Anthony Sykes & Company

            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...

     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 yea...

         When someone dies, an executor is appointed to identify the assets of the estate, pay its debts, and distribute what is left to the heirs. What some not realize is that the executor is also responsible for arranging to pay any taxes and filing the appropriate tax forms. This is a situation that can become very complicated for several reasons, so here are a few details to help get you through a difficult time.           For an unmarried person , the last Form 1040 should be filed the same as it would normally. It would cover the time from January 1 to the day of their death. There is the possibility of being able to deduct uninsured final medical expenses. If they are married , and the surviving spouse remains single until December 31 of that year, then the last Form 1040 can be filed as a joint return. In this way, they can continue to enjoy more favorable income tax rules. This may even be possible ...

         After a time of adjustment, the Form W-4 has been redesigned and is available for comment from the public. It is expected to be used in 2020. This is the form used to determine how much tax is to be withheld from an employee’s paycheck. This version will reflect the changes brought on by the Tax Cuts and Jobs Act ( TCJA ). A portion of the draft has been provided below.           It will require the Taxpayer to list every position they have. Essentially, they must tell their employer if they are holding another job, which is becoming increasingly common in the age of the side hustle. This might make some uncomfortable, but it is important to get the right balance on your Paycheck Withholding. This year, many were shocked to see their refunds shrink, or turn into a surprise debt. This is because the TCJA changed the withholding tables, and often this meant more take home pay during the year.  In ...

         It has been stated many times on this blog and from many other Tax news sources, the Tax Cuts and Jobs Act ( TCJA ) has been a game changer. Even basic calculations now need to be looked in a different way. Nothing will be done the same way. One example is tax withholding and estimated payments.           In general, when it comes to tax withholding from paychecks, things are very simple. A Form W-4 is filled out and given to your employer and that determines how much in taxes are withheld from your wages earned. However, when the TCJA went into effect, the withholding tables were adjusted, which meant less would be held from your pay. Most people saw an increase in wages last year. The real reasons for this were a suspension of certain exemptions and deductions.           What many Taxpayers may not have realized is that they needed to submit a revised W-4 to...

          After the federal changes made by the Tax Cuts and Jobs Act, many people are looking to see what moves their states will make. Some states have a relatively simple tax system (no state income tax or low property tax), and they want to keep it that way. Other states made their own changes that impacted tax collection in 2018. For example, Kentucky made adjustments that now allow for more taxes to be collected from the activities of non-profits.           Then there are the other states that want to do something but are not sure what. The state of California can fall into this category. The last major change to the state tax code occurred in 1935, and property tax has been limited since 1978 due to voter passed Proposition 13. This means that the majority of California’s income comes from personal income taxes. With its progressive nature, those who make the most, also pay the most. That is also true of b...

         As we have discussed in previous posts, the new version of Form W-4 will not go into effect until 2020 at the earliest . When the draft was proposed, it created much uncertainty and with time those privacy concerns will be addressed. In the meantime, withholding cannot continue the same as it has been. The form may be similar, but the law has changed.           The IRS guidance in the area does take into consideration the changes made by the Tax Cuts and Jobs Act . There is an allowance to consider Qualified Business Income ( QBI ) as a deduction for those who meet the requirements found in Section 199A . To not get surprised by a withholding error that may cost a large amount of money, it is good to speak to a Qualified Tax Professional in order to make the necessary adjustments in your paycheck.

         There has been much discussion and debate over this past year. We have all done our best to get an understanding of what the future of taxes will look like. In January, the theories will end, and the tax filings will begin. However, this is only the start of the changes in store. Let’s consider the example of tax brackets and rates.           A year ago, we wrote a post that covered the topic of tax brackets and rates. There are 7 rates that range from 10% - 37%. The brackets will change depending on the filing status. This information was understood at the end of 2017. There are new tax brackets that have been released, but they will apply to when filing taxes in the year 2020. There are aspects of the Tax Cuts and Jobs Act that will change year by year .           For Taxpayers who are not planning any big changes, all that is needed is to keep an eye on th...

