What's New in 2021 For Individuals

Identity thieves are becoming more creative in hitting people with realistic-looking emails and texts about their tax returns and refunds. These messages claim to be from the IRS.

The IRS will only send snail mail letters. They will never contact you via text, phone, or social media.

Scammers use these tactics to obtain your personal information, money, and more, leading to tax identity theft. This is when your Social Security number is stolen and used to file fraudulent tax returns. They then steal the funds your owed by depositing the tax refunds into their accounts.

There are signs that your tax identity has been stolen. One is if your tax return is rejected upon filing. This is due to your Social Security number being used by the scammers.

Another is if you receive a snail mail letter from the IRS notifying you of changes to your online account. If you receive a W-2 form from a company you haven't worked for more than a year, it means your tax identity has been compromised.

The IRS will always send you a letter to verify your identity when they suspect foul play.

To protect yourself from scammers, never give information over the phone, especially when an unrecognized number calls you and you don't know who is on the other end. It's also advisable to file your tax return early and electronically.

Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/

New investors may forget to consider taxes when dipping their toes into the crypto world. However, the IRS is cracking down on tax compliance. Be aware of how to handle your tax reporting when it comes to your digital assets.

Taxable events from crypto investments require tax reporting. A taxable event means a scenario that triggers or realizes income. When you buy Bitcoin at $1,000 and the value goes up to $1,500 and you sell it, it is a taxable event. Your realized gain is $500.

As stated in the IRS virtual currency guidance, taxable events for digital currency are trading crypto to a currency such as the US dollar, trading one cryptocurrency for another digital currency, spending cryptocurrency to purchase goods or services, and earning cryptocurrency as income.

If you have any questions, contact me at 877-6-SOLVER.

Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/

Are you unsure where to start with your tax planning? Do these simple tips that individuals like you can follow.

You should max out your retirement plan. Remember that withdrawing funds from a retirement account can trigger additional taxes of up to 40% or more. Ensure you have confirmed your withholdings.

Consider purchasing property. Also, take note that Sale of Property can initiate capital gains tax and must be communicated to your tax preparer before selling.

Donate money to charity. Don’t forget to track your out-of-pocket medical and dental expenses. If you’re someone with a child or a dependent, be aware that Child Tax credit reverts to $2,000 per child. Since 2021, dependent care expenses are no longer refundable.

Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/

No one likes the stress involved when your tax return is under the spotlight. There are some ways to avoid common audit triggers.

Make sure to report everything with an informational return. Most likely, you’ll receive either a W-2 or a 1099 form, and the IRS gets a copy of it, too. If your tax return exceeds or doesn’t match your reported income, expect to receive a notice from the IRS.

If you’re self-employed, steer clear from claiming large losses on a Schedule C. For business owners, consider incorporating your business instead of filing a Schedule C.

Avoid using too many round or even numbers. Be careful when taking higher than average deductions for charitable donations. Refrain from claiming 100% use of business vehicles. If you have a foreign bank account, report it. Don’t write off a loss for hobbies.

Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/

Businesses and employees have struggled with the onslaught of COVID-19.

In November 2021, the IRS enacted the Employee Retention Tax Credit (ERC), a refundable tax credit designed to reward business owners for employee retention throughout the pandemic. Business owners impacted by COVID-19 can claim up to $5,000 in refundable tax credits for each employee on their payroll in 2020 and up to $7,000 credit per quarter (excluding Q4) for each employee in 2021.

Consider opening a retirement plan as the employer match is 100% deductible. In California, starting June 30th, all employers with 5 or more employees are mandated to offer a retirement plan.

In 2022, there has been a 100% bonus depreciation on equipment purchased for business use. If you are buying meals and beverages from restaurants for the purpose of your business, these can also be deducted.

Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/

Question: What Interests the IRS?

Be aware of what puts you at risk of attention from the IRS. Here are some of the more vulnerable areas.

Frivolous tax protests have been frustrating to both the IRS and tax courts. If you file a return stating that you don’t owe any tax because the dollar is worthless, expect to be audited. Be wary if you’re someone in a high-income bracket auditing higher-income taxpayers because you’re likely to produce additional tax revenue.

Taxpayers with occupations that produce cash income, such as laundromats, beauty salons, restaurants, vending machines, and others are also on the radar of the IRS. If you have a complex return you prepared yourself, or your return was prepared by someone on the IRS's problem-preparer list, you may get their attention too.

In the last few years, the Internal Revenue Service has detected a proliferation of abusive trust tax evasion schemes and the use of credit cards to evade paying U.S. income taxes. The IRS intends to expand its efforts to crack down on these areas.

Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/

• IRS computers usually flag the tax returns for audits. The vast majority of them are routine.
• Because of the flagging process, your audit will usually focus on one to three categories of your tax return.
• Audits do not automatically mean something is wrong. It is possible to receive a “no change” or even an additional refund as an outcome of an audit.
  
  For more information about IRS Representation please visit www.yourirsproblemsolvers.com.
  

What’s New For Small Businesses in 2021

1. Refundable employee retention credit
2. PPP loan forgiveness is no longer a taxable event for your small business. The same goes for any second round loans your business receives this year if they qualify.
3. 100% meal deductibility. Business meals are typically only deductible at 50%. To help aid restaurants during the pandemic, the new law allows for 100% meal expense deductions for both 2021 and 2022.
4. Numerous general business credits extended. New laws extend expiring tax credits for many small businesses. There are too many to mention here, but common extended credits include; work opportunity credit, credit for paid family and medical leave, and employer paying employee student loan payments.

Call us today for a consolation on your business taxes-there is a lot of changes heading your way and you need the Best in the business helping you navigate through these tax situations. 1-877-6-SOLVER

What's New in 2021 For Individuals

Here are some of the changes coming into effect for tax year 2021:

1. Tuition and Fees Deduction eliminated. This tax break is now permanently closed.
2. Mortgage insurance premium deductibility. You may still deduct mortgage insurance premiums as an itemized deduction. 
3. Exclude discharge of mortgage indebtedness. With the extension of this law, qualified debt forgiveness on qualified mortgages is still not considered income.

4. Above the line charitable deductions. If you do not itemize, you can deduct up to $300 in qualified charitable deductions ($600 for married couples).

Given the ongoing pandemic, expect other tax changes throughout the year.

Social Security and Medicare income limits and tax rates

FICA tax is a combination of a Social Security tax and a Medicare tax. The Social Security tax is assessed on wages up to $142,800 ($137,700 in 2020); the Medicare tax is assessed on all wages.

Self-employed individuals pay a self-employment tax which is the equivalent of FICA tax. For 2021, they will pay a 15.3% self-employment tax on the first $142,800 ($137,700 in 2020) of self-employment income.

The earnings limit for retirees under full retirement age is $18,960 ($18,240 in 2020). Social Security benefits will be reduced $1 for every $2 of earnings above this limit. There is no earnings limit for individuals at full retirement age.

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