IRS Audit. What you need to know?

Just when you thought you were done with taxes, the IRS sends a letter informing you that an audit has been initiated.

Certain audits won't result in a higher tax bill from the Internal Revenue Service. Nonetheless, you can become anxious if you receive a letter. Is there going to be a significant fine? To what extent is the IRS privy to information about your life that you are unaware of?

You probably didn't intentionally do anything improper. National Taxpayer Advocate for the IRS's Taxpayer Advocate Program Erin Collins has stated that the IRS is not out to punish people for honest mistakes.

The Internal Revenue Service is well aware that tax day is a bittersweet one for many and that some taxpayers will go to great lengths to avoid forking over their dues. This is the main reason why the IRS investigates tax returns submitted by individuals and corporations.

1. Key Points

• What is an IRS audit?
• IRS method of communication
• How to deal with IRS Audit.

2. Tax audit definition

If the Internal Revenue Service suspects that you haven't paid all of the taxes that you owe, they may request an audit of your tax return. So, you may need to submit supporting documents, such as receipts, to verify that you are qualified for a credit or deduction you claimed on your tax return.

3.Where do IRS audit letters come from?

The Internal Revenue Service will always communicate with you by sending a letter in the mail. You will never be contacted by phone or e-mail in the event of an audit being conducted. If you are contacted in this manner in the beginning, the transaction is probably fake. IRS  letter will provide you with all of the information that you want regarding your audit, including the date by which you are required to take action.

After that, the vast majority of audits will continue to be carried out by postal correspondences; nevertheless, a tiny number of audits will require you to speak with an IRS agent either in person or over the phone in order to amend your return.

4.What does an IRS audit letter look like?

This is an example of the kind of letter that the Internal Revenue Service (IRS) could send to a taxpayer to inform them that their taxes are being audited. The letter will provide you with all of the information that you want on your audit, including the date by which you are required to take action.

It is essential that you check the accuracy of all of your personal information, including your Social Security number, address, and contact information.

You can register an online account with the Internal Revenue Service (IRS), if you haven't done so previously, and use it to examine digital copies of notices that have been sent to you.

5.How many years back can you be audited?

According to the Internal Revenue Service (IRS), an audit that the IRS performs on you may include returns that you have filed during the past three years.

"In the event that we find a significant mistake, we might tack on some additional years. In most cases, we don't look further back than the previous six years "according to a post made on the website of the organization. "The Internal Revenue Service makes every effort to conduct audits of tax returns as quickly as feasible after they have been submitted. As a result, the majority of audits will focus on returns that have been submitted during the last two years."

6. What should you do if you get audited? 

The initial step should be to "really open the letter," as this is the most important step. It's possible that a lot of individuals will be tempted to throw them away because they anticipate that it will contain unfavorable information. Ignoring correspondence from the government is the worst thing that you can do as a taxpayer. You need to get back to us as soon as possible, either in writing or by giving us a call. In most cases, the letter you get from the Internal Revenue Service (IRS) will tell you how many days you have to answer to their inquiry. You also have the option to seek additional time to respond.

Failure to answer may result in the assessment of further penalties and interest. It is also possible that you will lose the right to appeal the fees that the IRS thinks you owe to them. It is also possible that it will exacerbate the situation and lead to a legal case.

Once an audit has been initiated, it is vital that you cooperate with the IRS auditor and establish a positive working relationship with them. Get the help of a qualified professional to assist you and handle your situation.

Contact Surya Padhi at Sure Financials for any question and clarification. Surya Padhi is an expert who keeps current on tax law changes as well as a member of the National Association of Tax Professionals National Association of Tax Professionals (NATP) and  New Homepage - National Association of Enrolled Agents (naea.org). Visit Welcome | Sure Financials & Tax Services, LLC (surefintaxsvs.com) for more information and contact us by calling +1908.300.9193.

 

What to do when a W-2 or Form 1099 is missing or incorrect

Issue Number: IRS Tax Tip 2023-25

It’s important for taxpayers to have all their documents and information so they can file an accurate and complete tax return. This may mean waiting to file until they receive all their documentation – and it can also mean following up on missing or incorrect documents.

