2021 Tax Changes For Personal Filing

Before you know it, tax season will be here, and unless you’re an accountant or working for the IRS, you’re probably not too excited to look at W2s. As it goes, personal taxes will be a little bit different than it has been in previous years. 2022 brings with it new rules and changes that may take you by surprise if you’re not prepared early in the season. What specific new tax changes should you watch out for before you send in your return?

The Expanded Child Tax Credit

Was your family eligible for the expanded child tax credit? The American Rescue Plan boosted the credit to $3,000 for families with children 17 years of age or younger. In addition, an extra $600 was made available for children under 6 years of age to help families struggling during the pandemic.

While millions of Americans received advanced credits, some filers ended up earning more than expected in 2021 and may need to pay some of the credit back. How do you know if you may need to pay back some (if not all) of the credit?

Recipients can also easily check their advanced payments on the IRS website and determine whether they qualified for the payments received.

Health Insurance Premiums

In March 2021, Congress increased health insurance premium subsidies, capping premiums at 8.5 percent of household income, helping millions of Americans save money on their monthly premiums.

Did you get a raise or a new job in 2021, meaning an increase in wages? If so, your subsidies may not have been appropriately reflected throughout the year. What does this mean?

Similar to the child tax credit, 2022 filers may owe money back. Take time now to get an estimate of how much money you may need to set aside come tax season to offset these subsidies.

Required Minimum Distributions

In 2020, the CARES Act waived required minimum distributions, meaning that retirement plan participants, IRA owners (including beneficiaries) did not have to take RMDS from their IRAs.

The waiver has since ended, as did the RMD age, which changed to 72 from 70.5 years of age. If you’re unsure of the rules, deadlines, and requirements, visit the IRS’s site, check by plan, and learn about potential penalties.

Donohoo Can Handle Your Taxes

We realize these changing tax rules are hard to follow and stay on top of year after year. Donohoo Accounting Services is here to help make tax season easy for you while also helping you find every tax deduction you are entitled to.

When it comes time to file your 2021 taxes, you don’t have to do it on your own. We have been filing tax returns for individuals in the Greater Cincinnati area and beyond for more than 20 years, and our team is well versed in tax laws and rules, saving you time and money. Contact us today to schedule your free consultation! For more tips and our latest updates, check us out on Facebook, Twitter or LinkedIn!

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2021 Tax Changes For Businesses

Filing taxes for your small business is likely one of your least favorite things about being your own boss. Tax season might be months away, but now is the time to determine if you will need any extensions. Plus, waiting until the week before the deadline might increase your risk of making a mistake and getting unwanted attention from the IRS!

Work-From-Home Related Deductions

Were you working from home for a majority of 2021 due to the pandemic? If so, you might have loved the quick commute from your bedroom to the home office and being able to spend more time in comfortable clothes.

You may be eligible for a home office deduction, adding extra money to your pocket. A home office deduction is usually reserved for those who are not employed by a company that provides a W2, but if you’re self-employed or an independent contractor, it might be worth looking into, as it could save you hundreds of dollars.

Paycheck Protection Program Loans

In 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act helped small business owners keep their heads above water during shutdowns, layoffs, and COVID surges by offering Paycheck Protection Program (PPP) loans.

These loans were used on business expenses like payroll, mortgages, utilities, rent, but became effectively exhausted in May 2021. Were you one of the business owners who were eligible and received loans in the first part of 2021? If you’re looking into having your loans forgiven, you must submit a loan forgiveness application and have it approved by the Small Business Administration.

Charitable Donation Deductions

2021 has been a hard year for us all as we worked to recover as a nation in the midst of a pandemic. Many non-profits and shelters found themselves in dire need of supplies to help feed and clothe those who were laid off or struggling to make ends meet.

Did your restaurant or food-related business donate to food banks or shelters during 2021 to help feed others in need? If so, you may qualify for an increased deduction limit on your 2021 taxes if you meet certain requirements outlined by the IRS.

Donohoo Can Handle Your Taxes

Donohoo Accounting Services is here to help make tax season easy for your small business by finding every tax deduction you are entitled to, saving you time that can be spent focusing on keeping your business running.

We have been filing tax returns for small businesses in the Greater Cincinnati area and beyond for more than 20 years, and our team is well versed in tax laws and rules, saving you time and money. Contact us today to schedule your free consultation! For more tips and our latest updates, check us out on Facebook, Twitter or LinkedIn!

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Managing Student Loan Debt

The first step to attaining the career of your dreams is going to college. However, more Americans than ever are leaving their universities in a tremendous amount of debt, uncertain as to how they might pay it all back.

