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 yea...

        When it comes to taxes, there is a certain amount of anxiety for most people. According to some surveys, there is a greater amount of anxiety for younger Taxpayers than most. It might be due to inexperience and it might involve a lot of misconceptions that continue to confuse people every year. Not having a clear understanding of how the tax code in the United States works cost many people lots of money every year. In this post we will discuss 2 of the most common tax myths.           A tax extension means I have until October 15 to pay the Internal Revenue Service . A tax extension usually means there are documents that need to be gathered or complicated situations to handle. If that is the case, an extension is the right choice. However, in the eyes of the IRS , any taxes owed must be paid by April 15. It is not an extension on your tax obligation and penalties and interest can be added to the balance. No...

        One of the big surprises created by the Tax Cuts and Jobs Act ( TCJA ) was the disappointment many Taxpayer’s received when it came to their refund, or lack thereof. As many now understand, the tax savings that were promoted can be found in each paycheck. As a result, their tax refund was smaller, or it even an unexpected tax bill. This led to strong reactions and encouragement to do a Paycheck Checkup to make sure the next year would not turn out the same.           Next year has arrived. Did you make the necessary changes to your withholdings? If not, the problem could be magnified. In 2018, the new withholdings table was only in effect from about February or March. This means it did not cover the entire year. All of 2019 was covered, so if the withholding was too little, the amount owed will be greater . Nothing can change that now. But making changes now will keep you from dealing with the same problem n...

        It can be easily said that the Tax Season last year was the most difficult in recent memory. It can also be said that this year will probably not be any easier. As we have stated in previous posts, the Internal Revenue Service ( IRS ) still must provide written guidance for all the changes brought about by the Tax Cuts and Jobs Act ( TCJA ) of 2017. There were also many tax breaks extended by Congress in December of 2019. So, this filing season is shaping up to be very busy and challenging.           For Taxpayers who are involved in Partnerships or Hedge Funds , many are opting for extensions. In this way, they might have all available guidance provided for them by the September deadline. This type of strategy might also work for those who are looking to see if the recently extended tax breaks will apply to them. Talk to a Qualified Tax Professional to determine the best choice for you.   ...

         The Internal Revenue Service ( IRS ) has goals to accomplish in 2020 just like everyone else. Some of their goals might be considered ambitious, but it’s always best aim high. That is especially true when it comes to providing guidance related to defining changes created by the Tax Cuts and Jobs Act ( TCJA ).           There are about 100 topics that need some sort of written clarification. To provide all that by September would be a remarkable feat, since the Taxpayer First Act signed last year still needs to have a written plan about how it will be applied. How all this will happen we still do not know, but we can look forward to some guidance given on very popular topics that were impacted by the TCJA .           The deductions related to Meals and Entertainment were shaken up by the TCJA . These expenses can now only be deducted up to 50%. A clarific...

       When a person has an income, they typically pay taxes on it. The more they make, the higher rate of tax they pay. This has been the accepted pattern of life. When it comes to a business, people generally expect that pattern to continue. However, this is not always the case. For example, the Tax Cuts and Jobs Act ( TCJA ) changed the corporate tax code so that all businesses will be taxed at the flat rate of 21% . Another reason is that it has been proven that some companies have made billions but paid little or no taxes on that income.           This is because the companies and their subsidiaries were placed all around the world. As a result of this, they were taxed based on where they were located. This is scheme is not new but is now being implemented in a very sophisticated way. Reporting income in low tax countries has become an even more tempting option with the growing digital economy. Governments arou...

        The standard mileage rates that can be used to deduct the costs of operating a vehicle for business uses have been updated. When it comes to driving for business ( 57.5 cents per mile ) or for moving ( 17 cents per mile ), the rates have come down when compared to 2019. A half cent for business driving and 3 cents for the purpose of moving. One reason for this is that the mileage rate for business use is based on a yearly study of different costs related to using cars, trucks, vans, and pick-ups. Taxpayers always have the option using the actual cost of using their vehicle, instead of the mileage rate.           The Internal Revenue Service ( IRS ) stated that under the Tax Cuts and Jobs Act ( TCJA ) only members of the Armed Forces on active duty, who are moving under orders, can claim a deduction for moving expenses. A taxpayer cannot combine the business mileage rate, with any other depreciation method. ...