Most taxpayers should have received income documents near the end of January. These may include:

• Form W-2, Wage and Tax Statement
• Form 1099-MISC, Miscellaneous Income
• Form 1099-INT, Interest Income
• Form 1099-NEC, Nonemployee Compensation
• Form 1099-G, Certain Government Payments; like unemployment compensation or state tax refund

Taxpayers should first contact the employer, payer or issuing agency directly for copies
Taxpayers who haven't received a W-2 or Form 1099 should contact the employer, payer or issuing agency and request a copy of the missing document or a corrected document.  

If they can’t get a copy, they can contact the IRS for help
Taxpayers should file their tax return on time – this year’s tax deadline is April 18 for most filers – even if they still have missing or incorrect documents. If they don’t receive the missing or corrected form from their employer or payer by the end of February, they may call the IRS at 800-829-1040 for help. They’ll need to provide their name, address, phone number, Social Security number and dates of employment. They’ll also need to provide the employer’s or payer’s name, address and phone number. The IRS will contact the employer or payer and request the missing form.

Estimating income when forms are incorrect or missing
After the taxpayer contacts the IRS about missing documents, the IRS will send the taxpayer one of these forms:

Form 4852, Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, Etc.

If the taxpayer doesn’t receive the missing form in time to file their income tax return by the filing due date, they may complete Form 4852 or Form 1099-R to estimate their wages and earnings. They then attach the relevant form to their tax return when they file.

Taxpayers may need to file an amended return if they filed with missing or incorrect info
If they receive the missing or corrected Form W-2 or Form 1099-R after filing their return and the information differs from their previous estimate, they must file Form 1040-X, Amended U.S. Individual Income Tax Return.

Incorrect Form 1099-G for unemployment benefits
Taxpayers who receive an incorrect Form 1099-G for unemployment benefits they did not receive should contact the issuing state agency to request a revised Form 1099-G showing they did not receive these benefits. Taxpayers who are unable to obtain a timely, corrected form from the state should still file an accurate tax return, reporting only the income they received.

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Phone:+1.908.300.9193, Fax:+1.855.753.0066

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State Stimulus Checks 2023: What To Know About Payments

As a result of the coronavirus epidemic, the American economy entered a complete shutdown in March 2020. In an effort to boost businesses and consumers, the U.S. government enacted a series of stimulus packages almost immediately.

Despite the fact that federal funding has been exhausted for quite some time, certain states who were slower to respond are still delivering relief. Despite the fact that many programs terminated in 2022, a few states still have payments scheduled for 2023. The following is a summary of the states that still have payments due this year.

 

California

In 2022, the state of California permitted inflation relief checks of up to $1,050, the majority of which have already been distributed. The state expects that approximately 5% of checks will not be issued until January 15, 2023.

Rebate amounts begin at $350 and are determined by income, household size, and tax filing status. Individuals earning more than $250,000 and couples earning more than $500,000 are ineligible.

Learn more about -> Middle Class Tax Refund | FTB.ca.gov

For California taxes in general, see the California State Tax Guide.

 

Colorado

Resident Coloradans who timely filed their 2021 taxes most likely received payments of $750 for single filers and $1,500 for joint filers by September 30. Those who filed a request for an extension by the Oct. 17 deadline may still be awaiting their payout, which is expected no later than January 31, 2023.

Learn more about ->  Colorado Cash Back | Department of Revenue - Taxation

For Colorado taxes in general, see the Colorado State Tax Guide.

 

Idaho

Idaho passed rebates for the 2022 Special Session, which will be distributed by the end of March 2023. The rebate is equal to the greater of 10 percent of a taxpayer's 2020 income tax liability, $300 for single filers, or $600 for joint filers.

The state Tax Commission expects to send approximately 800,000 payments totaling up to $500 million.

Learn more about -> 2022 Tax Rebates: Frequently Asked Questions | State Tax Commission (idaho.gov)

You can track your payment through the Idaho Tax Commission's online portal(opens in new tab).

For Idaho taxes in general, see the Idaho State Tax Guide.

