Want money when you retire? Here are some tips. Here are five common retirement planning ideas and what you can do to take advantage of them. The key is retirement planning starts now, not decades from now when you are reaching retirement age.
1. Having a plan Surprisingly, most do not know how much money is needed for retirement. This is being made much more difficult with inflation playing a major role in finding the right answer. A retirement plan should consider how long you expect to live, an estimate of the amount of money you will need, and a description of your desired lifestyle during retirement. Your plan should have measurable goals that you aim to achieve. Action item: If you have a plan, review it for possible revisions. If you do not, consider getting one put together as soon as possible. 2. Start early enough One of the most powerful tools for a well-funded retirement is to start saving for your retirement at an early age. The sooner you start saving, the better off you will be. Action item: Open a retirement account and start saving now. Increase the percent of your pay that you place in tax-advantaged retirement saving accounts. This includes IRAs, 401(k)s, and other plans. 3. Maximize employer contributions Many employers have plans available to help their employees save for retirement. If your company has a pension plan, understand how it works and how much you can expect to receive upon retirement. If your company has a retirement plan contribution-matching program, take full advantage of this free money by making minimum contributions required to receive this employer match. Action item: Review your employer-provided retirement saving options. Maximize the benefits they are providing. 4. Consider working after retiring Do you plan on working during retirement or avoiding work at all costs? Do you plan on having a pension or Social Security covering all your retirement needs or none of it? Too often retirees plan the extremes, but reality is something in between. For example, if you are someone who plans to have your pension plan fail and Social Security go broke, you may be taking too conservative an approach. Action item: Create a range of retirement funding scenarios, not just the worst-case or best-case scenario. Consider no work or part-time work. Think about some contribution from Social Security and potential pension income if your employer has a program. 5. Understand the true nature of your retirement Are you being realistic in your future retirement plans? Have you correctly estimated the cost of health insurance? Have you really thought about the impact of relocating to a warmer climate? How important is living close to family and friends? Will you really downsize your home after the kids leave? Action item: If you have a retirement plan that includes relocating or traveling to far-off places, consider test-driving this idea before you implement it. You may be surprised at the result. Retirement should be something to look forward to, especially with a little planning. "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 [email protected]. 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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Many people take up gig work on a part-time or full-time basis, often through a digital platform like an app or website. Gig work, such driving a car for booked rides, selling goods online, renting out property, or providing other on-demand work, is taxable and must be reported as income on the worker’s tax return.
Here are some things gig workers should know to stay on top of their tax responsibilities: Gig work is taxable:
Proper worker classification: While providing gig economy services, it is important that the taxpayer is correctly classified.
Paying the right amount of taxes throughout the year:
The Gig Economy Tax Center on IRS.gov answers questions and helps gig economy taxpayers understand their tax responsibilities. "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 [email protected]. For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com. Mia Verc, CPA; Janice Papais, CPA  Less than 1% of more than 145 million individual tax returns filed during 2021 will be selected for audit. The percentage increases for higher income taxpayers, along with tax returns in areas of specific interest to the IRS. Here's what you should remember if you receive a notice from the IRS of an impending audit:
What to do if you are audited
If you feel you are being treated unfairly, remember there are numerous means within the system to help you such as talking to an auditor's supervisor to using the IRS taxpayer advocate service. "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 [email protected]. For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com. Mia Verc, CPA; Janice Papais, CPA The Internal Revenue Service reminds taxpayers who pay estimated taxes that the deadline to pay their second quarter tax liability is June 15.
