60 Second Tax Solution Podcast: Recent Episodes
Phil Liberatore
Welcome to the 60 Second Solution Podcast where you'll discover how to run your business operations and minimize your taxes with tax strategies and arranging business structures. Maximize all exemptions, exclusions, credits, and deductions allowed by law and increase your profits with your host, Phil Liberatore, CPA.
Identity thieves are becoming more creative in hitting people with realistic-looking emails and texts about their tax returns and refunds. These messages claim to be from the IRS.
The IRS will only send snail mail letters. They will never contact you via text, phone, or social media.
Scammers use these tactics to obtain your personal information, money, and more, leading to tax identity theft. This is when your Social Security number is stolen and used to file fraudulent tax returns. They then steal the funds your owed by depositing the tax refunds into their accounts.
There are signs that your tax identity has been stolen. One is if your tax return is rejected upon filing. This is due to your Social Security number being used by the scammers.
Another is if you receive a snail mail letter from the IRS notifying you of changes to your online account. If you receive a W-2 form from a company you haven't worked for more than a year, it means your tax identity has been compromised.
The IRS will always send you a letter to verify your identity when they suspect foul play.
To protect yourself from scammers, never give information over the phone, especially when an unrecognized number calls you and you don't know who is on the other end. It's also advisable to file your tax return early and electronically.
Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/
New investors may forget to consider taxes when dipping their toes into the crypto world. However, the IRS is cracking down on tax compliance. Be aware of how to handle your tax reporting when it comes to your digital assets.
Taxable events from crypto investments require tax reporting. A taxable event means a scenario that triggers or realizes income. When you buy Bitcoin at $1,000 and the value goes up to $1,500 and you sell it, it is a taxable event. Your realized gain is $500.
As stated in the IRS virtual currency guidance, taxable events for digital currency are trading crypto to a currency such as the US dollar, trading one cryptocurrency for another digital currency, spending cryptocurrency to purchase goods or services, and earning cryptocurrency as income.
If you have any questions, contact me at 877-6-SOLVER.
Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/
Are you unsure where to start with your tax planning? Do these simple tips that individuals like you can follow.
You should max out your retirement plan. Remember that withdrawing funds from a retirement account can trigger additional taxes of up to 40% or more. Ensure you have confirmed your withholdings.
Consider purchasing property. Also, take note that Sale of Property can initiate capital gains tax and must be communicated to your tax preparer before selling.
Donate money to charity. Don’t forget to track your out-of-pocket medical and dental expenses. If you’re someone with a child or a dependent, be aware that Child Tax credit reverts to $2,000 per child. Since 2021, dependent care expenses are no longer refundable.
Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/
No one likes the stress involved when your tax return is under the spotlight. There are some ways to avoid common audit triggers.
Make sure to report everything with an informational return. Most likely, you’ll receive either a W-2 or a 1099 form, and the IRS gets a copy of it, too. If your tax return exceeds or doesn’t match your reported income, expect to receive a notice from the IRS.
If you’re self-employed, steer clear from claiming large losses on a Schedule C. For business owners, consider incorporating your business instead of filing a Schedule C.
Avoid using too many round or even numbers. Be careful when taking higher than average deductions for charitable donations. Refrain from claiming 100% use of business vehicles. If you have a foreign bank account, report it. Don’t write off a loss for hobbies.
Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/
Businesses and employees have struggled with the onslaught of COVID-19.
In November 2021, the IRS enacted the Employee Retention Tax Credit (ERC), a refundable tax credit designed to reward business owners for employee retention throughout the pandemic. Business owners impacted by COVID-19 can claim up to $5,000 in refundable tax credits for each employee on their payroll in 2020 and up to $7,000 credit per quarter (excluding Q4) for each employee in 2021.
Consider opening a retirement plan as the employer match is 100% deductible. In California, starting June 30th, all employers with 5 or more employees are mandated to offer a retirement plan.
In 2022, there has been a 100% bonus depreciation on equipment purchased for business use. If you are buying meals and beverages from restaurants for the purpose of your business, these can also be deducted.
Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/
Question: What Interests the IRS?
Be aware of what puts you at risk of attention from the IRS. Here are some of the more vulnerable areas.
Frivolous tax protests have been frustrating to both the IRS and tax courts. If you file a return stating that you don’t owe any tax because the dollar is worthless, expect to be audited. Be wary if you’re someone in a high-income bracket auditing higher-income taxpayers because you’re likely to produce additional tax revenue.
Taxpayers with occupations that produce cash income, such as laundromats, beauty salons, restaurants, vending machines, and others are also on the radar of the IRS. If you have a complex return you prepared yourself, or your return was prepared by someone on the IRS's problem-preparer list, you may get their attention too.
In the last few years, the Internal Revenue Service has detected a proliferation of abusive trust tax evasion schemes and the use of credit cards to evade paying U.S. income taxes. The IRS intends to expand its efforts to crack down on these areas.
Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/
Less than 2% of over 145 million individual tax returns filed will be selected for audit. The IRS may increase this percent as they have hired 2500 new auditors. The percentage increases for higher income groups and tax returns in areas of specific interest to the IRS. If you should receive notice from the IRS of an impending audit, please remember: * IRS computers usually flag the tax returns for audits. The vast majority of them are routine. * Because of the flagging process, your audit will usually focus on one to three categories of your tax return. * Audits do not automatically mean something is wrong. It is possible to receive a “no change” or even an additional refund as an outcome of an audit.
For more information about IRS Representation please visit www.yourirsproblemsolvers.com.
What’s New For Small Businesses in 2021
- Refundable employee retention credit
- PPP loan forgiveness is no longer a taxable event for your small business. The same goes for any second round loans your business receives this year if they qualify.
- 100% meal deductibility. Business meals are typically only deductible at 50%. To help aid restaurants during the pandemic, the new law allows for 100% meal expense deductions for both 2021 and 2022.
- Numerous general business credits extended. New laws extend expiring tax credits for many small businesses. There are too many to mention here, but common extended credits include; work opportunity credit, credit for paid family and medical leave, and employer paying employee student loan payments.
Call us today for a consolation on your business taxes-there is a lot of changes heading your way and you need the Best in the business helping you navigate through these tax situations. 1-877-6-SOLVER
What's New in 2021 For Individuals
Here are some of the changes coming into effect for tax year 2021:
- Tuition and Fees Deduction eliminated. This tax break is now permanently closed.
- Mortgage insurance premium deductibility. You may still deduct mortgage insurance premiums as an itemized deduction.
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Exclude discharge of mortgage indebtedness. With the extension of this law, qualified debt forgiveness on qualified mortgages is still not considered income.
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Above the line charitable deductions. If you do not itemize, you can deduct up to $300 in qualified charitable deductions ($600 for married couples).
Given the ongoing pandemic, expect other tax changes throughout the year.
Social Security and Medicare income limits and tax rates
FICA tax is a combination of a Social Security tax and a Medicare tax. The Social Security tax is assessed on wages up to $142,800 ($137,700 in 2020); the Medicare tax is assessed on all wages.
Self-employed individuals pay a self-employment tax which is the equivalent of FICA tax. For 2021, they will pay a 15.3% self-employment tax on the first $142,800 ($137,700 in 2020) of self-employment income.
The earnings limit for retirees under full retirement age is $18,960 ($18,240 in 2020). Social Security benefits will be reduced $1 for every $2 of earnings above this limit. There is no earnings limit for individuals at full retirement age.
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The Social Security Administration announced a 1.3% percent boost to monthly Social Security and Supplemental Security Income (SSI) benefits for 2021. The increase is based on the rise in the Consumer Price Index over the past 12 months ending in September 2020.
For those still contributing to Social Security through wages, the potential maximum income subject to Social Security tax increases 3.1 percent this year, to $142,800 (up from $137,700 in 2020). A recap of the key amounts is outlined here:
Up to $142,800 in wages will be subject to Social Security taxes, up $5,100 from 2020. This amounts to $8,853.60 ($8,537.40 in 2020) in maximum annual employee Social Security payments. Any excess amounts paid due to having multiple employers can be returned to you via a credit on your tax return.
