Tax Tuesday: The Most Common Mistakes People Make When Filing Their Taxes
This article is presented by Mellor & Associates PLLC. Don’t miss “Tax Tuesdays,” as a CPA from Mellor & Associates joins Dave & Dujanovic every other Tuesday at 10:50 AM to help you save you money on your taxes.
Are you one of the millions of Americans who does your own taxes? If so, you’ve no doubt wondered if you’re doing everything correctly. Keep reading to make sure you’re taking advantage of these important tax breaks which could save you thousands.
What are 2 to 3 changes in tax code this year that might catch our listeners off guard?
Three things come to mind.
First, there is no unemployment tax break as was allowed in 2020; it is fully taxable in 2021.
Second, in 2021 and through 2025, certain student loan forgiveness is tax free. The American Rescue Plan Act created a special provision that excluded all student loan forgiveness from taxable income. This extends through 2025, so if you have any portion of a student loan forgiven from now until then you are in the clear.
Third, in tax year 2022, All the special tax provisions of the and American Rescue Plan Act will revert back to the rules from 2020 and before, meaning taxpayers may see smaller refunds:
- Child credit in 2021 was up to $3,000 ($3,600 for children 6 and under). In 2022 it reverts back to its pre-2021 amount at $2,000 per child. There won’t be in any advanced payments of child tax credit in 2022 either.
- Dependent Care Credit in 2021 increased to up to $8,000 in eligible expenses. It drops back down in 2022 to cap out at $6,000 in eligible expenses.
What are the most commonly missed write off’s?
For businesses and sole proprietors: One thing that went seemingly unnoticed for 2021 and 2022 with the CARES Act was that business can deduct up 100% of their business meals under many circumstances. This was limited to only 50% of the cost in prior years, so the deduction has essentially doubled! Additionally, meals is usually an “add back” or an increase to taxable income vs. “book income” but for 2021 and 2022 remember that 100% of business meals can be deducted!
For Individuals: Student Loan Interest – this is a direct reduction of income, so make sure you are claiming any student loan interest payments on your personal returns. For active military members, they are the only ones still allowed to deduct moving expenses for a Permanent Change of Station (PCS). Any amount they paid that wasn’t reimbursed is deductible, and that includes the cost of travel like lodging and mileage at a rate of 16 cents per mile. For National Guard and reservists, they also get a special deduction if they must travel more than 100 miles to their duty location. This deduction includes mileage, meals, and lodging while on a drill status.
Is there any more COVID relief available to businesses?
There is a possibility there will be some additional funding for a program called the “Restaurant Revitalization Fund”. The bill is headed for the senate which will provide an additional $42 billion for this fund. Beyond the Restaurant Revitalization Fund, the source of economic relief or stimulus more widely available to all types of other small businesses, including restaurants – is still the Employee Retention Credit. The Employee Retention Credit is still available retroactively. Businesses can get a refund of up to $26,000 per employee – even if they received PPP loans. Our firm is happy to do a free analysis for any small business to help them determine if they qualify. .
Get a free consultation at UtahERC.com.