       When starting a new job, every employee gets a Form W-4 . This will tell the employer how much money to withhold from the paycheck. These withholding amounts can lead to owing taxes after filing or getting a refund. As a result of the Tax Cuts and Jobs Act ( TCJA ) from 2017, this form has been changed.           Instead of checking off “allowances” to be used, it will ask for actual dollar amounts. This means that new employees will need to consider outside sources of income to make sure that the right amount is withheld in the eyes of the Internal Revenue Service ( IRS ). This is a controversial point for some because it may allow an employer to see if their employees have a second job. It will also require coordination with married couples to make sure that neither spouse under-withholds, which will lead to a tax bill the next year. The instructions must be read very carefully. Taking your time and filing the...

         Much has been made about the Internal Revenue Service ( IRS ) and its efforts to increase enforcement of tax law, especially after the passing of the Tax Cuts and Jobs Act ( TCJA ). According to a report released in December 2019, the results of these changes have been significant. This is because the IRS has now adopted an aggressive strategy to combat tax fraud.           You may have heard of the over 10,000 letters that were sent to individuals who had not properly documented their digital currency transactions. Many of those cases will be recommended for criminal prosecution . It is the view of the IRS that this is the new frontier for tax evasion, and they want to stop these crimes as soon as possible. In 2019, the IRS had a 91% conviction rate . It identified $1.8 billion in tax fraud. Prison sentences averaged over 3 years. With all this success, the IRS only sees room for improvement. They ...

        One of the well-received parts of the Tax Cuts and Jobs Act ( TCJA ) of 2017, was that it encouraged corporations to bring their overseas profits back to the US. Often, companies will keep their foreign profits in other countries, or try to minimize them, to reduce their tax responsibilities. The new rules set in place by the TCJA lowered the tax rate on cash to 15.5%. Before this change, the tax rate was 35%.           After a full year of the TCJA in effect, the Internal Revenue Service ( IRS ) is taking an active interest in companies that owe taxes on offshore profits. Auditors know that this is an area of tax law that can be easily abused. Currently, many companies who had taken advantage of the cut in the offshore tax rate are being audited to make sure they are following this aspect of the TCJA . If irregularities are found, the audits could expand to look to see what overall changes companies made to...

          A Health Reimbursement Arrangement ( HRA ) is a plan set up by an employer. It covers medical expenses related to the care of employees and their dependents. This type of fund can be claimed as a deduction by the business and is usually tax free for the employee. This is often an attractive option for businesses because they determine how much will be in the fund. Any expenses over that amount will be covered by the employee.           This is not an account that can have withdrawals as necessary. The expense must be made, then it will be reimbursed. Since the HRA belongs to the company, if the employee leaves, they will lose the benefit. Starting in January 2020, HRA ’s will undergo a massive change. Our next post will detail why that is.

         The limit that was put on the amount of State and Local Taxes ( SALT ) that could be deducted from Federal Taxes as a part of the Tax Cuts and Jobs Act ( TCJA ), was quite a controversial topic. Some felt that they were being targeted and this led to various schemes and lawsuits being filed. Those feelings have not changed, and as a result of different tax changes being considered, the SALT deductions are being reconsidered in Congress.           While the SALT deductions will expire in 2025, it is unlikely that a repeal will happen before then. However, there are different alternatives that might come into play. For example, a limit on all deductions, which would include mortgage interest and charitable contributions. There are certain tax deductions which have not been limited. To find out more about them and if they apply to your situation, talk to your Qualified Tax Professional .

          At the end of August, the Internal Revenue Service ( IRS ) released some new guidance on changes related to Qualified Business Income ( QBI ) as covered in Section 199A . When the Tax Cuts and Jobs Act ( TCJA ) took effect, QBI was a topic of interest for many businesses. If the amount was determined correctly, it would directly lead to tax savings for the business. The calculations for this deduction have now changed.           All items related to a trade or business must be considered, including charitable contributions and unreimbursed partnership expenses. The new guidance indicates that QBI will be reduced by the amount of charitable donations made by the business. As a result of this and other changes, the Qualified Tax Professional handling the taxes for the affected businesses will need to make several manual adjustments to the Tax Return. Tax software has not been able to keep up with thes...

