Category Archives: tax preparation

Summer is the Perfect Time to Do Tax Planning for Now and 2023


The summer is a good time to take a break. Head to the beach. Take a few weeks off. All of that is good and healthy.

However, summer is also a great time to do some minimal tax planning. It won’t take a lot of time to do it and you can still enjoy your summer. Trust us, you can take a few substantial steps now that will help you later.

So, before you pack the cooler and swimsuits, let’s do a few things:

  1. Retirement planning: You can still make plans by allowing for employer contributions to be made until the extended due date of the return. One way to do it is by making the maximum allowable contribution to your retirement plan. This year, 401(k) and 403(b) have a $20,500 contribution limit. There is also a $6,500 contribution for taxpayers who reach age 50 by 12/31/22. 
  2. Real Estate holdings: The DMV area has a hot real estate market. So §1031 can be used by rolling proceeds from a sale into the like-kind property within a timeframe. (It is specific and must be followed to the letter.)
  3. Capital gains: You may want to defer the tax liability with an Opportunity Zone investment. This is reinvesting capital gains in an Opportunity Zone within a 180-day window. Then defer the tax on the original gain until December 31, 2026. Opportunity Zone investments can be held for ten years as they will not be taxed by the IRS. 
  4. Depreciation: Depreciation, for business owners, need not be determined when the asset (business property) is used. Bonus depreciation is already automatic. “Out of bonus” depreciation can be claimed for each asset class. Attach a statement to the timely-filed tax return and then depreciate the asset over its life. 
  5. Required Minimum Distributions: Your brokerage can pay your RMD directly to the charity you designate. A qualified charitable distribution (QCD) is not recognized as income. It keeps your adjusted gross income lower, and it may even reduce Medicare premiums. You can still make the standard deduction but remember that you can only claim a total of $100,000 per tax year.
  6. Donor-advised funds: You are allowed to take a tax deduction in the year that cash or other assets are transferred to a DAF. They can be invested until you recommend the DAF distribute the funds to all of the charities you support. You are not taxed on interest, gains, and dividends generated by investments made by the DAF. It’s a great way to accomplish tax planning goals. You can also claim a deduction for the fair market value of the donated assets and not have to pay capital gains tax on the appreciation.

These are just a few of the ways you can plan for your 2022 tax returns and beyond. Be sure to consult the IRS, your tax advisor, or your accountant. ***

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. 

We serve the Bethesda, Rockville, and Montgomery County, MD area.

*** For more information on tax preparation, visit the IRS website

Tax Advisor: What If You Missed the Deadline on Your 2021 Tax Returns?


As we write this blog today, April 18-Tax Day 2022, has passed. The deadline to file for most US citizens is over. 

You read this and say, “I missed the deadline. Now, what do I do?” 

The good news is that if you missed filing on April 18, then you have options. All is not lost and no, there won’t be any black helicopters landing in your backyard. You can still file, so all is not lost.

In fact, here are some steps you can take that will resolve your tax filing deadline miss situation:

  1. If you owe money on your 2021 tax return and have not filed an extension: You should file your tax return as soon as possible. The IRS hands down two penalties if you owe: failure-to-file and a late payment penalty. Failure-to-file penalty applies when your return is late. It is five percent (5%) of your unpaid tax bill for each month or partial month your return is late. It maximizes to twenty-five percent (25%). The late payment penalty is 0.5% of your unpaid tax bill for each month or partial month your return is late, up to a total of 25%. The bottom line is that the quicker you get your tax returns filed after the deadline and pay your bill, after being late, the smaller the penalty you will have to pay. However, if you are unable to pay your tax bill in full, you can request the IRS to put you on an installment plan. It doesn’t erase your late penalties, but it will protect you from the IRS garnishing your wages. Just keep in mind, that the longer it takes for you to file your return, the greater the late payment penalty.
  2. If you don’t owe money for your 2021 tax returns: You may be due a refund from last year’s returns, but you missed the April 18 deadline, anyway. Believe it or not: You’re safe. You will not be penalized. You will have to wait longer to receive your tax refunds, though. Nevertheless, file your tax returns soon so you can get your money back.
  3. Missed deadline unknowingly: That’s okay, too. Just submit your return as soon as you can. Next year, if it looks like you may be filing your tax returns late again, ask for a tax extension by the filing deadline. *** You then have six more months to file your return. If you request the extension and still don’t get your return completed by the deadline, a late payment penalty will apply to any unpaid taxes from the current tax year. You won’t be charged with the aforementioned failure-to-file penalty as long as that extension request is made on time. And you don’t even have to give a reason to be granted an extension. The IRS doesn’t ask why you need more time to file. 

So, you see, it isn’t “Doomsday” after all. You do have options. Just be sure to act quickly to save yourself money and stress. 

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. 

We serve the Bethesda, Rockville, and Montgomery County, MD area.

*** If you’d like more information on IRS Tax Return extensions, visit the IRS website.  

How to Avoid an Audit on Your 2021 Tax Returns

Audit!

That word sends shivers into any honest taxpayer. You do everything you know to do on your tax returns. Your CPA has signed it and filed it. 

However, despite all that, the audit notice from the IRS has arrived. You’re stressed.

