Each year thieves try to steal billions in federal withholdings by stealing your identity. As the IRS focuses more attention on this quickly growing problem, now is the time of year to be extra vigilant.

Early tax filing season is the worst time
Your federal tax account at the IRS has plenty of money in it from all the taxes withheld from your paycheck during the course of the year. Until you file your tax return, the IRS does not know whether you need to pay more in or they need to refund you the excess amounts withheld.

Thieves know this too, and will try to file a fraudulent tax return before you have time to submit your own. By doing this, they can steal some of your withholdings and be long gone by the time you file your own tax return. So what can you do?

• File early. The sooner you file your tax return, the less likely a thief will beat you to your refund.

• Get an Identity Protection PIN. All taxpayers who can verify their identity can get an Identity Protection PIN (IP PIN) from the IRS. The IP PIN is a six-digit code known only to you and the IRS that helps prevent identity thieves from filing fraudulent tax returns. If you want an IP PIN, visit irs.gov/IPPIN.

• Check your credit reports. See if there is any suspicious activity on your accounts and on your credit reports.

• Protect your ID. Be suspicious. Never give out your Social Security Number, do not leave your credit card unattended, never give ID information to someone who called you, use the password function on your phone, be aware of strange mail, and shred important documents. Your best defense to IRS ID theft is to use best practices to protect your information.

The IRS is becoming a better spotter
If the IRS suspects something is wrong with your filed tax return they will send you a notice. If this happens to you:

• Respond immediately. Get the direct contact information from the IRS website and let them know that you have a possible identity theft problem.

• File an Identity Theft Affidavit (IRS Form 14039). This will record your problem with the IRS and they will take extra steps to ensure your account activity is coming from you and not the ID thief.

• File a police report.

• Contact the credit bureaus.

Having your identity stolen is one thing. Having your tax withholding stolen and then needing to unravel this problem within the IRS is a major hassle. Try to stay vigilant and know that there are steps to help protect your tax records. Is there good news in all this? If the IRS pays out a refund to someone stealing your identity, they are on the hook for this loss, not you.

"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at info@monarchaccountinggroup.com. 
 
For more free resources, such as Tax Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720
​

Are you an independent contractor or an employee? As the pandemic continues, many long-time employees are now picking up jobs as contractors. In the meantime, states like California are trying to force the definition of employees upon companies. Getting it wrong could cost you plenty in the way of Social Security, Medicare taxes, and other employment related taxes. Here is what you need to know.

The basics

As a contractor. If you are the worker and you are not considered an employee you must;

• pay self-employment taxes (Social Security and Medicare related taxes)
• make estimated federal and state tax payments
• handle your own benefits, insurance, and bookkeeping

As an employer. You must ensure your employee versus independent contractor determination is correct. Getting this wrong in the eyes of the IRS can lead to;

• payment and penalties related to Social Security and Medicare taxes
• payment of possible overtime including penalties for a contractor reclassified as an employee
• legal obligation to pay for benefits

Determining the answer: things to consider

Usually in determining whether you are an independent contractor or an employee, state and federal authorities look at the business relationship between the employer and you, the worker. The IRS focuses on the degree of control exercised by the business over the work done and they will assess your level of independence. Here are some tips.

• The more the employer has the right to control your work, when the work is done, how the work is done, and where the work is done, the more likely you are an employee.
• The more the financial relationship is controlled by the employer the more likely the relationship will be seen as an employee and not an independent contractor. To clarify this, an independent contractor should have a contract, have multiple customers, invoice the company for work done, and handle financial matters in a business-like manner.
• The more business-like the arrangement the more likely you have an independent contractor relationship.

Don't forget your obligations
With so many workers now in the contractor ranks, it is important to stay on top of your tax filing obligations. With 15.3 percent of your income due for FICA (Social Security and Medicare), forgetting to pay this can quickly become a financial nightmare.