 

Illinois

Similar to Idaho, eligible Illinois citizens may receive two "stimulus cheques" this year. There is a $50 income tax reimbursement (or $100 for married couples filing jointly), plus $100 per dependant, up to a maximum of three dependents. Then there is a $300 maximum property tax relief.

Residents of Illinois with a 2021 Illinois adjusted gross income of less than $200,000 (or less than $400,000 for joint filers) are eligible for the income tax rebate. To qualify for a property tax rebate, you must be an Illinois resident who paid Illinois property taxes on your primary residence in 2020 and have an adjusted gross income of $250,000 or less on your 2021 Illinois tax return ($500,000 or less for joint filers).

Beginning in September, rebate payments are still being mailed out in December. Look for the "Where's My Rebate?" link on the Illinois Department of Revenue's website(opens in a new tab) to follow the progress of your rebate payment.

Learn more about -> Illinois "stimulus checks"

For Illinois taxes in general, see the Illinois State Tax Guide.

 

Massachusetts

The issuance of stimulus checks to qualified Massachusetts residents began on November 1, 2022. They are available to everyone who filed a 2021 Massachusetts income tax return and paid Massachusetts personal income taxes by October 17, 2022. Payments equal 14.0312 percent of your Massachusetts income tax liability for 2021.

Payments to eligible Massachusetts individuals who filed their required tax return by October 17 were processed and mailed by December 15. Those who file after October 17 will have to wait approximately one month to receive their refund.

Check out the state's online calculator if you need an estimate of your payment amount (opens in new tab). There is no online way for verifying the status of your refund, however you can phone 877-677-9727 with inquiries.

 

Learn more about -> Massachusetts stimulus check payments

For Massachusetts taxes in general, see the Massachusetts State Tax Guide.

 

Maine

The majority of Mainers have received their $850 COVID Pandemic Relief Payment ($1,700 for couples). Due to the fact that payments are provided on a rolling basis as 2021 Maine income tax filings are received, the state will continue sending payouts through December to qualified persons who waited to submit their return (the extended due date was October 31, 2022).

To be eligible for a payment, you must (1) file a 2021 Maine income tax return by the final deadline, (2) not be claimed as a dependent on anyone else's Maine tax return, and (3) have a 2021 federal adjusted gross income of less than $100,000 (single filers and married taxpayers filing separate returns), $150,000 (head-of-household filers), or $200,000 (married taxpayers filing joint returns) (joint filers and surviving spouses).

Similar to other state tax offices, Maine Revenue Services offers an online payment status checker(opens in a new tab).

Learn more about -> online tool

For Maine taxes in general, see the Maine State Tax Guide.

 

New Jersey

 

Two million New Jersey households will receive property tax reimbursements totaling $2 billion. The rebate amount is determined by household income, with homeowners earning up to $150,000 receiving $1,500 and those earning between $150,000 and $250,000 receiving $1,000.

Renters are eligible for $450 if their annual income does not exceed $150,000. The payments are expected no later than May 2023.

Learn more about -> NJ Division of Taxation - ANCHOR Program (state.nj.us)

 

New Mexico

In 2022, "stimulus" funds for qualified New Mexico citizens take the form of two tax rebates. The initial tax rebate is $500 for joint filers, head of household filers, and surviving spouses with earnings below $150,000, and $250 for solo filers and married individuals filing separate tax returns. The second tax rebate is valued at $1,000 for joint filers, heads of household, and surviving spouses, and $500 for single filers and married residents filing separately. In November, certain low-income New Mexicans also got $400 in economic relief payments.

The first installment of tax rebates was issued in July, while the second installment was issued in June. Those who file a 2021 New Mexico tax return by May 23, 2023, will continue to receive payments. Consequently, some New Mexico residents will receive rebate cheques in December or later. Call the New Mexico Department of Taxation and Revenue at 866-285-2996 if you submitted a 2021 tax return but have not yet received a refund.

For New Mexico taxes in general, see the New Mexico State Tax Guide.

 

Pennsylvania

In July 2022, Pennsylvania began providing payouts to elderly tenants, homeowners, and persons with disabilities, but the deadline to submit a claim was December 31, 2022. This means that payments for eligible residents who submit their documentation by the deadline will continue till 2023.

