Did you give to charity in 2021? Make sure you have substantiation
To claim a tax deduction for a donation of $250 or more, you generally need a contemporaneous written acknowledgment from the charity. “Contemporaneous” means you receive it by the date you file your return, or the extended due date of the return. If you made a donation in 2021 but don’t have a letter from the charity, request it from the organization and wait to file your 2021 return until you receive it. Additional rules apply to certain types of donations. Under COVID-19 relief laws, taxpayers who don’t itemize deductions can claim a federal income tax write-off of up to $300 of cash contributions to qualified charities for the 2021 tax year ($600 for married couples filing jointly).
Important tax aspects of operating your business as a sole proprietor
Do you operate a small business as a sole proprietor? There are many tax rules and considerations involved in operating this way. For example, you may qualify for the pass-through deduction on qualified business income. You must pay self-employment tax and make estimated tax payments on income earned. You can deduct health insurance costs as a business expense. If you hire employees, you need a taxpayer ID number and must withhold and pay employment taxes. Keep complete records of income and expenses. Also, consider setting up a qualified retirement plan. Contact us if you want more information about the tax aspects of your business, or if you have questions about recordkeeping requirements.
Updates to the New Michigan Pass-through Entity Tax
On December 20, 2021, Michigan Governor Whitmer signed legislation making Michigan the latest state to allow pass-through entities the option to be taxed at the entity level. The 2017 Tax Cuts and Jobs Act signed into law on December 22, 2017, capped the amount of state and local taxes that can be deducted as itemized […]
2022 deadlines for reporting health care coverage information
A business with 50 or more full-time employees or full-time equivalents is generally considered an applicable large employer (ALE) under the Affordable Care Act. ALEs can be subject to penalties for failing to offer minimum essential coverage that’s affordable and provides at least “minimum value” to full-time employees and their dependents. ALEs also must comply with information reporting requirements using IRS Forms 1094-C and 1095-C. For businesses that were ALEs for calendar year 2021, three key deadlines this year are: 1) February 28, to file the 2021 forms on paper. 2) March 2, to furnish Form 1095-C to employees. 3) March 31, to file the forms electronically. Contact us for more info.
The Ins and Outs of IRAs
Traditional and Roth IRAs can help you save for retirement on a tax-favored basis. Contributions to a traditional IRA reduce your current tax bill, if you’re eligible, and earnings are tax-deferred. However, withdrawals are taxed in full (plus a 10% penalty if taken before age 59½, unless an exception applies). Roth IRA contributions aren’t deductible. But earnings are tax deferred and withdrawals are tax free if certain conditions are met. The maximum annual IRA contribution is $6,000 for 2022 and 2021 ($7,000 if age 50 or over). In addition, your contribution can’t exceed your compensation includible in income for the year. There’s no age limit for making contributions if you’re eligible.
Keeping meticulous records is the key to tax deductions and painless IRS audits
Businesses must keep records of their income and expenses. Carefully record them in order to claim the full amount of tax deductions to which you’re entitled. You also want to make sure you can defend the amounts on your tax returns if you’re ever audited by the IRS. Certain expenses, such as automobile, travel, meals and home office expenses, require special attention because they’re subject to special recordkeeping requirements or limits on deductibility. Contact us if you need assistance retaining adequate business records. By taking a painstaking approach to how you keep records, you can protect deductions and help make an audit much less difficult.
Let your financial statements guide you to optimal business decisions
Business owners: No matter how busy things get, don’t overlook the informative value of your financial statements. Assuming you follow U.S. GAAP or similar reporting standards, yours will have three major components: 1) The income statement, which shows revenue and expenses over the accounting period. 2) The balance sheet, which tallies assets, liabilities and net worth to take a snapshot of your financial position. 3) The statement of cash flows, which shows cash inflows and outflows from operating, financing and investing activities. Financial statements contain a wealth of data that can allow you to identify trends, both good and bad, affecting the business. Contact us for help.
Smooth sailing: Tips to speed processing and avoid hassles this tax season
The IRS began accepting 2021 individual returns on Jan. 24. Here are three quick tips to help speed processing and avoid hassles this tax season. 1) Contact us soon for an appointment to prepare your return. 2) Gather all documents needed to prepare an accurate return. This includes W-2 and 1099 forms. In addition, you may have received statements or letters in connection with Economic Impact Payments or advance Child Tax Credit payments. 3) Check certain information on your prepared return. Social Security number(s) should appear exactly as printed on Social Security card(s). Make sure names aren’t misspelled. If you’re receiving your refund by direct deposit, check the bank account number.
Entrepreneurs and taxes: How expenses are claimed on tax returns
While some businesses have closed since the start of the COVID-19 crisis, many new ventures have launched. If you’ve recently started a new business, or you’re contemplating starting one, be aware of the tax implications. Not all start-up expenses can be deducted on your federal tax return right away. Some expenses probably must be amortized over time. You might be able to make an election to deduct up to $5,000 currently, but the deduction is reduced by the amount by which your total start-up costs exceed $50,000. You can also deduct $5,000 of the organizational costs of creating a corporation or partnership. Contact us. We can help with the tax and other aspects of your new venture.
Using B2B media to lengthen your marketing reach
Marketing is tough for companies that sell products or services to other businesses. You must not only persuade customers to buy from you, but also communicate that you’re an expert in your industry or field. Getting involved in business-to-business (B2B) media can help. For example, send out press releases announcing new hires, products or services, or other developments. Or you could write bylined articles for selected industry publications. Just make sure they don’t read like free advertisements. You might also bypass traditional media outlets and focus on blogging and social media. If you do, set an editorial calendar and stick to it. Contact us for help assessing B2B marketing costs.