Determining If Your Vacation Rentals Are Really Commercial Real Estate

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This article discusses the ins and outs of a tax strategy known as a cost segregation study, and in particular, for those that own a vacation rental real estate. When the property is leased out for less than 30 days at a time, it could be recognized as non-residential real estate property. Therefore, taxpayers should undertake a cost segregation study on their property in order to take bonus depreciation and meet passive activity loss grouping rules. If your short-term vacation rental property qualifies, conducting the study can save a significant amount of money each year. Be sure to check out this link for more information!

To view this article, click HERE to access the original content.

Ways to Keep Adult Children from Becoming a Financial Liability

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This article explains several scenarios where your child may be asking you for financial help. First, they may have taken many loans and want your help with EMIs. The author suggests turning the child to a financial advisor to keep your finances intact. Secondly, the child may want a loan to help with a start-up company. If the child has mentioned this scenario before, then hopefully it makes sense for the parents to hand out a loan without interest with a direct time frame on when it needs to be paid back. Another scenario involves a child who wants frequent handouts. The author suggests getting a financial advisor or even seeking counseling. For more guidelines to help with your family business issues, click the link.

To view this article, click HERE to access the original content.

Tax Deductions and Credits to Consider in 2022

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This article discusses how there are two main strategies that individuals can take advantage of in order to lower their tax bills, deductions, and credits. While tax deductions lower your taxable income, tax credits are “a dollar-for-dollar reduction to your tax bill.” However, many people do not know of or forget about all the things that can qualify as either a deduction or credit. For example, tuition and fees deductions, educator expenses, and home office deductions are just a few. No matter the industry that you operate in, be sure to check out this link for the full list and to save as much money as possible this tax season!

To view this article, click HERE to access the original content.

Estate Planning Should Include What Happens to Digital Assets and Cryptocurrency

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This article explains how the assets people own have become more complicated, making it a little more difficult to include everything in your will. Only about 46% of Americans have made provisions for how their money and estate should be handled, according to a 2021 Gallup poll. Abby Schneiderman, co-founder and co-CEO of Everplans, which helps people create accounts to store their wills, passwords, and funeral wishes, suggests taking an inventory check of your digital assets and making sure that the assets are accessible at all times by sharing the passwords of your phone and computers with someone else. She also suggests making a plan for pets as well as plans for sentimental items. Providing access to online financial assets to someone you trust is especially important for cryptocurrencies, because if you are gone and nobody else knows how to access it, then it will be gone forever.

To view this article, click HERE to access the original content.

Watch Out for These Tax Changes in 2022

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As you gear up for the 2022 tax filing season, there are some challenges and changes of which you should be aware.

1. Significant IRS Delays – 

The tax bureau is incredibly overburdened due to understaffing, technology woes, and myriad complications arising from COVID-19 pandemic. “CPA tax professionals greeted the launch of tax season with skepticism that the IRS will be able to contend with its continuing logistical challenges,” explains a recent article from the Journal of Accountancy, “with taxpayers and their preparers likely to experience more frustration and delay.”

2. Rebate for the Third Economic Impact Payment – 

Taxpayers who received no payment or partial payment of the $1,400 third stimulus payment can claim it on their 2021 tax return using the Recovery Rebate Credit. In order to know how much to claim, refer to Letter 6475 from the IRS (expected to go out in early 2022) which details the amount of your third stimulus payment. Alternatively, you can determine your stimulus payment amount using your IRS.gov online account.

3. Changes to the Child Tax Credit – 

Firstly, the child tax credit increased significantly by the American Rescue Plan Act of 2021 (ARPA)—it was raised from a maximum of $2,000 per child to $3,000 per child aged six or older and $3,600 for children under six. On top of that, half of the tax credit was paid in advance in installment payments to qualifying families in 2021.

