Tax Tips
Can I pay my estimated taxes all at once?
Estimated taxes are payments made throughout the year to the government to cover taxes owed on income that is not subject to withholding. Examples of this type of income include self-employment income, rental income, and income from investments. If you expect to owe at least $1,000 in taxes for the year and your withholding and credits will be less than the smaller of 90% of the taxes to be shown on your current year's tax return or 100% of the taxes shown on your prior year's return, you may need to pay estimated taxes. The question of whether or not you can pay your estimated taxes all at once depends on the specific circumstances of your situation. In general, it is recommended that you make estimated tax payments on a quarterly basis to avoid underpayment penalties. However, there are certain situations in which it may be possible to pay your estimated taxes all at once. One situation in which you may be able to pay your estimated taxes all at once is if you have a significant amount of income that is not subject to withholding. For example, if you are self-employed and your income fluctuates greatly from year to year, it may be difficult to estimate your taxes accurately on a quarterly basis. In this case, you may be able to pay your estimated taxes all at once at the end of the year. Another situation in which you may be able to pay your estimated taxes all at once is if you have a significant change in your income or deductions during the year. For example, if you have a large capital gain from the sale of a property, it may be difficult to estimate your taxes accurately on a quarterly basis. In this case, you may be able to pay your estimated taxes all at once at the end of the year. Remember that if you choose to pay your estimated taxes all at once, you will need to make a large payment at the end of the year. This may be difficult for some taxpayers, especially those who have limited resources. Additionally, if you underestimate the taxes, you will still be liable for an underpayment penalty. It's important to remember that, regardless of whether you pay your estimated taxes all at once or on a quarterly basis, it is your responsibility to ensure that your estimated tax payments are accurate and timely. If you are unsure whether or not you are required to pay estimated taxes, or if you have any other questions about them, it is recommended that you consult with a tax professional. In conclusion, while it is generally recommended that you make estimated tax payments on a quarterly basis to avoid underpayment penalties, there are certain situations in which it may be possible to pay your estimated taxes all at once. However, it is important to remember that it is your responsibility to ensure that your estimated tax payments are accurate and timely, regardless of how you choose to pay them. If you are unsure whether or not you are required to pay estimated taxes, or if you have any other questions about them, it is recommended that you consult with a tax professional.
Business Taxes
How to reduce your tax bill through charitable giving and donations?
Charitable giving and donations can be used to reduce your tax bill by taking a tax deduction for the value of the gifts on your income tax return. In order to claim a tax deduction for charitable donations, you must itemize your deductions on your tax return using Schedule A, and the donations must be made to qualified organizations. Additionally, you must keep records of your donations, such as receipts or canceled checks, to prove the value of your gifts to the IRS. Additionally, you can also consider giving appreciated assets, such as stocks, rather than cash since you can deduct the full fair market value of the assets and avoid paying capital gains tax on the appreciation. Make sure the organization you are donating to is a qualified charitable organization. Check with the IRS or consult a tax professional to confirm. Keep records of your donations. This includes receipts, bank statements, or canceled checks. Take advantage of tax deductions for non-cash donations such as clothing, household items, or vehicles. Make sure to get a written receipt from the organization and have the item appraised if it is worth more than $500. Consider making a charitable contribution to a Donor-Advised Fund (DAF), which allows you to make a charitable contribution and get a tax deduction in the current year but then allocate the funds to different charities over time. If you are over 70 1/2 years old, consider making a charitable distribution from your IRA account. This allows you to donate directly from your IRA account, reducing your taxable income and satisfying your required minimum distribution. Keep in mind that charitable giving and donations can also reduce your estate tax. Consult a tax professional to determine the best strategy for maximizing your charitable giving and donations to reduce your tax bill. Always consult with tax professionals before making any financial decision. At NexGen Taxes, our qualified tax professionals can help understand the tips on how to reduce your tax bill through charitable giving and donations. Get Started Now to connect with a tax pro.
Chartity
What has changed for the 2022 tax?
There are a few changes for the 2022 tax season that individuals and businesses should be aware of: Increase in the standard deduction: The standard deduction for the tax year 2022 has increased for all filing statuses. For example, the standard deduction for single filers will be $12,550, up from $12,200 in 2021. Changes to itemized deductions: The Tax Cuts and Jobs Act (TCJA) made changes to itemized deductions starting in 2018. For the tax year 2022, the State and Local Tax (SALT) deduction is limited to $10,000. Additionally, the mortgage interest deduction limit is reduced to $750,000 for mortgages taken out after December 15, 2017. Increased child tax credit: The child tax credit for the tax year 2022 has increased to $3,000 per child under age 17, up from $2,000 in 2021. Extension of certain COVID-related tax breaks: Some tax breaks that were put in place to help individuals and businesses during the COVID-19 pandemic have been extended for tax year 2022. For example, the employee retention credit and the paid sick and family leave credit have both been extended. Changes to the earned income credit: The earned income credit has been expanded for the tax year 2022, with higher income limits and larger credit amounts for families with three or more children. It is important to note that these changes may be subject to change based on legislative actions. It's always best to consult with a tax professional for the most accurate and up-to-date information.
Non Profit
Help, My Nonprofit’s Tax Exemption Status has been revoked!
It’s easy for a 501(c)(3) organization (nonprofit) to maintain its IRS tax-exempt status and it is just as easy to lose it. The IRS recognizes private foundations, churches, educational institutions, hospitals, and many other types of public charities. 501(c)(3) IRS Tax-Exempt Status Is a Privilege IRS tax exemption status is a privilege, and your nonprofit organization can lose this status anytime if you’re not careful. There are 6 key areas to stay on the IRS’s good side and keep that tax exemption. Private benefit/inurement Lobbying Political campaign activity Unrelated business income (UBIT) Operation in accordance with the stated exempt purpose(s) Annual reporting obligation You can learn more about these six key areas here. If your nonprofit fails to file its annual return (Form 990) for three consecutive years, the IRS will automatically revoke your organization's tax-exempt status. This automatic revocation happens by operation of law – there are no exceptions. Check whether your nonprofit is tax-exempt The IRS maintains a list of all nonprofits that are tax-exempt called, “Select Check,” which is updated regularly by the IRS. Check the list. If your organization is not listed, contributions to it are no longer tax-deductible to the donor(s). What happens when a nonprofit’s tax-exempt status is revoked? Revocation means that your nonprofit is no longer exempt from federal income tax and will have to pay corporate income tax on annual revenue. Learn more. The organization may be subject to back taxes and penalties for failure to pay corporate income taxes if the effective date of revocation was in a prior tax year. A revocation means that any state tax exemptions that your nonprofit received may also be revoked now. Some of these State Tax exemptions are exemptions for income tax, property tax, and sales/use tax. These State tax exemptions are dependent on your IRS Tax Exempt Status Revocation will result in your non-profit organization not being listed in IRS Publication 78, which is the official list of organizations eligible to receive tax-deductible charitable contributions. Donors will not be eligible to receive a tax deduction for their gifts to the organization after the revocation date. Most private foundations are unlikely to give a grant directly to nonprofits that are not tax-exempt because their guidelines normally require grantees to be recognized as tax-exempt public charities. What if automatic revocation happened in error? If you believe that your nonprofit’s tax-exempt status was automatically revoked in error, the IRS encourages you to contact its Customer Account Services (toll-free): (877) 829-5500. Remember, before calling the IRS, be sure to obtain copies of all documentation that you have showing a mistake was made (such as copies of correspondence to or from the IRS demonstrating that an annual return, IRS Form 990 was filed within the last three years). What to do if you believe your organization is listed as revoked in error? Remember that once a charitable nonprofit is no longer tax-exempt, contributions to it are not eligible for a tax deduction. Always be transparent with donors about the tax status of your nonprofit. It is important to be compliant and follow the rules all the time to maintain your tax-exempt status with IRS. Reach out to our team today to get the help you need to maintain this status so that you can focus on supporting the ‘Cause’ that is close to your heart.
