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Businesses and employees have struggled with the onslaught of COVID-19. In November 2021, the IRS enacted the Employee Retention Tax Credit (ERC), a refundable tax credit designed to reward business owners for employee retention throughout the pandemic. Business owners impacted by COVID-19 can claim up to $5,000 in refundable tax credits for each employee on their payroll in 2020 and up to $7,000 credit per quarter (excluding Q4) for each employee in 2021. Consider opening a retirement plan as the employer match is 100% deductible. In California, starting June 30th, all employers with 5 or more employees are mandated to offer a retirement plan. In 2022, there has been a 100% bonus depreciation on equipment purchased for business use. If you are buying meals and beverages from restaurants for the purpose of your business, these can also be deducted. Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/  

Question: What Interests the IRS? Be aware of what puts you at risk of attention from the IRS. Here are some of the more vulnerable areas. Frivolous tax protests have been frustrating to both the IRS and tax courts. If you file a return stating that you don’t owe any tax because the dollar is worthless, expect to be audited. Be wary if you’re someone in a high-income bracket auditing higher-income taxpayers because you’re likely to produce additional tax revenue. Taxpayers with occupations that produce cash income, such as laundromats, beauty salons, restaurants, vending machines, and others are also on the radar of the IRS. If you have a complex return you prepared yourself, or your return was prepared by someone on the IRS's problem-preparer list, you may get their attention too. In the last few years, the Internal Revenue Service has detected a proliferation of abusive trust tax evasion schemes and the use of credit cards to evade paying U.S. income taxes. The IRS intends to expand its efforts to crack down on these areas. Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/  

Less than 2% of over 145 million individual tax returns filed will be selected for audit. The IRS may increase this percent as they have hired 2500 new auditors. The percentage increases for higher income groups and tax returns in areas of specific interest to the IRS. If you should receive notice from the IRS of an impending audit, please remember: IRS computers usually flag the tax returns for audits. The vast majority of them are routine. Because of the flagging process, your audit will usually focus on one to three categories of your tax return. Audits do not automatically mean something is wrong. It is possible to receive a “no change” or even an additional refund as an outcome of an audit. For more information about IRS Representation please visit www.yourirsproblemsolvers.com.

What’s New For Small Businesses in 2021 Refundable employee retention credit PPP loan forgiveness is no longer a taxable event for your small business. The same goes for any second round loans your business receives this year if they qualify. 100% meal deductibility. Business meals are typically only deductible at 50%. To help aid restaurants during the pandemic, the new law allows for 100% meal expense deductions for both 2021 and 2022. Numerous general business credits extended. New laws extend expiring tax credits for many small businesses. There are too many to mention here, but common extended credits include; work opportunity credit, credit for paid family and medical leave, and employer paying employee student loan payments. Call us today for a consolation on your business taxes-there is a lot of changes heading your way and you need the Best in the business helping you navigate through these tax situations. 1-877-6-SOLVER

What's New in 2021 For Individuals Here are some of the changes coming into effect for tax year 2021: Tuition and Fees Deduction eliminated. This tax break is now permanently closed. Mortgage insurance premium deductibility. You may still deduct mortgage insurance premiums as an itemized deduction.  Exclude discharge of mortgage indebtedness. With the extension of this law, qualified debt forgiveness on qualified mortgages is still not considered income.   Above the line charitable deductions. If you do not itemize, you can deduct up to $300 in qualified charitable deductions ($600 for married couples). Given the ongoing pandemic, expect other tax changes throughout the year.

Social Security and Medicare income limits and tax rates FICA tax is a combination of a Social Security tax and a Medicare tax. The Social Security tax is assessed on wages up to $142,800 ($137,700 in 2020); the Medicare tax is assessed on all wages. Self-employed individuals pay a self-employment tax which is the equivalent of FICA tax. For 2021, they will pay a 15.3% self-employment tax on the first $142,800 ($137,700 in 2020) of self-employment income. The earnings limit for retirees under full retirement age is $18,960 ($18,240 in 2020). Social Security benefits will be reduced $1 for every $2 of earnings above this limit. There is no earnings limit for individuals at full retirement age. www.liberatorecpa.com 

The Social Security Administration announced a 1.3% percent boost to monthly Social Security and Supplemental Security Income (SSI) benefits for 2021. The increase is based on the rise in the Consumer Price Index over the past 12 months ending in September 2020. For those still contributing to Social Security through wages, the potential maximum income subject to Social Security tax increases 3.1 percent this year, to $142,800 (up from $137,700 in 2020). A recap of the key amounts is outlined here: Up to $142,800 in wages will be subject to Social Security taxes, up $5,100 from 2020. This amounts to $8,853.60 ($8,537.40 in 2020) in maximum annual employee Social Security payments. Any excess amounts paid due to having multiple employers can be returned to you via a credit on your tax return. For all retired workers receiving Social Security retirement benefits the estimated average monthly benefit will be $1,543 per month in 2021 – an average increase of $20 per month. SSI is the standard payment for people in need. To qualify for this payment you must have little income and few resources ($2,000 if single/$3,000 if married). A full-time student who is blind or disabled can still receive SSI benefits as long as earned income does not exceed the monthly and annual student exclusion amounts listed above.

