2021 TAX NEWS & TIPS
For Individuals
With so much speculation surrounding President Biden’s Build Back Better agenda, now that the bill did not pass, you or I can relax. But will tax season be extended again?
Lenders should not report student loans discharged under American Rescue Plan Act for “any amount discharged after 12/31/20, and before 01/01/26, for certain loans provided expressly for post-secondary educational expenses, whether through an educational institution or directly to the borrower.”
By now if most of you Schedule A itemizers who deal with the SALT (State and Local Taxes) limitation, know that for certain pass-through entities like S-Corps, California has created a work around via an optional tax equal to 9.3% of the net income of the entity that is credited on the California personal return. Confusing, right?: https://www.ftb.ca.gov/file/business/credits/pass-through-entity-elective-tax/index.html
Alimony deduction allowed for health care premiums purchased with pretax wages -- This is sort of like double-dipping, but the Court seems to think this is okay, so if this applies, enjoy!
For Small Business Owners
PPP Loan forgiveness may still be part of your 2021 return if you got the loan in 2021. Let me know.
The standard business mileage rate goes to 58.5 cents per mile for the 2022 tax year, an increase of 2.5 cents. Go drive, but be sure to keep a contemporaneous log!
Employee Retention Credits (ERC) may still be available to you by filing a timely 941 or an amended 941-X if you started business after 02/12/2020. It is unquestionable one of the most generous credits, so apply!
For Everyone
IRS addresses taxpayer reliance on FAQs -- The new policy establishes a reasonable-cause defense and updates the procedure for issuing new FAQs. This should help you and I get answers quicker.
Since the IRS has been understaffed for years and due to pandemic-induced inefficiencies, the IRS will be slow on most things such as amended returns, paper returns, Advocate services, and a host of others the author has personally experienced over the last two years. While the IRS budget will include major hiring, will that mean better service? No, not right away as people are trained. The adage still applies: 6-8 weeks often is 6-8 months and a 90-day letter is at least twice that by the time they respond. Know that IRS letters often cross in the mail since most are computer-generated now.