Learning Center for Tax and Financial Insights

September 1 - 2022 Fall and 2023 Tax PlanningContact this office to schedule a consultation appointment.September 12 - Report Tips to EmployerIf you are an employee who works for tips and received more than $20 in tips during August, you are required to report them to your employer on IRS Form 4070 no later than September 12. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 12 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed.September 15 - Estimated Tax Payment DueThe third installment of 2022 individual estimated taxes is due. Our tax system is a “pay-as-you-earn” system. To facilitate that concept, the government has provided several means of assisting taxpayers in meeting the “pay-as-you-earn” requirement. These include:Payroll withholding for employees;Pension withholding for retirees; andEstimated tax payments for self-employed individuals and those with other sources of income not covered by withholding.When a taxpayer fails to prepay a safe harbor (minimum) amount, they can be subject to the underpayment penalty. This penalty is equal to the federal short-term rate plus 3 percentage points, and the penalty is computed on a quarter-by-quarter basis.Federal tax law does provide ways to avoid the underpayment penalty. If the underpayment is less than $1,000 (the de minimis amount), no penalty is assessed. In addition, the law provides "safe harbor" prepayments. There are two safe harbors:The first safe harbor is based on the tax owed in the current year. If your payments equal or exceed 90% of what is owed in the current year, you can escape a penalty.The second safe harbor is based on the tax owed in the immediately preceding tax year. This safe harbor is generally 100% of the prior year’s tax liability. However, for taxpayers whose AGI exceeds $150,000 ($75,000 for married taxpayers filing separately), the prior year’s safe harbor is 110%.

September 15 - S CorporationsFile a 2021 calendar year income tax return (Form 1120-S) and pay any tax due. This due date applies only if you requested an automatic 6-month extension. Provide each shareholder with a copy of their Schedule K-1 (Form 1120-S) or a substitute Schedule K-1 and, if applicable, Schedule K-3 (Form 1120-S) or substitute Schedule K-3 (Form 1120-S).September 15 - Corporations Deposit the third installment of estimated income tax for 2022 for calendar yearSeptember 15 - Social Security, Medicare and withheld income taxIf the monthly deposit rule applies, deposit the tax for payments in August.

Newspapers and media reports have been filled with talk of inflation and recession. Experts are arguing about the definition of the latter. Pundits are pondering whether the slow down reflected in the latest consumer price index report means that inflation has peaked. You, in the meantime, are still staring in disbelief at the numbers that are rolling by as you fill your tank with gas or the total tally when you buy a few bags of groceries.Are We in a Recession?It really doesn’t matter what anyone calls the nation’s economic condition when you’re having trouble paying your household bills – or worrying that’s where you’ll find yourself soon. Though gas prices have been dropping steadily and retailers like Walmart, and Home Depot are reporting strong financial results, there is some concern that higher prices may be driving their gains, and there is only so long that consumers will be able to maintain their spending habits.That diminished spending on goods and services is one of the top signs of recession, along with cuts in manufacturing and production, increases in unemployment, and stagnating or dropping income. As frightening as each of these elements sounds, it is when you personally experience a combination of them that you feel a real impact. The good news is that there are steps you can take to prepare.Can You Recession-Proof Yourself?Recessions impact everybody one way or another, but they are definitely more painful for those who aren’t prepared. Here are a few things that you can do to minimize the financial impact on your family:

As the saying goes, hope for the best but prepare for the worst. With concerns about a recession on the rise, now is the time to start thinking about how you would weather an economic downturn. There are a number of steps you can take to recession-proof your finances, and it's important to have a plan in place in case the economy takes a turn for the worse.

Article Highlights: • Relief Amounts• Income Limitations • Dependents of Another• Pell Grant Recipients• Repayment Pause• Monthly Payment Reduction • Cancellation of Debt IncomeOn August 24, President Biden announced a three-part plan to deal with student loan debt which includes, among other things, $20,000 in loan relief to borrowers with loans held by the Department of Education whose individual income is less than $125,000 ($250,000 for married couples) and who received a Pell Grant. Borrowers who meet those income standards but did not receive a Pell Grant in college can receive up to $10,000 in loan relief. Current students with loans are eligible for this debt relief.TARGETED STUDENT LOAN DEBT RELIEFPell Grant RecipientsOthersAmount To Be ForgivenUp to $20,000Up to $10,000Income Limit Married Filing Jointly $250,000Others $125,000Note: This is not a phaseout, $1 over the income limit ends the qualification.Dependents of Another - Borrowers who are dependent students will be eligible for relief based on parental income, rather than their own income.Who Will Benefit? – Since the forgiveness is targeted to lower income families, per a White House Fact Sheet, nearly every Pell Grant recipient comes from a family that made less than $60,000 a year. Based on that at least 93% of Pell Grant recipients have income less than $60,000 and would qualify for the $20,000 forgiveness.DISTRIBUTION OF PELL GRANT RECIPIENTS BY INCOMEFamily IncomePercent$30,000 or Less66%$30,001 through $59,99928%$60,000 or more7%Apparently the White House used rounded numbers thus the total is not 100%

Article Highlights:Penalty Relief2019 & 2020 Tax ReturnsIncludes 1040, 1120, Certain 1099 Series FilingsRefunds Are AutomaticSeptember 30, 2022, DeadlineThe First-Time Abatement Penalty ReliefTo help struggling taxpayers affected by the COVID-19 pandemic, the IRS has issued a notice, which provides penalty relief to most people and businesses who file or filed certain 2019 or 2020 returns late.This includes nearly 1.6 million taxpayers who will automatically receive more than $1.2 billion in refunds or credits. Many of these payments will be completed by the end of September. Besides providing relief to both individuals and businesses impacted by the pandemic, this action is designed to allow the IRS to focus its resources on processing backlogged tax returns and taxpayer correspondence to help return to normal operations for the 2023 filing season.The relief applies to the Failure to File Penalty. The penalty is typically assessed at a rate of 5% per month and up to a maximum of 25% of the unpaid tax when a federal income tax return is filed late. This relief applies to Form 1040 (Individual) and 1120 (Corporate) series, as well as others. To qualify for this relief, any eligible income tax return must be filed on or before Sept. 30, 2022. So to take advantage of this relief contact this office immediately if you have not already filed your 2019 or 2020 returns. In addition, the IRS is providing penalty relief to banks, employers and other businesses required to file various information returns, such as those in the 1099 series. To qualify for relief, the notice states that eligible 2019 returns must have been filed by Aug. 1, 2020, and eligible 2020 returns must have been filed by Aug. 1, 2021.Because both deadlines fell on a weekend, a 2019 return will still be considered timely for purposes of relief provided under the notice if it was filed by Aug. 3, 2020, and a 2020 return will be considered timely for purposes of relief provided under the notice if it was filed by Aug. 2, 2021. The notice provides details on the information returns that are eligible for relief.