2021 Tax Return Filing Deadlines Approaching
If you are on extension for your passthrough entity or individual income tax returns, your 2021 tax return filing deadline is rapidly approaching. Please provide Moskowitz LLP with all tax information, balance sheets and profit and loss statements for your pass-through entity no later than August 19, 2022 so that we may have sufficient time to prepare your returns for timely filing; filing deadline September 15, 2022. Failure to provide this information by the deadline may result in a late filed tax return, for which you will incur penalties. If you have any questions or if you have not received confirmation that we have your tax documents, please be sure to contact us no later than August 19th.
Moskowitz LLP asks that you provide tax information related to your individual tax returns no later than September 23, 2022 to allow us sufficient time to finalize your individual tax returns and get it to you for timely filing; filing deadline October 15, 2022.
Midyear tax-planning season is in full swing. In this month’s newsletter, read about several tax planning tips that can help ensure your company is in tiptop shape come year-end. And now is a great time to review best practices in accounting for business performance. To help you, included here are some common problems and how to avoid them.
August 1, 2022 –
Moskowitz LLP opens San Francisco Office – New Mailing Address:
201 California Street | Suite 640 | San Francisco, CA | 94111
August 19, 2022 –
Last Day to get Moskowitz LLP all tax information for Pass-Through Tax returns, due September 15, 2022.
August 23, 2022 –
Webinar with Steve Moskowitz and Donna Marie Baldwin re. Real Estate Tax Planning:
September 15, 2022 –
3rd Quarter Estimated Tax Payments Due; Pass-through Entity Tax Returns Due if on extension.
September 23, 2022 –
Last Day to get Moskowitz all tax information for Individual Income Tax Returns due October 15, 2022
In This Issue
- Upcoming Webinar: Real Estate Planning
- Midyear Tax Planning Ideas for Your Business
- Common Small Business Accounting Problems
- Your Business Mileage Deduction Just Became More Valuable
- IRS Warns Against These Especially Dangerous Tax Scams
- Recent Podcasts and Webinars
Upcoming Webinar: Real Estate Tax Planning
Tuesday August 23, 2022 6:00 PM PST
Join Steve and Liz for a conversation on tax planning for real estate investors with veteran realtor Donna Marie Baldwin.
With 2,500+ transactions under her belt, Donna Marie has lived through the roller coaster ride that is the Bay Area real estate market. Today, Donna Marie seeks to build on her 40+ years of experience of weathering the highs and lows and highs again of the Bay Area real estate market to help you find your next dream home. Donna Marie’s dedication to quality customer service, unimpeachable work ethic and market expertise will now be enhanced by the innovative tools that COMPASS has developed to adapt to our ever-changing world.
Register today and mark your calendars so you don’t miss what is sure to be a valuable presentation.
Register for our Free Webinar!
Midyear Tax Planning Ideas for Your Business
As a small business owner, there is plenty you can do in the summer months to reduce your 2022 tax liability. Here are several moves to consider now.
- Plan equipment purchases.
The Section 179 and bonus depreciation deduction are two valuable tax planning tools for small businesses. If you anticipate a profit this year, you can use planned improvements and equipment replacement to dramatically lower this year’s tax bill. In 2022, you can deduct up to $1.08 million of equipment purchases courtesy of the Section 179 deduction. The bonus depreciation deduction permits you to deduct 100% of an equipment’s price tag. The downside to the approach by bundling all the depreciation in one year, is that it makes profit in future years higher.
- Leverage the extra business meals deduction.
Plan your business meals to take advantage of the temporary 100% deductibility available for qualifying meals prepared by a restaurant. So now might be a great time to re-engage with key customers and suppliers in a friendly atmosphere to either enhance revenue or reduce your costs. The IRS has guidance on what is considered a restaurant for purposes of this 100% deduction. If food is purchased from a non-restaurant establishment, the traditional 50% deduction limitation still applies.
- Keep vehicle logs current.