Those who are eligible for supplementary refunds, as determined by the state, may get up to $975.

To qualify for a payment, you must be at least 65 years old, a widow(er) at least 50 years old, or a disabled person at least 18 years old. Additionally, your annual income cannot beyond $35,000 for homeowners and $15,000 for renters (50% of your Social Security benefits are deducted).

For Pennsylvania taxes in general, see the Pennsylvania State Tax Guide.

 

South Carolina

In November 2022, South Carolina started sending refund checks of up to $800 to eligible residents. Those who filed their tax returns by the October 17 deadline received their payouts before the end of 2022, while those who filed after the October 17 deadline but before February 15, 2023 will receive their reimbursements in March 2023.

Learn more about -> South Carolina Income Tax Rebate 2022 (sc.gov)

For South Carolina taxes in general, see the South Carolina State Tax Guide.

 

Virginia

You had to file a 2021 Virginia income tax return by November 1, 2022, demonstrating a net tax liability, in order to qualify for Virginia's $250 (or $500 for married couples filing jointly) stimulus tax rebate.

In the order it receives tax returns, the state is paying rebate payments on a rolling basis. Residents who filed a 2021 Virginia tax return by September 5, 2022, and were eligible for a payment have already received it. However, if you filed between September 6 and November 1, you may receive a reimbursement in December (it could take a few months to process your payment, though).

Learn more about -> Virginia's stimulus tax rebate

For Virginia taxes in general, see the Virginia State Tax Guide.

 

Rhode Island

Families in Rhode Island who qualify for a child tax credit this year will receive $250 for each kid who was 18 or younger at the end of 2021, up to a maximum of $750 per child (i.e., for up to three children). In October, the state began making payments on a rolling basis to Rhode Island individuals who filed their 2021 tax return by August 31, 2022. For those who file an extended tax return by October 17, 2022, however, refund checks will begin arriving in December.

If you filed a combined Rhode Island return for the 2021 tax year and your federal adjusted gross income did not exceed $200,000, you are eligible for a rebate. For everyone else, your federal AGI must be $100,000 or less.

Check out the Rhode Island Division of Taxation's online tool(opens in new tab) if you want to see the status of your rebate.

For Rhode Island taxes in general, see the Rhode Island State Tax Guide.

Contact Surya Padhi at Sure Financials for any questions and clarification. Surya Padhi is an expert who keeps current on tax law changes as well as a member of the National Association of Tax Professionals National Association of Tax Professionals (NATP) and  National Association of Enrolled Agents (naea.org). Visit Welcome | Sure Financials & Tax Services, LLC (surefintaxsvs.com) for more information and contact us by calling +1 908.300.9193. 

 

Sure Financials and Tax Services LLC

Phone:+1.908.300.9193, Fax:+1.855.753.0066

Email:services@surefintaxsvs.com | Web: https://surefintaxsvs.com

Reserve your time | 15 mins free | Tax Finalization Free |Paid Consultation 60 Mins.

 

Are you planning to file your tax return early? Here are reasons for not to do so.

When it comes to tax return filing, we always take it seriously and try to file our tax as early as possible. However, IRS is warning taxpayers who like to file their tax returns in late January or early February to wait until later in 2023, 

 

Key Points 

• New $600 threshold for receiving Form 1099-K for third-party payments. 
• Form 1099-K applies to payments from third-party networks, such as Venmo or PayPal, for transactions such as part-time work, side jobs or selling goods. 
• It is possible you will receive a form 1099-K for a transaction that you did not anticipate, such as making a profit by reselling Taylor Swift tickets. 
• You may take action if you received an incorrect Form 1099-K. 
• Wait until the end of February 2023 and file your tax return in order to avoid amendment.  

Here is the reason why IRS is warning and asking for late filing.  

In a recent release, the IRS strongly advised against filing tax returns early to look out for Taxpayers may receive Form 1099-K | Internal Revenue Service, which will track third-party payment systems like PayPal and Venmo, according to CNBC. 

As per IR-2022-203 news releases, published on November 22, 2022. Extract from the news releases. 

