Pearson & Co, PC, Author at Pearson & Co., PC

19 Nov 2022

Anything, Estate Planning, News, Retirement, Tax Credits, Tax Law Pearson & Co, PC 0 comment

OPPORTUNITY TO ACCELERATE YOUR RETIREMENT SAVINGS

401(k) and IRA Contribution Limits Increased

Contribution limits for 401(k)s, 403(b)s, 457(b)s, IRAs, Roth IRAs, HSAs, FSAs, SIMPLE IRAs, and SEP-IRAs are all indexed to inflation. While the contribution limits don’t go up every year, you will generally see an increased contribution every year or two.

The inflation rate is now running at a 40-year high. That triggered the IRS to announce significant jumps in allowed contributions for tax year 2023. More specifically:

Taxpayers under age 50 can contribute to their 401(k), 403(b), most 457 and the federal government’s Thrift Savings Plan accounts … increases to $22,500 for 2023 … a $2,000 bump over 2022 limits.
Notably, taxpayers 50 and older win a further concession … a $3,000 boost to $30,000 annually. That number includes a $7,500 so-called catch-up contribution, up from $6,500 in 2022.

Participants in qualifying plans can reduce their 2023 tax bill by
increasing the amount they contribute pre-tax to retirement accounts.

Here’s a summary of the key provisions of the changes for 2023.

401(k) Plans – Annual Contribution Limits

Employees under age 50 – $22,500, up $2,000 from 2022.
Employees 50 and older – $30,000 (Includes $7,500 catch-up contribution, up from $6,500)
If the Plan permits, additional after-tax employee contributions may be made to top-out the total employer/employee contribution limits – employees under age 50, $66,000; 50 and older, $73,500.

IRA – Annual Contribution Limits

Increased to $6,500 from $6,000
Participants 50 and older can make an additional $1,000 catch-up contribution.

Note: You can’t make a tax-deductible contribution to an IRA unless you have no workplace retirement plan, or your income is below certain limits. For 2023, the deduction will phase out for single taxpayers earning between $73,000 and $83,000 (up from $68,000 to $78,000) … and for married couples filing jointly earning $116,000 to $136,000 (up from $109,000 and $129,000 respectively).

If your spouse is covered by a workplace plan and you’re not, your deduction for an IRA phases out between $218,000 and $228,000 in 2023, up from $204,000 to $214,000 in 2022.

Roth IRA – Annual Contribution Limits

Increased to $6,500 from $6,000
Participants 50 and older can make an additional $3,000 catch-up contribution.

Note: The income phase-out for contributions to a Roth IRA for singles and heads of household will be $138,000 to $153,000 respectively in 2023, up from $129,000 to $144,000. For married couples filing jointly, the phase-out range will be $218,000 to $228,000, up from $204,000 to $214,000 this year.

Simple IRA Accounts – Annual Contribution Limits

Increased to $15,500, up from $14,000
If the Plan permits, employee participants 50 and older can make an additional $3,500 catch-up contribution, up from $3,000 in 2022.
Employee participation in other employer plans is limited to a combined annual contribution of $22,500.

Saver’s Credit

Low and moderate-income workers may add to their retirement fund value via federal tax credits that deliver a 100% reduction in the taxpayer’s tax-bill. Eligible workers may enjoy a tax credit in a range of 10% to 50% of contributions made to an IRA or employer sponsored retirement plan.

Note: The credit gradually reduces and phases out as a taxpayer’s income rises. In 2023, the credit will phase out at $73,000 for married couples filing joint tax returns (up from $68,000); $36,500 for singles and couples filing separately (up from $34,000); and $54,750 for heads of household (up from $51,000).

SEP IRAs – Annual Contribution Limits
(Self-employed & Small Business Owners)

Increased to $66,000 from 2022 limit of $61,000
Self-employed persons may contribute up to 20% of earnings up to $330,000, up from $305,000.

For more on how the above applies to your specific circumstances,
be sure to give Pearson & Co a call or drop an email. We’ll respond immediately.

20 Sep 2022

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PEARSON RECRUITING

About

Pearson & Company has helped small to mid-size companies and individuals with their
strategic financial goals and related tax needs since 1989. Our offices are conveniently
located in Mechanicsville, Virginia at an attractive, safe and well-maintained office park.