The IRS increased the business mileage rates for the final six months of 2022 from 58.5 cents to 62.5 cents. Be sure to take advantage of this larger tax deduction by keeping your mileage logs current if your business has one or more vehicles. Whether your logs are kept on either physical paper or in a software application, remember that the IRS requires contemporaneous documentation of all business activity related to a vehicle. If you don’t keep track of your vehicle expenses as they occur, your deduction could be disallowed.
- Look into hiring your children.
Your kids could provide a valuable tax break for your business, but you must follow certain steps to ensure the wages are fully deductible. The child must have a real job that helps the business, and the wages must be reasonable for the work performed. In addition, depending on how your business is organized and the age of your child, you may be able to avoid paying Social Security, Medicare, and unemployment taxes on their wages. To qualify, you must be a sole proprietor or a husband-wife eligible partnership and your child must be under the age of 18.
These are just some of the many ways your business can cut its tax bill. Call today to start your 2022 tax planning.
Common Small Business Accounting Problems
Keeping your company books in order can be a challenge. Consider these common accounting problems often seen when preparing business tax returns to ensure they do not happen to your business:
- Mixing in personal expenses.
Having non-business costs included in your business accounts creates several problems. First, your financial statements will not accurately portray your business performance. Second, personal expenses are a drag on your available cash. Third, the IRS is quick to deny legitimate business expenses as tax deductions if it perceives that personal expenses are blended with business expenses. Common sources of non-business expenses to watch for are charges you make on credit cards and expense reimbursements to owners.
- Not keeping your books current.
Waiting too long to record information in your accounting system actually requires more time to get back on track. Complex entries get even more complicated as your ability to recall transaction details diminishes over time. Set a goal to have all transactions entered every week at a minimum.
- Entering capital assets as expenses.
Because capital assets provide long-term value, they are entered on the balance sheet and depreciated over multiple years. Misclassifying a capital asset as an expense will torpedo your net income for that period and potentially create an audit problem. To avoid this, review large purchases and comb expense accounts likely to be hiding capital assets during your month-end review.
- Not performing timely bank reconciliations.
When you receive your bank statements, ensure they are reconciled to your books within a week or two. Bank reconciliations almost always identify errors. Delaying bank reconciliations will add unneeded complexity and decrease your chances of correcting an error in a timely manner.
- Mishandling sales tax.
Many businesses incorrectly record sales tax they receive as revenue. Sales tax you receive should be entered as a liability until you remit it to the proper tax authority, ultimately avoiding your income statement altogether. This is because it is not your money. You are holding that money in trust for each respective state. On the other hand, sales tax you pay on purchases should be booked as an expense.
- Lacking proper documentation.
Most business owners know that you need to save invoices and receipts for sales and purchases, but what about documentation for adjustments and journal entries? Proving these is just as important. Contracts, time sheets and shipping documents are some examples of substantiation required to support your journal entries.
- Devoting too much of your time.
Most entrepreneurs start their business for reasons other than spending hours working on their books. Don’t get bogged down worrying about the inner-workings of accounting rules and tax laws. Partnering with an expert to handle your accounting needs can free you up to use your expertise where it’s needed the most — running and growing your business.
Check out our full blog post on how Moskowitz LLP can help with account reconciliation; we’ll help you figure out what to do if your tax records are a mess!
Your Business Mileage Deduction Just Became More Valuable
You can deduct more for business mileage for the rest of 2022, per a recent announcement by the IRS.
Starting July 1st, the IRS’s business mileage rate is increasing by 4 cents, to 62.5 cents per mile, while the medical and moving mileage is also increasing by 4 cents, to 22 cents per mile. The previous mileage rates still apply through June 30th.
Here are some tips to make the most of your business’s vehicle expense deduction.
- Don’t slack on recordkeeping. You won’t be able to take advantage of the increased mileage rates without proper documentation. The IRS mandates that you track your vehicle expenses as they happen (this is called contemporaneous recordkeeping). You’re not allowed to wait until right before filing your tax return to compile all the necessary information needed to claim a vehicle deduction. Whether it’s a physical notebook you stick in your glove compartment or a mobile phone app, pick a method to track your mileage and actual expenses that’s most convenient for you.
- Keep track of both mileage and actual expenses. The IRS generally lets you use one of two different methods to track vehicle expenses – the standard mileage rate method or the actual expense method. But even if you use the standard mileage method you can still deduct other expenses like parking and toll fees. So keep good records.
