It is never too early to prepare for the 2022 tax season and file a tax return in advance. Factors such as pandemic-related tax breaks, unemployment benefits, and remote work alongside natural disasters will make 2021 tax returns particularly difficult. In light of everything that has happened this year, taxpayers will benefit from carefully tracking all the information they need for their tax returns. PNCPA reported on what to look for and how to prepare a declaration now.
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Keeping proper tax records will make it easier to prepare your tax return during the spring filing season.
Taxpayers-entrepreneurs
Tax rebate on employee retention in connection with COVID-19
Your tax return preparer must provide reasonable payroll tax returns to adjust your payroll deductions in 2021.
Tax rebate on employee retention in connection with qualified disasters
The IRS has allowed an Employee Maintenance Tax Discount (ERTC) for employers who have operated in a relevant disaster area, failed due to a natural disaster and continued to pay employees. Although it is too early to say whether the IRS will allow this loan to Hurricane Ida or Hurricane Nicholas, it is still an excellent choice to keep records of when the business was inoperable. The amounts paid to employees during that time will happen. This information will be needed to calculate the amount of credit allowed.
Proceeds from insurance against breaks in work
Break insurance is used to compensate for income that would otherwise be received and taxed. Therefore, this compensation is usually taxed.
However, taxable insurance payments may be offset against losses from accidents at work that are deductible from the taxable base if any insurance does not already cover those losses. To justify the deduction, the taxpayer must be able to document or explain the failure and prove that it was caused by an event that led to the closure of the business.
individual taxpayers
Home office costs
Many taxpayers continued to work remotely due to the pandemic. Home office costs can be deducted for qualified self-employed taxpayers and independent contractors who solely use part of their home to conduct business regularly. These taxpayers need to keep track of expenses and their work area to calculate the correct costs.
The third series of quarantine payments
In March 2021, the federal government paid the third series of payments to those who met the requirements. Tell your accountant (CPA) if you received this payment and its amount. In some cases, taxpayers who have not received a price based on their 2020 tax return may be eligible for it in their 2021 tax return.
Hurricane losses are Hurricane Ida or Hurricane Nicholas.
Taxpayers must keep track of their losses from any hurricane to determine whether the taxpayer can claim damages.
Advance payments for a child tax credit
Taxpayers eligible for a child tax credit will need to know the total amount of credit they received in 2021 and compare it with the total amount they may claim in their 2021 tax return.
The US Internal Revenue Service (IRS) is expected to send letters to taxpayers in January 2022, called Letter 6419, indicating the total amount of money received by the taxpayer in 2021. Keep this message, as you will need this information when filing your 2021 tax return.
Infrastructure bills will affect taxes.
Although these bills are not final and may be amended, taxpayers should consider potential changes that may affect them. One of the possible changes is a significant update of the capital gains tax rate. Although this is not the final option, one of the proposals will increase the rate from 20% to 25% and take effect for transactions after September 13, 2021.