Non Profit
Don’t Lose Your Nonprofit’s Tax-Exempt Status!
It’s easy for a 501(c)(3) organization / Nonprofit to maintain its IRS tax-exempt status – and it can be just as easy to lose it. the IRS recognizes private foundations, churches, educational institutions, hospitals, and many other types of public charities. 501(c)(3) IRS Tax-Exempt Status Is a Privilege IRS tax exemption is a privilege, and your 501(c)(3) organization can lose it if you’re not careful. There are 6 key areas to stay on the IRS’s good side and keep that tax exemption. Private benefit Lobbying Unrelated business income (UBIT) Political campaign activity Operation in accordance with the stated exempt purpose Annual reporting obligation 1. Private Benefit / Private Inurement If your 501(c)(3) holds an IRS tax exemption, then its activities have to be directed toward an exempt purpose. It should not serve the private interests, or benefit, of any person or organization more than insubstantially. The concept of inurement states that no part of an organization’s net earnings may inure to the benefit of a private shareholder or individual who, because of the person’s relationship to the organization, has an opportunity to control or influence its activities. Prohibited inurement includes the payment of dividends, the payment of unreasonable compensation to insiders, and the transfer of property to insiders for less than fair market value. By the same token, nonprofits with tax exemptions can’t have their income or assets benefit insiders. This includes people like board members, officers, directors, and important employees of an organization. If an organization benefits them, the insiders AND the organization could be subject to penalty excise taxes, and the nonprofit could lose its tax-exempt status. If a 501(c)(3) organization engages in inurement or substantial private benefit, the organization risks losing its exemption. Additionally, insiders guilty of inurement may be subject to excise tax. 2. Lobbying Lobbying is when an organization contacts, or asks the public to contact, lawmakers to propose, support, or oppose the legislation. It’s also considered lobbying when the organization directly advocates for or against any legislation. 501(c)(3) organizations are allowed to do some lobbying. However, if lobbying activities are substantial an organization risks losing its tax-exempt status. An organization can elect to have its lobbying activities measured by an “expenditure test” to determine whether or not the activities are substantial. This is known as a 501(h) election, so named for the section of the Internal Revenue Code where the rules for the expenditure test are spelled out. By making this election, an organization agrees to not spend more than a certain percentage of its total expenses on lobbying activities. The other way to measure lobbying activity is to determine whether, based on all of the pertinent facts and circumstances, an organization’s lobbying comprises a substantial part of its overall activities. This substantial part test is a more subjective method compared to the more mathematical, objective expenditure test. Organizations must file Form 5768, Election/Revocation of Election by an Eligible Sec. 501(c)(3) Organization to Make Expenditures to Influence Legislation, in advance to be subject to the expenditure test. 3. Political Activity Nonprofits cannot participate in political campaigns for or against any candidate for public office, at the federal, state or local level. All section 501(c)(3) organizations are prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate running for public office. The prohibition applies to all campaigns (federal, state and local level). Political campaign intervention includes any and all activities that favor or oppose one or more candidates for public office. The prohibition extends beyond candidate endorsements. Contributions to political campaign funds or public statements of position (verbal or written) made by or on behalf of an organization in favor of, or in opposition to, any candidate for public office clearly violate the prohibition on political campaign intervention. Section 501(c)(3) organizations may engage in some activities to promote voter registration, encourage voter participation, and provide voter education, but they can’t engage in activities that favor or oppose any candidate for public office. Whether an activity is a political campaign intervention depends on all the facts and circumstances. The political campaign intervention prohibition is not intended to restrict free expression on political matters by leaders of organizations speaking for themselves as individuals. Nor are leaders prohibited from speaking about important issues of public policy. However, for their organizations to remain tax-exempt under section 501(c)(3), leaders cannot make partisan comments in official organization publications or at official functions of the organization. To learn more about political activity and nonprofits, check out Charities, Churches, and Educational Organizations – Political Campaign Intervention. 4. Unrelated Business Income (UBI) Earning too much income from activities that aren’t related to your exempt purpose can endanger your exempt status. This kind of income comes from a business activity that is not substantially related to the organization’s exempt purpose. This can get murky because there are some modifications, exclusions, and exceptions. An organization that produces unrelated business income due to its unrelated trade or business may have to pay taxes on that income. The income-producing activity must meet three conditions before the income is potentially taxable. First, the activity must be a trade or business. Second, the trade or business must be regularly carried on. Third, the business activity is not substantially related to an organization’s exempt purpose. In other words, the activity itself does not contribute to accomplishing the exempt purpose for which the non-profit had been set up, other than through the production of funds. Some of the most common UBI-generating activities include the sale of advertising space in weekly bulletins, magazines, journals, or on the organization’s website; sale of merchandise and publications when those items being sold do not have a substantial relationship to the exempt purpose of the organization; provision of management or other similar services to other organizations; and, even some types of fundraising activities. Generally, organizations that generate unrelated business income should file Form 990-T, Exempt Organization Business Income Tax Return, and pay tax on the income. Any non-profit generating money in activities that do not further its specific exempt purposes should be very careful in continuing to do so. In addition to paying taxes on the income from unrelated activities, if those activities are substantial in relation to the exempt purpose activities, the non-profit may be putting its exempt status in jeopardy. For more information about what is considered UBI and how it’s taxed, see Publication 598, Tax on Unrelated Business Income of Exempt Organizations. 