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IRS reminds taxpayers an extension to file is not an extension to pay taxes

3/28/2022

For most individual taxpayers the tax filing and payment deadline is Monday, April 18, 2022. Those who need more time to file can request an extension to file. Taxpayers must request an extension to file by April 18, or they may face a failure to file penalty. This extension gives them until October 17 to file their tax return. An extension to file is not an extension to pay.
Most taxpayers must pay taxes by April 18 to avoid penalties and interest on the amount owed after that date. Taxpayers in Maine and Massachusetts have until April 19 to pay to file their returns due to the Patriots' Day holiday in those states.
How to request an extension to file

To get an extension to file, the IRS urges taxpayers to do one of the following:

File Form 4868 through their tax professional, tax software or by using IRS Free File on IRS.gov. Individual taxpayers, regardless of income, can use Free File to electronically request an automatic tax-filing extension.
Submit an electronic payment with Direct Pay, Electronic Federal Tax Payment System or by debit, credit card or digital wallet and select Form 4868 or extension as the payment type. Taxpayers don’t need to file Form 4868 when making an electronic payment and indicating it’s for an extension. The IRS will automatically count it as an extension.

Some taxpayers may have extra time to file their tax returns and pay any taxes due. This includes some disaster victims, taxpayers living overseas, including members of the military, and eligible support personnel serving in combat zones.

"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 Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA; Janice Papais, CPA

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Toss This. Not That.

3/25/2022

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Your guide to post tax-filing record retention

Before you close this year's tax file there is still some work to do. If the IRS or state revenue department selects your return for review, you will need to be prepared. Here is what you need to do now:

Keep a copy of your Form 1040 indefinitely. Do not toss or destroy any of your 1040s. You may need them to correct historic Social Security earnings statements or to prove that you filed a tax return.
Supporting documents need to be retained for three years. Records to support your tax return (i.e., W-2s, 1099s, K-1s, receipts, canceled checks, bank statements and mileage logs) should be kept for a minimum of three years from the later of the tax filing due date, the date you filed your taxes, or the date you paid your tax in full. This approach ensures that your records are available for a potential IRS audit.
Property and investment records need to be held longer. To prove your cost/basis and taxable gain or loss, all records relating to property that you own (your home, rental properties, stocks bonds and other investments) need to be kept for at least three years after it's sold or disposed.
Be mindful of other record retention requirements. The three-year period is the federal guidance for standard returns. There are other factors that should be considered, including:
- State record retention requirements (often six months to one year longer)
- Requirements for insurance, banking or estate management
- Additional federal requirements for tax returns including unreported income (six years), worthless securities (seven years) or bad debt (seven years)
- No audit time limit for fraudulent returns
A specific filing system is not required, but organization is key. The ability to easily find your documents in the event of an audit will make the process much simpler. Here are some tips:
- File records by year rather than income or deduction type.
- Within the file, order your records to match the flow of the Form 1040.
- Consider scanning your files to create a digital file as a backup.
- Create 2022 files now to save documents for current year.
- Shred old documents; don't just throw them away.

If you are unsure whether to retain or shred something, keep it unless you know the document can be replaced.

"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 Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA; Janice Papais, CPA

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Online Account and tax transcripts can help taxpayers file a complete and accurate tax return

3/24/2022

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Filing an error-free tax return is key to taxpayers getting any refund they are due as soon as possible. One IRS resource that can help is Online Account. This is the fastest and easiest way to see account information such as estimated tax payments, prior year adjusted gross income and economic impact payment amounts.

Taxpayers can also request a tax transcript. There are five types of transcripts. Taxpayers should review each transcript type to determine which one best meets their needs. IRS transcripts are also a good way to check for fraudulent activity. However, ordering a transcript will not help them find out when they will get their refund. Where's My Refund? provides the most up-to-date details about whether a tax return has been received and if the IRS has approved or sent the refund.

To protect taxpayers' identities, the transcripts partially hide personally identifiable information such as names, addresses and Social Security numbers. All financial entries are fully visible.

