The Importance of Tax Planning

A recent study showed that almost a quarter of American taxpayers do not have a financial plan. Financial planning can be hard. It involves so much time and information. Then, once you get that information what does it all mean, or how are you supposed to use it. A recent study shows that 55% of American taxpayers have gotten valuable financial information from their tax return, but only half of that number actually assess their tax returns annually.

Examining your tax return can tell you so much valuable information. It allows you to look at trends from year to year. You can assess income to see if it is non-recurring or reoccurring. You can look at deductions to identify your major expenses. With assessing both of these you can get a good idea of how much money you have left after all of your expenses are covered.

Then from here you can ask more specific questions. For example, how would it affect me if I took more money out of my retirement account, or how would buying this house affect me. You can even assess how having a kid would affect your tax return and financial wellbeing. There is so much you can learn and plan from taxes. Most people think having your taxes done is a once-a-year thing. Tax planning can be super beneficial and not only when it comes to tax time.

So, if it is this beneficial and great why isn’t everyone doing it? Well, that is a simple answer. Tax returns can be very hard to understand. There are so many schedules, depreciation sheets, and just forms in general to look through. That is why talking to a tax professional and tax planning can be so beneficial. Talking to an expert can allow you to benefit from tax breaks and to be able to better plan for the future. Here at SWVA tax and accounting we pride ourselves on our tax planning and want to help every client achieve financial success and peace of mind. Give SWVA Tax & Accounting a call today at (540)-250-3198. We’ll run the numbers, while you run the business.

 

IRS Relief for Small Business

tax-tips

The IRS (Internal Revenue Service) is offering penalty relief for any employer that fails to deposit employment taxes with the IRS by the correct date.

In Notice 2021-24, the IRS intensified prior guidance from 2020. The new notice offers relief for employers who are required to pay eligible sick leave wages and qualified family leave wages, along with qualified health plan expenses that can be allocated to those wages, as mandated by the Families First Coronavirus Response Act, which was amended by the COVID-related Tax Relief Act of 2020, along with the American Rescue Plan Act of 2021.

The IRS guidance targets to help businesses who were hurt by the COVID-19 pandemic through the coronavirus relief packages passed by Congress since last year, including the CARES Act, the Consolidated Appropriations Act, and most recently the American Rescue Plan Act. The guidance helps employers benefit from some of the tax credits available to them under those laws — such as for paid sick leave, family leave, and the Employee Retention Credit — while they continue to pay employees during the pandemic with some of the payroll taxes they otherwise would have needed to deposit with the IRS.

The notice also offers relief for some employers for whom COBRA continuation coverage premiums weren’t paid by former employees who were eligible for assistance with coverage under the American Rescue Plan Act.

In a statement from the IRS, “This relief ensures that such employers may pay qualified sick leave wages and qualified family leaves wages, qualified wages, and COBRA continuation coverage premiums using Employment Taxes that would otherwise be required to be deposited without incurring a failure to deposit penalty.”

The assistance also provides some relief for employers who experienced a full or partial closure order due to COVID-19 or who suffered a decline in business.

Overall, many businesses will experience a plethora of benefits from the IRS’s new guidance and the various coronavirus relief packages passed by Congress.

As always feel free to reach out to us so that we can make sure you are the best positioned on all of the above. Feel free to reach out to us and let’s set up a time for a review – call us at SWVA Tax & Accounting at 540-250-3198.

Does Your PPE Spending Qualify For Medical Deduction? by Rebekah Hodges

According to the IRS, amounts paid for personal protective equipment (PPE) used primarily to prevent the spread of COVID-19, including things like masks, hand sanitizer, sanitizing wipes, and other things, can be treated as medical care costs under Sec. 213(d). Because of this, if a taxpayer is not reimbursed by their insurance or a separate party for costs spent on COVID-19 PPE used by the taxpayer, the taxpayers spouse, or the taxpayers dependents, those costs are deductible under Sec. 213(a) if the taxpayer’s total medical expenses exceed 7.5% of adjusted gross income. 

Another option for taxpayers is to have PPE costs reimbursed under health flexible spending arrangements (health FSAs), Archer medical savings accounts (Archer MSAs), health reimbursement arrangements (HRAs), or health savings accounts (HSAs). But if an amount is covered in any way by a health FSA, Archer MSA, HRA, HSA, or any other health plan, it is no longer deductible under Sec. 213.

If the terms of a group health plan such as FSAs or HRAs do not allow for COVID-19 PPE reimbursements, they may be amended under this announcement to provide for reimbursements of expenses for COVID-19 PPE incurred for any period beginning on or after Jan. 1, 2020, and that amendment will not be treated as causing a failure of any reimbursement to be excludable from income under Sec. 105(b) or as causing a Sec. 125 cafeteria plan to fail to meet the Sec. 125 requirements.

However, a group health plan may only make an amendment under the announcement if the amendment is adopted before the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective, no amendment with retroactive effect is adopted after Dec. 31, 2022, and the plan is operated consistent with the terms of the amendment, including during the period beginning on the effective date of the amendment through the date the amendment is adopted.

As always if you have any questions about your deductions or whether or not something counts, make sure to reach out to us at 540-250-3198 or visit us online at www.swvatax.com.