 

“Taxpayers should report the income they earned, including from part-time work, side jobs or the sale of goods. The American Rescue Plan Act of 2021 lowered the reporting threshold for third-party networks that process payments for those doing business. Prior to 2022, Form 1099-K was issued for third-party payment network transactions only if the total number of transactions exceeded 200 for the year and the aggregate amount of these transactions exceeded $20,000. Now a single transaction exceeding $600 can trigger a 1099-K. The lower information reporting threshold and the summary of income on Form 1099-K enables taxpayers to more easily track the amounts received. Remember, money received through third-party payment applications from friends and relatives as personal gifts or reimbursements for personal expenses is not taxable. Those who receive a 1099-K reflecting income they didn’t earn should call the issuer. The IRS cannot correct it.” 

 

According to the IRS, the modification applies to payments made through third-party networks like Venmo or PayPal for transactions like selling items or performing part-time employment. Other examples include having a side job or selling goods. 

  

Before the year 2022, the reporting level for the federal Form 1099-K was for taxpayers who had more than 200 transactions with a total value of more than $20,000. However, as part of the American Rescue and Reinvestment Plan Act of 2021, Congress reduced the ceiling, and now a single transaction that is over $600 has the potential to activate the form. 

 

Reporting requirement is that (1) third-party networks like Venmo, or PayPal require to file annual information return and (2) issue Form 1099-K to the taxpayer. As a taxpayer, you will receive form 1099- K by January 31, 2023.  

 

Because there is a new tax reform, the taxpayer must wait until January 31, in addition to the number of days it takes for the mail to transmit the form 1099-K, before they may receive it. 

 

It is possible you will receive a form 1099-K for a transaction that you did not anticipate, such as making a profit by reselling Taylor Swift tickets. 

 

On the other hand, if you receive the form for personal transactions, the agency instructs you to get in touch with the issuer in order to have a correction made. According to the IRS, if the firm does not repair the error, you have the option of attaching an explanation to your tax return while still appropriately reporting your income. 

 

Read Understanding Your Form 1099-K | Internal Revenue Service (irs.gov) to know more. In this page, you will find FAQs which are very informative.   

 

Contact Surya Padhi at Sure Financials for any questions and clarification. Surya Padhi is an expert who keeps current on tax law changes as well as a member of the National Association of Tax Professionals National Association of Tax Professionals (NATP) and  National Association of Enrolled Agents (naea.org). Visit Welcome | Sure Financials & Tax Services, LLC (surefintaxsvs.com) for more information and contact us by calling +1 908.300.9193. 

TAX YEAR 2023 Changes

• Refer IRS Notice 2022-55,
• Individuals can contribute to their 401(k) plans in 2023 has increased to $22,500, up from $20,500 for 2022.
• The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased to $7,500, up from $6,500. Therefore, participants in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan who are 50 and older can contribute up to $30,000, starting in 2023. The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE plans is increased to $3,500, up from $3,000.
• The limit on annual contributions to an IRA increased to $6,500, up from $6,000. The IRA catch up contribution limit for individuals aged 50 and over is not subject to an annual cost of living adjustment and remains $1,000.
• Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase out ranges for 2023:
• For single taxpayers covered by a workplace retirement plan is increased to between $73,000 and $83,000.
• For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, is increased to between $116,000 and $136,000.
• For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, is increased to between $218,000 and $228,000.
• For a married individual filing a separate return who is covered by a workplace retirement plan is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.
• The income phase-out range for taxpayers making contributions to a Roth IRA is increased to
• between $138,000 and $153,000 for singles
• between $129,000 and $144,000 for heads of household,
• between $218,000 and $228,000 for married couples filing jointly,
• between $0 and $10,000 for a married individual filing a separate return
• The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $73,000 for married couples filing jointly, up from $68,000; $54,750 for heads of household, up from $51,000; and $36,500 for singles and married individuals filing separately, up from $34,000.

 

Sure Financials and Tax Services LLC

Phone:+1.908.300.9193, Fax:+1.855.753.0066

Email:services@surefintaxsvs.com | Web: https://surefintaxsvs.com

 

 

 

Reduce Your Tax Payable Or Increase Your Refund.