5. Annual Reporting Requirements Public charities are exempt from federal income tax, yes. But, the Internal Revenue Code requires most of these organizations to report information every year by filing Form 990. The 990 verifies that the nonprofit still qualify for tax exemption. It’s a public record, and it helps inform the public about the organization’s programs and operations. In addition, the non-profit may also be liable for unrelated business income tax as discussed above, employment tax, excise taxes, and certain state and local taxes. Public charities generally file either Form 990, Return of Organization Exempt from Income Tax, Form 990- EZ, Short Form Return of Organization Exempt from Income Tax or submit online Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations not Required To File Form 990 or 990-EZ. The type of form or notice required to be filed by the non-profit is determined by its gross receipts and the value of its assets. An organization may file Form 990-EZ if its gross receipts are normally less than $200,000 and if its total assets are less than $500,000 at the end of the year. If the organization’s gross receipts are $200,000 or greater, or if its assets at the end of the tax year are $500,000 or more, the organization generally must file Form 990. If the organization’s annual gross receipts are generally $50,000 or less, the organization may in lieu of Form 990 or 990-EZ submit online new Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations not Required to File Form 990 or 990-EZ. There are some public charities that are not required to file Forms 990 or 990-EZ, including churches and certain church-affiliated organizations. In general, the organizations that do not need to file a Form 990 are: Branches of other nonprofits: Subsidiaries of larger nonprofit organizations may be covered under a general return filed by the parent nonprofit organization. Many government corporations. State organizations that provide essential services. Smaller nonprofit organizations: Those with annual incomes of $25,000 or less do not need to file. Nonprofit organizations not yet in the system: Organizations that have not yet applied for exemption from federal income tax are not required to file a Form 990 as the IRS would not yet have the organization's information. State institutions: Organizations that provide essential services, such as universities, do not need to file a Form 990. Churches and other faith-based organizations. The Pension Protection Act of 2006 provides for the automatic revocation of an organization’s tax-exempt status if it fails to file a required annual information return for three consecutive years. In June 2011, the IRS enforced this provision for the first time by publishing a list of about 275,000 organizations that lost their tax-exempt status for failing to meet their annual filing obligations for three consecutive taxable years. If an organization finds that its exempt status has been automatically revoked due to non-filing and it wants its tax-exempt status reinstated, it will need to reapply and pay the appropriate user fee. Get started today to get the help you need in reinstating the tax-exempt status of your non-profit. You can learn more about filing requirements, including new requirements applicable to supporting organizations, at IRS Nonprofits and Charities. 6. Not Operating Within Your Exempt Purpose Endangers Your 501(c)(3) IRS Tax-Exempt Status This can be really troublesome. A 501(c)(3) with the IRS tax exemption received it because it promised to fulfill a charitable mission or purpose. Day to day it must pursue the exempt activities it promised in its IRS application for exemption. If an organization’s activities go toward something other than its original purposes, it must inform the IRS to prevent future problems. If you’re unsure whether a deviation is significant enough to report, contact a nonprofit attorney. Non-profit organizations must adhere to the guidelines inherent in these six areas. If they continue to do this, they will maintain their tax-exempt status and enjoy its benefits. Questions about 501(c)(3) IRS Tax-Exempt Status? If you have questions about your 501(c)(3) IRS tax-exempt status, schedule your consultation with NexGen Taxes now.
Track My Refund
8 Costly Tax Errors To Avoid While Filing Your Personal Taxes
Filing your taxes as an individual can seem very easy. However, a lot of little details can slip by depending on your due diligence. Here are 8 common tax filing errors committed by people while filing their taxes. 1. Missing/Incorrect Details A lot of missing or incorrect details go unnoticed when people file their tax reforms. People often forget to file entire forms depending on their tax bracket, their assets, and investments. Some of the details inaccurately or entirely left out of tax forms include: Missing or Inaccurate Social Security Numbers: Each SSN on a tax return should appear exactly as printed on the Social Security card. Misspelled Names: A name listed on a tax return should match the name on that person's Social Security card. Missed forms: 1099 forms for Interest and Dividends on the accounts, even the accounts that you didn't actively trade in, needs to be added to your filing 2. Incorrect Filing Status Certain taxpayers choose the wrong filing status for their filing. At times, more than one filing status applies to you. Figuring this out can be challenging as the Tax laws change from time to time. If you are in doubt, reach out to our team of tax experts to help you figure out your tax filing status. 3. Mathematical Errors The most common errors are often mathematical mistakes which can range from addition and subtraction to more complex operations. Taxpayers often double-check their math, but it’s better to have software do it automatically for you. 4. Unsigned Forms Unsigned tax returns are invalid. If you are filing a Join Tax Return with your Spouse, your spouse also needs to sign the joint tax return. Some exceptions do exist, like for members of the armed forces, and those taxpayers who have a valid power of attorney. The best solution is to file returns electronically and use a digital signature. 5. Figuring Credits or Deductions Did you know that one of the most common mistakes tax filers make while filing their taxes is figuring out things like their Earned Income Tax Credit, Child, and Dependent Care Credit, Child Tax Credit, and Recovery Rebate Credit? This can be a pain if you’re owed some deductions and want to collect. More importantly, if you don't use these credits correctly, you will get the dreaded letter from the IRS. Having a streamlined tax filing service for individuals can cut down on such errors. If you are in doubt, reach out to our team of tax experts to help you figure out the tax credits and deductions you are entitled to 6. Using an Expired ITIN (Individual Tax Identification Number) Many tax filers use ITIN instead of SSN to file their taxes. However, some of the ITINs series issued previously have expired. It’s quite common for tax returns to be filed using an invalid or expired tax identification number (ITIN). Taxpayers can renew their ITIN number while filing their tax return 7. Filing too early. While taxpayers should not file late, they also should not file prematurely. People who don't wait to file before they receive all the proper tax reporting documents risk making a mistake that may lead to a processing delay. 8. Incorrect bank account numbers. Taxpayers who are due a refund should choose direct deposit. This is the fastest way for a taxpayer to get their money. However, taxpayers need to make sure they use the correct routing and account numbers on their tax returns. During tax filing season, IRS is usually backlogged. If you have committed one of these errors, your tax file will get stuck in that backlog. The much-awaited tax refund you were looking forward to will be delayed. So don't commit these common mistakes. Better still, use one of the Tax Software to compute your taxes or reach out to our tax experts to help you file your taxes.
