Smart Accounting & Tax Solutions Inc

01/12/2023

IRS Sets Jan. 23 as Start of 2023 Tax Season

The IRS has announced that it will begin accepting individual 2022 returns for processing on Monday, Jan. 23, marking the beginning of the 2023 tax season. The IRS began accepting e-filed business returns using Forms 1120, 1120S, 1065, and 990s, today, Jan 12. E-filing for Forms 990-T and 4720 are still undergoing testing.

Many software providers and tax professionals are already accepting tax returns; they will transmit those returns to the IRS when the agency begins accepting tax returns on Jan. 23.

01/04/2023

Tax Office need help in Sterling starting January
Flexible hours
Training provided
Bouns
Must speak English and Spanish
Background in taxes is a plus

01/03/2023

RS Nixes Lower 1099-K Reporting Threshold

The IRS has announced that the $600 reporting threshold for third-party settlement organizations will not go into effect for the 2023 filing season. As a result, third-party settlement organizations will not be required to report transactions on a Form 1099-K, Payment Card and Third Party Network Transactions, when they exceed the $600 threshold amount enacted as part of the American Rescue Plan Act of 2021.

Before the act’s enactment, Form 1099-K was required when a business had more than 200 transactions or received payments exceeding $20,000 in a year. The IRS said those previous thresholds will apply to forms filed for the 2022 tax year.
The IRS said the postponement of the lower reporting threshold occurred after several organizations, including the NATP, said implementing the reduced threshold should be delayed until new rules are put into place to avoid taxpayer confusion and reduce the administrative burden on the IRS.

The IRS has updated its frequently asked questions (FAQs) fact sheet on the Form 1099-K to reflect the changes.

01/03/2023

WASHINGTON — The Internal Revenue Service today issued the 2023 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2023, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

5 cents per mile driven for business use, up 3 cents from the midyear increase setting the rate for the second half of 2022.
22 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, consistent with the increased midyear rate set for the second half of 2022.
14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2022.

01/01/2023

Smart Accounting and Tax Solutions wish you all a wonderful year full of happiness and success 🎉🎉

09/22/2022

The Internal Revenue Service today reminded struggling individuals and businesses, affected by the COVID-19 pandemic, that they may qualify for late-filing penalty relief if they file their 2019 and 2020 returns by Sept. 30, 2022.

01/11/2022

According to the most recent IRS announcement:
"The Internal Revenue Service announced that the nation's tax season will start on Monday, January 24, 2022, when the tax agency will begin accepting and processing 2021 tax year returns."

"The IRS encourages everyone to have all the information they need in hand to make sure they file a complete and accurate return. Having an accurate tax return can avoid processing delays, refund delays and later IRS notices. This is especially important for people who received advance Child Tax Credit payments or Economic Impact Payments (American Rescue Plan stimulus payments) in 2021; they will need the amounts of these payments when preparing their tax return. The IRS is mailing special letters to recipients, and they can also check amounts received on IRS.gov."

Important Dates:

January 24th - Start of e-File
Second half of February: PATH Act payments - dates to be announced!
April 18th - deadline for 2021 tax returns

01/10/2022

Tax season is about to start. The IRS is already facing a backlog - NewsBreak

Tax season is about to start. The IRS is already facing a backlog - NewsBreak

Tax filing season for 2021 tax returns will begin on Monday, January 24, 2022, the Treasury Department announced Monday. But amid the ongoing pandemic and a lack of resources at the Internal Revenue Service, Treasury officials warn it's going to be a challenge with taxpayers and tax preparers facing...

01/08/2022

Timeline photos

sending letters to recipients of advance payments and third . Using the information in these letters when preparing your tax return can reduce errors, avoid refund delays. https://go.usa.gov/xt3mm

01/03/2022

Tax Office need help in Sterling starting January
Flexible hours
Training provided
Bouns
Must speak English and Spanish
Background in taxes is a plus

01/03/2022

According to the IRS, Advance Child Tax Credit (ACTC), Letter 6419
AND
Economic Impact Payment (EIP), Letter 6475 will be issued soon!
These letters will be critical in helping you prepare an accurate tax return for your clients. An accurate return will help to reduce processing errors and delays. Advise your clients to keep an eye on their mailboxes for the important letter(s) from the IRS and to keep them for tax preparation purposes.
What you need to know about the ACTC Letter 6419:
Helps taxpayers reconcile and receive all entitled CTC payments
The letters will begin to mail in late December and continue into January
The letter includes the total ACTC payments received in 2021 and the number of qualifying children
Use this letter to help you compare the ACTC payments received with the amount that can be properly claimed
Taxpayers can also check the amount of their payments by using the CTC Update Portal available on the IRS website.

