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. 

 

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Phone:+1.908.300.9193, Fax:+1.855.753.0066

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Taxes 2023: Tax Return filing steps to avoid delay in getting your tax refund.

The Internal Revenue Service has claimed that it will send 9 out of 10 refunds within three weeks, though it has also given a heads-up that taxpayers should not expect to receive their rebate at an exact date this year.

As per IRS, The IRS set Monday, Jan. 23, as the beginning of the nation’s 2023 tax season, when the agency will begin accepting and processing 2022 tax year returns.

Here are some steps tax filers can take to receive this year's refund as soon as possible.

Filing your taxes by paper

The IRS must manually enter data from paper tax returns into their computer systems when dealing with paper tax returns, which slows down the process of receivers obtaining refunds.

According to IRS figures, approximately 13 million people filed paper tax returns in 2022 out of a total of 164 million returns, a reduction from 2019's 17 million paper tax returns.

Not asking to receive your return via direct deposit.

The IRS advises tax filers to request that their refund be received via direct deposit, as this expedites the process compared to mailing the refund. When requesting direct deposit, the IRS will request bank account and routing details, which filers should verify before providing to the agency.

Not being exact with your numbers

The IRS is "very adept at matching data" and filing taxes with exact figures, including income and mortgage rate, is advised. Failure to do so may result in returns being reported for review, further delaying the issuance of a refund.

Not double-checking personal information

Returns can also be reported for review if they contain inaccurate information about the filer. This would include accidentally providing the IRS with an inaccurate Social Security number.

Not waiting until you have all your tax forms to file.

Though some may desire their tax refund as soon as possible, it is crucial that you wait to submit until you have all of your tax paperwork. Although the IRS will begin taking tax returns on January 23, employers are not required to provide W-2 pay and tax statements for 2022 to employees until January 31.

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. 

 

Follow these links for tax return filing.

• Where to Find It - http://bit.ly/3Xt8DUU

• Tax Return Preparation Check List - 2022: http://bit.ly/3Zx5F3I
• NJ Property Tax credit - http://bit.ly/3X9L5nY
• Rental Income worksheet - http://bit.ly/3Xgk6XV
• Form 8949 - Sale of Assets - http://bit.ly/3WZS7f8
• FBAR information collection Template - http://bit.ly/3X0hrBP
• Supporting document for CTC,ODC Form 14815-A (6-2021) (irs.gov)
• Supporting document for AOTC : Form 886-H-AOC (Rev. 5-2017) (irs.gov)

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. 

Good recordkeeping year-round helps taxpayers avoid tax time frustration

Tax Tip 2022-183

Wading through a pile of statements, receipts and other financial documents when it’s time to prepare a tax return can be frustrating for people who haven’t managed their records. By knowing what they need to keep and how long to keep it, people can develop a good recordkeeping system year-round and make filing their return easier.

Good recordkeeping can also help taxpayers understand their situation when they receive letters or notices from the IRS.

Good records help:

• Identify sources of income. Taxpayers may receive money or property from a variety of sources. The records can identify the sources of income and help separate business from non-business income and taxable from nontaxable income.
• Keep track of expenses. Taxpayers can use records to identify expenses for which they can claim a deduction. This will help determine whether to itemize deductions at filing. It may also help them discover potentially overlooked deductions or credits.
• Prepare tax returns. Good records help taxpayers file their tax return quickly and accurately. Throughout the year, they should add tax records to their files as they receive them to make preparing a tax return easier.
• Support items reported on tax returns. Well-organized records make it easier to prepare a tax return and help provide answers if the return is selected for examination or if the taxpayer receives an IRS notice.

In general, taxpayers should keep records for three years from the date they filed the tax return. Taxpayers should develop a system that keeps all their important information together. They can use a software program for electronic recordkeeping. They could also store paper documents in labeled folders.

Records to keep include:

• Tax-related records. This includes wage and earning statements from all employers or payers including payment apps or cards, such as Form W-2, 1099-K, 1099-Misc, 1099-NEC. Other records include interest and dividend statements from banks, certain government payments like unemployment compensation, other income documents and records of virtual currency transactions. Taxpayers should also keep receipts, canceled checks, and other documents that support income, a deduction, or a credit reported on their tax return.
• IRS letters, notices and prior year tax returns. Taxpayers should keep copies of prior year tax returns and notices or letters they receive from the IRS. These include adjustment notices when an action takes place occurs on the taxpayer's account.
• Property records. Taxpayers should also keep records relating to property they dispose of or sell. They must keep these records to figure their basis for computing gain or loss.
• Business income and expenses. Business taxpayers should find a bookkeeping method that clearly and accurately reflects their gross income and expenses. Taxpayers who have employees must keep all employment tax records for at least four years after the tax is due or paid, whichever is later.
• Health insurance. Taxpayers should keep records of their own and their family members' health care insurance coverage. If they're claiming the premium tax credit, they'll need information about any advance credit payments received through the Health Insurance Marketplace and the premiums they paid.

