Information about the FinCEN Beneficial Ownership report

Beginning on January 1, 2024, many companies in the United States will have to report information about their beneficial owners, that is, the individuals who ultimately own or control the company.  FinCEN will begin accepting the new beneficial ownership information reports on January 1, 2024. Taxlink will not be preparing the reports for our business clients as these are considered legal matters and not tax matters. However, the reporting is quite simple and can be accomplished online. We are alerting our business clients to this new requirement as the penalties for non-compliance are quite substantial.

Who is required to file the new report? Companies required to report are called reporting companies. There are two types of reporting companies:

  • Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.

  • Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.

To determine if the company meets these requirements, see the FAQ here.

How to file the new report: The form is not yet available but will be posted here.

If the company is required to report their company’s beneficial ownership information to FinCEN, you will do so electronically through a secure filing system available via FinCEN’s website and not with the your tax return. FinCEN is currently developing this system and will be available before your report must be filed.

When to file: A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025 to file its initial beneficial ownership information report.

A reporting company created or registered on or after January 1, 2024, will have 30 days to file its initial beneficial ownership information report. This 30-day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.

Helpful resources:

Ensure Your Donations Pass the IRS Test

Charitable contributions may come to mind as you look for different ways to lower your 2023 tax bill before the end of the year, as donations are a great way to give to a deserving charity while giving back to you in the form of a tax deduction.

The IRS, however, can be quick to disallow charitable contributions without proper documentation. Here are 6 things you need to do to ensure your charitable donation will be tax deductible.

  1. Confirm eligibility of charity. Only donations to qualified charitable organizations registered with the IRS are tax-deductible. You can confirm an organization qualifies by calling the IRS at (877) 829-5500 or visit www.irs.gov and click on the charities and non-profits tab.

  2. Ensure you can itemize. You must itemize your deductions using Schedule A in order to take a deduction for a contribution. For 2023, you need to have at least $13,850 worth of deductions to itemize ($27,700 if married). If you're going to itemize your return to take advantage of charitable deductions, it also makes sense to look for other itemized deductions. These include state and local taxes, real estate taxes, home mortgage interest and eligible medical expenses over a certain threshold. If your deductions are not going to exceed these thresholds, delay your deductions until next year and bundle two or more years of contributions into one year.

  3. Get receipts. Get receipts for your deductible contributions. Receipts are not filed with your tax return but must be kept with your tax records. You must get the receipt at the time of the donation or the IRS may not allow the deduction.

  4. Pay attention to the calendar. Contributions are deductible in the year they are made. To be deductible in 2023, contributions must be made by Dec. 31st. Contributions made by credit card are deductible even if you don’t pay off the charge until the following year, as long as the contribution is reported on your credit card statement by Dec. 31. Similarly, contribution checks written before Dec. 31 are deductible in the year written, even if the check is not cashed until the following year.

  5. Be extra careful with noncash donations. You can make a contribution of clothing or other items around your home you no longer use. If you decide to make one of these noncash contributions, it's up to you to determine the value of the contribution. Many charities provide a donation value guide to help you determine the value of your contribution. Your donated items must be in good or better condition and you should receive a receipt from the charitable organization for your donations. If your noncash contributions are greater than $500, you must file Form 8283 to provide additional information to the IRS. For noncash donations greater than $5,000, you must also get an independent appraisal to certify the value of the items.

  6. Keep track of mileage. If you drive for charitable purposes, this mileage can be deducted on Schedule A. For example, miles driven to deliver meals to the elderly, to be a volunteer coach or to transport others to and from a charitable event, can be deducted at a rate of 14 cents per mile. A log of the mileage must be maintained to substantiate your charitable driving.

Remember, charitable giving can be a valuable tax deduction — but only if you take the right steps.

Starting a Business?

Quick tips everyone should follow

 Starting a business is exciting and nerve-wracking all at the same time. The “to do” list can seem never-ending. Below are a few reminders to help you stay on track.

•    Write a business plan. This key step will help you identify what is important to your business and where to focus your resources. By creating a plan, you will be able to outline your operational and financial goals. A plan will serve as a guide to shape budget and marketing strategies. Putting this information on paper will help to align your business purpose and outcome.

•    Do your research. You will most likely do a lot of research while working on your business plan; however, you need to explore every aspect of the business you want to start. Become an expert on your industry, products and services. Join related professional associations to keep you informed on what’s going on in similar markets. And don’t forget to learn the ins and outs of your competition.

