9 Things You Didn’t Know Were Tax Deductions
1. Sales taxes You have the option of deducting sales taxes or state income taxes off your federal income tax. In a state that doesn’t have its own income tax, this can be a big money saver. Even if you paid state taxes, the sales tax break might be a better deal if you made a big purchase like an engagement ring or a car. You have to itemize to take the deduction rather than take the standard deduction. 2. Health insurance premiums Deductible medical expenses have to exceed 7.5% of your adjusted gross income (AGI) to be claimed as an itemized deduction for 2021. However, if you’re self-employed and responsible for your own health insurance coverage, you might be able to deduct 100% of your premium cost. That gets taken off your adjusted gross income rather than as an itemized deduction. 3. Tax savings for teacher Qualified K-12 educators can deduct up to $250 for materials. That gets subtracted from your income, so you can take advantage of it even if you don’t itemize. COVID-19 related expense such as Personal Protective Equipment (PPE) are allowed as deductions under the Educator Expense Deduction. 4. Charitable gifts Out-of-pocket expenses for charitable work also qualify. For example, if you make cupcakes for a charity fundraiser, you can deduct the cost of the ingredients you used to bake them. It helps to save the receipts or itemize the costs in case of an audit. 5. Paying the babysitter You might be able to deduct the cost of a babysitter if you’re paying her to watch the kids while you are working, looking for work, or a full-time student. You will need to report the name, and tax ID number of the person or organization providing the care as well as the address of where the care was provided. Some states also require that you report the telephone number of the care provider. While this is technically not a deduction, it can be even better because you don’t have to itemize your deductions to receive the credit. This means that it can lower your tax in addition to taking the standard deduction rather than itemizing. 6. Lifetime learning The Lifetime Learning credit can provide up to $2,000 per year, taking off 20% of the first $10,000 you spend for education after high school in an effort to increase your education. This phases out at higher income levels but doesn’t discriminate based on age. 7. Unusual business expenses If something is used to benefit your business and you can document the reasons for it, you generally can deduct it off your business income. A junkyard owner, for example, might be able to deduct the cost of cat food that encourages stray cats to hang around and keep the mice and rats away. A bodybuilder got approved to deduct the body oil he used in competition. 8. Looking for work Losing your job can be traumatic, and the cost of finding a new one can be high. But, for tax years prior to 2018, if you’re looking for a job in the same field, you itemize your deductions, and these expenses exceed 2% of your adjusted gross income, any qualifying expenses over that threshold can be deducted. It may seem like a high bar, but those costs add up quickly—consider deducting the mileage you put on your car driving to interviews and the cost of printing resumes. Beginning in 2018, these expenses are no longer deductible for federal tax but some states, such as California, still allow this deduction after 2018. 9. Self-employed Social Security The bad news about being self-employed: You have to pay 15.3% of your income for social security and Medicare taxes, the portions ordinarily paid by both employee and employer. But there’s one small consolation—you do get to deduct the 7.65% employer portion off your income taxes.
The 6 Reasons Not to Do Your Taxes Yourself
Why, as a business owner, doing taxes yourself might not make sense. As a business owner, you’re probably used to wearing a lot of hats. That kind of “get it done” attitude makes for successful entrepreneurs (and successful businesses). But there’s one major area of your business that requires a very specialized hat—and that’s doing taxes yourself. While you certainly can do your taxes yourself, as a business owner, that doesn’t necessarily mean you should. Let’s take a look at some of the key reasons why doing taxes yourself might not be the best thing for you and your business: 1. Numbers Just Aren’t Your Thing … Not everyone is a numbers person. And if you’re not a numbers person? Doing taxes yourself probably isn’t a good idea. There’s a lot of complexity involved, and if numbers aren’t your thing, the monotony of all the math can feel overwhelming. 2. Or Numbers Are Your Thing, but You Don’t Have the Bandwidth for Taxes Even if numbers are your thing, it doesn’t necessarily mean that doing taxes yourself is the right move. Doing your business taxes is a time-consuming affair. And all that time you’re spending on your taxes? That’s time you’re not spending on your business, billing clients or bringing in revenue. Hiring a tax professional frees up your time and energy to work on your business while they work on your taxes. 