Tax Tips
10 Costly Tax Errors for Individuals and Businesses
There are several technicalities and inaccuracies through which you can make errors when filing taxes. These errors can be costly for both businesses and individuals, depending on the taxes owed. To make sure you don’t make these errors, you should hire a tax filing service for businesses or individuals. A business like NexGen Taxes has CPAs and tax professionals onboard to help you. Here are 10 costly tax errors which can cost businesses and individuals dearly according to the IRS. 4 Costly Tax Errors for Businesses These 4 tax errors can result in heavy penalties for business, big and small. 1. Underpayment of Estimated Taxes Business owners usually make an estimation of what taxes they have to pay if they are paying over $1,000. However, if they don’t pay enough of it through withholding and estimated tax payments, there is a penalty charge. These penalties start from 5% of the underpaid amount. However, they can rise to 25% of that amount as well. Depending on how much you’ve underpaid, the penalty can get larger and larger. 2. Depositing Employment Taxes Business owners have to deposit withholding tax if they have employees. These taxes also include the employer’s share of those taxes. This is done through electronic transfers. However, if not deposited correctly, or before the deadline, those taxes can result in penalties. 3. Late Filing This is a no-brainer. Filing your taxes late will result in a late fee. Whether you’re a business owner or an individual, you have to meet deadlines. These deadlines can vary depending on your status as a filer and the year in question. The tax filing deadline in the US is the 15th day of the 4th month. However, if that date falls on a Saturday, Sunday or legal holiday, it’s pushed to the next business day. 4. Not Separating Personal Expenses It may be easier to use a single credit card for all expenses if your business is a sole proprietorship. However, this can blur the lines between legitimate business expenses and personal expenses. This could cause errors when you claim deductions. It could also be a problem when an audit comes up. 6 Costly Tax Errors for Individuals Filing your own taxes as an individual can seem very easy. However, a lot of little details can slip by depending on your due diligence. Here are 6 tax filing errors for individuals. 5. Missing/Incorrect Details A lot of missing or incorrect details go unnoticed when people file their tax reforms. In fact, people often forget to file entire forms depending on their tax bracket, their various assets, and their investments. The various details inaccurately or entirely left out of tax forms include: • Missing or Inaccurate Social Security Numbers: Every social security number should match the one on your Social Security Card. • Misspelled Names: Your name should be filled out exactly as it appears on your Social Security Card. 6. Incorrect Filing Status Certain taxpayers choose the wrong filing status for their documents. This is one of the major problems that a tax filing service for individuals can help you solve. At times, more than one filing status applies to you. Figuring this out can be extremely tricky for the layman. 7. Mathematical Errors The most common errors are often mathematical mistakes which can range from addition and subtraction to more complex operations. Taxpayers often double check their math, but it’s better to have software do it automatically. 8. Unsigned Forms Unsigned tax returns are invalid. In several cases, spouses have to sign a joint tax return, so both their signatures are required. Some exceptions do exist, like for members of the armed forces, and those taxpayers who have valid power of attorney. The best solution is to file returns electronically and use a digital signature. 9. Figuring Credits or Deductions Did you know that one of the most common mistakes in tax filing is to figure things like credits or deductions? This can really be a pain if you’re owed some deductions and want to collect. The mistakes can include things like tax credits, child and dependent card credits, rebate credits, etc. Having a streamlined tax filing service for individuals can really cut down on such errors. 10. Using an Expired Individual Tax Identification Number Finally, it’s quite common for tax returns to be filed using an invalid or expired tax identification number (ITIN). This can work if you just have to file taxes. However, if you’re expecting exemptions or credits from that tax return, it won’t happen. The IRS has clear rules to not allow claims to be filed using an expired ITIN. Taxpayers can renew their number and refile a return to get back the claimed credits and exemptions. These are just a few of the errors that you can commit when filing individual and business taxes. However, if you’re working with a tax filing service, you can significantly minimize your chances of filing taxes incorrectly. Use NextGen Taxes for Your NextGen Tax Filing Needs If you’re looking for a tax filing service for individuals or businesses, look no further than NexGen Taxes. We provide not only a streamlined process for filing your taxes, but a network of experienced professionals to guide you. So, what are you waiting for? Whether you’re a business or a regular citizen, contact NexGen Taxes for tax filing in the 21st century!
Non Profit
Nonprofit Tax Filing 101 – Get Started Today!
Congratulations! You were able to set up your non-profit to work on the cause you care about. You also did the hard work of getting the non-profit status established with the IRS. Now what? Here are some of your questions answered about tax filing for the non-profit. Do Nonprofit Organizations File Tax Returns? Yes! Nonprofit organizations that have been granted tax exemption by the IRS are required to file an IRS Form 990, an annual information return. You might wonder why, given that such organizations are exempt from paying taxes anyway. To put it in layman’s terms – your nonprofit organization is required to ‘justify’ its tax-exempt status. In other words, the annual tax return of a 501(c)(3) organization proves to the IRS that the nonprofit is living up to its charitable purpose. Unfortunately, there are always some who might take advantage of a nonprofit’s tax-exempt status for personal financial gain. For example, an individual could create a shell company and submit invoices to obtain payments for services not rendered or deliver goods or services marked up excessively. It is for reasons such as these that larger nonprofits, and nonprofits that are recipients of grants, are required to have an independent accountant perform an audit. What is the IRS Form 990? IRS Form 990 is the annual information return or tax return filed by tax-exempt organizations with the IRS that details financial information, including statements of revenue and expenses and balance sheets. Form 990 is an annual compliance report of your organization to the IRS that documents: Information on governance, documentation of decisions made, and written policies to demonstrate accountability and transparency. That your tax-exempt organization is adhering to best practices and stays within the confines of its tax-exempt purpose. That your organization remained compliant with applicable federal tax law, from payroll and information reporting to unrelated business income taxes, and so on. Generally, tax-exempt organizations under section 501(a) of the Internal Revenue Code (which includes 501(c)(3) nonprofits) are required to file annual information returns. Failure to file the IRS Form 990, filing after the due date, or failing to file an extension of time to file, could result in the IRS assessing penalties of up to $20 or more per day. The penalty assessed largely depends on annual gross receipts, for each date the information return is overdue. It is worth noting that penalties will also be assessed if a tax-exempt organization files on time but files inaccurate information or omits any required information. Your information return is considered filed only if it is complete and accurate. What kind of Tax Return does a Nonprofit file? There are several types of IRS Form 990s, which are determined by the financial standing of a nonprofit. Nonprofit organizations are