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tax preparation Conway

Tax Extension

What to Know About Filing an Extension

One of the biggest misconceptions about filing an extension on federal tax returns is that it means individuals don’t have to pay any amount owed on time. An extension gives people more time to file, but not more time to pay.

Individuals can file an extension on their federal taxes, but it has to be done before the last day for filing the taxes. An extension provides taxpayers with additional months to prepare and file their return for any reason. The IRS automatically grants a request for an extension, but the proper forms must be filed and the extension is valid until Oct. 15. The extension can be filed electronically.

Taxpayers are expected to pay the full amount they owe by the tax deadline, even if they file an extension. The IRS assesses a penalty for late payments, usually 0.5 percent per month of the balance that’s due, but failing to pay can increase that penalty to a maximum of 25 percent.

There are 3 primary reasons that individuals file an extension. The first is missing or inaccurate information. Many people find that they haven’t received a form they need in time to file.

The second most common reason for an extension is that a taxpayer will be out of town during tax season. Many people from northern states winter in the south, while others choose to vacation during spring break. If they anticipate a refund, they often file an extension.

Lastly, people run out of time. Filing federal taxes can be stressful, leading to procrastination. Despite taxes being due on or near the same date every year, some individuals lose track of time, simply get busy, or find themselves dealing with a major life event.

For those that don’t have the money to pay their tax bill in full, the IRS offers some payment plans. Individuals will still have to pay their tax bill, along with any applicable penalties and interest, but at a lower rate. Installment agreements are also available, in which individuals pay a set amount each month. The IRS advises individuals pay their tax burden with a credit card or take out a loan to save 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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Adjusting Your W-4

There are some very good reasons to adjust your withholdings on your W-4. The form tells your employer how much money to keep out of your check for federal income tax. It will have an effect on your tax liability and prevent you from receiving an unexpected tax bill when filing your federal return.

Your W-4 is also critical for preventing a penalty for underpayment. Some people choose to claim every possible withholding, essentially living on less throughout the year to obtain a large refund at tax time. The IRS wants you to reduce your tax bill and have a refund that’s as close to zero as possible.

Life Events

Any time that your life circumstances change, you should complete a new W-4 with your employer. That includes a marriage, divorce or the birth or adoption of a child. Major life events also include buying a house, getting a raise, and contributing to educational funds. Some of those changes will make you eligible for credits on your federal tax return.

Part-Time Employment

If you normally work all year, but get laid off or experience downtime, you’ll need to adjust your withholding to account for those changing circumstances.

Second Job

It doesn’t matter whether you get a part-time job, work the gig economy, run a side hustle, or have a home business, you’ll need to adjust your withholding. There are a great many types of income producing ventures that are viewed as self-employment by the IRS, which makes you liable for income tax on the amount, along with the self-employment tax, Social Security and Medicare.

Spousal Employment

If your spouse gets a new job or changes jobs, they’ll also have to complete a W-4. Any change in income – an increase or a decrease – will have an impact on your income and amount of taxes you owe. Couples need to use both incomes and approximate as closely as possible what they need to claim on their W-4.

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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small business tax

Can You Get Tax Help for Free?

There are dozens of reasons why you need assistance with your taxes, especially if you’re doing them yourself. If you’re one of the millions that prepare their own taxes online, the services offer help in the form of popup windows, but those can be even more confusing and you may want to speak with a real person that’s knowledgeable about your particular circumstances.

You should bear in mind that the IRS was overwhelmed with calls in 2020 and again in 2021. People waited for hours on the phone to have their questions answered. That situation is likely to continue in 2022 and beyond.

Volunteer Income Tax Assistance (VITA)

VITA can be found online. You enter your zip code and the distance within which you want to find a volunteer. If you don’t find someone within your search criteria, keep expanding the distance. The online search will provide you with the name of the agency, it’s location and directions for contacting it. VITA help is available at a variety of locations ranging from colleges to community centers.

Tax Counseling for the Elderly (TCE)

To qualify for TCE, you must meet certain criteria. You’ll need to be a senior citizen, disabled, earn moderate or less income, or not be able to speak English very well.

IRS Taxpayer Assistance Center

These are IRS offices where you can search for a location where you can make an appointment to speak with an IRS representative. However, these sites can be 50 miles or more away from your location.

Taxpayer Advocate Center

The service is an independent organization within the IRS. It can be a good resource for those with a financial hardship due to a tax situation, levy or lien.

AARP Foundation Tax-Aide Program

Operated by the AARP for over 50 years, its focus is on those age 50 and older with a low to moderate income, though technically they offer help to any taxpayer.

MilTax Program

This is for current military personnel, a spouse or dependent child of someone in the military, or those who have served in the past. The organization offers help over the phone 24/7 and appointments can also be scheduled for MilTAX at a VITA office.

Local Services

Each year libraries and community centers in almost every town offers services provided by volunteers to help individuals with their tax-related questions. Some offer tax preparation seminars and workshops.

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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accountant conway south carolina

What is the Penalty for Not Paying Taxes?

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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efile

E-File for a Quicker Tax Refund

E-filing a tax return is the quickest and easiest way to get a refund if one is due, prevent identity theft, and arrange for the financial resources required if a balance is owed. Despite the convenience and ease of filing digitally, many still don’t take advantage of the technology even though it has distinct advantages.