3. Business Taxes Are More Complex than Personal Taxes If your personal finances are fairly straightforward, then filing your personal taxes can be pretty simple, which is why so many people choose to DIY them. But business taxes? They’re another beast entirely. Depending on your business structure, you may need to consider payroll taxes, profit-and-loss (a.k.a. P&L) statements, issuing 1099s to contractors … the list goes on. As a Tax professional with significant experience navigating each step of the complex process that is business taxes, you don’t have to spend the time and energy figuring out how to navigate it yourself. 4. Tax Laws Are Always Changing Tax laws are always changing and evolving—and unless you’re a tax accountant, you’re probably not going to know about all those changes when it comes time to file. Great Example – The Cares Act and the constant tax code update with the various COVID relief. Not knowing current tax codes can increase the chance that you’ll make a mistake on your return—which, again, can cause major issues with the IRS. But it goes further than that. It can also cause you to miss out on deductions and credits you may be eligible for, which can cause major issues with your bank account. It’s a tax professional’s job to keep their finger on the pulse of what’s happening in the tax world, including any new laws, credits or deductions. And when you work with US, you’ll know that your taxes are being done in accordance to the most up-to-date tax laws (and that you’re pocketing as much of your money as possible). 5. Making Mistakes on Your Taxes Is Costly The IRS is not a mistake-friendly branch of the government. When you submit your taxes, they expect them to be completely accurate, and if they’re not, it can cost you a lot of time, hassle, energy and cash. 6. The Internet Can Be an Unreliable Place If you do your business taxes yourself, you’re going to have questions, like: Which forms do I need to file? What are my tax rates? When are the deadlines for business filing? And when you need those questions answered, chances are, you’re going to head to the internet. 1But the internet can be an unreliable place. There is so much information out there, and it can be hard to sift through out-of-date or inaccurate info to find the answers you need. Doing Taxes Yourself Is Your Call—but Come Tax Time, Consider What’s Right for Your Business Bottom line? If you feel strongly that you want to manage and file your own business taxes, you can certainly go that route. But keep in mind that doing taxes yourself is a big job in your business, and if you’re going to do them, you need to dedicate the time, energy and resources into getting them done right. If not, it’s definitely in your (and your business’) best interest to partner with a tax professional.
What Is an IRS 1099-MISC Form?
Form 1099-MISC is used to report miscellaneous payments made to nonemployees, such as independent contractors. If you’re starting to work as an independent contractor or freelancer, you’ve likely heard people refer to Form 1099. A 1099 isn’t just one form, but actually a series of documents (including the 1099-MISC) that reports the various types of income you receive. For instance, you may receive a 1099-INT to report interest income received from your bank, or a 1099-R showing a distribution from a retirement account. But if you’re an independent contractor, the form you’re most likely to see is the 1099-MISC. What Is a 1099-MISC? Form 1099-MISC is used to report miscellaneous payments made to nonemployees, like independent contractors, to the IRS. You’re required to issue a 1099-MISC to someone based on two thresholds: I. You’ve paid at least $10 in royalties or broker payments, in lieu of dividends or tax-exempt interest II. You’ve paid at least $600 in services, rents, prizes or awards, and other income payments You can find the full list of payments that qualify for a 1099-MISC on the IRS website. 1099-MISC vs. W-2 Whether you send a 1099-MISC or a W-2 depends on who you are paying. A W-2 is issued for employees to report their wages and taxes withheld (like payroll taxes). A 1099-MISC is for any payments you made to a nonemployee, for example, an independent contractor. Before you start paying people, make sure to learn the difference between an employee and an independent contractor. What Do You Do If You Receive a 1099-MISC? If you received a 1099-MISC form from someone who paid you for work you performed, you must report this income on your tax return. When you receive a 1099-MISC, you should first check your records to ensure that what is reported on the 1099 form is correct. A 1099-MISC form gets sent to the IRS to report how much you’ve been paid. If the IRS received the wrong information, that could cause confusion with your tax return. How you report it depends on the type of business you own. If you are a sole proprietor or single-member limited liability company (LLC), you’ll report 1099 income on Schedule C, Profit or Loss from Business attached to your individual tax return. If your business is a partnership, multiple-member LLC, or corporation, your 1099 income is reported on the business tax return. But remember, you don’t want to double count your income. If you’ve already included this income on your tax return—you may have kept track of income during your bookkeeping—don’t add the 1099-MISC income to your tax return. What If the Information on Your 1099-MISC Is Wrong? The IRS uses 1099 forms to make sure the taxes owed are paid. It does this by matching the income reported on