Anthony Sykes & Company

             There are simple steps all of us can take now to make the filing process in 2022 go as smoothly as possible. Let’s not overlook the fact that we are about a month away from this starting. Here are a few tips that might keep you from being caught off guard.           Organize your tax records. One of the most stressful parts of tax season is searching for documents. We can start to lessen that stress by gathering, or preparing to gather, forms like a W-2 from an employer, a 1099 from unemployment compensation or a pension. Also make sure to have any records related to digital currency transactions. Make it a habit to keep this documentation for at least 3 years.           Review your withholding. Make sure that your withholding is in the right place to start 2022. If there was a surprise tax bill this year, or a larger than expected refund, ...

           With each new year, the Internal Revenue Service ( IRS ) makes changes to the tax law, and 2022 will be no different. Now is the time to get informed about these adjustments.           Economic Impact Payments have been a part of our lives for 2 years. However, some may not have received all of their third payment. A taxpayer in this situation may be eligible for the recovery rebate credit . They would need to file a 2021 tax return to determine how much they could claim. It is also necessary to use the records you already have regarding your previous stimulus payments. Keeping good records is always important.           When it comes to Child Tax Credits , many families got monthly advance payments. If the total was less than they were eligible for, the balance can be claimed on their tax return. If there were no advance payments, the entire amount can ...

             This is the busiest shopping season of the year, and most of it is being done online. This means that criminals are actively trying to find opportunities to steal your information. They often use it to try and get a fraudulent tax refund. This is our second post about how we can protect ourselves.           Beware of scammers using fake charities . This is a time of year when many want to give to organizations. Criminals know this and try to use it to their advantage. Never let anyone pressure you into donating without doing research first. Make sure the charity is real by confirming its exact name, website, and mailing address. If the name is similar to, but not the same, as a well-known charity, this is often a sign of fraud. Give donations by credit card or check, do not give gift cards or wire money.           Businesses need to learn b...

             This is the busiest shopping season of the year. As a result, criminals are doing their best to find ways to steal your sensitive personal information. Another time they try to do this is during tax filing season from January to April. However, according to a recent security report from the Internal Revenue Service ( IRS ), even if someone doesn’t file a tax return, their online interactions can reveal that same data and often it is used to try and get a fraudulent tax refund. How can we protect ourselves?           There are some basic steps that we can all take. Make sure that there is security software on all your devices and that it stays updated. Avoid the trap of phishing scams . These are the messages that seem to be from a legitimate source, but they ask for your personal information. They might claim to have information about Economic Impact Payments, Child Tax Credits, or oth...

             Time seems to move faster and faster. With the end of the year approaching, now is the time to prepare for filing taxes in 2022. Before we know it, different tax forms will be released documenting activity for this year. How can we get ready for that now?           Something that has made this year different from others are the advance Child Tax Credit payments and the third Economic Impact Payment. For those who qualified for this income, all documents need to be saved. This will help determine if the Taxpayer is eligible for a credit, especially if they did not receive their full payment. Now is the time to make sure that any address or name changes have been reported to the Internal Revenue Service ( IRS ) to avoid needless delays. Planning now will make things easier during filing season.

            With filing season approaching very soon, it is important for every Taxpayer to know what their Filing Status is. The Internal Revenue Service ( IRS ) has five. They can have a strong impact on how much tax is owed, what the Standard Deduction is, or if a return is even needed. The marital status is determined by how things are as of December 31.           Those who choose Single must be unmarried, divorced, or legally separated. Married filing jointly allows for a joint tax return with a spouse. If one passes away, the one who is widowed can still file jointly for that year. Married filing separately allows for separate tax returns and may result in less tax owed. Head of household can be used by unmarried Taxpayers, but under certain conditions. For example, it must be proven that one paid more than half of the cost of keeping a home for themselves and another individual. Qualifying widow...

                 Starting a business is hard work and can be expensive. Some of these costs can be deducted over time and recovered by the business. This can be done over a period of 15 years after the business is active, but it does not apply to every expense.           A qualifying start-up cost must be paid before the business is active. It must also be related to the field the business operates in. It can include advertisements for opening the business, travel costs related to securing suppliers and customers, and fees for consultants and other professional services. Costs related to investigating whether to purchase another business can also be deducted.           Not all costs qualify. Interest, taxes, and costs for experiments do not qualify for deduction. The actual purchase of another business cannot be deducted from federal taxes. The...

