Skip to main content Skip to search

News

Stimulus Relief and Taxes

Various stimulus payments during the COVID-19 pandemic have been designed to provide relief for those struggling during job loss and lock downs. The coronavirus has affected every aspect of life, and that includes income taxes.

Payment Delays

The federal government has made three rounds of stimulus payments to individuals, even to those that typically don’t file or aren’t required to file. The distribution of those payments has encountered a number of problems. Individuals may have received one, but not the other payment, but that doesn’t mean that they won’t receive the second and third.

Others received less than the full amount and in many cases, the payments were confiscated for child support and similar court-ordered payments or the full amount wasn’t disbursed. For those individuals, they may be eligible to claim a Recovery Rebate Credit, but to do so they need to file a tax return.

Tax Liability

The good news is that stimulus checks aren’t taxable. Individuals must pay taxes on income, but stimulus checks aren’t really income for tax purposes. It’s classified as an advance payment on a tax credit and a tax credit isn’t taxable either. Pay careful attention to the new tax forms, as they can save taxpayers money if they:

  • Had a baby
  • Were married and one spouse doesn’t have a Social Security number
  • Income dropped in 2020
  • Are a recent college graduate
  • Didn’t receive a full round of stimulus checks
  • Didn’t file a 2018 or 2019 tax return

Delivery Difficulties

The stimulus payments were first made to people that filed tax returns by e-file. Paper checks were then dispersed to those that filed paper copies of their return. It led to delays, shorted amounts, and no check at all, since distribution was based on 2019 and 2020 tax returns. That means individuals will be able to claim the amount they missed as a tax credit on their taxes.

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

Read more
tax professional

5 Reasons a Tax Professional is Better than Online Filing Services

Millions of people across the nation file their taxes each year using popular online software. It’s easy, convenient, and fairly inexpensive. The IRS recommends that individuals use e-file options for their taxes. However, the best solution can be a tax professional. The more complex the tax filing, the more a tax professional makes sense and they can also e-file for clients.

  1. Year-Round Help

Online tax software is only available for a limited time each year and it can’t provide advice on potential tax issues that may arise during the coming year. A tax professional is available to answer questions and concerns at anytime during the year, not just at tax time.

  1. Best Software

Tax professionals have access to better and more sophisticated software than that offered online. An individual’s information can be scanned, entered, and organized quickly and efficiently. The process eliminates manual data entry, significantly reducing the potential for human error.

  1. On Time

Online software depends on individuals buckling down, collecting their information and beginning the task of filing taxes. Fear of a mistake is common among self-filers and it’s exacerbated when the individual happens to be a procrastinator. Provided that individuals get the information to their tax professional in a timely manner, taxes will always be filed on time, thereby eliminating late fees and running afoul of the IRS. Filing via a tax professional may also reduce the potential of an audit.

  1. Business Needs

Complying with new tax laws for operating a business and investments becomes more complicated every year. A tax professional is one of the first to have access to upcoming changes that affect clients’ taxes and livelihood. They have a thorough understanding of tax laws in multiple areas and can guide individuals. Even those with straightforward tax returns will fare better.

  1. Stress

Tax time generates a considerable amount of stress each year and it’s compounded when people try to do their own taxes – even with online software. The changes in tax laws and the COVID-19 pandemic are further confusing requirements. An ordinary tax return can take up to two hours to complete online. A tax professional saves clients time, effort and stress.

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

Read more

Best Tax Savings for Single People

There’s a wealth of deductions that couples and parents of children can take to lessen their tax burden. Single people aren’t typically so fortunate, but there are ways that singles can utilize to reduce their monetary burden at tax time.

Adjust Withholding

A large tax refund is a good indication that an individual is having too much withheld from their paycheck. The solution is to file a new W-4 form with their employer. By reducing withholdings individuals will receive more money in each of their paychecks.

Health Care

A health care flex plan diverts money from a paycheck into an account that an individual can use to pay medical bills. Neither income taxes or Social Security taxes need to be paid on the money. The maximum contribution each year to a health care health plan is $2,500.

Job Hunting

For singles that are looking for a new position in the same line of work, job hunting expenses can be deducted. That includes transportation, food, lodging and other associated costs, not to exceed 2 percent of adjusted gross income. Moving costs can be claimed if a new job is more than 50 miles farther from the individual’s home. If the individual is using their own vehicle, they can claim 56 cents per mile, along with tolls and parking fees.