The Opportunity

Requires minimum 3 years of success in tax preparation for individuals and businesses
Proficiency with the Thomson Reuters of Software … Ultra Tax, Practice CS, etc.
Full Time:
- Salary Range: $70K – $85K
- 100% employer funded health insurance
- Matching 401(k)
- 3 weeks paid vacation; 8 paid holidays
Seasonal: Hourly Range: $34 – $41

Next Step

Your Choice … email your resume or contact us for a preliminary phone conversation.

20 Sep 2022

Anything, Business, IRS, News, Tax Credits, Tax Form Guidance, Tax Law Pearson & Co, PC 0 comment

INFLATION REDUCTION ACT

Key Tax Provisions … a Summary

The Inflation Reduction Act, was signed into law on Aug. 16. It includes numerous tax provisions that relate to both businesses and individuals … including clean-energy-related tax incentives, and expanded funding for IRS enforcement.

This month’s article offers a summary outline of key provisions of the Act.

Business

Individuals

Internal Revenue Service

The foregoing outlines key provisions of the Inflation Reduction Act as it applies primarily to small businesses and individuals. There are many other provisions that apply to larger entities that are renewable energy oriented and measures to address potential climate change issues.

For more on how the above applies to your circumstances,
be sure to give Pearson & Co a call or drop an email. We’ll respond immediately

26 Aug 2022

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EMPLOYERS … HOW TO CLAIM THE EMPLOYEE RETENTION CREDIT RETROACTIVELY!

How to Claim the Employee Retention Credit… Retroactively!

The Employee Retention Credit (ERC) is an $80 billion dollars tax savings program. Included in the CARES Act, the ERC offered tax credits to encourage employers to retain employees at the height of the COVID-19 pandemic in March 2020. The driving principle for Congressional adoption of the incentive was to help pandemic-impaired businesses and tax-exempts to retain jobs and trigger job creation.

Regrettably, many of those employer benefit candidates have ignored participation in the program. That triggered a major loss to willing workers who have been displaced or are about to be. Likewise, employers suffer when they are unable to maintain their pre-pandemic payroll which further impairs their success in recovering from the financial ravages of C-19 and prevail as viable enterprises.

Many employers were and are confused as to qualification requirements and application procedures. As noted above, the ERC was included as a provision in the CARES Act. Added fuel for the confusion is the Paycheck Protection Program (PPP) which was enacted in that legislation as well. The unintended consequence for a significant number of employers was and is the belief that it was an either/or choice … ERC or PPP.

Note: Employers who received a PPP) loan are eligible to claim the ERC. However, there are restrictions … e.g., the employer cannot claim the same expenses for both programs.

A second area of qualification-confusion surfaced. Many business owners and tax-exempt managers incorrectly interpreted the rules. The first misconception was that to qualify an enterprise must have suffered a 50 percent reduction in revenues … not so. There are two alternate tests to qualify:

a revenue test, or
demonstration that your operating entity was significantly and negatively impacted by government order, e.g., a partial or full shutdown due to a government order at the federal, state, municipality, county or other local level authority.

With this knowledge of qualification criteria, hundreds of businesses and tax-exempt organizations have applied for and been approved for ERC assistance under one or another of the above tests. Notably, for employers that have not yet applied, the ERC can be claimed for three years after the filing date of the original payroll returns.

For employers with 500 or fewer employees,
this presents an opportunity to retroactively claim these credits.

Takeaways
Employers who qualify and have not yet claimed their ERC are urged to adopt a sense of urgency to do so. The 3-year window after the filing date of the original payroll returns that ERC can be claimed is on the horizon.

Of considerable financial significance, the 2020 credit can be as much as $5,000 per employee … the 2021 credit up to $21,000 per employee.

Give Pearson & Co a call or drop an email to determine if you qualify
… and if so, how to submit a claim.

25 Aug 2022

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WORKER CLASSIFICATION – WHAT’S IN A NAME?

Employee or Independent Contractor?

Legal and regulatory debates continue to rage at both the state and federal levels, the topic … what workers may appropriately be deemed “employees” and which class of workers may be classified as “independent contractors”?

