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You are here: Home / Archives for Personal Finance

June 1, 2021 Leave a Comment

Second Quarter Estimated Taxes

As the Second Quarter of 2021 winds to a close, we wanted to remind you that estimated taxes are due on or before June 15, 2021.

If we prepared and included pre-addressed envelopes and vouchers with the amounts due in your tax return packet, please be sure to use those when mailing in your estimates (although we do strongly recommend paying these electronically – see below for instructions).  Please also be sure to write the correct Quarter, Year and your Social Security Number in the memo line so that the estimate gets applied to the right year.

*  We cannot stress enough that keeping accurate records of your estimates will prevent confusion when it comes time to prepare your return.  We provided you with an envelope to help keep track, so even if you pay online, print out the receipt showing the date and amount you paid and record it on the envelope or throw it in there for safe keeping.  99.9% of Post Filing Notices that are received are as a result of inaccurately reported estimate payments.

If we pay your estimates from our office, we will be calling shortly to remind you of the amount and the withdrawal date we will be processing them.  This is your time to inform us of any change in your employment or income which may affect your estimated tax due amount.

Again, you have the option to use EFTPS or IRS DirectPay for Federal estimated tax payments and TSC for the State.  Click here to be brought to the Federal site.  Click here to make CT online payments.

Federal estimates should be sent to:

Internal Revenue Service
P.O. Box 931100
Louisville, KY 40293-1100

CT Estimates should be sent to:

Department of Revenue Services
P.O. Box 5053
Hartford, CT 06102-5053

As always, we are here to answer any questions you may have.

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Filed Under: Featured Information, News, Personal Finance, Seasonal Information Tagged With: estimated taxes, estimates, Q2, quarterlies

December 1, 2020 Leave a Comment

CT Paid Family Medical Leave Act – What You Need to Know

By now, you have most likely heard of the CT Paid Family Medical Leave Act (PFMLA), which will begin on Jan 1, 2021 with .5% being deducted from employee wages by their CT employer.

There will be an impact to the EMPLOYERS and the EMPLOYEES and can involve the SELF-EMPLOYED.

CTPAIDLEAVE.ORG is an excellent site designed to answer questions for employees, employers, and self- employed.  Please take the time to visit this site. The following information is a snippet of what you need to know!

 

If you are an employer, this is what you need to know now:

If you have one or more employees, you MUST participate.

Employer registration is now open online at ctpaidleave.org.

Employee contributions begin on Jan 01, 2021 and will be run through your payroll system.

The employee deductions must be submitted quarterly to CPLA.

There are exemptions available; but, generally not for the very small businesses.

 

If you are an employee, this is what you need to know now:

You will have .5% deducted from your wages (equates to $250 yearly if you have earnings of $50,000).

The deduction is capped at wages of $142,800 for 2021.

Employees will be eligible for benefits starting in January, 2022.

This program can apply to part time employees assuming you have met certain earned-wage thresholds.

As an employee, there is nothing at this point that you need to do – just be aware that there will be a deduction in your paycheck starting the first pay in January.

 

If you are self-employed and/or a sole proprietor this is what you need to know now:

You can opt into the program if you wish, but you have to opt in for minimum of three years.

You can begin making contributions on Jan 01, 2021.

You can opt in now by registering at ctpaidleave.org.

 

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Filed Under: Featured Information, News, Personal Finance Tagged With: CTPFL, paid family leave, sole proprietors

June 26, 2020 Leave a Comment

Required Minimum Distributions, 2020

This year is like no other for RMD (Required Minimum Distribution) recipients, and boy, is it confusing!

UNDO YOUR 2020 RMD

The CARES Act suspended the rules for 2020. New guidance just came out that liberalized the rules even more.  IRS issued Notice 20-23 allowing those who had received an RMD between February 1 and May 15, 2020 to roll over the RMD into a plan or IRA by July 15 without owing any tax. The usual 60-day rule for rollovers was waived.

NOW IRS Notice 2020-51 allows tax free rollovers for RMDs received in January and waives the one-a-year limit for IRAs. All you have to do is complete the rollover by August 31.

