Anthony Sykes & Company

            With the start of the new school year upon us, educators will want their students to have a complete classroom available to them. That might mean having some out-of-pocket expenses that are not reimbursed. If that’s the case, any principal, counselor, aide, or teacher who works at a K-12 school for at least 900 hours in a year can claim the Educator Expense Deduction . The current limit is $300, but that can be adjusted in the future based on inflation.           The qualifying costs can be related to books, supplies, and other materials used in the classroom. Equipment, including computer equipment and software can qualify. COVID-19 protective items used in the classroom would also apply. This can be claimed even if you use the standard deduction on your tax return. As a reminder, it is always best practice, especially when claiming a deduction, to keep good records which would include receip...

                 The tax season for this year has been established. As announced by the Internal Revenue Service ( IRS ), the first day tax returns will be accepted is January 23 . The deadline to file is April 18 . After reflecting on the past 3 years, the IRS has taken steps to make improvements in the service it provides to taxpayers.           As part of the Inflation Reduction Act passed in August 2022, the IRS has hired 5,000 new employees. They will answer phone inquiries and provide in-person assistance. The date of January 23 was chosen to allow for training and needed updates to the software so IRS systems will work smoothly. Tuesday, April 18, 2023 will be the tax filing deadline in observance of Emancipation Day in the District of Columbia. Since there is more help available this year than in previous years, our next post will discuss how to best use our time in preparation f...

                 As the Internal Revenue Service ( IRS ) continues to catch up with its backlog of paperwork, there is a problem that is emerging. They have determined that a growing number of Paycheck Protection Program ( PPP ) loans have been improperly granted forgiveness. These loans were first established to assist small businesses that were adversely affected by the COVID-19 pandemic in paying certain expenses.           To have these loans forgiven, three criteria had to be met and that would allow the amount to be excluded from total income. For example, the loan had to be used to pay eligible expenses like rent, payroll, and utilities. However, upon further review, many of those who had their loans forgiven really do not meet those criteria. In situations like this, the loan amount is added to the total income for that year. This would require filing an amended tax return for that y...

           Many plan on making charitable donations this time of year, especially for Giving Tuesday. Before doing so, it is always best to know if the gift is tax-deductible. It is also a good practice to research the organization to make sure it is tax-exempt and get a written acknowledgement of a donation greater than $250. Usually, a gift of cash or property given to a charity can be deducted when itemized on a tax return. However, some donations do not qualify for a tax deduction. For example, a donation carried forward from a prior year, a donation made to a supporting organization, or donations made to most private foundations will not be eligible for a tax deduction. Take time now to plan your gift and understand how it may affect your taxes.

                 The tax filing deadline has passed. However, there are some common issues that come up that have relatively simple solutions. If a taxpayer expects a refund, they are usually processed in 21 days. Keep in mind that the Internal Revenue Service ( IRS ) will take longer to release a refund if the tax return is claiming a credit, has errors, or is affected by identity theft.           If you are not receiving a refund and are surprised by that development, then checking your withholding should be done. This will make sure that the correct amount of tax is being withheld from your paycheck.           Sometimes after filing their return, a taxpayer will realize that they made an error or forgot to attach a form. A common reaction is to amend their return. This should only be done to fix errors like filing status, income, deductions, ...

                 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...

          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 .

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...

     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 , ...

          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 .

                 This is a decision that some struggle with each year. Is it better to itemize or use the Standard Deduction? There is no one answer that fits everyone in every situation. Deductions can lower the amount of taxable income in a given year. Does that mean that itemized is best? Not always.           Itemized deductions. This is often used when the amount of deductions claimed will be greater than the Standard Deduction or if Itemization is the only option. For example, if a Taxpayer had large uninsured medical expenses, uninsured theft or losses, or large contributions to qualified charities, they may choose to itemize.           Standard deduction . This is considered to be the quick and easy option. However, this amount will change every year and is determined by the Taxpayer’s age, filing status and other factors. Something else...

            On the eve of the official start of Tax Season, the Internal Revenue Service ( IRS ) has just announced a new deduction that is appropriate to the times we are living in. Teachers and other qualified educators can deduct expenses related to COVID-19 personal protective equipment bought last year. This change took effect with the passage of the Omnibus Appropriations Act in December 2020.         No more than $250 can be deducted, and this only applies to expenses that were not reimbursed. This would include things like face masks, hand sanitizer, physical barriers, or tape and chalk to mark physical distancing guidelines. This deduction may apply to anyone who works at a K-12 school at least 900 hours during the school year. If you have not done so already, gather your records and make an appointment with your Qualified Tax Professional . Having all your documents prepared beforehand will make the tax f...

