Uncategorized

This Is When You Can Expect your 2020 Tax Refund

t is the holiday season, and many already have started preparing for the coming tax season. One of the most common questions taxpayers have is when exactly will they receive their 2020 tax refund. First, we need to remember that there are several aspects that will have an effect on when we receive our refund.

Also, it is important to keep in mind that the tax reform law that took effect in 2018 can also have an impact on this date.  Lastly, if we are applying for the Earned Income Tax Credit (EITC) or the Child Tax Credit (CTC), we might see a slight delay on our 2020 tax refund.

As we mentioned above, there are several factors that can come into play when determining the date on which we will receive our tax refund. To begin with, the date on which we file our taxes will play an important role. Also, whether or not we are claiming certain credits can make the process last a bit longer.

Another reason that will determine our refund date is whether we file our tax electronically or by mail. Lastly, if we have existing debts to the federal government can also affect the date on which we receive our refund.

This is because the IRS will take more time to finish the process, depending on how many of the scenarios above apply to us. If we filed credits, they will make sure we are eligible to receive them. Sending our tax return by mail may sound like a safer idea, but the IRS will take longer to receive it and process it. And if we have existing debts, the IRS will try to determine the best way for us to settle such debt.

Another aspect we should keep in mind is that, during recent years, the start of the tax season has been delayed from January to early February. This is in part a result of significant changes and updates in different tax laws and regulations.

In addition, the IRS also delays the processing of our income tax returns when we file for the Earned Income Tax Credit or the Child Tax Credit. Both the EITC and CTC have often been misused and abused, so the IRS takes longer processing them in order to prove their validity.

Now, the most important factor that will help us know when we can expect our 2020 tax refund is the date on which we submit our tax returns. You can find a chart below with IRS Acceptance dates and expected refund dates. If the IRS accepts your tax return between the dates on the left, you can expect them to send a Direct Deposit or to send a check on the corresponding dates listed on the right.

1/20/20- 1/24/20                             Friday 1/31/20

1/27/20- 1/31/ 20                            Friday 2/7/20

2/3/20- 2/7/20                                  Friday 2/14/20

2/10/20- 2/14/20                              Friday 2/21/20

2/17/20- 2/21/20                              Friday 2/28/20

2/24/20- 2/28/20                              Friday 3/6/20

3/2/20- 3/6/20                                  Friday 3/20/20

3/9/20- 3/13/20                                Friday 3/27/20

3/16/20- 3/20/20                              Friday 4/3/20

3/23/20- 3/27/20                              Friday 4/10/20

3/29/20- 4/3/20                                Friday 4/17/20

4/6/20- 4/10/20                                Friday 4/24/20

4/13/20- 4/12/20                              Friday 5/1/20

4/20/20- 4/24/20                              Friday 5/8/20

4/27/20- 5/1/20                                Friday 5/15/20

5/4/20- 5/8/20                                  Friday 5/22/20

5/11/20- 5/15/20                              Friday 5/29/20

5/18/20- 5/22/20                              Friday 6/5/20

5/25/20- 5/29/20                              Friday 6/12/20

6/1/20- 6/5/20                                  Friday 6/19/20

 

This Tax Season, Watch Out for Gift Card Fraudsters

Every tax season, fraudsters and scammers work their way into taking advantage of unsuspecting taxpayers who are worried about staying compliant with the IRS. That’s why the Internal Revenue Service is always sharing safety tips and information that we can use to protect ourselves from scams.

Nonetheless, fraudsters keep finding ways to trick us into paying fake tax bills, so we need to make sure we remain alert to any suspicious phone call, letter, or email we might receive.

The most recent tax fraud consists of fraudsters and scammers contacting taxpayers and pretending to be IRS agents. Imposters call demanding gift cards as payment for fake tax bills, tricking taxpayers into buying gift cards from different stores and giving sharing the cards’ access numbers.

This type of tax scam has become so popular, that the IRS is taking measures to prevent more people from falling victims to this modus operandi.