required to file form 990 based on their assets, gross receipts, and public charity status. Tax-exempt organizations with gross receipts that are equal to or greater than $200,000 or have total assets of $500,000 or more are required to file Form 990, Return of Organization Exempt from Income Tax. Organizations with gross receipts less than $200,000 and total assets less than $500,000 can file Form 990-EZ, Short Form Return of Organization Exempt from Income Tax. Organizations with gross receipts of at most $50,000 are not required to file either Form 990 or 990-EZ but are required to file, IRS 990-N Electronic Notice (e-Postcard). If the organization is a private foundation rather than a public charity, it is required to file an IRS Form 990-PF regardless of its revenue. To ensure that your tax returns are filed correctly and on time, the team at NexGen Taxes keep track of due dates on your behalf, file extensions when necessary, and triple-check every tax return to account for errors before filing. What happens if your Tax Return or Form 990 has incorrect or missing information? It is not uncommon for nonprofit organizations to file the wrong type of Form 990. All too often, Form 990s might be missing information or even an entire schedule. When this happens, the IRS generally sends back your information return along with one of the following letters: IRS Letter 2694C (Return Form 990 due to missing information) IRS Letter 2695C (Return Form 990-EZ due to missing information) IRS Letter 2696C (Mission Information Request to Process EO Return) If your organization has received one of these letters, Contact Us immediately. Our nonprofit tax filing experts here at NexGen Taxes will assist you in providing a corrected return, along with your explanation detailing why your organization failed to submit the required information. Once you receive one of these letters from the IRS, you have 10 days from the date of the letter to correct your mistake. If your organization fails to file its required information return for 3 consecutive years, the IRS will automatically revoke your tax-exempt status and place your organization on its Auto-Revocation List. Revocation means that your nonprofit organization will now be liable to pay federal income tax and often state income tax on annual revenue. In addition, your donors will no longer be able to make tax-deductible contributions. If your tax-exempt status has been revoked, reach out to the team at NexGen Taxes today, and we will help you reinstate it on your behalf. If your organization has reasonable cause for failure to file on time, we will also request an abatement of penalties assessed. How the IRS assesses penalties for Tax-Exempt organizations The maximum penalty the IRS can assess if an organization fails to file its return is the lesser of either 5% of the organization’s gross receipts or $10,000 for the year. For nonprofit organizations with over a million dollars in gross receipts per annum, the penalty is $100 per day with a maximum of $50,000. To avoid these penalties, your nonprofit must remain aware of Form 990 return due dates, which vary based on your organization’s accounting periods or tax timetable. What Is the Due Date of IRS Form 990? Form 990 due dates depend on the specific tax calendar that your nonprofit follows. This table outlines different due dates based on when your nonprofit's tax year ends: Who is responsible for filing non-profit taxes? Every nonprofit organization is responsible for filing its taxes, in fact, there are several people within the non-profit organization who are responsible for filing its taxes. The first person you should know about is the Board of Directors. The Board of Directors is often made up of volunteers (or paid employees) who oversee the day-to-day operations of your nonprofit organization and help ensure that all financial responsibilities are met. It's their responsibility to make sure that all tax filings are kept current and accurate so that you don't incur any penalties or fines from the IRS or state department. Another person who might be involved in helping prepare your nonprofit's tax returns each year is an accountant or CPA (certified public accountant). CPAs handle tax preparation for individuals and businesses alike, so if you don't have experience preparing tax returns yourself, it might be worth hiring one at least once every year to do so for you. Reach out to our qualified team of Tax experts to help you get started with tax filing for your non-profit. How do non-profits file their taxes? In general, non-profit/exempt organizations are required to file annual returns, although there are exceptions. If an organization does not file a required return or files late, the IRS may assess penalties. In addition, if an organization does not file as required for three consecutive years, it automatically loses its tax-exempt status. You can check which 990 Series Form your organization needs to file on the IRS's Website. You can now file your 990 Form online. What's at stake if I forget to file my non-profit taxes? If you don't file your nonprofit taxes on time, you may be hit with tax penalties and fines. Per IRS, if an organization fails to file a required return by the due date (including any extensions of time), it must pay a penalty of $20 a day for each day the return is late. The same penalty applies if the organization does not give all the information required on the return or does not give the correct information. The use of a paid preparer doesn't relieve the organization of its responsibility to file a complete and accurate return. In general, the maximum penalty for any return is the lesser of $10,500 or 5 percent of the organization's gross receipts for the year. For returns required to be filed in 2021, for an organization that has gross receipts of over $1,084,000 for the year, the penalty is $105 a day up to a maximum of $54,000. For returns required to be filed in 2022, for an organization that has gross receipts of over $1,094,500 for the year, the penalty is $105 a day up to a maximum of $54,500. If the organization is subject to this penalty, the IRS may specify a date by which the return of correct information must be filed. If the return is not filed by that date, an individual within the organization who fails to comply may be charged a penalty of $10 a day. The maximum penalty on all individuals for failures concerning a return shall not exceed $5,000. Penalties for failure to file may be abated if the organization has reasonable cause for the failure to file timely, completely, or accurately. Please keep in mind, automatic revocation of your tax exemption status occurs when an exempt organization that is required to file an annual return (e.g., Form 990, 990-EZ, or 990-PF) or submit an annual electronic notice (Form 990-N, or e-Postcard) does not do so for three consecutive years. Under the law, the organization automatically loses its federal tax exemption. The NexGen Taxes team can help you get this tax-exemption status reinstated. Reach Out to us today! How should I prepare for tax season? Some of the tips you can follow to file taxes are: Prepare to file taxes throughout the year, don't leave it for the last minute. It helps to be organized. Reach Out to us today to get our Non-Profit Tax Organizer to help you be prepared for the tax filing. Have a good understanding of your organization's financials, especially if you're new to running the non-profit. This will help you prepare accurate tax forms and keep records that are necessary for reviewing past years' tax returns. Use the Internal Revenue Service's (IRS) Form 990 series to submit your annual information return. These forms are public records and can be accessed by anyone who requests them online or in person at an IRS office, so make sure they’re accurate! Keep a calendar of when the filing is due and then file taxes for your non-profit on time. The IRS has strict rules about filing deadlines, so make sure you stay up-to-date with these deadlines when preparing for tax season each year. We hope you now have most of your questions answered for filing taxes for your non-profit. If you have any questions about how to file, please reach out to our team of qualified tax professionals. We'd love to hear from you!
