Monthly Archives: February 2020

2020 – 02/28

Good records are the key to tax deductions. In one case, an independent insurance agent’s claims for a variety of business deductions were largely denied. Notably, the U.S. Tax Court found he double counted some expenses. Also, his substantiation for various other items consisted of cancelled checks or credit card/ bank statements that showed expenses were paid, but they were made for such things as doctor visits, gas, and department store purchases for which there was no proof of a business purpose. However, he did substantiate some contract labor expenses to various persons for referrals and other services, including bookkeeping and answering phones. (TC Memo 2020-25)

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2020 – 02/21

Small employers may qualify to change the way they report and pay payroll tax. Generally, employers file Form 941 (Employer’s Quarterly Federal Tax Return) each quarter. Small employers with annual federal employment tax liability of less than $1,000 may now file Form 944 (Employer’s Annual Federal Tax Return) by Jan. 31 of the following year. Qualifying employers may ask the IRS to change their filing frequency from annual to quarterly or quarterly to annually. Requests may be made by U.S. mail (by March 16, 2020) or by phone (by April 1, 2020). If you request a change but the IRS doesn’t grant your request, you must continue with your current filing frequency. Contact us with questions.

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2020 – 02/10 – Do you want to go into business for yourself?

Many people who launch small businesses start out as sole proprietors. There are many tax rules and considerations involved in operating that way. For example, you may qualify for the pass-through deduction on qualified business income. You must pay self-employment taxes and make estimated tax payments on income earned. If you hire employees, you need a taxpayer ID number and must withhold and pay employment taxes. Keep complete records of income and expenses. Also, consider setting up a qualified retirement plan. Contact us if you want more information about the tax aspects of your business, or if you have questions about reporting or recordkeeping requirements.

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2020 – 02/07

How do dependents affect federal income taxes? The Congressional Budget Office recently issued a report (https://bit.ly/3bbJarM ) on this topic. It analyzed tax return data under 2019 tax rules and compared it with the rules that are scheduled to be in place for 2026. It estimated that the average tax benefit per dependent for 2019 is $2,300 ($3,800 per family). Under the 2026 tax rules, that benefit will be $1,700 per dependent ($2,800 per family), on average. Under current rules put in place by the Tax Cuts and Jobs Act, the tax benefit of children younger than 17 is generally greater than the tax benefit of older children or other relatives. Those rules are set to expire after 2025.

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