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Will I Owe the IRS Tax on My Stimulus Payment?

Covid-19 stimulus check payment jerry jones self-storage CPA

Some worry the money will get reported as income on 2020 tax returns

The Internal Revenue Service (IRS) sent out more than 160 million stimulus payments since the CARES Act was signed into law on March 27. Now it’s sending out millions more checks in the second round of stimulus payments. As people start to spend their money, some wonder: Is my stimulus payment taxable?

The short answer: No. In the somewhat longer words of the IRS: “No, the payment is not income and taxpayers will not owe tax on it. The payment will not reduce a taxpayer's refund or increase the amount they owe when they file their 2020 or 2021 tax return next year. A payment also will not affect income for purposes of determining eligibility for federal government assistance or benefit programs."

Not your average tax credit

The stimulus payment — or economic impact payment, as the IRS calls it — is technically a tax credit for 2020. But this isn't widely understood. Some people assume that the IRS will add the amount to your income, generating a bigger tax bill, or reduce your future tax refund when you file your tax return next year. Neither is the case, but this bears some explaining.

In the tax world, a tax deduction is a good thing. It reduces your income, which reduces the amount of tax you owe. If you had $50,000 in income and had a $5,000 tax deduction, your deduction would reduce your taxable income by $5,000. If you were in the 12 percent tax bracket, you'd reduce your taxes owed by $600 (12 percent of $5,000).

A tax deduction is good, but a tax credit is very good. A tax credit reduces your tax bill dollar for dollar. If you owe $1,500 in federal income taxes and you get a $1,000 tax credit, your tax bill sinks to $500.

refundable tax credit is a thing of wonder. A garden-variety tax credit can reduce your tax bill to zero, but it can't turn a tax bill into a tax refund. Refundable tax credits can. For example, if you owed $1,000 in taxes but had a refundable tax credit of $1,200, you'd get a $200 tax refund check from Uncle Sam.

Because you're getting what amounts to a refundable tax credit now in the form of a stimulus payment, rather than waiting to get the money from the credit in 2021 when you actually file your 2020 tax return, you're in effect getting an advanced refundable tax credit.

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Why You Shouldn’t Do Your Own Taxes Anymore

death by taxes

You’ve probably heard some variation of this: You wouldn’t do your own brain surgery, so why would you do your own taxes if you’re also not a tax expert? Plenty of accountants agree that you shouldn’t do your own taxes, said Dave Du Val, chief customer advocacy officer at tax audit defense firm TaxAudit.

It is true that most people can fill out a tax return on their own or with the help of tax software, Du Val said. But that doesn’t mean there aren’t benefits to hiring a tax accountant to help you.

Learn the signs you really do need professional help with your taxes, and just what you’ll get when you consult an expert.

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EEOC Permits Employers to Mandate COVID Vaccinations to Employees: Now What?

COVID-19 Coronavirus Vaccine and Syringe

As we approach the end of this tumultuous and uncertain 2020, there are strong signs that in 2021, life as we once knew it, will once again return to some level of normalcy.  This means employers can look forward to re-opening their doors to employees, clients, patients and customers.

The U.S. Food & Drug Administration (“FDA”) has just granted Emergency Use Authorization for two COVID-19 vaccines.  With the distribution of these vaccines, employers will now face a different set of challenges as they grapple with the decision of whether or not to require employee vaccination.

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Why You Need A Will (even if you think you don't)

man signing will

Be Prepared

The COVID-19 pandemic has created a tremendous amount of uncertainty about the future for millions of Americans. In fact, the increased level of anxiety triggered by the deadly, global health crisis has caused 25 percent of American parents with children under the age of 18 to realize that estate planning should be an immediate priority for them, according to a recent study by the insurance and wills website Fabric. But it's not just parents with young children who should have a will in place. Experts suggest that no matter your age or how good your health, it's best to draft a will earlier in life, rather than later. Here's why.

Wills Are Not Only for Those With Significant Assets

While you're young, you may not yet have accumulated substantial net worth. But that's no reason to ignore creating a will, says Karen Bussen, founder and CEO of Farewelling, an online platform designed to help people navigate funerals and end-of-life planning. "Even if you don't have a lot of assets, you can use a will to communicate instructions clearly to loved ones. An example would include guardianship for a pet, or what you'd like done with artwork you've created," says Bussen.

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self-storage virtual round table

Wednesday 12/16 @ 1pm est

Save Your Seat at:
SelfStorageVirtualRoundTables.com

The next Self Storage Virtual Roundtables is happening this Wednesday 12/16 at 1:00 - 2:00 EST.

You'll have the opportunity to network with peers, top industry professionals & vendors face to face!

click here to register

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Final Regulations on the Meals and Entertainment Deduction

meals and entertainment deduction

The law known as the Tax Cuts and Jobs Act (TCJA), P.L 115-97, significantly changed Sec. 274 by eliminating the deduction for any expenses considered entertainment, amusement, or recreation. The amendments denied deductions for expenses for business entertainment and increased the scope of the deduction limitation for expenses related to food and beverages employers provided.

