How To Prepare Taxes for 2022 Tax Season

 

 

Now that tax season is officially over, it is time to prepare for next year. To have an efficient tax filing in 2022, you must stay organized year-round. 

2022 Tax Season
Check out the info below for professional advice about tax preparation for the 2022 Tax Season.

 

Benefits of Tax Planning

 

Tax planning is beneficial to you in the following ways:

 

  • Get your tax deductions and tax credits. Keep track of all your supplies purchased, depreciation, and mileage. Subtract these expenses from your taxable income. Tax credits also reduce the amount of taxes you owe by reducing your income tax dollar-for-dollar.

 

  • Help decide on using standard deductions or itemizing. Many taxpayers use standard deductions because it is much faster at a flat rate. Itemizing is a longer process, but typically ends up with more deductions. Itemizing takes your tax deductions one by one.

 

  • Determine your tax bracket and plan for tax time. Knowing which tax bracket you fall in is vital so you know your standing and gives you time to prepare. The higher your income is, the more money you may have to pay in taxes.

 

  • Keep a good track of your tax records to file on time. The most important part of tax planning is keeping records of past tax returns and current documents. If you work with a tax preparer, this helps them keep you on track.

 

How to Stay Organized

 

Reduce the amount of paperwork as much as possible. Digitize everything you can and stay orderly with a spreadsheet. You may find that software like Quickbooks works best for you. Take a photo of your receipts while you are on the go. Quickbooks tracks the date, vendor, amount, and payment method for you. This prevents a pileup of printed receipts in your office.

 

When making note of your expenses, accurately add the date, location, amount, and item. Keep food and office supplies separate. Add in the number of miles driven, location, and reason for driving there so that you have good representation for the IRS if needed. 

 

Monitoring and collecting this data also shows your business where it is spending the most amount of money. This helps you determine whether it is a good use of your budget.

 

Should I Hire a Tax Planner or Tax Preparer?

 

A tax planner structures transactions to minimize the legitimate amount of tax you pay. Tax preparers file taxes for individuals and businesses. They ensure you consider all your legal deductions, so you realize your full tax benefit. 

 

PL Consulting has comprehensive interview techniques. Our computerized tax return preparation process assures that your return is complete, correct, and presented to you promptly. We assist you in planning your tax obligations for the entire year, so there are not any surprises at tax time. We ensure you gain the full benefit of your deductions through our intensive education and training.

Questions about our tax preparation services? Call us at 410.764.3731 or contact us on our website. Stay up-to-date with PL Consulting on our LinkedIn.

 

 

Frequently Asked Tax Questions

 

We get many tax questions coming our way daily. We do our best to thoroughly answer our clients. Our team compiled some of these questions so you have something to refer to when you need it last minute. Keep reading for answers to these frequently asked tax questions.

 

Is a TIN the same as an EIN?

 

A tax identification number (TIN) is a nine-digit number assigned to businesses by the IRS. Every company in the United States has a tax ID number. 

 

An employer identification number (EIN) is also a nine-digit number issued by the IRS. The IRS uses the EIN to identify taxpayers liable to file business tax returns. You do not need to have employees to get an EIN.

 

So what is the difference between a TIN and EIN? TIN identifies individuals and businesses to ensure tax compliance. You add your TIN in tax returns and other documents that you file with the IRS. An EIN is a type of TIN. It is used when identifying business entities instead of individuals.

 

Is tax evasion a felony?

 

Yes, tax evasion is a serious violation and a felony. Individuals and companies that fail to pay their taxes result in substantial financial penalties and/or criminal charges.

 

If you owe past due money, receive puzzling correspondence from the IRS, or your return has been selected for an audit, we are fully qualified to assist you before the IRS or the Franchise Tax Board. We specialize in collection and appeals representation.

 

What tax bracket am I in?

 

Federal income tax brackets are different for single filers, heads of household, and married people who file jointly and separately. These change from year to year, so it is important to check which one you are in. This article breaks down the tax brackets for 2021.

 

When is tax season?

 

Tax season typically starts on January 1st and ends on April 15th (Tax Day) every year. During this time, individuals, companies, and tax preparers gather information and file for the previous year’s taxes.

