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Tax Advice

The Expectations for the 2022 Tax Preparation Season

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The holiday season has come and gone but “tax season” is always with us. This tax season may be as complicated as ever due to the pandemic and a flurry of new tax laws that came down from Congress. 

Your expectations for your personal and business tax preparation may have to be adjusted, particularly with working with the IRS (always a challenge) and the child and dependent tax credit. Here are some facts to keep in mind as you get your documents in order to file for 2021:

  1. The Internal Revenue Service (IRS): Delayed and behind 
  2. E-filing begins January 24, 2022: The IRS is already way behind in preparing for this tax season and is still working on 2019 and 2020 tax filings. These disruptions are blamed on the ongoing pandemic along with budget cuts, a shrinking workforce, and outdated technologies at the IRS.
  3. Delayed refund for returns claiming Additional Child Tax Credit (ACTC). The IRS cannot issue refunds before mid-February 2022 for returns that properly claim ACTC. This time frame applies to the entire refund, not just the portion associated with ACTC.
  4. The Child and Dependent Care Credit: 
    • Differences in credits for qualifying children and other dependents tax year 2021
    • Enhanced child tax credit. For 2021, the child tax credit applies to qualifying children who have not attained age 18 by the end of 2021. Also, the initial amount of the child tax credit is increased to $3,600 for each qualifying child who has not attained age 6 by the end of 2021 and $3,000 for each other qualifying child who has not attained age 18 by the end of 2021. The credit for other dependents has not been enhanced. 
    • In the know. Important abbreviations: ACTC means additional child tax credit.  ATIN means adoption taxpayer identification number.  ITIN means individual taxpayer identification number.  NCTC means nonrefundable child tax credit.  ODC means credit for other dependents.  RCTC means refundable child tax credit.
    • Delayed refund for returns claiming ACTC. The IRS cannot issue refunds before mid-February 2022 for returns that properly claim ACTC. This time frame applies to the entire refund, not just the portion associated with ACTC.
    • 2021 Child and dependent care credit information: The American Rescue Plan Act of 2021, was enacted on March 11, 2021, making the Child and Dependent Care credit substantially more generous and potentially refundable (up to $4,000 for one qualifying person and $8,000 for two or more qualifying persons) only for the tax year 2021, This means an eligible taxpayer can receive this credit even if they owe no federal income tax. Your federal income tax may be reduced by claiming the Credit for Child and Dependent Care expenses on your tax return. ***

If you have been frustrated the past filing your individual and/or business in the past, this year will not be any different. We are constantly hearing from clients who are having difficulty contacting the IRS to get important information or a consultation on a previously filed tax return. 

AK Burton, PC, knows the current tax laws and how to work with the IRS. Our experienced tax preparers can file your business and personal tax returns and represent you to the IRS.  Call us at (301) 365-1974 for a consultation. Our office is open. Covid protocols if requested. We serve the Bethesda, Rockville, and Montgomery County, MD area. 

*** For more information on Child and Dependent Care Tax Credit, visit the IRS website.   

 

Financial Advice

How to Set Your Financial Goals for 2022

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When is a good time to set financial goals? The time is now; in December, when one year is ending a new year is on the horizon. This is the best time to set a few financial goals for the New Year. 

So, after the holidays, before you get caught up in work, school, and other busy parts of your life, you can meet with your financial advisor. They can review your current plan and make recommendations. 

Before you meet with them, there are several things you can do to improve our financial outlook for 2022 and beyond:

  1. Set short-term goals: In planning for the coming year, it is best to look at the short-term. You will not accomplish your retirement goals in one year. Make goals that you can accomplish in a few months. 
  2. Create an emergency fund: Hopefully, you will not have some type of emergency and need an emergency fund. An emergency can present itself in a multitude of unexpected ways; it may be medical, unemployment, or automobile related. Ideally, a good emergency fund has 3-6 months of money to pay the bills. This may seem impossible. However, you can start saving a small percentage of your paycheck by placing it into a bank account which you do not touch unless the emergency occurs. (Use this emergency fund calculator to figure out how much to save.) Over time, an emergency fund will accumulate and help you and your family if an emergency occurs.   
  3. Retirement savings: Even though there is Social Security, you may still want to enroll in a retirement savings plan. If your employer supports a 401(3) (k), you should consider signing up for it. Your employer may pay matching funds toward it. If you are self-employed, see your financial advisor for information on the array of retirement accounts that you can enroll in. 
  4. Pay off high-interest debt: Credit card debt and interest are a savings killer. Make it a goal to pay them off as soon as possible and cut up cards that are not needed. Begin with the debt that has the largest percentage of interest and whittle it down. Once you have erased your credit card debt, it will be surprised as to how much money you have available each month.
  5. Set a budget: This is the last point and, perhaps, the most difficult. Setting a family budget can be agonizing. It calls for discipline and restraint. So, to make it easier, create a spreadsheet with income and expenses. This budget will help you track your spending and saving. It is essential as you check off your goals and make progress. 

