Anthony Sykes & Company

     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.

     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.

     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