 Reduce Tax Payable Or Increase Refund

• Retirement Account : Max out contribution to your 401K, IRA , HSA account. These  contributions reduce your tax liability and increase refund. Although you can contribute to these accounts till 15th April, 2022. I would suggest planning it now, so that you can avoid last minute rush. Check for tax year 2021 limits

• Charitable Deduction: Now you can claim cash donation to certain charitable up to $600.00 (MFJ), or $300.00 (Single), even though you elect to  use standard deduction. If you are claiming a charitable contribution, you need to keep receipt of such a donation. 

• Loss Harvesting : Tax loss harvesting is when you sell some investments at a loss to offset gains you’ve realized by selling other stocks at a profit. The result is that you only pay taxes on your net profit, or the amount you’ve gained minus the amount you lost, thereby reducing your tax bill. Single filers and married couples filing jointly can deduct up to $3,000 in realized losses from ordinary income.

• Wash Sales: You can’t, for instance, sell a stock to realize a loss and minimize your tax burden—and then rebuy that exact same stock, or even one that’s nearly identical. This maneuver is referred to as a wash sale. A wash sale occurs when you sell securities at a loss and within 30 days before or after the sale buy “substantially” identical securities, or acquire a contract or option to do so. The wash sale rule does not, however, preclude purchasing securities in the same industry. For example, you can sell shares of Pfizer and replace them with shares of Merck. 

• Flexible Spending Account: FSA : Use IT or Lose IT. A Flexible Spending Account (also known as a flexible spending arrangement) is a special account you put money into that you use to pay for certain out-of-pocket health care costs. FSAs are limited to $2,750 per year per employer. If you’re married, your spouse can put up to $2,750 in an FSA with their employer. You generally must use the money in an FSA within the plan year. But your employer may offer one of 2 options:(1) It can provide a "grace period" of up to 2 ½ extra months to use the money in your FSA.(2) It can allow you to carry over up to $550 per year to use in the following year. As per [ https://www.irs.gov/pub/irs-drop/n-21-15.pdf], this rule temporarily  is allowing carry entire unused amount to next year

• Defer your income: By deferring ( postponing ) income to  next year, you may be able to minimize your current income tax liability. 

What you can tax as Business Tax Credit

Dear Client: 

 

Obtaining a tax credit is the next best thing to paying no taxes at all.  

 

The tax code contains over 30 non-refundable tax credits for businesses. These are part of the general business tax credit and are claimed on IRS Form 3800, General Business Tax Credit, and on Schedule 3 of Form 1040. The general business credit is not itself a tax credit, but rather an overall limitation on the total credits that a business can claim each year. 

 

What if you're a Schedule C business owner who doesn't have employees and isn't involved in one of the niche businesses that come with a credit? You're not necessarily left out of the tax credit bonanza. Here are six tax credits that many Schedule C businesses with no employees can claim (and of course, you can qualify for these credits with employees, too). 

 

1. Credit for Increasing Research Activities 

 

The credit for increasing research activities is intended to encourage businesses to invest in scientific research and experimental activities.  

 

Any technological research qualifies, so long as it relates to a product's new or improved function, performance, reliability, or quality. The research must involve the physical or biological sciences, engineering, or computer science.  

 

You don't have to have employees to get this credit, because you can claim the credit for 65 percent of the cost of hiring third parties to perform research activities on your behalf, such as outside contractors, engineering firms, or research institutes.  

 

Calculating the credit is complex. 

 

2. Qualified Plug-In Electric Drive Motor Vehicle Credit 

 

If you purchase a new electric vehicle, you may be able to claim a credit. These include fully electric vehicles (EVs) and plug-in hybrid EVs (PHEVs). 

 

The maximum credit is $7,500, and the minimum is $2,500. But the actual amount depends on the size of the vehicle's battery. EVs generally get the maximum $7,500, while PHEVs often qualify for less. For example, a Ford Mustang Mach-E qualifies for a $7,500 credit, while a Subaru Crosstrek Hybrid gets only $4,502.  