your tax return to the 1099 forms received from your clients. So if you receive a 1099 that you know to be wrong, you’ll need to act quickly to get it corrected. First, contact the issuer and ask them to issue a corrected 1099. If the issuer doesn’t cooperate, you’ll need to address this on your own return. Example, say a client paid you $1,000 during the year, but your 1099-MISC shows they paid you $1,500. Report the income correctly but attach an explanation to your tax return that addresses the difference. Make sure you keep copies of any records to back up the lower number just in case you receive an underreporting notice from the IRS, or your return is flagged for an audit. What If You Don’t Receive a 1099-MISC? If a client paid you $600 or more during the year but you didn’t receive a 1099-MISC, you still need to report the income. You are required to report all income, even if it is under the $600 threshold. Sometimes forms get lost in the mail or are sent to the wrong address. And occasionally, people send 1099s late or don’t even realize they need to issue them. You could contact the client and ask them for a 1099, but even if they don’t comply, just report your income per your records on your return. If you were paid by a client or customer through a credit card or third-party payment network, you won’t receive a 1099-MISC from your client. Instead, you should receive a 1099-K from the payment processor if you were paid over $600 by a credit card, or over $20,000 (and had over 200 transactions) from a third-party payment network. Do You Also Need to Send a 1099-MISC? If you made payments of $600 or more to any individual or unincorporated business as a small business or self-employed individual, you are likely required to file a 1099-MISC. Example, say you paid a graphic artist $1,200 to design a logo and website for your business. You would be required to file a 1099-MISC with the IRS by January 31 of the following year. There are some exceptions, though. You don’t need to send a 1099-MISC for: Payments made with a credit card or through a third-party network; the payment processor should file a 1099-K Payments made to a corporation Payments made to employees—these should be included on a W-2 For a full list of exceptions, refer to the IRS instructions for Form 1099-MISC. How Do You File a 1099-MISC for Your Contractor? To issue a 1099-MISC, you must have a valid tax ID number for the recipient. It’s a good idea to get a Form W-9 from each independent contractor or unincorporated business that you hire before issuing any payments. The W-9 simply ensures that you have the correct name, address and tax ID number to issue a 1099. You do not need to file Form W-9 with the IRS—just keep it for your records. With the W-9 in hand, you are ready to prepare the 1099. For each 1099 you prepare, you’ll need to include: Your business name, address and tax
Happy New Year!
Merry Christmas and Happy New Year! The IRS will start accepting income tax returns on: Jan 31, 2022. Organize your records for tax time Good organization may not cut your taxes. But there are other rewards, and some of them are financial. For many, the biggest hassle at tax time is getting all of the documentation together. This includes last year’s tax return, this year’s W-2s and 1099s, receipts and so on. How do you get started? Print out a tax checklist to help you gather all the tax documents you’ll need to complete your tax return. Track paperless records as they come Charitable donations Outlays for health care Gambling winnings and losses Property tax expenditures include for your auto. Keep all the information that comes in the mail in January, such as W-2s, 1099s and mortgage interest statements. Be careful not to throw out any tax-related documents, even if they don’t look very important. Collect receipts and information that you have piled up during the year. Group similar documents together Make sure you know the price you paid for any stocks or funds you have sold. If you don’t, call your broker before you start to prepare your tax return. Know the details on income from rental properties. Life events you experience Documents related to life events should all be saved, such as records of: marriage death of a spouse divorce deductible alimony payment records adoption papers child custody agreements A newborn brings joy into your life and potential tax advantages. When you sit down to prepare your return, have these documents for dependent children close at hand: Social Security card Childcare receipts Contributions to college savings plans Buying a home presents tax-saving opportunities. New homeowners should keep paperwork such as: Closing documents Home improvement invoices, receipts and proof of payment Annual mortgage statement Itemize your tax deductions It’s easier to take the standard deduction, but you may save a bundle if you itemize, especially if you are self-employed, own a home or live in a high-tax area. Itemizing is worth it when your qualified expenses add up to more than the 2021 standard deduction of $12,550 for most singles and $25,100 for most married couples filing jointly. Many deductions are well known, such as those for mortgage interest and charitable donations. You can also deduct the portion of medical expenses that exceed 7.5% of your adjusted gross income for 2021.