             After filing your tax return, you may have found that there is an error. Do you need to file an amended tax return? The Internal Revenue Service ( IRS ) provides some guidance on that. The original tax return must be processed before an amended one should be submitted.           The IRS is already overwhelmed with documents that it needs to process, and does not want anything unnecessary. They are making automatic adjustments for those who were reported all unemployment income before changes were made by the American Rescue Plan ( ARP ). It can take a few weeks before the refund is processed. Basic math errors can be corrected and are not reasons for an amended return.              However, there are definite situations when filing an amended return is needed. If income is entered incorrectly, deductions are taken incorrectly, or eligible tax credi...

             A known part of the American Rescue Plan ( ARP ) Act, which was enacted in March 2021, is that there would be an Advance Child Tax Credit. These are advance payments of what would be expected to be claimed on the 2021 tax return. However, things can become complicated when there is shared custody of the children.           How does the Internal Revenue Service ( IRS ) decide who gets these advance payments? The information is based off of the 2020 or 2019 tax returns. So the parent that claimed them in the most recent year will be the one who gets the tax credit. If they alternate years claiming the tax and the one who will claim it is not getting the payments, they should remove themselves from this program. This will allow the other parent to claim the credit in their 2021 tax return. The other parent may need to repay the IRS if they received advance payments. If changes need to be ma...

             The last day to file a California state personal income tax return on an extension is Friday, October 15. Anything after that will be considered late by the Franchise Tax Board ( FTB ). Filing on time will avoid penalties, and potentially allow you to qualify for Golden State Stimulus ( GSS ) payments. If you do not file income taxes for 2020, you cannot qualify.           If you have income of less than $75,000 for 2020, you can qualify for a GSS payment. In addition, the taxpayer cannot be claimed as a dependent and must be a resident of California when the payment is issued. They also must have spent at least half of 2020 in the state of California. If you have provided bank account information to the FTB , you can expect an electronic deposit. Otherwise, the payment will be sent by mail. It is estimated that half a million tax returns still need to be filed. If you have not done so a...

          The Internal Revenue Service ( IRS ) knows that people are looking to make contributions and charitable donations this time of year. In fact, they want to support this effort, as many individuals and businesses are still trying to recover. Certain temporary tax changes have been extended to the end of the year.           Deductions. Normally if a taxpayer were to use the Standard Deduction, they would not be able to deduct a charitable contribution. The law now allows for a deduction of up to $300 for a single individual. For a business, the limits of what can be claimed as a charitable donation in cash or food have changed as well. It varies depending on the type of business you have, and the increase in limits is not automatic. To find out what you can do before the end of the year, make an appointment with your Qualified Tax Professional .

             For those who have filed a tax extension, the time to file will arrive soon. At this point, you may be considering hiring a Tax Preparer. The Internal Revenue Service ( IRS ) wants to make sure that you hire the most qualified individual to care for your needs in this area. This is especially important considering that the taxpayer is always responsible for what is in the tax return, no matter who files it.           Not all tax preparers are the same, pick one that fits your needs. There are a few things you can look for. Make sure your preparer offers the ability to e-file . This is the preferred method of the IRS and it makes filing so much simpler. Make sure the preparer includes their Preparer Tax Identification Number . All paid tax preparers must sign and put their PTIN on every tax return they work on. Ask about fees . Make sure they are clear about their fees. Stay away from t...

           It seems that everywhere you look, disasters are taking place. Whether it’s earthquakes, fires, or floods, there are any number of circumstances that can completely change your life. However, to receive any federal assistance, make insurance claims, or write off tax losses, records will need to be provided. It might not be the first thing on your mind, but there are some simple steps that can be taken to help reach that goal.           Financial statements can be gathered from your credit card company or bank, in digital or paper form when requested. Property records can also be requested from the bank, escrow, or title company. If the property is inherited, court records can be used to estimate the value. If there is nothing else, the county assessor’s office will have records that address property value. If home improvements have been made, reach out to the contractors and get statements from them ...

                 In our last few posts, we have taken the time to highlight all of the details found in the Taxpayer Bill of Rights . This is the guide for how the Internal Revenue Service ( IRS ) operates. The last point is The Right to a Fair and Just Tax System .           This certainly sounds like a very difficult thing to expect, especially with how things have been going the past few years. But the basic idea is that we can expect the tax system to consider facts and circumstances that affect the ability to pay, or provide information in a timely manner. We have seen this applied the past 2 years when the individual tax filing deadline was pushed back because of COVID-19 . It was not practical to expect people to provide their tax returns at the same time as normal.           If you meet certain conditions and cannot pay your tax debt, yo...

