First 2022 Tax Filing Deadline Coming Up

It seems like we just rang in the new year, but, unbelievably, the first tax filing deadline is already upon us. By January 31st, businesses, nonprofits, and others who make certain payments must report them on IRS Form 1099. In general, Form 1099 must be completed and filed for each person or unincorporated business to whom $600 or more was paid during the year for rents, nonemployee income payments, and other payments defined by the IRS. 

Here are four tips to meet the Form 1099 Tax Filing Deadline:

  • Payments are reported on Form 1099-NEC (i.e., nonemployee compensation). The payor must report the name, tax ID, and amount paid for each applicable entity to whom $600 or more was paid during the year. For more information about Form 1099-NEC, including instructions, go to https://www.irs.gov/forms-pubs/about-form-1099-misc.
  • The due date for filing Form 1099-NEC is January 31st for the calendar year ending December 31st. There is no extended filing deadline for submitting this form.
  • Reporting on Form 1099-NEC does not apply to personal payments. The form is only used for payments made as part of a business, nonprofit, trusts of qualified pension or profit-sharing plans of employers. Like many IRS rules, there is an exception – payments to attorneys for legal fees. 
  • Some payments do not have to be reported on Form 1099-NEC, although they may be taxable to the recipient. For example, payments to a C or S corporation, payments of rent to real estate agents or property managers, and business travel allowances paid to employees are generally not reportable on a Form 1099. 

If you make payments as part of your business, nonprofit, trusts of qualified pension or profit-sharing plans of employers, your first tax filing deadline for 2022 could be coming up. Use these four tips to see if payments that you made in 2021 need to be reported to the IRS by January 31st

Need more details? The IRS has them for you at https://www.irs.gov/businesses/small-businesses-self-employed/am-i-required-to-file-a-form-1099-or-other-information-return

Keeping Your Tax Information Secure

The IRS announced last week that the 2022 tax filing season starts on January 24th. Most people will not have all their necessary tax documents for 2021 by then, but it’s the first day that the IRS will accept and start processing income tax returns for last year. As you’re gathering those W-2s, 1099s, 1098s, P&Ls, and the rest of the alphanumeric “soup” that comprises your tax information, how are you keeping it secure?

Most taxpayers receive or download their tax documents electronically and save them in a folder on a home computer. While the “work at home” aspect of the pandemic shed light on the need for enhanced cybersecurity at home, tax time reminds us how important it is to protect against identity theft. The IRS collaborates with the tax software and preparer communities to secure the tax filing process. Taxpayers have a role in keeping their tax information secure, too.

Here are three tips from the IRS for taxpayers to protect online personal and financial data from identity thieves:

  1. Keep Your Computer and Mobile Phone Secure 

Use firewall and security software on every device that contains confidential information and set it for automatic updates. Use strong, unique passwords and consider using a password manager to keep it all straight. Implement Multi-Factor Authentication. Only give personal information over encrypted websites, those with a “https” address. Periodically back-up your data onto an external drive as an “insurance policy” against ransomware or a crashed drive.

  1. Avoid Phishing Scams and Malware 

Identity thieves use phishing emails to trick users into giving up passwords and other information. Don’t take the bait. Before opening messages in your inbox, look out for emails that pose as trusted source (e.g., your bank) and for emails with an urgent message (e.g., update your account now!) with a link or attachment. Never download software or apps from pop-up advertising. Talk to your family members who also go online (i.e., everyone) about online security, both with computers and mobile devices. 

  1. Protect Your Tax Return 

Taxpayers who can validate their identities can obtain an Identity Protection PIN. An IP PIN is a six-digit code that prevents an identity thief from filing a fraudulent tax return using your Social Security number. After the IRS issues an IP PIN, that taxpayer’s tax return cannot be filed without entering the IP PIN to “unlock” the taxpayer’s return for that year. Learn more about getting an annual IP PIN at www.irs.gov/ippin

The 2022 tax filing season starts next week, on January 24th. As you receive or download all the tax documents that comprise your tax information, how are you keeping them secure? The IRS has tips for taxpayers to keep their confidential tax and other financial information secure. Read all about it here at https://www.irs.gov/pub/irs-pdf/p4524.pdf.

