City Tax Firm

08/10/2023

06/28/2023

Tax planning doesn’t stop after a taxpayer files a tax return

Just because a taxpayer filed a tax return doesn’t mean they should forget taxes until next year. What a taxpayer does now may affect the tax they owe or the refund they may receive next year.

Here are some simple year-round tax planning pointers for all taxpayers.

Organize tax records. Create a system that keeps all important information together. Taxpayers can use a software program for electronic recordkeeping or store paper documents in clearly labeled folders. They should add tax records to their files as they receive them. Organized records will make tax return preparation easier and may help taxpayers discover overlooked deductions or credits.

Identify filing status. A taxpayer’s filing status is used to determine their filing requirements, standard deduction, eligibility for certain credits and the correct amount of tax they should pay. If more than one filing status applies to a taxpayer, they can get help choosing the best one for their tax situation with Interactive Tax Assistant, What Is My Filing Status. Changes in family life — marriage, divorce, birth and death — may affect a person’s tax situation, including filing status and eligibility for certain tax credits and deductions.

Understand adjusted gross income (AGI). AGI and tax rate are important factors in figuring taxes. AGI is the taxpayer’s income from all sources minus any adjustments and deductions. Generally, the higher a taxpayer’s AGI, the higher their tax rate and the more tax they pay. Tax planning can include making changes during the year that lower a taxpayer’s AGI.

Check withholding. Since federal taxes operate on a pay-as-you-go basis, taxpayers need to pay most of their tax as they earn income. Taxpayers should check that they’re withholding enough from their pay to cover their taxes owed especially if their personal or financial situations change during the year. To check withholding, taxpayers can use the IRS Withholding Estimator. If they want to change their tax withholding, taxpayers should provide their employer with an updated Form W-4. Changing withholding and having more withheld may lower their AGI and affect their tax bill or expected refund.

Make address and name changes. Notify the United States Postal Service, employers and the IRS of any address change. To officially change a mailing address with the IRS, taxpayers must compete Form 8822, Change of Address, and mail it to the correct address for their area. For detailed instructions, see page 2 of the form. Report any name change to the Social Security Administration. Making these changes as soon as possible will help make filing their tax return easier.

Save for retirement. Saving for retirement can also lower a taxpayer’s AGI. Contributing money to a retirement plan at work and to a traditional IRA also reduces taxable income.

06/15/2023

Si una empresa debe dinero al Servicio de Impuestos Internos (IRS) o cualquier otra entidad gubernamental, lo más apropiado es abordar la situación de manera legal y ética. Recomiendo encarecidamente que la empresa busque asesoramiento profesional de un abogado o un contador con experiencia en asuntos fiscales. Estos profesionales podrán brindar orientación específica sobre cómo abordar la deuda y establecer un plan de pago adecuado con el IRS.

Recuerda que es importante cumplir con las obligaciones fiscales y abordar cualquier deuda de manera responsable y transparente.

05/05/2023

WHAT DID YOU DO TURBO TAX???

Consumers in all 50 states who were unfairly charged for tax services will get up to $85 each as part of a $141M settlement.

11/21/2022

Taxpayers should review the 401(k) and IRA limit increases for 2023



The amount individuals can contribute to their 401(k) plans in 2023 will increase to $22,500 -- up from $20,500 for 2022. The income ranges for determining eligibility to make deductible contributions to traditional IRAs, contribute to Roth IRAs, and claim the Saver's Credit will also all increase for 2023.

Taxpayers can read the technical guidance regarding all of the cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2023 in Notice 2022-55 on IRS.gov.

Here are some of the changes for 2023:

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan will increase to $22,500.

The limit on annual contributions to an IRA will increase to $6,500. The IRA catch‑up contribution limit for individuals age 50 and over is not subject to an annual cost‑of‑living adjustment and remains $1,000.

The catch-up contribution limit for employees age 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan will increase to $7,500.

The catch-up contribution limit for employees age 50 and over who participate in SIMPLE plans will increase to $3,500, up from $3,000.

The phase‑out ranges for deducting contributions to a traditional IRA will also increase. Taxpayers should review Notice 2022-55 regarding the details for their situation.

The income phase-out range for people making contributions to a Roth IRA will increase for taxpayers filing as single, head of household and married filing jointly. Again, taxpayers should consult Notice 2022-55 for specifics about their situation.

The income limit for the Saver's Credit for low- and moderate-income workers is $73,000 for married couples filing jointly; $54,750 for heads of household; and $36,500 for singles and married individuals filing separately.

The amount individuals can contribute to their SIMPLE retirement accounts will increase to $15,500.

01/26/2022

Why taxpayers should have their tax refund direct deposited

As the 2022 filing season begins, the IRS encourages taxpayers to file electronically when they are ready and choose direct deposit to get their refund. Direct deposit is the safest and most convenient way to receive a tax refund.