Because the Code was unclear about the deductibility of food and beverages expenses when combined with entertainment expense, the IRS provided transitional guidance on the deductibility of business meals through Notice 2018-76 and later through proposed regulations under Sec. 274 issued in February 2020 (REG-100814-19). On Sept. 30, 2020, the IRS issued Regs. Secs. 1.274-11 and 1.274-12 (T.D. 9925) to address the changes made to the meals and entertainment deduction under the TCJA.

Business Meals

Regs. Sec. 1.274-11 disallows the deduction for certain entertainment, amusement, or recreation expenditures paid or incurred after Dec. 31, 2017. An objective test is used to determine whether an activity is entertainment and the taxpayer's trade or business is considered when applying this test. Under this provision, any expenditure that is considered entertainment or in connection with an entertainment activity, including a facility used in connection with an entertainment activity, is not deductible. Dues or fees to any social, athletic, or sporting club, or to any organization that has connections to facilities are nondeductible. In addition, no deductions are allowed for amounts paid for membership in any business, pleasure, recreation, or social club.

However, under Regs. Sec. 1.274-11, entertainment does not include expenditures for food and beverages, unless the food or beverages are provided at an entertainment activity. Food and beverages provided at an entertainment activity are considered an entertainment expense and not deductible unless the food or beverage cost is stated separately from the cost of the entertainment cost on bills, invoices, or receipts. If the food or beverages are not purchased separately from the entertainment, or there is no reasonable allocation of the cost of food or beverages on the invoice separate from the cost of entertainment, then the entire amount is nondeductible.

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New Dates Announced for 2021 Inside Self-Storage World Expo

inside self storage world expo

The Inside Self-Storage (ISS) World Expo, originally scheduled to take place April 6-9, 2021, at The Mirage Hotel & Casino in Las Vegas, has been rescheduled to July 13-16 due to the ongoing pandemic and concerns over the health and safety of show participants and the general public. The decision to push back the dates was made in concert with key stakeholders and industry professionals who believe July offers better timing for an in-person event.

“We have a commitment to our attendees and exhibitors to provide a valuable and productive face-to-face experience in 2021, conditions permitting,” said Dana Hicks, show director. “We feel the new July dates will provide everyone with the necessary time to plan effectively and allow us to reimagine ISS for a different time of the year.”

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How the CARES Act Changes Deducting Charitable Contributions

CARES Act Tax Buttons - Tax Issues

Whether taxpayers are supporting natural disaster recovery, COVID-19 pandemic aid or another cause that’s personally meaningful to them, their charitable donations may be tax deductible. These deductions basically reduce the amount of their taxable income.

Here’s how the CARES Act changes deducting charitable contributions made in 2020:

Previously, charitable contributions could only be deducted if taxpayers itemized their deductions.

However, taxpayers who don’t itemize deductions may take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations. For the purposes of this deduction, qualifying organizations are those that are religious, charitable, educational, scientific or literary in purpose. The law changed in this area due to the Coronavirus Aid, Relief, and Economic Security Act.

The CARES Act also suspends limits on charitable contributions and temporarily increases limits on contributions of food inventory. More information about these changes is available on IRS.gov.

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IRS Makes it Easier to Set Up Payment Agreements; Offers Other Relief to Taxpayers Struggling with Tax Debts

IRS Instalment Payment Arrangement

The Internal Revenue Service today announced a number of changes designed to help struggling taxpayers impacted by COVID-19 more easily settle their tax debts with the IRS.

The IRS assessed its collection activities to see how it could apply relief for taxpayers who owe but are struggling financially because of the pandemic, expanding taxpayer options for making payments and alternatives to resolve balances owed.

“The IRS understands that many taxpayers face challenges, and we’re working hard to help people facing issues paying their tax bills,” said IRS Commissioner Chuck Rettig. “Following up on our People First Initiative earlier this year, this next phase of our efforts will help with further taxpayer relief efforts.”

“We want people to know our IRS employees are committed to continue helping taxpayers wherever possible, including offering many options for those struggling to pay their tax bills,” said Darren Guillot, the IRS Small Business/Self-Employed Deputy Commissioner for Collection and Operations Support. Guillot discussed the new relief options in a new edition of IRS “A Closer Look.”

Taxpayers who owe always had options to seek help through payment plans and other tools from the IRS, but the new IRS Taxpayer Relief Initiative is expanding on those existing tools even more.

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Taxpayers Who Need Last Year’s Tax Return Have Several Options

Help is available for taxpayers who need tax information for prior years, but who didn’t keep copies of their returns. There are options for helping taxpayers get the information they need.

Taxpayers should generally keep copies of their tax returns and any documentation for at least three years after they file. If taxpayers didn’t keep these records, here are some things they can do:

Ask software provider or tax preparer
Those who need a copy of their tax return should check with their software provider or tax preparer first. Prior-year tax returns are available from the IRS for a fee.

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A Professional Corporation
4600 Kietzke Ln, Suite E-148
Reno, NV 89502
The Selfstorage CPA
Jerry Jones, CPA
775.828.0767
fax 775.348.9518
jerry@theselfstoragecpa.com