For all retired workers receiving Social Security retirement benefits the estimated average monthly benefit will be $1,543 per month in 2021 – an average increase of $20 per month.
SSI is the standard payment for people in need. To qualify for this payment you must have little income and few resources ($2,000 if single/$3,000 if married).
A full-time student who is blind or disabled can still receive SSI benefits as long as earned income does not exceed the monthly and annual student exclusion amounts listed above.
One of the New Biden Tax Plans is The American Families Plan. Our goal is to help inform you with the basics. The American Families Plan was introduced by President Biden at the end of April. The action plans address insurance premium costs, basic expenses, and investing in the children of this country.
I covered in a previous segment the Child Tax Credit Payments. As for tax rates, people who are making over $1 million a year would become subject to a tax rate of 39.6% on all of their income. This includes removing the current capital gains tax rate (20%) for those making over $1 million. That income would then be taxed at 39.6%, plus the 3.8% NII surtax, totaling a 43.4% tax rate for capital gains.
Other plans are on public education and an investment of $225 billion would be used to help American families with childcare, paid leave from work, and nutrition programs.
With ever-changing tax laws, forecasting your tax obligation is now extremely difficult to do. This uncertainty can create the need to write a large payment to the IRS. Here are some suggestions to help prevent overpaying your taxes.
- Make estimated tax payments
The objectives of an accurate tax forecast are to avoid IRS penalties and eliminate surprises. To avoid IRS underpayment penalties, your estimated tax payments must be large enough to satisfy these thresholds:
90% of your current year tax liability, or
100% of your prior year tax liability (110% if your adjusted gross income is more than $150,000).
- Maintain your books and records
Don’t wait until December to balance your books. This holds true for both individuals and small businesses. Create periodic income statements and project what the full year will look like.
- Contribute to your retirement accounts
- Invest back in your business by purchasing equipment
Call us today at 877-6-SOLVER -we can run a tax forecast to help you maximize your tax savings.
Get ready for it folks, discussions about federal tax legislation are heating up in Washington D.C. Sweeping estate tax changes have been proposed, including higher estate tax rates, and a repeal of the step-up in basis rule.
Although these changes are a long way from fruition and likely won’t be enacted in their current form, now is a great time to consider estate planning strategies so that you're prepared for possible changes:
Plan for a higher estate tax rate. The top estate tax rate of 40% has remained in effect since 2013, but could be increased in conjunction with other changes. A higher tax could expose more assets to estate tax. Consider reducing the size of your taxable estate through lifetime gifts and other strategies.
Plan for eliminating step-up on basis. For estate tax purposes, the value of inherited assets is stepped up to its fair market value on the date of death. Once the heirs sell inherited assets soon after death, there’s usually little or no income tax liability. If this rule is goes away, heirs may face a much higher capital gains tax.
Call us today 877-6-SOLVER to schedule a in-person or zoom consultation-don’t wait till it’s too late, your family should benefit from the best tax counsel possible.
On July 15th, the IRS began sending out monthly Child Tax Credit
payments to those who qualify. You may have received a letter if
they have determined you qualify for payments. Many people are
still unsure of how it works so, I’ll break it down to you in this video.
Who Qualifies? In order to qualify for the Child Tax Credit
payments, you will have needed to claim the credit previously on a
2019 or 2020 tax return. You MUST have a main home in the US
for more than half the year and have a qualifying child under the
age of 18 at the end of 2021. As well as making less than certain
income limits.
The IRS will use the information provided to them to see if you are
eligible and they will automatically enroll you for advance
payments.
If you are unsure if you qualify, you can use the Eligibility
Assessment tool on irs.gov.