If you find yourself in this situation, know that you are not alone. With a little expert advice and savvy financial planning, you will be on your way to managing your student loan debt like a pro.

Step 1: Understand How Much Debt You Actually Have
Many students take out a variety of public and private loans to pay for their college expenses. Because these debts are paid to different creditors, it may be challenging to determine the total amount of your current debt. Contacting each of these creditors to determine the principal amount of the loan, as well as your interest rate, will help you to create a management plan that works best for you.

In some cases, consolidating your debt can be a good financial option. This helps keep things streamlined, and prevents you from missing any payments. However, the interest rates on consolidated loans are usually much higher, so be sure to explore all of your options before committing to consolidation.

Step 2: Make A Plan For Paying It Back
After determining your monthly loan payments, it’s time to integrate your loan payments into your monthly budget. Though it may seem like it makes sense to pay the exact minimum payment on all your loans, there are advantages to paying more per month on your loans with higher interest.

You’re losing the most money over time by not paying these back, so focus on paying them off, first. Additionally, if you have substantial credit card debt, you may want to pay that back before paying any extra on your student loans, as the interest rate is likely to be much higher.

Step 3: Apply For Other Repayment Options If Necessary
If your current monthly income doesn’t allow you to pay the required monthly payments on your student loans, you may be eligible for graduated or extended repayment. These options allow you to pay smaller monthly payments over a longer period of time.

Additionally, if you have federal loans, you can apply for forbearance. This is a process that allows you to stop payment on loans for a specified period of time. However, your loans still build interest during this time that is added to the principal amount you owe, so forbearance is by no means a permanent solution.

Step 4: Consider Public Service Forgiveness
Many public service jobs, like teaching, provide forgiveness for employees after working in the job for a certain number of years (usually three to five). This can be a good option for recent graduates interested in the education or public service field who have debts to pay.

Need help managing your student loan debt? The experts at Donohoo Accounting Services are standing by ready to help. We can help you make sense of your student loan debt, and answer any other financial or tax question you have for yourself or your business. Schedule a free consultation with us today! For more tips and our latest updates, check us out on Facebook, Twitter or LinkedIn!

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Payment Options If You Owe The IRS

Owing money to the IRS is a stressful predicament, but one that many Americans find themselves in each year. Being indebted from years prior can put a strain on your present-day budget, and make it challenging to plan for future purchases. So, if you do owe the IRS money, what are your choices? Thankfully, there are many options for taxpayers out there, each with its own pros, cons and protocol.

Option 1: Pay Your Balance In One Lump Sum
If you are able to, paying your taxes in one lump sum before the annual tax deadline is your best option for avoiding any penalties or interest. For each month your debt remains, you incur compounding 5 percent interest, which will increase to as much as 25 percent after 6 months. This means that if you don’t pay a $3,000 tax bill, you could owe as much as $2,250 in interest, in addition to the balance, after six months.

Option 2: Settle Your Balance In Two Payments
If you can make half of your payment now and half within 45 days of the tax deadline, you can send a partial payment using the Form 1040-V. The IRS will contact you to let you know how much of your balance is left over, and any other fees you owe. Pay your second amount (either by check, direct deposit or credit card) within the 45 days.

If you decide to pay with your credit card, be sure you will be able to fully pay the balance on your card. The outstanding balance may impact your credit and, depending on where you are at with the IRS, your interest payments may be even more coming from your creditors than the IRS.

Option 3: Petition The IRS To Enroll In An Installment Plan
Know you won’t be able to make your payment this year, but anticipate being able to pay it within six years? An installment plan may be the right option for you.

The IRS does not give this option to everybody, so be sure to make your offer sound. Most first-time applicants are accepted, and as long as you fulfill your promise to the IRS, this can be a great option for many taxpayers.

Option 4: Apply For An Offer-In-Compromise
For those who owe more than they will ever be able to pay, the IRS offers an offer-in-compromise option. The IRS will evaluate your unique situation, and determine if you qualify to pay less than what you owe. They will forgive an agreed upon amount, which can be negotiated between you and your tax representative.

Regardless of which route you take, know that you are not alone. Many people find themselves indebted to the IRS, which is why they have created these options for you.

Interested in talking to a tax expert about which option is best for your situation? Donohoo Accounting Services has been preparing tax returns and helping small businesses with their financial needs for more than two decades. For questions or more information, contact Donohoo Accounting Services today for your free consultation. For more tips and our latest updates, check us out on Facebook, Twitter or LinkedIn!

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