Sure Financials and Tax Services LLC

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Taxpayers should review the 401(k) and IRA limit increases for 2023

Issue Number:  Tax Tip 2022-178

The amount individuals can contribute to their 401(k) plans in 2023 will increase to $22,500 -- up from $20,500 for 2022. The income ranges for determining eligibility to make deductible contributions to traditional IRAs, contribute to Roth IRAs, and claim the Saver's Credit will also all increase for 2023.

Taxpayers can read the technical guidance regarding all of the cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2023 in Notice 2022-55 on IRS.gov.

Here are some of the changes for 2023:

• The contribution limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan will increase to $22,500.
• The limit on annual contributions to an IRA will increase to $6,500. The IRA catch‑up contribution limit for individuals age 50 and over is not subject to an annual cost‑of‑living adjustment and remains $1,000.
• The catch-up contribution limit for employees age 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan will increase to $7,500.
• The catch-up contribution limit for employees age 50 and over who participate in SIMPLE plans will increase to $3,500, up from $3,000.
• The phase‑out ranges for deducting contributions to a traditional IRA will also increase. Taxpayers should review Notice 2022-55 regarding the details for their situation.
• The income phase-out range for people making contributions to a Roth IRA will increase for taxpayers filing as single, head of household and married filing jointly. Again, taxpayers should consult Notice 2022-55 for specifics about their situation.
• The income limit for the Saver's Credit for low- and moderate-income workers is $73,000 for married couples filing jointly; $54,750 for heads of household; and $36,500 for singles and married individuals filing separately.
• The amount individuals can contribute to their SIMPLE retirement accounts will increase to $15,500.

Sure Financials and Tax Services LLC

Phone:+1.908.300.9193, Fax:+1.855.753.0066

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

 

Year-End Preparation: What You Need to Know and Plan for 2022?

Before it's too late, now is the opportunity to cut your next tax payment by taking advantage of year-end measures that can help you save money.

Whether you donate to a nonprofit organization, put money into your retirement account, or look into helpful tax deductions, taking these tiny efforts now can make a large difference when it comes time to file your taxes. The filing deadline for taxes owed for 2022 is April 18th, 2023.

The following is a list of five tax-related decisions that you should make before the clock strikes midnight on New Year's Eve.

 

1) Key Points

• Reconsider and review your withholding tax deduction.
• Make a right and tax-deductible charitable contribution.
• Maximize your 401(k) deduction.
• Utilize your FSA to the maximum extent.
• Harvest your expected loss.
• Consider wash sale rules.
• Defer your income to reduce tax.
• Withdraw required minimum distribution.
• Review and consider estate planning.

2) Lookback your withholding tax

If you've experienced any significant changes in your career or personal life, such as a raise in salary, a shift in your marital status, the birth of a child, or the purchase of a home, it's vital that you review your current tax withholding. To ensure that the appropriate amount of taxes are being withheld from your paycheck, it is a good idea to review your withholding.

If you don't withhold enough money from your paychecks, you could end up with a tax charge after filing your returns. Altering your tax situation to get more money in each paycheck may be preferable if you withhold too much and end up getting a huge tax refund.

The IRS provides a self-service tool called the tax withholding estimator that can help you determine if you have withheld enough money from your paycheck. To get started, you'll need to have access to your most recent pay stub and tax return.

Read SURE FINANCIALS AND TAX SERVICES LLC: Taxpayers should check their federal withholding to decide if they need to give their employer a new W-4 (surefintaxsvs.blogspot.com) to know when you need to update your employer with new form W-4

3) Think about charitable donations.

Contributing to a charity you care about before the end of the year might have additional benefits, including lowering your taxable income.

Donations to charity are generally deductible only if you itemize your tax deductions. But to itemize, your total deductions must be higher than the standard deduction.

When filing your taxes, the IRS permits you to deduct a standard amount called the "standard deduction" regardless of your personal circumstances. As the government attempts to adjust for the biggest inflation in decades, it has been increasing standard deductions.