What you need to know about EIP Payment #3, Letter 6475:
It only applies to taxpayers that received the third round of EIP
The third round of Economic Impact Payments started in March 2021 and continued through December 2021
Use the letter to help determine if EIP 3 recipients are entitled to or should claim the Recovery Rebate Credit on the tax year 2021 tax returns that will be filed in 2022
Letter mailing will begin in late January

12/25/2021

WASHINGTON — The Internal Revenue Service announced today that it will issue information letters to Advance Child Tax Credit recipients starting in December and to recipients of the third round of the Economic Impact Payments at the end of January. Using this information when preparing a tax return can reduce errors and delays in processing.

The IRS urged people receiving these letters to make sure they hold onto them to assist them in preparing their 2021 federal tax returns in 2022.

Watch for an advance Child Tax Credit letter

To help taxpayers reconcile and receive all of the Child Tax Credits to which they are entitled, the IRS will send Letter 6419, 2021 advance CTC, starting late December 2021 and continuing into January. The letter will include the total amount of advance Child Tax Credit payments taxpayers received in 2021 and the number of qualifying children used to calculate the advance payments. People should keep this and any other IRS letters about advance Child Tax Credit payments with their tax records.

Families who received advance payments will need to file a 2021 tax return and compare the advance Child Tax Credit payments they received in 2021 with the amount of the Child Tax Credit they can properly claim on their 2021 tax return.

The letter contains important information that can make preparing their tax returns easier. People who received the advance CTC payments can also check the amount of their payments by using the CTC Update Portal available on IRS.gov.

Eligible families who did not receive any advance Child Tax Credit payments can claim the full amount of the Child Tax Credit on their 2021 federal tax return, filed in 2022. This includes families who don't normally need to file a tax return.

Economic Impact Payment letter can help with the Recovery Rebate Credit

11/12/2021

Highlights of changes in Revenue Procedure 2021-45:

The tax year 2022 adjustments described below generally apply to tax returns filed in 2023.

The tax items for tax year 2022 of greatest interest to most taxpayers include the following dollar amounts:

The standard deduction for married couples filing jointly for tax year 2022 rises to $25,900 up $800 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,950 for 2022, up $400, and for heads of households, the standard deduction will be $19,400 for tax year 2022, up $600.
The personal exemption for tax year 2022 remains at 0, as it was for 2021, this elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.
Marginal Rates: For tax year 2022, the top tax rate remains 37% for individual single taxpayers with incomes greater than $539,900 ($647,850 for married couples filing jointly).
The other rates are:

35%, for incomes over $215,950 ($431,900 for married couples filing jointly);

32% for incomes over $170,050 ($340,100 for married couples filing jointly);

24% for incomes over $89,075 ($178,150 for married couples filing jointly);

22% for incomes over $41,775 ($83,550 for married couples filing jointly);

12% for incomes over $10,275 ($20,550 for married couples filing jointly).

The lowest rate is 10% for incomes of single individuals with incomes of $10,275 or less ($20,550 for married couples filing jointly).