Delayed Refunds – Calling IRS is not the Answer
IRS is holding millions of tax returns, delaying refunds… The IRS is holding 29 million tax returns for manual processing, delaying tax refunds for many Americans. The delays are prompting some taxpayers to fret over social media about weeks of waiting in limbo for their money. Here at Mac Neal LLC we understand, we have gotten a volume of calls regarding delayed returns. Typically, the IRS sends most refunds within three weeks (21 Days) of taxpayers filing their return. But this year is complicated by a several issues, including a backlog of 2019 paper tax returns that the IRS was unable to process after shuttering its offices during the coronavirus pandemic. A recent notice from the IRS said that some people may experience a longer than average wait for their payments. That may especially impact tax returns that need a correction due to changes made by the Recovery Rebate Credit — a tax credit adjustment for people who were owed more stimulus money — or to verify income for the Earned Income Tax Credit (EITC)and Additional Child Tax Credit (ACTC), according to the agency. “This work does not require us to correspond with taxpayers but does require special handling by an IRS employee, so in these instances, it is taking the IRS more than 21 days to issue any related refund,” the IRS said in a March 18post. The IRS has gone through more than 91 million individual tax returns filed for the2020 tax year and issued more than 68 million refunds so far. The IRS has also distributed more than 161 million payments for the third stimulus check over the past several weeks, adding to its workload during the current tax season. Mac Neal LLC understands that this may not provide much comfort to you if you are still waiting on your tax refund. However, please be patient and continue to wait, there is not much more that can be done at this juncture. While the IRS has warned that some people may face delays, it suggests that taxpayers check the status of their refund using the “Where’s My Refund?” tool on its site. Notably, however, the tool only tells taxpayers that their return is being processed — it doesn’t provide details such as when the refund will be issued or if the taxpayer needs to give the IRS additional information. “6 weeks since IRS accepted my return and still no update. ‘It has been received and being processed.’ How long does it take to process?” one taxpayer wrote on Twitter. “Others got theirs in 2 weeks, 4 weeks.” Calling the IRS? Good luck Calling the IRS for information may not be much help, either. Many frustrated taxpayers may attempt to call the IRS for a status update on their tax refund, however it is very difficult to get through on their lines. In addition, Mac Neal LLC has called on behalf of many taxpayers, however the responses are standard and not helpful. The consistent feedback has been, “Your return is still processing, it is in another department for further review and processing, we do not have any further information, please allow 6 to 8 weeks from the date in which you filed. Should there be any issues, a notice will be mailed to the address on file”. Calls to the IRS’ Accounts Management lines — the primary phone contact for taxpayers— are up 300% this filing season, but IRS employees are answering only about 7%of all such calls. The delays in issuing refunds this year are “unavoidable” given the complexity of the tax changes authorized by several stimulus packages, which included three rounds of stimulus checks and new tax credits. For instance, the stimulus package signed into law at the end of December came too late for the IRS to adjust its forms and computer systems for provisions related to the EITC and the ACTC. That means tax returns with this issue must be corrected by hand rather than via computer, a tax advocate stated. These returns must be corrected manually are “in ‘suspense’ until an IRS employee can review it. Essentially, the return is in a queue waiting to be reviewed and processed, and during this time, it is not evident on IRS systems why the return is being held. Mac Neal LLC understands that this is frustrating for taxpayers who are banking on their tax refund to pay for essentials or to take care of their debts. Three of four Americans receive a tax refund, with the typical payment amounting to $3,660. Please continue to be patient and mindful that we cannot speed up the processing time and that having us call expends both of our time without any productive outcome, other than possibly a reassured mind. It is our intent to ease your worry and reassure you that your return is processing! We hope that this has explained what is going on and we are here for you if you need anything! How to Notify the IRS your Address has Changed If you filed a joint return and are still residing with the same spouse, both you and your spouse should provide your names, social security numbers, new address and signatures on the form or statement. If you filed a joint return and you now have separate addresses, each of you should notify us of your new, separate addresses. Authorized representatives filing a form or written statement to change an address for a taxpayer must attach a copy of their power of attorney or Form 2848, Power of Attorney and Declaration of Representative. Unauthorized third parties can’t change a taxpayer’s address. Changes of address through the U.S. Postal Service (USPS) may update your address of record on file with us based on what they retain in their National Change of Address (NCOA) database. However, even when you notify the USPS, not all post offices forward government checks, so you should still notify us. For changes of address relating to an employment tax return, we issue confirmation notices (Notices 148A and 148B) for the change to both the