Here are some other benefits of choosing IRS direct deposit:

It’s fast. The fastest way for taxpayers to get their refund is to electronically file and choose direct deposit. Visit IRS.gov for details about IRS Free File, Free File Fillable Forms, free tax return preparation and more. Taxpayers who file a paper return can also choose direct deposit, but it will take longer to process the return and get a refund.
It’s secure. Since refunds are electronically deposited, there's no risk of having a paper check stolen or lost in the mail.
It’s easy. Taxpayers can simply follow the instructions when selecting direct deposit as a refund method and enter their account information as directed. They must enter the correct account and routing numbers when they file.
It provides options. Taxpayers can split a refund into several financial accounts. These include checking, savings, health, education and certain retirement accounts. They should use IRS Form 8888, Allocation of Refund, Including Savings Bond Purchases to deposit a refund in up to three accounts. However, this form cannot be used to designate part of a refund to pay tax preparers.
Taxpayers should deposit refunds into U.S. bank accounts in their own name, their spouse's name or both. They should avoid making a deposit into accounts owned by others. Some banks require both spouses' names on the account to deposit a tax refund from a joint return. Taxpayers should check with their bank for direct deposit rules.

Get banked
Taxpayers who don't have a bank account can visit the FDIC website for information on banks that allow them to open an account online and how to choose the right account. Veterans can use the Veterans Benefits Banking Program for access to financial services at participating banks. Tax preparers may also offer electronic payment options.

Mobile apps may be an option
Some mobile apps and prepaid debit cards allow for direct deposit of tax refunds. They must have routing and account numbers associated with them that can be entered on a tax return. Taxpayers should check with the mobile app provider or financial institution to confirm which numbers to use.

Taxpayers must have their routing and account numbers for direct deposit available when they are ready to file. The IRS can't accept this information after a return is filed.

There is a limit of three direct deposit refunds made into a single financial account or prepaid debit card.

01/19/2022

How small business owners can deduct their home office from their taxes

The home office deduction allows qualified taxpayers to deduct certain home expenses when they file taxes. To claim the home office deduction on their 2021 tax return, taxpayers generally must exclusively and regularly use part of their home or a separate structure on their property as their primary place of business.

Here are some details about this deduction to help taxpayers determine if they can claim it:

Employees are not eligible to claim the home office deduction.

The home office deduction, calculated on Form 8829, is available to both homeowners and renters.

There are certain expenses taxpayers can deduct. These may include mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent.

Taxpayers must meet specific requirements to claim home expenses as a deduction. Even then, the deductible amount of these types of expenses may be limited.

The term "home" for purposes of this deduction:
Includes a house, apartment, condominium, mobile home, boat or similar property.
Also includes structures on the property. These are places like an unattached garage, studio, barn or greenhouse.
Doesn't include any part of the taxpayer's property used exclusively as a hotel, motel, inn or similar business.

Generally, there are two basic requirements for the taxpayer's home to qualify as a deduction:
There generally must be exclusive use of a portion of the home for conducting business on a regular basis. For example, a taxpayer who uses an extra room to run their business can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business.
The home must generally be the taxpayer's principal place of business. A taxpayer can also meet this requirement if administrative or management activities are conducted at the home and there is no other location to perform these duties. Therefore, someone who conducts business outside of their home but also uses their home to conduct business may still qualify for a home office deduction.

Expenses that relate to a separate structure not attached to the home may qualify for a home office deduction. They will qualify only if the structure is used exclusively and regularly for business.

Taxpayers who qualify may choose one of two methods to calculate their home office expense deduction:
The simplified option has a rate of $5 a square foot for business use of the home. The maximum size for this option is 300 square feet. The maximum deduction under this method is $1,500.
When using the regular method, deductions for a home office are based on the percentage of the home devoted to business use. Taxpayers who use a whole room or part of a room for conducting their business need to figure out the percentage of the home used for business activities to deduct indirect expenses. Direct expenses are deducted in full.

01/17/2022

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12/16/2020

Find out the procedures for renewing an Individual Taxpayer Identification Number (ITIN). You can also go to https://www.irs.gov/itin :0:00 Intr...

11/04/2020

The IRS on Monday announced a new program, the Taxpayer Relief Initiative, to help taxpayers who are unable to pay their taxes because of the pandemic (IR-2020-248). Taxpayers who owe taxes and could not pay have always had options such as installment agreements and offers in compromise, but now they have more options.

The highlights of the Taxpayer Relief Initiative, according to the IRS:

Taxpayers who qualify for a short-term payment plan option may now have up to 180 days to resolve their tax liabilities instead of the usual 120 days.
The IRS says it will offer more flexibility for taxpayers who are temporarily unable to meet the payment terms of an accepted offer in compromise.
The IRS will automatically add certain new tax balances to existing installment agreements for individuals and for business taxpayers who have gone out of business. This will occur instead of having taxpayers default on their agreements.
Certain qualified individual taxpayers who owe less than $250,000 may set up installment agreements without providing a financial statement or substantiation if their monthly payment proposal is sufficient.
Some individual taxpayers who owe only 2019 taxes and owe less than $250,000 may qualify to set up an installment agreement without having a Notice of Federal Tax Lien filed by the IRS.
Qualified taxpayers with existing direct debit installment agreements may now be able to use the online payment agreement system to propose lower monthly payment amounts and change their payment due dates.
Taxpayers who cannot pay can contact the IRS to request a temporary halt in collection efforts, which the IRS will grant if the taxpayer is currently unable to pay.
Reasonable cause and first-time abatement
The IRS initiative is also highlighting reasonable-cause relief from penalties for taxpayers with failure-to-file, failure-to-pay, and failure-to-deposit penalties. First-time abatement penalty relief is also available to taxpayers the first time they are subject to the penalty.