E.L.M Accounting, Payroll & Tax Services INC

E.L.M Accounting, Payroll & Tax Services INC

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Home Testing for COVID Is an FSA & HSA Eligible Expense – Did You Know?

The IRS recently reminded taxpayers that home testing for COVID-19 (coronavirus) is a qualified medical expense for various medical spending and savings accounts. The cost of home testing may be paid or reimbursed with tax-protected funds from an eligible account. Specifically, you may use a health flexible spending arrangement (FSA), health savings account (HSA) or certain other cafeteria plans to pay or receive reimbursement for testing expenses.

Other COVID-related eligible medical expenses include the cost of personal protective equipment (PPE) like masks, hand sanitizer and sanitizing wipes. The equipment must be used primarily to prevent or reduce the spread of coronavirus in order to qualify for FSA, HSA or other medical cafeteria plan reimbursement.

You can maximize the tax benefits of your FSA or HSA by making expenditures or accepting reimbursements at well-chosen times. A tax advisor can help you formulate the best strategy for using your account.
Quarterly Estimated Tax Payments - Reminder

If you are making quarterly estimated tax payments to the IRS, the due date for the June 1 - August 31 quarter of the year is September 15, 2021.

For payments made using IRS Direct Pay, you can make payments until 8PM EST, and for payments using a credit or debit card, payments can be made up to midnight on the due date.
IRS Announces New Tax Relief for Those Affected by Disasters

The IRS has announced filing and payment deadline extensions for taxpayers affected by Hurricane Ida and the California wildfires. These tax relief measures include a later due date for taxpayers who requested a 6-month extension for their 2020 tax returns, and an extension for estimated tax payments. Some affected taxpayers may also qualify for a waiver of penalties. If you receive an IRS penalty notice but may qualify for disaster penalty relief, you can call the number on the notice to ask about an abatement.

In general, the IRS offers various forms of relief to taxpayers in regions covered by federal disaster declarations. Relief programs include providing free transcripts of past tax returns to those whose records have been damaged or lost. To learn about federal tax relief measures in your region, visit the IRS Around the Nation webpage (link below) and click on your state.

The IRS also reminds taxpayers of steps they can take to prepare for a disaster before it strikes. They include scanning paper records to create digital copies that can be stored in the cloud or on USB drives, and photographing rooms to document important belongings. If you or your loved ones have been affected by a disaster, a tax professional can help you determine your IRS relief rights.

IRS Around the Nation Resource Page: https://www.irs.gov/newsroom/around-the-nation
IRS Opens Address Change Portal for Advance CTC Payments – Did You Know?

The IRS recently added a new address change feature to the 2021 Child Tax Credit (CTC) Update Portal (link below). This tool allows families who are receiving advance payments of the 2021 CTC to update the mailing address that the IRS has on file. It is especially important for families who get their advance CTC payments by paper check to update their address information. Otherwise, checks may be delayed or even returned to the IRS by the post office.

Households that receive their advance payments by direct deposit should also use the portal to report mailing address changes as soon as possible. The IRS will use the updated address information to mail important tax documents, including Letter 6419 in January. If you receive advance CTC payments, you will need this letter to complete your 2021 tax return and claim any remaining credit amount you are owed. For many taxpayers, the advance payments will only total about 50% of their allowed credit.

You can also use the 2021 Child Tax Credit Update Portal to switch from paper check to direct deposit payments, change your direct deposit account information or opt out of advance payments for the rest of the year. The IRS will take changes reported by August 30 into account for the round of payments being sent on September 15. Changes reported after that date will affect the October 15, November 15 and/or December 15 payments.

IRS Child Tax Credit Update Portal: https://www.irs.gov/credits-deductions/child-tax-credit-update-portal
Tracking Tips - Did You Know?

For those that work in summer or other jobs that include tipping, the IRS recommends keeping a tips diary so that tips can be accurately reported on your tax return, to your employer, and as proof of tip income.

The IRS provides a Form 4070A (https://www.irs.gov/pub/irs-prior/f4070a--2005.pdf) that can be used as a tip diary, or you can use a notebook to note down for the record:

- Cash tips you get directly from customers or from other employees.

- Tips from credit and debit card charge customers that your employer pays you.

- The value of any noncash tips you get, such as tickets, passes, or other items of value.

- The amount of tips you paid out to other employees through tip pools or tip splitting, or other arrangements, and the names of the employees to whom you paid the tips.
Some Taxpayers May Choose to Unenroll from 2021 Advance CTC – Did You Know?