Taxpayers who received advance monthly child tax credit payments should be on the lookout for Letter 6419 from the IRS detailing the total amount of payments that they received in 2021. If you received advance payments, there are three possible outcomes for these you:

  • You received the correct amount of advance payments. In this case, you simply need to report the advance payments you received and apply the remaining half of the child tax credit to your tax return.
  • You received less of an advance payment than you were entitled to. In this case, you will report the amount that you did receive and will then apply the remaining half of the child tax credit, plus the additional amount you are owed, to your tax return.
  • You were given more advance payment than you were entitled to. In this case, you will report the amount that you did receive and then your tax return will be lowered by the amount that you received in excess of what you were entitled to.

For further details on this topic, visit the 2021 Child Tax Credit and Advance Child Tax Credit Payments FAQ on IRS.gov

4. Deducting Charitable Contributions Without Itemizing

For 2021, taxpayers who take the standard deduction (rather than itemizing) can still deduct up to $300 for donations to qualifying charities ($600 for married couples filing jointly). Additionally, taxpayers who do itemize can claim charitable contribution deductions for cash contributions up to 100% of their adjusted gross income (AGI). Usually, the deduction is limited to 50% of AGI.

As always, please do not hesitate to reach out to your Brady Martz tax advisor with any questions or concerns regarding the items listed above. We are eager to work with you to ensure that you maximize your return and minimize your tax burden.

Embracing a New Era of Innovation in 2022

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This article explains the importance of building your company’s online structure in a growing technological world. Technology is more powerful than ever challenging a business to restructure in new ways where it can sustain itself in a new market. It offers an opportunity to grow in every aspect because every facet of your brand can be tracked. The key element to success is finding a mission to stand behind which can build up you and the people you work with.

To view this article, click HERE to access the original content.

The Benefits of Business Valuation for Small Businesses

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This article demonstrates the possibilities a small business can pursue after receiving a valuation. A valuation can give small business owners benefits such as tracking progress and “a road map to deliberate decision making.” Some other benefits that come along with a business valuation include access to more investors, better decision making to improve your business value, sale value, understanding where your business fits in the industry, and finally obtaining a true company value. Business valuation is great from an investor’s standpoint because it will allow them to see where the money is going and if their investment will generate a smart return. A valuation will also enable the owners of the business to see where their progress lies on a national scale.

To view this article, click HERE to access the original content.

Changes are coming to your benefit plan audit…

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Beginning with either the 2021 plan year financial statements (plans audits performed in 2022) Brady Martz will be following new auditing standards to perform and report on your plan financial statement audit.

Read more

Important Tax Due Dates – January 2022

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January 2022 Individual Due Dates

January 3 – Time to Call For Your Tax Appointment –

January is the beginning of tax season. If you have not made an appointment to have your taxes prepared, we encourage you to do so before the calendar becomes too crowded.

January 10 – Report Tips to Employer –

If you are an employee who works for tips and received more than $20 in tips during December, you are required to report them to your employer on IRS Form 4070 no later than January 10.

January 18 – Individual Estimated Tax Payment Due –

It’s time to make your fourth quarter estimated tax installment payment for the 2021 tax year.

January 31 – Individuals Who Must Make Estimated Tax Payments –

If you didn’t pay your last installment of estimated tax by January 18, you may choose (but aren’t required) to file your income tax return (Form 1040 or Form 1040-SR) for 2021 by January 31. Filing your return and paying any tax due by January 31 prevents any penalty for late payment of the last installment. If you can’t file and pay your tax by January 31, file and pay your tax by April 18 (April 19 if you live in Maine or Massachusetts).

 

January 2022 Business Due Dates

January 3 – Payment of Employer Share of Social Security Tax from 2020 –

If you are an employer that deferred paying the employer share of social security tax or the railroad retirement tax equivalent in 2020, pay 50% of the deferred amount of the employer share of social security tax by January 3, 2022. The remaining 50% of the deferred amount of the employer share of social security tax is due by January 3, 2023. Any payments or deposits made before January 3, 2022, are first applied against the payment due by January 3, 2023.