               The Taxpayer Bill of Rights is a fundamental document that guides how the Internal Revenue Service ( IRS ) will act in all situations. All of their employees know it, so all Taxpayers should be familiar with it as well. One of them is The Right to Retain Representation .           Every Taxpayer has the right to choose an authorized person ( not all tax preparers are the same ) represent them before the IRS . If you are having the interview with them directly, tell them you want to consult your representative and they will stop questioning you. This person must be in good professional standing and not under a suspension or disbarred. They must submit a written Power of Attorney document to be able to represent you before the IRS . If your income is below a certain level, the Low Income Taxpayer Clinic can represent you for free. They are independent from the IRS even though some of th...

            The Taxpayer Bill of Rights describes how the Internal Revenue Service ( IRS ) interacts with all Taxpayers. We should be aware of the rights that we have. Among them is The Right to Confidentiality .           You should have the expectation that what you provide to the IRS will never be shared, unless authorized by you, or by law. Appropriate action will be taken against employees, return preparers, or others who wrongfully use this information. The IRS will only contact your bank or employer to try and get more information to adjust the tax you owe if it is necessary and they give advance notice. The tax communication you have with your Qualified Tax Professional is generally given the same protection as communication with an attorney. This protection is voided if the conversation is about criminal matters.

                 The Taxpayer Bill of Rights is a detailed document that outlines the rights that all taxpayers have before the Internal Revenue Service ( IRS ). We all need to be aware of them because taxes are a very personal matter. This post will discuss The Right to Privacy . This involves the expectation that all IRS inquiries, examinations, and enforcements will comply with all laws (including due process rights), be no more intrusive than necessary.           If collection measures get to the point where the IRS is seizing wages, there is a portion that will be protected from a levy. The IRS cannot seize necessary personal items. A home can only be taken by court order and they must show there is no other reasonable way to collect the tax debt. The IRS should not seek any information about your lifestyle during an audit if there is no sign you have unreported income. The taxpayer h...

            The Taxpayer Bill of Rights is a document that highlights the rights that all have when dealing with the Internal Revenue Service ( IRS ). Each taxpayer needs to know them. In our continuing discussion of them, we arrive at Number 6, The Right to Finality . This involves knowing the time available to challenge an IRS position and how long they have to start an audit or collect a debt.           The IRS usually has 3 years from the date a tax return is filed to assess additional taxes. However, that time frame becomes unlimited if the tax return is determined to be fraudulent. There is a 10 year limit to collect taxes, and that can only be extended as part of a payment agreement or a court order. If the IRS sends a notice that additional taxes must be paid, it will tell you the deadline for when you can file a petition in Tax Court to challenge. This is another way you can determine if a cri...

             The Taxpayer Bill of Rights is a fundamental document that details how the Internal Revenue Service ( IRS ) will interact with all Taxpayers. Our last post dealt with the right to challenge. In some situations, the challenge continues past the first or second level. In those cases, the right to appeal an IRS decision in an independent forum must be preserved.           There is a fair and impartial appeals process for IRS decisions. To provide for this, there is an IRS Office of Appeals . Not every appeal will qualify to go through this office. Those that do, will not be discussed with the IRS to prevent any compromise of the independent appeal process. Even with this provision, Taxpayers can usually take their cases to court if they choose.

            The Taxpayer Bill of Rights is a document that the Internal Revenue Service ( IRS ) operates by, and should be understood by all Taxpayer’s. At some point in time, many will have an issue with an IRS notification or decision about your Tax Return. This will be provided in writing. After that, there will be a period of 60 days when you have the right to challenge and be heard .           This is the time when the Taxpayer may introduce new documentation to support their position. If the objection is raised within this period of time, it will be considered. If the IRS agrees, they will make the adjustment and a notice will be sent. If they do not agree, a different notice will be sent allowing for an appeal in Tax Court. Clear documentation will be sent explaining the situation. There will never be a surprise phone call demanding immediate payment. Knowing these rights is a protection for every...