Setting financial goals can be daunting. But with these financial planning suggestions. They can be accomplished with resolve and hard work. Start now and get on the road to financial freedom. 

A.K. Burton has licensed and experienced financial advisors on staff. If you have questions concerning your financial goals, call us at (301) 365-1974 for a consultation. We serve the Bethesda, Rockville, and Montgomery County, MD area. 

Accounting, Investment Advice

Year-end Retirement Planning Strategies

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As we come to the end of 2021, as you are making plans for the Thanksgiving and Christmas holidays, you may want to take some time out and look at your retirement plans, too. No matter what your age, your career advancement, or where you live, it’s not too late to begin, or add to, your retirement plans.  

In fact, this is a good time to assess your progress in planning and see if there are any gaps that need to be filled. So, here are several tips on how you can do retirement planning. You need to be informed. You need to know all the retirement options available to you. Discuss your available retirement planning options through your work. Do some quick web research. Consult your financial advisor and tax advisor.

Not enough? The following are possibilities for your retirement plan: 

    1. Taxable brokerage account: These are accounts funded with after-tax dollars. There are no contribution limits. Just remember that capital gains and investment income are taxable.
    2. Tax-deferred accounts:  These include the following: Traditional, SEP, & SIMPLE IRAs, 401(k)s, and 403(b)s. There are contribution limits depending on the plan. Also, depending on your tax bracket a tax deduction for the year that the contribution was made may be applicable (check with your tax advisor). Don’t forget about the required minimum distributions! The IRS requires withdrawals once you reach the age of 72 if your 70th birthday is July 1, 2019, or later. Roth IRAs do not require minimum distributions.
    3. Medicare: Medicare is a benefit for seniors 65 and older; however, it still has costs to it. Medicare doesn’t cover certain medical expenses like hearing aids, vision care, dental care, and long-term care. It also has large gaps in prescription coverage. In your retirement planning, you may want to budget supplemental medical insurance that goes beyond Medicare. Medicare Advantage and Medigap policies have premium costs and copays that supplement Medicare.
    4. Consider your cash reserves: Cash reserves help ride out stock market down cycles covering expenses while allowing time for investments to hopefully recover from the downturn.
    5. It is truly not too late: Don’t be discouraged! If you are 55 years or older without a retirement plan, it is not too late. Jump on the retirement planning bandwagon. It is possible to do! 

The main point here is that even if you are older and retirement is on the horizon, you can still make smart and logical decisions for your retirement. Consult with your financial advisor and tax advisor to make the changes you need to before the New Year begins.  

 A.K. Burton, PC, can help you do your retirement planning. We have experienced staff who can prepare your retirement accounts. Call us at (301) 365-1974 for a consultation. We serve the Bethesda, Rockville, and Montgomery County, MD area. 

tax preparation

How to Beat a Small Business Tax Audit

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The Internal Revenue Service IRS) has ratcheted up its small business audits this year. *** These audits include the mom-and-pop retail stores, tech startups, and investment funds such as cryptocurrency.

The infrequent checks from the IRS for small businesses are over for now. So, you as a small business owner, need to be ready when the tax-man cometh. Here are several tips on how you can beat the small business tax audit:

  1. Keep good records: The main question we accountants get is, “How far back do they go to do the audit?” Typically, you will need to keep copies of filed returns and documents for at least three years from the filing date or the return’s due date, whichever is later. This is the period of time that the IRS has to audit most returns. This process can go out as long as six years if the income was misreported by 25 percent or more. (There is no statute of limitations on fraudulent tax returns.)
  2. Make a case for unsubstantiated income: The IRS has an aggregate or algorithm of the typical income/expense ratio for any type of business. If they see a higher-than-average expense list, extremely low income, or a major loss, it may trigger an audit. If you have truthful and legitimate reasons for that data, such as insurance claims that show losses after a natural disaster (such as the floods in the Southern US) or advertising promoting more services, you may be able to survive the audit. You must have detailed records of it. This would include travel expenses, receipts, calendars, and mileage logs. 
  3. Investigate your records for possible audit red flags. You must do your due diligence to protect yourself from an audit. It’s actually pretty simple to do. Review your income records. Did you write the correct amount? (No transposed numbers.) The IRS cross-references your wages with other tax records. Also, be sure you have reported all of your income. Lastly, double-check your business deductions, particularly meal and entertainment expenses, a major bugaboo with the IRS. 
  4. Don’t lose your head. An IRS Audit does not mean you are going to prison, your home will be seized and your business(es) closed.  Actually, field audits are rare. If an IRS agent visits your location, then it would have to be an audit substantial enough to pay for the audit. In fact, most IRS audits are done online or with mail correspondence. The IRS, once it reviews the documents that you have sent, may only recalculate the return and bill you for the corrected amount. So, you can be calm about it and no need to look for agents in dark suits hopping out of SUVs with briefcases, showing you their IDs, and bargaining into your home. It makes for interesting television, but it is quite rare in real life.
  5. Bring in a professional accountant. Your tax records may be much more complicated than just transposed digits. When that is the case, you should consult with a professional, licensed, accountant. They can review and check all your numbers and documents to see if there are any discrepancies. Additionally, they can represent you to the IRS and make sure you are not unfairly or inaccurately audited. 

Audit. It is not a pleasant process but there is no need to hyperventilate and lock yourself in your basement. But, before tax season begins on January 1, 2022, do the necessary tasks to best protect yourself from a letter from the IRS requesting a small business tax audit. It can be done and you can survive it. Millions do every year. 

A.K. Burton, PC, can do all your income tax preparation. We have experienced staff who can prepare and file your tax return and represent you before the IRS. Call us at (301) 365-1974 for a consultation. Our office is open. We serve the Bethesda, Rockville, and Montgomery County, MD area.  

*** For more information on IRS Tax Audits see this website. 

tax preparation

Extended Business Tax Returns: One Month to Go

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August marks the end of summer and beginning of school. As summer draws to a close don’t forget that the end of summer marks an important tax deadline: Filing 2020 Extended Business Tax Returns.

Business owners that filed a 6 month extension to file their 2020 business tax return Form 1065 or Form 1120S must file by their tax returns by September 15, 2021. ***

If you haven’t filed your 2020 form 1065 or 1120S and don’t know where to start; here are some tips to collect the information to prepare your return:

  • Make sure your books are up to date and reconcile your books
  • Compile your business bank & credit card statements
  • Download your December 2020 loan statement that shows the year-end balance and interest paid
  • Compile your payroll tax returns including:
    • Quarterly Forms 941
    • Form 940
    • Quarterly state unemployment returns
  • Compile your sales tax returns
  • Did you file form(s) 1099? – if so, gather form(s) 1099
  • Did you make estimated payments? – if so, make note of the date and amount of each payment.
  • Did you make an extension payment? – if so, make note of the date and amount of each payment.
  • Vehicle mileage – make note of your:
    • Total mileage
    • Business mileage
  • Do you have a home office which you use exclusively for business? Include:
    • Total sq ft of home
    • Exclusive Business use sq ft of home
    • Expenses (utilities, taxes…etc,)
  • Does your business have a retirement plan? If so – gather your December 2020 retirement plan statement

Once you have collected this information, it’s time to file. The deadline to file extended partnership and S-Corporation returns is less than a month away. Not sure about preparing your own return? At A.K. Burton PC, we specialize in tax services for small business owners. We prepare and file forms 1065 and 1120(S). 

A.K. Burton, PC, can do all your income tax preparation. We have experienced staff who can prepare and file your tax return and represent you before the IRS. Call us at (301) 365-1974 for a consultation. Our office is open. We serve the Bethesda, Rockville, and Montgomery County, MD area.  

*** For more information on filing as a Partnership or an S Corp, consult the IRS website.  

Quickbooks, Small Business Accounting

Five QuickBooks Small Business Hacks You Need to Know

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Small business accounting and bookkeeping is a necessary part of the business. The software has made small business accounting and bookkeeping easier and more convenient. Affordably-priced software ranging from Wave Accounting to Xeno help business owners easily run billing, payroll, invoicing, and inventory.