The IRS is also warning taxpayers about a different version of the scam that gift card fraudsters are using. This consists of imposters calling taxpayers and telling them they are being victims of identity fraud theft.

In order to convince their victims, fraudsters tell them that the stolen identity is being used to open fake, suspicious bank accounts. As a result, victims feel a sense of urgency and worry about any potential damage to their data, which is why they end up buying gift cards that fraudsters eventually use.

One of the most effective ways to know if we are being targeted by a fraudster is because they will be demanding immediate payment and specify the method of such payment. Needless to say, the payment method of choice this season seems to be through stores’ gift cards.

Another way to identify potential scams is by getting information about how exactly IRS agents contact taxpayers. If the callers are threatening to send local police, immigration officers, or any other law-enforcement to our location, we are surely dealing with a fraudster. The IRS cannot have us arrested for having unpaid tax bills, neither can they claim they will revoke our driver’s license, business license, or our immigration status.

Even when this and other types of scams are more frequent during the end of the year and tax season, the IRS urges taxpayers to stay alert throughout the year. They also urge taxpayers who might think a fraudster has targeted them to report such calls by phone, to 800-366-4484, or by contacting the Treasury Inspector General for Tax Administration. You can also alert the Federal Trade Commission through their online complaint assistant, adding “IRS Telephone Scam” in the notes.

How Not to Hire a Business Tax Advisor for Our Company

One of the most important responsibilities no business owner can ignore is complying with the corresponding tax duties we are required. In order to make sure our company remains compliant with IRS laws and regulations, we need to hire a business tax advisor that helps us with these duties. However, many business owners tend to make the mistake of either hiring the cheapest advisor they find or hiring one only during tax season. These are some of the most common mistakes we can make when we hire a business tax advisor for our company, and unfortunately, not the only ones.

Don’t Hire the Cheapest Option You Find

They say that we get what we pay for, and when we look to hire a business tax advisor, this is very close to reality. Hiring the cheapest option we can find might seem quite appealing, especially when we have a tight budget. This doesn’t mean that a “good” tax advisor will necessarily be the best one, either. However, choosing a tax preparer solely based on the price can be a poor decision for our company. Instead, we should look for credentials, qualifications, experience, and of course, the reputation of a tax advisor.

Don’t Hire an Advisor Only for Tax Season

A very common mistake we see business owners make repeatedly is that they hire a business tax advisor only for tax season. In the case of many corporations, this means hiring a temporary advisor three or four times a year, and only for periods shorter than a week. Nevertheless, we should make sure we find a long-term advisor, as they will become a valuable asset to our company. Their experience with our company and their guidance throughout the year will help us make smarter tax-related decisions all year round.

Don’t Hire Someone Who Lacks Credentials

We cannot stress this enough, but it is important to pay attention to the word “professional” when we are looking to hire a business tax advisor for our company. Nowadays, this word has pretty much become meaningless, as anybody can call themselves professionals of their field. This means that we have to find someone with the proper credentials, with the right qualifications, knowledge, and expertise in the field. Besides, finding positive reviews and recommendations from our business partners can also be included in what we are looking for.

Don’t Hire an Advisor Who Ignores the Big Picture

As we mentioned above, hiring a business tax advisor for our company can become a very valuable asset. Therefore, we should look for a professional who is willing to collaborate with us in the long run. This includes looking at the big picture, developing strategies that will give us both short-term and long-term results. If our current advisor only works on fixing immediate problems but doesn’t provide long-lasting solutions, we might want to look for someone else.

These Are the Tax Brackets that Will Apply for 2020

This year is coming to an end, and taking advantage of the time we have before tax season begins is one of the smartest decisions we can take. One of the most common questions we get is regarding the tax brackets, since many taxpayers may be confused about which one applies to them. Now, understanding the tax brackets set by the IRS can be a bit tricky, especially if we are filing our income tax report on our own. That’s why we decided to share with you the tax brackets that will apply for 2020. This way, you will be able to find which one you’re at, and what part of your income qualifies to a given tax rate depending on your filing status.

