When I grow up

Clients arrive
We greet them (my feathered-kids and I 🙂

Then we sit down and start talking about their latest project — their small business.
All is going well, and I’m happy for them.

We move on to tax talk.
And discover there’s some missing documentation.
“We can bring the info next week” they say.
So we set a date/time.

That’s when the wife said, “and we’ll bring pizza for lunch.”
Husband turns to me and asks “Do you like pizza?”
Before I could talk the wife answers for me:
“She LOVES pizza.”

I have the best clients!

Next week arrives.
I knew they came before I saw them.
Flipper lets me know when someone pulls in the driveway.
She’s my feathered “watchdog” 🙂

Husband and wife take their seats.
And I get some plates and glasses with water
While I’m doing that, the wife takes a slice of pizza and breaks it in small pieces.
Then goes around to each of my feathered kids — gives them a small pizza bite
Love her!

I’m looking at the two of them:
Integrity, strong work ethics.
And respect for others.

Financially comfortable yet they started a business.
Still wanting to contribute, to do their part.

When I grow up I want to be just like them.

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It’s that time of the year — tax planning time

Hard to believe but Halloween is hereEmoji
Time flies, doesn’t it?
Year-End Tax Planning

For business owners this is also the time for year-end tax planning

Start by reviewing your 2022 paperwork (Jan to Oct).
Income and expenses.
Then estimate revenue and deductions for Nov and Dec.

Look at your 2021 tax return
Next try to anticipate 2023 projected revenue and expenses
Armed with this information, you can develop a strategy on how
to save on your 2022 taxes.

Example: if you expect an increase in your 2023 income then
you need to postpone some of deductible expenses until next year.
This way the deductions claimed in 2023 will provide you with
with greater tax savings

*  *  *  *  *
DID YOU KNOW
You can now pay your taxes with cryptocurrency!?
Yes, you can

Venture to guess what state is the front runner?

You’re right if you guessed Colorado
If you live in Colorado, you can pay your taxes using cryptocurrency.

Bitcoin, bitcoin cash, ethereum, and others, will be accepted as tax payments
You submit your payments through PayPal’s Cryptocurrencies Hub.
Three to five days later the cryptocurrency will be converted to U.S. dollars
It’s that easy

*  *  *  *  *
Well, that’s it for today
Enjoy all the cute little trick-or-treaters 🙂
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Tax News

TAXPAYERS
You’ll be happy to know:
The IRS waives $1.2 Billion in Late-Filing Penalties

Big relief for struggling people and business who filed late their tax returns
(For tax years 2019 and 2020)

Those of you who already paid the penalties will get refunded.
Or get credits.

The IRS Commissioner, says the penalty relief is automatic if you qualify.
No need to call.
Eligible tax returns need to be filed on/before September 30, 2022.

MORE GOOD NEWS
The IRS made a promise to increase the pace on its processing of paper tax returns.
Mid August backlog of unprocessed tax returns: close to 9 million.
But the agency’s pace is steadily increasing.
The goal is to get to a manageable level by the end of this year.

Let’s hope so.

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Remote work and its tax implications

Remote work opened up a whole world of possibilities.
Especially for the people living in states with a higher cost of living.
They can now move to much more affordable areas.
And keep their well-paying jobs.

Good for the employees.
And good for the companies.

All these advantages come with a few challenges as well.
One of the major one being taxes.

Nexus
As a company, when one of your employee is working remotely from another state, then the tax authority of that state can impose taxes on your business.
Why?
Because your remote employee can establish nexus (connection) between your business and your employee’s home state.
And this triggers tax obligations for your business.

The solution?
Keep informed — know the tax requirements.
In situations like these the rules require that the connection must be “substantial” before nexus applies.

Yes, remote work can create some tax complexity.
But, overall, it’s a win/win — for the company and its employees.

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Gig Workers and Taxes

Tax Day is fast approaching

If 2021 was your first year in the gig economy then tax time will be full of surprises for you.
Most likely not very pleasant surprises either
Higher than expected tax liabilities
Even some penalties

Not much fun dealing with all of that.

What to do now?
Get some strong coffee (or your favorite give-me-energy drink)
And start on your paperwork.

Process your paperwork (get help, if necessary).
And file your taxes.

Tax time it’s a stressful time for many.

Now it’s the best time to start thinking, and planning, for next year
Think about how to make it easier on yourself when next tax filing comes around

Here are three things to get you started on the right track:

  1. Income
    Keep track of your income.
    Make sure to keep good records.
    The companies you work with will issue you 1099-NEC and other 1099s
    Do remember:
    The companies will also send copies of these forms to IRS
  2. Expenses
    Keep track of work-related expenses: car maintenance and repairs, work supplies, etc.
    These expenses will help lower your tax bill
  3. Taxes
    Put aside ~20% of your income. Save that money for taxes.
    (If necessary, and to avoid penalties, you may want to make estimated payments.)

That’s it!
Develop a system when you se aside time (weekly or monthly ) and do these.
And I promise you:
Consistently doing these 3 things will make tax time much less stressful.

Wishing you success in all you do

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IRS Performing a Ministerial


I know many of you who have had interactions with IRS in the past two years.
And feeling frustrated by the whole process.

IRS has a backlog of millions of unprocessed 2020 returns.
Their automated system sent out many erroneous notices.
Not a lot of fun — to put it mildly.