A worker’s classification has real world financial and other consequences for both the individual worker and the company utilizing their services. Independent contractors are not eligible for state or federal minimum wages. Additionally, they are not entitled to overtime pay, workers compensation coverage, unemployment insurance, or benefits. Effectively, independent contractors do not enjoy the protections of state or federal workplace law as do employees.

Employers are often tempted to seek grounds to classify workers as independent contractors rather than employees. Doing so relieves the employer of paying its share of employment taxes … plus avoiding withholding and paying income, Social Security and Medicare taxes.

Employers are cautioned to be diligent in their research before classifying workers as independent contractors.

Misclassifying a worker may subject the business to significant financial penalties.

A prudent place to seek guidance is to review how the IRS determines whether a worker is an independent contractor or an employee. There are 3 relational categories to consider.

Behavioral control − Does the company control or have the right to control what the worker does and how the worker does the job?
Financial control − Does the business direct or control the financial and business aspects of the worker’s job. Are the business aspects of the worker’s job controlled by the payer? Things like how the worker is paid, are expenses reimbursed, who provides tools/supplies, etc.
Relationship of the parties − Are there written contracts or employee type benefits such as pension plan, insurance, vacation pay? Will the relationship continue and is the work performed a key aspect of the business

With the above as a guide, an employee is generally considered anyone who performs services under circumstances that the business can control what will be done and how it will be done. What matters is that the business has the right to control the details of how the worker’s services are performed.

In contrast, independent contractors are typically people in an independent trade, business or profession in which they offer their services to the public. Workers often classified as independent contractors include truck drivers, home health workers, auto mechanics, carpenters, plumbers, painters, roofers, drywall installers, among others.

For more on how the above applies to your specific circumstances,
be sure to give Pearson & Co a call or drop an email. We’ll respond immediately.

20 Jul 2022

Covid-19, IRS, News, Tax Law, Uncategorized Pearson & Co, PC 0 comment

AVOID TAX SCAM VICTIMHOOD

IRS Annual List of Tax Scams –Taxpayers Beware in 2022!

Compiled annually for more than 20 years, the Dirty Dozen lists a variety of common scams that taxpayers can encounter anytime. The IRS identifies problematic transactions through taxpayer examinations, promoter investigations, whistleblower claims, data analytics, document matching, and marketing material review.

The objective of the agency is to raise awareness of threats by fraudsters to steal money and personal information from honest taxpayers.

The IRS warns taxpayers to be aware of these scams aimed at fleecing innocent victims. This year’s list is divided into five groups outlined below. The IRS reminds taxpayers to watch out for and avoid advertised schemes, many of which are now promoted online, that promise tax savings that are too good to be true and will cause taxpayers to legally compromise themselves.

“Taxpayers should stop and think twice before including these questionable arrangements on their tax returns,” said IRS Commissioner Chuck Rettig. “Taxpayers are legally responsible for what’s on their return, not a promoter making promises and charging high fees. Taxpayers can help stop these arrangements by relying on reputable tax professionals they know they can trust.”

Note: The following is not intended as a complete description of each scam … just a heads-up to alert taxpayers when solicited to engage in certain tax avoidance schemes. Click here for in-depth detail.

1) Potentially Abusive Relationships

The 2022 Dirty Dozen begins with four abusive transactions that involve charitable remainder annuity trusts, Maltese individual retirement arrangements, foreign captive insurance, and monetized installment sales.

Use of Charitable Remainder Annuity Trust (CRAT) to Eliminate Taxable Gain.
Maltese (or Other Foreign) Pension Arrangements Misusing Treaty.
Puerto Rican and Other Foreign Captive Insurance.
Monetized Installment Sales.

2) Pandemic-related Scams

Taxpayers are still at risk from criminals who continue to use the COVID-19 pandemic to steal people’s money. Taxpayers should be alert to potential fake emails, phone calls or texts seeking your personal information. Note: The IRS will never initiate contact with taxpayers via email about a tax bill or refund.

Likely alerts to scams:

Tax refund frauds;
Unemployment fraud resulting in inaccurate filing of 1099-G forms
Fake employment offers
Fake charities seeking contributions.

3) Offer In-compromise “Mills”

Offer in Compromise or OIC “mills,” typically appear in local advertising heralding how they can settle a person’s tax debt for a fraction of what’s owed … for a fee of course. Often, the reality is that taxpayers could have worked directly with the IRS at no additional cost.