Millions of U.S. households received their first advance payments of the 2021 Child Tax Credit (CTC) in July. While these payments will help many families, some taxpayers may come out better by unenrolling from the advance payment program. If the advance payments add up to more than your total credit for 2021, you may end up owing tax for the year.

In most cases, the IRS bases CTC advance payments on the taxpayer's 2020 federal tax return, or their 2019 return if their 2020 return has not been processed. Certain life changes during 2021 could reduce your CTC amount, or even make you ineligible for the credit. Therefore, you may wish to consider opting out of advance payments if any of the following occur:

- A qualifying child who lived with you in 2020 (or 2019) will not live with you for more than half of 2021.
- Your income increases significantly in 2021.
- Your filing status changes in 2021.
- You previously met the CTC residency requirement, but will not live in a U.S. state or D.C. for more than half of 2021. In this case, unenrollment may be required.

You can also choose to unenroll from advance payments simply because you want to receive your entire 2021 CTC when you file your tax return in the spring. To unenroll for any reason, use the IRS Advance CTC Update tool (link below).

Note that for married couples filing jointly, both spouses must unenroll from advance payments. If only one spouse opts out, the other will still receive monthly advance payments equal to half of the original payment amount calculated for the household.

IRS Advance CTC Portal to unenroll: https://www.irs.gov/credits-deductions/child-tax-credit-update-portal
IRS Warns Businesses About Tax Promoter Scams – Did You Know?

As part of the Dirty Dozen list of the worst tax scams of 2021, the IRS has issued multiple warnings to business taxpayers about tax promoters. These individuals and entities promise to help businesses claim large deductions and credits that will dramatically reduce their tax. Many tax promoters charge substantial fees for their “services,” which often involve schemes that violate IRS regulations.

Some tax promoter scams deal with the Research and Experimentation Credit, commonly called the Research & Development or R&D Credit. Promoters often mislead business owners into believing that they can claim sizable R&D Credits with relatively little effort. In reality, to legally claim this credit, a business must demonstrate that a designated research activity satisfies a long list of IRS requirements. In addition, the progress of qualified research activities, and all associated expenses, must be thoroughly documented over a period of time.

Similarly, while conservation easements can provide legitimate tax deductions, tax promoters often peddle bogus “syndicated easements” based on phony partnerships. The IRS rejects many of these arrangements, and has recently stepped up enforcement of conservation easement rules. Tax promoters also push “micro-captive” insurance scams, pension plans that abuse international tax treaties, and shady methods to improperly defer capital gains on property sales.

The IRS recently created a new Office of Promoter Investigations (OPI) to crack down on these and similar scams. Importantly, the OPI is authorized to pursue action against not only promoters, but also any businesses that participate in the scams. In general, if a tax-reducing scheme sounds too good to be true, it usually is. To protect your enterprise, check with a business tax professional about the rules and regulations before claiming any of these deductions or credits.
IRS Identity Protection PINs – Did You Know?

Beginning in 2021, the IRS now offers IP PINs to all interested taxpayers. Unlike a Social Security Number (SSN), this unique code is known only to the taxpayer and the IRS. Having an IP PIN helps to protect you against others filing fraudulent returns in your name, along with other forms of tax-related identity theft.

If you choose to obtain an IP PIN, you will need to include it on all electronic and paper IRS forms filed in 2021, including your 2020 federal tax return. Thereafter, you will receive a new IP PIN each year by mail. Although there is currently no way to opt out of the program once you have registered and received a PIN, the IRS plans to allow opt-outs beginning with tax year 2022.

The easiest way to apply for an IP PIN is to use the Get an IP PIN tool at http://www.IRS.gov/IPPIN. You will need to verify your identity by providing your legal name, birthdate, federal tax filing status, mailing address, and SSN or Individual Taxpayer Identification Number (ITIN). You will also need a financial account other than a checking or savings account, such as a major credit card, student loan, auto loan, mortgage, or home equity loan. If you have a mobile phone, you can request an activation code to receive your IP PIN instantly. Otherwise, the IRS will mail you the code you need to complete your registration and get your PIN.

If you cannot complete the online verification process but your adjusted gross income (AGI) is $72,000 or less, you may file Form 15227 (Application for an IP PIN) by mailing or faxing it to the IRS. You can then use your most recent tax return to complete the verification process over the phone with an IRS agent. Otherwise, you can apply for an IP PIN in person by making an appointment at an official IRS Taxpayer Assistance Center.