It doesn’t have to be that way. You can avoid an audit on your 2021 tax returns if you take the right preventative steps to do it. Here are some smart and legal ways to do it: 

    1. Don’t lie or attempt to cheat the IRS: This is the first and foremost reason! SO many people try to cheat the IRS every year. Some get away with it but most do not. Besides that, it’s just wrong. Dishonest tax filers claim excessive or unreasonable tax deductions. They are so obvious, that the IRS flags them and begins investigating. Their agents will ask for additional information. If discrepancies are found, the agency may levy penalties. Instead, be truthful in all your deductions and credits.
    2. Keep accurate and detailed records: There is a boatload of different forms that are available based on deductions and income. They can be confusing and it’s easy to make mistakes or forget them. Thus, the importance of keeping accurate and thorough records during the year. Keep all expense receipts in a file labeled for that year. That file should be accessible at all times. File your taxes only when you have all the required forms so you won’t have to amend your tax return.
    3. Don’t overdo it with your home office deduction. Self-employed people who have businesses in their homes are considered independent contractors. The deductions designated for that should be “reasonable” as the IRS defines it or it may become a huge red flag, especially if the home office is where you derive most of your income. So, claim just a percentage of your mortgage or rent that is your true workspace. Other expenses, such as phone, AC/heat, supplies, and other expenses can be claimed as business-related.
    4. File electronically. A good way to avoid audits is to file them online. The IRS encourages this for one big reason: paper filing usually contains many more errors than electronic files. Hard copy errors are 21% as electronic filing is 0.5%. The IRS software has protections in place so that filers have fewer errors. 
    5. Hire an experienced bookkeeper, accountant, or CPA. Tax laws change every year. It’s almost impossible to keep up with them unless you are an accounting professional. So, protect yourself and hire an accountant or bookkeeper to file your taxes for you. Most good accountants will also represent you to the IRS, which can be invaluable to prevent an audit. 

Tax Day is April 18, 2022, which is only a few weeks away as we publish this blog. No one wants to be audited. It can be agonizing. If you have not done the above steps or wonder if you are going to be audited, please contact an accountant for a consultation. 

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. 

We serve the Bethesda, Rockville, and Montgomery County, MD area.

How to Save Money on Your 2021 Tax Returns


Tax season has already started. Many people are scrambling to get all of their documents together for their 2021 tax returns.

If you’re one of those people gathering their tax documents, keep in mind some of the following four ways you can save, now, on your 2021 tax returns:

  1. Contributing to your retirement account, such as an IRA, may reduce your tax bill by reducing your taxable income (depending on your tax bracket). This works especially if you haven’t maxed out on your 2021 IRA contributions. Your tax deduction is determined by your total income and filing status. You or your spouse may be covered by a retirement account at work- which limits your tax deduction. You can contribute to your IRA until April 15, 2022, so you have time! The limits are $6,000 per year for 50 years old and under and $7,000 per year for people over 50 years old.
  2. Charitable donations: Donations to qualified charities last year may help you save on your 2021 tax returns. Taxpayers who don’t itemize can also benefit. For the tax year 2021, individual taxpayers may deduct up to $300 in contributions to qualified charitable organizations. Married couples filing together can deduct up to $600 in cash donations made to approved charities. Donations must be made by Dec. 31, 2021. This deduction may reduce your taxable income for 2021 and, in turn, lower your federal tax bill.
  3. Deduct eligible business expenses: Self-employed business owners must keep detailed business expenses. These expenses may include business meals, business travel, legal fees, computer purchases, subscription fees (Microsoft Word, etc.), accounting fees (QuickBooks, etc.), marketing/advertising costs, and other eligible business expenses. Business deductions lower taxable income, which results in a lower tax bill for 2021.
  4. Earned Income Tax Credit (EITC): this is available for the 2021 tax year dependent on your adjusted gross income (AGI). Income limits vary depending on your filing status, AGI, and the number of dependents. If you qualify for this credit, it may offer significant tax savings. 

As you prepare to file your 2021 tax return keep these 4 tax savings tips in mind. Please consult your tax preparer for more information.

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.

How to Beat a Small Business Tax Audit

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

Extended Business Tax Returns: One Month to Go

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.  

2021 Child Tax Credit and Advanced Child Tax Credits

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.  

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

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.   

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

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.

Tax Season 2021: Get Your Tax Returns Done on Time!

The good news is that Congress moved the date your tax returns are due to May 17, 2021! ***

The bad news is that you are still sorting out your tax return documents and haven’t filed yet or even sent the documents to your accountant! 

2020 was a year. You may be wondering, are there any special documents and information that I need to provide to my accountant to prepare my taxes? Here are a few reminders of documents and information you need to gather for your accountant:

  1. Home office deduction: Did you change jobs during the pandemic? Are you now a self-employed or an independent contractor working from home? If so, while gathering your tax preparation documents, include your expenses for your business use of home as well as any improvements made to your home.
  2. Estimated Payments:. If your income did not include federal and state withholding, you may have scheduled monthly or quarterly estimated tax payments. When submitting documents to your accountant, make sure to include the jurisdiction, amount, and date the estimated payment was made.
  3. Interest Income: 2019 tax filers who had a refund on their tax returns may have also received interest income from the IRS. (Due to delaying Tax Day from April 15 to July 15 due to the COVID-19 pandemic.) Interest payments are taxable and interest must be reported on the 2020 federal income tax return. (Minimum $10.)
  4. Charitable donation deduction:. The CARES Act allows taxpayers who file using the standard deduction to claim a limited deduction for cash contributions to qualifying organizations. The deduction cannot exceed $300. (Donated property cannot be deducted.)
  5. Economic impact payment(s): Include the amount of economic impact payment (EIP) provided by the COVID-related tax relief act of 2020 in your tax preparation documents. 
  6. Paycheck Protection Program loans (PPPL): Make sure to let your accountant know if you received a first and if applicable second round PPPL.

2020 was an extraordinary, and confusing, year for American taxpayers. We recommend that individuals and business owners consult an accountant for their tax preparation so they get all they deserve for the year most of us want to forget.

A.K. Burton, PC, can do all your individual and business tax preparation. We have experienced accountants 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.