 

Unfortunately, the credit phases out the year after a manufacturer reaches 200,000 total EV car sales in the U.S.  

 

Tesla and General Motors are the only two manufacturers so far to reach the limit, and the credits for their EVs are now completely phased out. So you won't get a federal credit if you purchase a Tesla or a Chevy Volt. Toyota and Ford will probably be next to cross the 200,000-EV threshold. 

 

You can find a list of credit-eligible models and their amounts by clicking here. The IRS updates this page frequently. 

 

When you claim the credit for a business vehicle, you reduce the vehicle's depreciable basis by the credit amount. You then depreciate the remaining adjusted basis as you would for any other business vehicle. 

 

3. Disabled Access Tax Credit 

 

The Americans with Disabilities Act (ADA) prohibits private employers with 15 or more employees from discriminating against people with disabilities in the full and equal enjoyment of goods, services, and facilities offered by any "place of public accommodation"—this includes businesses open to the public. 

 

The disabled access tax credit is designed to help small businesses defray the costs of complying with the ADA. But you don't have to have employees to claim the credit. The credit may be claimed by any business with either 

 

• $1 million or less in gross receipts for the preceding tax year, or 
• 30 or fewer full-time employees during the preceding tax year. 

 

The amount of the tax credit is equal to 50 percent of your disabled access expenses that exceed $250 in a year but are not more than $10,250. Thus, the maximum credit is $5,000. 

 

4. Business Energy Tax Credit 

 

There is a business energy credit based on the cost of qualified energy property used in a trade or business or for the production of income, such as a residential rental building. The credit ranges from 10 percent to 30 percent of the cost of such property.  

 

The credit can be claimed for various types of renewable energy installations, including thermal and geothermal energy, wind turbines, and fuel cells.  

 

But small businesses most often claim the credit for the cost of installing solar panels and related equipment to generate electricity to provide illumination, heating, or cooling (or hot water) in a business structure, or to provide solar process heat.  

 

Unlike the solar credit for homeowners, there is no dollar limit on this business credit. The credit is 26 percent of the cost of solar property whose construction begins in 2020, 2021, or 2022.  

 

The tax code reduces the credit percentage to 22 percent if construction begins during 2023.  

 

5. Rehabilitation Tax Credit 

 

The rehabilitation tax credit helps defray part of the cost of rehabilitating historic old buildings. The credit is available only if you rehab a certified historic building or a building located in a registered historic district. The credit can be claimed for commercial, industrial, agricultural, and residential rental historic buildings. 

 

The secretary of the interior must certify to the secretary of the treasury that the project meets their standards and is a "Certified Rehabilitation." If your building is not already registered as historic but you think it should be, you can nominate it for historic status by contacting your state historic preservation office.  

 

6. New Energy-Efficient Home Credit 

 

If you're a building contractor who builds homes, there is a tax credit just for you. You can get a credit of up to $2,000 for building an energy-efficient home.  

 

The credit is available for all new homes, including manufactured homes, built between January 1, 2018, and December 31, 2021. To meet the energy savings requirements, a home must be certified to provide heating and cooling energy savings of 30 percent to 50 percent compared with a federal standard.  

 

A reduced credit of $1,000 is available for manufactured homes with a heating or cooling consumption at least 30 percent less than a comparable house and with the Energy Star label. 

 

Are More Credits on the Way? 

 

In the news, you have been reading and hearing about the Build Back Better bill that passed the House and is being considered by the Senate. There are lots of tax credits in the bill. But there are three things to know as of December 1, 2021. 

 

1. The Senate will likely create and try to pass its own version of this bill. 
2. If the Senate passes the bill in a different form, the bill will go to a conference with both House and Senate members, who will make more changes. 
3. Regardless of what happens, we don't see any changes in the current bill or expect any changes that will affect the information in this article. The changes, if any do become law, will apply to 2022 and later. 

 

If you would like my help in qualifying for any tax credits, please call me on my direct line at 908-300-9193

 

Sincerely, 

Sure Financials and Tax Services LLC

Mobile: 908.300.9193 | Fax: 855.753.0066

E-Mail:services@surefintaxsvs.com

Web:https://surefintaxsvs.com/