We’ve reached 2021, but it has already been an eventful January. Tax season is in full swing, so we want to share a few things:
As you know, there is another round of stimulus payments. Many have already received them. The 2020 stimulus payments will be reconciled on the tax return. These payments are not income.
We will need to know the amount of 2020 stimulus payment you received. At this time, the IRS website only tells us if you received a payment, not how much the payment was. You may not have received the correct amount due to you. For example, if you had a child in 2020, you qualify for an additional $500. If you want to check on your stimulus payment go to this IRS website.
If you do not itemize deductions, you may qualify for a $600 charitable contribution deduction. This must be a cash donation, not a donation of goods typically given to Goodwill, etc.
Medical expense deduction starts at 7.5% of income, not 10% previously allowed. Keep in mind most people do not qualify for this deduction due to income levels or insurance payments.
Educator expenses now include protective equipment expenses. The maximum credit remains at $250.
Private mortgage insurance premiums can be deductible again for the 2020 tax season.
The standard mileage rate is .56 per mile in 2021.
Did you take a distribution from your qualified retirement plan or IRA? If so, and it was for COVID-19 reasons you will not incur the 10% early withdrawal penalty. Also, you have options on how much to report on your tax return. For example, if you withdrew $60,000 from your IRA you can report the entire amount in 2020 or spread this out over three years.
If you repay the loan within three years amended returns can be filed to refund the tax paid on the distribution. Contact us for the COVID-19 rules on this distribution.
In 2020, the optional standard mileage rate used to calculate the deductible costs of operating an automobile for business decreased by one-half cent, to 57.5 cents per mile.
As a result, you might claim a lower deduction for vehicle-related expenses for 2020 than you can for 2019.
Businesses can generally deduct the actual expenses attributable to the business use of vehicles. This includes gas, oil, tires, insurance, repairs, licenses and vehicle registration fees.
In addition, you can claim a depreciation allowance for the vehicle. However, in many cases, depreciation write-offs on vehicles are subject to certain limits that don’t apply to other types of business assets.
The cents-per-mile rate comes into play if you don’t want to keep track of actual vehicle-related expenses.
With this approach, you don’t have to account for all your actual expenses, although you still must record certain information, such as the mileage for each business trip, the date, and the destination.
Using the mileage rate is also popular with businesses that reimburse employees for business use of their personal vehicles.
Such reimbursements can help attract and retain employees who drive their personal vehicles extensively for business purposes.
Why? Under the Tax Cuts and Jobs Act, employees can no longer deduct unreimbursed employee business expenses, such as business mileage, on their own income tax returns.
If you do use the cents-per-mile rate, be aware that you must comply with various rules. If you don’t, the reimbursements could be considered taxable wages to the employees.
The rate for 2020 Beginning on January 1, 2020, the standard mileage rate for the business use of a car (van, pickup or panel truck) is 57.5 cents per mile.
It was 58 cents for 2019 and 54.5 cents for 2018. The business cents-per-mile rate is adjusted annually.
It’s based on an annual study commissioned by the IRS about the fixed and variable costs of operating a vehicle, such as gas, maintenance, repair and depreciation.
Occasionally, if there’s a substantial change in average gas prices, the IRS will change the mileage rate midyear.
There are some situations when you can’t use the cents-per-mile rate. In some cases, it partly depends on how you’ve claimed deductions for the same vehicle in the past.
In other cases, it depends on if the vehicle is new to your business this year or whether you want to take advantage of certain first-year depreciation tax breaks on it.
As you can see, there are many factors to consider in deciding whether to use the mileage rate to deduct vehicle expenses.
At David Mills CPA, LLC, our expert can help if you have questions about tracking and claiming such expenses in 2020 — or claiming them on your 2019 income tax return.
David Mills CPA, LLC has offices in Morton and East Peoria.
Keeping track of key tax-related deadlines for your business is an ongoing concern. Here are some of the key tax-related deadlines affecting businesses and other employers during the first quarter of 2020.
Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you.
Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.
January 31 is the deadline to File 2019 Forms W-2 “Wage and Tax Statement,” with the Social Security Administration and provide copies to your employees.
Provide copies of 2019 Forms 1099-MISC, “Miscellaneous Income,” to recipients of income from your business where required.