Extended 2020 Tax Filing Season Details
The IRS has implemented plans for the extended federal income tax filing deadline for individual returns. Deadlines for other return types were not affected (other than those previously announced for the winter storms in some states (see below)). Federal 1040 – All Filers Filing due date – 5/17/2021 Payment due date – 5/17/2021 Default payment withdrawal date for electronic funds withdrawal – none. You must enter a requested payment date on the PMT screen to clear EF message 2522. 4/1/21– IRS adjusted the business rules to allow requested payment dates for electronic funds withdrawal beyond 4/15. An update to Drake20, released 4/2/21, allows a requested payment date up until May 17, 2021 for the 1040 main form. EF message 5299 now only generates if a date after 5/17/21 is entered on the PMT screen. Extension due date – 5/17/2021 Default extension payment withdrawal date for electronic funds withdrawal – none. You must enter a requested payment date on the PMT screen to clear EF message 2522. 4/1/21– IRS adjusted the business rules to allow requested payment dates for electronic funds withdrawal beyond 4/15. An update to Drake20, released 4/2/21, allows a requested payment date up until May 17, 2021 for the 1040 extension. EF message 5299 now only generates if a date after 5/17/21 is entered on the PMT screen. 1st quarter estimate date – 4/15/2021 1st quarter estimate payment withdrawal date for electronic funds withdrawal – 4/15/2021 1040 filers in LA, OK, and TX affected by the February winter storms Filing due date – 6/15/2021 Payment due date – 6/15/2021 Default payment withdrawal date for electronic funds withdrawal – none. You must enter a requested payment date on the PMT screen to clear EF message 2522. 4/1/21– IRS adjusted the business rules to allow requested payment dates for electronic funds withdrawal beyond 4/15. An update to Drake20, released 4/2/21, allows a requested payment date up until June 15, 2021 for a TX, OK, or LA filer. EF message 5299 now only generates if a date after 6/15/21 is entered on the PMT screen. Extension due date – 6/15/2021 Default extension payment withdrawal date for electronic funds withdrawal – none. You must enter a requested payment date on the PMT screen to clear EF message 2522. 4/1/21– IRS adjusted the business rules to allow requested payment dates for electronic funds withdrawal beyond 4/15. An update to Drake20, released 4/2/21, allows a requested payment date up until June 15, 2021 for a TX, OK, or LA filer. EF message 5299 now only generates if a date after 6/15/21 is entered on the PMT screen. 1st quarter estimate date – 6/15/2021 1st quarter estimate payment withdrawal date for electronic funds withdrawal – 4/15/2021 IRS is not adjusting business rules to allow the 1st quarter estimate to be electronically withdrawn on 6/15. Combining 1st and 2nd quarter amounts and including the total as the 2nd quarter amount will allow them to pay 1st and 2nd quarter estimates electronically. 1120, 1120s, 1065, 1041, 990, and 706 returns due after February 11, 2021 and before June 15, 2021 for filers in LA, OK, and TX affected by the February winter storms Important: Due dates did not change for any other package except for filers in LA, OK, and TX affected by the February winter storms. Those changes are as follows: Filing due date – 6/15/2021 Payment due date – 6/15/2021 Default payment withdrawal date for electronic funds withdrawal – original due date of return IRS is not adjusting business rules to allow requested payment dates for electronic funds withdrawal beyond the original due date for these filers. They will not be able to schedule future payments after the original deadline up to 6/15. If they are filing after the original due date, electronic funds withdrawal will have to be made the date they file or an alternate payment method must be used. 1st quarter estimate date – 6/15/2021 Extension due date – 6/15/2021 Default extension payment withdrawal date for electronic funds withdrawal – 4/15/2021 IRS is not adjusting business rules to allow requested payment dates for electronic funds withdrawal beyond the original due date for these filers. They will not be able to schedule future payments after the original deadline. Extensions filed after the original due date perfection period will have to be mailed.
