03 Jun 2021
0

Some 2020 Unemployment Compensation is Tax-Free

Roger Rossmeisl, CPA
Individual Tax Briefs
Some 2020 Unemployment Compensation is Tax Free

In recent months, there have been a number of tax changes that may affect your individual tax bill. Many of these changes were enacted to help mitigate the financial damage caused by COVID-19. Here are two changes that may result in tax savings for you on your 2020 or 2021 tax returns. The 2020 return was due on May 17, 2021 (because the IRS extended many due dates from the usual April 15 this year). If you couldn't file by that date, you could have requested an extra five months to file your 2020 tax return by October 15, 2021. Your 2021 return will be due in April of 2022. Some unemployment compensation from last year is tax free Many people lost their jobs last year due to...

28 May 2021
0

Determining the “Basis” in your Residence

Roger Rossmeisl, CPA
Individual Tax Briefs
Determining the "Basis"in your Residence

The housing market in many parts of the country is strong this spring. If you’re buying or selling a home, you should know how to determine your “basis.” How it works You can claim an itemized deduction on your tax return for real estate taxes and home mortgage interest. Most other home ownership costs can’t be deducted currently. However, these costs may increase your home’s “basis” (your cost for tax purposes). And a higher basis can save taxes when you sell. The law allows an exclusion from income for all or part of the gain realized on the sale of your home. The general exclusion limit is $250,000 ($500,000 for married taxpayers). You may feel the exclusion amount makes keeping track of the basis relatively unimportant. Many homes...

18 May 2021
0

Who Qualifies for “Head of Household” Tax Filing Status

Roger Rossmeisl, CPA
Individual Tax Briefs
Who Qualifies for Head of Household Tax Filing Status

When you file your tax return, you must check one of the following filing statuses: Single, married filing jointly, married filing separately, head of household or qualifying widow(er). Who qualifies for "head of household" tax filing status, which is more favorable than single? To qualify, you must maintain a household, which for more than half the year, is the principal home of a “qualifying child” or other relative of yours whom you can claim as a dependent (unless you only qualify due to the multiple support rules). A qualifying child? A child is considered qualifying if he or she: Lives in your home for more than half the year, Is your child, stepchild, adopted child, foster child, sibling stepsibling (or a descendant of any of these), Is under...

07 May 2021
0

What If You’re Not Ready to File Your 1040 by 5/17/21?

Roger Rossmeisl, CPA
Individual Tax Briefs
What if You're Not Ready to File Your 1040 by 5/17/21?

“Tax day” is just around the corner. This year, the deadline for filing 2020 individual tax returns is Monday, May 17, 2021. The IRS postponed the usual April 15 due date due to the COVID-19 pandemic. If you still aren’t ready to file your return, you should request a tax-filing extension. Anyone can request one and in some special situations, people can receive more time without even asking. Taxpayers can receive more time to file by submitting a request for an automatic extension on IRS Form 4868. This will extend the filing deadline until October 15, 2021. But be aware that an extension of time to file your return doesn’t grant you an extension of time to pay your taxes. You need to estimate and pay...

04 May 2021
0

Importance of Meeting Tax Return and Payment Deadlines

Roger Rossmeisl, CPA
Individual Tax Briefs
Importance of Meeting Tax Return and Payment Deadlines

The May 17 deadline for filing your 2020 individual tax return is coming up soon. It’s important to file and pay your tax return on time to avoid penalties imposed by the IRS. Here are the basic rules. Failure to pay  Separate penalties apply for failing to pay and failing to file. The failure-to-pay penalty is 1/2% for each month (or partial month) the payment is late. For example, if payment is due May 17 and is made June 22, the penalty is 1% (1/2% times 2 months or partial months). The maximum penalty is 25%. The failure-to-pay penalty is based on the amount shown as due on the return (less credits for amounts paid through withholding or estimated payments), even if the actual tax bill turns out to...

