When you’re entitled to a refund at tax time, it’s understandable that you want to receive it as quickly as possible. E-filing your tax return is efficient, reduces errors, and it’s the quickest way to get your refund.

Speedy Refunds

By e-filing your tax returns, you can typically expect your refund within 3 weeks or less and choosing direct deposit further facilitates the process.

Quick Confirmation

When you e-file your returns, you’ll receive a text within 24-48 hours that your state and/or federal return has been accepted. Conversely, if for some reason an error has occurred, you’ll have the opportunity to go back and fix the problem before resubmitting via e-file.

Fewer Mistakes

According to the IRS, there’s only a 1 percent error rate on returns that are filed electronically, compared to a 20 percent error rate with paper returns. There are numerous online options for completing tax returns that will walk individuals through every step of the filing process and check for mistakes that can be rectified before sending the return.

Direct Deposit

Choosing the direct deposit option ensures your refund is deposited directly into your bank account. You won’t have to worry about having a refund check lost or stolen from your mailbox. It’s a common problem around tax time and once a paper check is gone, there’s no way to retrieve it. If you use one of the many cash apps available, you can also have your refund deposited into your cash app account.

Money and Deadlines

Depending on the taxpayer, some individuals can complete and e-file their taxes for free. Shop around to find the best option. Many companies advertise low-cost tax preparation and e-filing, but individuals only find out upon completion that they owe nearly as much as if they’d taken their taxes to a tax professional.

If you’re among the millions of people that procrastinate on their taxes, e-filing is an excellent way to ensure you beat filing deadlines and avoid penalties. You’ll still be able to receive your tax refund in 3 weeks or less.

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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The U.S. tax system is complicated, complex, and the IRS has hundreds of forms to account for different reporting needs. One of the biggest confusions for individuals is the difference between Form 1099 and the W-2. Both are important, absolutely required, but serve very different purposes.

Form 1099

There are multiple types of Form 1099. The most common is used to report various types of payments that are made by a business or individual that’s not an individual’s regular employer. The person that made the payments completes the appropriate details and sends a copy to the payee and the IRS at tax time.

A Form 1099-MISC is used by the government to report income such as Medicare earnings. It’s also used to report prizes and awards, fishing boat proceeds, medical and healthcare payments, and crop insurance proceeds. Form 1099-MISC is also utilized to report earnings from direct sales of at least $5,000.

W-2

In comparison, individuals complete a W-2 when they start a new job. It tells the employer how much money to withhold in federal, state and Social Security (FICA) taxes from each paycheck. The IRS utilizes that information to track each person’s earnings and income every year from employment. IRS rules state that employers must provide individuals with their W-2 by Jan. 31^st of each year.

The form is used each year when an individual files their annual income tax returns. The W-2 shows the amount of any benefits that may have been paid by the employer on an employee’s behalf that encompasses items ranging from health savings accounts (HSA) and number of dependents to insurance benefits.

If there are any errors such as name misspellings, incorrect Social Security number, or an incorrect amount, individuals should contact their employer for a corrected copy of their W-2. Independent contractors should receive a 1099-NEC instead of a W-2.

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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There’s some confusion for some about what the capital gains tax is, especially if they’ve sold an asset or they’re new to trading. It’s a tax that’s levied on the profit an individual makes when they sell an asset or investment. The asset can range from real estate to stocks and bonds. The amount of tax is determined by how much the asset has appreciated in value during the time it was held by the owner.

The rate of tax is also dependent on the filer’s income bracket. The tax can range from 0% to 15% or 20%. A long-term capital gains tax is assessed if an individual has owned the asset for a year or more. Short-term capital gains taxes will apply if the investment has been owned for less than a year and will be taxed according to the individual’s normal tax rate.

Unrealized capital gains refer to unsold investments. It doesn’t matter how much in assets an individual has, how long they’re held, or how much they’ve increased in value. Purchasing or investing in an asset and keeping it over the long term is a way of building wealth that can be passed on to heirs.

