Follow these tax prep tips from Steve Moyer, CPA in Telford, Pennsylvania. Member of the American Institute of Certified Public Accountants and Pennsylvania Institute of Certified Public Accountants
The Tax Informer
2021 Tax Returns
We are looking forward to seeing and talking to you about the many changes applicable to your 2021 tax returns. This year, more than any other, it is most important that we explore all of the legal deductions that are available to you. Our clients can call upon us for tax preparation, financial and retirement strategies, and tax planning. Moyer & Associates is dedicated to the needs of our clients. Service is our “buzz” word, and we have never wavered from that concept.
An account beneficiary is the person or persons designated to receive the assets or funds from your financial accounts when you pass away. Beneficiaries are typically designated for your credit union membership checking accounts, savings accounts, investments, IRAs, life insurance policies and more. Maintaining current designations is an important step to protecting your assets; yet, many people forget to check this information. Incorrect or outdated beneficiary information could cause problems for your
family down the line. Here’s more about beneficiaries and why you should monitor this information.
The importance of current designations: If beneficiaries are incorrectly stated (or not declared at all), funds from your accounts could go to the wrong person, end up part of your estate, or be subject to a costly probate. Without a beneficiary on your credit union membership, we won’t know who to reach out to if you pass away and funds could end up being distributed as unclaimed funds to the State; your family would have to go through a time-consuming process to claim them. It’s good practice to keep a list of your accounts, where they are, and who the beneficiaries are and to check it annually and after a life event such as change in marital status, children, or retirement.
In 2021, tax-related identity theft still remains a serious concern for taxpayers and tax practitioners. Tax-related identity theft occurs when someone uses a stolen SSN or ITIN to file a fraudulent tax return claiming a refund. There are various scams and schemes used for individual data theft, but an estimated 91% of all data breaches and cyber attacks begin with a spear phishing email that targets an individual. The criminal poses as a trusted source, such as IRS e-Services, a tax software company, or a cloud-storage provider. We remind our clients that the IRS will never email you and ask for sensitive information. In addition, they will never contact you without first sending you a notice. If you receive something you are unsure of, we are here to help.
Our society values ethical conduct. A simple definition of good ethics is the act of doing that which is right not wrong. Doing what is right is not always that obvious. Sometimes one can be led down the unethical path by rationalizing. We at Moyer & Associates always choose to do the right thing. We have built our practice on extremely high ethical standards.
Personal Exemptions and Standard Deductions
Effective for years after 2017, PERSONAL EXEMPTIONS have been eliminated. These have been replaced by the higher standard deductions which are as follows:
Deductions for State and Local Taxes
Effective for years after 2017, Individuals may deduct state and local income (or sales) taxes and real and personal property taxes up to $10,000 or ($5,000 if married filing separately) in the aggregate.
Annual Gift Tax Exclusion
There is the annual gift tax exclusion in the amount of $15,000.00 for 2021. Married couples can exclude up to $30,000.00 per donee.
Qualified Business Income Deduction (QBID)
Taxpayers may generally deduct up to 20% of the qualified business income of S Corporations, partnerships and sole proprietorships, subject to limitations. This also includes Single Member LLC’s.
Personal Tax Credits
● Adoption Credit
● Child and Dependent Care Credit (children under 13)
● Education Savings Accounts
● Adoption Expense Credit
● Child Tax Credit (children under age 17)
● Tax Credit for Qualifying Dependents (see below)
● Credit for the Elderly / Disabled
● Earned Income Tax Credit
● American Opportunity Tax Credit (up to $2,500.00 per student)
● Foreign Tax Credit (Federal and some States)
● Lifetime Learning Credit (20% of the first $10,000.00)
The Child Tax Credit is a fully refundable credit, meaning families can receive the full credit even if they don’t owe any income taxes. The child tax credit will allow families to receive up to $3,600 per qualifying child under six and up to $300 per qualifying child ages six to 17. The qualifying child must be a dependent. There is no earned income threshold for refundable credit.
IRA Limitations for Year 2021
Successful Tax Return
A successful tax return is one which is theoretically and mathematically correct, and which has taken advantage of every deduction, credit, and tax method to produce the smallest legal tax liability.
Long Term Care, Medicare, Health Insurance Premiums
All of the above insurance premiums are deemed to be health insurance premiums, and therefore, are deductible as an adjustment against adjusted gross income for a self-employed taxpayer. Health insurance includes coverage for family members and children under 27.
Some Pension Plan Limitations for 2021 & 2022
We do not disclose any non-public information except as permitted by law or with your permission. We are trained and required to safeguard your information.
Mileage Rates for 2021
Business may elect to expense all or part of the cost of what is often referred to as Section 179 property and deduct this in the year they place the property in service. The maximum deduction for 2021 is $1,050,000/year and the phase-out threshold has been increased to $2,620,000. The deduction applies to new property as well as used property.
Working With a Financial Consultant
There are three basic items that you should consider when working with a financial consultant, broker, or banker: (1) establish goals, (2) develop a plan, and (3) stick with it. It’s of prime importance that you take the responsibility of understanding your investments and monitoring their progress.
Canceled Checks and Estimated Payments
At the time of your tax interview, bring in a summary of checks used to pay estimated Federal, State, and Local taxes. We want to be sure that you get credit for payments made, and the canceled checks become part of the package for the 2021 returns. Taxing authorities often lose track of payments made, and disallow the credit if canceled checks cannot be produced.
Social Security Taxable Wage Base
The Social Security taxable wage base for 2021 is $142,800.00. Medicare (1.45%) has no limit on wages.
Every year, Moyer & Associates invests time and money in continuing education to stay up to date on the regulations that can affect your tax return. This year is no exception.
Call Early for Your Tax Appointment
Please call us early to set up your next appointment to prepare your annual tax returns. We want you to be able to secure a time that is most convenient for you.
WE ARE MORE THAN JUST TAX PREPARERS. WE EVALUATE YOUR ENTIRE FINANCIAL PICTURE.