There is a wide range of small business accounting software. As a small business owner who doesn’t even have time to spare for accounting and bookkeeping, how do you decide which software is best for your company? One potential software is Quickbooks Online. It’s a cloud-based accounting solution where records are kept online, protected by security, easily accessible, and regularly updated. *** 

If you are considering Quickbooks Online for your business or are using it now, here are some highlights of features that you should know:

  1. Connect your bank account(s) to it: Quickbooks Online allows you to connect your bank account once and it will then download all your bank transactions from the last 90 days. Additionally, it lets you connect multiple checking accounts, savings accounts, and credit cards. It will also auto-suggest categories and functions. The algorithms are quite amazing. 
  2. Don’t have to back up your data: As QuickBooks Online is all web-based, you keep all the data in the cloud. All information you store on QuickBooks Online is stored in the cloud. Data can be accessed at any time from your laptops and devices. 
  3. Invoice clients in CBO: Quickbooks Online can do all client invoicing. Gone are paper billing and sealing envelopes. It lets you design invoices with your business brand on it. Invoices can be automated and it will mark invoices that have been paid. Recurring invoices can be sent out, too, thorough the automated invoicing function. 
  4. User Interface Is Intuitive: QuickBooks was created for the non-savvy, non-accountant business owner or employee. So, it is much easier to use based on the easy interface. It has a brief and easily-understood tutorial. This five-minute guide shows users how to import and categorize transactions. A menu shows how to navigate between the Banking, Reports, Sales and Expenses functions. Reviewers consistently complement the design as it is not all pushed into a small space.
  5. Many users can use it at the same time: Quickbooks Online has several packages which allows multiple users to have full access and use of the data. Additionally, if you want to save money, the username and password can be shared with other employees. However, if there is restricted data, such as payroll, it can be protected and accessed only approved individuals. 

These are just a few of the features available with Quickbooks Online. As with any small business accounting software you choose, the software might be designed to be simple and easy to navigate but somehow a wrench gets thrown into the books!

If this happens, the staff at A.K. Burton, PC is here to help. We specialize in small business tax preparation and provide a wide range of services to our clients including getting that wrench out of your books. If you need help straightening out your QuickBooks online, please call us at (301) 365-1974 for a consultation. Our office is open! We serve Bethesda, Rockville, and Montgomery County. MD area.

*** For more information about Quickbooks Online, visit their website.

Tax Advice, tax preparation

2021 Child Tax Credit and Advanced Child Tax Credits

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As the season’s change, so do the tax laws. Congress and the Internal Revenue Service make adjustments yearly though they usually give taxpayers a year to get ready for the changes. Most of them are minor, however, there are a few laws, especially following the COVID-19 crisis, that affect millions of Americans.  

The pandemic spurred lawmakers to sign into law the American Rescue Plan. It includes an important change to the Child Tax Credit (CTC)***, which will become effective July 15, 2021. The changes to the CTC include:

  • amount increased for many taxpayers
  • fully refundable
  • includes children who turn 17 in 2021
  • monthly advance payments of half the estimated annual CTC from July through December

Here are some details about the CTC:

  1.  Your child must be under eighteen (18) years of age
  1.  For tax year 2021, the Child Tax Credit is increased from $2,000 per qualifying child to:
    1. $3,600 for children ages 5 and under at the end of 2021; and
    2. $3,000 for children ages 6 through 17 at the end of 2021. 
  2. Depending on your tax bracket and filing status, you may be phased out from receiving the refundable credit:
    1. A single filer with children under 17 making up to $75,000 will receive the full payment for each child, while those earning up to $90,000 will get a reduced amount. 
    2. Joint filers with children who make up to $150,000 will get the full credit, while those earning up to $170,000 will receive a smaller amount.
  1. Unlike the economic impact payments which did not need to be paid back if they were issued in error, the CTC must be paid back if issued to an ineligible recipient. To unenroll in the advance CTC payments go to: www.irs.gov/childtaxcredit2021 .

If you have any questions about child tax credits, consult your income tax advisor or accountant. A.K. Burton, PC, can do all your income tax preparation. We have experienced staff who can prepare and file your federal and state tax return and represent you before the IRS. Call us at (301) 365-1974 for a consultation. Our office is open. At this time we are not providing in-person services because of the pandemic. We serve the Bethesda, Rockville, and Montgomery County, MD area.