E-filing is offered by tax preparers, online tax services, and tax software programs. Filing digitally is an easy way to know if the return has been accepted by federal and state governments and track its progress.

Faster Refund

The biggest motivator for e-filing a tax return is a quicker refund for those that have money coming back. By choosing to file electronically, tax returns arrive quickly and individuals can have the funds deposited directly to their bank, a pre-paid card, or a cash app card. Paper tax returns take longer to arrive at the IRS and requires extra effort on the part of IRS workers to process. A return can take weeks to be processed.

Balance Due

For individuals that owe the IRS, filing early lets them know how much they owe and buys them extra time to come up with the money owed. The amount is due on the filing deadline. If the money owed is readily available, people can opt to have the money automatically withdrawn from their account.

Late Filers

There are those that always procrastinate and wait until the last minute to file their taxes. E-filing ensures that tax returns arrive at the IRS in a timely manner and prevents them from being late.

Avoid Extensions

Filing early can prevent tax payers from the need to apply for an extension. The IRS will charge interest and penalties on any outstanding tax debt until the balance is paid in full.

Identity Theft

The risk of identity theft and having a refund stolen increases the longer tax payers wait to file their return. The instances of fraudulent tax returns continue to increase and all the unscrupulous need to file a return and steal a tax return is an individual’s Social Security number. Tax payers at the highest risk are those that wait until the last minute to file.

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 credits and tax deductions

Can You Use Tax Credits and Tax Deductions?

You can definitely use tax credits and tax deductions to lower the amount of federal income tax you pay. Tax credits directly reduce your tax. Deductions reduce the amount of your taxable income, the taxes you pay and may increase the amount of your refund if you have one coming. However, taking some deductions and credits will depend on which tax bracket you fall within and your personal situation.

Tax Credits and Tax Deductions

Federal income taxes can be complex, even for low-income filers. The Advance Child Tax Credit payments that began in the summer of 2021 is an example. You may have been receiving them, but the amount is half of what the total would be. You can claim the other half when you file your federal income tax return. Corona Virus Impact payments and stimulus payments will also have to be considered.

Tax Credits

There are credits for Earned Income, dependent care, adoption, and the elderly or disabled. There’s a foreign tax credit, those for undistributed capital gains, excess Social Security and RRTA withholdings and retirement savings contributions. You may have a credit if you’re a homeowner or have costs from healthcare and education. Some have limits on the amount that can be claimed.

Deductions

Work deductions are one of the most common types of deductions, enabling you to deduct expenses such as union dues and uniforms, or the use of your car and a portion of your home space if you’re working from home. If you’re part of the gig economy or use an employment app for per-day jobs, you can still take those deductions.

If you use those apps or are part of the gig economy, you should be aware that you’ll be classified as self-employed by the federal government and that means you’ll be paying higher taxes. You’ll be liable for self-employment taxes, Social Security and Medicare taxes. The good news is that you can typically claim your earnings on your regular income tax form under “Other Income.”

Tax Preparation

There are a number of good online tax preparation software programs for those that have fairly straightforward tax forms. If your taxes are more complicated, you should definitely seek the services of a professional tax preparer or CPA.

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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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!

 

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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!

 

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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!

 

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tax deductions

Common Tax Deductions you should Never Miss

Income tax time can be a dreadful season if you are not aware of all of the income tax breaks you can get through income tax deductions.  It is important to understand what is tax-deductible so that you can get as large of a tax refund as possible.

Probably the most well-known income tax deduction is the Earned Income Credit.  The earned income tax credit is available to those who make a minimum amount of money and can file tax as single, married, or head of household.  The more money you made, the more your earned income tax credit is until you hit the peak.  Once you hit that peak, the earned income tax credit goes down until you reach the maximum income allowed to receive the earned income tax credit.

The second well-known income tax deduction is the Child Tax Credit.  The child tax credit is available to you if you have two or more children in the home for more than six months out of the year for which you are filing tax, and if you have a tax liability.  The total amount is then applied to your tax liability, and any amount of child tax credit left over is made a part of your income tax refund.

Another income tax deduction is for child daycare, when the child daycare is needed in order for one or both parents to work outside the home.  This daycare income tax credit is equal to a percentage, up to a maximum amount, of the actual daycare expenses paid for that tax year.  

Other expenses can also be tax-deductible.  Interest paid on a mortgage for the primary residence can be claimed as an income tax deduction.  Medical expenses can also be claimed as an income tax deduction, although this is not very helpful unless you have an excessive amount of medical expenses to deduct on your income tax return.  Tax paid to another state can be used as an income tax deduction in the state that you live in.  Donations and contributions to charities, fundraisers, churches, etc. can also be tax-deductible.  

If you are self-employed, you can also claim business expenses as income tax deductions.  This includes any expenses directly related to running your business.  You can take a mileage income tax deduction for any miles you put on your vehicle for business purposes.  You can also take an income tax deduction for your office space in your home if it is used only for business purposes in the form of a portion of your rent, utilities, and phone bills.  You can also take an income tax deduction for your personal computer, printer supplies, and other office supplies as long as you have the receipts for the tax-deductible expenses, and usage logs for the personal computer and other equipment to show that it is used primarily for business.

As you can see, there are many income tax deductions available to you.  If you have any questions about what is tax-deductible, you should contact a qualified, certified, licensed tax accountant today.

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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