Tag: tax services

Categories
Financial Tax Services

Why You Should Get a CPA to Prepare Your Taxes

Why You Should Get a CPA to Prepare Your Taxes

There is nothing as annoying or necessary as filing your taxes. It is never any fun but is something that every American adult has to do every single year without exception.

You can always file your own taxes and it is rarely that complicated. It takes a lot of time and it can be boring but it doesn’t suck up too much time. However, sometimes you need extra help to get your taxes done. That help will come in the form of a CPA, a professional who is specially trained at filing taxes for people. When do you need the help of a CPA? What instances call for a CPA instead of doing the taxes yourself?

The IRS Contacts You

Uh oh, this is never fun. The IRS may contact you for any number of reasons, they aren’t always bad. But they are usually complicated and need to be handled in the most professional manner possible. Professionalism is exactly what you get with a CPA. They know exactly how to handle and deal with the IRS and they will make any interactions with them way, way easier and way less of a headache.

You Have a Side Gig

In this modern age, many people make their money with various jobs, or gigs. Do you drive for Uber? Maybe you deliver food for DoorDash. If you do, that could complicate the tax filing process and that means you need to bring in a CPA to get it done. You deserve to have an easy filing procedure and that is what you get with a CPA doing your taxes because you have multiple gig jobs.

You Own a Rental Property

Are you a landlord? Do you rent out a home or real estate investment? If so, a CPA should be employed when you are filing your taxes. A CPA will make renting a lot easier and will also be able to find all the deductions you could enjoy. Remember, these CPAs are trained professionals and they know how to file taxes accordingly and smartly. They will save you extra money and use all the tricks of the trade to make being a landlord easier than ever.

You Are Investing your IRA or 401K

Many people self-direct their Roth IRS or 401k money into investments in bonds, stocks, and mutual funds. Others invest in real estate with the money they earn from their IRAs or retirement funds. It can be a very smart and financially beneficial call, but it can also make filing taxes way more complicated. If you are doing this and making money this way, use a CPA to do your annual taxes to get rid of all the complications that these self-directing moves can make.

There are many reasons to use a CPA, from the ones listed above to the simple fact that they make filing your taxes a complete breeze. The fact of the matter is that you don’t need any reason to hire a CPA other than the fact that it will take your taxes out of your hair and make tax season a simple, laid back time. You can kick back and relax while others are stressing out about the IRS.

Categories
Financial Tax Services

5 New Tax Changes You Should Know About

5 New Tax Changes You Should Know About

While most of us are happy to leave 2020 behind, there’s still one more loose end to tie up. Filing taxes. With the global pandemic, there have been some significant changes to the tax code. So, you need to be up to date on what those changes are.

1.   Tax Bracket Changes

Tax brackets have changed a bit, so depending on your income, your household tax bracket may change. The rates themselves haven’t changed, but the brackets have increased by a marginal amount to cover annual inflation.

As an example, if you are single and made $86,100 in taxable income last year you would be in the 22% bracket. That doesn’t mean that you’re paying 22% on your entire income, just that you are taxed up to that amount. You’re taxed 10% on the first part up to about $14k, then 12% on the next part up to nearly $54k, and 22% on the last approximately $24k.

2.   Boost To Charitable Contributions Allowance

Owing to the Coronavirus Aid, Relief, and Economic Security Act, also known as CARES Act, you will no longer have to itemize the deductions in order to claim charitable contributions. So even if you don’t itemize and simply take the standard deduction for the 2020 tax year, you can still deduct $300 in donations to charity. Additionally, if you do itemize, you can deduct up to your full remaining adjusted gross income, based on your donations to charity.

3.   Stimulus Checks

One of the more widely-known benefits of the CARES Act, was the aid payments of $1,200 and $600. These were sent to millions of Americans. These payments were aimed at giving people some cash relief during the initial and continuing economic shutdowns. While they are not counted as taxable income, they are going to be treated as our old friend the “refundable tax credit” that is basically an advance on next year’s refund.

4.   Unemployment Benefits

This year was hard for a lot of people. Many of them needed to turn to unemployment benefits to try to stay afloat. If you were one of those people, you may have had the option to have income taxes automatically withheld. If so, hopefully, you used that option, otherwise, you will need to pay up come tax time. However, if you do owe, you can pay all at once. You can also split the amount into 4 payments that you would pay as quarterly payments.

