While most income received from your employer quickly ends up on a W-2 tax form at the end of the year, here are some common employee benefits that often avoid the impact of Federal taxes.
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Health Benefits. While now reported on W-2's, employer-provided health insurance premiums are currently not required to be reported as additional income by the employee. This includes premiums paid for the employee and qualified family members. In addition, the employee portion of premiums can be paid in "pre-tax" dollars.

Credit Card Airline "miles". Credit card benefits like miles are not generally deemed as taxable income. So those miles earned on corporate credit cards that go to you as an individual are not likely to increase your tax bill.

Employee tuition reimbursement. Up to $5,250 of tuition reimbursed to you by your employer is not deemed to be additional taxable income.

Commuting expenses. You can generally exclude the value of transportation benefits you receive up to the following limits.

• $270 per month for combined commuter highway vehicle transportation and transit passes.
• $270 per month for qualified parking.
• For a calendar year, $20 multiplied by the number of months for qualified bicycle commuting expense reimbursement.

Company Health Savings Account (HSA) Contributions. Up to specified dollar limits, cash contributions to the HSA of a qualified individual (determined monthly) are exempt from federal income tax withholding, social security tax, Medicare tax, and FUTA tax.

Group Term Life Insurance. You can generally exclude the cost of up to $50,000 of group-term life insurance from your wages.

Small gifts. The IRS calls these "de minimis" benefits. Small-valued benefits are not included in income and could include things like the use of the company copy machine, occasional meals, small gifts, and tickets to a sporting event.

"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. 

The Social Security Administration announced a whopping 5.9 percent boost to monthly Social Security and Supplemental Security Income (SSI) benefits for 2022. The increase is based on the rise in the Consumer Price Index over the past 12 months ending in September 2021.
 
For those contributing to Social Security through wages, the potential maximum income subject to Social Security tax increases 2.9 percent this year, to $147,000. Here's a recap of the key dollar amounts:

​2022 Social Security Benefits - Key Information

The Social Security and Medicare tax rates do not change from 2021 to 2022.
Note: The above tax rates are a combination of 6.20 percent Social Security and 1.45 percent for Medicare. There is also a 0.9 percent Medicare wages surtax for single taxpayers with wages above $200,000 ($250,000 for joint filers) that is not reflected in these figures. Please note that your employer also pays Social Security and Medicare taxes on your behalf. These figures are reflected in the self-employed tax rates, as self-employed individuals pay both halves of the tax.
 
"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. 
​

Though the markets have been up strongly this year, your investment portfolio could have a few lemons in it. Using the tax strategy of tax-loss harvesting, you may be able to turn those lemons into lemonade. Here are five tips:

Tip #1: Separate short-term and long-term
Your investments are divided into short-term and long-term buckets. Short-term investments are those you've held a year or less, and their gains are taxed as ordinary income. Long-term investments are those you've held more than a year, and their gains are taxed at generally, lower capital gains tax rates. A goal in tax-loss harvesting is to use losses to reduce short-term gains.
Example: By selling stock in Alpha Inc., Sly Stocksale made a $10,000 profit. Sly only owned Alpha Inc. for six months, so his gain will be taxed at his ordinary income tax rate of 35 percent (versus 20 percent had he owned the stock more than a year). Sly looks into his portfolio and decides to sell another stock for a $10,000 loss, which he can apply against his Alpha Inc. short-term gain.

Tip #2: Follow netting rules
When tax-loss harvesting, use IRS netting rules on the realized gains and losses in your portfolio. Short-term losses must first offset short-term gains, while long-term losses offset long-term gains. Only after you net out each category can you use excess losses to offset other gains. Use this knowledge to your advantage to reduce your taxable income when selling investments.

Tip #3: Lower your ordinary income by $3,000
In addition to reducing capital gains tax, excess losses can also be used to offset up to $3,000 of ordinary income each year. If you still have excess losses after reducing both capital gains and ordinary income, you can carry these losses forward to use in future tax years.