Takeaways

If you don’t currently need the money, you will benefit from more tax deferred compounding by replacing or not taking the RMD for 2020.

If you are subject to increased Medicare premiums this could be a strategy to consider.

ROTH IRA CONVERSION

Because of the financial downturn, this may be a year to convert your traditional IRA to a Roth IRA. If you are eligible for a coronavirus-related distribution you can convert up to $100,000 of your traditional Roth and take advantage of the three-year spread of the taxable income.

If there is one thing that we’ve picked up on over the last four months, it’s that you need to be on your toes. In the immortal lyrics of Rush’s Tom Sawyer, “No changes are permanent, but change is.”  If (and when) anything changes, we’ll be here, letting you know.

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Filed Under: COVID-19 Related News and Updates, Featured Information, News, Personal Finance Tagged With: changes to RMD, COVID, RMD

December 2, 2019 Leave a Comment

2019 End of Year Letter to Our Amazing Clients

2019 is barreling towards its completion and we can sit idly by and not tell you all we’ve learned this year.

But we won’t.

With the new Tax Cut and Jobs Act of 2017, deductions are not as beneficial as in the past.  There are more IRS proposed regulations in the pipeline and we will update you as soon as we get the information.

Brace yourselves.

End of Year To-Do’s:

  • Review your stock portfolio. It takes time for stock transactions to process, so get your portfolio tax-deduction optimized well before the end of the year.  Carefully structure your capital gains and losses to minimize your taxes.
    • Do you give money to your parents to assist them with their retirement or living expenses? How about children (specifically, children not subject to the kiddie tax)? If so, consider giving appreciated stock to your parents and your non-kiddie-tax children. Why? If the parents or children are in lower tax brackets than you are, you get a bigger bang for your buck by gifting them stock, having them sell the stock, and then having them pay taxes on the stock sale at their lower tax rates.
  • Don’t forget to take your 2019 RMD (Required Minimum Distribution – see our previous blog regarding these). You can use the Qualified Charitable Distribution (donation) process for more tax benefits.
  • This is a good time to:
    • Update your beneficiaries in your retirement plan
    • Contribute to your CHET 529 plan, and
    • If you have a flexible spending account at work, find out the last date that you can use this account. Pay attention or you could lose it!

Your tax refund may take longer to process this year.  The IRS has upwards of 200 fraud detection filters that every return goes through.  Patience is a virtue when it comes to the reduction of identity theft.  We, too, continue to upgrade our systems to protect our clients from identity theft and cyber thieves.  Also, *Windows 7 is obsolete, and we don’t just say this in an elitist, make way for Artificial Intelligence kind of way – we want to encourage you that your personal data is at risk when your operating system is antiquated.

A new W4 form will be available in 2020.  This is the form you fill out when you start a new job or want to change what’s going on with your paycheck in your current job.  We will have it on our site once it is finalized and be available to answer any questions you may have about filling it out.  This is much more complex than the current form.  When filling out said W4, it is recommended that you utilize a handy-dandy Tax Withholding Estimator tool the IRS developed.  We’ve added it to our site on the Helpful Links page.

EFTPS is the Electronic Federal Tax Payment System.  The IRS is encouraging us (and we in turn are encouraging you) to utilize this system to make your tax payments.  In the past we have advised you to use the IRS DirectPay site, but EFTPS allows you to see all payments made, which is helpful, especially considering the majority of notices our clients received were mostly about misapplied or forgotten payments.  To register for EFTPS, click here to enroll, accept the terms of agreement and enter all the information required.  You will then be mailed a PIN.  You need to be on the lookout for it and keep it in a safe, warm place so that you know exactly where it is in order to utilize this system.  We are asking our clients for printed back up for estimated payments this year specifically due to the number of notices we dealt with this year, so this is one stop shopping for you!

You can also request your federal tax transcript online.  Click here and click “Get Transcript Online.”  From there, you will have to create an account in order to gain access to your transcripts, but this is a secure and fast way to do so.