We specialize in bookkeeping, accounting, tax, IRS resolution services. We also offer payroll svcs t

Timeline photos 09/20/2021

Home Testing for COVID Is an FSA & HSA Eligible Expense – Did You Know?

The IRS recently reminded taxpayers that home testing for COVID-19 (coronavirus) is a qualified medical expense for various medical spending and savings accounts. The cost of home testing may be paid or reimbursed with tax-protected funds from an eligible account. Specifically, you may use a health flexible spending arrangement (FSA), health savings account (HSA) or certain other cafeteria plans to pay or receive reimbursement for testing expenses.

Other COVID-related eligible medical expenses include the cost of personal protective equipment (PPE) like masks, hand sanitizer and sanitizing wipes. The equipment must be used primarily to prevent or reduce the spread of coronavirus in order to qualify for FSA, HSA or other medical cafeteria plan reimbursement.

You can maximize the tax benefits of your FSA or HSA by making expenditures or accepting reimbursements at well-chosen times. A tax advisor can help you formulate the best strategy for using your account.

Timeline photos 09/13/2021

Quarterly Estimated Tax Payments - Reminder

If you are making quarterly estimated tax payments to the IRS, the due date for the June 1 - August 31 quarter of the year is September 15, 2021.

For payments made using IRS Direct Pay, you can make payments until 8PM EST, and for payments using a credit or debit card, payments can be made up to midnight on the due date.

Timeline photos 09/08/2021

IRS Announces New Tax Relief for Those Affected by Disasters

The IRS has announced filing and payment deadline extensions for taxpayers affected by Hurricane Ida and the California wildfires. These tax relief measures include a later due date for taxpayers who requested a 6-month extension for their 2020 tax returns, and an extension for estimated tax payments. Some affected taxpayers may also qualify for a waiver of penalties. If you receive an IRS penalty notice but may qualify for disaster penalty relief, you can call the number on the notice to ask about an abatement.

In general, the IRS offers various forms of relief to taxpayers in regions covered by federal disaster declarations. Relief programs include providing free transcripts of past tax returns to those whose records have been damaged or lost. To learn about federal tax relief measures in your region, visit the IRS Around the Nation webpage (link below) and click on your state.

The IRS also reminds taxpayers of steps they can take to prepare for a disaster before it strikes. They include scanning paper records to create digital copies that can be stored in the cloud or on USB drives, and photographing rooms to document important belongings. If you or your loved ones have been affected by a disaster, a tax professional can help you determine your IRS relief rights.

IRS Around the Nation Resource Page: https://www.irs.gov/newsroom/around-the-nation

Timeline photos 08/30/2021

IRS Opens Address Change Portal for Advance CTC Payments – Did You Know?

The IRS recently added a new address change feature to the 2021 Child Tax Credit (CTC) Update Portal (link below). This tool allows families who are receiving advance payments of the 2021 CTC to update the mailing address that the IRS has on file. It is especially important for families who get their advance CTC payments by paper check to update their address information. Otherwise, checks may be delayed or even returned to the IRS by the post office.

Households that receive their advance payments by direct deposit should also use the portal to report mailing address changes as soon as possible. The IRS will use the updated address information to mail important tax documents, including Letter 6419 in January. If you receive advance CTC payments, you will need this letter to complete your 2021 tax return and claim any remaining credit amount you are owed. For many taxpayers, the advance payments will only total about 50% of their allowed credit.

You can also use the 2021 Child Tax Credit Update Portal to switch from paper check to direct deposit payments, change your direct deposit account information or opt out of advance payments for the rest of the year. The IRS will take changes reported by August 30 into account for the round of payments being sent on September 15. Changes reported after that date will affect the October 15, November 15 and/or December 15 payments.

IRS Child Tax Credit Update Portal: https://www.irs.gov/credits-deductions/child-tax-credit-update-portal

Timeline photos 08/23/2021

Tracking Tips - Did You Know?

For those that work in summer or other jobs that include tipping, the IRS recommends keeping a tips diary so that tips can be accurately reported on your tax return, to your employer, and as proof of tip income.

The IRS provides a Form 4070A (https://www.irs.gov/pub/irs-prior/f4070a--2005.pdf) that can be used as a tip diary, or you can use a notebook to note down for the record:

- Cash tips you get directly from customers or from other employees.

- Tips from credit and debit card charge customers that your employer pays you.

- The value of any noncash tips you get, such as tickets, passes, or other items of value.

- The amount of tips you paid out to other employees through tip pools or tip splitting, or other arrangements, and the names of the employees to whom you paid the tips.

Timeline photos 08/18/2021

Some Taxpayers May Choose to Unenroll from 2021 Advance CTC – Did You Know?