             It’s no secret that the Internal Revenue Service ( IRS ) has been very slow to adapt to what modern technology makes available. That history makes this week’s announcement all the more impressive. The IRS has now created a feature which allows Taxpayer’s digital control over who has Power of Attorney ( POA ) to represent them and who can view their tax accounts with a Tax Information Authorization ( TIA ). This may seem like a simple idea, but it’s also a breakthrough.           Tax Professionals can also go online and initiate a POA and TIA . These requests are simpler than the forms that needed to be filled out in the past. When they go to the online account of the Taxpayer, all they need to do is apply their digital signature and submit it. This process is sped up dramatically and no longer requires manual filing. It is currently only available for individual Taxpayers, but there will be ...

             The Taxpayer Bill of Rights are 10 fundamental rights that Taxpayers have when dealing with the Internal Revenue Service ( IRS ). Knowing these rights will improve interaction when dealing with tax matters. The third on this list is: The Right to Pay No More Than the Correct Amount of Tax .           All Taxpayers have the right to pay only what is legally due, including penalties and interest. If you receive a tax notice and believe that it is in error, you should write back to the office that sent the notice within the appropriate time frame. Providing photocopies of detailed records that support your claim would be helpful. However, keep in mind there is currently a month’s long backlog of processing mail correspondence at IRS offices. These delays can add to penalties and interest being added if there truly is a tax debt. Since these unreasonable delays are caused by the IRS that i...

                 The National Taxpayer Advocate is required to issue a report to Congress on how the Internal Revenue Service ( IRS ) is functioning. This would include positive points and where they need to improve. How do you think the IRS did in the tax filing season of 2021?           The IRS completed 136 million income tax returns and issued 96 million refunds. This is very similar to what was done in 2019. (The year 2019 is used as a comparison because nothing can ever compare to 2020.) These efforts are made more impressive by the fact that the IRS also issued 3 rounds of Economic Impact Payments within 15 months. With this encouraging news, there are some areas that are in need of improvement.           There is currently a backlog of 35 million individual and business tax returns that need to be processed. Almost half of them are o...

          The Taxpayer Bill of Rights is a fundamental document that details should expect to interact with the Internal Revenue Service ( IRS ). We should all be aware of these rights and the IRS reminds their employees of them as well. The second of these is called The Right to Quality of Service . This refers to prompt, courteous, and professional assistance. All communication with the IRS should be clear and easily understood.           In practical terms, this means that every IRS representative should care about the quality of service that they provide. This applies to the way they listen, how they consider information, and the answer they provide. A supervisor can be requested if you have a problem. The IRS should treat you with courtesy when collecting taxes. This is one reason why aggressive phone calls threatening arrest for not paying taxes are always a scam. In general, the IRS will only conta...

             The American Rescue Plan ( ARP ) Act of 2021 is expansive and has the potential to touch every aspect of the lives of Taxpayers, as we have mentioned in previous posts. This is something to keep in mind for those who have not filed, have filed an extension, or who may see the need to file an amended Tax Return. For example, the Earned Income Tax Credit ( EITC ) has changed, not just for this year, but for years to come.           As a reflection of the times, there is an increase in the amount of investment income allowed while still qualifying for the EITC . The new amount is $10,000 starting this year. Married, but separated spouses who do not file jointly may attempt to qualify for this credit. They need to be legally separated and not live in the same home. However some changes only apply to this year, like being able to receive half of this credit in advance . For those who have the...

          The tax deadline has passed, but we are still learning more about how the American Rescue Plan ( APR ) is impacting a variety of tax situations. This is something to keep in mind for those who have not filed, have filed an extension, or may see the need to file an amended Tax Return.           For example, the Child and Dependent Care credit has increased greatly for 2021. This credit would apply to children 13 and younger, or a child of any age or spouse that is unable to care for themselves and lives with the Taxpayer for over half the year. The allowable amount of related expenses that can be claimed has more than doubled. However, these increases are only available for 2021. They are also fully refundable, which means that an eligible person can receive this credit even if they do not owe any federal income tax. Check with your Qualified Tax Professional to see if this may apply to you.

             Taxpayers and Tax Professionals alike have searched for the latest information related to tax compliance this year. That is true of every Tax Season since the law changes each year, sometimes even during the year. However, the need to be informed does not stop after April or May. It is in fact, a right that all Taxpayers have.           At times there are issues with a Taxpayer’s account with the Internal Revenue Service ( IRS ) and adjustments must be made. This cannot be done in secret. The Taxpayer has the right to know what has happened and how they can comply with tax laws. They must be given clear explanations of IRS procedures and decisions. Written notices of why taxes are owed or why certain refund claims are denied will be sent.           Understanding these facts will help to protect all of us from scams and frauds claiming to be ...