Restricted Stock

Taxes on stock received as a fringe benefit can be paid at the time of the stock’s value rather than until the restrictions disappear. The benefit is that the tax rate could be far more after the stock vests.

Side Hustles

Individuals that are making extra money at home through a side hustle can deduct a percentage of the space as a home office. However, individuals that make more than $400 may be taxed at the increased level reserved for the self-employed.

Pandemic

For singles that have been sharing their home with a family member of friend during the pandemic, if they’ve been providing more than 50 percent of that person’s living expenses, they can claim them as a dependent. Many people didn’t receive one or more of the three stimulus payments that were distributed by the federal government. For others, the full amount wasn’t received. Anyone that experienced one of those situations can claim the amount as a tax credit.

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

Read more
estimated taxes

Estimated Taxes for the Self-Employed

People that are self-employed typically pay a self-employment tax, income tax, and are required to file quarterly. Estimated taxes are similar to the Medicare and Social Security taxes that are withheld from a person’s paycheck. The goal for the self-employed is to subtract business expenses from business income to determine estimated taxes.

If expenses are less than income, the difference becomes net profit and part of the income. The reverse is also true. If expenses are more than income, the difference is the net loss. Net earnings of more than $400 requires the filing of self-employment taxes and the individual may also have to file an income tax return.

Since there’s no employer taking Medicare and Social Security taxes from a paycheck, those that are self-employed have to estimate their tax liability. Specialized forms and worksheets will be required and it’s at this point that most individuals hire a tax professional. They will know when the client needs to file and they have the advanced software needed for the complex computations. They can also e-file.

Business Structure

When an individual launches a business, they must decide what type of business structure the enterprise will follow to ensure they’re estimating the correct level of taxation. People most commonly establish a sole proprietorship, corporation, partnership or S corporation. They may also choose to operate as a limited liability company (LLC), which is a relatively new type of entity that most states deemed allowable in the 1990s.

Joint Venture

When spouses form a business venture, it’s considered a joint venture for tax purposes and the rules are slightly different. They have the option, if they’re the only employees, to elect to file taxes individually rather than as a partnership.

Penalties

Business owners will find that they’re charged a penalty if they don’t pay enough taxes through estimated tax payments if they receive other income. Those sources can include alimony, dividends and capital gains, and prizes and awards. It’s just one of the reasons why it’s easier and more efficient to hire 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!

 

Contact Us Today

Read more

Tax Advantages of an HSA

A Health Savings Account (HSA) is an often-overlooked strategy that has tax advantages. An HSA allows individuals to set aside money on a pre-tax basis to pay for qualifying medical expenses. The savings account can be used to pay for insurance copayments and other expenses that can save money on overall healthcare costs.

It’s important to remember that employer contributions will also figure toward those amounts. Individuals that contribute more than the allowable amount will incur a 6 percent tax. However, not everyone can take advantage of an HSA.

The HSA funds can be utilized at any time, but funds can only be contributed if individuals have a high deductible health plan – such as those available through the Health Insurance Marketplace. In 2022, individuals can contribute up to $3,650 and up to $7,300 for families. The funds also roll over from year to year if they’re not spent. HSAs have the potential to earn interest or other benefits that aren’t taxable.

Contributions

Contributions are tax free. They can be made through a pre-tax payroll deduction and isn’t counted as income so it can’t be taxed. Self-employed people can make pre-tax contributions and it won’t count as taxable income.

Interest

An HSA is a savings account and it will earn interest like any other savings account. The good news is that interest earned won’t be deemed as taxable income.

Withdrawals

Withdrawing funds to pay for allowable medical expenses can be done without penalty. An added bonus is that the HSA will perform like a traditional IRA once an individual turns 65 years old. Funds can then be withdrawn for any reason, not just for medical care and costs. However, individuals will be taxed on the money if they do. Anyone that’s enrolled in Medicare won’t be able to contribute to the HSA any longer. The good news is that any unused money that rolled over for all those years will still be there to pay for medical expenses tax free.

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

Read more

Does my Teen Need to File Taxes?

Filing income taxes can be difficult enough with the constant changes to IRS rules. The situation becomes significantly more difficult when a teen and their income are involved. You’ll need to have a variety of information at your fingertips. The IRS sets dollar amount limits and whether or not your teen will have to file a tax return will depend on their total income was from all sources.

