Dickinson & Clark

April 18th: Tax Deadlines Are Here

Thu, 27 Jul 2023 04:46:41 GMT

The 2021 tax filing season is quickly coming to an end. The last day to timely file your Income Tax Return or Extension is Monday April 18th. This is an important date to avoid any late filing penalties and possible interest on payments due.

April 18th is also the deadline to send in your 1st Quarter 2022 estimated tax payments. All payments must be postmarked by this date to avoid penalties.

The IRS has processed roughly 89 million tax returns as of April 1st. If you have already filed and are waiting on your refund, click here to check the status.

More Business Meals in 2022

Thu, 27 Jul 2023 04:43:11 GMT

The temporary provision that allowed meals to be 100 percent deductible in 2021 remains unchanged for 2022.

The Provision allows for a full deduction of expenses paid or incurred after

December 31, 2021 and before January 1,2023 for food or beverages provided by a restaurant.

This means you may see a higher deduction for business meals on your tax return this year. In order to qualify, the business expense must have been

incurred at a restaurant. The IRS defines a restaurant as “a business that prepares and sells food or beverages to retail customers for immediate

consumption, regardless of whether the food or beverages are consumed on the business’s premise”.

Meal expenses related to prepackaged food or beverages are excluded from the 100 percent deduction. The provision specifically excludes expenses from a grocery store; specialty food store; beer, wine, or liquor store; drug store; convenience store; newsstand; or a vending machine, or kiosk.

Excluded meal expenses are still subject to the 50 percent limitation.

The 100 percent deduction is also subject to the same rules as the 50 percent deduction.

Higher Mileage Deduction in Response to Gas Prices

Thu, 27 Jul 2023 04:35:25 GMT

In recognition of recent gasoline price increases, the IRS announced an increase in the standard mileage rates for the rest of the year. Taxpayers may use the optional standard mileage rates to calculate the deductible costs of operating an automobile for business and certain other purposes.

Beginning July 1, 2022, the rates are 62.5 cents per mile for business use of an automobile (up 4 cents) and 22 cents per mile for costs of using an automobile as a medical or moving expense (also up 4 cents) . Rates from the beginning of the year remain 14¢ per mile for charitable organizations remains unchanged as it is set by statute.

If this calculation is used in any form of a deduction on your 2022 tax return, it will be imperative for you to keep totals accurate to maximize your deduction.

Mid-Year Tax Planning: Lowering Your Individual Income Tax Bill

Thu, 27 Jul 2023 04:30:28 GMT

Consider adjusting your tax withholding or estimated payments

Individual Income Tax Opportunities – Mid Year Planning Ideas

Thu, 27 Jul 2023 04:25:04 GMT

Take Advantage of Lower Tax Rates on Investment Income.

Gains from the sale of an investment held for more than one year (as well as dividends on certain stocks) are generally taxed at preferential capital gains rates. Those rates are 0%, 15%, and 20% for most investments. The applicable rate depends on your taxable income.

If your income is too high to benefit from the 0% or 15% rates, try gifting investments (like appreciated stock or mutual fund shares) to children, grandchildren, or other loved ones.

If these individuals are in the 0% or 15% capital gains tax bracket when they later sell the investments, any gain will be taxed at the lower rates if you and your loved one owned the investments for more than one year. Dividends from any gifted stock also may qualify for the lower rate.

However, beware of the “Kiddie Tax,” which applies to all children under age 18 and most children age 18 or age 19–23 who are full-time students. It may limit your opportunity to take advantage of this strategy. Also, beware of a potential increase in both long-term capital gains rates and ordinary income tax rates heading into 2023.

Charitable Contributions: Deductible or Not?

Thu, 27 Jul 2023 04:20:59 GMT

Giving Back is Always in Season

The holidays are a great time to give back, and possibly even receive a tax deduction for your generosity. But do you know what qualifies and what doesn’t?

To qualify for a deduction the contribution must meet the following:

The contribution must be to a qualified organization (i.e. churches, veteran organizations, certain nonprofits, etc.)
The contribution must be paid in cash or other property before the close of the tax year

Generally Go Fund Me and contributions to individuals do not qualify.

Generally you may deduct up to 50% of your adjusted gross income, but 20% and 30% limitations do apply.

The most important thing to keep in mind when making your charitable contributions this season is to keep your documentation!