Tip #4: Beware of wash sales
The IRS prohibits use of tax-loss harvesting if you buy a "substantially similar" asset within 30 days before or after selling it. Plan your sales and purchases to avoid this problem.

Tip #5: Consider administrative costs
Tax-loss harvesting comes with costs in both transaction fees and time spent. Reduce the hassle by conducting tax-loss harvesting once a year as part of your annual tax-planning strategy.
Remember, you can turn an investment loss into a tax advantage, but only if you know the rules.
​
"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. 

​Friday, October 15 marks the extension deadline for filing your 2020 Form 1040 Tax return. Given all the recent tax legislation, numerous stimulus checks and COVID-related tax changes, there are more open tax return filings than ever!
 
If you have not filed a tax return and don't think you need to file one, please reconsider. Billions of refunds go unclaimed each year by taxpayers that really should file a tax return.
 
Here's a quick checklist of situations when filing a tax return might make sense even if you don't have to:

• You are due a refund. Without filing, the government could end up keeping these funds. So double check your stimulus check payments. Did you get them? Were they for the full amount? Preparing a tax return, even if not filed, is a good exercise to ensure you received the full benefit.
• You paid tax on unemployment benefits. With the federal government making up to $10,700 of these benefits tax-free, you may be due a nice refund.
• You had taxes withheld from your paychecks, but end up owing no tax for the year.
• You are eligible for Health Insurance Premium Credits. Be aware of this possible benefit if you use the market exchange to purchase your health care insurance.
• You are eligible for a refundable credit. This is true with the popular Earned Income Tax Credit, the Additional Child Tax Credit, and a portion of the American Opportunity Tax Credit.
• Your state requires a federally filed tax return.
• You want the filed tax return for your records.
• You wish to start your audit time clock. Remember the audit time-frame never starts if you do not file your tax return.

 
Many taxpayers have trouble gathering accurate and complete information necessary to file their tax return. When they cannot get all the necessary information, they get stuck. Should this be your situation, please ask for help. Even a reasonably close tax filing that is later amended when more information becomes available is sometimes a better alternative than not filing at all.
 
"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. 
 

Market values of homes are skyrocketing and higher property tax bills are soon to follow. Prepare now to knock your property taxes back down to earth.

What is happening
Property taxes typically lag the market. In bad times, the value of your home goes down, but the property tax is slow to show this reduction. In good times, property taxes go up when you buy your new home, but these higher prices quickly impact those that do not plan to move.
To make matters worse, you can now only deduct up to $10,000 in taxes on your federal tax return. That figure includes all taxes - state income, property and sales taxes combined! Here are some suggestions to help reduce your property tax burden.

What you can do
If you dread the annual letter informing you that your property tax is going to go up again what can you do? Your best bet is usually to approach the assessor and ask for a property revaluation. Here are some ideas to successfully reduce your home's appraised value.

Do some homework to understand the approval process to get your property revalued. It is typically outlined on your property tax statement.

Understand the deadlines and adhere to them. Most property tax authorities have strict deadlines. Miss one deadline by a day and you are out of luck.

Do some research BEFORE you call your assessor. Talk to neighbors and honestly assess the amount of disrepair your property may be in versus other comparable properties in your neighborhood. Call a few real estate professionals. Tell them you would like a market review of your property. Try to choose a professional that will not overstate the value of your home hoping to get a listing, but will show you comparable sales for your area. Then find comparable sales in your area to defend a lower valuation.

Look at your property classification in the detailed description of your home. Often times errors in this code can overstate the value of your home. For example, if you live in a condo that was converted from an apartment, the property's appraised value could still be based on a non-owner occupied rental basis. Armed with this information, approach the assessor seeking first to understand the basis of the appraisal.