 

The upcoming 2021 tax season ends April 15, 2021. You must file your taxes to avoid penalties and fees.

 

How are taxes calculated?

 

The IRS goes through several complex steps to calculate income taxes. The following categories and steps are included when determining your taxes:

  1. Gross income
  2. Adjusted gross income (AGI)
  3. Taxable income
  4. Personal exemptions
  5. Tax brackets
  6. Tax credits

 

If you want further details and explanations on tax calculations, contact us!

 

Tax Questions

 

Hire a Tax Accountant From PL Consulting

 

Our professionals at PL Consulting and Bookkeeping Plus will assist you in tax planning, accounting, tax returns, and more. We ensure you file your taxes on time and accurately. 

 

Our team serves the Baltimore, Maryland area and beyond. We customize our services to each client. Your ideas are unique to your business, and we understand that. We help you maintain good records and financial statements.

 

Do you have tax questions or want to learn about how our tax and accounting services can help your business? Call us at 410.764.3731 or contact us on our website to schedule an appointment with one of our accounting professionals.

 

 

Last-Minute Tax Tips

 

Tax day is almost one month away! Keep reading for some last-minute tax tips for last-minute filers.

When is the last day to file taxes?

First, know when to file your taxes to avoid any late fees or penalties. For your 2020 taxes, the last day to file is Thursday, April 15, 2021. If you need more time, you can try to file for a tax extension. This gives you until October 15th to file your tax return. 

 

What tax bracket am I in?

Know which tax bracket you are in when assessing your financial decisions. This is especially beneficial to next year’s tax return, but it still gives you an idea of how much you will need to pay in taxes this year. If you are unsure of which tax bracket you are in, this tax bracket calculator may help you. 

 

Credits and Deductions

Business tax credits are subtracted directly from your taxes, while deductions reduce your taxable income. File for all the deductions and credits possible. Do your research to ensure which ones apply to your business, and have proof of why. 

 

Common deductions for small business owners:

 

Common business tax credits: 

 

Last-Minute Tax Tips

 

Gather Receipts

If you haven’t been collecting your physical and digital receipts from purchases all year, now is the time to get those together. Your receipts are proof of purchases made throughout the year concerning your business. You may write off some of these amounts as deductions, saving you money. 

 

Have a plan of saving receipts for 2021 so that you aren’t in the same situation next year. This keeps you organized, saves you less time gathering items, and reduces your taxable income.

 

Hire a Tax Accountant

If you are struggling to complete your taxes, or just simply don’t want to, PL Consulting is here to help you. Hire our professional tax accounting team to help you file your 2020 taxes. Though this will be a financial investment, it will save you money. We will manage your business taxes this year and plan for upcoming years. 

 

Our professionals at PL Consulting and Bookkeeping Plus will assist you in saving as much money as possible. We are qualified to assist you with any issues relating to the IRS, relocation, or out-of-state taxes.

 

We are your go-to resource for bookkeeping and accounting services. Our team serves the Baltimore, Maryland area and beyond. We customize our services to each client and help you maintain good records and financial statements.

 

Questions about filing for taxes last minute? Call us at 410.764.3731 or contact us on our website to schedule an appointment with one of our professionals.

 

 

Tax Tips: Home Office Deduction

 

Working from home? Your at-home office can save you money this tax season! Keep reading to see what qualifies–and what doesn’t–for home office deductions. Here’s a few tax tips. 

 

Are Tax Deductions Good?

 

Self-employed taxpayers, independent contractors, and those working in the gig economy can claim tax deductions. By writing off certain expenses, you may owe less in taxes. Your claimed expenses must be for business use. 

 

How to Keep Track of Tax Write-Offs 

 

First, know what qualifies for tax deductions. Each year, it is vital to keep track of all business transactions to claim them during tax time. 

 

It is easiest to keep an electronic folder with all receipts. A spreadsheet may also help you stay organized with spending amounts. Consider hiring a professional accountant to plan and evaluate your business transactions. This structure will minimize the legitimate amount of tax you pay.

 

To figure out your home office deduction, the IRS issued a simplified version. Check out the home office deduction calculation to add to your bookkeeping.