Tax Tips
Tips for 401k Retirement Investment
For most people retirement planning is synonymous with investing in 401(K) or 403(B) plans as employer provided tax advantage retirement vehicles are most used retirement planning tools. Quite frankly, they are some of the best vehicles out there for the average employee. They provide great ways to defer money from your payroll on a pre-tax, or post-tax, basis for retirement. Here are some tips for optimizing your retirement savings through your employer provided 401(K) or 403(B). Sign up immediately– The old Chinese proverb by Lao Tzu goes “a journey of a thousand miles starts with the first step.” Interpreting it in terms of building your retirement nest egg, if you aren’t contributing to your 401(k) / 403(B), do it now! The sooner you get started the closer you will be to building a nest egg that can help you retire with peace of mind. Minimum contribution– Now even if you are facing challenges in your life, you should still contribute in your 401(k) / 403(B) account to at least the minimum your company will match. For instance, if your company matches on the first 6% you defer, then put minimum 6% away. If you are not doing the minimum contribution, you are leaving literally free money on the table. Beyond the minimum contribution whatever extra you can contribute will be a huge plus but doing the minimum contribution should be a first and foremost priority. 10%-15%– The general rule of thumb is to elect a minimum of 10%-15% of your salary from day one to defer into your 401(k) / 403(B) account. This will typically have you in a pretty good position when it comes time to retire. Don’t think about doing all the savings in later part of the year. Nobody can predict future; you might encounter some emergency due to which you might not be able to maximize the contribution in later half of the year. Also, last few months of the year also are filled with holidays. What if did some impulse shopping and are unable to maximize your contribution. So, it makes sense to start contributing into your retirement account from the beginning of the year. Max out– If the minimum target to save is the company match, and the minimum target for a good retirement savings rate is 10%-15%, then what is the maximum we can contribute? Well, in 2022 if you are under 50 years old you can contribute $20,500 with a $6,500 catch-up amount for those 50 or older. Everyone’s goal should be to max out as soon as they can. However, highly paid employees may be restricted in their ability to make 401(k) contributions. A 401(k) plan can elect to stop salary deferrals once a participant's compensation reaches $305,000 in 2022 and can only use up to this amount when providing a 401(k) match. For the 2022 plan year, an employee who earns more than $130,000 in 2021 is a Highly Compensated Employee. Also, keep a lookout year-to-year on the maximum as the government tends to increase these limits frequently. Auto increase– A cool feature that will help big time is the auto increase feature. This is one feature that everyone should check / enable when they sign up It will increase your 401(k) contribution 1% a year until you hit the IRS maximum. Most people don’t even notice the marginal change as it is usually offset with the yearly pay increase and it goes a long way in getting your retirement savings on the right track. Before or After-tax Savings– Many a company these days offer both a pre-tax option and a Roth 401(k) option. Whatever you choose or even a mixed combo is still subject to the IRS limits in aggregate. Thus, not allowing you to contribute $20,500 to both accounts. That said, which account should you invest in? This is a personal decision and one that you should discuss with your financial planner. As such a good rule of thumb is the higher your income bracket is, the bigger the benefit of pre-tax contributions are as you’ll likely be in a lower tax bracket at retirement. Of course, the opposite is true for Roth 401(k) contributions. If you are in a modest tax bracket it may be better for you to contribute to the Roth and take the tax hit now in hopes of never paying taxes on those dollars ever again. Keep in mind, whatever type of account you choose the company match always goes in pre-tax account. How much savings for retirement is enough– This is a great question and the best way to answer this is to consult with your financial planner. A good financial planner can see how much you are earning and based on your unique needs how much you will need in retirement. Having said that, for a quick reference guide go by these guidelines suggested by Fidelity based upon a study it has done of retirement portfolios it holds. At age 30 you should aim to have one times your yearly salary saved in your 401(k), thus if you earn $75,000 your 401(k) balance should be $75,000. By age 40 aim to have three times your yearly salary saved. Age 50 the goal is six times of your yearly salary saved, while at age 60 the minimum target is eight times your yearly salary. This is a good basic guideline to reference while saving for retirement. That said, you can never have too much stashed away in your savings. Brokerage window– 401(k) plans can be a little confining if you have investing experience. Because a 401(k)can only be offered by an employer, you’re stuck investing money into a plan with relatively few investing options compared to the almost limitless options of an IRA or traditional brokerage account. As more people become sensitive to investing fees, employers have started offering 401(k) accounts with a brokerage window. A brokerage window allows you to take advantage of the many other investment options outside of a normal 401(k) and yes, it includes stocks, ETFs, bonds, and even some lower risk trading. If your employer provides this option, and you have solid investment experience or guidance, you should definitely look into it. Essentially, the Provider allows you to pay a nominal fee to elect to open a brokerage window within your 401(k) account. You can then move your balance within the plan to this brokerage window. Once it is done, you’ll have many more investment options, rather than the normal dozen or so your provider offers. However, this can be overwhelming and risky if investing isn’t your strong suit. Good news is that you can easily get someone to help you with investments, and investing in stocks and bonds does not carry any investing fees. How to invest– Once you start making deductions, the next big hurdle is, how to allocate your 401(k). Conventional wisdom is the younger you are the more “aggressive” or equity based your allocation should be. However, it is a personal decision based on your goals and risk tolerance. You should look at what are the investment options offered by your 401(K) service provider in your plan, research a little on historical performance and trends of investment options. Choose investment offerings based on this research and your investment goals. Target Date funds– Most 401(k) plans these days offer ‘No Brainer’ target date funds. These are funds where you choose a retirement date and basically let it ride. The funds will shift through the years to a more and more conservative allocation or more bond focused as it starts getting close to your target retirement date. For some these are simple and get the job done. However, if you have experience with investing, you don’t have to put your funds in the Target Date Funds. Keep in mind, most of these Target Date Funds have additional costs associated to them. Also, the fact of the matter is the investing, and investment allocation is a very personal decision so generalizing it with a Target Date Fund should be your last choice. The investment choices should be based off goals and needs, rather than arbitrary age allocation. If you are uncomfortable making investment choices by yourself, reach out to your 401(K) service provider to get the help. Rebalance– Often missed or misunderstood by many is the option of rebalancing your retirement portfolio. By selecting this option (semiannually if not quarterly) your 401(k) portfolio will be rebalanced at your chose interval back to your preselected allocation. You may ask why is it important? Because funds performance is not guaranteed so with the passage of time you may find your 60/40 Stocks / Bonds allocation has drifted into a 90/10 Stocks / Bonds allocation which may leave you exposed and out of your comfort zone. Active vs. PassiveFunds– Another question that comes up time and again is whether to go with actively managed funds or passively managed (index) funds while selecting funds in your retirement portfolio. Frankly speaking, there are benefits to both. During certain time periods, and for certain sectors that will benefit from both active and passive management. It is advisable to get exposure to both in hopes of smoothing out the ride. Diversification– It is a good idea to hold different funds in different sectors within your retirement portfolio. This will help you in smoothing out the ride a bit and you don’t end up putting all your eggs in one basket. It also can go a long way in protecting the downside from one sector decimating your retirement savings. Rollover Old 401(k)’s– Don’t forget to take care of your old 401(K)s with your ex-employers. Roll them into an IRA or Roth IRA depending how you contributed in the first place. This way you will have endless investment options vs. handful that your ex-employer is offering. If you consolidate them into a single IRA it will become more manageable and you won’t have to spend endless hours taking care of multiple IRAs with multiple providers. Rollover of old 401(k) into an IRA is tax-free to do and relatively easy. In the long term, you will see enormous benefits from this move. Audit your retirement accounts – Once a year you should audit your retirement accounts. Retirement account is not like your Checking Account that you need to keep a close eye on. However annually or semiannually do an audit of the account and check for the following: Is your allocation still appropriate? How has the performance been? Any new funds available? Any new features added like Roth or open architecture? Is your contribution rate appropriate, or can you do more? If intending to max out, are you on track to hit the limits? if you are 50 or older have you selected the catch-up option? Are you receiving the full employer match? Any change in your beneficiaries? After Tax Strategy– Last but not the least, see if you can do a Mega Back-Door Roth. A mega backdoor Roth is a special type of 401(k) rollover strategy used by high earners to deposit funds in a Roth IRA account. This strategy only works under certain circumstances for people with extra money they would like to stash in a Roth IRA. In short, if your employer allows after-tax (different than Roth 401(K)) contributions, you can contribute above and beyond the $20,500 limit (up to $61,000 including all sources if under 50 or $67,500 if you are 50 or over) to an after-tax bucket. Then typically once a year you can convert just the after-tax dollars to a Roth IRA of your own effectively making a substantial Roth IRA contribution each year from already after-tax dollars. If this sounds complicated it probably is so it would be probably better to get help from an investment professional. If you keep on following these tips year after year, you will have a stellar nest egg built by the time you are ready to retire.