Tax Brackets for Filing Single

 

Bracket Tax Amount plus Percentage Amount Over
$0 to $9,875 $0 plus 10% $0
$9,875 to $40,125 $987.50 plus 12% $9,875
$40,125 to $85,525 $4,617.50 plus 22% $40,125
$85,525 to $163,300 $14,605.50 plus 24% $85,525
$207,350 to $518,400 $47,367.50 plus 35% $207,350
Above $518,400 $156,235 plus 37% $518,400

 

Tax Brackets for Filing as Head of Household

 

Bracket Tax Amount plus Percentage Amount Over
$0 to $14,100 $0 plus 10% $0
$14,100 to $53,700 $1,410 plus 12% $14,100
$53,700 to $85,500 $6,162 plus 22% $53,700
$85,500 to $163,300 $13,158 plus 24% $85,500
$163,300 to $207,350 $31,830 plus 32% $163,300
$207,350 to $518,400 $45,926 plus 35% $207,350
Above $518,400 $154,793.50 plus 37% $518,400

 

Tax Brackets for Married Filing Jointly

 

Bracket Tax Amount plus Percentage Amount Over
$0 to $19,750 $0 plus 10% $0
$19,750 to $80,250 $1,975 plus 12% $19,750
$80,250 to $171,050 $9,235 plus 22% $80,250
$171,050 to $326,600 $29,211 plus 24% $171,050
$326,600 to $414,700 $66,543 plus 32% $326,600
$414,700 to $622,050 $94,735 plus 35% $414,700
Above $622,050 $167,307.50 plus 37% $622,050

 

Tax Brackets for Married Filing Separately

 

Bracket Tax Amount plus Percentage Amount Over
$0 to $9,875 $0 plus 10% $0
$9,875 to $40,125 $987.50 plus 12% $9,875
$40,125 to $85,525 $4,617.50 plus 22% $40,125
$85,525 to $163,300 $14,605.50 plus 24% $85,525
$163,300 to $207,350 $33,271.50 plus 32% $163,300
$207,350 to $311,025 $47,367.50 plus 35% $207,350
Above $311,025 $83,653.75 plus 37% $311,025

 

What You Need to Know About Claiming Tips on Your Tax Return

For many workers, tips are an important part of their income, as many companies and businesses rely on them in order to cover the wages for their staff. If we count on tips as part of our income, we need to report them to the IRS, as we need to cover our corresponding taxes for Social Security and Medicare based on tip income we receive. In order to help you take care of this process, we have put together a short list of steps and tips you need to follow when claiming tips on your tax return. These include keeping a monthly record, documenting shared tips, checking for tax withholding balances, and filing a form for unreported income.

Keep a Monthly Record on Your Tip Income

One of the most important aspects you need to keep in mind when claiming tips on your tax return is that the IRS requires you to report your total tip earnings to your employer on the 10th of every month. Most employers have a specific process to follow for reporting tip income, but if yours doesn’t, you can do it by filing Form 4070. This way, your employer will be able to cover income withholding from your tip income. Remember that if you fail to report this income, you can be subject to a penalty equal to 50% of the Social Security and Medicare taxes you are not paying.

Document How Much Tip You Share with Other Employees

In many places, it is common for employees to share or pool tips with other employees, and we must remember to document this when claiming tips on your tax return. This is because it can help you reduce the amount of tip income you need to report. Since every company might work with different processes of tipping structures, we need to keep a very detailed record of how much we got and how much we shared. For example, if we received a total of $200 in tips, but need to share $50 with another staff member, we should only report $150 as tip income.

Check Your Tax Withholding on Your W-2 Form

When it comes to claiming tips on your tax return, we must pay a lot of attention to tax withholding. In most cases, your employer will be in charge of taking your tax withholding share and reporting it to the IRS. However, you might not have earned enough in tips and wages to cover your withholding. If this were the case, you will be able to find the balance you owe in your W-2 Form. If it shows a significant balance, you might be subject to several tax penalties after submitting your returns.

