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Archives for November 2021

Tax Extension

Reasons to File a Tax Extension

Amidst the hustle and bustle of the holiday season, many forward-looking individuals are already thinking about their tax return. Even though federal tax returns are due on April 15, there are a variety of legitimate reasons why individuals may want to file for an extension on their taxes. For those that file an extension, be aware that the deadline for paying their taxes is Oct. 15.

Incomplete Documentation

The IRS requires documentation of all earnings and individuals may not have it. They may have lost their W2 from an employer and be waiting for a copy or the documentation. Though it doesn’t happen often, forms may be lost in the mail. It’s far better to file for an extension and wait for the W2 or other forms. It’s not uncommon for documents such as Form 1099 or Schedule K-1 to be late.

Life Events

Natural disasters, a death in the family, or severe illness are also reasons for filing an extension. Filing taxes is something that requires an individual’s full attention and any of those situations are distractions that aren’t conducive to filing tax returns.

Tax Savings

In some instances, an extension can be a strategic money-saving decision for converting an IRA. Taxpayers can perform a Roth IRA conversion, and while they’ll still have to pay taxes on it, the advantage is that individuals can take tax-free deductions from the IRA in the future. Filing an extension makes good business sense.

Procrastinators

A number of individuals simply run out of time to file due to procrastination. The IRS won’t ask individuals to supply a reason for late filing, but for those that insist on waiting until the last moment, an extension does give them some breathing room.

Fees and Penalties

Even if a taxpayer files an extension on their taxes and doesn’t file by the extension deadline, they’ll still be subject to fees and penalties. The IRS will charge 1½ percent for each month the taxes aren’t paid after the filing deadline has passed. For those that don’t file a return at all by the extension date, the penalty increases to 5 percent per month and can reach a maximum of 25 percent.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

 

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Tax Accountant

How can a Tax Accountant Help Me?

Approximately 33 percent of all taxpayers prepare their own taxes each year, thanks to online tax preparation software. What you may not know is that you could be leaving money on the table by not consulting with a tax accountant. Tax laws are highly complex and complicated. The following are just some of the ways that a tax accountant can help.

Minimize Audits

The odds of being audited increase the more you make and a tax accountant will considerably reduce the potential. If you make less than $200,000, the chances of being audited is 0.9 percent. That number increases to 3.7 percent if you make over $200,000 and 12.5 percent if your income exceeds $1 million.

Own a Business

If you own a business, are self-employed, or are in partnership, a tax accountant can determine how much you should pay in quarterly taxes. The benefit is that you won’t be faced with a huge tax bill at the end of the year.

Life Changes

Buying a house, getting married, having a child, getting a divorce, or investing in the stock market are all significant events in anyone’s life. A tax account is able to help you take advantage of the available tax breaks and even help you adjust your withholding to accommodate those changes.

Failure to Pay

If for any reason you failed to pay your taxes in the past or owe a balance, a tax accountant is able to help you file appropriately. He/she will also know about IRS programs designed to help people in these situations.

Other Situations

A tax accountant can help in a wide variety of situations, including if you’re anticipating a large capital gains tax, have investments and income from foreign sources, or if you have rental properties. You can utilize a like-kind-exchange to minimize taxes if you’re thinking of selling real estate. A tax accountant can also help you if you’re planning on making a large gift, putting away money for your kids’ college, or creating a trust.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

 

Contact Us Today

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tax records

4 Ways to Organize Tax Records

Documentation is essential for the IRS when filing taxes. Saving receipts and a myriad of tax-related items can seem overwhelming. Without a system for preserving documents, individuals can easily lose track of those important papers. The result is lost money in deductions.

No matter what method people use, it’s important that they choose a system that best fits their needs and more importantly, they’re likely to maintain. No one enjoys the process of saving documents for tax time or sorting through them, but it’s a critical step for income tax returns.

Another option that people are turning to is digital documents. Digital scanners are an excellent way to keep a backup copy of paperwork of all types. It’s a good idea to keep originals, while digital copies provide an important resource in the event of an audit. Digital documents can also be backed up to the cloud. The following are four ways that people can utilize to keep their tax documents organized.

Boxes

It may seem old-fashioned, but a simple box with file folders is still a reliable way to keep track of tax documents. When individuals receive receipts and other important paper documents, simply place them in the correct file folder. However, many people still maintain a box in which they drop documents, pay slips and receipts and just sort them at the end of the year.

Envelopes

Equally effective is using 9×12 manilla envelopes and labeling each envelope for specific categories. Don’t forget to write the tax year the documents are for on the envelope. The envelopes need to be placed in a box or file cabinet to ensure all tax documents are kept together in a single location.

Category

There are deductions for a wide variety of situations. Individuals can organize their documents by categories that include, home, business, military service, and employer, and self-employment for side hustles.

Spreadsheet

Individuals will still need to keep the originals, but a spreadsheet is an easy method to jog a memory at the end of the year and ensure that income and expenditures match the paper documents kept in boxes and envelopes.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

 

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elder care

Can I Deduct Elder Care on my Tax Return?

An increasing number of individuals are caring for elderly parents and the costs can add up. Many people overlook the deduction when filing their income taxes. There is definitely an elderly care tax credit, but it represents a highly complicated set of rules. Unlike most credits, the individual doesn’t have to qualify as a dependent, but they can be.

Eligible Costs

In 2021, you could claim up to $4,000 in elderly care costs for one individual and up to $8,000 when caring for two people or more. Costs can include medications, medical care, exams, therapy, and mental health support.

Expenses can also encompass meals and household services, along with qualifying long-term care services. Dental care, transportation, recreational activities may also qualify. There are very specific rules governing whether you can claim it.

Who Qualifies?

The person being claimed must have lived with you for at least six months during the year. They must be physically or mentally unable to care for themselves. Only one sibling may claim the deduction, and the parent must be a legal resident, U.S. resident alien, U.S. national, a resident of Canada or Mexico, the Republic of Panama, or the Canal Zone. They’ll also need valid ID and Social Security number.

In-Home Care

Your parent’s gross income must be less than $4,300. You may also claim an elderly care credit if you hire an in-home caregiver. If you plan on claiming the credit, it’s best to consult with a tax accountant to determine if you’re eligible and if specific conditions and costs qualify.

Seniors and Spouses

If you’re a senior residing in an assisted living or long-term care facility, you may be able to claim a variety of deductions. IRS rules are different for individuals claiming the expenses for themselves vs. a child claiming the deductions for a parent. There are also precise rules for spouses. The rules are complicated and will also depend on who is actually paying the costs.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

 

Contact Us Today

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