•    Obtain professional help when necessary. Although you might be an expert in your industry, you don’t need to be an expert on everything. If you need a contract written up, hire an attorney. If you are not an accountant or a bookkeeper, hire one or both to make sure your business financials are in order from the get go. Focus your energy on what you are good at! You don’t want to waste time and money to fix a financial or legal mess later.

•    Ask questions. When you are starting a business, you’ll have a lot of questions. Find an experienced mentor in your industry. The opportunity to learn from someone who has already been through the start-up phase will prove invaluable.

•    Meet registration requirements. Your location and business structure will determine your registration requirements, if any. Most businesses do not need to register with the federal government to become a legal entity; instead they need to file to obtain a federal tax identification number. Small businesses sometimes register with the federal government for trademark protection or tax-exempt status. In addition, if your business is an LLC, corporation, partnership or nonprofit corporation, you’ll most likely need to register with any state where you conduct business. And don’t forget about local registration requirements. Check with your local government websites to find out what is required in your area.

•    Open a business bank account. You don’t want to co-mingle your personal and business banking activities. You can open a business bank account once you have your federal EIN. Having a business bank account is a good practice for limiting your personal liability by keeping your business funds separate. A business account also allows customers to be able to pay you with credit cards and make checks out to your business rather than to you personally. Furthermore, a business account can offer the capability of creating a credit card account that can help your business make large startup purchases and help establish a credit history for your business.

While these tips only scratch the surface, hopefully they’ll help you get started off on the right foot. Remember, we work with other businesses, so please reach out with any questions before or during your business journey.

Some Year-End Updates for 2021

Winter has arrived in our part of the world, and it’s been somewhat mild so far. The same goes for the current tax climate. In general, it was a somewhat quiet year for tax changes (well, at least after April), which was a big relief from the roller coaster that taxpayers, and tax professionals, have experienced the last few years.

We can hope that this peacefulness lasts, and will keep you up-to-date on anything that comes through. But in the meantime, here are a couple of tax items that you should be aware of before year-end:

The American Rescue Plan boosted the child tax credit and while you may have received an advance credit, if you earned too much, you may need to pay some of it back. This means that to receive the full credit, single filers need a modified adjusted gross income of less than $75,000 and married filing joint taxpayers must earn under $150,000. Taxlink will need to know exactly how much you received throughout the year for the advanced payments, and you can look at the IRS website for guidance here. You may also receive a letter from the IRS in January summarizing the payments.

It came out later in the year, the reason there were so many delayed refunds, and it was of no surprise to us. The IRS had a hard time reconciling the economic stimulus payments based on what taxpayers reported on their tax filings. It has been a mess for them, and nothing was in place to quickly check status of the payments. We will need that information once again for 2021, since the third and final payment was made around March. We highly suggest if you do not know if you received this payment to log on to the IRS website and set up an online account. This will give you access to many other tax related items, as well as the status of any payments you were supposed to receive. You can download your transcripts and upload them to our portal where we can find all the information we need.

The above the line deduction for taxpayers who are unable to itemize deductions is $300 for single and $600 for married filing jointly. The MFJ deduction was raised for 2021 (for 2020, the above the line deduction was $300 for all filing statuses).

After being waived in 2020, required minimum distributions for those receiving retirement distributions have been resumed in 2021. So, if this applies to you, **the distribution must be made by December 31st, 2021**. Penalties are steep if the amounts are not taken in the required year - 50% of the amount that was required to be distributed!

On the subject of retirement, make sure you've maxed out your retirement plan at work, if applicable, and try not to make any IRA/ROTH/SEP IRA contributions until we take a look at your return for 2021. You have until the due date of the return to make these contributions.

There is significant student loan tax relief for canceled, forgiven or otherwise discharged debt. In 2021 through 2025, canceled debt for most student loans incurred for post-secondary education will not be considered taxable income.

Annual adjustments for inflation have been implemented, as usual. This affects the tax brackets, the capital gain rates, standard deductions, the foreign earned income tax and housing exclusion, AMT, the qualified business income deduction and more. Basic things that adjust every year with little impact to the overall picture, in most cases.

Some tax deductions and credits were set to expire, but have been extended to 2021, for example:

  • Mortgage insurance premiums deduction

  • Nonbusiness energy property credit for certain energy-saving improvements to your home (e.g., new energy-efficient windows and skylights, exterior doors, roofs, insulation, heating and air conditioning systems, water heaters, etc.