5.   No-Penalty Retirement Withdrawals

If you needed it, the CARE Act allowed workers under 59 and a half to pull up to $100k from their 401(k) plan or IRA without any penalty. This does have the negative of counting as income and is then taxed as such. However, if you put it back into your IRA or 401(k) plan inside of three years, that tax can be refunded back.

Categories
Financial Tax Services

5 Tips That Will Make Tax Season So Much Easier

tax season

With the yearly tax deadline rapidly approaching many people are gearing up to try to make the process as painless as possible. This year was hard on a lot of people, so many of them want to at least make the unpleasant business of taxes as easy as they can. Here are 5 great tips to make sure you’re ready to file on time.

1.   Get Organized

This is one of the most significant and powerful things you can do to be prepared for the annual chore. Most times, you can get a lot of pertinent info from last year’s return paperwork. However, if you’ve moved, bought a house, gotten married, or had a baby, then there are additional deductions you may be able to claim. Keep all that paperwork together in a folder for tax time, and file important emails in their own folder to be printed ahead of time if needed.

2.   Get Help

If you need some in-person, face-to-face help, you may be able to get IRS-endorsed help through a program called VITA, the Volunteer Income Tax Assistance program. Low-income taxpayers who earn $57k or less annually, or are disabled, can get help from the tax preparers in VITA. Those in active-duty capacities in the military even have their own tax channels like TurboTax Military or TaxSlayer Military to help them get the most out of filing.

3.   Don’t Forget Your Retirement And Charity Contributions

Make sure that you are aware of your IRA and 401(k) contributions, limits, and overages. You have until the tax deadline to make any IRA contributions that you need to make to catch up, and if you’ve contributed excess, make sure to withdrawal to avoid penalties.

Charity contributions have also changed this year. If you are taking the standard deduction you can automatically claim $300 in charitable donations without needing to itemize. If you itemize you can claim up to your entire adjusted income.

4.   File For Free

The IRS allows any individuals or families with an income below $72k to use the Free File software to both prepare and file their federal taxes. It will also allow the free filing of state taxes in some states. Even those with incomes over the threshold can use the IRS’ Free File Fillable Forms, though they do generally need someone familiar with paper filing.

5.   File For An Extension If You Need It

There’s no sugar-coating it, tax season is stressful. Not only is there a nationwide rush to file in the final few weeks, but that is also when millions of Americans file an extension. A tax filing extension needs to be filed by April 15th. However, it does allow until October 15 to finish filing your return.

There is a catch, however, and any estimated owed taxes by the original tax deadline. If not, they will accrue penalties and interest. If you aren’t sure how much you’ll owe, start by paying what you paid the previous year.

Categories
Financial Tax Services

COVID-19 and Taxes: Will Your Refund be Impacted?

COVID-19 and your taxes

COVID-19 has severely impacted individuals and businesses. From the shutdowns, quarantines, and economic situation that affected people from different economic situations. These changes will also affect your taxes and tax returns.

While people are filing taxes and accounting for any economic changes that 2020 brought to their personal or business finances, there are also more things to think about. 2020 also brought in new economic stimuli and potentially unemployment that will also need to be accounted for when filing taxes. So, here are some tips to keep in mind to get the most out of your taxes and tax return.

Individuals and Families

Many individuals have been affected by COVID-19. With record unemployment and stimulus checks, families and individuals are in different economic situations than they were in 2019. These changes may impact how much money you file and how much money you can expect back.

Two stimulus checks went out in 2020 to many people. In regards to your taxes, these stimulus checks are tax-free and do not need to be noted. The IRS should already have on record that you received these payments and accounted for. These payments will not impact your tax return at all.

Unemployment rates also went up during 2020, with almost 15% of people declaring unemployment at one time. To compensate for the economic downturn that many felt, unemployment checks increased by $600 a week. Unemployment payments are taxed as income. Up to $10,200 in unemployment is tax-free.

Six states do not tax unemployment at all. If you live in one of these states then you can expect to pay less in taxes. Seven states do not tax income at all, since unemployment is taxed as income this can also result in how your taxes are filed if you live in one of those states.

Businesses and Other Entities

Businesses and other places that employ people were severely impacted by COVID-19 and the subsequent economic downturn. The government passed different stimuli and credits to help businesses stay in business and continue to employ people.