Millions of U.S. households received their first advance payments of the 2021 Child Tax Credit (CTC) in July. While these payments will help many families, some taxpayers may come out better by unenrolling from the advance payment program. If the advance payments add up to more than your total credit for 2021, you may end up owing tax for the year.

In most cases, the IRS bases CTC advance payments on the taxpayer's 2020 federal tax return, or their 2019 return if their 2020 return has not been processed. Certain life changes during 2021 could reduce your CTC amount, or even make you ineligible for the credit. Therefore, you may wish to consider opting out of advance payments if any of the following occur:

- A qualifying child who lived with you in 2020 (or 2019) will not live with you for more than half of 2021.
- Your income increases significantly in 2021.
- Your filing status changes in 2021.
- You previously met the CTC residency requirement, but will not live in a U.S. state or D.C. for more than half of 2021. In this case, unenrollment may be required.

You can also choose to unenroll from advance payments simply because you want to receive your entire 2021 CTC when you file your tax return in the spring. To unenroll for any reason, use the IRS Advance CTC Update tool (link below).

Note that for married couples filing jointly, both spouses must unenroll from advance payments. If only one spouse opts out, the other will still receive monthly advance payments equal to half of the original payment amount calculated for the household.

IRS Advance CTC Portal to unenroll: https://www.irs.gov/credits-deductions/child-tax-credit-update-portal

Timeline photos 08/10/2021

IRS Warns Businesses About Tax Promoter Scams – Did You Know?

As part of the Dirty Dozen list of the worst tax scams of 2021, the IRS has issued multiple warnings to business taxpayers about tax promoters. These individuals and entities promise to help businesses claim large deductions and credits that will dramatically reduce their tax. Many tax promoters charge substantial fees for their “services,” which often involve schemes that violate IRS regulations.

Some tax promoter scams deal with the Research and Experimentation Credit, commonly called the Research & Development or R&D Credit. Promoters often mislead business owners into believing that they can claim sizable R&D Credits with relatively little effort. In reality, to legally claim this credit, a business must demonstrate that a designated research activity satisfies a long list of IRS requirements. In addition, the progress of qualified research activities, and all associated expenses, must be thoroughly documented over a period of time.

Similarly, while conservation easements can provide legitimate tax deductions, tax promoters often peddle bogus “syndicated easements” based on phony partnerships. The IRS rejects many of these arrangements, and has recently stepped up enforcement of conservation easement rules. Tax promoters also push “micro-captive” insurance scams, pension plans that abuse international tax treaties, and shady methods to improperly defer capital gains on property sales.

The IRS recently created a new Office of Promoter Investigations (OPI) to crack down on these and similar scams. Importantly, the OPI is authorized to pursue action against not only promoters, but also any businesses that participate in the scams. In general, if a tax-reducing scheme sounds too good to be true, it usually is. To protect your enterprise, check with a business tax professional about the rules and regulations before claiming any of these deductions or credits.

Timeline photos 08/04/2021

IRS Identity Protection PINs – Did You Know?

Beginning in 2021, the IRS now offers IP PINs to all interested taxpayers. Unlike a Social Security Number (SSN), this unique code is known only to the taxpayer and the IRS. Having an IP PIN helps to protect you against others filing fraudulent returns in your name, along with other forms of tax-related identity theft.

If you choose to obtain an IP PIN, you will need to include it on all electronic and paper IRS forms filed in 2021, including your 2020 federal tax return. Thereafter, you will receive a new IP PIN each year by mail. Although there is currently no way to opt out of the program once you have registered and received a PIN, the IRS plans to allow opt-outs beginning with tax year 2022.

The easiest way to apply for an IP PIN is to use the Get an IP PIN tool at http://www.IRS.gov/IPPIN. You will need to verify your identity by providing your legal name, birthdate, federal tax filing status, mailing address, and SSN or Individual Taxpayer Identification Number (ITIN). You will also need a financial account other than a checking or savings account, such as a major credit card, student loan, auto loan, mortgage, or home equity loan. If you have a mobile phone, you can request an activation code to receive your IP PIN instantly. Otherwise, the IRS will mail you the code you need to complete your registration and get your PIN.

If you cannot complete the online verification process but your adjusted gross income (AGI) is $72,000 or less, you may file Form 15227 (Application for an IP PIN) by mailing or faxing it to the IRS. You can then use your most recent tax return to complete the verification process over the phone with an IRS agent. Otherwise, you can apply for an IP PIN in person by making an appointment at an official IRS Taxpayer Assistance Center.