The amount you receive depends on the age of your kids. For
children ages 5 and under, you will receive monthly payments of
$300 – totaling $1,800. For children ages 6 to 17, you will receive
$250 monthly – totaling $1,500. The payments will be disbursed on 15th of every month beginning July through December. Lastly you can choose to opt out and keep the child tax credit for tax time-use the online tool for this.
For more info - use the Eligibility Assessment tool on irs.gov
At this time of recording, Biden has proposed several tax changes. I repeat, these are proposed tax changes. Some of them include: the top individual income tax rate would go from thirty-seven percent to 39.6% percent, that's the pre-2018 income tax rate increase. The federal corporate tax rate from 21% to 28%. Elimination of capital gains tax preferences. It would tax long-term capital gains and qualified dividends at the ordinary income tax rate of 39.6%. For individuals with income above a million dollars, the maximum child and dependent tax credit would rise from three thousand dollars to eight thousand dollars sixteen thousand for more than one dependent.
Once again, I want to remind you that these are only proposals and may change by the time you're watching this.
Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/
If you're paying too much on taxes, we can help you by taking a customized approach in reviewing your overall tax structure to ensure that you're paying the least amount in taxes.
If you have not received your first or second stimulus payments, the credit will be given directly on your 2020 tax return.
If you haven't received your third stimulus payment, log on to irs.gov. Click on the get payment and fill in the information required. It will give you your expected stimulus date if you are qualified.
Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/
Here are three time-tested steps you can take to begin your 2021 tax planning on the right foot:Check your withholdings. Confirm you have the right amount withheld from your paycheck in 2021. Doing this will help you make sure your withholdings will meet minimum tax payment requirements, so you don’t end up paying underpayment penalties or providing interest-free loans to the IRS. It’s imperative to check if you recently had a change in income or you’ve experienced a significant life event, like childbirth or a new home purchase.
You can check your withholding using the IRS Withholding Tool. If you need to change your withholding, complete a new Form W-4 and submit it to your employer as soon as you can.
Prioritize retirement and savings plans. This is low-hanging fruit when it comes to tax savings. Look over your 401(k), individual retirement account (IRA), health savings account (HSA), and other savings accounts to ensure you’re maximizing your tax savings. Establish a regular contribution schedule early in the year, while taking into account the maximum contribution limits (401(k) is $19,500; age 50 years and over can contribute $26,000; IRA is $6,000; age 50 years and over can contribute $7,000). And if you’re working, make sure to take full advantage of your employer’s retirement matching program - it's free money to you.
Find out more about creating an effective tax strategy using these tips and others when you call to set up a tax strategy planning appointment.
As always, should you have any questions or concerns regarding your tax situation, please feel free to call.
Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/
On MARCH 15, IRS and Treasury officials said about 100 million checks would be distributed within 10 days. But some bigger banks said that the timing of the payments was outside of their control. Here are some things to consider:
Deductibility of expenses paid with PPP loans. Businesses that received PPP loans and had them subsequently forgiven will be permitted to deduct the expenses covered by those loans on their federal tax returns. Much to the chagrin of the IRS, the recent bill clarifies that PPP loan forgiveness now means no tax impact due to the forgiveness. For example, if you used $100,000 of payroll in your application to get your loan forgiven, you can still deduct the payroll as an expense on your tax return.
New PPP loan funds. There is additional money available from the Small Business Administration (SBA) for a new round of PPP loans. The new loan program is targeted to businesses that need the funds. To qualify, your business must have 300 or fewer employees and have seen a drop in revenue of 25% or more during any quarter in 2020. Some of the money is earmarked for very small borrowers, underserved communities, and small lenders. There are even simplified requirements for forgiveness if the loan amount being applied for is less than $150,000.
There is much more in this huge bill, including relief for hard-hit industries, education, student loans. Please keep up-to-date as more is learned after a full review of the bill is made available.
As always, should you have any questions or concerns regarding your tax situation please feel free to call.
Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/
Major life changes can be stressful, not least because they often affect your taxes. The following are just some of the many life events that you’ll encounter, along with some tips on how to cut your tax bill or save money.
