"Important Tax Information Enclosed" is Coming

Prepare For The April 18, 2022 Filing Deadline

Most of the needed tax records to prepare your tax return will show up in the mail or online in January 2022. Collecting all your tax related documents is important so that we prepare a complete and accurate return.

The IRS also gets copies of many of these documents and will match your tax return to their records.

Let Us Review What You Should Be Looking For...

NEW for 2021! IRS Letter 6419 Advance Child Tax Credit Payments   Advance Child Tax Credit payments that were disbursed to you during 2021. Please keep this letter regarding your Advance Child Tax Credit payments with your tax records. We will need to refer to this letter when I prepare your 2021 tax return during the 2022 tax filing season. This letter is extremely important for us to accurately reconcile your advance payments against the actual child tax credit that you are entitled to claim. (See more about the Advance Child Tax Credit in the "Tax Tips for You ... Now!" section of this Newsletter).

W-2s   Read them carefully. Contact your employer if there is a discrepancy or if you do not receive them by the end of January.

1099s   You should receive 1099-INT or 1099-DIV forms for any accounts that pay interest or dividends. Even tax-exempt interest must be reported. IMPORTANT: "Corrected" forms are always a possibility. Be alert for such announcements.

1099-K   This Form may indicate proceeds for transactions involving the sale, redemption or use of Cryptocurrency (i.e., Bitcoin). Cryptocurrencies are treated similarly to property like stocks, bonds, and real estate.

During the year, if you have more than $20,000 in proceeds and 200 transactions through one crypto exchange, you will receive Form 1099-K.

You may have reportable crypto transactions even though you may not receive a 1099-K if you have transactions below these reporting requirements.

I will need a listing of each of your crypto transactions so that all tax reporting requirements are met.

The 1099-K also reports Payment Card and Third-Party Network Transactions.

Other 1099s   Other 1099s. You will generally receive a 1099 for self-employment income called 1099- NEC if:

• You received the payment from someone who is not your employer (you may be considered an independent contractor),
• you received the payment for services
• You received payments of at least $600 during the year.

You will generally receive a 1099- MISC for rents or royalty payments that you received.

Real estate sales are often reported on I 099-S. Stock sales on 1099-B or Consolidated 1099. Pension, 401K, and IRA distributions are reported on 1099-R. Pay special attention to forms 1099-A and 1099-C. These report foreclosures and debt consolidations or debt cancellations which may or may not result in taxable income. We need to see them to correctly prepare your return.

Form 1095-A   You would receive a 1095-A if you purchased Health Care through the Health Insurance Marketplace and had part of your premiums offset by the Advance Payments of Premium Tax Credit. This form is needed to calculate the actual Premium Tax Credit for which you would be entitled.

Form 1098   Reports mortgage interest paid to a bank, savings & loan or credit union. These forms may also report real estate taxes (if payments are escrowed by the lender).

Other Income   Look for 1099s of state tax refunds, unemployment income, prizes or gambling winnings or rents that you collect. Read each one carefully and keep them with all your other tax documents. Gambling winnings can also be reported on Form W-2G.

Your Records   Review records for possible income or deductions. Add up medical expenses and any taxes paid. If you recall paying a deductible expense but do not have a receipt, jot it down and we can discuss it before your return is prepared. Charitable contributions are different - you must have receipts, or your deduction could be challenged and denied! If you are missing a receipt, contact the charity to see if you can get the document(s) needed.

Frequently Overlooked Tax-Related Info!
Take extra time to make sure that you have all the necessary facts if any of the following situations applies to you.>

Child Care Expenses.  I need the full name, address, telephone number and tax ID number of your care providers, and the total paid per child to each caregiver.

Estimated Federal Tax Payments.   Find the date and amount for payments. April 15, 2021, June 15, 2021, September 15, 2021, and January 18, 2022. A Federal January 2021 payment would have been claimed on your 2020 return.

Sales of Property.   The most important item is the Final Settlement Statement. Include a list of home improvements in all prior years since purchase. You may also receive a 1099-S showing the gross sales price for the property.

College Tuition.   Form 1098-T lists tuition paid. These forms are generally available electronically to the student. Make sure that the "student" checks for these forms and gives them to you. I need these forms as well as details on the courses, all education-related expenses for required equipment and related fees, when each item was paid and who the "student" was.

Sales of Stock.   Form 1099-B shows sale prices or proceeds. If this form does not show the original purchase information, you will need to provide this.

Tax Rules On Pass-Through Entities Continue.   Schedules K-1 from partnerships, S-Corps and Trusts always seem to arrive late. do the rest of your return and be ready to finish when the elusive K-1 arrives.

Social Security Benefits.   Look for Form 1099-SSA. We must report the gross amount and not just your net monthly benefit. Your Medicare Premiums listed on the form may also provide you with a medical deduction.

Employees - Last Pay Stub.   Your W-2 is critical, but your last pay stub may reveal tax deductions that do not usually show up anywhere else. Some charitable contributions may be reported that are deductible on your Federal Income Tax Return. Other reported items, such as union dues or employee expenses are no longer deductible on your Federal Income Tax Return but may continue to be deductible on your State or Local Income Tax Returns.

Special Accounts.   Do you contribute to an IRA, Roth IRA or Health Savings Account? These and others can affect your taxes. Make sure I have all 1099s and information on contribution and distribution amounts and dates.

Complex Transactions.   Please call if you have a foreclosure, sale or exchange of real estate, casualties such as a natural disaster.

Social Security Review

Social Security Benefits are increasing for 2022. Americans who collect Social Security will receive a 5.9% increase in their monthly payouts in 2022. The extra benefits kick in on January 1. Annual increases in Social Security are determined every year based on changes in a component of the consumer price index. Social Security recipients got a 1.3% cost-of-living adjustment in 2021, 1.6% in 2020, 2.8% in 2019, 2.0% in 2018 and 0.3% in 2017. These annual increases are meant to keep up with inflation. The average retiree received a benefit of $1,565 in 2021, meaning that the average retiree can expect to see a gross increase of about $92 per month. This will be the largest cost-of-living adjustment in 40 years.

Social Security Recipients Medicare Premiums for 2022

While it's still uncertain what the standard premium will be for 2022- it is based on an actuarial formula and is typically revealed in early November for the next year. Early estimates would have most people pay about $10 per month more for Medicare Part B in 2022 than the $l48.50 per month they are currently paying for 2021.

Social Security benefits are increasing by 5.9% in 2022, which will cover the increase in premiums for most people.

Premiums are increased for higher-income beneficiaries -- those with adjusted gross income (AGI) plus tax-exempt interest income of more than $91,000 if single or $182,000 if married filing jointly. These beneficiaries will continue to see the income limits adjust to general price inflation annually.

Social Security Wage Base Increases

The base upon which working taxpayers must pay the 6.2% Social Security tax for 2022 is increasing to $147,000. This is an increase of $4,200 over the 2021 limit of $142,800.

Third Stimulus Payment
(Economic Impact Payment)

The Third Stimulus Payment was sent to eligible taxpayers beginning in March 2021 and are continuing for some taxpayers that were left out earlier in the year for various reasons. I will need the amount you received from your 3rd Stimulus when we prepare your 2021 Federal Income Tax Return in early 2022. This 3rd Payment will be reconciled on your 2021 Tax Return in a similar process as the first two Stimulus Payments were accounted for on your 2020 Federal Income Tax Return. None of the Stimulus Payments are considered taxable income.

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