Income Levels

Unlike adults, there’s more flexibility when a child is filing, but that can also make it more complicated. If your child has income above the level set by the IRS, he/she won’t need to file. However, when a child has both earned and unearned income, the two will have to be added together to determine their filing status.

Financial Support

You can claim your child if you provide more than 50 percent of their financial support, they live with you more than half the year, and they’re under the age of 19 during the entire year. You can claim them up to the age of 24 if they’re a full-time student, even if they live outside your home due to their education.

Wages and Salary

The type of income your child has will also affect their filing status. Dependent children that have earned income of more than $12,400 (as of 2020) through wages and salaries must file. They may also owe income taxes. A child’s standard deduction can’t exceed the larger of $1,100 or their earned income plus $350. The maximum is $12,400.

Investment Income

A child’s investment income is treated differently. It’s considered unearned income when acquired through dividend or interest payments, for example. If all the child’s money was unearned income, you can include it on your return and combine it with your income. However, doing so has the potential of elevating you to a higher tax bracket.

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

Read more

Financial Steps to Take After you get a Raise

A raise represents a welcome addition to your income, but it can also come with some pitfalls. You may be tempted celebrate by splurging on something you or the family have wanted. While a small purchase may be in order, it’s important to remember that the money will be doled out across multiple pay periods. You also won’t receive the entire $5,000 since taxes will take a percentage of each dollar.

Take Home Pay

Take stock of your current financial situation and figure out how many dollars more you’ll be taking home each pay period. You may also have to make adjustments to your withholdings your IRS W-4 form. Claiming too much in withholdings will net a large refund at the end of the year, but it can also bring unwelcome attention from the IRS. Claiming too little in withholdings can leave you owing a significant amount of money to the IRS that you’re ill-equipped to pay.

Address Debt

If you have credit card debt or a car loan, use the extra money each pay period to pay it down. It’s especially important if you have high-interest credit cards or long-term debt. It will also work to increase or maintain your credit rating.

Emergency Fund

A raise is a great way to build on an existing emergency fund or start one. You’ll have the needed funds if there’s a job loss, unexpected medical bills, or a major appliance needs to be replaced. Keep the money in a separate savings account so you won’t be tempted to spend it. Financial advisors recommend having enough money in an emergency fund to cover living expenses for 3 to 6 months.

Retirement Fund

It’s never too early to think about retirement. Contributing even 1 percent of your raise to retirement can make a big difference. Consider making it an automatic deduction from your pay check. If your employer matches your contributions, definitely take advantage of it.

Treat Yourself

It’s okay to set aside a little money to treat yourself or the family and enjoy your success. It’s your reward for hard work. Just keep it small and don’t go overboard. A treat doesn’t have to cost a fortune to be appreciated and savored.

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

Read more
side hustle

Side Hustle Taxes

Over 55 million people are engaged in side hustles. Commonly known as the gig economy in today’s vernacular, people are turning to work they can do on their own terms to earn extra cash in addition to their regular jobs. Side hustles run the gamut from making handcrafts and freelance writing to dog walking and driving for ride-share companies.

The activities can generate significant funds to help people get out of debt, finance college, or save for retirement. It allows individuals to follow their passion, provides a measure of financial freedom, and allows for extreme flexibility on the part of the individual. What most people don’t realize is that they’ll also be responsible for paying taxes on their side hustle.

However, the IRS has an entirely different set of rules for people in the gig economy. If an individual makes more than $600 in a calendar year, they’ll have to report the money as earnings on their tax returns. The IRS then classifies individuals as self-employed and subject to a 15.3 percent self-employment tax.

To offset that, individuals will need to take every deduction possible and make sure they have enough money in savings to pay the taxes the IRS will impose. Failing to plan ahead will leave side hustlers with a large tax bill they may be ill-equipped to pay, which can set an entirely new set of problems in motion.

The first thing that side hustlers learn is to save every receipt. Individuals working from home can claim a portion of their home as office space. Expenses for driving to trade shows, assignments, and even internet services can be deducted, along with laptops, software and similar expenses for conducting the side job.

Performing work for others via online platforms is one of the most popular ways that people are engaging in side hustles. It’s important to know that these gig platforms typically don’t issue a form 1099 for taxes at all, and some only do if a certain income level is reached. Individuals will need to learn how to keep accurate records of expenses and income on their own.