New Child Tax Credit and Stimulus Updates
When will your $3,600 child tax credit check arrive — and how often? If you qualify for the 2021 child tax credit, you could receive multiple payments. Will they be monthly? When will the first check arrive? Here’s what we know so far. The new stimulus checks are being delivered at a steady pace. New information for Social Security beneficiaries heralds another wave of payments for this group, and for others waiting for their third stimulus checks to arrive through paper checks and EIP cards (track your payment here). But the $1,400 stimulus payments are only one way qualified families will receive more money this year. Families with children under 17 may actually receive more than a stimulus check if they qualify for the 2021 child tax credit, also called the CTC. Detailed in the $1.9 trillion stimulus bill signed earlier in March, the CTC expansion allows eligible parents to claim up to $3,600 for each child dependent. That’s a raise of up to $1,600 over the $2,000 parents could claim last year for each dependent aged 17 or younger on the parents’ 2020 tax returns. But with the IRS now processing millions of stimulus checks and hundreds of millions of tax returns between now and the new May 17 Tax Day deadline, what does that mean for the child tax credit timeline? When would the first CTC payment arrive, and how often would you get them? Could they become permanent? We’ll explain that and more below. Meanwhile, here’s seven tax credits for 2021, more information about unemployment benefits, and what we know so far about whether a fourth stimulus check could happen. This story was recently updated. When will the 2021 Child Tax Credit payments begin arriving? We know a general timeline, but the specifics are yet to be pinned down. The American Rescue Plan stipulates that the CTC payments will start to arrive in July. However, a specific date hasn’t been released for when the payments will come. The IRS will make additional information about the expanded child tax credit available “as soon as possible,” the agency said in a statement March 12. How often will the CTC checks be distributed? The child tax credit will be paid out “periodically,” according to the text of the stimulus bill, from July through December. However, the IRS hasn’t shared how often it will be able to get the checks out. Monthly delivery has been a goal, and the initial language used in earlier drafts of the stimulus bill. However, the language changed to “periodically,” perhaps in part because of the extra burden placed on the IRS to also distribute tax returns and stimulus checks. In other words, some may have felt a monthly delivery cycle was too ambitious or unrealistic. “I think it might be a challenge to get into the monthly right out of the box,” IRS Commissioner Charles Rettig said when asked about the timeline. The amount you’d receive would be half of what you’re owed for the year, under the new stimulus bill, and you’ll receive the other half of the payment with your 2021 tax refund. If paid out monthly, the payments would break down to up to $300 per month for each qualifying child age 5 and under, and up to $250 per month for each child between the ages of 6 and 17. Note that this amount phases out for those with higher incomes — for single people earning more than $75,000 per year, heads of household earning more than $112,500 per year and married couples earning more than $150,000 a year. How will I be paid the CTC: Direct deposit, mail, some other way? When the payments do start arriving, the Treasury and IRS could very well send out the payments the same way they do the stimulus checks, Joanna Powell, managing director and certified financial planner at CBIZ, told CNET. It hasn’t been confirmed by the IRS yet, but if the agency does use the same method as stimulus checks, here’s how it would work: If you have direct deposit on file with the IRS, that’s how you’ll get your payment. If not, you’ll receive your money as a paper check. It isn’t clear if Social Security beneficiaries, like people in SSI, SSDI and veterans programs, would receive their CTC through their Direct Express card, the same way millions could get their third stimulus check. Do I have to do anything to get the child tax credit money? What if I already filed my 2020 taxes? Taxpayers shouldn’t file an amended return related to the new legislation and shouldn’t take any other “unnecessary steps,” the IRS said March 12. Rettig said payments will be automatic for those who file their 2020 tax returns by May 17, the new tax deadline. However, nonfilers will need to file a 2020 tax return to get the credit, even if they don’t usually submit tax returns. This will inform the IRS of how many dependents are in the household who would count toward the CTC benefits. When will the IRS portal for fixing errors be available? The IRS said it will launch an online portal by July 1, Rettig said, but the IRS won’t have the resources to build this until after tax filing season ends. Once the CTC portal is available, recipients can log in to update their information if their circumstances have changed. For example, if you have a child in 2021, the IRS wouldn’t have that information on file yet, so updating those details could help you get a larger tax credit payout. Will I have to return money to the IRS if I get more money than I should? The CTC isn’t as flexible as the stimulus check rules. If you receive more money than you should have, you will have to pay it back. Powell explained that when you file your 2021 tax return (in 2022), if your tax situation isn’t what the IRS has in its system, and you
IRS to Handle Unemployment Returns, Don’t Amend
Returns filed with unemployment benefits prior to the $10,200 exclusion should not be amended. The IRS has indicated it will refigure taxes on these returns and adjust the taxpayer’s account accordingly. The IRS will then send any refund amount directly to the taxpayer. The IRS has not yet communicated a timeline for making adjustments and sending refunds. Look for an official news release in the coming days: https://www.irs.gov/newsroom If you file state returns in states that conform to the federal unemployment exclusion, you may still need to file amended state returns. Mac Neal LLC makes regular updates on social media accounts for real time immediate updates.