4) Suspicious Communications

Suspicious communications are crafted to trick or scare the recipient to respond before thinking … referred to as “phishing”. Phishing is the fraudulent practice of sending communications purporting to be from reputable companies to induce individuals to reveal sensitive personal financial information, money, passwords, Social Security numbers and more. The fraudsters’ intent is to use this information to file false tax returns and tap into financial accounts, among other schemes.

Four common phishing communication vehicles are:

emails
social media posts
phone calls
text messages

5) Spear Phishing Attacks

Spear phishing frauds are known to target specific individuals as well as distinct groups. As described in 4) above, the bad guys’ intent is to steal taxpayer data and identities to file fraudulent tax returns for refunds. Virtually any type of business or organization may be subject to a tailored spear phishing attack. Again, be highly skeptical of communications requesting your financial or personal information.

Take a look at this report of a recent spear phishing email sent to tax preparers. The IRS logo was prominently displayed along with a variety of subject lines such as “Action Required: Your account has now been put on hold”. The objective of the communication was to steal tax professionals’ software preparation credentials. Unwary recipients who clicked on a link were sent to a website requesting the tax preparer’s account credentials thus revealing sensitive client information.

If any of the foregoing seems unclear as to how it applies to your specific circumstances, please keep in mind that Pearson & Co. will help.
Give us a call or drop an email. We’ll respond immediately.

20 Jul 2022

IRS, News, Tax Credits, Tax Form Guidance, Tax Law, Uncategorized Pearson & Co, PC 0 comment

2 ENHANCED TAX BREAKS APPLY FOR REST OF THIS YEAR

Meal Deductions Extended & Mileage Rates Increased

The Internal Revenue Service has announced two tax savings benefits … the extension of the 100% deduction for the cost of business-related food and beverages purchased from a restaurant plus an increase in the allowable mileage rate deduction. Learn more below.

Enhanced Business Meal Deduction – Here’s What Businesses Need to Know

Beginning in 2021, businesses are permitted to deduct the full cost of business-related food and beverages purchased from a restaurant. That enhanced deduction is continued for tax year 2022 … a sizable increase in tax savings from the usual limit – 50% of the cost of qualifying meals.

Here are the qualification requirements to benefit from the enhanced deduction:

The business owner or an employee of the business must be present when food or beverages are
Meals must be from restaurants, which includes businesses that prepare and sell food or beverages to retail customers for immediate on-premises or off-premises consumption.
The cost of the meal can include taxes and tips.
The cost of transportation to and from the meal isn’t part of the cost of a business meal.
Payment or billing for the food and beverages occurs after December 31, 2020, and before January 1, 2023
The expense cannot be lavish or extravagant. An expense isn’t considered lavish or extravagant if it is reasonable based on the facts and circumstances. Meal expenses won’t be disallowed merely because they are more than a fixed dollar amount or because the meals take place at deluxe restaurants, hotels, or resorts.

Note: Grocery stores, convenience stores and other businesses that mostly sell pre-packaged goods not for immediate consumption, do not qualify as restaurants. The same holds true for employer-operated eating facilities, even if they operate under contract by a third party.

Business owners may be able to deduct the costs of meals and beverages provided during an entertainment event if either of these apply:

the purchase of the food and beverages occurs separately from the entertainment
the cost of the food and beverages is separate from the cost of the entertainment on one or more bills, invoices, or receipts.

Mileage Rate Increased

Effective July 1, the standard mileage rate for the final 6 months of 2022 has been increased by 4 cents per mile to 62.5 cents per mile. Likewise, the new rate for deductible medical or moving expenses (available for active-duty members of the military) is increased by 4 cents to 22 cents for the remainder of this year.

“The IRS is adjusting the standard mileage rates to better reflect the recent increase in fuel prices,” said IRS Commissioner Chuck Rettig. “We are aware a number of unusual factors have come into play involving fuel costs, and we are taking this special step to help taxpayers, businesses and others who use this rate.”

Additionally, other items comprise the calculation of mileage rates as well … such as depreciation, insurance and various fixed and variable costs.

Midyear increases in the optional mileage rates are rare. The last time the IRS made such an increase was in 2011.

Note: For travel from January 1 through June 30, 2022,
taxpayers should use the rates set forth in Notice 2022-03 PDF.