Include Unreported Tip Income on Form 4137

If there were some months on which we didn’t receive more than $20 in tips, or if we received non-cash tips, we need to fill out Form 4137. This form will allow us to include any unreported tip income and wages we didn’t have the chance to report during the year. Also, the form comes with instructions that will help you calculate the amount of Social Security and Medicare tax you must cover on your unreported tip income reports.

This Is How You Can Deduct your International Business Expenses

As business owners, traveling outside our city to meet with existing and potential clients is an important part of our company’s success, as it allows us to expand the reach of our brand and build strong relationships with our partners. However, this can represent a significant portion of our budget, as we need to cover several travel expenses, such as transportation, meals, and accommodations. Luckily for us, there are many business-related expenses we can deduct from these trips, and these apply for both domestic and international expenses. This is how you can deduct your international business expenses and the limitations you might need to know.

Eligibility Rules for Business Travel Expenses

The very first thing we need to know regarding deducting our business travel expenses is that the IRS divides these into two different categories, having ordinary and necessary business expenses incurred for travel away from home. According to the IRS, ordinary expenses correspond to those that are common and accepted in your trade or business, and necessary expenses are those considered helpful and appropriate for your work. When it comes to international travel, the expenses incurred away from home during trips that are longer than an ordinary day’s work and that require us to rest or sleep are eligible.

Business Travel Expenses We Can Usually Deduct

If this is the first year we will be deducting business travel expenses, we should become familiar with the types of expenses that tend to be eligible for deductions. The most common types of expenses include transportation expenses, whether we go by plane, train, or automobile; shipping and baggage of any props or materials we need for work purposes; and accommodations if our trip is overnight and we need to stay in a hotel while away from home. We can also deduct half the costs of our meals as long as they are not lavish or extravagant, as well as our communications, dry cleaning, and laundry expenses when away from home on work purposes.

Expenses We Can Deduct from International Business Trips

Deducting international business expenses can get a bit trickier, as the IRS sets expenses into two different categories you must meet in order to be eligible for these deductions. These categories of expenses are from trips that were entirely for business or considered entirely for business. Expenses for international travel entirely for business can be deducted if you spent virtually all waking hours of your trip on business activities. On the other hand, an international trip is considered entirely for business can still qualify for expenses deductions if you didn’t have substantial control in arranging the trip if you spent no more than a week outside of the US, and if you spent at least 76% of your time on business-related activities.

What Limits the Deductions for International Business Expenses

Once you have figured out which of your expenses qualify for international business expenses and which ones do not, you still need to consider the limits of these deductions. If you don’t meet one or more of these conditions, and if your business trip was not entirely work-related, you don’t have to worry. You can still deduct a portion of these expenses, as long as you determine the percentage of business days from your trip. This way, the IRS will have a more accurate and acceptable idea of just how many days you spent on work-related activities, being able to grant the deductions for the expenses on those days only.

If You Are a Real Estate Investor, Keep These Tax Tips in Mind

Dealing with taxes as an independent business owner can get tricky when we don’t have all the information and guidance we need. This can get even more confusing when we have just started to invest in real estate property. However, there are several tax tips we should keep in mind in order to make the most out of our investments, especially when it comes to property taxes and other taxes involved. That’s why we decided to share some useful tax tips that any real estate investor can follow to make tax season easier for them.

Take Advantage of Business Deductions

Something that every real estate investor needs to remember is that they qualify as a business, so they are entitled to submit business expense deductions just like any other company can. This means that, by the end of the year, you can write off several of your expenses, as long as they are related to running your investments and your properties. Some of these expenses include mileage from driving to and from properties, home office expenses like rent and electricity, mortgage interests and premiums, professional services, and depreciation of your property.

Don’t Sell your Property Before the First Year

One mistake we might be likely to make when we begin to invest in real estate is selling a property before the first year of ownership. When we have owned a property for less than 365 days and then we sell it, we will be subject to a short-term capital gains tax. Instead, we should hold properties for more than a year, so that, when we sell them, the profit ends up being subject to a long-term capital gains tax.