January 3 – Payment of the Deferred Employee Share of Social Security Tax from 2020 – 

If are an employer that deferred withholding and payment of the employee share of social security tax or the railroad retirement tax equivalent on certain employee wages and compensation between September 1, 2020, and December 31, 2020, you should have withheld and paid those taxes ratably from wages paid to the employee between January 1, 2021, and December 31, 2021. The employer is liable to pay the deferred taxes to the IRS and must do so before January 3, 2022.

January 18  – Employer’s Monthly Deposit Due –

If you are an employer and the monthly deposit rules apply, January 18 is the due date for you to make your deposit of Social Security, Medicare, and withheld income tax for December 2021. This is also the due date for the nonpayroll withholding deposit for December 2021 if the monthly deposit rule applies. Employment tax deposits must be made electronically (no paper coupons), except employers with a deposit liability under $2,500 for a return period may remit payments quarterly or annually with the return.

January 18 – Farmers and Fishermen –

Pay your estimated tax for 2021 using Form 1040-ES. You have until April 18 (April 19 if you live in Maine or Massachusetts) to file your 2021 income tax return (Form 1040 or Form 1040-SR). If you don’t pay your estimated tax by January 18, you must file your 2021 return and pay any tax due by March 1, 2022, to avoid an estimated tax penalty.

January 31 – 1099-NECs Due to Service Providers & the IRS –

If you are a business or rental property owner and paid $600 or more to individuals (other than employees) as nonemployee compensation during 2021, you are required to provide Form 1099-NEC to those workers by January 31. “Nonemployee compensation” can mean payments for services performed for your business or rental by an individual who is not your employee, commissions, professional fees and materials, prizes and awards for services provided, fish purchases for cash, and payments for an oil and gas working interest. To avoid a penalty, copies of the 1099-NECs also need to be sent to the IRS by January 31, 2022. The 1099-NECs must be submitted on optically scannable (OCR) forms. This firm prepares 1099s in OCR format for submission to the IRS with the 1096 submittal form. This service provides both recipient and file copies for your records. A business or individual who is required to file 250 or more information returns (i.e., 1099s and W-2s among others) must file those forms electronically. Please call this office for preparation assistance.

January 31 – Form 1098 and Other 1099s Due to Recipients –

Form 1098 (Mortgage Interest Statement) and Forms 1099, including 1099-NEC (see above) are due to recipients by January 31. The IRS’ copy, other than for 1099-NECs, is not due until February 28, 2022, or March 31, 2022, if electronically filed. These 1099s may be reporting the following types of income:

  • Dividends and other corporate distributions
  • Interest
  • Rent
  • Royalties
  • Payments of Indian gaming profits to tribal members
  • Profit-sharing distributions
  • Retirement plan distributions
  • Original issue discount
  • Prizes and awards
  • Medical and health care payments
  • Debt cancellation (treated as payment to debtor)

January 31 – Employers – W-2s Due to All Employees & the Government –

EMPLOYEE’S COPY: All employers need to give copies of the W-2 form for 2021 to their employees. If an employee agreed to receive their W-2 form electronically, post it on a website and notify the employee of the posting. GOVERNMENT’S COPY: W-2 Copy A and Transmittal Form W-3, whether filed electronically or by paper, are due January 31 to the Social Security Administration.

January 31 – File Form 941 and Deposit Any Undeposited Tax –

File Form 941 for the fourth quarter of 2021. Deposit any undeposited Social Security, Medicare, and withheld income tax. (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.

January 31 – File Form 943 –

All farm employers should file Form 943 to report Social Security, Medicare taxes and withheld income tax for 2021. Deposit any undeposited tax. (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.

January 31 – W-2G Due from Payers of Gambling Winnings –

If you paid either reportable gambling winnings or withheld income tax from gambling winnings, give the winners their copies of the W-2G form for 2021.

January 31 – File Form 940 – Federal Unemployment Tax –

File Form 940 (or 940-EZ) for2021. If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it is 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.