17 Apr 2021
0

ARPA Tax Break May Make Child Care Less Expensive

Roger Rossmeisl, CPA
Individual Tax Briefs
ARPA Tax Break May Make Child Care Less Expensive

The new American Rescue Plan Act (ARPA) provides eligible families with an enhanced child and dependent care credit for 2021. This is the credit available for expenses a taxpayer pays for the care of qualifying children under the age of 13 so that the taxpayer can be gainfully employed. Note that a credit reduces your tax bill dollar for dollar which, in effect can make child care less expensive. Who qualifies? For care to qualify for the credit, the expenses must be “employment-related.” In other words, they must enable you and your spouse to work. In addition, they must be for the care of your child, stepchild, foster child, brother, sister or step-sibling (or a descendant of any of these), who’s under 13, lives in your home for...

13 Apr 2021
0

How to Ensure Life Insurance Isn’t Part of Your Taxable Estate

Roger Rossmeisl, CPA
Individual Tax Briefs
How to ensure life insurance isn't part of your taxable estate

If you have a life insurance policy, you may want to ensure that the benefits your family will receive after your death won’t be included in your estate. That way, the benefits won’t be subject to federal estate tax. Current exemption amounts For 2021, the federal estate and gift tax exemption is $11.7 million ($23.4 million for married couples). That’s generous by historical standards but in 2026, the exemption is set to fall to about $6 million ($12 million for married couples) after inflation adjustments — unless Congress changes the law. In or out of your estate Under the estate tax rules, insurance on your life will be included in your taxable estate if: Your estate is the beneficiary of the insurance proceeds, or You possessed certain economic ownership...

29 Mar 2021
0

2021 Individual Tax Estimates are Due April 15th

Roger Rossmeisl, CPA
Individual Tax Briefs
Q1 2021 Individual Tax Estimates are Due April 15th

April 15 is the deadline for the first quarterly estimated tax payment for 2021, if you’re required to make one. You may have to make estimated tax payments if you receive interest, dividends, alimony, self-employment income, capital gains, prize money or other income. If you don’t pay enough tax during the year through withholding and estimated payments, you may be liable for a tax penalty on top of the tax that’s ultimately due. Four due dates Individuals must pay 25% of their “required annual payment” by April 15, June 15, September 15, and January 15 of the following year, to avoid an underpayment penalty. If one of those dates falls on a weekend or holiday, the payment is due on the next business day. The required annual payment for...

25 Mar 2021
0

Recent Laws May Impact Your Retirement Savings

Roger Rossmeisl, CPA
Individual Tax Briefs
Recent Laws May Impact Your Retirement Savings

If you’re approaching retirement, you probably want to ensure the money you’ve saved in retirement plans lasts as long as possible. If so, be aware that a law was recently enacted that makes significant changes to retirement accounts. The SECURE Act, which was signed into law in late 2019, made a number of changes of interest to those nearing retirement. You can keep making traditional IRA contributions if you’re still working  Before 2020, traditional IRA contributions weren’t allowed once you reached age 70½. But now, an individual of any age can make contributions to a traditional IRA, as long as he or she has compensation, which generally means earned income from wages or self-employment. So if you work part time after retiring, or do some work as...

23 Mar 2021
0

Eligible Americans to Receive Direct Payments

Roger Rossmeisl, CPA
Individual Tax Briefs
Eligible Americans to Receive Direct Payments

The American Rescue Plan Act, signed into law on March 11, provides a variety of tax and financial relief to help mitigate the effects of the COVID-19 pandemic. Among the many initiatives are direct payments that will be made to eligible individuals. And parents under certain income thresholds will also receive additional payments in the coming months through a greatly revised Child Tax Credit. Here are some answers to questions about these payments. What are the two types of payments?  Under the new law, eligible individuals will receive advance direct payments of a tax credit. The law calls these payments “recovery rebates.” The law also includes advance Child Tax Credit payments to eligible parents later this year. How much are the recovery rebates? An eligible individual is allowed a 2021...

ROGER ROSSMEISL, CPA

Kho & Patel CPAs
160 E. Arrow Highway
San Dimas, CA 91773

(714) 325-0442
roger@khopatel.com

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