This is the time of year when many businesses are hiring seasonal employees, or simply increasing the hours for staff already on the payroll. Because of these changes, some may not realize how this influx of income can affect their overall tax responsibility. When getting a new job, no matter how long you are working there, a Form W-4 must always be completed. This form details the amount an employer should keep from an employee’s paycheck. Thanks to recent IRS guidance, we know that it will not be changed by the Tax Cuts and Jobs Act until 2020 at the earliest.          When it comes to a job that involves tips, it is a good practice to keep a log of the amount, and date of the tip. All tip income must be reported and keeping good records makes the tax return process that much easier. Sometimes, the amount made from a seasonal job will not be high enough to end up owing income tax. Often it is students and other young people who are getting their first job...

         With the new Tax Law in effect this year, almost every area of Tax and Finance has been changed. Some of the changes are taking place slowly, but they are happening. For example, new tax withholding information for employers simply was not available. The withholding tables have now been released and must be implemented no later than February 15.           Employees will probably see an increase in their paycheck. This is because of changes in the Tax Brackets, Tax Rates, and standard deduction. This will be true depending on the circumstance of the Taxpayer. At this point, employees have to do nothing. The IRS is working on revising the Form W-4 to reflect the changes made by the Tax Cuts and Jobs Act. When this has been completed, Taxpayers will be encouraged to consider whether or not they need to update their responses on that form. Within this complicated area of Tax and Finance, patience truly is ne...

         With the new Tax Laws that have now gone into effect, businesses will see a big change in their finances. The most talked about aspect, is that the tax rate has been lowered to 21%. This is true, but it is not the only adjustment that businesses need to get familiar with.           What is determined to be “qualified business income” from companies, such as LLC’s, Sole Proprietorships, or Partnerships, can become “pass through” income. If this “qualified income” is passed through to an individual, trust, or estate, then 20% of it can be deducted from the Federal Tax rate. This can be a nice option, but it is limited in availability. It will not be an option for certain types of businesses including those in the Health, Law, or Financial services fields. This deduction option will end in 2026. Considering how new this law is, it would be the course of wisdom to seek advice from a Qualified Tax Professional ...

         It seems today, that the only constant that we can rely on is change. Whether that is true or not, there are many things that we do need to be aware of, and adjust to. There are waves of change that hit us and it's our responsibility to keep moving forward. That is especially true now.          With all of the changes that have recently taken place, trying to look ahead and plan for the Tax Year of 2018 is very different than it was in 2017. The brackets have changed and overall taxes have changed. This is a situation that will require some patience. It is needed because no one can say for any certainty how things will definitely work out.           One reason this is true is because the IRS has not yet issued guidelines on what needs to be done in different situations. Paychecks, for example, may look the same once or twice in the year before pa...

          Can it be possible to pay Federal Income Tax on Social Security benefits? The short answer is: yes. There are situations where this can happen. Beyond this fact, there are a number of States that also might tax Social Security income. Here are a few points to keep in mind.           States that do not have their own Income Tax will obviously not tax Social Security income. So if you live, or are planning to move to, a State like Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, or Wyoming, this will not be an issue. Other States give an exemption to Social Security income. This is true for States like Alabama, California, Delaware, Hawaii, Idaho, Maine, Massachusetts, Oklahoma, and Oregon. However, Minnesota, North Dakota, Vermont and West Virginia will apply Federal guidelines to Social Security income. States like Colorado, Connecticut, Kansas, North Dakota, and U...

Everyone wants to have a good idea on how to plan for the future. That is especially true in the area of finance, and taxes play a huge role in that planning. Long before most people start to file Tax Returns, the next year’s Tax Brackets are released. So 2017’s Tax Brackets are now available. They would apply to Tax Returns to be filed in 2018.           Tax Brackets are only a guide, a starting point, based on what a person’s Taxable Income might be. They really only give part of the picture of what the Tax Return will actually look like. This information, along with advice from a qualified Tax Professional, will help make the Tax Process much easier to deal with.