Timeline photos 07/26/2021

Summer Activities May Affect Your 2021 Taxes – Did You Know?

Both major life events and small changes to your work or family routines can have an impact on your taxes. These events and changes often occur during the summer, especially this summer with the economy reopening. If your life circumstances take either a planned or unexpected turn this summer, you may want to take a few extra steps to prepare for tax season next spring.

If you get married, you should report any name or address change to the Social Security Administration, IRS and post office to ensure that you receive important tax documents. If your child returns to in-person day camps or daytime education programs, some of the cost may qualify for the Child and Dependent Care Credit. Make sure to save records of all fees paid.

Seasonal and part-time work create a variety of record keeping and tax reporting considerations. If you are a student and do not earn enough money to owe federal income tax, you may need to file a 2021 tax return to claim a refund of any tax withheld from your pay. Those who earn side income from a part-time job or gig economy work may need to adjust their paycheck withholding for their primary job to make sure enough tax is withheld. You can use the IRS Withholding Estimator tool (link below) to check where you stand.

Also keep in mind that income earned as a freelancer or independent contractor may be subject to self-employment tax. Figuring out whether you are officially an employee or an independent contractor can get tricky for temporary work. A tax pro can help you determine your status, and plan for self-employment tax if appropriate.

IRS Withholding Estimator: https://www.irs.gov/individuals/tax-withholding-estimator

Timeline photos 07/19/2021

IRS Begins Sending 2021 Advance Child Tax Credit Payments – Did You Know?

On July 15, the IRS sent the first round of advance payments of the 2021 Child Tax Credit (CTC) to over 30 million families. Qualifying households will receive monthly payments of up to $300 per child under age 6, and up to $250 per child age 6 through 17, through the end of 2021. The payment amount depends on the taxpayer's adjusted gross income (AGI). Generally, the advance payments will total half the CTC that the IRS anticipates for the taxpayer for 2021.

The IRS is sending most CTC advance payments by direct deposit, so millions of taxpayers have already received their first payment. Paper checks are mailed in cases where the IRS does not have banking information for a qualifying family. It may take a week or more for mailed payments to arrive. Upcoming payments will be sent on August 13th, and on the 15th of September, October, November and December.

The IRS will automatically calculate and send advance CTC payments to taxpayers who qualify and have done any ONE of the following:
- Filed a 2020 federal income tax return
- Filed a 2019 federal income tax return
- Used the 2020 IRS Non-Filers Tool for Economic Impact Payments (EIPs)
- Used the 2021 Non-Filers Signup Tool for Advance CTC (see link below).

The IRS urges all potentially eligible Americans who are not required to file federal tax returns and have not yet used an online Non-Filers Tool to do so as soon as possible. If you filed returns for both 2019 and 2020 but the IRS has not yet processed your 2020 return, your advance payments will initially be calculated based on your 2019 return. Your monthly payment amount may change after your 2020 return is processed.

You can also use the Advance CTC portal to check your CTC eligibility, update your banking information, or opt out of advance payments if you prefer to claim your entire credit when you file your 2021 tax return.

IRS 2021 Advance CTC site, including Non-Filers Signup, Eligibility and Unenroll Tools:
https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021

Timeline photos 07/13/2021

100% Business Deduction for Restaurant Food & Beverage in 2021 – Did You Know?

A special tax rule may enable many businesses, including sole proprietors and independent contractors, to take larger meal expense deductions in 2021 than the IRS usually allows. Ordinarily, deductions for food and beverage costs cannot exceed 50% of the actual expense. However, the 2021 rule enables businesses to deduct 100% of the cost of food and beverages from restaurants in certain cases beginning January 1, 2021 through December 31, 2022.

The provision defines a restaurant as a business that prepares food or beverages for retail customers to consume on-site, pick up, or receive by delivery. This definition excludes most grocery and convenience stores, unless the store contains a separate restaurant or cafe area. In addition, facilities overseen or owned by the employer claiming the deduction, such as a workplace cafeteria, generally do not qualify as restaurants under this rule.

In order for meal expenses to qualify for this special deduction, the following conditions must be met:

- The business owner or an authorized employee is present when the food and/or beverages are provided.
- The expense is paid to a restaurant, based on the definition above.
- The food and beverage costs are not lavish or extravagant for the circumstances.

The activity must also meet all the standard criteria for business meal deductions. A business tax advisor can help you determine whether your food and beverage expenses comply with IRS rules, and whether they qualify for a 100% deduction in 2021.

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