IRS Help to Prepare for Tax Season

Believe it or not, yet another tax filing season is upon us. Pretty soon, you’ll start getting your 2021 year-end wage, investment, and mortgage interest statements. Between now and when you are ready to fill out those lovely tax forms, you can take three steps to get a jump on tax season and feel more confident. Most of the tips you need are on the IRS website. For free! Well, not exactly for free – our tax dollars pay for the IRS. 

Get your money’s worth with these three tips to be prepared for tax season:

  • Plan Ahead

You can take steps now to get a jump on filing your 2021 income tax return. Use this link to access a list of documents you’ll need to file, check on your tax withholdings, verify your bank information, and reconcile your Advance Child Tax Credit. This page also has a link to potential issues that can delay the processing of your 2021 income tax return. https://www.irs.gov/individuals/steps-to-take-now-to-get-a-jump-on-next-years-taxes

  • Check Your Online Account

Every taxpayer can access her or his online account to see the information that the IRS has on file. Your individual account information includes any outstanding tax balances, a five-year history of payments made, and copies of your tax records. You can even view the details of any payment plans in place with the IRS. https://www.irs.gov/payments/your-online-account

  • Expectations for IRS Operations

The IRS is just as overworked and under-resourced as it was during the last two tax seasons. Service delays include phone support call wait times, paper return processing times, and manual reviews of electronically filed returns. While they are reporting that mission-critical functions are continuing during COVID-19, this link provides periodic updates on expected wait times to reduce frustration and potential complaints. https://www.irs.gov/newsroom/irs-operations-during-covid-19-mission-critical-functions-continue

Tax season is almost here. The IRS has tips to help you prepare and feel more confident about filing an accurate return, and to make the filing process go more smoothly for everyone. Being prepared can help you prevent a delay in processing your return and help manage your expectations for IRS operations during tax filing season. Sure, filing your taxes is not a lot of fun, but getting prepared now will make the process easier and less stressful.

Reflections on 2021 – Plans for 2022

The end of one year and the beginning of another is the perfect time to pause and savor your successes from the year that is ending. Celebrate both your business and your personal accomplishments from 2021, month by month. Reflections on the 2021 goals that you achieved can also be the genesis for planning what you want to achieve during 2022. You know what they say…a goal without a plan is just a dream

Whether you are expanding, launching something new or maintaining the status quo, 2022 will be different than 2021. That means setting new goals and making a new plan. Starting is always the hardest part, so begin by identifying one overarching change you want to achieve by the end of the year. Want more customers, higher cash flow, or a new worker? Focus on achieving that one change, then break it down into manageable pieces.

Change doesn’t just happen; you need a plan to get it done. Follow these three planning tips to achieve your goals in 2022:

  • Gather the Numbers

Quantify all the applicable aspects of your goals. This task will require some research and could entail making estimates and assumptions. For example, how many more customers do you want? Can you quantify the additional income and cost of serving more customers? What about how much a new worker would cost and how much additional income they could generate? The more numbers you can nail down, the better.

  • Be Realistic

Keep market conditions and your resource capacity in mind when setting growth and other goals. It’s important to be realistic to ensure that your goals are achievable. Setting unrealistic objectives is not only discouraging, but it can also result in allocating resources – aka time and money – on activities that are unlikely to succeed. Better to target those resources on realistic, achievable goals.

  • Adjust As Needed

No matter how well you research the numbers and focus on what’s realistic, any view of future events is imperfect, as we’ve seen with COVID-19. Market conditions and other factors that you depended on when setting your goals could change. Periodically assess progress on meeting your objectives. Are you on track? Why or why not? Based on those answers, you may need to make some adjustments.

