How would you increase your total assets?
Well let the Government Help You!
Here’s how: with both the SEP IRA and the solo 401(k) retirement plans, your investment in your tax-favored retirement
Example. You invest $1,000 a month in your retirement. You are in the 40 percent tax bracket (combined federal and state), and you earn 10 percent on your investments. At the end of 30 years, you have $1.58 million in after-tax spendable cash, which comes from (in round numbers):
If you had no government help on the taxes and invested $1,000 a month in an investment that earned 10 percent (6 percent after taxes), you would have a little more than $950,000.
Winner. The retirement plan wins by $630,000—after taxes ($1.58 million vs. $950,000).
Okay, that’s the big picture. It tells you that tax-advantaged investing multiplies profits. So, do it.
If you would like to discuss your retirement options, please contact us.
The IRS can waive penalties it assessed against you or your business if there was “reasonable cause” for your actions.
The IRS permits reasonable cause penalty relief for penalties arising in three broad categories:
Contrary to what you might think, the term “reasonable cause” is a term of art at the IRS. This seemingly simple phrase has a precise and detailed definition as it relates to penalty abatement.
There are three instances where you might qualify for reasonable cause.
There are five instances where you likely do not qualify for reasonable cause penalty relief.
If you would like to discuss IRS penalty relief, please don’t hesitate to contact us!
The Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted on December 27, 2020, deals with the annual tax extenders. Congress made some of them permanent, while others got short- or long-term extensions.
These are the big five Form 1040 tax breaks that were scheduled to expire on December 31, 2020:
Here is what Congress did with each of these five provisions:
Embedded in the COVID-19 relief law is $900 billion for financial assistance.
As you would expect in these unusual times, some of the relief is in the form of direct government financial assistance and some is from tax benefits that can impact both tax year 2020 and tax year 2021.
Most of the provisions create extra deductions or credits where Uncle Sam puts cash directly into your wallet. Here are four:
1. Recovery Rebate Payments and Credits
Remember those $1,200 checks many people got earlier in the year? Well, there’s another round of $600 payments coming, with rules very similar to the first round.
2. Paid Sick and Family Leave Credits
As you may remember from the March 2020 law, Congress provided two ways to give workers paid sick and family leave:
The tax credits require that the self-employed person or the employee was unable to work due to a qualifying situation between April 1, 2020, and December 31, 2020. The maximum non-working days eligible for the tax credits are
Under the new law, you now can claim these tax credits for qualifying days through March 31, 2021. But the new law did not increase the maximum creditable days.
3. 100 Percent Business Meal Deduction
The new December 27, 2020, law allows you to deduct 100 percent of your business-related expenses for food and beverages provided by a restaurant for amounts paid or incurred after December 31, 2020, and before January 1, 2023.
4. Charitable Contributions
The CARES Act made three major changes to charitable contribution deductions for tax year 2020:
The new law enacted on December 27, 2020, extends the increased charitable contribution deduction limits for individuals and corporations to tax year 2021. In addition, in tax year 2021, non-itemizers can deduct below-the-line cash charitable contributions up to $600 on a married-filing-joint return ($300 for singles).
If you would like to discuss any of the changes described above, please contact us!
Before the December 27, 2020, enactment of the new COVID-19 relief law, you may have chosen the PPP loan and given no thought to the employee retention credit.
Remember, under the original law, you had to choose between the retention credit and the PPP loan. Millions chose the PPP loan route.
But now the game has changed. You may, as a PPP recipient, qualify to take the employee retention credit retroactively for tax year 2020 and also going forward in tax year 2021.
Here are the key changes you as a PPP player need to know:
Two things to know about the Paycheck Protection Program (PPP) first draw enacted on December 27, 2020:
Who qualifies for first-draw PPP money today? You, most likely—if you file a business tax return and have not yet received any PPP monies.
But don’t wait. The money is going to run out fast, and once it’s gone, so is the PPP. And the new PPP ends March 31, even if the money is not gone by then.
You qualify for the PPP if any of the following are true:
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Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.
Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.