While there are no hard set rules, the more reasonable your basis for classification and the more consistently it is applied, the more likely an independent contractor classification will not be challenged. But beware, states are trying to constantly move contractors into the ranks of employees, all of which can cause havoc as companies and workers try to understand the changes these initiatives create.

"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at info@monarchaccountinggroup.com. 
 
For more free resources, such as Tax Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720

WASHINGTON − The Internal Revenue Service today reminded businesses and other payors that the revised Form 1099-MISC, Miscellaneous Income, and the new Form 1099-NEC, Nonemployee Compensation, must be furnished to most recipients by Feb. 1, 2021.
 
Redesigned Form 1099-MISC
The IRS revised Form 1099-MISC for the 2020 tax year to accommodate the creation of a new Form 1099-NEC. The redesigned 1099-MISC has different box numbers for reporting certain income. Businesses must send Form 1099-MISC to recipients by Feb. 1, 2021, and file it with the IRS by March 1 (March 31 if filing electronically).
 
If businesses are using Forms 1099-MISC to report amounts in box 8, Substitute Payments in Lieu of Dividends or Interest, or box 10, Gross Proceeds Paid to An Attorney, there is an exception to the normal due date. Those forms are due to recipients by Feb. 16, 2021.
 
New Form 1099-NEC
Form 1099-NEC is a new form for tax year 2020 for nonemployee compensation of $600 or more to a payee. This form should be filed with the IRS, on paper or electronically, and sent to recipients by Feb. 1, 2021.
 
There is no automatic 30-day extension to file Form 1099-NEC. However, an extension to file may be available under certain hardship conditions. Also, nonemployee compensation may be subject to backup withholding if a payee has not provided a taxpayer identification number to the payer or the IRS notifies the payer that the Taxpayer Identification Number provided was incorrect.
 
Deadlines help fraud detection
The due dates for information returns, like Forms 1099-MISC and 1099-NEC help the IRS more easily detect refund fraud by verifying income that individuals report on their tax returns. Payors can help support that process, and avoid penalties, by filing the forms on time and without errors. The IRS recommends e-file as the quickest, most accurate and convenient way to file these forms.
 
For more information, the instructions for Forms 1099-MISC and 1099-NEC are available on IRS.gov.

"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at info@monarchaccountinggroup.com. 
 
For more free resources, such as Tax Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720

Now is the time to make your estimated tax payment

If you have not already done so, now is the time to review your tax situation and make an estimated quarterly tax payment using Form 1040-ES. The 2020 fourth quarter due date is now here.

Due date: Friday, January 15, 2021

You are required to withhold at least 90 percent of your 2020 tax obligation or 100 percent of your 2019 federal tax obligation.* A quick look at your 2019 tax return and a projection of your 2020 tax return can help determine if a payment by Friday, January 15, 2021 is necessary. Here are some other things to consider:

Underpayment penalty. If you do not have proper tax withholdings, you could be subject to an underpayment penalty. The penalty can occur if you do not have proper withholdings throughout the year. So a fourth quarter catch-up payment may not help avoid an underpayment penalty if you didn't pay enough taxes in prior quarters.

Self-employed. Remember to also pay your Social Security and Medicare taxes, not just your income taxes. Creating and funding a savings account for this purpose can help avoid a cash flow hit each quarter when you pay your estimated taxes.

Don't forget state obligations. With the exception of a few states, you are often required to make estimated state tax payments when required to do so for your federal tax obligations. Consider conducting a review of your state obligations to ensure you meet these quarterly estimated tax payments as well.

Special situations during this COVID tax year. The pandemic makes this fourth quarter estimated tax payment more complicated, especially if the following situations happened to you in 2020:

• Received unemployment. If so, check to see if either federal or state taxes were withheld. If not, you may need to account for these payments with your fourth quarter estimated tax payment.

 

• Had unusual business income. If your business was hit by the pandemic, you may find your withholdings were either over withheld or under withheld compared to normal. Run a quick projection to make sure you are adequately covered.

 

• Picked up side jobs to make ends meet. These part time gigs often create income without proper withholdings.