See the chart below for a quick reference to the increases described above.

For more on how these tax breaks apply to your specific circumstances,
be sure to give Pearson & Co a call or drop an email. We’ll respond immediately.

20 Jun 2022

Employment, IRS, News, Tax Credits, Tax Law, Uncategorized Pearson & Co, PC 0 comment

SMALL BUSINESS OWNERS AND HIRING MANAGERS

Tax Relief to Attract & Retain Qualified Workers

Work Opportunity Tax Credit

Attracting and retaining quality workers has never been more challenging. You may identify with the most recent statistics of the labor struggle faced by “Main Street” employers:

Fifty-two percent of small business owners who responded to a survey, report that it was harder to find qualified people to hire in Q1 2022 … a 50% jump from Q4 2021
Twenty-nine percent of small business owners said they have open positions vacant for at least three months, with no success in attracting workers.
Likewise 77% of small businesses with more than 50 employees anticipate turnover to likely be a significant problem by year-end.

OK. Enough of the recruiting and retention crisis facts. This article is not to rehash the obvious. Our intent is to offer a potential solution to attract and retain qualified workers … many of whom are demanding increases in compensation to consider accepting a position or remaining employed.

The Work Opportunity Tax Credit (WOTC)

WOTC Defined: The work opportunity tax credit (WOTC) is a federal business tax credit designed to increase employment opportunities for American job seekers who consistently experience barriers to employment. Said workers are deemed “targeted groups” such as veterans, public assistance recipients, or ex-felons.
(More detail in a bit.)

The Consolidated Appropriation Act, 2021 authorized the extension of the Work Opportunity Tax Credit (WOTC) until December 31, 2025.

Eligible Businesses: Any business, regardless of size or industry, may be eligible to claim tax credits under the WOTC program. Notably, there’s no limit to the number of individuals employers can hire as part of the program. That means there’s no cap on the amount of credits that they can claim.

The WOTC credit amount can be as much as $9,600 for each qualified new hire. The maximum credit is determined by the employee’s target group equal to a percentage of the eligible employee’s wages. Additionally, the employee must work at least 120 hours for the employer to receive the credit.

WOTC Target Groups: The new employee must belong to one of the following WOTC target groups:

Work Opportunity Tax Credit

Take These 3 Steps to Take Advantage of the WOTC

Click here for more details at the Department of Labor website.

Connect with a qualified job candidate. American Job Centers can help!
State Workforce Agencies (SWAs) are authorized to administer the WOTC certification process. SWAs coordinate with American Job Centers and partnering agencies – such as vocational rehabilitation agencies, city and county social service offices, the Veterans Administration and others – to help employers connect with skilled job seekers who may be members of WOTC targeted groups.
File a WOTC certification request with your state workforce agency.
Employers must apply for and receive a certification verifying that the new hire is a member of a targeted group before they can claim the tax credit. To verify whether a job applicant is a first-time, qualifying member of a targeted group, employers must submit IRS Form 8850, together with ETA Form 9061 or ETA Form 9062, to the state workforce agency in which your business is located within 28 calendar days after the new hire’s start date.
Receive a WOTC certification for eligible new hires and claim the credit after their first year of employment.
If the new hire meets the eligibility requirements for a WOTC targeted group, you will receive a certification (ETA Form 9063) from your state workforce agency. Taxable employers can claim the WOTC as a general business credit against their income taxes. Tax-exempt employers who hire qualified veterans can claim the WOTC against their payroll taxes. Generally, the credit is 40% of qualified wages for individuals who work 400+ hours in their first year of employment. For more information about claiming the credit, see the instructions on the IRS.gov website.

Claiming the Credit & Limitations

Employers claim the tax credit for the year that that the credit was awarded … not the year the employee was hired.
The business must have a tax liability against which to use the credit.
A taxable business may apply the credit against its business income tax liability.
For qualified tax-exempt organizations, the credit is limited to the amount of employer Social Security tax owed on wages paid to all employees for the period the credit is claimed.
Unused credit can be carried back one year and carried forward for 20 years.

If any of the foregoing seems unclear as to how it applies to your specific circumstances, please keep in mind that Pearson & Co. will help. Give us a call or drop an email. We’ll respond immediately!