          Some are surprised to find out that their Social Security benefits can be taxed. This would apply to survivor, disability benefits, or monthly retirement income. Supplemental Security Income ( SSI ) cannot be taxed. The final outcome depends on the individual’s total income and filing status.           For example, someone who files as “Single” would have a lower threshold to meet for tax responsibility, than those who are “Married, Filing Jointly”. The greater the combined amount of Social Security and other income, the more their benefits will be taxed. It is easier than ever to create different streams of income, and this can change your tax situation. If you have a pension, a job in the gig economy (rideshare driver, food on demand delivery), or are active with cryptocurrency, to the Internal Revenue Service ( IRS ) this is all income. If you are not sure if you need to pay taxes on your benefits,...

          It is easier to create different streams of income than ever before. With that ability comes certain obligations. Primarily, you must understand your tax responsibilities. All income is subject to tax. That includes part time, temporary, and side jobs. The payment may be in cash, property, goods, or even virtual currency. All of it must be reported, this means that a good record keeping system must be used during the year.           In addition, every employee must be classified correctly. This does not mean that the employer decides who is an employee and who is an independent contractor. An accurate classification is based on an examination of how the employer influences the work being done and how it is accomplished. When this is done correctly, all parties understand what is required from a tax standpoint. An employee will have income taxes withheld according to what is stated on the Form W-4 . A ...

The Internal Revenue Service ( IRS ) will still initiate communication by written letter. Never using Social Media or a text message. There is always a specific reason for the letter, like informing the Taxpayer of a large Tax amount that is due, there is a question about the Tax Return, or that the Tax Return has been changed by the IRS . What should you do if you receive a letter like this?       Never ignore communication from the IRS . The letter will clearly state what needs to be done. There is no need to panic, reading the letter closely usually helps you to get a clear understanding about what has happened and if anything has changed. Always keep a copy of any letters or notices, and put them with your important tax documents. They may be needed later. If the letter informs you of a tax amount that must be paid, there are a variety of payment options . Pay as much as you can, even if it is not the full amount. However, if you are asked to pay in a specific way...

     We have stated before that the American Rescue Plan of 2021 ( ARP ) is expansive and it will take time to understand all the areas that it touches. It was recently announced that there are tax credits to help businesses provide paid time off for employees receiving COVID-19 vaccinations. This would be available to eligible employers with less than 500 employees.      That means if the employer offers a paid day off to get a vaccine, this tax credit will equal the amount of wages paid. There are also tax credits that reimburse the cost of providing sick and family leave related to COVID-19 . These credits are available for use from April 1 to September 30, 2021. There are similar credits available for those who are self-employed.

     The May 17 tax deadline is almost here. If you know that you are going to owe the Internal Revenue Service ( IRS ), but are not able to pay the full amount, make sure that you file your complete Tax Return anyway. Why is that so important?      Those who owe taxes and do not file on time may be given a Failure-to-File penalty. This would be in addition to the interest and other penalties added to the amount that needs to be paid. Filing an extension is not an extension on paying taxes due, they must still be paid by May 17. If that is not possible, pay as much as you can by May 17. You can also work with your Qualified Tax Professional to set up a payment plan with the IRS right now. There is no need to wait for that.

            The Internal Revenue Service ( IRS ) recently estimated that there is a $1 trillion “tax gap”. That would be the difference between what it collects, and what people and businesses owe. They feel a big reason for this discrepancy is the explosion of cryptocurrency. Cryptocurrencies by their very nature are designed to be elusive and invisible to the outside world. IRS Criminal Investigations has made great strides into exposing how crime organizations use digital currencies on the dark web and significant arrests have been made. However, more Taxpayers are using these currencies and not accurately reporting them. The IRS taxes Cryptocurrencies as property. So anyone who uses them must pay taxes if they are sold for profit or used to purchase anything. One recent example would be a nonfungible token ( NFT ). A NFT is a collectible that is bought or sold in the cryptocurrency world and it has quickly become a billion dollar market. Some...