File 2019 Forms 1099-MISC reporting nonemployee compensation payments in Box 7 with the IRS. File Form 940, “Employer’s Annual Federal Unemployment (FUTA) Tax Return,” for 2019.
If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it’s more than $500, you must deposit it.
However, if you deposited the tax for the year in full and on time, you have until February 10 to file the return.
File Form 941, “Employer’s Quarterly Federal Tax Return,” to report Medicare, Social Security and income taxes withheld in the fourth quarter of 2019.
If your tax liability is less than $2,500, you can pay it in full with a timely filed return.
If you deposited the tax for the quarter in full and on time, you have until February 10 to file the return. (Employers that have an estimated annual employment tax liability of $1,000 or less may be eligible to file Form 944, “Employer’s Annual Federal Tax Return.”)
File Form 945, “Annual Return of Withheld Federal Income Tax,” for 2019 to report income tax withheld on all nonpayroll items, including backup withholding and withholding on accounts such as pensions, annuities and IRAs.
If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 10 to file the return.
February 28 File 2019 Forms 1099-MISC with the IRS if 1) they’re not required to be filed earlier and 2) you’re filing paper copies. (Otherwise, the filing deadline is March 31.)
March 16 If a calendar-year partnership or S corporation, file or extend your 2019 tax return and pay any tax due.
If the return isn’t extended, this is also the last day to make 2019 contributions to pension and profit-sharing plans.
If you have questions about meeting applicable deadlines or to learn more about filing requirements, contact David Mills CPA, LLC. We have offices in Morton and East Peoria or can arrange a video conference with you.
April 15th is behind us and if you’ve filed your tax return you’ve probably had the chance to see how the Tax Act affected you. Here are some thoughts on this past tax season and about the tax seasons going forward:
There are some big changes that are happening and it will be interesting to see their effects. It’s best to stay on top of the changes. We can help you there! Contact us about your financial needs.
This tax season, make sure you are getting the tax return you deserve with our help. Taxes are a complex system and having a knowledgeable and experienced professional at your back can be the best way to improve your return. We offer tax planning and preparation for both individuals and small to medium-sized businesses.
For business owners, your personal and businesses taxes are closely linked. It’s especially important for business owners to have proper tax preparation. One issue many business owners face is that sometimes business owners think only of yearly taxes, but they are subject to many more such as:
We have the experience and knowledge required to guide you through the many regulations and laws. Minimizing these taxes is a goal of every business. We can help you and your business through our advising!
Many individuals believe that their tax return is relatively simple. You can go the simple route, but you are likely making mistakes and missing out on deductions you are able to claim. We can help you get the most out of your tax return.
Get the most out of your tax return, call us today so we can provide you with professional tax preparation. You’ll see the difference for yourself and your business.
If you are like most people when it comes to taxes, you don’t feel confident in what you are doing. A tax consultant can help relieve stress and reduce mistakes while filing taxes. Check out five reasons why you should consider hiring a tax consultant.
Have you found a mistake on a previous tax return in the past three years? You can work with a tax constant to file an amended return. A consultant can help to minimize any damage that may have been caused. It can also provide you with peace of mind in knowing that your tax return will be properly handled.
Have you gotten married or divorced in the last year? If so, your tax filing may be affected.
Filling Your taxes can be time-consuming. A tax consultant will be able to work quickly and efficiently. They will be able to save you the stress of making sure your taxes are done right.
Taxes can become confusing if you live and work in different states. If you’ve recently moved to a new state it can be confusing as well.
A tax consultant will be able to assist you in the different states’ tax rules and can help you sort out any issues that arise.
A common mistake of new business owners is waiting to hire a tax professional. How you file your taxes the first year can impact future tax filings. It is important to start off right.
David Mills is proud to assist our customers with their taxes and make recommendations that fit your needs. If you need assistance with your taxes, contact David Mills today. We look forward to working with you!
With tax season approaching, it is time to start planning and preparing for taxes. In order to effectively plan for taxes, it is important to plan with an experienced professional. Continue reading to learn about David Mills’ approach to tax planning and tax preparation.
How does David Mills help you and your company with effective tax planning? We take into consideration the following things:
If you are a business owner, we take into consideration both your personal and business objectives. At David Mills, we take a long-term approach to planning. Our team will provide several planning scenarios that consider both your short and long term goals.
In recent years, there have been over 300 tax law changes and revisions. Several of the laws have limited time frames. The David Mill’s team keeps up with all of the current tax law developments that affect you and your business.
