Izella Financial & TaxWorks

How To Give Yourself A Tax Cut

Quarterly Estimated Tax Payments - Reminder If you are making quarterly estimated tax payments to the IRS, the due date for the January 1 March 31 quarter of the year is April 15th, 2021. For payments made using IRS Direct Pay, you can make payments until 8PM EST, and for payments using a credit or debit card, payments can be made up to midnight on the due date.... If the due date for making an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be considered on time if you make it on the next day that's not a Saturday, Sunday, or legal holiday.

IRS reminds foreign bank and financial account holders the FBAR deadline remains April 15

IRS Allows Medical Expense Deduction for COVID PPE Did You Know? If you have bought personal protective equipment (PPE) during the pandemic, you may be able to deduct those expenses on your tax return. Alternatively, you may choose to reimburse yourself with funds from a tax-advantaged medical savings plan. Eligible PPE includes sterile gloves, face masks and shields, and hand sanitizer and sanitizing wipes, as long as these items were purchased primarily to prevent the spr...ead of coronavirus. The IRS recently confirmed that taxpayers who itemize deductions may deduct the cost of COVID-related PPE as a medical expense. For tax year 2020, you may generally only deduct medical expenses that exceed 7.5% of your adjusted gross income (AGI). For example, since 7.5% of $40,000 is $3,000, a couple with an AGI of $40,000 could not deduct their first $3,000 of medical expenses. However, if their unreimbursed medical expenses total $5,000, they can generally claim a $2,000 deduction ($5,000 $3,000) if they itemize. If you do not claim the tax deduction, you may instead use a qualified medical savings plan to reimburse yourself for eligible PPE costs. Qualified plans may include health flexible spending arrangements (FSAs), health savings accounts (HSAs) and Archer MSAs. Just remember that reimbursed medical expenses cannot be claimed as tax deductions. In other words, you may EITHER claim a tax deduction for your coronavirus PPE expenses OR use your qualified medical savings plan to reimburse yourself, but not both. A tax professional can help you determine which tax strategy works out better for you.

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IRS Warns On New Scam Related To Stimulus Checks

Watch Out for Disaster-Related Charity and Tax Scams Did You Know? The IRS has warned taxpayers about new and ongoing scams targeting both people affected by natural disasters and those seeking to help disaster victims. In many of these fraudulent schemes, the scammers impersonate IRS representatives or charitable organizations. SCAMS INVOLVING BOGUS OFFERS OF TAX ASSISTANCE... Taxpayers impacted by federally declared disasters like hurricanes and wildfires may qualify for various forms of tax relief, such as deductions for casualty losses. Knowing this, some scammers are calling taxpayers in disaster-affected areas, claiming to represent the IRS. They may say that they can help people get tax refunds or file claims for their losses. DO NOT give any money or personal or financial information to these scam callers. The IRS generally does not call taxpayers out of the blue about tax relief programs. Hang up on any unknown callers who say they can offer you disaster-related tax assistance. What to DO: To learn whether you qualify for tax relief or to seek help with other disaster-related tax issues like reconstructing lost records, call the IRS disaster assistance line directly at 866-562-5227. SCAMS INVOLVING BOGUS CHARITIES Unfortunately, many scammers try to prey upon generosity by posing as representatives of charitable organizations that help people affected by disasters. These fake charities may have official-looking websites with names similar to legitimate charities, making it difficult for consumers to spot the scam. DO NOT make an over-the-phone contribution without first making sure that the charity is legitimate. Also do not donate using forms of payment that cannot be tracked, such as wire transfers, gift cards or signing over a tax refund or stimulus check. Most importantly, do not give out personal information like your Social Security Number (SSN) or bank account numbers. What to DO: Ask for more information so you can check up on the supposed charity. One of the best ways to determine whether the caller is a scammer is to ask for the charity's Employer Identification Number (EIN). You can then search IRS records of reputable charities by entering the EIN into the Tax Exempt Organization Search Tool (link below). If you determine that it is safe to donate, pay by check or credit card so you will have a record of the payment. You may also wish to ask the caller to direct you to the charity's website, so that you can donate through a secure online portal rather than over the phone. IRS Tax Exempt Organization Search Tool: https://apps.irs.gov/app/eos/.

The Beneficiary IRA Has New Rules You Need To Know About In 2020

IRS Posts Updated Penalty Amounts For 2021

Social Security Tax Deferral May Change Your Withholding Did You Know? An Executive Order issued in August allows U.S. employers the option to defer collection of the employee's share of Social Security tax between September 1, 2020 and December 31, 2020. The employee's share of this tax makes up the majority of paycheck withholding labeled as FICA on most worker pay stubs. Importantly, the Executive Order only authorizes DELAYED collection, rather than an actual reduction ...or temporary elimination of the tax. Most employers that choose not to withhold Social Security tax during the specified four-month period will need to collect the deferred tax through extra withholding after January 1, 2021. In other words, employees of these companies will have less money withheld from their paychecks this fall (resulting in increased net pay), but their net pay may decrease for several months after January 1 due to makeup withholding. For this reason, many employers have opted to continue withholding all FICA taxes as usual. The simplest way to determine whether your employer might be deferring Social Security tax collection is to save your pay stubs from August, and compare them to your pay stubs during the fall. If you see no significant change in your FICA withholding and net pay, then your employer has most likely opted out of delayed withholding. On the other hand, a decrease in the withholding amount and increase in your net pay may indicate that Social Security tax has not been withheld. You can check with your company's payroll department to make sure. Some companies may offer employees the choice to individually opt out of deferred withholding. However, under the Executive Order, deferred withholding may be mandatory for military and federal government employees with incomes below specified limits. If your Social Security tax withholding is delayed under this program, you may wish to take steps now to prepare for a potential increase in withholding and decrease in net pay during early 2021. For example, you could set aside the extra money you receive each pay period this fall as savings. A professional tax and financial advisor can help you explore other options to ensure that you are prepared for any possible upcoming changes to your net pay.

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