 

tax tips

 

Do Employees Qualify for Home Office Deduction?

 

Because of COVID-19, many employees switched to working from home. Some employers provided their employees with WFH equipment. Still, many employees had to buy new items for their home office themselves. They also had to make extra space in their home for work. 

 

Unfortunately, because of the Tax Cuts and Jobs Act, employees cannot use the home office deduction from 2018 through 2025. This includes employees who receive paychecks or W-2’s exclusively from an employer even if they are working from home. This deduction only includes self-employed taxpayers, independent contractors, and those working in the gig economy.

 

According to the IRS, 

 

“If you use part of your home exclusively and regularly for conducting business, you may be able to deduct expenses such as mortgage interest, insurance, utilities, repairs, and depreciation for that area. You need to figure out the percentage of your home devoted to your business activities, utilities, repairs, and depreciation.”

 

Do Home Office Deductions Trigger Audits?

 

It is not likely for the IRS to audit your home office. You should not have to worry if you work from home and use the space regularly and exclusively for business.

 

If you are still unsure, learn more about home office deductions from the IRS Business Use of Your Home guide. You may also contact PL Consulting, a team of professional accountants and bookkeepers. 

 

Outsource Your Tax Preparation to PL Consulting

 

PL Consulting is your go-to resource for tax preparation services. We serve the Baltimore, Maryland area and beyond. We are experienced in tax preparation, including filing individual, small business, partnership, and estate returns. We ensure you consider all your legal deductions to realize your full tax benefit. 

 

Our comprehensive interview techniques and computerized return preparation process assure that your return is complete, correct, and presented to you promptly.

 

Questions? Call us at 410.764.3731 or contact us on our website to schedule an appointment with one of our professionals.

 

 

All Independent Workers Need to Know About 1099-Misc Forms

 

Tax season is typically a stressful time for many people. It’s important not to make any tax mistakes or miss out on extra cash through deductions. 

 

Most people complete their contracted jobs from the comfort of their own home. Because of this, many independent workers started their businesses or began working as freelancers during the pandemic. If you are new to this type of work, it may be more confusing to do your taxes this year. 

 

Get prepared for tax season. Here is what you need to know about 1099-Misc forms as an independent worker. 

 

Who Gets a 1099-Misc Form?

If you are an independent worker and get contracted to do a specific job, you will receive a 1099-Misc form during tax return season. Unlike a W-2 employee, independent contractors have to determine their own payroll taxes. These are paid every quarter. 

 

There are several other differences between being an employee of a company and an independent contractor. Employees receive benefits from their employers. Independent contractors pay for their own insurance policies and retirement plans. 

 

1099-Misc Form Requirements

You must answer “yes” to these questions to receive and file a 1099-Misc form during tax season.

 

  • The payment must be more than $600. 
  • 1099-Misc forms are used to report money paid for services. It is not used for physical products.
  • The services performed must be for business purposes. If the payments were for personal services, you do not need to file a 1099-Misc form. 

 

Independent Worker Deductions

If you are an independent contractor, deduct work-related expenses from your taxes. When filing your 1099-Misc forms, deduct these items:

 

  • Internet
  • Travel/gas
  • Home office 
  • Car/office maintenance
  • Phone bill
  • Computer/laptop
  • Conferences, classes, and training
  • Office supplies

 

There are so many more deductions that you may qualify for as an independent worker. Talk to a professional tax preparer or accountant to maximize the amount that you will receive back from the government.

 

1099

 

More Notes About 1099-Misc Forms

If you are not sure if you need to file a 1099-Misc form or not, you can still file it. There is not a penalty if you do. If you do not file one that is required to, you may be subject to penalties and fees.

 

Before any payments are made with a new vendor, always get a W-9 form from them. It is vital to do this if there may be a requirement for a 1099-Misc. This saves you during tax-time from vendors that are too busy or unorganized to get you the information.

 

Maintain Your Bookkeeping Records

Are you considered a freelancer, contractor, or independent worker? You must keep track of your bookkeeping records. Make sure you are getting payments from the vendors you are working with. Record where your money is going so you can save money for taxes, retirement, and insurance.

