News & Updates for You
Here is what you can find in the most recent newsletter!
- Required Minimum Distributions
- Advance Child Tax Credit & Economic Impact Payment Information Letters
- Tax Moves to Make Before Year-End
- Year-End Tax Planning Ideas For Your Business
- 5 Great Money Tips
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2022 Tax Season Dates to Remember
Tax Season is quickly approaching again, here are some dates for you to keep in mind:
- January 18- Due date for the 4th quarter estimated tax payment for 2021
- January 31- Due date for W2s and 1099s informational returns
- March 15- Due date for Partnership and S Corporation income tax returns
- April 18- Due date for Individual and Corporation income tax returns
Please let us know if you need additional time for any of your returns, we can file six-month extensions for any income tax returns.
Required Minimum Distributions
Required minimum distributions (RMDs) generally are minimum amounts that a retirement plan account owner must withdraw annually starting with the year that he or she reaches 72, or if later, the year in which he or she retires. RMDs can be an important part of your retirement income strategy.
Although the IRA custodian or retirement plan administrator may calculate the RMD, the IRA or retirement plan account owner is ultimately responsible for calculating the amount of the RMD. A RMD is calculated for each account by dividing the prior December 31 balance of that IRA or retirement plan account by a life expectancy factor.
If an account owner fails to withdraw a RMD, fails to withdraw the full amount of the RMD, or fails to withdraw the RMD by the applicable deadline, the amount not withdrawn is taxed at 50%. Planning ahead may reduce taxes and increase options for reinvesting.
Contact your investment broker or financial advisor if you have any questions on your future RMDs.
Advance Child Tax Credit & Economic Impact Payments Information Letters
The Internal Revenue Service announced today that it will issue information letter to Advance Child Tax Credit recipients and to recipients of the third round of Economic Impact Payments.
The IRS will send letter 6419 for Advance Child Tax Credit recipients starting late December 2021 and continuing into January. The IRS will begin issuing letter 6475 for your third economic impact payment in late January. The IRS urges people receiving these letters to make sure they hold onto them to assist in preparing their 2021 federal tax returns in 2022.
These items will be necessary to file a proper income tax return, without them we will not be able to complete your return!
Tax Moves to Make Before Year-End
There are always moves you can make to reduce your taxable income. Some of these tax-saving moves, however, must be completed by December 31.
- Tax Loss Harvesting: If you own stock in a taxable account that is not in a tax-deferred retirement plan, you can sell your underperforming stocks by December 31 and use these losses to reduce any taxable capital gains. If your net capital losses exceed your gains, you can even net up to $3,000 against other income such as wages. Losses over $3,000 can be used in the future.
- Take a peek at your estimated 2022 income: If you have appreciated assets that you plan on selling in the near future, estimate your 2022 taxable income and compare it to your 2021 taxable income. If your 2022 income looks like it might be significantly higher, you may be ale to sell your appreciated assets in 2021 to take advantage of a lower tax rate.
- Max out pre-tax retirement savings: The deadline to contribute to a 401(k) plan and be able to reduce your taxable income on your 2021 tax return is December 31. For 2021, you can contribute up to $19,500 to a 401(k), plus another $6,500 if you're age 50 or older. You also have until April 18, 2022, to contribute to a traditional IRA and be ale to reduce your taxable income on your 2021 return.
- Make cash charitable contributions: On your 2021 tax return, you may contribute up to $300 in cash to a qualified charity and deduct the amount whether or not your itemize your deductions. Married taxpayers who file jointly may contribute $600. Remember that this above-the-line deduction is for cash contributions only. It does not apply to non-cash contributions.
- Bunch deductions so you can itemize: Consider bunching your personal deduction into 2021 so you can itemize this year. The easiest way is to bunch two years of charitable contributions into a single year. These can include gifts of appreciated stock where you get to deduct the fair market value without paying capital gains tax.
Year-End Tax Planning Ideas For Your Business
As 2021 winds down, here are some ideas to lower your business taxes, get organized, and to prepare for filing your 2021 tax return.
- Identify all vendors who require a 1099-MISC and a 1099-NEC.
- Determine if you qualify for the Paycheck Protection Program safe harbor threshold that allows you to deduct certain 2020 expenses on your 2021 tax return.
- Consider accelerating income or deferred earnings, based on profit projections.
- Business meals are 100% deductible in 2021 if certain qualifications are met. Retain the necessary receipts and documentation that note when the meal took place, who attended and the business purpose of the meal on each receipt.
- Consider any last-minute deductible charitable giving including long-term capital gain stocks.
- Set up separate business bank accounts. Co-mingling business and personal expenses in one account is not recommended.
- Create expense reports. Having expense reports with supporting invoices will help substantiate your tax deduction in the event of an audit.
- Organize your records by major categories of income, expenses and fixed asset purchases to make tax return filing easier.
- Make your 2021 fourth-quarter estimated tax payments by January 18, 2022.
5 Great Money Tips
Creating a sound financial foundation for you and your family can be difficult. Here are 5 tips on how to save money:
- Pay yourself first- Treat savings money with the same care you pay your bills. Take a percentage of everything you earn and save it. Using this technique can help build an emergency fund and keep you from living paycheck to paycheck.
- Know and use the Rule of 72- You can roughly estimate the number of years compound interest will take to double your money using this rule. Do this by dividing 72 by your rate of return to estimate how long it takes to double your money. You can use this concept to understand the power of savings and investment.
- Use savings versus debt for purchases- Unpaid debt is like compound interest but in reverse. It results in you having to work harder and earn more to pay for the items you purchase. A better idea may be to save and then buy your dream item.
- Understand amortization- When a bank loans you money, it gives you a specific interest rate and a set number of years to pay it back. Most of the interest payments are front-loaded, while the last few payments are virtually all principal. Making additional principal payments at the beginning of the loan's term will decrease the amount of interest you pay to the bank and help you pay off the loan more quickly.
- Taxes are complex and require help- Tax laws are complicated. They are made even more complex when the rules change, often late in the year. The best way to stay out of the IRS spotlight and minimize your taxes is to ask for help.