         There are over 48 million Americans with student loans, and the number increases every year. While the amount of student loan debt can be stressful, it often turns into a benefit when it comes time to file your taxes. Specifically, the amount of interest paid on the loan during the year.           This applies to any loan taken out for educational expenses, which might include tuition, books, or room and board. This might be a loan for yourself or a family member, but your name must be on the loan in order to claim the deduction. The loan provider will send out a form that clearly states the amount of interest paid during the year to make the deduction claim easier. However, when it comes to these types of situations, there are restrictions and limitations on the amount that can be deducted and who may qualify. Talk to your Qualified Tax Professional to determine if this savings is available to you.

     The new COVID relief package ( Consolidated Appropriations Act, 2021 ) was signed on December 27. A Bill like this is unlikely to be changed after it has been signed. This means we have a much clearer understanding of what it will provide.      This is actually part of a larger piece of legislation that includes funding the government until September 2021. The COVID relief part of the law renews many of the programs created with the Coronavirus Relief and Economic Security ( CARES ) Act. For example, the Paycheck Protection Program ( PPP ) will continue. There is also a clarification that businesses can deduct expenses paid with funds from a forgiven PPP loan. There will be an extension of Federal Pandemic Unemployment Assistance ( FPUA ). This allows for Unemployment Insurance for Independent Contractors and those who work in the Gig Economy. This will go in effect 1 week later due to the delay in signing the Bill. Another round of Economic Impac...

     The Internal Revenue Service ( IRS ) is making a special effort to make sure that taxpayers know about a special charity deduction that is available this year. The year of 2020 has affected all of us in different ways. However, because of the unique challenges faced this year, some may feel even more motivated to give to charities. The Coronavirus Aid, Relief and Economic Security ( CARES ) Act gives extra encouragement to do so.      This special tax law allows for a $300 tax deduction without the need to itemize your Tax Return. This special deduction will allow for some extra tax savings while using the standard deduction. To qualify, these donations must be made by cash, check, debit or credit card. Good records must be kept, including having a receipt or acknowledgement letter from the charity to file with your Tax Return. Please check to make sure that the organization you choose is eligible for tax-deductible donations. Make an appointment wit...

     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.

It’s never too early to plan for the future. That is especially true when it comes to taxes. People are always looking for the best, legal ways, to reduce what they owe. One way is to take a close look at deductions. There are two choices when it comes to this area, a Taxpayer can Itemize or take the Standard Deduction . To make the right decision, you need to know how much the Standard Deduction will be worth. It changes every year, usually to keep up with inflation. The amount also varies depending on the filing status you choose. For 2020, the Standard Deduction will increase . For example, for someone who will file as “Single” the deduction will rise by $200 to $12,400. If the Standard Deduction is claimed, then most other deductions like property taxes or charitable contributions cannot be claimed. If someone would like to claim deductions in excess of what the Standard Deduction amount is, then they should Itemize . This would require much more detailed information, bu...

        Many Small Businesses are anxiously awaiting an opportunity to have their share of some of the COVID-19 relief provisions that have been made by the Coronavirus Relief and Economic Security ( CARES ) Act. The most well-known is the Paycheck Protection Program ( PPP ). We have written about this program in the past. One reason it is so attractive to businesses is that a loan of up to $10 million can be forgiven if the owner follows some simple rules and applies all of the money to the firm and its employees. Now the Internal Revenue Service ( IRS ) has weighed in on how this changes what a business can deduct.           During normal times, a business can deduct things like wages and rent. These are the same expenses the loan in the PPP is expected to be used for. With that understanding, the IRS has now stated that anything the PPP is used for cannot be deducted from taxes for the business. The reasoning i...

As the 2019 Novel Coronavirus ( COVID-19 ) spreads, people are doing one of two things. They are either changing their routines completely hoping that it does not directly affect them, or they are making slight modifications ready to get tested if they feel the onset of symptoms. The information and direction from sources like the Centers for Disease Control ( CDC ) is clear. People may wonder if getting a COVID-19 test would change their deductible medical expenses. Are these tests covered?          The Internal Revenue Service ( IRS ) has determined that High Deductible Health Plans ( HDHP ) can pay for COVID-19 testing and treatments. In a previous post, we discussed the details of Health Savings Accounts ( HSA ) and how they affect a person’s tax responsibilities. Simply put, these plans and accounts will cover the testing needed if you feel it necessary to go to the doctor. Do not let worries about taxes keep you from seeking medical help that you ...