Tax season 2022 will be unique: how to prepare now
It's never too early to start preparing for the 2022 tax season and file your tax return ahead of time. Factors such as pandemic-related tax breaks, unemployment benefits and teleworking along with natural disasters will make 2021 tax returns particularly difficult. In light of everything that has happened this year, taxpayers will benefit from carefully tracking all the information they need for their tax returns. What you should pay attention to and how to prepare a declaration right now, the publication told PNCPA.
Keeping proper records and tax records will make it easier to prepare your tax return during the spring filing season.
COVID-19 Employee Retention Tax Credit
Corresponding payroll tax returns must be provided to your tax preparer in order to adjust payroll deductions in 2021.
Qualified disaster retention tax credit
In the past, the IRS has authorized Employee Retention Tax Credit (ERTC) for employers who operated in the relevant disaster area, were out of service due to the disaster, and continued to pay employees. While it is still too early to tell whether the IRS will allow this loan for Hurricane Ida or Hurricane Nicholas, it is still good practice to keep records of the dates when the business was inoperative and the amounts paid to employees during that time, in case if it happens. You will need this information to calculate the amount of the allowed loan.
Business interruption insurance revenue
Business interruption insurance is used to compensate for income that would otherwise be earned and taxed. Consequently, this compensation is usually tax deductible.
However, taxable business interruption insurance benefits may be offset by work accident losses, which are tax deductible if the losses are not already covered by any type of insurance. In order to justify a deduction, the taxpayer must be able to document or explain the loss and prove that it was caused by the event that led to the business interruption.
Home office costs
Many taxpayers continued to work remotely due to the pandemic. Home office costs can be deducted for qualified self-employed taxpayers and independent contractors who use a portion of their home solely to conduct business on a regular basis. It is important for these taxpayers to keep track of expenses, as well as the area of your workplace, in order to calculate the correct amount of spending.
The third series of quarantine payments
In March 2021, the federal government paid a third installment of payments to those who qualify. Tell your CPA if you received this payment and the amount. In some cases, taxpayers who have not received payments based on their 2020 tax return may be able to claim them on their 2021 tax return.
Accident losses - Hurricane Ida or Hurricane Nicholas
Taxpayers must keep records of their losses incurred as a result of any hurricane in order to calculate whether the taxpayer can claim damages in the form of a deduction.
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Advance payments for child tax credit
Taxpayers who are eligible for the Child Tax Credit will need to know the total amount of the loan they received in 2021 and compare to the total amount that the taxpayer can claim on their 2021 tax return.
The IRS is expected to send letters to taxpayers in January 2022, called Letter 6419, indicating the total amount of money received by the taxpayer in 2021. Keep this notice as you will need this information when filing your 2021 tax return.
Infrastructure Bills Will Affect Taxes
While these bills are not final and subject to change, taxpayers should start considering potential changes that might affect them. One of the possible changes is a significant update of the capital gains tax rate. While not final, one proposal will increase the rate from 20% to 25% and will take effect for transactions after September 13, 2021.
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