The standard deduction amounts for the 2022 tax year (for returns submitted in 2023) are as follows:

• $12,950 for single and married-filing-separately taxpayers
• $19,400 for head of household taxpayers
• $25,900 for married-filing-jointly or qualifying widow(er) taxpayers

However, before making a donation, verify that the charity of your choice is eligible to receive tax-deductible contributions. The Internal Revenue Service (IRS) provides a search tool where you may get up-to-date information about tax-exempt organizations.

To complete your search, you will need either the company name or EIN.

4) Take the benefit of 401(k) contributions.

A 401(k)-retirement account contribution deadline is typically the later of December 31 or your final paycheck of the year. A maximum of $20,500 can be contributed that year. To the maximum of $27,000, an additional $6,500 can be contributed if you are 50 or older. Limits do not apply to employer contributions. There is a cap of $61,000 for 2022 on the sum of your and your employer's contributions.

You need to take action immediately because December will bring your last paycheck of the year. Increasing your retirement contributions typically requires a conversation with your company's human resources division. To make sure you haven't already reached the annual contribution limit, you should know how much you contributed this year.

5 ) Take a look at your 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 $2,850 per year per employer. If you’re married, your spouse can put up to $2,850 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 $570 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 the entire unused amount to next year.

6 ) Harvest your loss.

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.

Select this course of action if you are confident that your investment will not rise in value in the near future.

7 ) Keep in mind the wash sale rules

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 strategy 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. 

8 ) Defer your income

By deferring ( postponing ) income to next year, you may be able to minimize your current income tax liability, if your future year tax rate is low. Here are ways you can achieve this strategy

(1) Cash method of accounting: First, the Tax Cuts and Jobs Act (TCJA) widened the class of companies eligible to adopt the cash method of accounting. You still have time to put this plan into action by switching to the cash method automatically before the tax return's due date (including any extensions). Exactly who has the authority to implement this change? As long as inventory is not a significant contributor to income, sole proprietorships, partnerships, and S companies can switch to the cash method of accounting regardless of their average annual gross receipts. A switch to the cash method is made automatically for C corporations (or partnerships with a C corporation partner) with average annual gross receipts of $25 million or less for the past three taxable years.

(2) Postpone Year-End Billing: If you're using the cash approach, put off billing your customers until after the end of the year.

(3) Installment sales: A sale is the transfer of ownership of an item. As long as at least one payment is received in the year after the sale, income recognition is typically deferred under the installment method until the gain is realized. If you think you would sell property before the end of 2022 and it would be financially beneficial to do so, you might want to explore selling the property and reporting the gain under the installment method so that any payments (and tax) can be postponed until 2023 or later.

(4) Interest and Dividend: Treasury securities and bank CDs with maturities of one year or less earn interest, but that interest is not considered taxable income until it is actually received. Investing in bonds or certificates that won't mature until next year is one way to put off collecting interest money. The 2022 tax year won't apply to dividends unless you have constructive receipt of them before December 31. (exceptions may apply if you have control over when dividends are paid to you.)

9 ) Be cognizant about RMD ( Required Minimum Distribution).

Required minimum distributions (RMDs) must be taken from traditional IRAs and employer-sponsored retirement plans after the account holder reaches age 72 (exceptions may apply if the account holder is still actively employed by the plan's sponsor). Withdraw the RMD by December 31st, the end of the tax year for most people. The penalty for not doing so is steep: fifty percent of the amount you were supposed to disperse but didn't. Beneficiaries are typically expected to take annual payments from inherited retirement accounts (and under the 10-year rule), with some exceptions for surviving spouses. Refer to SURE FINANCIALS AND TAX SERVICES LLC: Required Minimum Distribution (RMD) (surefintaxsvs.blogspot.com) for more information.

10 ) Make an estate plan or revisit estate planning.

It's a good idea to sit down with a financial advisor and go over your estate plans towards the end of the year to see if there are any ways you can save money on taxes or improve upon your current approach. The current $12.06 million lifetime gift and estate tax exception, in effect until 2026, may be a topic of conversation. You might also talk about whether or not it makes sense to set up a trust and fund it before the end of the year so as to take advantage of the tax benefits offered by the current legislation.

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 +1 908.300.9193.

 

 

What is Form W-4? What is the use of it?

Employer must complete new hire papers when employer recruit a new employee. Form W-4 is one that employer has to have new hires complete and keep on file. So what does a W-4 form mean? What does the Form W-4 serve? Continue reading to learn the solutions to these and other W-4 queries.