     As we have stated before, the American Rescue Plan ( ARP ) Act is expansive and touches many areas. One aspect is a temporary enhancement to the Child Tax Credit. Under ARP this credit would be increased to $3,000 per child from the ages of 6 – 17 and $3,600 for every child under the age of 6. After some initial hesitation about being able to implement this because of all the other new tax laws being enacted, the Internal Revenue Service ( IRS ) has confirmed that it will be able to provide this tax credit. It will start as payments from $250 - $300 per child starting in July and ending in December. The rest can be claimed on their Tax Return in 2022. How will they know who qualifies, and for how much?      The only way for a family to qualify for this credit is to file a 2020 Tax Return. If this is not done, the IRS will not have the needed information to deliver the credit. This is another reason to not wait unnecessarily to file a Tax Return this...

     The deadline to file your Federal income Tax Return has been pushed back to May 17, but that time will pass very quickly. There is also no extension on paying taxes that are due. Individuals can pay by May 17, but those who own businesses, or are independent contractors need to pay by April 15 . Paying taxes is mandatory, but you have a few options regarding how you pay them.      When E-Filing your Tax Return, you have the option to add your bank account information to allow for an electronic funds withdrawal ( EFT ). This is done without charge and is the easiest way to make payments to the Internal Revenue Service ( IRS ). IRS Direct Pay is a service that allows Taxpayers to use their Savings or Checking account for electronic payments. This is a service that the IRS does not invite people to join, it must be requested. If you receive an email about it asking for information, it is a scam. Payments can also be made using credit or debit cards o...

          There is a 3 year window to claim a Tax Refund. For those who did not file a 2017 Tax Return, that window will soon be closing. The Internal Revenue Service ( IRS ) says that the last day to claim any of the $1.3 billion is May 17. After this, it will belong to the Treasury Department. It’s estimated that the median amount of the refunds is $865. For a state like California, there is the potential for over $120 million in refunds for that Tax Season. All that is needed is to file that 2017 Tax Return. There is no penalty for filing late, if you are receiving a refund. This can be the key to getting an Economic Impact Payment ( EIP ) if you did not get one last year and you qualify. However, that refund might be held back if you have not filed for 2018 or 2019. The refund may also be applied to any outstanding federal or state tax debts, unpaid child support, or student loans.           Those who have not filed the...

When the American Rescue Plan ( ARP ) Act was enacted last month, it allowed for up to $10,200 of Unemployment income to be untaxed. However, for weeks prior, Taxpayer’s had been filing their Tax Returns and paying the full tax on all of their income, including Unemployment benefits. The Internal Revenue Service ( IRS ) stated that amended returns did not need to be filed at that time. Now they have presented the solution to this paradox. Starting this month, the IRS will automatically reexamine Tax Returns that were filed before the new rules went in place. They will determine the correct taxable amount and if there is an overpayment it will be refunded, or it will go toward any taxes owed. For most, there will be no need to file an amended return. The exception would be if the new taxable amount allowed you to qualify for a new tax credit or deduction. At that point an amended Tax Return must be filed. The new refunds are scheduled to be sent out in May. Make sure to speak with yo...

          A report that was released this month confirmed what many had long suspected, the Internal Revenue Service ( IRS ) is very, very behind in processing Tax Returns. This is a situation that will not quickly resolve itself. The Treasury Inspector General said that the backlog was at about 12 million paper returns in December 2020. Even though this report focuses on paper Tax Returns, it’s reasonable to apply this to any paper correspondence as well. How did this happen? The IRS was put into an unknown situation in 2020 just like every other organization. They moved to remote work as much as possible and closed many distribution centers. However, what is sent to them on paper requires a physical presence. While the mail continued to be delivered, few would enter the offices and do the manual data entry. This is why many are waiting for acknowledgment of payments, or Tax Refunds. The different rounds of Economic Impact Payments ( EIP ) have also ca...

     The Internal Revenue Service ( IRS ) has announced that any Personal Protective Equipment ( PPE ) that was bought to stop the spread of COVID-19 is tax deductible. This means that masks, hand sanitizer, sanitizing wipes, gloves, and other tools used to fight the spread of Coronavirus and keep safe can be deducted from your Tax Return.      These items must have been purchased in 2020. You do not qualify for the deduction if you were reimbursed by insurance or other health savings account. If you have not yet filed your Tax Return, this is another reason to keep good records. You never know when you might need them and a new deduction might become possible. Take action to have all your information ready for your Qualified Tax Professional before the May 17 deadline.