Maximizing profitability and minimizing capital gain taxes requires careful, well-though out strategies. For tax purposes, a purchased asset is typically treated the same as if was a salary or wages. The same is true of dividends derived from an asset.

An increasing number of people are using software applications to trade online. The thrill of buying and selling can override any benefits if they’re not aware of the capital gains taxes they’ll have to pay or if they don’t understand IRS laws.

However, taxable gains can be offset by capital losses. A maximum tax of $3,000 per year is levied on net losses. Leftover losses can be carried forward into following tax years.

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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The Office of Management and Budget reports that between 2010 and 2018, the wealthy paid an average of 8.2 percent of their income from their wealth, and a large part of their wealth went untaxed. There are 22 different tax brackets in 2022, with the highest rate at 37 percent, making the taxation system confusing at best.

That estimate is at odds with millionaire Warren Buffett’s statement in 2013, who famously said he pays lower taxes than his secretary. The wealthy pay less in taxes for multiple reasons. The first is that their income is derived from dividends, stocks, and capital gains from investments, rather than wages, that are taxed at a lower rate of 20 percent.

Additionally, a tax code feature called “stepped up basis,” says gains on an asset is never subject to income tax if an asset isn’t sold during the owner’s lifetime. That continues when the wealthy pass it on to their heirs.

That means that a significant amount of the wealthy’s income will never appear on their income tax return. A study by the White House in Sept. 2021 showed that the wealthy paid an average of 8.2 percent in actual taxes, while the typical middle-class family paid 13.3 percent.

Taxes are just one component of a highly complicated and complex tax code that enables the ultra-rich to pay a small fraction of taxes on their actual wealth. They use legal loopholes that includes depreciation, hiring their children, deducting business expenses, and rolling forward business losses.

Other legal methods of avoiding income taxes are deducting interest payments on debt, claiming investment losses, and like-kind exchanges of property. The wealthy also claim a deduction when they transfer money to their own philanthropic foundations.

For millions of Americans, the avenues used by the wealthy aren’t available to the average taxpayer. It’s also interesting to note that in the 1950s and 1960s, the federal income tax rate was 91 percent for the wealthy, down from 94 percent in 1944-1945. The tax rate for the wealthy has steadily been decreasing since then.

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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For those that don’t have the money to pay their tax bills in full, the IRS offers tax relief programs. The initiatives help taxpayers settle tax-related debts for less than the total amount, thereby preventing liens from being placed on their assets. They typically utilize a monthly repayment plan.

Tax relief programs won’t eliminate the money owed to the IRS, but it will help make it easier to repay. The IRS will charge interest on any unpaid taxes, along with a setup fee for its programs. To qualify for a long-term repayment plan of more than 120 days, individuals must owe $50,000 or more in taxes, penalties and interest.

Individuals that have been affected by natural disasters have access to tax relief initiatives. People should consult a tax specialist that’s knowledgeable in the regulations and forms required to take advantage of specific programs.

The IRS is currently offering tax relief programs to victims of wildfires, straight line winds, landslides and mudslides, flooding, tornadoes and hurricanes in certain areas. The tax relief initiatives provide extra time for taxpayers to file their federal return, pay their taxes, and file any required forms.

Another initiative of the IRS is penalty relief/interest abatement. Under the program, the IRS may forgive any penalties charged to the person’s tax bill, providing they meet certain criteria. Individuals will still owe their taxes, but eliminating penalties can save a substantial amount of money.

There are also companies that negotiate with the IRS on behalf of a client. Their fees can run into thousands of dollars and there’s no guarantee that they’ll be successful. Individuals should be wary of upfront fees, undesirable refund policies, and default billing if they decide to cancel.

The best option for those seeking tax relief is to engage the services of a qualified tax professional that has the authority to represent individuals with the IRS. Those include a CPA, attorney, or federally authorized tax practitioner.

