 .      To speed up this process and make it as successful as possible, the IRS has declared November 10 as “ National EIP Registration Day ”. It is estimated that 8 million people have registered for the EIP using the Non-Filers tool on IRS.gov since the spring, and many more still need to be reached. That is the reason for this special push, which will include reaching out to those experiencing homelessness. Information explaining what is needed will be translated in 35 languages. What about those who need to file, but haven’t done so in the past 3 years or jus

The Best Reason to Wait to Submit a PPP Loan Forgiveness Application

     The Paycheck Protection Program ( PPP ) has been a very useful tool to help many businesses stay open during these challenging times. However, there are many questions surrounding when is the best time to submit the applications for forgiveness of these loans. There are different ideas, but this series of posts has shed some light on what to do in different situations.      This post will give the best reason why a borrower might want to wait to submit their application. Some businesses have potential forgiveness reductions . Our last post discussed how fewer full-time employees or reductions in salary would impact the qualified expenses that could be claimed.      It may be best for some of these businesses to wait until after December 31 to file their applications to see if they were able to restore any of their employees and/or salaries. That would allow them to qualify for what are known as Safe Harbors and not have to reduce their forgiveness amounts. Applying too early

Why Wait to Submit PPP Loan Forgiveness Applications?

     The Paycheck Protection Program ( PPP ) has been a very useful tool to help many businesses stay open during these challenging times. However, there are many questions surrounding when is the best time to submit the applications for forgiveness of these loans. There are different ideas, but this series of posts will shed some light on what to do in different situations.      The last post shared why a borrower might apply early and may want to wait. Another reason to wait is if the borrower has reductions to forgiveness due to fewer full-time employees or reductions in salary . It would be best to wait until the end of their covered period. This is because the reduction applies to all qualified expenses, not loan forgiveness. At the end of the covered period all the expenses can be added and then reduced by the necessary amount. If this is greater than the loan, a borrower can still qualify for full forgiveness. A Qualified Tax Professional is essential in guiding you through