 

PL Consulting is your go-to resource for bookkeeping and accounting services. We will help you maintain good records.

 

Questions about 1099-Misc forms, taxes, or bookkeeping? Call us at 410.764.3731 or contact us on our website to schedule an appointment with one of our professionals.

 

Year-End Payroll Processing Tips

 

January is almost here, which means it is time to focus on your business’s year-end payroll processing. Processing payroll is complex and detail-oriented. It requires tax calculations and compensation totals for each one of your employees. 

 

This can be a dreadful time for many business owners, so we are sharing some of our expert tips to make year-end payroll processing run smoothly for you.

 

Update Employee Information

The IRS may penalize you for missing or incorrect employee information on their W2 forms. To avoid these penalties, audit employee information like social security numbers, addresses, and names. If you outsource your payroll or use a payroll service that employees can view online, encourage them to review and edit their information throughout the year.

 

Verify Employee Wages, Benefits, and Deductions

Double-check that each employee has the correct pay-rate on file. Review their benefits and deductions to make sure that everything is listed correctly. Many businesses give bonuses at the end of the year. If these bonuses withhold retirement deductions, do not exceed the annual limit.

 

processing

Process All Checks

Sometimes you make payments outside of your regular payroll processing system. Be sure to keep track of those checks. Pay the tax liabilities for these checks on time. Report all voided checks as well. 

 

Do not mark uncashed checks as voided checks. Report those checks to the unclaimed property office in your state. For Maryland, you can visit their unclaimed property website for more information.

 

Payroll Processing Software

A streamlined payroll process sets a good foundation for your business. Payroll software organizes all important documents and manages employee pay periods. Select which program best suits your business model by weighing out the pros and cons. This is one of the most important payroll management decisions that you will make. 

 

The software will help you out immensely at the end of the year because of its structure and paperless system. If you don’t already use this software, consider acquiring it next year for a trouble-free process.

 

Stay Up-to-Date

Even though you may have done your business’s year-end payroll last year, rules and regulations always change. Stay up-to-date with how your payroll system works. Continue learning about payroll best-practices and make note of important deadlines that you must meet.

 

Payroll Processing Help

If your business is growing and you find it hard to keep up with payroll processing on your own, consider sending it to an outside contractor. This gives you time to focus on what is more important in your business.

 

PL Consulting is here as your business’s go-to resource for bookkeeping and payroll processing. We focus on small and mid-size companies who desire substantial growth. Our payroll services include:

 

  • Payment of State and Federal taxes
  • Track vacation, leave, and sick time
  • Issue paychecks on paper or via direct deposit
  • The ability for employees to view up-to-date pay info online
  • Generate W-2, W-3, 1099 & 1096 forms

 

We customize our services to each of our clients and their business plans. Call us at 410.764.3731 or contact us on our website.

 

 

Should I Apply For the PPP Loan Forgiveness Right Now in 2020 or Defer?

The Paycheck Protection Program (PPP) was created as a result of the COVID-19 pandemic. It is a part of the Coronavirus, Aid, Relief, and Economic Security Act (CARES Act). Many business owners are wondering if they should apply for the PPP loan forgiveness or defer in 2020.

 

PL Consulting has helped many employers apply for the PPP loan and assisted others when deciding not to. Here is our expert advice on the pros and cons of applying before the end of 2020.

 

PPP

 

PPP Background Information

The PPP has helped businesses both large and small ever since it was enacted on June 5, 2020. If you apply for it, all the money that you have borrowed will be forgiven. Payroll costs include all forms of cash compensation paid to employees, including tips, commissions, bonuses, and hazard pay. The forgivable cash compensation per employee is limited to $100,000 annually.

 

The uncertainty that many employers are having right now is that they want to defer payroll taxes, but still hope and expect to get a PPP loan at some point. Some taxpayers want to avoid IRS penalties that may come with deferring payroll. Others are deferring payroll taxes intending to repay them if they ultimately get loan forgiveness under a PPP loan.

 

Employers who obtain PPP loans may defer the deposit of payroll taxes until the employer receives a decision from its lender that all or any portion of their PPP loan is forgiven.