Track My Refund
Check your state refund status
Track Your State Refund Lets help you track your State Tax Refund Status. If you are wondering when you will receive your refund? The answer depends on how you filed your return. The state should typically issue your refund check within six to eight weeks of filing a paper return. If you use e-file, your refund should be issued between two and three weeks. You can check on the status of your refund by clicking on the links below. Select state and press submit to open corresponding state website State Files Alabama California Delaware Alaska Colorado Georgia Arizona Connecticut Hawaii Idaho Iowa Louisiana Illinois Kansas Maine Indiana Kentucky Maryland Massachusetts Misssisippi New Jersey Michigan Montana New Mexico Missouri Nebraska New York North Carolina Oklahoma Rhode Island North Dakota Orego South Carolina Ohio Pennsylvania Utah Vermont Wisconsin Wyoming Virginia Washington North Carolina (NC) West Virginia
Child Tax Credit
IRS Letter 6419-Reporting Child Tax Credit Payments
IRS Letter 6419: How do I report my Child Tax Credit payments? Now that the tax season is about to start, you must be collecting your tax documents to file your taxes. While doing this, keep an eye out for IRS Letter 6419. The IRS is planning to send this important notice in late January to those who received Advance Child Tax Credit Payments in 2021. You may ask, why is this letter so important? The details in the document will not only help you report your advance payments correctly—it will also help you claim the other half of your Child Tax Credit that is still pending. Additionally, by reporting the amount reported in IRS Letter 6419, you can avoid delays in processing and sending your refund that might arise due to mismatch in amount. So let’s dig deeper into what is the IRS Letter 6419 and what you can do in case you didn’t receive this letter or lost it? What is a letter 6419? The IRS Letter 6419 is the official documentation that has the details you need to report your advance Child Tax Credit (CTC) payments. Specifically, it will show you: The total amount of advance CTC payments you received for 2021. This information will go on Schedule 8812, line 14f or 15e as applicable. Number of qualifying children counted in determining the advance CTC In addition to the details above, the letter 6419 will also outline how the IRS calculated your amount and the conditions for repayment. You can also find those details here in our 2021 Child Tax Credit article. Do I really need the 6419 letter to file my taxes or can I just use my bank statement? As such it in not required for you to have the IRS Letter 6419 but we would strongly encourage you to reference IRS letter 6419 before you file your taxes. Using incorrect amounts on your return can trigger a manual review of your return, which can result in possible delay in processing your return—and refund for weeks. Also, using your bank statements may not be the best route. In some cases, amounts may have been adjusted due do a variety of reasons, including if the processing of a 2020 return after an initial advance CTC payment was made. Or, the amounts may have changed from one payment to the next as you made changes in the IRS Child Tax Credit portal. Ready to file but don’t have your IRS Letter 6419? Read on to learn about using the IRS Child Tax Credit portal as an alternative. Who will receive the IRS Letter 6419? Anyone who received at least one advance Child Tax Credit payments from July 2021 to December 2021 will receive the IRS Letter 6419. So, even if you stopped payments after receiving your first or second payment, you should still expect to receive a letter. In case of ‘Married’ filers, both spouses will receive their own IRS Letter 6419. You’ll need to have both documents to file an accurate return and claim the second half of your credit. Help, I can’t find my IRS Letter 6419? If you’re ready to file, but don’t have your letter, there is an alternative. You can use the IRS Child Tax Credit portal with an ID.me account to verify the details from the letter. Here’s how to check your advance child tax credit payments: Create a new ID.me account (if you don’t have one) by going to: https://www.irs.gov/credits-deductions/child-tax-credit-update-portal Click Manage Advance Payments Click ID.me Create New Account Follow the on-screen instructions to provide information to set up the secure ID.me account. Note that users may be asked to create a live video of themselves (using phone or webcam) and/or upload photo identification. Once you’ve created an ID.me account, you can access the portal at the link directly above. Need help reporting advance Child Tax Credit payments? Need help filing your IRS letter 6475, NexGen Taxes team of fully vetted accounting and tax professionals can help you report the advance payments you received in 2021 and help you claim the second half of your Child Tax Credit payment on your return. We are here for you 24/7, reach out to us today.
