We are almost at the deadline for sending W-2s. If you’ve already sent them out, these W-2 compliance tips will be great for 2022 year-end. If not, you have a little bit of time left to tie things up and get them out to your employees. Employer Responsibilities As the employer who will be sending out the W-2s, you’re responsible for all the copies, as well. Copies B, C, and 2 are to be sent to your employee. Copy A goes to the Social Security Administration, Copy 1 is to be submitted to the state tax authority if applicable, and Copy D is for you to keep with your employer records. A single employer is only required to submit one W-2 per employee, even if the employee in question has worked in multiple roles. The only instances in which an exception would be made are if a single employee worked in multiple roles across different locations or if company ownership changed mid-year. In these special cases, W-2s must be issued for each different EIN (Employer Identification Number) that said employee worked for. Compliance and 2022 Changes The IRS recently published the Employer’s Tax Guide, which helps identify the items that employers are responsible for this tax season, as well as highlights the latest updates as they pertain to your business and operations. One update addresses the COVID-19 related credit given for sick and family leave wages. This credit is limited to leave that was taken after March 30, 2020, and before October 2021. The COVID-19 related employee retention credit has expired, and COBRA premium assistance payments credit is limited to coverage periods on or after April 1, 2021, through coverage periods that began on or before September 30, 2021. There are also some updates and reminders regarding Social Security and Medicare Tax, as well as deferment amounts of the employer share of these taxes. All of these insights can be found in the IRS 2022 Publication 15. Compliance Tips for 2022 Filing This year, employers are able to …
Get Ready for 2022 Tax Season: Best Practices
We’ve already shared a few great tips to make your 2022 tax season go smoothly in this blog article. As we get closer to January, we thought we’d share some more best practices for the 2022 tax season that can help your business save money and file without errors. Don’t Forget Your Write-Offs OWLLytics has a great master list of tax write-offs for 2022 tax season. Your business needs every penny it can get- either for expenses or to put towards future investments and growth. You can write off your salaries, wages, labor, and supplies. This includes contract and freelance labor payments (typically reported using Forms 1099, specifically 1099-NEC). But everything from printer ink to advertising expenses can be written off as business expenses. Automotive expenses, rent, utilities, all of these (whether it’s a warehouse or a home office) are also eligible for write-offs. If you have a home office, you will have to calculate the square footage and deduct the appropriate amounts as it pertains to your home mortgage, rent, utilities, and internet expenses for example. Depending on your situation, all of the following are other deductions you could be entitled to: business insurance and licenses renter’s and health insurance bank and ATM fees professional organization memberships education (books, courses, workshops, online courses, etc.) business travel and lodging expenses As a general note, anything you do that could be used to help or carry out your business tasks should be well-documented so you can take advantage of all these deductions and more. Be Aware of the Latest Updates You would be surprised how many changes are made to the tax code each year, and with the unprecedented changes we have experienced nationally and globally in 2020 and 2021, you may be able to take advantage of many changes to the personal and business aspects of your tax filing in the 2022 tax season. We recently shared an eFile360 blog post with some …
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Small Business Tax News 2021
There are a number of tax changes brewing, and we want to help keep you and your business in the loop. Small Business Taxes and Government Changes As the first year of a new President’s term is coming to an end, that means there are lots of potential changes on the horizon. According to the National Federation of Independent Business, new proposed tax plan changes will increase the corporate tax rate from 21% to 26.5%, which will negatively impact small businesses classified as C-corps. The good news is that only about 25% of small businesses are classified this way. However, many experts are saying that these changes would still impact small businesses in the coming tax year, if the plan gets approved. There are also changes coming in the form of increasing the top capital gains tax rate and changes to the estate tax, says the NFIB. 2021 Losses All non-corporate business taxpayers can deduct a net trade or business loss up to $262,000 (or $524,000 for joint returns). This includes Schedules C, E, and F business activities. Employee Retention Credit Your business may also be eligible for Employee Retention Credit (ERC). Though initially only applicable to wages paid from March 13, 2020, to December 31, 2020, the recently passed Consolidated Appropriations Act and American Rescue Plan Act have expanded this credit. For tax year 2021, eligible employers can claim the employer share of Social Security tax if it equals 70% of up to $10,000 in qualified wages paid per employee, per quarter. Maximum credits are $28,000 per employee for the year. Qualifying businesses must prove it fully or partially suspended operations due to the pandemic, had a 50% decline in 2020 gross receipts compared to the same quarter in 2019, or less than 80%of 2021 gross receipts when compared to the same 2019 quarter. Net Operating Loss Limits Are Back to Normal The CARES Act relaxed limits on net operating loss for tax years beginning in 2018. 2019, and 2020. But no such …
