According to the IRS, one of the first decisions taxpayers must make when completing a tax return is whether to take the standard deduction or itemize their deductions.

When starting the tax process, there are several factors to consider before making a choice, including changes to your tax situation, changes to the standard deduction amount, and recent tax law changes.

Want to learn more on Tax deductions, visit the IRS Tax Basics.

1099 Tax Reminders

Once again, it is the time of year for small business owners, self-employed individuals, and rental property owners to consider your filing requirements. When you operate your business for a profit, the IRS considers you engaged in a trade or business, and therefore you are required to file certain informational returns. Information relating specifically to Form 1099-MISC, Miscellaneous Income, and Form 1099-NEC, Nonemployee Compensation, can be found at https://www.irs.gov/instructions/i1099mec.

Form 1099-NEC is due to the recipient and IRS by January 31, using either paper or electronic filing procedures. Form 1099-MISC is due to the recipient by January 31, and to the IRS by February 28 if you file on paper, or March 31, if you file electronically. 

Fourth quarter estimated tax payments are due January 16, 2023. 

Depending on your situation, these estimates may include federal, state, and/or local vouchers. If quarterly estimates were recommended when we prepared your 2021 return, they would be included with your tax return. If you requested a paper copy of your return, the instructions, vouchers, and envelopes were included in your tax folder. If you requested an electronic copy, the instructions and vouchers were included in your action-needed copy posted to your client portal. 

Please follow the applicable instructions previously provided to mail your payment and voucher by January 16, 2023. There may be situations where the estimates were generated, but an overpayment was applied in full or partially. If your income or withholdings have significantly changed since last year and you still need to discuss these changes with your advisor, please get in touch with your tax preparer to review. If you change or do not make the estimate, please inform your tax preparer at tax filing time.

Q3 estimated payment reminder
Third quarter estimated tax payments are due September 15, 2022. These estimates may include federal, state and/or local vouchers depending on your situation.
 
There may be situations where the estimates were generated, but an overpayment was applied in full or in part. If your income or withholdings have significantly changed since last year, please contact your tax preparer to review. If you change or do not make the estimates, let your tax preparer know at tax filing time.

FINAL TAX FILING REMINDER
Don’t forget to return your signed e-file authorization forms (Form 8879 for Federal Returns). Your preparation team cannot file your tax return without that official authorization from you (and your spouse if filing jointly).

Our Tax Department has begun filing tax return extensions. If we did not receive all of your information and supporting documents by April 1, we are likely going to file an extension on your return. Please refer to the following guidance about preparation of an extension:

• Still give us whatever information you have as soon as possible or as soon as it becomes available.
• Expect to pay an anticipated taxes owed by the original filing date in April. We will determine if you will have a balance due or if you ca expect a refund based on the available tax information you submit.
• If you are required to make quarterly estimated tax payments, individual first quarter estimated tax payments are due April 15.
• If you are anticipating a large refund, we will try to get your extended return completed as soon as possible once all tax information is available.

Contact our team at tax@valleynatinalgroup.com or 610-868-9000 if you need more information.

American Rescue Plan
For tax year 2021 only, the amount of the child and dependent care tax credit is significantly enhanced under the American Rescue Plan Act of 2021. In addition, the maximum exclusion of employer-provided dependent care assistance is also increased. READ MORE

Cryptocurrency and Virtual Currency IRS Guidance
Virtual currency transactions are taxable by law just like transactions in any other property. The IRS is aware that some taxpayers with virtual currency transactions may have incorrectly reported or failed to report income and pay the related tax. Therefore, it is actively addressing potential non-compliance in this area. Millions of taxpayers may find themselves the target of a new IRS initiative called Operation Hidden Treasure.
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Education Savings Plans
Parents with young children, are faced with many rewards and challenges. One of which may be saving for the high cost of a college education. However, there are two tax-favored options that might be beneficial:
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Education Tax Credits
There are two credits available to help taxpayers offset the costs of higher education. The American opportunity tax credit (AOTC) and the lifetime learning credit (LLC) may reduce the amount of income tax owed. Taxpayers who pay for higher education can see these tax savings when they file their tax returns next year. READ MORE

2021 Charity Deductions
You probably know that you can get an income tax deduction for a gift to a charity if you itemize your deductions.  However, the Consolidated Appropriations Act, 2021 offers enhanced tax incentives for making charitable contributions for the 2021 tax year. READ MORE