1. Getting married. Your marital status affects the tax bracket you’re in and doubles your standard deduction to $24,800. If you are married and either you or your spouse is 65 or older, your standard deduction increases by $1,350. If both you and your spouse are 65 or older, your standard deduction increases by $2,700.
2. Birth. With a new birth comes a new dependent on your return. You may now qualify for credits and deductions that can have an immediate benefit on your tax situation. You also have the option of withdrawing $5,000 per parent (or $10,000 total as a couple) without penalty from qualified retirement accounts to help with costs associated with your new bouncing baby. You’ll still owe income taxes on this distribution, but can avoid an early withdrawal penalty.
Please call if you have tax questions about these and other major life events. As always, should you have any questions or concerns regarding your tax situation please feel free to call.
Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/
The American Rescue Plan makes the child credit fully refundable for people who live in the United States for more than one half of the year. Before this change, certain low-income people could only get up to $1,400 per child as a refund, instead of the full $2,000 child credit, if their child credit was more than the taxes they otherwise owed. Under the new rules for 2021, people who qualify for a child tax credit can receive the full credit as a refund, even if they have no tax liability.
Parents don't need to be employed or otherwise have earnings in order to claim the child credit for 2021. Prior rules limited the credit to families having at least $2,500 of earned income. For 2021, families with no earned income can take the child credit if they meet all the other rules.
Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/
Just to be clear, this is a 2021, not a 2020 tax credit. And no, not all families with children will get the higher child tax credit, but most will. The enhanced tax break begins to phase out at AGIs of $75,000 on single returns, $112,500 on head-of-household returns and $150,000 on joint returns. The amount of the credit is reduced by $50 for each $1,000 (or fraction thereof) of AGI over the applicable threshold amount. Note that this phaseout is limited to the $1,000 or $1,600 temporary increased credit for 2021 and not to the $2,000 credit.
For example, if a married couple has one child who is four years old, files a joint return, and has an AGI of $160,000 for 2021, they won't get the full $3,600 enhanced credit. Instead, since their AGI is $10,000 above the phase-out threshold for joint filers ($150,000), their credit is reduced by $500 ($50 x 10) – resulting in a final 2021 credit of $3,100.
Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/
For 2020 tax returns, which are due by May 17th of this year, the child tax credit is worth $2,000 per kid under the age of 17 claimed as a dependent on your return. The child must be related to you and generally live with you for at least six months during the year. He or she must also be a citizen, national or resident alien of the United States and have a Social Security number. You must put the child's name, date of birth and SSN on the return, too.
The credit begins to phase out if your adjusted gross income (AGI) is above $400,000 on a joint return, or over $200,000 on a single or head-of-household return. Once you reach the $400,000 or $200,000 AGI threshold, the credit amount is reduced by $50 for each $1,000 (or fraction thereof) of AGI over the applicable threshold amount.
Up to $1,400 of the child credit is refundable for some lower-income individuals with children. However, you must also have at least $2,500 of earned income to get a refund.
Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/
If you qualify for the 2020 unemployment compensation exemption, you may end up getting additional tax breaks. This is because your adjusted gross income (AGI) will be reduced by up to $10,200 (up to $20,400 for married couples filing a joint return.
That means you could suddenly be allowed to claim other tax breaks with an AGI-based eligibility cut-off, or claim a larger amount for a tax break with an AGI-based phase-out, such as the earned income tax credit, child tax credit, retirement saver's credit, American Opportunity credit, Lifetime Learning credit, or student loan interest deduction.
A reduced AGI could also mean a larger third stimulus check, since the eligibility for and amount of these payments is tied to your 2020 AGI.
Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/
If you have already filed your 2020 tax return, the IRS will automatically adjust for the new $10,200 tax exemption for unemployment benefits received in 2020. Do not amend your return - the IRS expressly stated that you “Should not file an amended return at this time, be patient as it will be adjusted.”
It’s a little easier if you haven’t filed your 2020 tax return, you can claim the new $10,200 tax break for unemployment benefits on your tax return.
Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success. Learn more here: https://www.liberatorecpa.com/