***Find out more about the Child Care Tax Credit from the IRS website.  

Small Business Accounting, tax preparation

Business Tax Preparation Tips: Why You Should Do Estimated Tax Payments Now!

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By the time you read this, Tax Day 2021 is over. Millions of Americans have filed their tax returns to the Internal Revenue Service and to the state or to the District where they live. 

For many people, Tax Day meant they wrote large checks or filed extensions so they could pay off the 2020 tax bill. It was a very difficult and stressful day for millions of filers. 

You can save yourself a lot of pain, stress and fees by doing one thing differently: Make estimated tax payments as soon as possible! 

Estimated Tax Payments *** are for those whose federal and/or state withholding is under withheld during the year. Estimated tax payments are used to fill in the gap in withholding and proactively pay your predicted tax liability for the current year as you earn the money. Paying quarterly estimated payments is a strategy to avoid having to pay a huge bill on tax day along with penalty and interest that may be charged by the IRS or the state. Payments are made incrementally, on the following quarterly tax dates:

Payment Period                         Due Date 

January 1 to March 31 April 15
 April 1 to May 31   June 15
 June 1 to Aug. 31   Sept. 15
September 1 to December 31   Jan. 15 of the following year
2021 Estimated Tax Payments Schedule

 

Traditionally estimated payments are made quarterly. Had a big tax bill this year and want to avoid it next year with similar earnings predicted for this year? Have your accountant or bookkeeper calculate estimated payments. At A.K. Burton PC, we calculate estimated payments for our clients regularly. Has your income changed significantly this year? Contact your accountant and have them recalculate your estimates.

How do you pay your estimated payments? Methods of payment include scheduling an online payment or by check. If you’re interested in paying your estimated payments online: find the correct links by going to your state’s department of taxation’s website or to the IRS website and have them withdraw the funds.  Don’t have the full amount to send in that your accountant recommended? Send in the amount you can. 

A.K. Burton, PC, can do all your income tax preparation. We have experienced staff who can prepare and file your tax return and represent you before the IRS. Call us at (301) 365-1974 for a consultation. Our office is open. At this time we are not providing in-person services because of the pandemic. We serve the Bethesda, Rockville, and Montgomery County, MD area.

*** You can find out more about Estimated Tax Payments at the IRS website.   

tax preparation

Income Tax Preparation: How You Can Get Your Tax Refund ASAP

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The good news is that the IRS gave us an extra month to file our tax returns for 2020. It is May 17, 2021, and not April 15, 2021. ***

The bad news is that it may take a while to receive your tax refund.

It is frustrating, especially if you need the refund to catch up on bills you may have accumulated during the COVID crisis. Here are several ways you can get your tax refund quicker:

  1. E-File: Submit your tax returns electronically versus mailing your tax return in.
  2. Confirm that you have all your income documents before you file. You should have all of your 2020 income documents by now, but if you don’t, get them before you file. If you don’t have them and file your return, then you might have to amend your return(s). 
  3. Double-check your mailing address. This one is crucial! The IRS contacts you by mail for required updates on your tax return. Make sure your mailing address is correct so that you will receive all correspondence, (including a refund check), from the IRS. 
  4. Double-check your bank information on your return. If you choose direct deposit to speed up receiving your refund but fail to provide the correct bank account information, then you won’t receive your refund by direct deposit. 
  5. Check all your ID numbers. IRS has every citizen’s name and address on file. Each name has a unique ID number that is tied to the name, birthdate, income amount, and social security number. 
  6. Confirm that you are the only one claiming your dependent(s). If you know someone who could also claim your dependent on their tax return, then verify who will be claiming the dependent(s). If a dependent is claimed by more than one person, then the second tax return to claim them will be rejected by the IRS. 

Have a Certified Public Accountant file your tax returns for you. Tax laws are notoriously complicated and change year to year. So, save yourself the stress and fees by hiring a CPA to file your taxes for you. They can file them and represent you before the IRS. What’s not to like?!

As of this blog posting, there are still a few weeks left before the May 17, 2021 posting. Have you done all of the above?

A.K. Burton, PC, can do all your income tax preparation. We have experienced staff who can prepare and file your tax return and represent you before the IRS. Call us at (301) 365-1974 for a consultation. Our office is open. At this time we are not providing in-person services because of the pandemic. We serve the Bethesda, Rockville, and Montgomery County, MD area.

*** See the IRS website for updates on the new tax return due date for 2021.