Don’t waste money on penalties! Penalties apply when you owe taxes or did not file a tax return or extension. Keep in mind that the penalties for not filing a tax return or tax extension are higher than not paying taxes owed. The late filing penalty is 5% of the additional taxes owed amount for every month your return is late. A maximum penalty is 25%. If you file more than 60 days after the DUE DATE, the minimum penalty is $435 or 100% of your unpaid tax, whichever is less.

Important! You can correct your taxes for the last three years! Story 1 Clients Alice and Erik came to our office with a recommendation from their friend. For the last couple of years, they were using another accountant. Erik was telling Alice for a while that they need to look for a second opinion and they were glad they came to our office. When we looked at their taxes, we immediately noticed that they were not signed by the accountant who prepared their taxes. It was sent

If you just received a notice that your taxes are being audited: what does it mean? A Tax Audit is an accounting procedure where the IRS examines your individual or business financial records. If you prove that your initial return was complete and correct, you won’t be asked anything further, but if the IRS finds errors or purposeful misreporting, you will have to pay the recalculated return amount and any penalties. The IRS is supposed to tell you why your return was selecte

You must file an amended tax return entering the corrected info and an explanation of why are you changing your report. Based on the three-year rule, you can file an amended tax return during the next three tax seasons. But it depends on what type of mistake you’ve found. For example, if the correction states that you owe more taxes, it makes sense to file the amendment ASAP. The IRS charges penalties and interest after the tax deadline. If you realize you need help to correc

What to do: Verify why exactly the IRS sent you a letter. The agency categorizes notices to: – information letters (the agency wants to clarify your identity; needs additional information about your tax return) – letters about changes to your tax return or/and account (these letters relate to the mistakes you made, underreporting income or/and you are being audited, and the agency lets you know about this) – letters where you owe money to the IRS (in these letters the IRS inf

Get ready to launch a solo 401(k) retirement plan Most contributions and other limits for retirement plans only budged slightly for 2020. But some small business owners can take matters into their own hands. Strategy: Set up a "solo 401(k) plan." If you qualify, you can effectively benefit from both "employee" and "employer" contributions to your account. In many cases, this dual tax winner can't be beaten because it often allows you to sock away more money than any other ty

It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors. An employee is generally considered to be anyone who (a) performs services, (b) the business can control what will be done, and (c) how it will be done. What matters are that the business has the right to control the details of how the worker's services are performed. Independent contractors are normally people in an independent trade, b

Substance over form. Have you received a W-2 or 1099 with an error? Check forms carefully to ensure accuracy. If you discover a mistake, contact the payer promptly to obtain a revised form. Also, a payer may issue a corrected form on its own. Don't ignore the change on 1040 you file with the IRS. The IRS computers match up W-2s and 1099s and could produce an unexpected tax bill. Self-insured plans. A little-known tax applies to employers with self-insured health plans—you mus

Low-incomers needn't pay back credit overpayments. But others will have to. Families with 2021 modified adjusted gross incomes at or below $40,000 for singles, $50,000 for household heads, and $60,000 for couples needn't repay any overpayments. Those with 2021 modified AGIs of at least $80,000, $100,000, or $120,000, respectively, will need to repay the full amount of any overpayment when they file their 2021 1040s. Families with 2021 modified AGIs between the thresholds need

The monthly child credit payments aren't taxable. On your 2021 Form 1040, which you file next year, you'll reconcile the payments you got with your actual credit. If the child credit exceeds the payments that you received, you can claim the excess. If the credit is less than what you got, you may or may not have to repay the excess. IRS will mail a notice by Jan. 31, 2022, showing the total amount of payments made to you. Keep the letter with your tax records to help you fill

Let's take a look at the 2021 filing season. Millions of individuals still await refunds from timely filed 2020 tax returns. As of Sept. 18, IRS had a backlog of 7.8 million individual returns that require manual processing. Some need further review because of mistakes with refundable credits or math errors. About 9 million math error notices were mailed to taxpayers from June 1 through July 15, compared with 628,997 for the same period last year. Others are paper returns fil

Tax pros support a bill to change the due dates for estimated tax payments CONGRESS by individuals. Currently, estimated payments are due in April, June, Sept., and Jan. of the following year. For example, for 2021, the first payment was due on April 15, 2021; the second, on June 15, 2021; the third is due Sept. 15, 2021; and the fourth, on Jan. 18, 2022. The proposal would have the payments due 15 days after the end of each quarter: April 15, 2022 / July 15, 2022 / Oct. 15

We are approaching the end of the year, and that means the IRS has been busy processing and reviewing hundreds of millions of returns! Many of you might have already received your refunds, but some of you may have received IRS letters in the mail! These letters can be anything from requests for more information to penalties, additional taxes due, and even audits! Do not deal with the IRS by yourself! Our office is open all year and we are here to help you handle any IRS issue

Unfortunately, you may have been forced 10 lay off or furlough workers during the pandemic, but now you're short-staffed. Strategy: Hire your spouse, especially if he or she is already pitching in. Make them an official company employee, with all that, entails, including filing the proper paperwork with the IRS. Of course, your spouse will owe income and payroll taxes on wages, just like any other new hire, but he or she can also pocket company benefits, subject to tax-law el