Learn About the Power of 1031 Exchanges

Another quite useful strategy any real estate investor must learn about is 1031 exchanges, also known as like-kind exchanges. This allows us to defer the taxes generated by selling a property when we use it to buy another property. As a result, we are able to buy/sell properties in order to increase our portfolio without having to worry about paying taxes on each sale. However, 1031 exchanges might be tricky at times, so it is important that we do extensive research or consult with a professional tax advisor before we choose to take advantage of them.

Opt for Tax-Free Refinances

Refinancing a property tends to be a common scenario any real estate investor will likely face. Even when we might think that refinancing a property means another transaction being subject to taxes, this is actually not the case. Therefore, we are able to pull equity out of a property we own through a cash-out refinance plan without being subject to any taxes for that transaction. Since we are not really making money from this, the IRS won’t consider it as taxable income. This way, real estate investors can take money to invest in new properties without being subject to taxes, and having the opportunity to report loan interests as a business expense, qualifying for a deduction.

4 Useful Tax Tips for Independent Contractors to Keep in Mind

Working as an independent contractor can come with many benefits, such as being able to choose the projects we work on, the clients we network with, and the rates we set for our work. However, all of this comes with many responsibilities, including paying more attention to our income tax return. Whether we decide to do this part of the job ourselves or hire a tax professional to guide us through each part of the process, we must make sure we stay on top of our tax obligations. That’s why we have gathered these four useful tax tips for independent contractors to keep in mind.

Always Remember to Report All Your Income

To begin with our list of tax tips for independent contractors, we must remember that we always should report all of our income, including that from each job and project we got during the year, regardless of the amount of what we got paid. Whenever we work on a job that included a payment of more than $600, we will get a 1099-MISC Form. This should happen with most of our projects. However, if we did a job with a payment of $599.99 or less, we won’t see this form. No matter how tempted we are, we should include this part of our income when we file our tax returns.

Pay Your Estimated Taxes and Include SE Taxes, Too

When we work as independent contractors, we need to remember that we are responsible for paying our income tax on the earnings we made as estimated taxes. Unlike our income tax return, our estimated taxes are due four times a month. The due dates we need to pay attention to are April 15, June 15, September 15, and January 15. Whenever we pay our estimated taxes, we need to add our SE (self-employed) taxes, too. Otherwise, we will be subject to different interests and penalties when we cover our final tax return.

Keep All Your Receipts Stored and Registered

Every taxpayer should be aware of the importance that keeping all your receipts stored and registered represents when filing their income tax return. This is particularly true for independent contractors since much of what qualifies as a business expense can be deductible. In order to get a lower tax bill, storing our receipts is essential. This way, we will be able to list and justify the expenses we made for a particular job, allowing us to request a deduction to the IRS.

Determine Which Schedule You Should File

The last thing we need to check when working as independent contractors is determining which schedule we will use to file our taxes. Many contractors decide to file Schedule C, adding it to their annual Form 1040 tax return. However, filing under Schedule C-EZ might be more convenient for some contractors, especially when:

  • they had business expenses for less than $5,000
  • used the cash method of accounting
  • didn’t have an inventory during the tax year
  • didn’t hired an employee
  • didn’t claim home office business expenses, or
  • didn’t carry over any passive activity losses from a previous year.

LLC or S Corp: Which Should I Choose for My Business?

Whenever we decide to start our own business, one of the first questions we should ask ourselves which business structure we’ll choose, LLC or S Corp? Each will come with different benefits regarding structure, organization, and taxation, depending on which we choose. Every business will differ, and there is no fool-proof method to know which option better suits our situation. Therefore, we must always consult with a professional before making a decision.

One of the first aspects to consider is trying to fully understand what an LLC is, and what an S Corp is. This way, we’ll be able to make a more informed decision, one that will benefit our business. Learning the differences in structure and taxations will make the decision easier to take. Again, we should hire a professional tax advisor to help us make the best choice.

A Limited Liability Company, also known as LLC is a type of business structure that legally separates it from its business owners. This means that the members of your company would receive protection from personal liability. In other words, if members of an LLC were subject to legal action, only their business assets would be on the line, not personal ones.

