Anthony Sykes & Company

             There are many things that go through the minds of individuals and families during a disaster. One of the greatest concerns is how they can provide for their needs. This is especially true if they have been displaced or have lost a source of income. That is the situation of many in LA County right now. One source of relief that some may not think of is an Individual Retirement Account ( IRA ). Usually when taking an early distribution or withdrawal it would be limited and taxed. When it comes to a disaster situation, some of these things can be waived. This would only apply to those taxpayers who qualify. A person could qualify if they are displaced from their home, if their home is significantly damaged, or if they have temporary or permanent income loss. This could allow them to avoid the tax now and give them three years to pay back what is withdrawn. Check with your qualified tax professional to see if this is an option for you....

                 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 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...

          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 ...

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 , ...

         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...

            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 .

                 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...

         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.

     On December 20, new information about another round of COVID relief was released. This is certainly welcome news. Not everything is known at this time about the deal in Congress, but there are some details that have surfaced.      Unemployment assistance will be extended by about 11 weeks. However, it will only be at $300 per week. The Paycheck Protection Program ( PPP ) would continue and even expand to allow some businesses to apply for a second loan. It is still unclear if paying for business expenses with these loans is fully tax deductible. There would be a simplified process for those seeking a loan of less than $150,000. The Employee Retention Credit will continue. Student loan forbearance on Federal Student Loans would be extended. There is also a report of a provision to increase business meal deductions from 50% to 100%. Remember that nothing is final until it is written down and voted on, so a lot can still change.

     A variety of circumstances can come together that make Tax Season a very difficult and challenging time for many individuals and business owners. With that understood, there is one action that must be taken. File your Tax Return on time! Taking this seemingly simple step will save much anxiety and some money.      For those who know they will owe taxes, but are unable to pay the full amount, filing your Tax Return on-time is a very important step. Not doing so may add special penalties and interest to your debt. If you pay what you can at the time of filing, the Internal Revenue Service ( IRS ) will take this into consideration. Remember that a tax filing extension is not an extension to pay tax responsibilities. For help to make sure that you are in the best position when dealing with the IRS , please consult your Qualified Tax Professional . 

     For those who provide on-demand work or services, it can be difficult at times to get all your paperwork together to file your taxes. Keep in mind that no matter what your activity is in this field, all income is taxable. The biggest concern is that you are classified correctly as either an employee, or an independent contractor. Lawsuits have been filed over this issue because states have different standards they apply to make this determination.      An employer will withhold some income from their Employees to pay their share of Social Security, Medicare, and Medicaid taxes. Independent Contractors must estimate those payments every Quarter. They must keep good records to make sure they are current with their tax responsibilities. If you were providing ride-sharing or home rentals or any other access economy activity in 2019, make sure to report it all on your Tax Return by July 15 .

     Soon information related to Paycheck Protection Program ( PPP ) loans will be made public. Specifically, the names of businesses that received over $150,000. It will also include business names, types, and addresses. This list may not be very long since the majority of loan borrowers were under $150,000. However, 75% of the $500 billion in loans went to businesses that were approved for more than $150,000.      In the beginning, no information was going to be released. When the first round of loans ran out in record time, many insisted on disclosure of who was receiving the funds. This was not expected, and the results of knowing these details is going to make some uncomfortable. There will now be a very public scrutiny for some.

     As the tax filing deadline draws closer, many Taxpayers begin to think about their expected Tax Refunds. The Internal Revenue Service ( IRS ) gets a few common myths every year regarding Tax Refunds.     If I get a refund, then I don’t need to adjust my Withholding this year. A Taxpayer should always be prepared to change their Withholding. This is especially true if their Tax Refund was an unexpected amount. This could be because of the employer withholding too much or too little in 2019. Making a change now will improve the situation when filing next year. Talk to your Qualified Tax Professional to find out how.     There is a secret to finding out my Tax Refund deposit date. No, there is not. Calling the IRS or your Tax Professional will not speed the process. The funds are usually sent after 21 days, but each situation is different. The IRS made a mistake on my Tax Refund. That might be the case, but there are other reasons why your T...

     As so many thoughts and concerns dominate our hearts and minds, let’s not forget that Tax Returns for the year 2019 must be filed in less than a month. There are many credits that can be claimed, which may provide some financial relief this year. For example, the Child and Dependent Care Tax Credit can help to offset major expenses.      According to the Internal Revenue Service ( IRS ), Taxpayers can claim a credit of up to 35% of their costs. To qualify, this care must have been provided for someone who is under the age of 13. If they are over 13 , this person must be a dependent who lived with the Taxpayer for over half of the year. To find out more details about this credit to see if you qualify, talk to your Qualified Tax Professional . The time to prepare to file your Tax Return is now. The deadline is fast approaching and it’s best to find out what credits you qualify for as soon as possible.

          The Internal Revenue Service ( IRS ) has stated that certain travelers who are stranded in the United States due to Coronavirus restrictions may not be subject to tax requirements. Normally the IRS would subject foreign individuals to file a Tax Return stating their worldwide income, and potentially pay taxes on it, if they met a residency threshold. Considering how much traveling has been impacted by the COVID-19 pandemic, many might be in the US much longer than they planned.           Nonresident aliens, foreign corporations, or partnerships can choose a 60-day period starting between February 1 and April 1 that will be excluded from consideration by the IRS when it decides if they are engaged in active business in the US. They could have asked all foreign individuals to file tax returns and then make the determination. Even with this bit of good news, business owners still need to be proactiv...

On April 27, the Paycheck Protection Program ( PPP ) restarted with $310 Billion dollars ready to loan to Small Businesses. This time there are promises to learn from earlier mistakes. For example, $60 Billion is reserved for smaller community banks, and no bank can process more than $60 Billion in loans. This is thought to create a sense of equality and pacing for all businesses looking to seek relief. The Small Business Administration ( SBA ) is trying to keep large corporations from squeezing out loan access for small shops. How did things work out the first week? There were widespread complaints about the online application system. E-Tran continues to crash and is overloaded by the number of users and applications that are uploaded. With that said, the SBA claimed it processed 100,000 loans from 4,000 lenders on Monday alone. Community banks feel that this is worse than their first try. While there is a limit of $10 Million per application, many feel that this funding will...

With all of the confusion we are dealing with on a daily basis, and economic relief being provided, many are wondering how this may affect their Tax Return for next year. What Taxpayers are being given is tax-free. On March 13, the President declared a National Emergency because of the spread of COVID-19 . Any payments given that relate to that emergency will be tax free. Much of that will come from the Coronavirus Aid, Relief, and Economic Security ( CARES ) Act.           This does not allow for a person to receive 2 forms of payment for the same disaster relief. There can be no double dipping. If you are receiving income from Unemployment, that is taxable.