New Connecticut Provisions:

  • Social Security income can be 100% deducted if the Federal AGI (Adjusted Gross Income) is less than $75,000 (for taxpayers who are single and/or married filing separately) or $100,000 (for joint files and heads of household). If your income is equal to or greater than the above, you can potentially deduct 75% of your Social Security income.
  • You can deduct a portion of certain retirement income that is included in Federal gross income if your Federal AGI is below $75,000 for single filers, married taxpayers filing separately, and heads of households; or $100,000 for married taxpayers filing jointly. The deduction is equal to 14% of pension or annuity income for the 2019 taxable year and increases annually over the next 6 years.
  • Military and railroad retirement that is included in federal gross income is fully deductible.
  • An increase in the teacher retirement system income tax deduction from 25% to 50% remains delayed.

Under Federal Provisions:

  • We have been told that Connecticut residents have been included in the Federal IP PIN program, which allows residents to request an identity protection PIN and use that when filing Federal income taxes as an added layer of security. If you elect to sign up for this program, you will be mailed a new IP PIN each year and will need to keep track of it.  To sign up, visit IP PIN.  This link provides you with an overview of the IP PIN program.  At the bottom of the page is the button to request a PIN, but the program will not be available until January, 2020, so save this link and check back later.

Final tips and thoughts:  Have The Talk with your college student – the tax talk.  Your college student may make his/her own decision to file their own tax return to get a highly anticipated refund.  It is so important to discuss with them beforehand WHO will be claiming the dependency exemption; it most often is a greater benefit to the parent(s).  It is complex reversing the decision.  Before your college student files a tax return, know the ramifications.  Call our office!

The penalty on individuals who fail to carry health insurance, part of the ACA, has been eliminated for 2019.

The annual gift tax exclusion for 2019 and 2020 is $15,000 per donee.

The 2019 IRA contribution can be made up until April 15, 2020.  The 2019 SEP contribution can be made through April 15, 2020 or until the date of tax filing extension.

If you are going to make a donation to a charity, how about an appreciated stock rather than a cash donation?  A donation of appreciated stock gives you more of a tax benefit:  The fair market value of the stock gets deducted as a charitable donation and you don’t pay any of the taxes you would have if you had sold the stock.  Example: You bought a publicly traded stock for $1,000, and it’s now worth $11,000. You give it to a 501(c)(3) charity.  You get a tax deduction for $11,000, and you pay no taxes on the $10,000 profit.

We know – it’s a lot to digest, especially after all that turkey and pie – but forewarned is forearmed.  As Sun Tzu said, “In the midst of chaos, there is also opportunity.”  We hope to provide you with many opportunities to be victorious in the chaos that is tax season.

 

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Filed Under: Healthcare and Taxes, Personal Finance, Seasonal Information, Tax Preparation Tagged With: charitable, QCD, RMD, stocks, tax return, tax strategy, Year-end

August 12, 2019 Leave a Comment

What’s the Use of the Use Tax?

Use tax is a sales tax on purchases made outside of one’s state of residence for taxable items that will be used, stored or consumed in your home state.  It is a tax you are required to pay when you purchase a taxable good or service for use in Connecticut on which you did not pay sales tax to a retailer.

A use tax is supposed to protect in-state retailers against unfair competition from out-of-state sellers that aren’t required to collect tax. It also ensures that all of a state’s residents help fund state and local programs and services, regardless of where they shop. As of 2018, 45 states have a use tax law.

What about online shopping?

If you’re a Connecticut resident, chances are you’ve been shortchanging the State Treasury each year when you file your state income tax return without even realizing it. With all that online shopping offers, many use the internet to buy all sorts of products. The fact that many online retailers do not charge sales tax on purchases is seen as an extra incentive to shop online. However, just because your go-to online store doesn’t charge you sales tax doesn’t mean that you don’t have to pay taxes. Connecticut law requires you to self-report the purchase and pay use tax in lieu of sales tax.  The use tax rate is the same as the resident’s local sales tax rate, which includes both state and local sales taxes. A resident who does not pay use tax may be subject to interest and penalties.

Amazon states that items purchased on their site may be subject to tax depending on the type of the item purchased and the delivery address of your order, among other factors.