          One feature of the recently passed 2021 American Rescue Plan ( ARP ) is the ability to have up to $10,200 of Unemployment Income from 2020 be exempted from tax. This is certainly something that many Taxpayer’s would want to make use of. However, this was enacted after Tax Season had begun. Tax returns were already being filed and tax refunds issued without this credit being applied. The Internal Revenue Service ( IRS ) was very clear in saying that they did not want amended returns to be filed.           It has now become clear why they did not want this to happen. The IRS will automatically issue refunds for the tax paid on the Unemployment Income, if you qualify. They are also updating their software and sending out new worksheets for those who have not filed. This is might be one of the reasons why the tax filing deadline for individuals has moved to May 17 . As we have stated in a previous post , ...

          The 2021 American Rescue Plan ( ARP ) Act created a third round of Economic Impact Payments ( EIP ). An earlier post had discussed the changed eligibility requirements. Within the first 5 days of enactment, the Internal Revenue Service ( IRS ) has made 90 million payments. This was made possible by the use of Direct Deposit, and this will be the primary method of payment. In time, more checks and debit cards will be mailed.           These payments are made automatically, and since we are in the third round, no action is required by most Taxpayers. Please remember that this payment is coming from the Treasury Department and the IRS . There is a new scam that has come to light where someone contacts a Taxpayer claiming to be from the Federal Trade Commission ( FTC ). That person will claim that a fee or tax needs to be collected to receive the EIP , or they may want some personal information from you. ...

          Just like last year, the Tax Deadline for 2021 will be pushed back. This year it will now fall on Monday, May 17 . There have been calls for this action for some time. The reasons the Internal Revenue Service ( IRS ) took this action are many, but here are a few.           The Tax Season this year started two weeks later than normal. This was to accommodate law changes that were passed in December 2020 and make sure that IRS computers were updated. The newly enacted 2021 American Rescue Plan Act also makes some significant changes to existing tax law, including allowing a certain amount of unemployment benefits from 2020 to be untaxed. With this recent news, some may take additional time to file, but the IRS does not want anyone to file an amended Tax Return at this time. If you look at this time last year, there have been about 18% fewer Tax Returns filed . It’s clear that people needed more time....

          Many parts of the 2021 American Rescue Plan ( ARP ) Act touch almost every aspect of our lives. A previous post discussed the third round of Economic Impact Payments. This is something that many have talked about and are looking forward to. One aspect that many are not talking about is a new tax exclusion for unemployment benefits.           With the enactment of ARP , it may be possible to exclude $10,200 of unemployment income. This means that Federal income tax would not have to be paid on that amount. State taxes would still apply. There are also overall income requirements that determine eligibility. To find out if you qualify, please talk to your Qualified Tax Professional .

         The 2021 American Rescue Plan ( ARP ) Act and its $1.9 trillion budget has been discussed since it was passed and enacted last week. One of the most talked about parts has been the third round of Economic Impact Payments ( EIP ) that it allows for many who received the previous two. The Internal Revenue Service ( IRS ) immediately went to work on sending out the payments, which for many would amount to $1,400. However, the criteria for who qualifies is now different.           Individuals making over $75,000 will receive smaller payments, and those who make over $80,000 will have no payment at all. This is based off of their 2019 or 2020 Tax Return. This means that some who were a part of the last two payments may not qualify for this one. Unlike the last two payments, dependents under 17 will be included. Those with Direct Deposit may already have the payment. If you got a debit card before, a new one wi...

          The $1.9 trillion American Rescue Plan ( ARP ) has many parts to it. The ARP was enacted on March 11, 2021 and some aspects have already gone into action. With something this large, it is difficult to truly understand what it will do unless you look at its different components.           That is what we will do. Over the next few posts, we will discuss how the ARP changes things. It was designed to essentially touch some aspect of our lives, from COVID vaccines to unemployment payments, and increases to different tax credits. Some have been talked about at length, others are less well known and the effects may only be seen in the near future. Our next post will discuss how the Internal Revenue Service ( IRS ) will be impacted by the ARP .

            Many filed for Unemployment Benefits for the first time last year and received those payments during a very difficult time. Now as we file our taxes, it is thought that less than half of those who had Unemployment income had their taxes withheld. This can lead to a great shock when those Federal Tax Returns are filed. All of that income is taxable, including the enhanced federal payments that were available most of the year. This can lead to tens of thousands of dollars in taxes owed this year.           If you are still collecting Unemployment Benefits, check your withholding. There should be a simple option that allows you to voluntarily withhold the necessary amount to avoid any unwanted surprises next year. If you are unsure of what your status is, you can always check with your Qualified Tax Professional .