Wednesday, December 1, 2021

It happened. We are actually in the final month of the year. We have already talked a bit here about getting to the end of the year and your last chances to make moves that can affect your tax picture. And now, it is December, the chances are decreasing, and it will be 2022 almost before we know it.

So consider that another little warning about timing.

But there’s no need to be all doom and gloom here, for there can be good news when it comes to taxes. (I know, I know, that sounds utterly impossible.)

First, last month the IRS released some guidance over a 100% deduction for food and beverage from restaurants. That’s right, 100%! Now, can you even get more good news than that?

You can! It applies to next year, too!

Hyperbolic exclamation points aside, this is something that will be a pretty good benefit for many. The actual IRS news about this is full of boring notices and procedures, but what they represent is not complicated. The meals deduction is usually 50%, so when you double what you are eligible for, that’s a good thing. Granted, this isn’t something so huge that I’m recommending planning some more end-of-year work dinners, but it is still a benefit worth highlighting. So just remember to keep those receipts after you have finished eating.

And yes, it is now time for the return of excessive punctuation! For did you know that teachers were also eligible for some deductions?!?!

This essentially is a deduction for classroom expenses that teachers paid out of their own pockets. Again, there is some hyperbole involved here, though, for this deduction caps out at $250 for an individual. The IRS sent out another notice about it last month, though, so I figured it was worth highlighting it here, too.

These may be only small bits, but they call attention to a bigger point about timing. The more prepared you are for your tax return, the more deductions you will have time to find out about, document, and claim. Each individual deduction may not be the difference between owing money and getting a hefty refund, but enough of them could shift things in a significantly better direction. And sure, the things we most look forward to this month aren’t tax preparation, but don’t forget about how good it can be to be on top of things before it is too late and time gets away from you.

Wednesday, November 17, 2021

It is a good general rule to know that if anyone receives money for a good or service, the IRS wants to know about it. Income is taxable, no matter how it is received. This basic tenet is reasonable and understandable, but as more people use more money in new ways, it can take a while for some of the rules around that to make complete sense.

This has been most noticeable in recent years when it comes to cryptocurrency. No matter whether you think of it as an investment or another type of currency, if it is worth more than you paid for it, there’s an amount in there that is taxable and the IRS has been working on cracking down on getting its share of that. Beginning next year, it will start to have its hands deeper in payment apps, as well.

Your first question may be just what is a payment app? The answer is probably simpler than you realize, for most of us have used something along the lines of PayPal or Venmo to send and/or receive money. At the same time, you may be surprised to think that this could affect your tax picture if you mainly use it to pay someone back when they go pick up coffee. If that is all you use such platforms for, though, then don’t worry, you will not be affected by this. What will be changing is payment app providers will have to start reporting if a user’s business transactions total $600 or more a year. If you want to get into the weeds on this, you can read this recent article from CNN.

This isn’t the space to get into deep details, but I do want to highlight a couple takeaways from this:

The biggest thing is that this is not making any sort of transaction newly taxable. Rather, this is being put in place because the IRS is trying to track down transactions that are already taxable and may be slipping through the cracks. So if you are already paying taxes on everything you should be, this is not increasing your tax burden.

The next thing to know about this, though, is that it might be making things messier for some and placing the burden on the taxpayer to find a way through that mess. First, it’s possible that one could receive a 1099 from a payment app for transactions that should not be taxable. It could then fall to the taxpayer to have to explain that to the IRS. It’s also possible that you will receive a 1099 from a payment app and also a 1099 from a client for the same transaction. Again, it would then fall to the taxpayer to explain to the IRS that they are not covering separate events and reflect the same money.

So don’t be afraid that this is going to increase your tax obligation in any way, but be aware that you may need to be vigilant to ensure that this reported on your tax return in the right way. Even if this isn’t going into action until next year, I wanted to mention it now so that we can be ready to help you handle this in the right way.

  

Wednesday, November 10, 2021

I have written a lot recently about this being the time when you must start thinking about big moves you can make if you still want to really affect your tax picture. Granted, this is a discussion that is not for everyone. You need to have a certain amount of money (and possibly in the right places) for some of that to really matter. For this week, though, I want to talk about a smaller thing that everyone can do.