Still, some of you choose to see the funny side of things.
Like one of my friends who sent me this email:

> > > > > >

So I’m on the internet, looking up some tax information.
And I’m reading this:
“All or part of any interest you were charged can be forgiven if the interest is due to an unreasonable error or delay by an officer or employee of the IRS in performing a ministerial…”

IRS in performing a ministerial?!
WHAT?!

Now I’m thinking:
“Did I accidentally go to a religious site!?
But it clearly says ‘IRS’

> > > > > >

Love my friends.
And their sense of humor.

On a more serious note, do remember:
You don’t need to pay the interest you were charged due to an IRS employee’s instructions/action.
Or as they said, that interest can be forgiven.

Forgiven
Yes, I know what you’re thinking — that’s another word closely related to ministerial 😊

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What gets Small Town, USA on the World Map?

Jackson, Wyoming
Population: 10,553 (2019)

A small town.
In a sparsely populated state.

Simple country life style.
Small town not many people know about it, right?

Wrong.

Russian billionaires know about it.
And so do wealthy people from Argentina, India, Italy, Venezuela.

Why?

Two words:
Tax haven

Yes, the rich of the world are moving their wealth to Jackson, Wyoming.
The millionaires and billionaires have their attorneys set up trusts.

Washington Post article:
“Wyoming trust and layers of private companies with concealed ownership – allow the world’s wealthy to move and spend money in extraordinary secrecy, protected by some of the strongest privacy laws in the country and, in some cases, without even the cursory oversight performed by regulators in other states.”

Incidentally, they call this “The Cowboy Cocktail.”
So would you like one?

Better question — can you afford it?

How much money are we talking about?

Washington Post:
“Trust companies in Wyoming now manage at least $31.5 billion in assets, according to the state.”

That’s right.

Law professor Allison Tait, a trust and estate expert, regarding the anonymity/privacy of these trusts:
“It’s like a wrapped gift inside a wrapped gift,” she said. “The more wrapping you put on, the harder it is to figure out if there has been tax avoidance or evasion or even financial crime. Very few people know what you’re doing, basically.”

How is this possible?

It began with a 1977 law.
The brain child of an oil company.

As the years passed the lawmakers “improved” the law. And made it easier for company owners to hide their identities.

Adam Hofri-Winogradow, a law professor and trust expert:
“Wyoming is now among the 10 least restrictive, most customer-friendly trust jurisdictions in the world.”

In the WORLD!
Got that!?

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Charity, worker classification, and other tax stuff


* Charity
* Employees vs independent contractors
* Automation and tax collection

FEELING CHARITABLE?
Corporate charitable giving limit has been increased this year
(25% of taxable income).

Individuals
For those of you who itemize, the tax laws now allow an “increased individual limit” up to 100% of your AGI. This is cash contributions made during the calendar-year 2021.
(Contributions made to qualifying charitable organizations.)

Another change for individuals:
Even if you don’t itemize, you can still give and claim a charitable deduction

EMPLOYEES OR INDEPENDENT CONTRACTORS?
IRS reminds business owners (again!) how important is to correctly classify the people they work with.

Missclassifying employees as independent contractors can be costly.
You and/or your company will be held liable for employment taxes, including Social Security, Medicare, and other taxes.

A good starting point (to determine the correct classification):
1. WHAT service will be done, and
2. HOW the work will be done.

If you, the business owner, can control/direct both (what and how) then that worker is generally an employee.

AUTOMATION AND TAX COLLECTION
It happened again!!
Don’t panic if you received a collection letter from the IRS
You are not alone
Almost 90,000 taxpayers (who filed their taxes timely) received these erroneous collection notices

If you received one don’t stress
There’s no action needed on your part

The lesson in this:
It appears that automation and tax collection still haven’t learned to work well together 🙂

 

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Possible tax law changes on the horizon

Investing in infrastructure
Helping families with education, child care and paid family leave

These are topics at the top of the agenda in Washington.

Where do the funds come from?
Tax increases.

Possible tax law changes on the horizon
Congress is discussing proposals and (possible) changes to tax laws.
Estate and gift taxation, FICA, and eliminating the $10,000 limit on SALT taxes — these are some of the tax proposals Congress is considering making changes to.

On the personal level, whether these changes affect you (or not) depends on your income bracket.

Those who will be mostly impacted by these changes include taxpayers with a household income over $400,000, who itemize, and make (or receive) annual gifts.

The big question is whether some of these changes will be made retroactively.
And the effects on individuals and businesses.

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IRS and Virtual Currency

At any time during the year
“Did you receive, sell, send, exchange, or otherwise
acquire any financial interest in any virtual currency?”

This question is on the first page of your tax form (US).
And you need to answer it.

Globally, many tax authorities are not sure how to tax cryptocurrency.
We don’t have that problem here.
It’s classified as property.

Cryptocurrency transactions (related to tax evasion and dark web):
IRS (through its Criminal Investigation unit) is using #dataanalytics and #artificialintelligence to address both.
Transactions are traced across borders.
(Obviously these guys don’t believe in border walls 🤣 )

To accomplish this IRS works through groups such as J5 and others.

The goal?
Improved tax compliance.
Globally.

(IRS is hiring tech experts: data scientists and behavioral scientists.
And individuals with significant cryptocurrency knowledge)

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