There are three ways taxpayers can get transcripts:

Online. People can view their tax records in their Online Account. From there, they can visit Get Transcript Online to view, print, or download all transcript types.

By mail. Taxpayers can use Get Transcript by Mail to get a tax return or tax account transcript delivered within 5-10 calendar days. They can also submit Form 4506-T to request any transcript type. Most Form 4506-T transcript requests are processed within 10 business days and then mailed. Form 4506-T is available on the Forms, Instructions and Publications page on IRS.gov.

By phone. Taxpayers can call the IRS’s automated phone transcript service at 800-908-9946 to get a tax return or tax account transcript delivered by mail within 5-10 calendar days.

All transcripts are provided free of charge.

"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 Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA; Janice Papais, CPA

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Homeowner Alert! Review Your Tax Forms

3/18/2022

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New tax rules are creating confusion

Home-related tax rules changing over the past few years have caught some taxpayers by surprise. When your mortgage company reports tax-related information to you and the IRS using Form 1098, it no longer means all the interest and points reported on these statements are tax deductible. Here's what you need to know.

Mortgage interest deductions have new loan amount limits. For new mortgages starting on or after Dec. 15, 2017, you can deduct interest on up to $750,000 of the loan (down from $1 million for mortgages initiated before Dec. 15, 2017). If your original mortgage is above the threshold, a calculation will be done to determine the deductible amount of interest. You can’t simply deduct the full amount of interest being reported on your Form 1098.

Proceeds not used to buy a home add complexity. Proceeds from home equity debt that are not used to build, buy or substantially improve a qualified home are not tax deductible. This includes mortgage or home equity proceeds used to pay for college expenses, debt consolidation or other purposes. Mortgage companies issuing these loans will still send you a Form 1098, but it’s up to you to prove how you use the funds during the current year and any prior year.

Mortgage points requires review of settlement statements. Points are paid as a way to obtain a lower interest rate. Generally, points are deductible in the year they are paid, but they have more restrictions than mortgage interest. Points paid to refinance an existing mortgage, for example, may need to be deducted over the life of the loan. If you bought or refinanced a home in 2021, a review of your mortgage settlement statement may be required to ensure proper tax treatment of the cost of your points.

Mortgage insurance premiums are still deductible. Congress extended the deductibility of mortgage insurance premiums through the end of the 2021 tax year. You will need to itemize deductions to take advantage of this extended tax law.

With all the buying and selling homes in the past year, being aware of the tax consequences is more important than ever. For each Form 1098 you receive, make a note on the form to explain what the loan is for to ensure a proper deduction.

"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 Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA; Janice Papais, CPA

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Do You Need to File a Tax Return?

3/11/2022

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Getting this wrong can cost you

One of the more common tax questions is whether you need to file a federal tax return this year. The answer is: it depends. But not filing a tax return when you should can cost you plenty. Here are some quick tips to help you determine your answer.

Income thresholds matter
If your gross income is less than the federal standard deduction you usually do NOT need to file a tax return. This is because the deduction effectively eliminates any taxable income. The amounts for 2021 are:

Married filing joint: $25,100
Head of household: $18,800
Unmarried (single): $12,550

Over the age of 65
If you or your spouse are over the age of 65 the income required to file a tax return goes up by $1,350 (Married) to $1,700 (Single/Head of Household) for each of you that meets the age threshold. So a single person, age 65 or older, for example, does not need to file a federal tax return if their gross income is $14,250 or below.

Not so quick! There are exceptions
Like most tax laws, there are exceptions to the income limits mentioned above. Here are some of the more common situations where filing a tax return still makes sense.

