It's full speed ahead for tax season now that the IRS is accepting returns. Here are some quick tips to help speed the process and avoid common errors that could delay a refund, if you're due one. Bring all required Social Security (SS) numbers to your tax appointment and check them for accuracy. Make sure names are spelled correctly and match the names on your SS cards. If you expect a direct deposit refund, ensure the bank account number you provide is correct. If filing on paper, remember to sign your return (an unsigned return is invalid).
Ideally, you've been gathering tax records and have already made an appointment with us. Provide us with all W-2s, 1099s and documents about state tax refunds and other payments. You also may have received a Form 1095-A, B or C (Health Insurance statement) from your employer. Unemployment recipients should get a 1099-G (Government Payments). If you receive an incorrect 1099-G, contact your state agency to request a corrected form.
Taxpayers who received interest income (of at least $10) from the IRS will be sent a Form 1099-INT, which must be reported on the 2020 tax return. Many received this income related to last year's delayed filing deadline (to July 15, 2020, related to COVID-19). And finally, taxpayers who claim the standard deductions on their federal tax returns generally can't deduct charitable donations. But thanks to the CARES Act, taxpayers can deduct up to $300 in donations to qualified charities on their 2020 federal returns, even if they claim the standard deduction. Feel free to contact us with questions before your appointment with us to prepare your tax return.
Do you have a child age 17 or older or other dependent? You can't claim the Child Tax Credit for these individuals but you may qualify for the Credit for Other Dependents. The maximum credit is $500 for each dependent who meets certain conditions. For example, the person can be a:
1. Dependent age 17 or older (such as a college student),
2. Parent or other qualifying relative supported by you, or
3. Dependent who lives with you but isn't related.
The credit begins to phase out when modified adjusted gross income is more than $200,000. For married couples filing jointly, the phaseout begins at $400,000. We can discuss your eligibility for the credit when we prepare your taxes.
New plug-in vehicles are now available for a tax break. The IRS has added models to its list of vehicles that are eligible for the plug-in electric motor vehicle tax credit. The tax code provides a credit to buyers of certain electric passenger vehicles and light trucks. The maximum credit allowed for a qualifying vehicle is $7,500. The IRS has added these vehicles: the 2021 Audi e-tron Sportback ($7,500); the 2021 Audi A7 55 TFSI e Quattro ($6,712); the 2021 Audi A8 L 60 TFSI e Quattro ($6,712); the 2021 Audi Q5 55 TFSI e Quattro ($6,712); the Ford 2021 Mustang Mach-Es ($7,500); the Lincoln 2021 Corsair Reserve Grand Touring PHEV ($6,843); and the Mitsubishi 2021 Outlander PHEV ($6,587)
The models added by the IRS to the list of qualifying vehicles also include the 2021 Ford Escape Plug-in Hybrid ($6,843 credit) and these 2021 Porsche models: Taycan 4S EV, Taycan Turbo EV and Taycan Turbo S EV ($7,500 credit for any of these Porsche models). The credit is nonrefundable (meaning you can only get a refund up to the tax you owe). The credit availability begins phasing out after a manufacturer has sold at least 200,000 qualifying vehicles in the United States.
Are you self-employed and a survivor of COVID-19? If so, you may be able to claim a sick and family leave tax credit under the Families First Coronavirus Response Act. The law allows certain self-employed individuals, who due to COVID-19 were unable to work or telework for reasons related to their health, to claim the refundable credit to offset their federal income tax.
The credit also applies to those unable to work or telework due to caring for a child with COVID-19. To claim the credit (up to $5,110) for 2020, the leave must have been taken between April 1, 2020, and December 31, 2020. We'll help determine your eligibility and file a form to claim the credit when we prepare your return.
Corporation loses in court over management fees. The taxpayer operated an asphalt paving business and was denied deductions by the U.S. Tax Court for purported management fee payments to its three shareholders.
The corporate taxpayer didn't show that supposed fees were purely for services. It appeared the payments were disguised distributions when considering factors including: the taxpayer never declared distributions; the fees were in amounts roughly corresponding to shareholders' respective interests; payments were made at end of year rather than throughout year; the taxpayer had relatively little taxable income after deducting fees; and the process for setting fees was unstructured. (Aspro, Inc., TC Memo 2021-8)