School is out for the summer, but tax planning is year-round

Source - IRS.

School is out for the summer, but tax planning is year-round

Now that the April filing deadline has passed, most people are spending more time thinking about summer vacations than taxes. However, summer is a great time to review withholding and see if summer plans will affect next year's tax return. Below are some common summertime tax situations and tips to help taxpayers figure out if they apply to their tax situation.

Getting married
Newlyweds should report any name change to the Social Security Administration. They should also report an address change to the United States Postal Service, their employers and the IRS. To report a change of address for federal tax purposes, taxpayers must complete Form 8822, Change of Address and submit it to the IRS. This will help make sure they receive the documents they will need to file their taxes.

Sending kids to summer day camp
Unlike overnight camps, the cost of summer day camp may count towards the child and dependent care credit.

Working part-time
While summertime and part-time workers may not earn enough to owe federal income tax, they should remember to file a return. They'll need to file early next year to get a refund for taxes withheld from their checks this year.

Gig economy work
Taxpayers may earn summer income by providing on-demand work, services or goods, often through a digital platform like an app or website. Examples include ride sharing, delivery services and other activities. Those who do are encouraged to visit the Gig Economy Tax Center at IRS.gov to learn more about how participating in the gig economy can affect their taxes.

Normally, employees receive a Form W-2, Wage and Tax Statement, from their employer to account for the summer's work. They'll use this to prepare their tax return. They should receive the W-2 by January 31 next year. Employees will get a W-2 even if they no longer work for the summertime employer.

Summertime workers can avoid higher tax bills and lost benefits if they know their correct status. Employers will determine whether the people who work for them are employees or independent contractors. Independent contractors aren't subject to withholding, making them responsible for paying their own income taxes plus Social Security and Medicare taxes.

Remember to file their tax return if they got an extension
People who requested an extension to October 17 or missed the April deadline should be sure to file their return. Many taxpayers can prepare and e-file tax returns for free with IRS Free File. MilTax online software is also available for the members of military and certain veterans, regardless of income. This software is offered through the Department of Defense. Eligible taxpayers can use MilTax to prepare and electronically file their federal tax returns and up to three state returns, for free.

Adjust withholding now to avoid tax surprises next year
Taxpayers can avoid a tax surprise next filing season by reviewing their withholding now. Life events like marriage, divorce, having a child, or a change in income can all affect taxes. The IRS Tax Withholding Estimator on IRS.gov helps employees assess their income tax, credits, adjustments and deductions and determine whether they need to change their withholding by submitting a new Form W-4, Employee's Withholding Allowance Certificate. Taxpayers should remember that, if needed, they should submit their new W-4 to their employer, not the IRS.

Share this tip on social media -- #IRSTaxTip: School is out for the summer, but tax planning is year-round https://go.usa.gov/xu6NY

Sure Financials and Tax Services LLC

Mobile: 908.300.9193 | Fax: 855.753.0066

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Did you get CP11? (IRS Notice CP11)

When IRS made changes to your return because IRS believe there's a miscalculation  and you owe money on your taxes as a result of these changes, then IRS will send this notice CP11. 

Let us know to resolve this letter. 

The following images are an example of CP11. 

USA Taxpayer and Foreign Financial Reporting Requirement.

In this section, I will cover following foreign financial reporting requirement from USA tax law point of view. 

• Form FinCEN 114: Form FinCEN 114, report of Foreign Bank and Financial Accounts, also known as Foreign Bank Account, or "FBAR"). If you are a US citizen or resident, you may need to file this form.  Who Must File the FBAR? A United States person that has a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. 

• Schedule B, Interest and Ordinary Dividends: This schedule is used to include interest and ordinary dividend. In the part III of the schedule require the taxpayer to disclose foreign accounts and trusts. Further in this section, taxpayer need to select the check box whether FinCEN 114 need to be filed or not.  

• Form 8938 – Statements of Specified Foreign Financial Assets. Taxpayer need file this form 8938 to report taxpayer specified foreign assets if the total asset of the specified foreign assets in which taxpayer have an interest is more than the threshold.  

• Form 5471, Information Return of U.S. Persons With Respect. To Certain Foreign Corporations. Certain U.S. citizens and residents who are officers, directors, or shareholders in certain foreign corporations file Form 5471 and schedules to satisfy the reporting requirements of sections 6038 and 6046, and the related regulations. 

• Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business. Corporations file Form 5472 to provide information required under sections 6038A and 6038C when reportable transactions occur with a foreign or domestic related party. 

• Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. U.S. persons (and executors of estates of U.S. decedents) file Form 3520 to report: (1) Certain transactions with foreign trusts, (2) Ownership of foreign trusts under the rules of sections Internal Revenue Code 671 through 679, (3) Receipt of certain large gifts or bequests from certain foreign persons. 

• Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner. A foreign trust with at least one U.S. owner files these forms annually to provide information about: (1) the trust, (2) its U.S. beneficiaries, and (3) any U.S. person who is treated as an owner of any portion of the foreign trust. 

• Form 2555, Foreign Earned Income. If you qualify, you can use Form 2555 to figure your foreign earned income exclusion and your housing exclusion or deduction. You cannot exclude or deduct more than your foreign earned income for the year. 

Sure Financials and Tax Services LLC
Mobile: 908.300.9193 | Fax: 855.753.0066
E-Mail:services@surefintaxsvs.com
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IRS Interest and Penalty. What you need to know?

Generally IRS charges below penalties. Refer notice 746, information about your notice, penalty and interest.

1. Failure to file – you didn't file your tax return by the return due date or extended due date if an extension to file is requested and approved.
2. Failure to pay – you didn't pay the taxes reported on your tax return in full by the due date of the original tax return. An extension to file doesn't extend the time to pay so you must pay your taxes by the original due date of the tax return even if you have requested an extension of time to file your tax return. In addition, the IRS may charge a failure to pay penalty if the IRS sends a request for payment and you fail to pay on time.
3. Failure to pay proper estimated tax – you didn't pay enough taxes due for the year with your quarterly estimated tax payments, or through withholding, when required.
4. Bad check – your bank doesn't honor your check or other form of payment.

Notice 746  : Information About Your Notice, Penalty and Interest

Sure Financials and Tax Services LLC

Mobile: 908.300.9193 | Fax: 855.753.0066

E-Mail:services@surefintaxsvs.com

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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/

What you need to know for Self-Employment Tax?

Dear Client: 

 

The tax code says, "The term 'net earnings from self-employment' means the gross income derived by an individual from any trade or business carried on by such individual . . ."  

 

The Supreme Court ruled that to be in a trade or business, you need to be involved with continuity and regularity and that a sporadic activity does not qualify. 

 

In Batok (T.C. Memo 1992-727), the court ruled that John Batok's installation of windows did not rise to the level of a trade or business. Mr. Batok's activity, although engaged in for profit, was neither continuous nor regular. He had never installed windows before this effort nor at any time after that.  

 

The court ruled that Mr. Batok's activity was a "one-time job" not subject to self-employment taxes. 

 

The one-time project can avoid having your child on the payroll, and it can give you the best of all worlds.  

 

For example, say you are in the 40 percent federal bracket, and you pay your 20-year-old college student $23,225. You deduct the $23,225 and save $9,290 on your taxes. 

 

Your child pays $1,028 in taxes. 

 

If you would like to discuss this strategy, please call 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/

Take the Advantages of Self-Directed IRA and Maximize Your Return On Investment

Dear Client: 

 

Tax-advantaged retirement accounts such as IRAs are a great way to save for retirement.  

 

But when you establish a traditional IRA with a bank, a brokerage, or a trust company, you are ordinarily limited to a narrow range of investment options, such as CDs, publicly traded stocks, bonds, mutual funds, and ETFs. The IRA custodian will not permit you to invest in alternative investments such as real estate, precious metals, or cryptocurrency. 

 

A self-directed IRA could be for you if you want to walk on the wild side and invest your retirement money in assets such as real estate or cryptocurrency. 

 

You can invest in almost anything other than collectibles such as art or rare coins, life insurance, or S corporation stock with a self-directed IRA. Investment options include, but are not limited to the following: 

 

• Real estate 
• Private businesses 
• Trust deeds and mortgages 
• Tax liens 
• Precious metals such as gold, silver, or platinum 
• Private offerings 
• LLCs and limited partnerships 
• REITs 
• Livestock 
• Oil and gas interests 
• Franchises 
• Hedge funds 
• Cryptocurrency 
• Promissory notes 

 

Aside from he vast array of investment options, a self-directed IRA is the same as a traditional IRA and subject to the same rules. The income the investments in your IRA earn is not taxed until you take distributions, but distributions before age 59 1/2 are subject to a 10 percent penalty unless an exception applies.  

 

You can also have a self-directed Roth IRA for which distributions are tax-free after five years. 

 

But you must avoid self-dealing and other prohibited transactions or your self-directed IRA could lose its tax-advantaged status. 

 

Establishing a self-directed IRA need not be too difficult. You first open an account with a custodian that offers self-directed investments. You can also acquire checkbook control over your self-directed IRA by forming a limited liability company to own all the IRA investments. 

 

Investing in alternative assets such as cryptocurrency is riskier than stocks, bonds, and mutual funds.  

 

• The rewards can be great, as you've seen with recent returns for cryptocurrency investors.  
• And the damage to your investment portfolio can be substantial, as we've also seen over the years. 

 

When it comes to alternative investments, you need to know what you are doing or have an investment professional you trust to do this for you. 

 

If you have any questions or need my assistance, 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/