1. Key Points

• Employee's Withholding Certificate, Form W-4, is an IRS document used by employees.
• When the employee begins working, the employee must fill it out and submit it.
• Employers should use a Form W-4 that has been filled out to calculate how much federal income tax (FIT) should be deducted from employee wages.
• An employee may claim credit for dependent kids on Form W-4.
• The dependent credit depends on the age of the dependent.
• Dependents are eligible for a $500 credit if they are over the age of 17 years old and $2000 if they are under 17 years old.
• The need to amend a form may arise from a significant life event for an employee.

2.  What is Form W4

When an employee begins working for an organization, they must complete IRS Form W-4, Employee's Withholding Certificate. Employee must fill up the following information on the form:

1.  Name

2.  Address

3.  Social Security number

4.Filing status (e.g., Single)

5.Multiple job or spouse work information (if applicable)

6.Number of dependents (if applicable)

7.Adjustments (if applicable)

8.Signature

Additionally, the form includes a few worksheets that employees can use to figure out how many jobs they have and what deductions they have made. Depending on the individual employee, some form sections may be skipped (e.g., claiming dependents).

Employers must calculate the amount of federal income tax (FIT) to deduct from employees' paychecks based on the Form W-4 that the employee has completed.

The IRS Form W-4 is primarily filled out by the employee, although there is a minor section at the bottom that employers must complete. Employers must fill out the form with the following details:

1. Employer’s name and address
2. Employee’s first date of employment
3. Employer Identification Number (EIN)

3. What is the use of Form W-4?

A Form W-4 is used to calculate the amount of federal income tax that will be withheld from an employee's paycheck. The form is filled up by employees using the worksheets and tables. Employer will utilize the form to determine the employee's FIT withholding after that.

Employers need to use the tax tables in IRS Publication 15-T to determine how much Federal Income Tax (FIT) should be deducted from an employee's paycheck. 

Remember that the IRS Publication 15-T contains tax tables that are compatible with W-4 forms from 2019 and prior. Before calculating the employee's withholding, make sure you're using the right tax table.

4. Are you exempt from filing Form W-4?

Some employees may, in exceptional circumstances, be excused from federal income taxes. This means that no federal income tax is deducted from the employee's salary.

The federal income tax exemption is only available to some employees. A worker is exempt if they:

1.Owed no federal income taxes for the prior year.

2. Expect not to owe any federal income taxes this year.

Employees must indicate on Form W-4 that they are exempt from FIT by writing "Exempt" in the box underneath Line 4. (c). On their W-4 form, exempt workers must additionally include their name, address, SSN, and signature.

Remember that the data on Form W-4 never expires. An exemption from withholding, however, does. Employees who claim exemption on Form W-4 must submit a fresh form by February 15 of each year.

Look at IRS Publication 505 and the General Instructions on Form W-4 for more information on exemption from withholding.

5. When is an employee expected to update Form W-4?

The Form W-4 can always be updated by an employee. A significant change in circumstances may need an employee to update their form (e.g., got married or had a baby). They could also elect to modify their W-4 form to change the withholding percentage.

Employees must complete a new Form W-4 if they need to make any changes to their current one.

Employer has a set amount of time to make the modifications after the employee fills out the new form. No later than the paycheck period that ends on or after the 30th day following the date the employer received the updated form, put the modifications into effect.

Wait until the next year to put any modifications into effect if the employee is revising a form for the coming year.

6. What employee need to do to claim Dependents:

Starting from 2020 and later, the form W-4 is changed to claim dependents instead of allowances. 

The new Form W-4, an employee with a dependent child must look at their dependent’s age to determine the amount of the child tax credit and the credit for other dependents that they may be able to claim. Dependents under 17 have a dependent amount of $2,000, while dependents over 17 have a $500 amount.

7. What is the employer's responsibility?

Yes, the majority of Form W-4 is completed by your employees. However, employer has a few Form W-4 obligations as an employer, including:

1. Completing the Form W-4's bottom employer section

2.W-4 data entry in your payroll processing system

3. Immediately after receiving the form, withhold taxes.

4.Maintaining all W-4 documents in your files for a minimum of four years

Employer and employee may occasionally get a letter from the IRS stating that not enough FIT was withheld from the employee's pay. In most cases, the letter gives the employer instructions to withhold federal income tax at a higher rate.

If an employer or employee gets a letter from the IRS, the withholding tax needs to be adjusted within 60 days in accordance with the notice's instructions. Keep in mind, too, that the employee does have the option to challenge or alter their deductions.

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.

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