We find ourselves in a familiar position. It’s December, time to do tax planning, and the majority of proposed tax changes haven’t yet been signed into law.
That being said, there are changes that have been passed for this tax season to be discussed and understood. There are hundreds of changes. Here are a few that will probably affect your individual circumstances.
Economic Impact (Stimulus) Payments
These stimulus payments of up to $1,400 per individual in your family went out in early 2021. The exact amount sent was a function of your reported taxable income.
You’ll need to keep track of exactly how much was received. If the amount given to us is off by even one lousy dollar, your income tax return will be wrong. This will hold up any refunds.
The IRS will send a change letter, altering the refund or changing the amount due. They’ll also probably levy interest and penalties. If this occurs because you made a mistake on the figure given to us, there will be very little if anything that we can do.
Student Loan Forgiveness
Under a new law, student loans that are forgiven don’t need to be included in income if the discharge occurred after 12/31/2020 and before 1/1/2026 for the following type of loans.
a – One discharged due to death or the total and permanent disability of the student
b – Any loan discharged that was provided expressly for post-secondary education purposes by an eligible lending institution
Fully Deductible Business Meals
In 2021, business meals that qualify under the normal regulations are fully deductible rather than only 50% deductible as it has been in former years.
Don’t misunderstand. This doesn’t mean that you can deduct any Saturday night out with your significant other. We still need to go through the “newspaper proof” showing who was at the meal, what was the business purpose, where it occurred, when it happened, and why, in order for it to be deductible.
Much more will follow on these tax changes.
Let me leave you with this.
There’s a piece in today’s Wall Street Journal that piqued my curiosity. The hypothesis is that the new Omicron Variant could widen the divide between Blue and Red States.
Anyone who has read my column knows that I don’t do politics. I provide information to Entrepreneurs, helping them with their businesses and their taxes, but this article is unique.
It turned politics into economics, and a proper look at economics could mean profit for us all.
It began by saying that at the beginning of the pandemic there was no difference between the concept of health and one’s livelihood. Traditional wisdom said that protective measures would also translate into minimizing economic harm.
But that is no longer the case.
The ten states with the strongest payroll recoveries since the beginning of the pandemic all have Republican governors, eight of which were carried by the former president. Conversely, of the ten states with the worst payroll performance in the same period, eight have Democratic governors and eight were carried by our present administration.
The ten states with the highest C-19 rates are predominantly red states, while the blue states have the least infection and resulting death rates.
I had never thought about it that way before, and now we have a new variant. Getting past the political divide and the harm it creates, what will this mean for the future? How will this affect our businesses?
I have clients on both sides of the economic divide. Many have prospered beyond imagination while others have struggled to survive.
Little is known about Omicron. There are sketchy reports coming out of South Africa and Europe, but nothing I’ve read so far could possibly be used to plan our futures.
But plan we must. We need to be ready.
Whether they begin a shut down process or not, there is no way that this new variant won’t affect you and your business. Even if they don’t begin closures, there will certainly be less foot traffic in the stores.
Will people go to restaurants, the theater, or be fearless enough to hop on a plane? If they do again begin closures, will they do another round of PPP Loans and extend the ERC?
The time to plan is now. Be ready. Winter is here and we all have an uninvited guest coming for the holidays.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Employee Retention Credits, PPP Loan Forgiveness, Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Accounting Solutions Ltd.
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