Taxes are pay-as-you-go This means taxpayers need to pay most of the tax they expect to owe during the year, as income is received. There are two ways to do that:
Estimated tax is the method used to pay tax on income that isn’t subject to withholding. This includes income from self-employment, interest, dividends, rent, gains from the sale of assets, prizes and awards. Taxpayers may also have to pay estimated tax if the amount of income tax being withheld from their salary, pension or other income isn’t enough. If necessary, those who receive a salary or wages can avoid having to pay estimated taxes by asking their employer to withhold more tax from their earnings. To do this, taxpayers should submit a new Form W-4 to their employer. There is a special line on Form W-4 for them to enter the additional amount they want their employer to withhold. Who must pay estimated tax? Individuals, including sole proprietors, partners and S corporation shareholders, generally have to make estimated tax payments if they expect to have a tax liability of $1,000 or more when they file their return. Individual taxpayers can use the IRS Interactive Tax Assistant online to see if they are required to pay estimated taxes. They can also see the worksheet in Form 1040-ES, Estimated Tax for Individuals, for more details on who must pay estimated tax. Corporations generally have to make estimated tax payments if they expect to owe tax of $500 or more when they file their return. Corporations can see Form 1120-W, Estimated Tax for Corporations, for more information. Publication 505, Tax Withholding and Estimated Tax, has additional details, including worksheets and examples, that can be especially helpful to those who have dividend or capital gain income, owe alternative minimum tax or self-employment tax, or have other special situations. How to avoid an underpayment penalty Taxpayers can avoid an underpayment penalty by owing less than $1,000 at tax time or by paying most of their taxes during the year. Generally, for 2022 that means making payments of at least 90% of the tax expected on their 2022 return, or taxpayers who pay at least 100 percent of the tax shown on their return for tax year 2021. Special rules apply to some groups of taxpayers, such as farmers, fishers, certain higher income taxpayers, casualty and disaster victims, those who recently became disabled, recent retirees and those who receive income unevenly during the year. For more information, refer to Form 1040-ES. Generally, taxpayers should make estimated tax payments in four equal amounts to avoid a penalty. However, if they receive income unevenly during the year, they may be able to vary the amounts of the payments to avoid or lower the penalty by using the annualized installment method. Taxpayers can use Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, to see if they owe a penalty for underpaying their estimated tax. Third quarter payments are due September 15 and the final estimated tax payment for tax year 2022 is due on Jan. 17, 2023. Tax Withholding Estimator The Tax Withholding Estimator offers a step-by-step method for effectively ensuring taxpayers have the right amount of tax withheld from their paychecks or other income that is subject to withholding. Using the Tax Withholding Estimator can help taxpayers prevent having too little tax withheld and facing an unexpected tax bill or penalty at tax time next year. How to pay estimated taxes An electronic payment is the fastest, easiest and most secure way for individuals to make an estimated tax payment. Taxpayers can securely log into their IRS Online Account or use IRS Direct Pay to submit a payment from their checking or savings account. Taxpayers can also pay using a debit, credit card or digital wallet. Taxpayers should note that the payment processor, not the IRS, charges a fee for debit and credit card payments. Both Direct Pay and the pay by debit, credit card or digital wallet options are available online at IRS.gov/payments and through the IRS2Go app. Taxpayers can also use the Electronic Federal Tax Payment System (EFTPS) to make an estimated tax payment. Corporations must use electronic funds transfer to make all federal tax deposits (such as deposits of employment, excise and corporate income tax). This includes installment payments of estimated tax. Generally, an electronic funds transfer is made using the Electronic Federal Tax Payment System (EFTPS). However, if the corporation does not want to use EFTPS, it can arrange for its tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on its behalf. If taxpayers opt to mail a check or money order, they should make them payable to the "United States Treasury." Form 1040-ES, Estimated Tax for Individuals, includes instructions to help taxpayers figure their estimated taxes. For information on all payment options, visit IRS.gov/payments. IRS.gov assistance 24/7 Tax help is available 24/7 on IRS.gov. The IRS website offers a variety of online tools to help taxpayers find answers to common tax questions. For example, taxpayers can search the Interactive Tax Assistant, Tax Topics and Frequently Asked Questions to get answers to common questions. The IRS is continuing to expand ways to communicate to taxpayers who prefer to get tax information in other languages. The IRS has posted translated tax resources in 20 other languages on IRS.gov. For more information, see We Speak Your Language. "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 [email protected]. For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com. Mia Verc, CPA; Janice Papais, CPA The IRS recently rolled out a new and improved Where's My Refund tool. This updated tool allows taxpayers to check the status of their refunds for the 2021, 2020, and 2019 tax years.