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

Read more

How To Use Accounting Software To Organize Your Tax Records

Keeping track of your tax records does not need to mean an overflowing file cabinet. Plenty of free online resources will help keep even the most chaotic offline tax records well organized. Finding out which records should be kept and where is just half the battle. Storing them properly takes discipline, without which you will be left with an over-loaded shoebox full of receipts.

There are many different ways that you can store and organize your records; some work better than others for different people. In the case of individual tax returns, it is easier to use accounting software to manage the accounting side of things; you simply record when you make a purchase, when you make a payment or write in a check. It would be much more time consuming, however, if you want to organize your receipts and other documents.

One of the first steps in keeping up with your records is to have a system in place for storing all of the receipts that come into your business. If you are using a single computer for all of your document filing and accounting needs, then you can easily install and use one of the free accounting software programs available online. You can then print out each receipt and store it in your receipt folder. If you have more than one location for your receipt and bookkeeping needs, you can use labels or tags to organize the documents as you see fit.

If you use accounting software to organize your tax records, you may also want to purchase a receipt scanner. With this tool, you can scan every receipt that comes into your office. These scanners are usually used by accountants and other individuals who have a lot of paperwork to process. There are even models available that can be mounted on the wall so you can scan everything that comes into your office. There are even some models available that will allow you to print out everything that is scanned. The benefit of using these products is that you will be able to save money by eliminating the cost of purchasing ink and paper.

In addition to using an accounting software product to organize tax records, you can also take advantage of available online resources. One of the best options available is the ability to use an online filing program. These types of programs will allow you to electronically file your income tax documents so that you can avoid the extra time and money spent filing by hand. When you file electronically, you can usually do it from any location with an Internet connection. This will allow you to access your files from any computer with an Internet connection. This option is often times very helpful if you have a home office because you can easily conduct your tax records there.

The tax records that you maintain should be organized so that you can easily retrieve them when you need them. There are a variety of ways that you can organize these documents. If you want to save time while filing your tax returns, consider buying an accounting software product that will help you organize your tax records. If you are unsure about how to organize your tax records, then you can hire a certified public accountant to help you. There are many advantages to keeping your tax records in order and using a tax software product that helps you organize your information.

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

Read more

Tax Liability – A Simple Tax Strategy

Knowing how to minimize your tax liabilities can help you avoid having to pay too much in taxes or using up too much of the tax season. Ways to minimize tax liabilities for your business include: Using an accountant or CPA. A certified public accountant will help you create a comprehensive year-end tax strategy, which can be used to reduce both your taxable income and your taxes. Accountants will also help you with tax-deductible expenses such as those related to buying equipment, selling assets, or increasing your tax deductible business expenses.

Create a Budget for Tax Liabilities Your budget should include a list of all your income, expenses, and assets. Divide income into your tax liability category in order of highest to lowest. Include your total annual expenses, including mortgage, insurance premiums, and property taxes. Add your investment earnings and include the total amount you pay to rent, repair or improve the house, and any other miscellaneous expenses. Do not include retirement contributions and interest income on retirement accounts or pensions.

Maximize your deductions When you are trying to minimize your tax bill, consider being audited by the government. Audits are designed to identify areas where business owners can make improvements to their business in order to minimize their tax liability. Some auditors will suggest that business owners meet with them before the audit to discuss their income taxes and assets.

Be sure to calculate a tax-free allowance If you don’t have enough taxable income to meet the asset limitation on your return, you may want to calculate a tax-free allowance. The tax-free allowance is the maximum amount of money that you can claim on your tax return for each taxable income class. For most people, the tax-free allowance is around 50% of their income. It is possible to increase this allowance over time, especially if you meet the eligibility requirements.

Estimate taxes payable annually One way to minimize your tax liabilities is to make an educated guess at how much you will owe. This method, though imperfect, will provide a ballpark figure for you. Many tax professionals will encourage you to make an annual estimate of taxes payable. Estimations are available from different sources such as the Internal Revenue Service, the Social Security Administration, and your own payroll processor. If you don’t have access to these sources of information, there are many websites that offer free tax planning advice and tools.

All these steps will help you reduce your tax liability. Be prepared when tax season comes and do your homework. Educate yourself about income tax liabilities and strategies that could reduce your tax liability. You can always adjust your estimated tax liability for the current year when tax season arrives.

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

Read more