The Employee Retention Credit is refundable. Immediate access to credit is available by reducing the employment tax deposits you are required to make. If your employment tax deposits are not sufficient to cover the credit, then you can get an advanced payment.

Small businesses with 500 or fewer employees were also eligible for Coronavirus-related paid leave. Employers can receive 100% reimbursement for paid leave related to the act. This includes leave for expanded paid childcare leave and paid sick pay leave.

Conclusion

While, COVID-19 changed finances for many people and businesses, these changes in finances also affect taxes and tax returns. For many people who received credits or stimuli, those credits are refundable or not taxed. This means that many people who relied on these services to stay afloat will continue to experience assistance when filing for taxes.

Filing taxes for 2020 will be just as different as the rest of 2020, there will be many changes that will be COVID-19 specific. For many of these changes, individuals and businesses can benefit from receiving credits.     

Categories
Financial Tax Services

How Much of a Tax Deduction Can You Claim For Charitable Donations

charitable gifts donations tax

Gifts to charitable and non-profit organizations help in so many ways. They benefit the charity itself, often by providing funds that are used in research, operations, and more. They are also one of the best ways to minimize your tax obligations. Charitable gifts are deducted in part or in whole on yearly tax return filing. This ultimately reduces your taxable income.

There are new provisions in place for the 2020 tax season that will apply to your returns filed in 2021. You need to know about them in order to take advantage of them properly when you file.

Charitable Contribution Basics

Charitable gifts are treated differently for tax purposes for a number of reasons. It can vary depending on the type of assets that were donated. For example, cash, clothing, household items, or even vehicles and boats. The rules also vary based on who the contribution is made by. Whether that is an individual, a business, or a corporate entity.

The amount of the deduction is particularly important, and usually subject to limits and ceilings. The changes to the 2020 charitable gifts deduction put in place special rules for the 2020 tax year only, which increase the deductions significantly. These changes, therefore, increase the amounts of tax benefits for donations made specifically in cash.

Some Donations Do Not Qualify

While the limits of contributions went up, you will want to ensure that your donations to charity were made to allowable organizations. The law states that the deductions are only to be used to contributions that serve a charitable purpose. This means that the recipient must have already qualified for and been granted tax-exempt status by the IRS.

These organizations most commonly include religious entities, charities operated for scientific, educational, or literary goals, and organizations that strive to prevent cruelty to animals or children. Other eligible parties may include nonprofit veteran organizations, amateur sports development entities, fraternal groups or lodge orders, and burial or cremation companies.

What Is The Maximum Deduction Amount You Can Claim For Your Donation

For the 2020 tax year, taxpayers who choose to claim the standard deduction can claim up to $300 in charitable gifts made in cash, used in the determination of the taxpayer’s adjusted gross income, or AGI. It is worth noting specifically, that noncash property like securities are not eligible. Neither are donations to dormant or non-operating organizations, or contributions to veterans fraternal societies, or carryforwards from previous tax years. This “above the line” deduction will generally benefit taxpayers that do not itemize.

The donation ceiling was raised for 2020 from the previous limit of 60% of any individual’s contribution base (commonly their AGI). This limit was raised to allow the contributions of non-cash donations up to the entire amount of their AGI. In some situations, individual taxpayers may be able to completely eliminate their taxable income. In many cases, this means the tax obligation would also drop to zero, meaning a refund of all taxes.

 

Categories
Financial Savings Tax Services

How Saving for Retirement Can Reduce Your Taxes

saving for your retirement can reduce taxes

It is definitely no secret that saving for retirement is important. It is so important that the government even offers a tax credit for those that choose to save for the future. Worth up to $1,000 for an individual tax-payer, or $2,000 if filing jointly, many independent adults can qualify for the saver’s credit.

Who is Eligible for the Saver’s Credit?

To receive this credit, you must be 18 years old, not enrolled in school full-time, and not be claimed as a dependent. You also must make a contribution to an IRA or other eligible retirement plan and fall within specific income thresholds.

As far as your contributions go, you can only claim contributions of new money. Any money that was a rollover from an existing account does not count towards your eligible contributions.