To use the tool, taxpayers will need their Social Security number or ITIN, filing status and expected refund amount from their original tax return for the year they're checking. About the Where's My Refund tool Available on IRS.gov or the IRS2Go mobile app, Where’s My Refund allows taxpayers to track their refund through three stages: 1. Return received. 2. Refund approved. 3. Refund sent. Using this tool, taxpayers can start checking the status of their refund within: · 24 hours after e-filing a tax year 2021 return. · Three or four days after e-filing a tax year 2019 or 2020 return. · Four weeks after mailing a return. Eligible people who haven’t filed a 2021 tax return yet, including those who requested an extension to file, can use IRS Free File to prepare and file their federal tax return for free. Filing electronically is fast, accurate and secure. When an individual chooses direct deposit their refund goes directly from the IRS into their bank or financial account getting them their refund in the fastest time possible. When the IRS accepts the electronically filed return, taxpayers can track their refund with the Where's My Refund tool. Additional refund status information The Where's My Refund tool should be the first place people go for more information about checking the status of a tax refund. There's no need to call the IRS to check on refund status unless it’s been more than 21 days since they filed the return, or the tool says the IRS can provide more information. Where taxpayers can find other information about their account Taxpayers can log in to their Online Account to find their prior year adjusted gross income, balance due and other account information. They can also see their payment history, or other tax records. "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 [email protected]. For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com. Mia Verc, CPA; Janice Papais, CPA What everyone should know Small business owners have a number of options on how to organize their business for tax purposes. And if you sell items on eBay or Esty, drive for Uber, or offer your services as a writer or programmer, you are probably considered a flow-through entity in the eyes of the IRS. Frankly, so much of individual tax is paid by these small businesses, it is important for all taxpayers to understand this tax code logic as politicians debate trying to increase tax revenues.
How pass-through entities work Pass-through entities do not pay taxes with a separate business tax return. Instead, the business's taxable income is reported on the owner's individual tax return. A sole proprietor does this on their Schedule C, while other entities like partnerships and S corporations send owners their respective share of profits via a K-1 tax form. Generally, business owners prefer pass-through entities because:
What you should know
With 95% of business entities being taxed on personal tax returns, it is important to understand that raising individual tax rates is really an increase in tax to most businesses in the United States. To better serve our clients and friends, to keep you up-to-date and informed, here is our Tax Tip for today. "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 [email protected]. For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com. Mia Verc, CPA; Janice Papais, CPA The IRS encourages all taxpayers to review their federal withholding at least once a year to make sure they're not having too little or too much tax withheld.
Taxpayers whose employers withhold federal income tax from their paycheck can use the IRS Tax Withholding Estimator to help decide if they should make a change to their withholding. This online tool guides users, step-by-step through the process of checking their withholding, and provides recommendations to help aim for the withholding amount that’s right for them. Taxpayers should check with their employer to update their withholding or submit a new Form W-4, Employee's Withholding Certificate. Adjustments to withholding Individuals should generally increase withholding if they hold more than one job at a time or have income from sources not subject to withholding. If they don't make any changes, they will likely owe additional tax and possibly penalties when filing their tax return. Individuals should generally decrease their withholding if they qualify for income tax credits or deductions other than the basic standard deduction. Either way, those who need to adjust their withholding must submit the new W-4 information to their employer as soon as possible since withholding occurs throughout the year. Individuals who should check their withholding include those:
Reasons to use the Tax Withholding Estimator The IRS Tax Withholding Estimator can help taxpayers:
Individuals who should not use the Tax Withholding Estimator are those: Who have a pension but not a job. Form W-4P, Withholding Certificate for Pension or Annuity Payments, should be used to estimate this tax withholding. Who have nonresident alien status. These individuals should use Notice 1392, Supplemental Form W-4 Instructions for Nonresident Aliens. Whose tax situation is complex. This includes alternative minimum tax, long-term capital gains or qualified dividends. Taxpayers should prepare before using the Tax Withholding Estimator by having pay statements for all jobs, information for other income sources and their most recent income tax return. The tool does not ask for sensitive information such as name, Social Security number, address, or bank account numbers. "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 [email protected]. 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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