One of the New Biden Tax Plans is The American Families Plan. Our goal is to help inform you with the basics. The American Families Plan was introduced by President Biden at the end of April. The action plans address insurance premium costs, basic expenses, and investing in the children of this country.  I covered in a previous segment the Child Tax Credit Payments. As for tax rates, people who are making over $1 million a year would become subject to a tax rate of 39.6% on all of their income. This includes removing the current capital gains tax rate (20%) for those making over $1 million. That income would then be taxed at 39.6%, plus the 3.8% NII surtax, totaling a 43.4% tax rate for capital gains. Other plans are on public education and an investment of $225 billion would be used to help American families with childcare, paid leave from work, and nutrition programs. 

With ever-changing tax laws, forecasting your tax obligation is now extremely difficult to do. This uncertainty can create the need to write a large payment to the IRS. Here are some suggestions to help prevent overpaying your taxes. Make estimated tax payments  The objectives of an accurate tax forecast are to avoid IRS penalties and eliminate surprises. To avoid IRS underpayment penalties, your estimated tax payments must be large enough to satisfy these thresholds: 90% of your current year tax liability, or 100% of your prior year tax liability (110% if your adjusted gross income is more than $150,000). Maintain your books and records Don’t wait until December to balance your books. This holds true for both individuals and small businesses. Create periodic income statements and project what the full year will look like.  Contribute to your retirement accounts Invest back in your business by purchasing equipment Call us today at 877-6-SOLVER -we can run a tax forecast to help you maximize your tax savings.

Get ready for it folks, discussions about federal tax legislation are heating up in Washington D.C. Sweeping estate tax changes have been proposed, including higher estate tax rates, and a repeal of the step-up in basis rule. Although these changes are a long way from fruition and likely won’t be enacted in their current form, now is a great time to consider estate planning strategies so that you're prepared for possible changes: Plan for a higher estate tax rate. The top estate tax rate of 40% has remained in effect since 2013, but could be increased in conjunction with other changes. A higher tax could expose more assets to estate tax. Consider reducing the size of your taxable estate through lifetime gifts and other strategies. Plan for eliminating step-up on basis. For estate tax purposes, the value of inherited assets is stepped up to its fair market value on the date of death. Once the heirs sell inherited assets soon after death, there’s usually little or no income tax liability. If this rule is goes away, heirs may face a much higher capital gains tax.  Call us today 877-6-SOLVER to schedule a in-person or zoom consultation-don’t wait till it’s too late, your family should benefit from the best tax counsel possible.

On July 15th, the IRS began sending out monthly Child Tax Credit payments to those who qualify. You may have received a letter if they have determined you qualify for payments. Many people are still unsure of how it works so, I’ll break it down to you in this video. Who Qualifies? In order to qualify for the Child Tax Credit payments, you will have needed to claim the credit previously on a 2019 or 2020 tax return. You MUST have a main home in the US for more than half the year and have a qualifying child under the age of 18 at the end of 2021. As well as making less than certain income limits. The IRS will use the information provided to them to see if you are eligible and they will automatically enroll you for advance payments. If you are unsure if you qualify, you can use the Eligibility Assessment tool on irs.gov. The amount you receive depends on the age of your kids. For children ages 5 and under, you will receive monthly payments of $300 – totaling $1,800. For children ages 6 to 17, you will receive $250 monthly – totaling $1,500. The payments will be disbursed on 15th of every month beginning July through December. Lastly you can choose to opt out and keep the child tax credit for tax time-use the online tool for this. For more info - use the Eligibility Assessment tool on irs.gov

At this time of recording, Biden has proposed several tax changes. I repeat, these are proposed tax changes. Some of them include: the top individual income tax rate would go from thirty-seven percent to 39.6% percent, that's the pre-2018 income tax rate increase. The federal corporate tax rate from 21% to 28%. Elimination of capital gains tax preferences. It would tax long-term capital gains and qualified dividends at the ordinary income tax rate of 39.6%. For individuals with income above a million dollars, the maximum child and dependent tax credit would rise from three thousand dollars to eight thousand dollars sixteen thousand for more than one dependent. Once again, I want to remind you that these are only proposals and may change by the time you're watching this. Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/