Evaluating Withholding at Year-End
The last quarter of 2021 is a great time for evaluating withholding for the year. New Items for Tax Year 2021 This year, your tax prep schedule and operations – both for personal and for business taxes – looked very different from past years. There were some good parts and some not-so-good parts. And the tax process next year will likely also be abnormal. The best practice for that is to get started early. Here are some items of interest for the coming tax season. There are several COVID-related tax items, first and foremost. The American Rescue Plan Act (ARPA) expanded the Advance Child Tax Credit and updated certain qualifications and payment management procedures. As of October 9, 2021, there were still more than 7 million unprocessed individual tax returns, which include tax year 2020 returns with errors and other returns that require special handling. Under ARPA, employers are entitled to tax credits if they provide paid leave to employees who take time off related to COVID-19 vaccinations. You can find more information on that here. Tips for Evaluating Withholding The IRS has an Income Tax Withholding Assistant for Employers tool that can help small and medium-sized businesses determine the amounts they should be withholding. The tool is available in the form of an Excel spreadsheet. Everything from regular pay to commissions and vacation pay is subject to withholding standards. Regardless of the time of year, here are some of the main instances where your business should be evaluating withholding: Early in the year to set your business on the right track Late in the year to be sure you are still on target as you head into tax prep season When the tax law changes (like with the American Rescue Plan Act changes, and other COVID-related changes) When wages change When itemizing deductions or tax credits If your business has seen a change in the percentage of employees versus gig workers being hired Types of Taxes …
Tax Breaks for Tax Year 2021
2020 made us all look long and hard at the current state of our business industries and our personal finances. And with that came new laws and tax breaks that you may be eligible for. Charitable Contribution Tax Breaks The Taxpayer Certainty and Disaster Relief Act of 2020 allows you to take up to $300 in charitable contributions as a tax deduction for the tax years 2020 and 2021, without itemizing. This change was made to help charities that were struggling during the pandemic, which means your charitable giving benefits you while also helping spur more momentum for philanthropy in these difficult times. It’s also worth noting that if you are able to itemize your charitable giving, the CARES Act allows you to deduct 100% of your adjusted Gross Income (AGI) in 2021, rather than the standard 60% deduction rate. Credit for Health Insurance Costs If your medical expenses exceed 7.5% of your AGI, and you itemize your deductions, you can deduct them. This percentage was set to go up in 2021 to 10%, but the passing of the latest act made this lower rate permanent. Medical expenses could include things like medical office fees, dental expenses, copays, health insurance payments, eyeglasses and eye exams, and more. You can also get a refundable credit (known as the HCTC or health coverage tax credit) that equals 72.5% of premiums paid by certain taxpayers for coverage of the individual and any qualifying family members under qualified health insurance. Temporary – Full Deduction of Business Meals For 2021 and 2022, the Taxpayer Certainty and Disaster Relief Act has provided a 100% deduction for business meal food and beverage expenses, which is a big jump from previous years where the standard deduction was 50%. Keep in mind, this provision is still considered temporary. Saver’s Tax Credit If you are 18 or older and you make eligible contributions to your IRA or employer-sponsored retirement plan in tax year 2021, you can claim 10%, 20%, or 50% of your …
Changes for Tax Year 2021
The IRS has released its updates for the tax year 2021. As 2020 draws to a close, it’s hard to imagine even beginning to think about the tax year 2021, but the IRS has just released 2021 tax rates, standard deduction amounts, and more. These updates are not for you to use in 2021 on your tax year 2020 filings, but rather the information you’ll be using in 2022 to complete your taxes for the tax year 2021. Let’s break down some of the updates. Tax Brackets, Rates, and Deductions Forbes has some great infographics that clearly illustrate the tax rates and brackets both for individuals and for married individuals filing jointly. For married individuals filing jointly: 10% - for taxable income up to $19,900 12% - for taxable income between $19,900 and $81,050 22% - for taxable income between $81,050 and $172,750 24% - for taxable income between $172,750 and $329,850 32% - for taxable income between $329,850 and $418,850 35% - for taxable income between $418,850 and $628,300 37% - for taxable income over $628,300 For individual taxpayers: 10% - for taxable income up to $9,950 12% - for taxable income between $9,950 and $40,525 22% - for taxable income between $40,525 and $86,375 24% - for taxable income between $86,375 and $164,925 32% - for taxable income between $164,925 to $209,425 35% - for taxable income between $209,425 to $523,600 37% - for taxable income over $523,600 Along with these brackets and rates, the IRS also announced an increase in the standard deduction of $300 for married couples filing jointly and $150 for individuals for tax year 2021 – bringing that total to $25,100 and $12,550, respectively. The standard deduction for heads of households will also increase by $150. Exemptions For the tax year 2021, the AMT (alternative minimum tax) exemption amounts have been adjusted for inflation. They are as follows: Individuals: $73,600 Married filing jointly and surviving …