Once loan forgiveness has occurred, the employer must resume timely payroll tax deposits. The amount that was deferred through the date that the loan was forgiven will continue to be deferred. Half of the deferred amount will be due on December 31, 2021, and the other half will be due on December 31, 2022.

 

Our PPP Recommendation

Instead of rushing to apply, consider how much adequate preparation will help you in the decision-making process. If you wait to apply for the PPP loan, there also may be financial benefits for borrowers. There will be additional information and guidance available to you. The loan forgiveness process has been frustrating for many employers, so the longer you wait, the more established the system is.

 

There is a PPP FAQ page that was recently updated in October. This page has great information that may help with your decision-making process.

 

Do You Have Additional PPP Questions?

We understand many factors go into your decision as a borrower and employer. We suggest that you discuss your decision with a CPA or legal counsel before submitting your application.

PL Consulting is committed to helping each one of our current and future clients with their business finances and bookkeeping. We are continuously researching up-to-date information on the Paycheck Protection Program. We are available for all the questions you have about the PPP loan forgiveness and deferring. If you would like to set up an appointment, call us at 410-764-3731.

January-October Financial Review for Tax Planning: Why It’s Beneficial

 

Financial reviews evaluate your financial position. Since everyone’s tax planning needs are different, each review focuses on what is most important to you. 

 

Financial reviews help with future tax planning. This gives you structure in your transactions and minimizes the legitimate amount of tax you pay. Tax planning is a great tool to use for businesses, wills, retirement plans, and properties. 

 

Tax season is a stressful time of year for everyone, but everything becomes easier when there is a tax plan in place. These 4 concepts are a part of the tax planning process and will benefit your business. 

 

tax planning

 

Utilize Tax Deductions and Tax Credits

 

Both tax credits and deductions reduce your tax bill. Tax credits are more beneficial, giving you a dollar-for-dollar reduction of income tax that you owe.

 

Tax deductions are expenses that are subtracted from your taxable income. Expenses include contract labor, supplies, and depreciation. These expenses must be for business use, and not personal use. You should keep track of your tax deductions throughout the year. 

 

Decide on Standard Deductions or Itemizing

 

Many taxpayers use standard deduction because it is much faster. Standard deductions are a flat rate deduction. The government provides set amounts of standard deductions each year based on filing statuses. 

 

Itemizing is a longer process, but typically ends up with more deductions. Itemizing takes your tax deductions one by one.

 

Determine Your Tax Bracket

 

Knowing which tax bracket you fall in is vital because it gives you knowledge of your current standing. It also helps you plan for the future. The higher your income is, the more money you may have to pay in taxes.

 

Keep Track of Your Tax Records

 

The most important part of tax planning is keeping records of past tax returns and documents. Stay organized so it is easy to find the paperwork. If you work with a tax preparer, it helps them keep you on track to filing taxes on time. 

 

It can take the IRS up to three years to decide whether to audit your return, so hold on to your records for at least that long.

 

Financial Review for Tax Planning

 

PL Consulting is experienced in all facets of tax planning and financial reviews. We structure tax plans to cut the legitimate amount of tax you pay. We help plan your tax obligations for the entire year, so there are not any surprises at tax time. We can explain the tax structure so you know where your money is going. 

 

Whatever your financial objectives are, we will discuss them with you and then deliver a plan to help you achieve them. We are here as your business’s go-to resource when you have questions about bookkeeping, taxes, and finances. Our services are customized to each of our clients and their business plans. 

If you have questions about why financial reviews for tax planning is beneficial, call us at 410.764.3731 or visit us at https://www.plcfo.com/contact/.

Do Not Make These Mistakes on Your Taxes Next Year

 

Tax day is always April 15th – besides this previous year, of course! Even though that date seems far away, it is never too early to be ready for the time of the year that everyone dreads. 

 

Prepare yourself and your small business for next year’s tax season so it runs smoothly. Do not make these mistakes on your taxes next year.

 

dont make these mistakes

Income Reports

Inaccurate income reports are a big mistake that is often made in small businesses. Do not fail to report income or accidentally over-report your income. The IRS has access to the information that you are trying to withhold. Throughout the rest of 2020, make sure that all income reports are correct by double-checking them. 