Generally speaking, use tax is determined by where the buyer is located.  If an online retailer maintains a physical presence in a state that charges a sales tax on most purchases, then that online retailer must charge sales tax on any items that are sold to customers within the home state. However, if the online retailer is selling an item to a customer outside of its home state, then it is not required to collect sales tax from that customer.

Isn’t it the same as sales tax?

The sole difference between a sales tax and a use tax is the person who ends up giving the money to the state government. When it is a sales tax, the retailer is the one handing over the money, while a use tax is handed over directly by the consumer.   Other than that, it is functionally the same tax.  For more FAQs, click here.

And coming up, a way to avoid the use tax altogether!

From August 18th-24th, 2019, it’s the Annual One-Week Sales and Use Tax Exclusion
for Clothing and Footwear Costing Less Than $100 – it’s the Sales Tax Holiday!

This is a one-week period in August for clothing and footwear sales and use tax exclusion.  The “sales tax holiday” occurs the third Sunday in August through the following Saturday, and applies to clothing sales made by Connecticut and out-of-state retailers to Connecticut customers for purchases of clothing or footwear costing less than $100 per item.

The exclusion applies to each item of clothing or footwear sold, regardless of how many items are sold to a customer on the same invoice. However, for any item that costs $100 or more, sales tax applies to the entire price of that item.

This is just in time for back to school shopping or snapping up the end of summer sales for next year!

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Filed Under: Featured Information, News, Personal Finance, Seasonal Information, Tax Preparation Tagged With: online shopping, sales tax, tax free, use tax

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Recent Posts

  • Name Change
  • Child Tax Credit
  • Second Quarter Estimated Taxes
  • Mid-Season Tax Check-In
  • American Rescue Plan Act
  • We may have moved but fret not – We’re Still Us!

COVID-19 Related News and Updates

Check here for the most recent updates we have gathered regarding the impact of COVID-19 and taxes, personal finance and planning.

We are also going to be providing – and updating – links to get you the most up-to-date information on changes.

 

Regarding the PPP (Paycheck Protection Program), please note: 

Because we are not “authorized agents” for purposes of completing loan applications, we are not able to complete the actual loan applications for our clients. At this point, there is limited and unclear guidance available for the loan process. We will do our best to provide information and/or documentation requested by the lenders that we have access to as your bookkeepers/accountants and/or tax preparers, but we are unable to assist with the actual loan application or loan amount requests. There are severe penalties for misrepresentation. These documents must be signed under penalty of perjury and we take that responsibility very seriously.

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Get My Payment (Economic Impact Payment) status checking tool:  https://www.irs.gov/coronavirus/get-my-payment

Senator Chris Murphy’s Page:  https://www.murphy.senate.gov/coronavirus

From the IRS, those who would have had to take an RMD have been given relief for 2020.  Official policy can be found here:  https://www.irs.gov/pub/irs-drop/n-20-06.pdf

For those with student loans, check out this site for FAQs on relief in 2020:  https://studentaid.gov/announcements-events/coronavirus and https://patch.com/connecticut/across-ct/ct-coronavirus-payment-relief-student-loan-borrowers-lamont

SBA Loan Info:  https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources

CT Department of Labor

CT DMV is extending license renewals:  https://portal.ct.gov/DMV/Easy-Answers/Easy-Answers-Webpages/How-to-Renew-Your-Drivers-License

IRS FAQs on the stimulus payments:  https://www.irs.gov/newsroom/economic-impact-payments-what-you-need-to-know

Employee Retention Credit:  https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act

CT Program for minority and female-owned businesses (It’s a 0% line of credit with forgiveness if used for certain types of expenses within 3 months):  https://www.hedcoinc.com/state-of-ct-hedco-decd-covid-19

The IRS has suspended their collections process during COVID-19.  Click here to read the updates:  https://www.taxprotoday.com/news/irs-hits-the-brakes-on-collections-in-response-to-the-coronavirus

 

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Name Change

We have just finished with the 2020 tax season! We are thrilled that we made it intact! It was a brutal one; but for the most part all of us – taxpayers included – came out unscathed in the world of taxation. Now we plan for the next tax season. After almost two years of […]

  • Child Tax Credit
  • Second Quarter Estimated Taxes
  • Mid-Season Tax Check-In

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