Ask for a review of your property. Position your request for a review based on your research. Do not fall into the assessor trap of defending your review request without first having all the information on your property. Meet the assessor with a specific value in mind. Assessors are used to irrational arguments, that a reasonable approach is often readily accepted.
While going through this process remember to be aware of the pressure these taxing authorities are under. This understanding can help temper your position and hopefully put you in a better position to have your case heard.

"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. 

Many Americans have been working from home due to the pandemic, but only certain people will qualify to claim the home office deduction. This deduction allows qualifying taxpayers to deduct certain home expenses on their tax return when they file their 2021 tax return next year.
Here are some things to help taxpayers understand the home office deduction and whether they can claim it:

• Employees are not eligible to claim the home office deduction. 
• The home office deduction, reported on Form 8829, is available to both homeowners and renters.  
• There are certain expenses taxpayers can deduct. They include mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent.  
• Taxpayers must meet specific requirements to claim home expenses as a deduction. Even then, the deductible amount of these types of expenses may be limited.  
• The term "home" for purposes of this deduction:  
  • Includes a house, apartment, condominium, mobile home, boat or similar property which provide basic living accommodations.
  • A separate structure on the property such as an unattached garage, studio, barn or greenhouse.
    • Any portion of a home used exclusively as a hotel, motel, inn or similar establishment does NOT qualify as a “home” and, therefore, does not qualify for a home office deduction.  
• Generally, there are two basic requirements for the taxpayer's home to qualify as a deduction:  
  • There must be exclusive use of a portion of the home for conducting business on a regular basis. For example, a taxpayer who uses an extra room to run their business can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business.
  • The home must be the taxpayer's principal place of business. A taxpayer can also meet this requirement if administrative or management activities are conducted at the home and there is no other location to perform these duties. Therefore, someone who conducts business outside of their home but also uses their home to conduct business may still qualify for a home office deduction.
    • A portion of a home that is used exclusively for conducting business on a regular basis but not used as the principal place of business, will qualify for a home office deduction if either patients, clients or customers are met in the home or there is a separate structure that is used exclusively for conducting business on a regular basis.  
• Taxpayers who qualify may choose one of two methods to calculate their home office expense deduction:  
  • Using the simplified method consisting of a rate of $5 per square foot for business use of the home which is limited to a maximum size of 300 square feet and a maximum deduction $1,500.
  • Using the regular method whereby deductions for a home office are based on the percentage of the home devoted to business use. Any use a whole room or part of a room for conducting their business will involve figuring out the percentage of the home used for business activities to deduct indirect expenses. Direct expenses are deducted in full.

More information:
Publication 587, Business Use of Your Home, Including Use by Daycare Providers
Share this tip on social media -- Small business owners should see if they qualify for the home office deduction. https://go.usa.gov/xMTr7

​"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. 

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 third quarter due date is now here.
Due date: Wednesday, September 15th, 2021

Remember, you are required to withhold at least 90 percent of your current tax obligation or 100 percent of last year’s obligation.* A quick look at last year’s tax return and a projection of this year’s obligation can help determine if a payment is necessary. Here are some other things to consider:

• Avoid an underpayment penalty. If you do not have proper tax withholdings during the year, you could be subject to an underpayment penalty. The penalty can occur if you do not have proper withholdings throughout the year.
• W-2 withholdings have special treatment. A W-2 withholding payment can be made at any time during the year and be treated as if it was made throughout the year. If you do not have enough to pay the estimated quarterly payment now, you may be able to adjust your W-2 withholdings to make up the difference.
• Self-employed need to account for FICA taxes. Remember to account for your Social Security and Medicare taxes as well. Creating and funding a savings account for this purpose can help avoid the 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 also required to make estimated state tax payments if you're required to do so for your federal taxes. Consider conducting a review of your state obligations to ensure you meet these quarterly estimated tax payments as well.

* If your income is over $150,000 ($75,000 if married filing separate), you must pay 110 percent 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.