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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Not to be confused with interest rates on a mortgage or ongoing property taxes to be paid each year, a mortgage recording tax is used to document a loan transaction. It’s a fee that’s paid when someone takes out a mortgage. There are currently eight states that charge a mortgage tax and one of those is Florida. Numerous lending institutions offer online mortgage tax calculators that perform the financial calculations.

Individuals can do the math themselves by taking the total amount being borrowed and dividing it by 100. Then round up that number to the nearest whole number. Local laws may allow for a deduction to reduce the amount.

Florida residents pay 35 cents per $100, based on the amount of debt being incurred on the mortgage. However, that amount can vary among counties and a surtax may also apply. It’s customary for the seller to pay the tax, though that isn’t a mandate. The real estate agent is responsible for securing a check for the amount before the deed is recorded.

Failure to pay the amount promptly can result in the state assessing a monthly penalty fee. A floating interest rate may also be placed on any unpaid document. Parties exempt from the tax include state and federal government agencies, political subdivisions, and Florida counties and municipalities. When an entity is exempt from the tax, the other party must pay it.

Many types of deeds require this documentation, including warranty and quit claim deeds, easements, and contracts for mineral, timber, gas and oil rights. A mortgage tax is also collected if an individual refinances. However, a mortgage reassignment can transfer the original mortgage tax to the new lender. Not all lending institutions will do this, but if the lender agrees to do so, it can save individuals a significant amount of money.

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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Everyone is looking for ways to reduce their tax liability. There are dozens of ways business owners can reduce their taxes, but not necessarily for the average person. The following are 5 big tax credits that you may qualify for without even knowing it.

Earned Income Tax Credit (EITC)

The EITC is one of the best-known credits. It can range from a few hundred to several thousand, depending on the number of children you have and your filing status. The credit will factor in your adjusted gross income, investment income and earned income. You won’t qualify if you can be claimed as a dependent on someone else’s taxes, lived outside the U.S. for 6 months or more, or earned more than $10,000 in investment income. You may be able to claim children up to 24 years of age if certain criteria are met.

American Opportunity Tax Credit (AOTC)

Formerly known as the Hope Credit, the AOTC helps if you’re paying for college expenses that includes tuition and course materials. The allowable amount is determined according to your modified adjusted gross income. Students must be enrolled at least half time and the credit is available on a per-student basis.

Lifetime Learning Credit (LLC)

You can claim this to help offset the costs of post-secondary education, even if you’re not pursuing a degree. It’s available to those within specific income brackets.

Child and Dependent Care Credit (CDCC)

The credit is available to help mitigate the costs of child care services for children under age 13 so parents can work. The credit also encompasses caring for a spouse, parents, or other individual that’s mentally or physically incapable of caring for themselves.

Savers Tax Credit (STC)

Previously known as the Retirement Savings Contributions Credit, it provides a credit if you contribute to retirement plans encompassing a 401(k), investment retirement accounts, and some other types of retirement plans. Age, along with dependent and student status will be factored in.

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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Individuals that don’t pay their taxes in full by the deadline of April 15 each year are subject to a monetary penalty. The IRS can charge up to 6 percent interest on the unpaid balance and may choose to add a late payment penalty of 0.5 to 25 percent. Individuals that don’t pay their taxes are digging themselves a financial hole that can be almost impossible to escape.

Notices about the unpaid balance will begin to arrive and the letters will take on a more severe tone the longer a taxpayer ignores them. The IRS may place a tax lien against any property and financial assets that the person owns. The IRS will then be entitled to some or all of the money if an asset is sold.

Even if the actions aren’t reported on the taxpayer’s credit report, liens are part of public records. It can affect the person’s ability to maintain security clearance, obtain employment, a credit card or loan. Filing bankruptcy is no guarantee that the lien or tax bill will be dismissed.