* If your income is over $150,000 ($75,000 if married filing separate), you must pay 110% of last year’s tax obligation to be safe from an underpayment penalty.

"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at info@monarchaccountinggroup.com. 
 
For more free resources, such as Tax Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720

Employers must file Form W-2 and other wage statements by Monday, February 1, 2021. This is also the date Form W-2s are due to employees.
 
By law, employers are required to file copies of their Form W-2, Wage and Tax Statement, and Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration by January 31. However, since January 31 falls on a Sunday in 2021, the deadline is the next business day, Monday, February 1.
 
Form 1099-MISC, Miscellaneous Income and Form 1099-NEC, Nonemployee Compensation, are also due to recipients on February 1, 2021, with some exceptions. Other due dates related to Form 1099 are listed in the instructions for these forms.
 
Timely filing helps prevent fraud.
Filing wage statements on time and without errors is beneficial to employers and the IRS. The employer avoids penalties, and the IRS has time to verify income taxpayers report on their tax returns, which helps prevent fraud.
​
E-file is the quickest, most accurate and convenient way to file these forms. The law requires certain filers who file 250 or more information returns for any calendar year to file electronically.
 
Employers should plan and prepare early.
Good preparation now can help employers avoid problems later. For instance, employers can start by verifying or updating employee information, such as:
  • Names
  • Addresses
  • Social Security numbers
  • Individual Taxpayer Identification Numbers
 
Employers should be sure their account information is current and active with the Social Security Administration as soon as possible. Lastly, employers should order paper Form W-2s, if needed.
 
Automatic extensions of time to file Form W-2s are not available. The IRS will only grant extensions for very specific reasons. For details, employers should read the instructions for Form 8809, Application for Extension of Time to File Information Returns.
 
More information:
Form W-2 and W-3 instructions
Information Return Penalties

"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at info@monarchaccountinggroup.com. 
 
For more free resources, such as Tax Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720

Remember to properly document your mileage to receive full credit for your miles driven.

​"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at info@monarchaccountinggroup.com. 
 
For more free resources, such as Tax Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720

There are many tax benefits built into home ownership. Here is a review of the most common. It may be worth a quick check to ensure you are maximizing your home ownership tax benefits.

Common deductions

Interest deductibility. Mortgage interest is one of the few allowed deductible interest expenses. It is limited to the first $750,000 dollars in loans secured by your primary residence ($1 million for mortgages underwritten prior to 2018). You may also deduct points paid as an itemized deduction over the life of your mortgage.
Bonus: You can also deduct interest on a second home (cabin).

Home office. If you have a qualified home office, it also creates a deductible expense. There is also a safe harbor home office simplified calculation that makes it easy to get this tax deduction.

Property taxes. Your property taxes are also allowed as an itemized deduction. Current tax laws limit this deduction along with other taxes to $10,000 whether you are married or single.

Free rental income. You can rent out your home for up to two weeks and not claim the income. This is a great tax break if your home is located next to a popular landmark or a major event. Many taxpayers rent out their lake home for two weeks to help reduce the cost of their home away from home.

Home mortgage insurance. Premiums paid for home mortgage insurance are also deductible through 2020. While this tax deduction is not a permanent part of the tax code, it is often extended from year to year by Congressional action.

More home benefits!

Capital gain exclusion. Perhaps the best tax benefit of home ownership is receiving tax-free gains. Generally when you sell property for a profit it creates a taxable event. However, if the property is your primary residence you can omit up to $250,000 ($500,000 married filing jointly) of these gains. Special rules apply, but this is a major tax benefit of home ownership.

Better than rent. Since the housing bust of 2008, many would be homeowners are reluctant to exit their rental housing because of the perceived risk involved in owning a home. However, with the recovery of the housing market coupled with lower interest rates, now might be the right time to realize the tax benefits of owning your own dream home.

"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 ​
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at info@monarchaccountinggroup.com. 
 
For more free resources, such as Tax Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720