Tax Tip: Keep your Books Updated!

Thu, 27 Jul 2023 04:09:35 GMT

The end of the year can be a stressful time for business owners. One way to alleviate that stress is by keeping your books updated throughout the year.

Having updated books makes planning easier and takes some of the surprise out of tax time.

Here are three tips for making bookkeeping easier

Keep business and personal bank accounts separate – have one (or more) for each
Enter receipts on a timely basis.
Be consistent with expenses – categorize using set accounts that make sense to you

Automated accounting software can also make bookkeeping easier. Bookkeeping does not have to be time consuming and strenuous. Modern bookkeeping can be done on-the-go. There are options to reconcile accounts on your phone and computer in short amounts of time.

Tax Tip: Save for Retirement, Save on Tax!

Thu, 27 Jul 2023 04:06:20 GMT

Deductibility of Travel Expenses

Tax payers can reduce or defer tax by contributing to a retirement account.

Certain taxpayers’ contributions could also qualify them for a tax credit

Eligible workers still have time to make qualifying retirement contributions and get the Saver’s Credit on their 2022 tax return.

Who’s eligible for the credit?

You’re eligible for the credit if you’re:

Age 18 or older,
Not claimed as a dependent on another person’s return, and
Not a student

Taxpayers have until April 18, 2023 – the due date for filing their 2022 return – to set up a new IRA or add money to an existing IRA for 2022. Both Roth and traditional IRAs qualify.

Amount of the credit

Depending on your adjusted gross income, the amount of the credit is 50%, 20% or 10% of:

contributions you make to a traditional or Roth IRA,
elective salary deferral contributions to a 401(k), 403(b), governmental 457(b), SARSEP, or SIMPLE plan,
voluntary after-tax employee contributions made to a qualified retirement plan (including the federal Thrift Savings Plan) or 403(b) plan,
contributions to a 501(c)(18)(D) plan, or
contributions made to an ABLE account for which you are the designated beneficiary (beginning in 2018).

The IRA contribution limit for 2022 is $6,000 ($7,000 if you’re age 50 or over). They increase to $6,500 ($7,500 if you’re age 50 or over) for 2023.

Any employee sponsored retirement plan contributions have to be made before the last day of the year to qualify. Although it is too late to make contributions to impact your 2022 tax return, this is a great planning tool for 2023!

The SIMPLE IRA limit for 2023 is $15,500 ($19,000 if you’re age 50 or over)

You are Appreciated: Educator Expense Deduction!

Thu, 27 Jul 2023 03:59:36 GMT

Deductibility of Travel Expenses

Eligible educators can claim up to $300 in tax deductions for unreimbursed trade or business expenses in 2023. They can claim up to $600 if married filing joint, and both taxpayers are eligible educators.

Who is an eligible educator? –

K-12 teacher, instructor, counselor, principal, or aid who is in the school at least 900 hours a school year

What is a qualified expense? –

Professional development courses
Books
Supplies
Computer equipment
Software and services
Supplementary materials

Any qualified expense must solely be used used in the classroom. In 2023, qualified expenses also include equipment, disinfectant, and supplies to prevent Covid-19.

Business Travel: Go or No?

Thu, 27 Jul 2023 03:54:06 GMT

Deductibility of Travel Expenses

Business travel expenses can be deducted when a taxpayer has to travel away from their tax home for business purposes. A taxpayer is considered to be traveling if they are away for more than on ordinary workday and need to sleep to meet the demands of their work.

A tax home is generally a taxpayer’s regular place of business where work duties are performed.

If the individual has more than one regular place of business, their tax home is their main place of business or work. An individual’s main place of business or work is determined by:

The total time the employee ordinarily spends in each place,
The level of business activity in each place, and
How much money the employee earns at each place.

What Expenses are Deductible?

How to Deduct Travel

Xero/Figured

Thu, 27 Jul 2023 03:45:16 GMT

“We have looked for years to be able to find a way to help our clients know which acres are profitable, which decisions were cost-effective, and which were not. Instead of knowing where clients are from an annual tax perspective, what did that crop truly do to change their bottom line?”

– Jeremiah R. Woltemath (J.R.), CPA

Separately Xero is an accounting software and Figured is a production planning tool. Integrated together they become a production planning and farm budgeting tool.