          After over a year and a half since the passage of the Tax Cuts and Jobs Act ( TCJA ), the regulations that apply to many international transactions are still not finalized. There are issues that still need to be addressed as companies are unsure how to proceed. They are making some conservative guesses but are really looking for clarity from the Internal Revenue Service ( IRS ).           For example, there is the Foreign Derived Intangible Income ( FDII ) provision. This is a potential deduction for businesses, but it can only be claimed if the business can prove that what it sells is for foreign use . In this way, a company’s decision on where to locate its headquarters will not be based on how it can avoid paying taxes where most of its goods are sold. Companies are unwilling to alter their normal business operations to prove that they qualify for FDII. The IRS has indicated that there will be more...

         One of the most talked about issues surrounding the Tax Cuts and Jobs Act ( TCJA ) was the deduction limitation of $10,000 when applying State and Local Taxes ( SALT ) to Federal taxes. One immediate idea that certain high tax states proposed, was to create charitable accounts where Taxpayers could give money to states to pay taxes, and yet have them considered as charitable contributions. In this way people could make up for the Tax deductions they lost. Some states loved the idea and started to put it into action, while the Internal Revenue Service ( IRS ) said it would not work. The rules have now been established.           One of the rules being applied should be somewhat familiar. The whole idea behind a truly charitable donation is that a person is giving money or other goods in exchange for nothing . If there is an expectation of something in return, then it is really a payment and no charity i...

        One of the goals of the 2017 Tax Cuts and Jobs Act ( TCJA ) was to keep multinational corporations from hiding profits offshore to avoid paying US taxes. While this Tax Reform has taken great steps toward reaching this goal, unanticipated results have come to be seen. In applying this law, any foreigner who becomes a US citizen must report the global income of any family businesses in the US and pay the tax on the income of those businesses.           The changing of tax rules in this area do not only impact business interests, these can be applied to domestic trusts, partnerships , and estates . This is a sharp increase in tax responsibility that many are unprepared for. This is a real situation that many are dealing with and have very limited options moving forward. With guidance, some can navigate this tricky situation, without having to renounce their claims or move out of the country.

          Deductions and credits help the bottom line for every self-employed person and small business owner. With most of the year still ahead, this is a good time to check your options and eligibility which will allow you the ability to plan for the future.             Business Expenses. To be considered a deductible business expense, the expense must be considered ordinary (common and acceptable in this trade) and necessary (helpful and appropriate for the business). For example, if part of a Taxpayer’s home is used for a business, some of the mortgage interest insurance, utilities and depreciation can be deducted. Usually rent can be considered a deductible expense if the property is used for the business.           Business Credits . A new credit that was created by the Tax Cuts and Jobs Act ( TCJA ) is a credit for paid family and medical leave. ...

         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 ...

         Federal income tax that is withheld from paychecks is generally paid over the year. The amounts withheld are shown on the Form W-2 . That has not changed. However, this has been a big issue when filing 2018 Tax Returns because of how the Tax Cuts and Jobs Act ( TCJA ) changed Withholding Tables. That directly impacted the Tax Refund or debt responsibility given to Taxpayers.           To avoid another surprise next year, the Internal Revenue Service ( IRS ) recommends a Paycheck Checkup as soon as possible. This should be done even if there are no significant changes from last year. This way, you can plan to get the refund you want next year. Withholding can be changed by filling out a Form W-4 . The amount withheld depends on the amount of income earn, along with filing status (married or single), the number of allowances (the more claimed, the less withheld), and any other additional amount request...

         After considering one of the more well-known (yet difficult to qualify for) plans in Offer-In-Compromise ( OIC ), let’s shift our focus to realistic options. There is a real expectation that more Taxpayers will end up with a tax debt after filing a Tax Return this year. Let’s see why these agreements may prove to be a better choice when it comes to dealing with a surprise debt.           Guaranteed Installment Agreement ( GIA ). This typically is a 3-year payment plan for balances of under $10,000. This is attractive because it does not require management approval or selling off assets to pay the IRS . However, the Taxpayer must not have been involved in any other payment plan in the previous 5 years. They must also have filed all Tax Returns related to the debt.           There are other programs for those who owe around $50,000 and $100,000. The length ...