1) Make sure your mileage log is in order for the first 10 Months of 2020. Waiting is only going to give you more work to do later, plus it will give you a good idea of your total mileage expense for the year.
2) Get W-9's now from contractors you need to 1099 at year-end. Waiting until after year-end makes it much more likely that you'll never get them, especially if the contractor will not be working with you again.
3) Identify expenses to be paid by year-end to lower your taxes. This is a key tax planning step and one of the easiest to do, as paying expenses by year-end, vs. in January will give you a deduction in 2020.
Courtesy of the Tax Foundation | https://ramlcpa.link/jq2
2021 Federal Income Tax Brackets and Rate
In 2021, the income limits for all tax brackets and all filers will be adjusted for inflation and will be as follows (Tables 1). The top marginal income tax rate of 37 percent will hit taxpayers with taxable income of $523,600 and higher for single filers and $628,300 and higher for married couples filing jointly.
2021 Federal Income Tax Brackets and Rates for Single Filers, Married Couples Filing Jointly, and Heads of Households
2021 Standard Deduction and Personal Exemption
The standard deduction for single filers will increase by $150 and by $300 for married couples filing jointly (Table 2).
The personal exemption for 2021 remains eliminated.
2021 Alternative Minimum Tax
The Alternative Minimum Tax (AMT) was created in the 1960s to prevent high-income taxpayers from avoiding the individual income tax. This parallel tax income system requires high-income taxpayers to calculate their tax bill twice: once under the ordinary income tax system and again under the AMT. The taxpayer then needs to pay the higher of the two.
The AMT uses an alternative definition of taxable income called Alternative Minimum Taxable Income (AMTI). To prevent low- and middle-income taxpayers from being subject to the AMT, taxpayers are allowed to exempt a significant amount of their income from AMTI. However, this exemption phases out for high-income taxpayers. The AMT is levied at two rates: 26 percent and 28 percent.
The AMT exemption amount for 2021 is $73,600 for singles and $114,600 for married couples filing jointly (Table 3).
In 2021, the 28 percent AMT rate applies to excess AMTI of $199,900 for all taxpayers ($99,950 for married couples filing separate returns).
AMT exemptions phase out at 25 cents per dollar earned once taxpayer AMTI hits a certain threshold. In 2021, the exemption will start phasing out at $523,600 in AMTI for single filers and $1,047,200 for married taxpayers filing jointly (Table 4).
2021 Alternative Minimum Tax Exemption Phaseout Thresholds
2021 Earned Income Tax Credit Parameters
The maximum Earned Income Tax Credit in 2021 for single and joint filers is $543, if the filer has no children (Table 5). The maximum credit is $3,618 for one child, $5,980 for two children, and $6,728 for three or more children. All these are relatively small increases from 2020.
2021 Child Tax Credit
The child tax credit totals at $2,000 per qualifying child and is not adjusted for inflation. However, the refundable portion of the Child Tax Credit is adjusted for inflation but will remain at $1,400 for 2021.
2021 Capital Gains Tax Rates & Brackets (Long-Term Capital Gains)
Long-term capital gains are taxed using different brackets and rates than ordinary income.
2021 Qualified Business Income Deduction (Sec. 199A)
The Tax Cuts and Jobs Act includes a 20 percent deduction for pass-through businesses against up to $164,900 of qualified business income for unmarried taxpayers and $329,800 for married taxpayers (Table 7).
2021 Annual Exclusion for Gifts
In 2021, the first $15,000 of gifts to any person are excluded from tax. The exclusion is increased to $159,000 for gifts to spouses who are not citizens of the United States.
Policyholders finding out that business interruption insurance doesn't cover coronavirus | The Atlantic
I was fortunate earlier in my career to work directly with my employer’s risk management department for guidance and feedback as well responsible for most of the insurance accounting for our organization. Along with previous audit experience of some smaller insurers, I received a world of insight into the world of insurance, including coverage types, specialty insurance, coverage limitations, reinsurance, premium increases (even when costs are flat or going down), and insurance reserves.
If not already obvious, it’s simple to understand that insurance companies are designed to come out on the positive end of premiums received minus claims paid, especially over the mid and long term (reserves help cover acceptable short and long term losses & risks) …..they are in the business of making money. No, while it's not exactly Vegas, the odds are on the carrier side by using a laundry list of people and means to do so, including: actuaries, risk models, historical experience, premium methodology, client selection process, risk weighting, coverage types provided especially by area & region, coverage limits, and so much more. So, a tremendous amount of information is considered, and we should all get why, as when a carrier fails, everyone seems to lose.