News
2021 Tax Law Changes
It is easy to keep up with Kardashians than with ever-changing tax laws!! No wonder it gets challenging to file your taxes. You have been closely following news about all tax-related changes and then you blinked and now you don’t know what you missed! Luckily, the team at NexGen Tax is here to walk you through the must-know tax law changes for 2021, so you can file your taxes with confidence. Top 10 Must-know changes for 2021 taxes Here is a summary of the top tax law changes for 2021 and a brief outline of what has changed along with the reason why it could matter to you. Need help navigating 2021 tax law changes? NexGen Tax team of fully vetted accounting and tax professionals will evaluate your tax situation, and can help you determine whether you qualify for a deduction and identify other opportunities to minimize your taxes. Contact our Tax Services team to learn how legislation can impact you or can benefit you. Reach out to us today. 2021 Tax Changes Change Impacting Individual Tax Filing Stimulus payments and Recovery Rebate Credits You need to report any stimulus payments you received in the spring of 2021 on your tax return. At the time of tax filing, if you realize that you didn’t get every dollar you should have, you can claim a Recovery Rebate Credit to get the money you deserve. Unlike last year, the IRS will send out Letter 6475 in January to everyone who received the Stimulus payments, which will show the amount you received for 2021. In order to avoid tax refund delays, you may want to use the amounts shown on your Letter 6475 to report your payment and claim any additional money. Find out more about Letter 6475 and how to validate your amount if you don’t have your letter. Child Tax Credit The Child Tax Credit was expanded in 2021 to provide more money for more families. With this 2021 tax law change, up to half of the credit was paid as advance payments, while the other part can be claimed when you file. To provide relief to the families during difficult Covid pandemic times, this is the first-time child tax credit has been sent in advance to families. As part of your 2021 tax filing, you need to accurately report the advance amount on your 2021 returns in order to claim the remainder of your child tax credit. The IRS will send Letter 6419 to you in January, which will show the amount of advance payment you received. In order to avoid tax refund delays, you may want to use the amount shown on your Letter 6419 to report your advance payments and claim the rest of your credit. Find out more about Letter 6419 and how to validate your amount if you don’t have your letter. You can estimate the Child Tax Credit with our child tax credit calculator. Earned Income Tax Credit The Earned Income Tax Credit has always been a valuable tax credit for families whose income falls beyond a certain threshold but understanding who is eligible for it has always been a bit complicated. For the tax year 2021, the IRS has expanded the maximum credit for childless workers from $538 to about $1,500, making this credit even more valuable. Additional changes include lowering the bottom age limit to 19 and allowing for those without children to claim the credit if they are 65 or older. These changes are new for 2021 tax filing. Besides this, you can also choose to use your 2019 income to calculate your Earned Income Credit amount if your 2019 earned income is larger than your 2021 earned income and that provides a larger credit (this is called the Lookback Rule). However, keep in mind that if you decide to use your 2019 income for calculation, it might take IRS more time to process your refund. As you may already know that the Earned Income Credit is a refundable credit, meaning after it helps reduce your tax bill, you could potentially get your money back. With the changes above and the potential for a delay related to using the Lookback Rule, it is always advisable to get help from a tax expert to file your taxes. NexGen Taxes team of fully vetted accounting and tax professionals will evaluate your tax situation, and do the analysis to figure out if choosing to use the Lookback Rule can qualify you for a better refund and helps you in minimizing your taxes. Child and Dependent Care Credit The Child and Dependent Care Credit allows families to claim expenses related to the care of a child or someone who is physically or mentally unable to care for themselves. While filling 2021 taxes, families may now claim a refundable credit of up to 50% of qualifying expenses, meaning they could claim a maximum credit of: $4,000 for one qualifying child (based on $8,000 of expenses) $8,000 for two or more qualifying children (based on $16,000 of expenses) As this is a refundable credit, this tax benefit not only will help in lowering the tax you owe, but it also can potentially help you in getting your money back. You can estimate the Child Tax Credit with our child tax credit calculator. Unemployment Income Taxability Historically unemployment income is considered taxable income by the IRS. However, in the tax year 2020 due to the pandemic, the unemployment income up to $10,200 was excluded for tax purpose. For tax filing for 2021, the tax law has changed back to what it was before 2020 which means, any unemployment compensation received will be subject to income taxes. If you received unemployment income in 2021, please make sure to include that in your taxable income. In case, you had taxes withheld from your unemployment benefits as they were paid out, you might have already covered a portion of your tax liability for this income. Education Credit Changes The cost of going to college is high. However, education-related tax benefits can help make college more affordable for students and their families. For the tax filing year, 2021 few changes have been made to these tax benefits to make them more streamlined. While the Tuition and Fees deduction has not been extended for the tax year 2021, eligibility has been extended for more people for the Lifetime Learning Credit. To extend the eligibility, the phase-out range for this credit has been increased to $80,000-$90,000 for single filers and from $160,000 to $180,000 for joint filers. As such this credit still carries a value of up to $2,000 While the eligibility for the Lifetime Learning Credit for higher education has been extended, American Opportunity Credit still gives you a better refund. However, you need to carefully review other factors to consider around choosing between the Lifetime Learning Credit or American Opportunity Credit when filing as a student or filing with a dependent student. Wrongfully applied education credits are one of the leading causes of Tax audits but IRS. Get help from the NexGen Taxes team of fully vetted accounting and tax professionals to which credit is best suited for your tax situation. Charitable Contributions When the standard deduction was doubled in 2017, far fewer taxpayers were still able to itemize their deductions. This impacted the deductions related to charitable contributions as well. 2021 tax law change allows for a deduction for up to $600 in cash charitable contributions for those married filing jointly and up to $300 for individuals and married filing separately. This deduction is available to all taxpayers whether you use the standard deduction or itemize your deductions. So make sure you keep the receipts of your charitable contributions handy and use this deduction to lower your tax liability. 2021 & 2022 Tax Changes Premium Tax Credit For Health Insurance If you are one of those who buy health insurance from the federal or a state marketplace, the Premium Tax Credit makes health insurance premiums will give you relief and make it more affordable. A larger tax credit was put in place for the tax years 2021 and 2022. In order for households to pay a smaller share of their income towards premiums, they get a higher premium tax credit. You can use the credit to pay a smaller share of your income towards the premium. Change Impacting Business Tax Filing 100% Business Meal Tax Deduction To incentivize visits to restaurants after the pandemic, an expanded business meal deduction was added for the tax years 2021 and 2022. Unlike previous years the deduction now covers 100% of business meals that are dine-in, catered, or take-out; and a 50% limit is in place for food and beverage not from restaurants. So start gathering receipts on your business meals that meet the criteria for business meal deductions, so you can claim the deduction for the tax years 2021 and 2022. Employer Incentives And Payroll Credits For Small Business The 2021 American Rescue Plan Act put in place several new or expanded credits that impacted employer payroll returns, especially among small businesses. This business stimulus relief was designed to help keep people on the payroll through a long period of economic uncertainty. Payroll credits for continuing to pay employees in adverse situations were extended and a new credit for covering health insurance premiums was added. There are multiple credits employers can use for their payroll tax filings. If you’re a small business owner and you have people on payroll, or if this is your first year with employees on a payroll, there may be credits and incentives you’re unaware of for payroll quarters during 2021. NexGen Taxes team of fully vetted accounting and tax professionals will evaluate your tax situation, and do the analysis to figure out what credits your business can qualify for to help you in minimizing your taxes. 2022 Tax Changes A major change coming in for tax year 2022 that impacts gig workers: 1099-K Rule Change For Gig Workers Previously, workers who received payments via credit card or a third-party payment network received Form 1099-K if they had more than 200 individual payments and $20,000 in payments. When you report this income, you also report the expenses associated with your business. Starting in 2022, these thresholds have been significantly lowered. Now you only need payment transactions of $600 or more. While the first 1099-Ks under this rule won’t be sent until Jan. 2023, if you expect to meet this new threshold, you’ll have additional tax responsibilities—this year. For starters, you may want to consider making or adjusting quarterly estimated tax payments to help avoid an unexpected tax bill and to avoid underpayment penalties. Need Help Navigating 2021 Tax Laws? With the ever-changing tax laws you may want to work with a tax pro to have peace of mind. We’re ready to help you in tax season 2021! Get started with filing taxes online with the NexGen Taxes team of fully vetted accounting and tax professionals who will analyze your tax situation to help minimize your taxes. We are here for you 24/7, reach out to us today.