When it comes to taxes, the IRS doesn’t recognize LLCs for taxes purposes; LLCs are not taxing entities. Therefore, an LLC might be taxed as either a corporation, a partnership, or as part of the owner’s tax return. If we have a partnership or multi-member LLC, the IRS would not tax the business, but each member instead. If we want to file taxes as an S Corp, though, we must request the tax form 2243.

There is the common misconception that the term S Corp refers to “small corporations”. However, the name comes from the Subchapter S of the IRS code. In order for our business to choose this structure, it must meet several IRS requirements. First of all, it must be a domestic corporation, with no foreign owners. It must also have no more than 100 approved members, unlike an LLC, which can have as many members as they consider.

One of the benefits S Corps have is that they include lower taxes, from both income tax and self-employment tax. Also, shareholders of an S Corp report its flow-through of income and losses on their personal taxes. This way, S Corps are able to avoid being subject to double taxation on their corporate incomes. To see the full filing requirements to become an S Corporation, you can go to the IRS website.

Like we mentioned above, every company is different. Choosing between an LLC or S Corp structure will require a thorough analysis. That’s why every business owner or entrepreneur should consider getting the assistance of a professional tax advisor. This way, they will be able to balance the pros and cons of each structure, LLC or S Corp, and make a decision that will benefit them the most.

Even when it might sound like a long and daunting process, sitting down with your accountant or advisor is a must. Don’t be afraid to express what your goals and objectives are. Also, think about the total income you are expecting to make. All this will help you make an informed decision, and your company will see the results.

 

These Are the Tax Implications of Employing Family Members

As small businesses keep growing at a steady rate, entrepreneurs and business owners will eventually reach a point on which they have to start employing workers to help make a company successful. It is not uncommon to see that many opt to offer a job to their family members, as they already know the qualifications, skills, and attitudes certain relatives have. This can bring many benefits to a business, as it allows you to spend more time with your loved ones, it strengthens the family economy. Besides, this also comes with different tax implications that you might want to take advantage of.

Whenever we hire an employee, regardless of them being a relative, a friend, or a job applicant, we need to remember that we still need to cover certain employment taxes. These include federal income tax withholding, Social Security taxes, and Medicare taxes. There is one exception, though, which is the federal unemployment tax, also known as FUTA. This tax is used to help fund workforce agencies in every state. The Current FUTA rate is 6%, and it is applied to the first $7,000 we pay our employees in the year. We might be exempt from having to pay this tax on certain family members, which comes as a great advantage for many entrepreneurs and business owners.

Employing a spouse tends to be quite a common scenario for those who are just starting their own business. In this case, their salary is subject to all the taxes mentioned above except FUTA, in the case of a sole proprietorship. However, by being the owner of a sole proprietorship and choosing to employ our spouse, we can have access to an interesting tax-saving strategy. If our employee-spouse chose to purchase a health insurance policy under their name, extending the coverage to their employer-spouse, this can be written off as a fully deductible business expense.

Another situation that we can see happening quite often is when parents offer their kids an employment opportunity. This might happen under different circumstances, and it also comes with certain requirements in order to remain compliant to IRS regulations. If our child is under 18 years old, their wage isn’t subject to FICA and FUTA employment taxes, and if they are under 21, their salary is only subject to FICA. We need to make sure we treat our child as a real employee, compensating them fairly, complying with all legal laws and requirements, and giving them the benefits the rest of our employees receive.

Lastly, offering our parents employment at our business is another common situation among family businesses, small companies, and startups altogether. If we are employing our parents, their salaries are subject to income tax withholding, Social Security, and Medicare taxes only, as FUTA taxes do not apply to their wages. It is very important to remember that FICA taxes also apply to any payment we may make to our parents and that qualifies as a “domestic service”. This is particularly important if we are employing our parents, if we have child or stepchild living with us, if we can’t take care of the child or stepchild for more than four continuous weeks due to a mental or physical condition, and if our child or stepchild is under 18 and requires constant care for at least four continuous weeks because of a mental or physical condition.