withholding

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 …

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