The account may be sent to a collection agency for recovery. For those that owe tens of thousands of dollars or more, an individual could receive a visit from a revenue officer. During this time, the IRS may begin seizing assets.

The law says the IRS can take the taxpayer’s vehicle to sell at auction, 401(k) accounts, IRAs and homes. The State Department may get involved and can refuse to renew or issue a passport or revoke an existing passport.

However, what many don’t know is that the IRS generally won’t pursue individuals for unpaid taxes after 10 years, but they might, due to the 10 Year Statute of Limitations. The IRS doesn’t consider it in their best interests or cost effective to continue trying to collect and will wipe it clean from their books. It’s a complicated process that can be temporarily suspended under circumstances and the only one qualified to advise an individual on this is a tax professional.

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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There’s a lot of confusion about the definition of independent contractor when filing tax returns. According to the IRS, “An individual is an independent contractor if the payer has the right to direct the result of work, but not how it’s done or how it will be done.” The definition by the IRS doesn’t necessarily provide clarity for tax filers and serves to create more confusion.

Self-Employed

Independent contractors are considered to be self-employed. That means their earnings are subject to taxes, and they’ll pay Social Security and Medicare related taxes. Individuals that operate a part-time business are also considered to be self-employed, along with those that receive money in connection with hobbies and similar activities.

Net earnings of $400 or more from self-employment activity must be reported or if they meet other filing requirements as determined by the IRS. The IRS tax form 1040 or 1040-SR will be needed, along with Schedule C for losses. A 1099-NEC should be obtained for non-employee compensation.

Gig Workers

An independent contractor, as defined by the IRS, is especially important for the increasing number of gig workers. Income taxes aren’t withheld from their earnings and the full tax burden falls on them at tax time since they’re considered self-employed. The same rules and forms apply to gig workers as those that are self-employed.

Consider a Professional

The tax laws governing the self-employed can be extremely difficult to navigate. While most online tax services may be adequate for completing filing requirements and providing the needed forms, individuals that are considered self-employed can benefit from a professional tax preparer or a tax attorney.

The professionals will know exactly what forms are needed for each individual situation, along with any related deductions. Whether an individual is operating a full-time or part-time business in which they’re paid for their services, they’re considered self-employed for the purposes of the IRS.

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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The U.S. utilizes a progressive system of income tax in which individuals are taxed different amounts on each portion of their yearly income. It’s a confusing system that leaves taxpayers reeling. There are multiple tax brackets and each one is assigned a tax rate percentage. A person’s yearly income determines their tax rate.

Tax Brackets

When individuals file their annual taxes at the end of 2021, they’ll find 7 different tax brackets.

• 10 percent for $0 to $9,950
• 12 percent for $9,951 to $40,525
• 22 percent for $40, 526 to $86,375
• 24 percent for $88,376 to $164,925
• 32 percent for $164,926 to $209,425
• 35 percent for $209,426 to $523,600
• 37 percent for $523,601 ad over

The number of deductions claimed on federal income tax reduces the amount of taxable income. The more deductions an individual has, the less of their income will be taxed at a higher rate. There are a number of deductions that individuals can claim on their federal income tax to reduce their tax burden.

There are also dollar-for-dollar tax credits that can reduce the actual tax bill. Tax credits typically produce a better result than deductions. That doesn’t mean individuals will receive the difference in the form of a refund, just that they will have less to pay taxes on.

People can itemize deductions, but there are some types of itemizations that have limits on the dollar amount that can be claimed. However, deductions reduce the amount of taxable income, and thereby the amount of taxes to be paid. A number of life events, such as having a child, may qualify individuals for additional deductions and credits that reduce their tax liability.

Many individuals purchase income tax software or use an online tax service to do their taxes and those methods are acceptable for people with simple taxes to calculate. For those making $200,000 or more or who own a business, a tax accountant is a better option. The professionals are experts at finding legal ways to reduce tax burdens and the amount of taxes their clients have to pay.

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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