You have federal or state withholdings. The ONLY way to get money back that was withheld from a paycheck or a Form 1099 is to file a tax return. If you do not do so within three years, your refund will be absorbed by the government. While the IRS is quick to let you know that you owe them money, there is no such program to let you know that a refund is due to you.
You are eligible for a refundable credit. Refundable credits will pay you money even if you don’t owe income tax. For example, if you have a tax liability of $750, but you are eligible for a $1,000 tax credit, you normally can only receive the $750 tax benefit. But with a refundable tax credit you can receive the additional $250, even without a tax liability. The most common examples of refundable credits are the Child Tax Credit, the Earned Income Tax Credit and the American Opportunity Tax Credit.
If you are a dependent. Special filing rules apply if you are a dependent on someone else’s tax return. If this is the case, filing rules vary depending on your age, your earned income (like wages) and your unearned income (like interest income). In this case it is usually best to conduct a review of your situation.
There are incentives out there. With the numerous economic stimulus payments, the enhanced Earned Income Tax Credit and higher Child Tax Credit payments this year, it may make financial sense to file a tax return to maximize your benefit. The only way to know for sure is to review your tax situation.
Other reasons. Sometimes filing a tax return can be used for other purposes. This includes using your tax return to obtain financing or to receive college financial aid. Another reason is to limit the amount of time your tax return can be audited. Once a tax return is filed, the audit time limit clock starts. After 3 to 4 years, most tax returns can no longer be audited by the IRS. However, if the return is not filed, this audit clock never starts.

"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 Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA; Janice Papais, CPA

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Yikes! It's that Bad? The 1040 tax instruction publication lays it all out

3/7/2022

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Any way you look at it, the federal government's spending habits are a big mess. As required by law, in every Form 1040 instruction booklet there's a section that shows where our federal government gets its money and where it is spent. As taxpayers, it makes sense to know this information. Here is the data for the government's fiscal year ending September 30, 2020, as reported by the IRS in the 2021 instruction booklet for Form 1040:

Observations

Deficit spending balloons to $3 trillion for one year and is not sustainable. No matter where you fall on the political spectrum, annual deficits of $3 trillion cannot be sustained. Much of this increase is due to multiple stimulus payments, tax-free small business loans, and increases in credits like the child tax credit.

Government borrowing hurts savers. In 1990, $50,000 worth of Certificates of Deposits (CDs) earned 8% interest, or $4,164, each year. Today, that same $50,000 earns just 0.6%, or $301. What happened to the other $3,863? Your interest income is now helping to cover money borrowed by the government in the form of lower interest rates. Look at 2020...almost half of the money inflows received by the federal government was borrowed!

Low interest expense risk. Look at the percentage of money spent on interest expense in 2020. It’s at 5% with interest rates hovering around zero. So what happens when rates start to increase? As a percentage of overall expenditures, interest expense could triple to 15% of spending...and potentially go even higher than that.

Solutions to money problems are the same for everyone. When you have a money problem, you either bring in more money, spend less, or some combination of the two. The same is true for our federal government.

Make a difference!
Spending more than you bring in will cause big problems...eventually. Money doesn’t just magically appear on printing presses. That money has to come from someplace and that someplace is from everyone. It is not a hopeless situation, however. Make your voice heard...it’s your money!

"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 Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA; Janice Papais, CPA

0 Comments

IRS reminds taxpayers an extension to file is not an extension to pay taxes

Toss This. Not That.

Your guide to post tax-filing record retention

Online Account and tax transcripts can help taxpayers file a complete and accurate tax return

Homeowner Alert! Review Your Tax Forms

Do You Need to File a Tax Return?

Getting this wrong can cost you

Yikes! It's that Bad? The 1040 tax instruction publication lays it all out

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IRS reminds taxpayers an extension to file is not an extension to pay taxes

Toss This. Not That.

Your guide to post tax-filing record retention

Online Account and tax transcripts can help taxpayers file a complete and accurate tax return

Homeowner Alert! Review Your Tax Forms

Do You Need to File a Tax Return?

Getting this wrong can cost you

Yikes! It's that Bad? The 1040 tax instruction publication lays it all out

BLOG

CATEGORIES​

ARCHIVES

CATEGORIES