The purchase of this insurance probably starts out something like this with a business owner talking to an agent, "I need to make sure that I have enough coverage for me/my business so if something (catastrophic) major happens and I can't open my doors for more than a couple days, months, or possibly forever, I'll have plenty of protection in place for at least a period of time so I don't lose everything."
The agent’s response, "sure thing, business interruption insurance would be perfect for you. If some major event occurs (excluding those covered by other types of insurance) forcing you to close for several days or weeks, then the policy will provide X dollars a month for X months."
Yes, a bit simplistic but this does occur, and I understand both sides of it, including an agent acting in good faith. Yet, chances are other than price, the small business owner is hooked, and along with their other coverages think they are fully covered, with the rest being noise and fine print. The carrier knows they've covered a majority, if not near ALL the major risk factors (along with other types of insurance coverage) a business will encounter. However, the carrier ABSOLUTELY KNOWS the owner is nowhere near fully covered, which is the part I really can't stand and needs to change in some meaningful way as this happens all too often.
Now with the entire world being caught in the clutches of the Coronavirus (Covid-19) pandemic we’re hearing the stories once again of insurers denying claims and this time it’s about business interruption insurance, just when businesses need it most.
From the Article in The Advocate https://ramlcpa.link/935ca ...., Bill Davis, a regional spokesman for the Insurance Information Institute said:
“They all contain generally the same language, but there’s always the oddball policy,”
This response is telling and shows why the excuses need to stop, while solutions being found.
A fact of life is there will always be one off crises & events putting money and lives at risk. Including man made events there have been at least three (3) major world effecting events in the past 20 years which have changed are lives forever (9/11, the 2008 Financial Crisis, and Covid-19). If you count more localized disasters and events (Katrina, Fukushima, Thailand to name a few…. its 6+ easy, likely closer to 10) this number gets more unsettling very quickly.
As bad as that may sound, if we look back through the 20th century (I know, history shows how great we are at looking to the past for insight, as why learn something from our past troubles or mistakes) this shouldn’t be much of a surprise, as its littered with events & crises every decade while wiping away billions of dollars & lives in the process (Vietnam, Korea, WWII, WWI, and the Great Depression to name some of the largest). The one certainty is uncertainty, which is exactly what insurance is for.
So, while pricing in a specific unknown world or local event may be difficult for the carrier, it makes no difference to a business owner if their doors are shut due to a virus, a tsunami, or war. Yes, property damage does matter but that is the easy part. While this is not a new problem, it is a lot more fixable especially if measures are setup before the next crisis hits and provide more favorable back stops by the government, especially for things that an insurance policy can't be expected to cover. Thus, they can be structured in far more favorable ways for business owners and everyday taxpayers instead of just another last-minute bailout.
#ramlcpa,#business,#covid_19,#covid19,#covd_19, #insurace, #claims, #businessinsurance, #interruptio, #insurer, #insurancecompany, #businessinterruptioninsurance
3 Health Savings Account Mistakes to Avoid | The Motley Fool | https://ramlcpa.link/sfl
HSA's are still so underutilized as a tax tool it’s a bit unreal especially considering its 2019 & HSA's have been around for years.
While we’ve been delayed a bit longer than planned with the clients only section to our website, we are now just a short time away. The emphasis in the end is to touch on matters like this in greater and greater detail, and move BEYOND the OBVIOUS, and instead supercharge wealth creation for ALL our clients.
Here are a few of my favorite perks of HSA's.
1) Maximizing your contribution(s) when able. As some who's been through hell and back with health scares in the past, and the money crunch that can come after (even with insurance), HSA's that are well planned and funded long before an event arises can save a ton of heart ache and years of hard work.
2) IT’S TAX FREE MONEY - Literally!! When you put money into an HSA it's tax deductible up to the limits, it then grows tax free, and as long as distributions (and growth) are used for qualified medical the entire transactions costs you nothing in tax. How many tax breaks save you money to start, and charge no tax on the back end (even on the growth)? Not many believe me.
3) If you're Married and Your Spouse is the Beneficiary the funds transfer TAX FREE, better yet the spouse isn't even required to carry an HSA-eligible health plan. There are other rules if the beneficiary is not your spouse which can be very tax beneficial in their own right if done properly.
#HSA, #hsa, #hsau, #RamlCPA, #taxplanning, #taxstrategy, #taxplanning, #Healthcare, #healthcarefinance, #healthcarecompliance, #healthcarepowerof, #healthcaremanagement, #healthplanning, #HSA2019, #HSA2020, #healthcaresystem, #HealthcareInsurance, #taxtips, #taxstrategies, #taxsavings, #taxservices
Travis Raml, CPA