18 May 2022

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11 MAJOR TAX CHANGES FOR 2022 YOU NEED TO KNOW

Learn How Your Tax Bill May Be Affected

2022 Tax Laws The old saying that the only thing constant is change … and that certainly applies annually to the U.S. tax code. That said, it’s no surprise that 2022 taxes will differ from last tax year. Here’s a rundown on how those revisions may affect your taxes come next filing season.

1. Tax Brackets Increase

Your tax bracket triggers the calculation of your tax bill. Each year, the IRS adjusts these brackets to keep pace with inflation. The objective is to prevent “bracket creep” … where the rate of inflation drives a tax payer into a higher tax bracket.

Note: With higher-than-expected inflation, some taxpayers may pay more in 2022, even with the adjustments referred to above.

The table below shows federal tax brackets for 2022. The “Tax Rate” column refers to your Marginal Tax Rate … how much you would pay on one more dollar of taxable income. For example, if you’re a single filer with $30,000 of taxable income, you would be in the 12% tax bracket. If you had $41,000 of taxable income, however, most of it would still fall within the 12% bracket, but the last few hundred dollars would land in the 22% tax bracket. Your marginal tax rate would be 22%.

Rule of Thumb: About a 3% inflation-adjusted increase over 2021.

2022 Tax Brackets

2. Standard Deduction Increase

You will likely choose the standard deduction which doubled with the passing of the Tax Cuts and Jobs Act to compensate for the loss of personal exemptions. The 2022 standard deductions for all filing statuses are as follows:

Single: $12,950 (up from $12,550 in 2021)

Head of Household: $19,400 (up from $18,800)

Married Filing Jointly: $25,900 (up from $25,100)

Married Filing Separately: $12,950 (up from $12,550.

3. Capital Gains Tax Increase

Capital gains taxes are assessed on profits realized from the sale of an asset. Short-term gains are taxed as ordinary income. Long-term gains are those on assets you’ve held for at least a year. The long-term income thresholds have been increased for 2022 as illustrated in the following table.

Capital Gains Tax Rates

4. Earned Income Tax credit

The earned income tax credit (EIC or EITC) is a refundable tax credit for low and moderate-income workers. The amount depends on income and the number of children. Note: People without kids can qualify. For 2022, the earned income credit range will be $560 to $6,935, depending on income and the number of children … a reduction from the range in 2021.

5. Alternative Minimum Tax (AMT) Increase

The single taxpayer exemption for tax year 2022 increased to $75,900. That maximum exemption begins to phase out when taxpayer income reaches $539,900. The exemption for married couples filing jointly is $118,100 and begins to phase out at $1,079,800.

6. Estate Tax Exemption Limits and Gift Tax Limits Rise

The federal estate tax exemption rises to $12.06 million from $11.7 million in 2022. The gift tax annual exclusion … the amount you can give each person before you use up some of the estate tax exemption (or owe gift taxes) … increases to $16,000 from $15,000.

7. HSA Contribution Limits Increase

Health savings accounts let you save money in a special tax-advantaged account for future medical expenses. In 2022, the amount you can reserve increases to $3,650 for self-only coverage (up from $3,600 in 2021) and $7,300 for taxpayers with family coverage (up from $7,200).

8. Traditional IRA Income Restrictions Rise

Contribution limits for IRAs remain unchanged at $6,000 if you are under 50 years old and $7,000 if you are 50 or older.

There are changes for IRAs in 2022 for taxpayers covered by an employer-sponsored plan. If you’re covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction.

Note: Your modified AGI is the sum of your adjusted gross income (AGI), your tax-exempt interest income, and specific deductions added back. The IRS uses MAGI to establish whether you qualify for certain tax benefits.

Filing Status Chart

9. Increased Income Limits for Contributions to a Roth IRA

Contributions to Roth IRAs are restricted to taxpayers with income that exceeds specific limits.

Single filers: For 2022, your maximum contribution is reduced when your modified adjusted gross income is $129,000 (up from $125,000 in 2021) and eliminated at $144,000 (up from $140,000).

Joint filers: Your maximum contribution is reduced when your modified adjusted gross income is $204,000 (up from $198,000) and eliminated at $214,000 (up from $208,000).