We also can answer any questions about any returns that you have prepared yourself or by someone else who prepared them for you. Our team can review your past tax returns to ensure they are accurate and provide you with advice. Learn more about our tax preparation service.
As tax season approaches, it is time to call David Mills. Our team will be happy to help you with both planning and preparation for taxes. Contact our team today for all of your tax needs!
When it comes to paying your taxes, many people find themselves scrambling in April trying to get their act together. While you may think it would be an annual routine for many, about 20% of people wait until the last week to pay their taxes. Are you in that 20%? Whether you are or are not, understanding the benefits of filing taxes earlier than later is very important and will help taxpayers in the long run.
The most obvious reason to file your taxes early is to receive your tax refund as soon as you can. Last year the IRS made it possible to have your tax refund direct deposited into your account, which will allow you to receive your tax refund even faster rather than waiting weeks for a paper return.
Tax fraud is a major issue that many people end up having to deal with. While tax fraud is more common than you think, there are ways to prevent it. One of these ways is to file your taxes as early as possible. By filing taxes early, it will be more difficult for criminals to pull off. This is because if the IRS receives a duplicate return after you have already filed yours, it will be noted as fraudulent. If you have not filed yours yet, you could be in trouble.
If you discover that you owe a balance to the IRS, filing taxes early will allow you extra time to sort everything out. If you file as soon as you can in January, then you will have until mid-April to come up with the extra money that you owe. The extra time makes it much less stressful for you and your financial situation.
If you wait until the last minute to file your taxes, you may find yourself scrambling in search of receipts, personal information, etc. Thus, leading to the need for a tax extension. This turns into a serious issue when you owe a balance to the IRS and do not pay what you owe. The IRS will charge you interest and penalties until the full amount is paid off. Filing your taxes early will help you avoid all of these potential issues.
Waiting until the last minute to file taxes will do nothing but add additional stress to your life. You will feel the pressure to find your needed information and file as fast as you possibly can, which can lead to errors and other problems down the road. Tax season is stressful enough, there is no need to add even more stress by waiting until the last minute.
If you are in need of additional tax information or need assistance in filing your taxes, contact David Mills CPA LLC today. We provide expert accounting and financial services to small and medium-sized businesses, as well as individuals across Morton, Peoria, & the rest of Central Illinois. We look forward to answering any questions you may have!
No matter the type or size of your business, the tax man will come knocking on your door when tax season comes among us. It is always best to have your books in order and up to date when that time comes. We are aware this may seem like a hassle to keep up with yourself, but by following our tips below you will be on your way to better, more organized accounts this year and a more successful business.
Becoming and remaining organized is incredibly important when it comes to keeping your finances in order. The good news is, this doesn’t have to be a difficult task. Keeping up with basic spreadsheets showing all of your funds received and funds paid out is a simple way to track your finances. At the end of every month, check to make sure your records all align with the money in your bank account to ensure balanced accounts.
We understand that handling your financials is not the easiest task to take on by yourself, which is why we always recommend hiring a professional accountant in your area to take care of the dirty work for you. Through hiring a professional, you can rest assured knowing your accounts are in good hands and you are up to date with all rules, laws, and aren’t missing out on any tax allowances. Through hiring an accountant, you can put all of your attention on growing your business.
There are many benefits when it comes to separating your personal and business finances. Not only will it make your business look more professional, but it will make it much easier to separate personal and business expenses when tax time comes. Depending on how your business is set up, it may be required by law to have separate accounts. Ask a local accountant in your area if you are curious if this is required for your business or not.
Waiting until the last minute to get your finances in order is never a good idea. Procrastinating this task usually leads to additional issues down the road and by then, it is too late to have sorted out. Staying on top of your receipts and invoices will make it easier for you and your accountant to get your accounts sorted out in a timely manner. And not to mention, will help your overall business run more smoothly.
By following the four tips above, you should be on your way to better, more organized accounts. The more you keep track of and have up to date, the easier it will be when tax season comes along. If you are looking for additional help with your finances or have any questions about getting your books in order, contact a professional accountant in your area. David Mills CPA LLC provides expert accounting and financial services to both small and medium businesses, as well as to individuals across Peoria, Morton, and the rest of Central Illinois. If you are looking to get your books in order this year, feel free to contact us here.