Stimulus – Tax Season Extension – Updates
Mac Neal LLC is working around the clock to stay current on the tax law changes, stimulus updates, and tax return processing times. The IRS has a backlog of over 7 million returns from 2019. In addition, the IRS is working on processing 2020 returns and stimulus checks. Please be patient and give the IRS time to get to your stimulus and your tax return. I personally do not have additional information about your stimulus or your tax return other than providing clarifying information on eligibility or answers as it relates to your tax return paperwork and your personal tax situation. The IRS has instructed that we should not call regarding the stimulus at this time. The IRS has also instructed to not call and inquire about your 2020 tax refund status unless it has been more than the 21-day processing time deadline since the submission of your filing. If it is more than 21 days since your return has been processed and the “Where’s my refund?” tool does not have an update for you, feel free at that time to contact me for further advice. IRS to Extend Filing Season The IRS has announced that it will extend the filing season until Monday, May 17, 2021. This one-month extension is for filing and payment. Thank you in advance for your patience while I work with my software company on the federal and state software updates related to this filing deadline change, such as due dates, payment debit dates, and filing instructions. I will be checking closely with the IRS and state tax agencies to conform to their official guidance on this matter. For more information, view https://www.irs.gov/newsroom/tax-day-for-individuals-extended-to-may-17-treasury-irs-extend-filing-and-payment-deadline. Stimulus # 3 Update The Internal Revenue Service told financial institutions to expect roughly 90 million direct deposits amounting to $242.2 billion on March 17 in the initial distribution of the American Rescue Plan stimulus payments, according to a banking industry group. Following the deposits, the IRS mailed an additional 150,000 checks amounting to $442 million, with a pay date of March 19, according to the Independent Community Bankers of America, based on a briefing from the IRS. “Additional batches of payments will be sent in the coming weeks with the vast majority sent by direct deposit,” “Payments will also be sent through the mail as a check or debit card.” The American Rescue Plan provides a third round of direct stimulus payments, up to $1,400 for individuals, $2,800 for couples, and an additional $1,400 for each dependent regardless of age. If you haven’t received your deposit, here’s some information that may help you figure out when your money will arrive and what to do if you get your funds on a prepaid debit card. Stimulus Q & A What’s the maximum amount you can receive? Individuals will receive up to $1,400, while married couples who file jointly will get up to $2,800. Additionally, dependents will receive as much as $1,400. (The IRS automatically calculates the amounts issued.) Unlike the first two payments, families will get the stimulus checks for all dependents claimed on their tax returns. That includes adult dependents, such as college students and older relatives. Previously, only children under the age of 17 qualified. However, if you’re in debt, you might not see some — or even all — of that money. That’s because debt collectors can garnish funds from the stimulus checks, something consumers were previously protected against. Who qualifies for stimulus checks? U.S. citizens or permanent residents are generally eligible for the full amount — provided they are not dependent on another taxpayer and have a valid Social Security number — if their adjusted gross incomes don’t exceed certain amounts. Those levels differ somewhat from the first two checks, so not everyone who qualified for those them will get the third one. The eligibility amounts are as follows: $75,000 for individuals (including single tax filers or a married person filing separately) $112,500 for those filing as head of household $150,000 for married couples who file a joint return, or those filing as a qualifying widow or widower Once that threshold is met, taxpayers may still be eligible to receive reduced amounts. But the stimulus checks phase out entirely for those whose adjusted gross income is over the following amounts: $80,000 for individuals $120,000 for those filing as head of household $160,000 for married couples filing jointly, or those filing as a qualifying widow or widower Still unsure how much you’ll get? Try this stimulus check calculator. How eligibility is determined? Most people, including those who received the first two rounds of stimulus checks, likely won’t need to take further action to get this latest economic impact payment, as eligibility is determined based on information already available to the IRS. The third