- Consider using standard mileage the first year a vehicle is in service. If you use standard mileage the first year your car is placed in service, you can then choose which expense tracking method to use in subsequent years. If you initially use the actual expense method the first year your car is placed in service, you’re locked in to using actual expenses for the duration of using that car in your business. For a car you lease, you must use the standard mileage rate method for the entire lease period (including renewals) if you choose the standard mileage rate the first year.
- Don’t forget about depreciation! Depreciation can significantly increase your deduction if you use the actual expense method. For heavy SUVs, trucks, and vans with a manufacturer’s gross vehicle weight rating above 6,000 pounds, 100% bonus depreciation is available through the end of the 2022 tax year if the vehicle is used more than 50% for business purposes. Regular depreciation is available for vehicles under 6,000 pounds with annual limits applied.
Please call if you have any questions about maximizing your business’s vehicle expense deduction
IRS Warns Against These Especially Dangerous Tax Scams
Every year, the IRS compiles a list of common scams that taxpayers can encounter. This year, they’re putting the following threats at the top of it:
- Pandemic-related scams. Criminals are still using the COVID-19 pandemic to steal people’s money and identity with phishing emails, social media posts, phone calls, and text messages.All these efforts can lead to sensitive personal information being stolen, and scammers using this to try filing fraudulent tax returns. Some of the scams people should continue to be on the lookout for include Economic Impact Payment and tax refund scams, unemployment fraud leading to inaccurate taxpayer 1099-Gs, fake employment offers on social media, and fake charities that steal taxpayers’ money.
- Offer-in-compromise mills. Offer-in-compromise (OIC) mills make outlandish claims about how they can settle a person’s tax debt for pennies on the dollar. Often, the reality is that taxpayers are required to pay a large fee up front to get the same deal they could have gotten on their own by working directly with the IRS. These services tend to be more visible right after the filing season ends while taxpayers are trying to pay their recent bill.
- Suspicious communication. Every form of suspicious communication is designed to trick, surprise, or scare someone into responding before thinking. Criminals use a variety of communications to lure potential victims. The IRS warns taxpayers to be on the lookout for suspicious activity across four common forms of communication: email, social media, telephone, and text messages. Victims are tricked into providing sensitive personal financial information, money, or other information. This information can be used to file false tax returns and tap into financial accounts, among other schemes.
- Spear phishing attacks. Criminals try to steal client data and tax preparers’ identities to file fraudulent tax returns for refunds. Spear phishing can be tailored to attack any type of business or organization, so everyone needs to be skeptical of emails requesting financial or personal information.
What you can do
If you discover that you’re a victim of identity theft, consider taking the following action:
- Notify creditors and banks. Most credit card companies offer protections to cardholders affected by ID theft. Generally, you can avoid liability for unauthorized charges exceeding $50. But if your ATM or debit card is stolen, report the theft immediately to avoid dire consequences.
- Place a fraud alert on your credit report. To avoid long-lasting impact, contact any one of the three major credit reporting agencies—Equifax, Experian or TransUnion—to request a fraud alert. This covers all three of your credit files.
- Report the theft to the Federal Trade Commission (FTC). Visit identitytheft.gov or call 877-438-4338. The FTC will provide a recovery plan and offer updates if you set up an account on the website.
- Please call if you suspect any tax-related identity theft. If any of the previously mentioned signs of tax-related identity theft have happened to you, please call to schedule an appointment to discuss next steps.
Moskowitz LLP Resources for You
We are striving to offer you relevant and timely resources to assist you. Please check out our recent additions:
Episode 27: Self Employed Bank Loans & The Bay Area Real Estate Boom
Episode 26: The Price of Gas and the Benefits of Giving
Episode 25: Deferred Sales Trusts with Brett Swarts
Episode 24: Tax Planning and Preparation ft. Roger Knecht
Watch: Steve’s Recent Webinars
Cryptocurrency and Taxation 2022 Update
California SALT Tax Workaround: AB150 & SB113
Tax Planning for Real Estate: Opportunity Zones