The end of 2021 is the perfect time to savor your successes and to plan for what you want to achieve in 2022. Don’t let your goals turn into the dreams you never achieved. Establish a plan for 2022 and turn those dreams into your reality. 

IRS Announces 2022 Standard Mileage Rates

Do you use your personal vehicle for business, charitable, or medical purposes? If the answer is “yes,” you could qualify for an income tax deduction. How much you can deduct and how you report the deductible expense depends on your situation. Generally, you can deduct qualified vehicle expenses that total the greater of actual expenses or a standard rate. Whether you deduct the standard rate or actual expenses, you must track your miles driven during the year.

Most people deduct their mileage deduction based on the standard rate because it’s easier and often results in a larger deduction amount. The standard deduction rate per mile is determined each year by the Internal Revenue Service based on data about the cost of operating and maintaining a vehicle, including passenger cars, vans, pickups, and panel trucks. 

In recent years, the rate per mile has risen and fallen based on the price of gasoline. With gas prices up significantly since 2020, the mileage rates are up for next year, too. The IRS recently issued the new standard mileage rates for 2022 that reflect those higher gas pump prices. 

Beginning on January 1, 2022, the standard mileage rates are:
 

  • 58.5 cents per mile driven for business use, up 2.5 cents from the rate for 2021
  • 18 cents per mile driven for medical or moving purposes, up 2 cents from the 2021 rate
  • 14 cents per mile driven for charitable purposes to serve a qualified tax-exempt organization. The charitable rate is set by statute, so it doesn’t change.

Using the standard mileage rate can really add up to a substantial tax deduction. Remember that you always have the option of calculating the actual costs of using your vehicle and deducting the higher of the two options. Also, you can choose the standard mileage rate one year and actual expenses the next year, whichever is more beneficial for you. 

No matter which of the two expense methods you choose, you must track your overall mileage driven during the year, and track the miles by category (e.g., business and personal). And if you use more than one vehicle, mileage must be tracked for each vehicle you use for business, charitable, or medical.

Taking vehicle deductions for business, charitable, or medical purposes involves a lot of tracking, but the effort can be worth it. You can use mileage tracking apps to help. Once you get your tracking system down, you’ll see that those mileage deductions can add up and reduce the bottom line on your taxes.

DIY Access to Your Tax Information

With tax-filing season coming up soon, you might have started to get your 2021 tax information together. Or you could have been looking for last year’s tax return to update your Advance Child Tax Credit information on the IRS portal. You might have been looking for older tax return copies to submit with a mortgage application. Regardless of your tax information need, you can’t always find what you need when you need it.

The IRS has you covered with new DIY tools to access your tax information. Their old online sign-in process to verify your identity and access your information is clunky and difficult to navigate. The new process recently launched by the IRS allows more people to securely access and use online tax information tools. Plus, it’s mobile-friendly.

Using the new verification process allow you to access several IRS online services including:

Access to more DIY tax services is scheduled to transition from the existing process to the new identity verification process in 2022. The new process is designed to be even more secure than the old one to make sure that tax information is only provided to the authorized taxpayer.

The new process uses a secure verification service called ID.me. Taxpayers create an ID.me account and use it to upload identity documents. The new process also has increased the amount of help desk assistance for taxpayers who run into a snag when verifying her or his identity online. Most people shouldn’t have a problem, though. 

You only need two things to verify your identity with ID.me:

  • A photo of your driver’s license, state-issued identification, or passport.
  • A selfie using a smartphone or a computer with a webcam.

Once you verify your identity, you can securely access IRS online services listed above. If you need help verifying your identity or experience another issue, you can visit the ID.me IRS Help Site.

This is all great news. Getting DIY access to your tax information is a huge step forward to preparing for tax filing season, updating your Advance Child Tax Credit information, or applying for a mortgage. Create and access Your Online Account at https://www.irs.gov/payments/your-online-account. Quick, easy, and mobile-friendly. Can’t get better than that.