 

Small Business Tax Deductions

Small businesses have the opportunity to claim tax deductions. By writing off certain expenses, your small business should owe less in taxes. 

 

The IRS says that business expenses must be ordinary (common in your industry or trade) and necessary (needed to run the business). Expenses must be for business, not for personal use. Below are a few tax deductions that small business owners should keep track of.

 

  • Car and truck expenses
  • Salaries, wages, and contract labor
  • Supplies
  • Depreciation
  • Business rent
  • Utilities
  • Insurance
  • Repairs

 

This article goes in-depth about expenses that can be considered a tax deduction

 

Personal vs. Business Finances

Small business owners commonly mix up their personal and business expenses. Although it may seem easier to keep everything in your personal account, it causes problems during tax time. This might cause you to overlook a small business deduction. Avoid mixing these expenses by opening up separate accounts.

 

File On Time

This might seem like an easy decision, but make sure to file your taxes on time. Steer clear of problems caused by late taxes by asking for a filing extension. 

 

PL Consulting Will Prepare You For Tax Season

We want to help small businesses in any way that we can. We hope that you can take these suggestions and implement them in your business as soon as possible. 

 

We are experienced in all facets of tax preparation. We ensure that you consider all of your legal deductions so you realize your full tax benefit. Our comprehensive interview techniques and computerized return preparation process assure that your return is complete, correct, and presented to you promptly.

 

We help structure transactions to minimize the legitimate amount of tax you pay. Through careful evaluation, we help plan your tax obligations for the entire year so there are not any surprises at tax time. We can explain the tax structure so you know where your money is going. 

 

Along with tax return preparation services, we offer a diverse range of bookkeeping and budgeting services. We are here as your business’s go-to resource when you have questions. Our services are customized to each of our clients and their business plans. 

 

If you have questions about tax preparation, call us at 410.764.3731 or book an appointment through https://calendly.com/michaelplc.

 

 

4 Tax Preparation Tips for Small Businesses

 

Tax season is right around the corner and quickly approaching. You don’t want to wait until the last minute to file your business taxes. In fact, it’s better to plan ahead and prepare so that you know what to expect financially and are able to get your taxes done faster. Here are four great tax preparation tips for small businesses!

Hire the Right Accountant

The first thing to remember is that there is nothing wrong with seeking professional help for your business taxes.

 

The best way to prepare for tax season is to invest in an accountant before tax season so that they can assist you throughout the entire year.

 

The right accountant will do more than just your taxes, instead of working with you to track financial transactions, profits, etc.

 

A good accountant helps you properly maintain your finances the entire time so that when it’s time for tax season, everything is already organized and in place.

Separate Business & Personal Accounts

When kicking off a small business, it may seem easier to just keep those finances in your personal account.

 

However, even if you reported all business expenses correctly, the IRS now has access to your personal account.

 

They can look into your personal account because of the combined money and this could end up impacting your tax information.

Keep Financial Records

It is so important to keep track of all your business expenses, both internal and external, as you go along. If you are unsure of the proper way to keep track of your finances, a professional finance service can help.

 

Bookkeeping has been made easier due to digital software, but a professional can ensure that all expenses are accounted for and also analyze financial information to help improve your small business and keep it growing.

Claim all Income Reported to the IRS

Trying to get over on the IRS is never a good idea because they most likely have access to the information that you are trying to withhold.

 

The IRS gets a copy of the same 1099-MISC forms that you receive, so they know exactly how much income your business has made within the year.

 

They compare the amount you made to the amount you reported and if they don’t match, it’s a red flag for the IRS.

Contact PL Consulting Today to Prepare for Tax Season!

At PL Consulting, we consider our clients part of our team. We provide full financial management services including bookkeeping, accounting, payroll, tax preparation, budgeting, and more.

 

Serving the Baltimore area for several years, we are dedicated to providing customized service to fit each and every one of our client’s unique needs.

 

To book PL Consulting today or get more information, contact us at (410)-764-3731 or at https://www.plcfo.com/contact/