Tis the season of amore, a time to celebrate our loved ones (or an excuse to gorge on indulgent treats and guilty pleasure TV). No one is celebrating, nor in love with, the idea of hunting down vital forms and getting appropriate supporting documentation as tax deadlines approach. We at OFWF are privileged to be your life partners in all things tax and finance.
All-important compliance and money-saving functions are a breeze, and don’t add to the considerable stress everyone is already under with post-holiday recovery and as filing dates loom large. Furthermore, we encourage our current clients and would-be ones to reimagine the way they perceive tax time. It is, indeed, an opportunity to pocket more money, to be reinvested back into one’s business or enriching one’s personal life, as well as to heighten how your business operates and to reach personally satisfying goals.
It is our privilege to start the new(er) year off on the best foot possible by supporting your personal and or professional business lives with the following information:
· Personal tax items that are needed to get your tax filing in order
· What’s new or specific to the 2022 filing season
· Business documents that you need to provide to us, or need to get in order if you’re starting the process independently
· List of tax obligations and, largely, the associated forms that are based off the likes of how your business is structured.
With a few clear lists and some savvy support on your side, we are able to take the complex and simplify it – and not the other way around. See, tax time isn’t so daunting after all!
Organization fuels accuracy, timeliness and thoroughness and fights the risks of errors, incomplete returns, audits and missed opportunities in the form of deductions and credits. Aside from the obvious issues that can arise due to oversights and poor planning, these mistakes can lead to delays in processing the refund that may be due to you.
Be sure to collect and provide to your trusted tax partner the following:
· W-2 forms from any and all employers
· 1099s related to investments such as distributions from pensions, annuities, and retirement funds
· Gig workers, mind your income statements and related records (cash, property, goods, virtual currencies – it’s all fair game)
· Interest income (Form 1099-INT)
· Health Insurance Marketplace statements (Form 1095-A), which reconciles advance premium tax credits (within the Marketplace coverage space)
· Documentation related to the Total Advance Child Tax Credit Payments (2021), reconciling advanced Child Tax Credit payments
· Economic Impact Payment letter (2021), to support Recovery Rebate Coverage eligibility
· Unemployment income and refund interest is taxable and, again, it is vital to have supporting relevant documentation
The IRS reports that 80% of taxpayers now get their refunds from direct deposit. So, in all likelihood, you are already set up to have funds directly deposited into your bank account. If you haven’t done so yet, this is the fastest way to get your refund. It also helps to avoid the potential mess and hassle associated with a refund check being lost, or further delays caused by damage to the check or the check being returned as “undeliverable.”
Personal taxes – What’s new(er)
We’ve referenced a few of the timely credit-oriented items above. The IRS is encouraging taxpayers to take actions early to help with filing, especially as it relates to notable 2021 Economic Impact and Child Tax Credit payments. The latter item involves comparing the payments received this year with the amount that can be properly claimed on the 2021 tax return. By now you may have received Letter 6419, which shows the total advance payments that were received (according to IRS records). Keep this letter and any other documents related to this credit with your other important tax files. Those families who didn’t get advance payments this year can still claim the credit when filing a lump-sum payment if they are eligible.
Pivoting to the former opportunity (Economic Impact/Recovery Rebate Credit), those who didn’t qualify for the third round of payment or didn’t receive the full amount may claim the credit based on 2021 tax filing information. Again, it’s important to be able to retrieve the documents that show the amounts of payments on this front, and any “Plus-Up” payments. In doing so, the correct amount for the credit can be calculated when completing the return. Incorrect calculations or basing the amount off of incomplete information, can lead to delays in processing the return, which slows getting the refund in your hands.
Our business clients can benefit from skills not limited to our in-house QuickBooks Pro certified professional. We echo much of what QuickBooks defines as key documentation that is a “must” to help us to help you. The better prepared you are, the less time you spend dealing with tax matters. Let us do that – it’s our jobs after all. This frees up time for you to get to the day-to-day business of your business.
The must-have documentation that we will ask you about sooner rather than later generally boils down to:
· Financial statements – You know the drill: cash flow and income (P&L) statements, and balance sheet within. Think of this as the formal recording of all of the financial activities within the past year. When you remember this, it’s easy to see how important it is to the accuracy of your tax return.
· Transactions and recorded capital assets[BS1] – These assets are characterized as benefiting your business for more than one year. They are largely divided into “tangible” assets like land and vehicles, and “intangible” assets like patents and trademarks. Accounting for these assets is, partly, crucial to determining whether an asset is depreciable property (with associated deductions), and is either a capital loss or capital gain.
· Anything related to the company and “wheels” – In general, any expenses that go toward the operation of the vehicle and the operation of the business can be claimed. The process of calculating deductible expenses applies to more obvious costs (like gas and mileage or wear and tear), as well as interest on a car loan or tied to leasing said vehicle. Don’t forget to track repairs, services (maintenance), insurance and the like.
· The home office – An increasingly important consideration due to COVID-driven workplace changes, home office expenses are similar to applicable vehicles in that you can view deductible expenses through the lens of, “What do I need to operate my home as business?” This might include utilities and repairs, again, tied to when the home is being used as an office space. It gets stickier and trickier when discussing requirements for claiming the home as the primary “office,” though rules have evolved in more recent tax seasons.
Largely, taxes as a business (what you pay, how you pay, when you pay) is dependent on the structure of the operation. Accordingly, the forms that you fill out and the “t’s” that you cross also depend on if your business is a sole proprietorship (this is the “default” structure for most operations), an LLC, S-Corp, C-Corp, partnership and so on. Tax categories range from employment and income to self-employment and excise.
Employment accounts for Social Security, Medicare, Federal income tax withholding and Federal Unemployment taxes. All businesses, less partnerships, are responsible for income taxes, with federal obligations on a pay-as-you-go or pay-as-you-earn system. Self-employment is like employment tax, only for those individuals classified as such. Excise tax may or may not apply to your business. Your obligations on this front depend on if you make or sell certain goods, and other factors; for instance, businesses that operate trucks or other vehicles on public highways with a taxable gross weight of 55,000 pounds or more.
Tax rates can also differ considerably depending on if you file jointly or separately, have dependent children, pay social security and any number of other considerations. We at OFWF can walk you through sound strategies that work in favor of your personal and business “life.” An example of some of the forms to be filled out include:
· Schedule C for sole proprietorships and single-member Limited Liability Corps
· Form 1065 for multi-member LLCs; Schedule K-1 for each member within the LLC
· Form 1120 for Corps
· Schedule D (Form 1120-S) for S-Corps
· 1040-ES (Estimated tax) for those filling as “self-employed”
For the savvy business owner or professional who knows their respective disciplines or business niche like the back of his or her hand, one can quickly see how “in the weeds” the process of calculating, sorting, organizing, retrieving, storing (securely), reporting and so on can dwarf one’s day to day and truly be a taxing process. We at OFWF are on your side to keep the wind in your sails and a spring in your step as you effortlessly round the bend toward April 15. There is no time like the present to embark on the journey toward a less taxing, more rewarding tax time.