Tax laws are currently set up that you usually cannot claim a deduction for charitable contributions unless you are itemizing your deductions. Legislation passed during the coronavirus pandemic, however, allowed for everyone to claim some of that deduction for tax year 2020 and it will now continue through the 2021 tax year. This allows an individual to claim up to $300, with married people filing a joint return qualifying for up to $600.

Now sure, as I intimated above, this is not a huge amount of money and not being taxed on a few hundred dollars isn’t going to result in you getting some massive windfall of a tax refund. I do still want to highlight the availability of this deduction, though, as an extra little impetus to do an extra little good during this time of year when many could use it.

First, I don’t want this to be such a push as to be asking those who cannot afford it to donate money they do not have. Your obligation then is to take care of yourself and any family depending on you. Beyond that, though, if you can give, please do. Chances are really good that you will feel better about putting the money there than in your next few coffees.

So if you do have enough to give, give to something meaningful to you. Is there an organization doing something in your local area that you admire? Have you or someone in your family personally benefitted from the work of a charitable group? Do you feel a pull to a cause every time you hear about it but have never actually donated to it? No matter where you fall, no matter how you feel, there are connections that can be found which will leave you feeling happy and satisfied with where a donation goes.

And all of that is even before you get that little tax benefit at the end of it. So how can you lose? 

Thursday, November 4, 2021

Over the past couple of weeks, I have been writing about looking forward to next tax season and getting a hold on your situation while there is still time. This week, I wanted to change the focus a bit to those who may be paying taxes for the first time.

I first started thinking about this group because of this recent article, which discusses how some NCAA athletes may be receiving payments for the first time. We are still in the early stages of seeing how (and how much) these athletes are going to be paid, but I am sure the tax implications of what they receive are going to be a surprise for some. Ideally, their institutions would provide some guidance on this, but how much of it, how good it is, and how well people listen are certain to vary.

Now this may feel like a small group of people, and the high-profile ones certainly will be a limited batch. The amount of people who have to pay taxes for the first time each year, though, is still pretty vast. As we get older, paying taxes (and having them withheld from our paychecks) just becomes part of the process and many do not give it a second thought. I think many of us, though, can still remember when we were younger and had to enter that so very ‘adult’ world.

Traditionally, this was not necessarily a trying experience. You filled out a form when you got your first job, some amount of money was taken out of your pay, and then when it came tax filing, you found someone who could help you with that part of it. With more and more people making money in new ways, though, this can get complicated. After all, it’s not only the NCAA’s ‘real’ sports that come with payouts, others are making money in Esports, as well. Add in delivery drivers and other types of ever more available freelance work and you build a larger and larger group of younger people with a cloudier and cloudier tax picture than the one seen by previous generations.

Let this then be a call to not only give some thought to your tax picture as we approach the end of the year, but to also think if there are people in your life who may not have had to have these thoughts before. And if there are, give them a nudge to do so. For to them, those potential unpleasant surprises at filing time may be even more surprising if they didn’t appreciate that they were even possible

Wednesday, October 27, 2021

Last week I wrote a little bit about how time was running short to make moves that can affect your tax picture by the end of the year. A lot of that was aimed at the individual taxpayer, but this is also the case for small businesses.

So if you are a small business owner, you may want to look at this recent article from Forbes.com that goes a list of things you may want to consider as you look ahead to tax planning. In this spot, I want to highlight only one part of this, though, and that is to keep on top of your bookkeeping.

I completely understand how this falls to the bottom when it comes to the to-do list for your business. You want to be much more involved in what you do for your clients and/or customers. You want to be doing what you started your business to do, and that wasn’t to go home at the end of the day and categorize your banking transactions.

But then it becomes something that suffers from procrastination. It’s not something that HAS to be done for your business to operate. You then think you can do it at the end of the week, which becomes the end of the month, the end of the quarter, and suddenly, Eek!, it’s tax season. This snowballs into many problems.

First, operating in this manner makes it impossible to really know how your business is doing. Sure, you may be doing okay enough since there is money in the bank and you are paying your bills, but you don’t have really any idea how much money you are making – and how you can make more.