10. Employer-Sponsored Retirement Contribution Limits Increase

The contribution limit for elective deferrals to 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan increases to $20,500 for 2022. The total amount that can be contributed to a plan by you and your employer combined rises to $61,500 from $58,000 in 2021. However, the amount of the catch-up contribution for taxpayers aged 50 and older remains at $6,500.

11. Child Care Tax Credit

The provisions for this credit expired December 31, 2021, and not renewed for tax year 2022.

Have Immediate Questions or Concerns!

Pearson & Co stand ready to help as needed. A phone call or email is all it takes. We’ll respond promptly.

26 Feb 2022

IRS, Tax Credits, Tax Form Guidance Pearson & Co, PC 0 comment

JUST WHEN YOU THOUGHT ‘TIS THE SEASON’ 2021 GREETINGS WERE OVER

‘Tis Tax Season 2022 … So, Time to Get Ready!

Pearson & Co CPAs

In this article, you’ll learn how to best comply with this year’s annual tax filing event with a minimum of frustration and effort. Whether you choose a do-it-yourself (DIY) approach or engage the expert advice of a tax preparation professional, here are 5 critical items to complete your 2021 tax return in a timely manner.

1. Timing is Key

The IRS started accepting 2021 tax returns on January 24, 2022. To revisit a history of last filing season, the IRS had a huge inventory of tax returns waiting to be processed. The pandemic was and is a factor in delays in processing … coupled with the need to manually process more than 10 million electronically filed returns that contained errors. As of December 2021, the IRS remained backlogged with 9.3 million returns.

Lesson: A sense of urgency to file early is desirable to avoid delays in your 2021 return being processed and the potential for a wait on tax refunds you are due. Whether you intend to be a self-preparer in 2022 or not, it’s a good idea to prepare for the tax season sooner rather than later. To better understand your individual situation, consider contacting a tax professional to answer your specific questions.

2. Organize Your Paperwork

Be sure to have all your 2021 tax information in hand before filing. That way you, your tax-preparer and the IRS will avoid processing delays that could stall your receipt of a tax refund.

Here’s a list of common documents you may need to file your taxes:

W-2s from employers
1099s from anyone who paid you miscellaneous, contract, or other relevant funds
Documents showing medical, educational, childcare, or other expenses, especially if you’re itemizing
Statements regarding investments or mortgage interest payments
Receipts for itemized expense deductions.
Deductible charitable donations over $300 for individual filers; $600 for married couples filing jointly.
Advance Child Tax Credit payments
Recovery Rebate Credit (stimulus payment)
Unemployment compensation
Health Insurance Marketplace Statements
State tax refund
Retirement plan contributions and distributions
Health Savings Account contributions

The above is not a complete list of tax filing documents you may need to deal with. Additionally, there are limitations and exclusions on many. Again, engaging a tax professional may save you hours of research and preparation time while better ensuring accuracy in filing your return.

3. Dependent Information

Assemble the names and Social Security numbers of all dependents you claim on your tax return. Note: Only one taxpayer may claim the same child as a dependent in the same tax year. For example, if you’re divorced, work with your ‘ex’ to agree on which parent will claim a child or children for the 2021 tax year.

4. Expedite Your Filing & Tax Refund

The filing deadline to submit 2021 tax returns or an extension to file and pay tax owed is Monday, April 18, 2022, for most taxpayers. Electronic filing and direct deposit are the way to go for the fastest refund. Filing electronically with direct deposit and avoiding a paper tax return is more important than ever this year to avoid refund delays. For optimal tax return processing, do not file on paper – use software, a trusted tax professional or Free File on IRS.gov. For people with an error-free tax return, the IRS anticipates most taxpayers will receive their refund within 21 days of when they file electronically and choose direct deposit.

5. Need More Time?

Clearly, there’s a lot that goes into preparing to file your return. If you are running out of time or have not gathered all the information you will need, you can file an extension for your return. This gives you an additional six-month window for filing your federal tax return … until Monday, October 17, 2022. to file. Note: An extension doesn’t apply to your tax payment. If you wait until later to pay your taxes, you might still owe penalties and interest.

Don’t feel like you can handle the job on your own? Engage a tax professional. You’ll likely save time and frustration … plus accelerate your refund and minimize your tax bite.

Have Immediate Questions or Concerns!

Pearson & Co stand ready to help as needed. A phone call or email is all it takes. We’ll respond promptly.

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