January 31 – File Form 945 –

File Form 945 to report income tax withheld for 2021 on all nonpayroll items, including backup withholding and withholding on pensions, annuities, IRAs, gambling winnings, and payments of Indian gaming profits to tribal members. Deposit or pay any undeposited tax. (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 timely, properly, and in full, you have until February 10 to file the return.

Start 2022 Off Right: Clean Up QuickBooks

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January is always such a transitional month. You’re trying to wrap up everything that didn’t get done during a hectic December. At the same time, you have to jump into the new year and start doing your regularly-scheduled work. It can be hard to tell sometimes which year you’re working on.

Don’t forget about QuickBooks while you’re catching up on 2021 and looking ahead to 2022. You probably don’t want to put one more item on your to-do list, but any steps you take now to ready the software for the new year will pay off. Once you start entering transactions and placing orders and welcoming new customers, it will help tremendously to have a clean slate.

Here are some suggestions for completing as much of the work you started in 2021 as you can.

Run four critical reports.

Bills can slip through without being paid in December because there’s so much going on. This applies to both you and your customers. You need to catch up on what’s owed to you and what you owe. So generate these four reports in QuickBooks:

  • A/R Aging Detail. Which of your customers are in arrears with their payments to you? How much do they owe you, and when should the money have come in?
  • Open Invoices. Which invoices have not yet been paid? There will be some duplication with A/R Aging Detail, but this report isolates only unpaid transactions.
  • A/P Aging Detail. Are you caught up with the money you owe other individuals and companies? This report will tell you.
  • Unpaid Bill Details. Like Open Invoices, this report sets apart only the bills that have unpaid balances.

Create statements for past-due customers.

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One collection method you can use in QuickBooks if you don’t want to communicate directly with overdue customers is to send statements.

You’ll have to decide how hard you want to lean on customers who are late paying your bills when it’s so early in the year. Certainly, if some customers are more than 60 days late (30 days if they have sizable balances), you may want to make a phone call or at least send a personalized email asking them to fulfill their obligations.

But you can also send statements. These documents provide details of financial activity between you and your customers for a given period of time. Open the Customers menu and click Create Statements. Look over all of the options in the window that opens and indicate your preferences. If customers don’t respond to your statements within 10 days, then it may be time for a phone call.

Take a hard look at your inventory.

It may have been a while since you did this, but it’s really important to do it regularly – especially if you had a busy holiday season. The best way to start on this is to open the Vendors menu, scroll down and hover over Vendor Activities, and click Inventory Center.

If you don’t have a lot of inventory, you could just highlight each entry under Active Inventory, Assembly over to the left. The window that opens on the right side of the screen holds an enormous amount of detail about each item. But if you sell a lot of different kinds of items, that will take too much time. In that case, you might run one or more of the reports linked from this screen. Even the QuickReport can be helpful.

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You can get a lot of information about individual items you sell in QuickBooks’ Inventory Center.

Tip: If you need to adjust the quantity you have on hand, click the down arrow next to Manage Transactions in the lower left and select Adjust Quantity/Value on Hand. You might consult with us if you’re running into this problem, and we can go over inventory issues with you.

Set Up Online Financial Connections

January is also a good time to be thinking about how you can better use QuickBooks in 2022. We tend to learn how to use the tools we need and not explore any further when we’re using any kind of software. QuickBooks is such a massive program that that’s understandable.

But there are two tools that can have tremendous impact on your daily workflow, your ability to get paid faster by customers, and your understanding of where you stand financially every day. They are:

  • Online Banking. Did you know that you can connect QuickBooks to many financial institutions and import your cleared transactions every day? That’s what the Bank Feeds Center is all about. If you sign up for this service, you won’t have to wait until your monthly statement comes to see what transactions have gone through.
  • Online Payments. If you’re only accepting checks as payment from your customers, you’re probably getting paid more slowly than you might. Sign up for QuickBooks Desktop Payments, and you’ll be able to process credit cards, eChecks, and ACH payments.

We know you’re busy catching up from the holiday breaks right now. But if you need our help with anything we discussed in this month’s column, please reach out to us. We’re always available to set up a consultation.