Your income must be underneath the following thresholds to get the credit:

  • Head of Household: $48,750 in 2020; $49,500 in 2021
  • Married, Filing Jointly: $65,000 in 2020; $66,000 in 2021
  • Other Filing Statuses: $32,500 in 2020; $33,000 in 2021

How Your Saver’s Credit Value is Determined

Those that qualify for the saver’s credit can receive up to $1,000 ($2,000 for married couples that file jointly). The value of your credit is based upon how much you contributed to your 401(k), Roth IRA, SARSEP, SIMPLE IRA, 403(b), or 457(b) plan. You may be eligible for 10%, 20%, or 50% of the maximum contribution amount, depending on your adjusted gross income and your filing status.

Saver’s Credit Rates

Married Filing Jointly

  • 50% of contribution: $39,000 or less in 2020; $39,500 or less in 2021
  • 20% of contribution: $39,001 – $42,500 in 2020; $39,501 – $43,000 in 2021
  • 10% of contribution: $42,501 – $65,000 in 2020; $43,001-$66,000 in 2021

Head of Household

  • 50% of contribution: $29,250 or less in 2020; $29,625 or less in 2021
  • 20% of contribution: $29,250 – $31,875 in 2020; $29,626 – $32,250 in 2021
  • 10% of contribution: $31,876 – $48,750 in 2020; $32,251 – $49,500 in 2021

Other Filers

  • 50% of contribution: $19,500 or less in 2020; $19,750 or less in 2021
  • 20% of contribution: $19,501 – $21,250 in 2020; $19,751 – $21,500 in 2021
  • 10% of contribution: $21,251 – $32,500 in 2020; $21,501 – $33,000 in 2021

With many credits, the math to figure out how much you are getting can be a bit tricky, but not with this one. Based on your income, your credit is worth 10%, 20%, or 50% of a cap on the amount contributed of $2,000 for an individual filer, or $4,000 for married couples who are filing together. If you are a single filer with an income of $18,000 and you contributed $1,000 to your Roth IRA, your saver’s credit would be $500.

Categories
Financial Tax Services

Taxes Made Simple: 3 Tips for Quick and Easy Filing

taxes made simple

Many people think that filing their taxes is a complicated process. The IRS is known for collecting your money and auditing if something is wrong, and you don’t want to be audited. If it’s your first time filing taxes, it is easy to be intimidated by all of the forms and situations that are available to file for.

Filing taxes does not have to be needlessly complicated though. For many people, taxes do not have to be difficult. By following some simple steps, you can file your taxes simply and without worry.

Gather All of Your Tax Documents

Having your tax documents prepared will help your filing go by faster. As your tax information comes in, store them in the same spot that you can access easily when you’re ready to file. This will also simplify what kind of taxes you need to file and how you will file them.

Some of the documents you will want to have are

  • W-2s
  • 1099s
  • Tax forms that report incomes
  • Tax deductions
  • Receipts

This information being readily available will help you streamline your taxes. When you have all of your information in front of you, it will be much easier to know where you need to go and what you qualify for. 

Don’t Forget About Gig Economy Income

More people are relying on making money through the gig economy. Whether you make money driving or delivering food, freelancing, or working as a consultant it is important to remember to declare that income. Some gig economy jobs also have deductions that you can note.

Some jobs have a 1099-MISC for the work done. Even if there is not a form attached, you will still need to report your income. Keeping track of your income if you make money freelancing or another gig job is crucial. You will also want to keep track of any miles you drove, supplies, and advertising costs because these costs can be deducted.  

File Electronically

Almost anything can be done online today, including filing taxes. Software exists to help make sure that you file them correctly and will tell you how much more you owe or will receive. Filing electronically will also save you postage and time.

People who file electronically also get their returns quicker. It is also easier to note your banking information so that your returns can go directly into your bank account. 

Conclusion

Filing taxes can seem daunting, especially when it’s your first time. These tips can help it go smoothly so you don’t have to worry about your them being filed correctly. With some thinking ahead, documents, and software you can file your taxes quickly and easily.

When you’re able to file them quickly, you will also receive any refunds that you’re owed quickly. Filing taxes does not have to be a scary process to go through. For many adults, it can be completed and filed in a day, that’s how quick and easy it can be.   