round of payments will be issued to eligible people who: Filed a 2020 tax return (the due date will be delayed until May 17 this year) Filed a 2019 tax return (if the 2020 return hasn’t been submitted or processed yet) Didn’t file a tax return for either of those years but registered for the first stimulus check using the special non-filers portal last year Are, as of Dec. 31, 2020, recipients of federal benefits who don’t usually file a tax return. This group includes people who received Social Security or Railroad Retirement Board benefits, Supplemental Security Income or veteran benefits in 2020. (More information for federal benefit recipients will be provided at a date to be determined as the IRS works with the various information to update information for this year. Further details will be released at IRS.gov.) People who didn’t file a 2019 or 2020 return, or register for the non-filers tool, can also still qualify for all three payments (provided they meet all the eligibility requirements) through the Recovery Rebate Credit. The credit can be claimed by filing a 2020 tax return. Find out how to do that here. For married couples, what if only one spouse has a Social Security number? Couples who file their
COVID-19 stimulus package: Jobless Americans get a tax waiver of up to $10,200 on unemployment benefits
UPDATE Returns not-filed yet with Unemployment Compensation Tomorrow morning, a software update for the new Unemployment Compensation Exclusion will be available, the IRS provided guidance just today. Tomorrow I will be able to file returns with this new exclusion. If you have unemployment benefits and provided me with your files on or after March 11, I have been holding your return awaiting IRS guidance. Returns Previously Filed with Unemployment Compensation The IRS strongly recommends that tax preparers and taxpayers should not yet file amended returns for the Unemployment Exclusion. Official IRS guidance is forthcoming. The Jobless Benefit Further Explained As part of the American Rescue Plan, many taxpayers wouldn’t be required to pay taxes on up to $10,200 in unemployment benefits received last year. The exclusion is up to $10,200 of jobless benefits for each spouse for married couples. So it’s possible that if both lost work in 2020, a married couple filing a joint return might not have to pay federal income taxes on up to $20,400 in jobless benefits. It can be a little confusing. So, for example, if one spouse received $15,000 in jobless benefits but the other received just $1,000 in unemployment compensation in 2020, then the exclusion for tax purposes that the couple would receive would be $11,200 – not $16,000. Who is eligible? Not everyone will be covered. The special provision to waive taxes on some unemployment income applies to those who made less than $150,000 in adjusted gross income in 2020. Example of potential savings. Take a single filer who worked for part of 2020 but who had been jobless for a short time last year. Assume a single taxpayer had an adjusted gross income of $75,000 in 2020. And let’s assume that the only jobless benefits they received totaled $10,200 when they were out of work. Such a taxpayer could now exclude the $10,200 in jobless benefits. The single filer would be in the 22% bracket, so the filer would save about $2,244 in taxes, thanks to the new exclusion for some jobless benefits. What about state taxes? More than half of states levy an income tax on jobless benefits. States will have to decide if they will also offer the tax break on state income taxes. It’s possible that some may still opt to tax the jobless aid, experts say. Some already exempt taxes on unemployment, including California, New Jersey, Virginia, Montana and Pennsylvania. And some don’t levy state income taxes at all, including Texas, Florida, Alaska, Nevada, Washington, Wyoming and South Dakota. Should I wait to file my taxes to claim the waver? Many out-of-work Americans rushed to complete their taxes to get a possible refund to help make ends meet. The tax break is becoming law after 55.7 million tax returns were already filed by Americans with the IRS, as of March 5. Some filers may consider waiting to file their taxes until the IRS issues new guidance to claim the new $10,200 waiver, experts say. To be sure, the stimulus package also offers $1,400 stimulus checks to individuals who earned up to $75,000, and married couples with incomes up to $150,000. Payments would decline for incomes above those thresholds, phasing out above $80,000 for individuals and $160,000 for married couples. Some taxpayers may opt to file their taxes sooner to get the latest stimulus check, particularly if their 2020 income was lower than in 2019. That single filer (anyone earning 75k or less and eligible for the stimulus) would be in the 22% bracket, so the filer would save about $2,244 in taxes, thanks to the new exclusion for some jobless benefits.