Last-Minute Tax Tips for 2021

Less than two weeks left to go before the year ends. Wow! You’ve been meaning to do some 2021 tax planning for months now. Is it too late? Believe it or not, there’s still time to implement some planning moves that can improve your tax situation for 2021. 

Here are four last-minute tax tips you can jump on and still enjoy the holidays:

  • Make HSA contributions If you are an eligible individual under the health savings account (HSA) rules for December 2021, you are treated as having been eligible for the entire year and can make a full year’s deductible contribution for 2021. The maximum contribution provides a deduction of $3,600 for individual coverage and $7,200 for family coverage. Taxpayers aged 55 or older also get an additional $1,000 catch-up amount.
  • Nail down stock losses Consider realizing losses for stock you planned to divest anyway. Those losses can offset gains from other stock or investment asset sales. Losses that exceed gains may be deducted up to $3,000 for individuals and married couples filing jointly, or up to $1,500 for married taxpayers filing separately. Any losses above the deduction limit can be carried forward to the next year to offset gains or other income.
  • “Bunch” deductible contributions and/or payments of medical expenses Many taxpayers who itemized deductions before the 2017 Jobs and Tax Cut Act no longer benefit from doing so because the standard deduction has been increased and many itemized deductions have been cut back or abolished. A bunching strategy can help you get around these new limits — by accelerating or deferring discretionary medical expenses and/or charitable contributions into the year where they will exceed the standard deduction and do some tax good.
  • Use IRAs to make charitable gifts If you are age 70½ or older, own IRAs, and are thinking of making a charitable gift, consider arranging for the gift to be made with a qualified charitable contribution, a direct transfer from the IRA trustee to the charitable organization. The transferred amount, up to $100,000, isn’t included in gross income or allowed as a deduction on your tax return. A qualified charitable contribution is a particularly good idea for retired taxpayers who don’t need all their required minimum distribution (RMD) for living expenses.

Yes, it’s late in the year for tax planning, but not entirely too late. Implementing one or more of these four last-minute tax tips will improve your tax situation for 2021. Makes the holidays even merrier, doesn’t it?

Be Prepared for Next Tax Season

The holiday season is upon us, and tax season will be here before you know it. Filing your tax returns is not exactly a festive time, but, just like the holidays, the season will be less stressful if you are prepared. Even though the year isn’t over yet, starting early reduces stress and confusion caused by rushing to meet a deadline. Plus, you have time to review your situation for tax savings or other strategies that may still be available before year-end, such as contributing to a retirement plan.

Whether you file your own tax returns or engage a tax professional, these three tips will help you be prepared for next tax season:

  • Pandemic-Related Items 

Various pandemic-relief and other tax changes could impact the information that you need to gather when filing your 2021 income taxes. The expanded Advance Child Tax Credit was authorized by the American Rescue Plan Act in March. Monthly advance tax credit payments started in July, based on the parent’s 2020 reported income, or the 2019 income if a 2020 return was not filed. The March tax act also included a third round of Economic Impact Payments, depending on a taxpayer’s income level and family size. 

  • Tax Estimates and Withholdings

Did you owe a lot when filing your 2020 returns, or did you get a big refund? An IRS Paycheck Checkup is an online tool to make sure that your withholdings will cover your anticipated tax liability https://www.irs.gov/paycheck-checkup.Taxpayers with investment, self-employment or other non-wage income can check if they need to make a larger or smaller quarterly estimated tax payments at https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes.

  • Organize Tax Documents

Use your 2020 tax return to identify documents that you’ll need to accumulate in preparation for next tax season. Start printing the charitable donation letters and real estate tax bills to cut the delay when the 1099s and W-2s are released or mailed to you. If a life event in 2021, such as buying a home, starting a business, or changing your marital status, you need to check out how it impacts your taxes. You might need a tax professional to help you plan for and understand the tax impacts of life changes.

Follow these three tips to be prepared for next tax season. And one last thing. Supply chain issues hit the tax profession just like it’s hit the store shelves. If you plan to engage a tax professional for your 2021 preparation, start looking now. There’s a shortage.