For 2022, as in 2021, 2020, 2019 and 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act.
The Alternative Minimum Tax exemption amount for tax year 2022 is $75,900 and begins to phase out at $539,900 ($118,100 for married couples filing jointly for whom the exemption begins to phase out at $1,079,800). The 2021 exemption amount was $73,600 and began to phase out at $523,600 ($114,600 for married couples filing jointly for whom the exemption began to phase out at $1,047,200).
The tax year 2022 maximum Earned Income Tax Credit amount is $6,935 for qualifying taxpayers who have three or more qualifying children, up from $6,728 for tax year 2021. The revenue procedure contains a table providing maximum EITC amount for other categories, income thresholds and phase-outs.
For tax year 2022, the monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking increases to $280.
For the taxable years beginning in 2022, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements increases to $2,850. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $570, an increase of $20 from taxable years beginning in 2021.
For tax year 2022, participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,450, up $50 from tax year 2021; but not more than $3,700, an increase of $100 from tax year 2021. For self-only coverage, the maximum out-of-pocket expense amount is $4,950, up $150 from 2021. For tax year 2022, for family coverage, the annual deductible is not less than $4,950, up from $4,800 in 2021; however, the deductible cannot be more than $7,400, up $250 from the limit for tax year 2021. For family coverage, the out-of-pocket expense limit is $9,050 for tax year 2022, an increase of $300 from tax year 2021.
The modified adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit provided in § 25A(d)(2) is not adjusted for inflation for taxable years beginning after December 31, 2020. The Lifetime Learning Credit is phased out for taxpayers with modified adjusted gross income in excess of $80,000 ($160,000 for joint returns).
For tax year 2022, the foreign earned income exclusion is $112,000 up from $108,700 for tax year 2021.
Estates of decedents who die during 2022 have a basic exclusion amount of $12,060,000, up from a total of $11,700,000 for estates of decedents who died in 2021.
The annual exclusion for gifts increases to $16,000 for the calendar year 2022, up from $15,000 for calendar year 2021.
The maximum credit allowed for adoptions for tax year 2022 is the amount of qualified adoption expenses up to $14,890, up from $14,440 for 2021.

11/05/2021

E-File Closes Nov. 20 for 1040s

Taxpayers, including those in disaster areas, who want to file a 2020 tax return electronically have until Nov. 20. To prepare the e-filing system for the upcoming filing season, shutdown for the Form 1040 series begins on Saturday, Nov. 20, 2021, at 11:59 p.m. ET. As a result, any taxpayer needing to file a tax return after Nov. 20 must file on paper. The business return e-filing shutdown typically occurs in late December. That date will be released by the IRS in early December.

11/04/2021

4 ways to withdraw cash from a corporation
Owners of closely held corporations often want or need to withdraw cash from the business. The simplest way, of course, is to distribute the money as a dividend. However, a dividend distribution isn’t tax-efficient because it’s taxable to the owner to the extent of the corporation’s earnings and profits. It also isn’t deductible by the corporation. Here are four alternative strategies to consider:

1. Capital repayments. To the extent that you’ve capitalized the corporation with debt, including amounts that you’ve advanced to the business, the corporation can repay the debt without the repayment being treated as a dividend. Additionally, interest paid on the debt can be deducted by the corporation.

This assumes that the debt has been properly documented with terms that characterize debt and that the corporation doesn’t have an excessively high debt-to-equity ratio. If there isn’t proper documentation or the debt-to-equity ratio is too high, the “debt” repayment may be taxed as a dividend. If you make future cash contributions to the corporation, consider structuring them as debt to facilitate later withdrawals on a tax-advantaged basis.

2. Compensation. Reasonable compensation that you, or family members, receive for services rendered to the corporation is deductible by the business. However, it’s also taxable to the recipient(s). This same rule applies to any compensation (in the form of rent) that you receive from the corporation for the use of the property.

In both cases, the compensation amount must be reasonable in terms of the services rendered or the value of the property provided. If it’s considered excessive, the excess will be a nondeductible corporate distribution (and taxable to the recipient as a dividend).

3. Property sales. You can withdraw cash from the corporation by selling property to it. However, certain sales should be avoided. For example, you shouldn’t sell the property to a more than 50%-owned corporation at a loss, since the loss will be disallowed. And you shouldn’t sell depreciable property to a more than 50%-owned corporation at a gain, since the gain will be treated as ordinary income, rather than capital gain.

A sale should be on terms that are comparable to those in which an unrelated third party would purchase the property. You may need to obtain an independent appraisal to establish the property’s value.

4. Loans. You can withdraw cash tax-free from the corporation by borrowing money from it. However, to prevent having the loan characterized as a corporate distribution, it should be properly documented in a loan agreement or note. It should also be made on terms that are comparable to those in which an unrelated third party would lend money to you, including a provision for interest (at least equal to the applicable federal rate) and principal. Also, consider what the corporation’s receipt of interest income will mean.