Categories
Financial Tax Services

What is the Internal Revenue Service (IRS)?

internal revenue service

Founded in 1862 by President Abraham Lincoln, the Internal Revenue Service is in charge of enforcing tax laws as well as the collection of taxes. Under the authority of the United States Department of the Treasury, the IRS’s main purpose is the taxation of all American companies and businesses. Taxpayers can file either electronically or they can mail in their taxes. No matter how you prefer to file your taxes, the department handling your paperwork is the IRS.

What Does the IRS Do?

The overall purpose of the IRS is to enforce and uphold tax laws enacted by congress. Additional duties include:

  • Overseeing certain types of retirement plans
  • Collecting the tax returns filed by businesses and individuals
  • Issuing refunds to those that overpaid taxes
  • Conducting criminal investigations
  • Ensuring you pay whatever taxes are due

The busiest department of the IRS is likely the enforcement side of the organization. According to the Tax Policy Center, the IRS spent almost 40% of its budget on enforcement. Of that funding, 83% of it was for investigations and tax audits.

In addition to collecting taxes, they also ensure that those Americans that qualify for other tax credits, such as the Earned Income Credit, receive them. There are even educational tax credits that can help with your children’s future college education.

Owner and Leadership

The IRS has no owner but is considered the tax administrator that works for the Secretary of the Treasury. The IRS technically has no owner, they are under the direction of the Treasury. They are under the leadership of the IRS Commissioner who is appointed by the President of the United States every five years.

If you have seen the logo for the IRS, either on the website or maybe a piece of mail, you have probably recognized a few familiar elements. The logo for the IRS contains several elements that are found in other pieces of American government signage and seals.

The first and most obvious part of the logo is the eagle. This is the bald eagle, the national bird, and it is also found on many other government buildings, seals, and logos. In the logo for the IRS, it simply represents the USA.

The next component seen is the olive branch. This is another component that is present in a lot of US imagery. The olive branch represents mediation and the offering of peace. The olive branch is accompanied by the scales, another truly American image. The scales represent fair measure and justice.

History of the Internal Revenue Service

The roots of the Internal Revenue Service reach all the way back to the Civil War. It was created by President Lincoln and Congress. They were initially created to collect the original income tax to pay for the plethora of war expenses. That income tax was quickly repealed a decade later, not to be seen again until 1913, when it was included in a Constitutional amendment.

Categories
Financial Tax Services

Which Tax Software is Best for You?

tax services

Tax season is upon us and for many people, that means stress and worry about filing their taxes correctly. You want to be sure to file your taxes correctly while still getting all of the deductions and refunds that you qualify for. Using tax software can help you achieve that goal.

Tax software leads you through the entire tax process by asking questions to know what forms you should file. They will also tell you what information you need and where to find it on your tax forms. They also make it easy to file electronically so that you can get your refund quickly.

There are different tax software available and each kind of tax software is best for certain people and situations. Which one you want to use will depend on your situation and what taxes you file.  

TurboTax

TurboTax is one of the leading tax filing software companies. Their software asks you questions about how you’re filing taxes this year, how you made money, and what your year looked like financially to get you to the right places to file correctly and get the right deductions. They also account for federal and state taxes in the same filing. 

This software is easy to use whether you’re an individual or business filing taxes. It will automatically include home purchases, dependents, and other deductions so you don’t have to worry about including them. By answering the questions it asks you, you can be ready to file electronically and know that they will be filed correctly. 

H&R Block

If you want free software to file your taxes, H&R Block can help with that. They provide ease of filing without having to pay for anything. It covers federal and state taxes for many filing options without any additional charges. 

Many individuals do not have complex tax forms, they have a W-2 form and some deductions. In these situations, having a free option for filing taxes is the best option. When your taxes are easy to file, they should come with a corresponding price tag.   

Tax Slayer

As more people become reliant on the gig economy or self-employment for either a portion or for their entire paycheck, having tax software that understands that can help ensure that your taxes are filed correctly. These kinds of jobs have different tax forms and deductions that you want to account for.

Tax Slayer is affordable and will help you account for all of the ways you made money and the different deductions that you qualify for. They provide options for state and federal taxes so you can be assured that all of your tax needs are met.     

Conclusion

Filing taxes requires different needs depending on how you’re filing taxes. Some taxes are easier to file than others. There are several kinds of tax software available so you can find the right one for your situation. Filing taxes with the help of tax software makes filing taxes easy, no matter how you made money.