Second, operating in this manner is going to make the task feel unbearable when you finally come around to the bookkeeping. You will be scrambling from behind, won’t remember what every transaction was for, and will potentially be missing out on deductions. When it then comes back around to just how much money you are making, this could again mean it is not going to be as high as it could be.

Lastly, this is going to result in you losing a sense of control. It can feel great when you have enough things to do while working in your business, you feel successful when your schedule is full. But it will feel awful when things catch up to you and you realize you have spent no time working on your business.

Let this be a call to catch up on the things you need to catch up on. This puts you in the best position to have the most success. And remember that we are always here to help you reach that spot in any way that we can.

Wednesday, October 20, 2021

It has been less than a week since the deadline passed for filing your taxes if you received an extension. That may seem like it must be much too early to discuss next year’s filing, but it means we are in the final quarter of 2021, and that means the time to make moves that can affect your tax picture for this year is running short.

If you are someone who just filed and were surprised at your final numbers, let that be the kick you need to seek the answers that will move things closer to where you need them to be. That kick can be more difficult if you filed six months ago, however, for the sting wears off. But let this be a call to remind you that back then you wanted to investigate what you could do to improve things and better enjoy how your tax picture looks come filing season.

The trick with these situations is that there is no one-size-fits-all solution. If there was some simple action everyone could do to pay less taxes, it would be well known and you would have already done it. Instead, everyone’s personal situation is different and the answers and strategies that are best for you may not be best for your neighbor, and vice versa.

We are always happy to provide this personal touch. And sure, when it comes time to file, maybe we can make you aware of some deductions that you did not know you were eligible for. But at that time, we may also see things that you could have done six months previously but is too late to do then. Time is an ally in these situations.

So do not be afraid to reach out at this unorthodox time. We clearly cannot make any promises that doing so will result in future savings but can guarantee that you will have a clearer vision of your tax picture. Even if the answer isn’t the best, and even if there are no ways to make a big difference to it, you will at least be prepared and can plan for it. For again, time is your ally in these situations.

For not only is time a help in this area, so is knowledge. The bad times happen when you find out something you didn’t know at a time when you can’t do anything about it. This is your chance to not end up there.  

Wednesday, October 13, 2021

I have recently tried to communicate just how difficult it can be to deal with the IRS. This is not a straight criticism of the agency as an institution, it simply does not have the manpower to properly address all the things it should be able to properly address.

The IRS has given indications that things will improve, but that doesn’t seem to be happening, or at least not very quickly. This recent article showcases some of the ways and some of the reasons the IRS is falling behind and how a fix doesn’t appear to be imminent. With this all happening at a time when even some who filed their taxes on the original deadline back in May are waiting for their returns to be processed, the frustration can be strong.

With this growing frustration then, I thought it could be helpful to look at what rights you have as a taxpayer, a list that Is very simply labeled, the Taxpayer Bill of Rights. Of course, when you look at this, it may seem more than a little ironic that the second thing on the list is the right to quality service (where even the IRS includes the word ‘prompt’ in the definition of this type of service).

Furthermore, I can completely appreciate a cynic’s view of this list. It may look like a lot of platitudes that do not do you a lot of good if you are actually facing the IRS. Add in the increased tension that can be caused by the difficulty experienced in attempting to contact the agency, and a list of rights can feel empty.

You do not have to just throw up your hands, though. If you receive a letter from the IRS, it does not mean that you are automatically wrong. Sure, some people make mistakes when filing their taxes. But the IRS also makes mistakes when looking at those filed returns. And even more often lately, the agency makes mistakes when sending out notices – some of which have not been actually applicable to its recipients.

And it is frightening to receive such a letter, especially since they sometimes come in the form of a large bill that you did not expect. But one of the rights on the list is ‘The Right to Challenge the IRS’s Position and Be Heard,” so if it is their mistake, you have a chance to set it right. You want to act quick (especially when receiving a response to such action can be delayed) but you can do so. And if you need assistance from those with a greater understanding of how those things work, then do not hesitate to find it.