  • Fuel cell motor vehicle credit

  • Alternative fuel vehicle refueling property credit

  • Two-wheeled plug-in electric vehicle credit

  • The solar credits rate of 26% was extended until 2023

  • While the tuition and fees deduction was eliminated in 2021, the phase-out thresholds for the life-time learning credit and American Opportunity credit have increased significantly, allowing for more taxpayers to be eligible for these education tax credits.

Please send us an email if you have any questions prior to year-end. We will be happy to assist you. Please note that our office is closed for the month of December for our annual holiday. We will be back in the office on January 4th, 2022.

The American Rescue Plan Act (ARP) Summary

The House and Senate have just passed the American Rescue Plan Act (ARP) and the president has signed it into law. This bill includes many provisions that have major tax impacts for 2020 and 2021 tax returns.

2020 tax-free unemployment benefits Initially the bill didn’t include retroactive tax provisions, but during the Senate’s voting session, a compromise was made on unemployment benefits that will affect 2020 tax returns. The bill provides a $300 weekly federal unemployment benefit through Sept. 6 and also makes the first $10,200 of unemployment payments nontaxable ($20,400 in the case of a joint return, but only $10,200 per spouse) in 2020 for households earning less than $150,000.

The IRS has not provided guidance on whether an amended return will be necessary for those of you who have already filed. If it is determined that amendments are necessary, we will be contacting you shortly after the end of tax season to file the amended return.

Retroactive advanced premium tax credit An individual can receive an advanced premium tax credit (APTC) to lower their monthly health insurance payment (premium). If at the end of the year they have received more APTC than the credit allowed based on final household income, the taxpayer does not have to pay back the excess when filing their 2020 federal tax return. For those who have already filed their 2020 return, once again, we are waiting for guidance as to how to get the refund.

Recovery rebates to individuals (stimulus number three) Single taxpayers with AGI under $75,000 will receive a $1,400 refundable tax credit, while joint filers with AGI under $150,000 will receive $2,800. In addition, taxpayers will receive $1,400 for each qualifying dependent (including adult dependents). The credit will completely phase out at an income threshold of $80,000 for single filers and $160,000 for joint.

The Treasury is directed to issue this credit as an advance payment based on the information on 2019 or 2020 tax returns. This credit will be reconciled on the 2021 tax return. Taxpayers who are married to undocumented residents will be able to receive the stimulus payments. If there are changes to income, dependencies, or filing status, it may be advantageous to file before/after these payments are issued. But rest assured, if you have not filed, there will be a second round of payments coming out between April and September, according to the bill.

Child tax credit Special rules for 2021 include an expansion of the credit from $2,000 to $3,000 per eligible child under age 18 ($3,600 per child under age 6). The fully refundable credit, with 50% of the credit issued as advance periodic payments starting in July, will be reconciled on the 2021 tax return. For 2021, the increased credit amount (additional $1,000 or $1,600 per-child in excess of the present-law $2,000 per-child) begins to be phased-out at $75,000 ($150,000 for MFJ and surviving spouse and $112,500 for head of household). Once the increased credit amount is reduced, the credit plateaus at $2,000, and the phaseout begins at $200,000 ($400,000 for MFJ).

Starting in July, the Treasury will issue advance payments of the child tax credit based on 2019 or 2020 tax return information. The Treasury is tasked with establishing an online portal to allow taxpayers to opt out of receiving advanced payments and provide information regarding changes in income, marital status and the number of qualifying children for purposes of determining each taxpayer’s maximum eligible credit. We will send an email out around that time when the portal is available to access.

Other provisions The act includes other tax changes, such as:

  • Refundability and enhancement of child and dependent care tax credit

  • Increase in exclusion for employer-provided dependent care assistance

  • Extension and expansion of the Families First Coronavirus Response Act (FFCRA) paid sick leave and paid family leave credits

  • Extension of employee retention credit

  • Modification of the premium tax credit

  • Change to the tax treatment of targeted economic injury disaster loan (EIDL) advances

  • Exemption of student loan forgiveness from federal taxation through 2026

  • Expanded COBRA continuation coverage premium assistance credit - if you need more information regarding this, please contact a COBRA administrator for guidance.

Most of the above items are business related and handled through payroll assistance and/or lendors, and I’m happy to help navigate if you have any questions.