Category Archives: Tax Questions

The Inland revenue Service recently announced the 2021 tax year annual inflation adjustments for upwards of sixty provisions. The details below are from: https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2021

Highlights of changes in Revenue Procedure 2020-45

The Consolidated Appropriation Act for 2020 increased the amount of the minimum addition tax for failure to file a tax return within 60 days of the due date. Beginning with returns due after Dec. 31, 2019, the new additional tax is $435 or 100 percent of the amount of tax due, whichever is less, an increase from $330. The $435 additional tax will be adjusted for inflation.

The tax year 2021 adjustments described below generally apply to tax returns filed in 2022.

The tax items for tax year 2021 of greatest interest to most taxpayers include the following dollar amounts:

• The standard deduction for married couples filing jointly for tax year 2021 rises to $25,100, up $300 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,550 for 2021, up $150, and for heads of households, the standard deduction will be $18,800 for tax year 2021, up $150.
• The personal exemption for tax year 2021 remains at 0, as it was for 2020; this elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.
• Marginal Rates: For tax year 2021, the top tax rate remains 37% for individual single taxpayers with incomes greater than $523,600 ($628,300 for married couples filing jointly). The other rates are:
  • 35%, for incomes over $209,425 ($418,850 for married couples filing jointly);
  • 32% for incomes over $164,925 ($329,850 for married couples filing jointly);
  • 24% for incomes over $86,375 ($172,750 for married couples filing jointly);
  • 22% for incomes over $40,525 ($81,050 for married couples filing jointly);
  • 12% for incomes over $9,950 ($19,900 for married couples filing jointly).
  • The lowest rate is 10% for incomes of single individuals with incomes of $9,950 or less ($19,900 for married couples filing jointly).
• For 2021, as in 2020, 2019 and 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act.
• The Alternative Minimum Tax exemption amount for tax year 2021 is $73,600 and begins to phase out at $523,600 ($114,600 for married couples filing jointly for whom the exemption begins to phase out at $1,047,200). The 2020 exemption amount was $72,900 and began to phase out at $518,400 ($113,400 for married couples filing jointly for whom the exemption began to phase out at $1,036,800).
• The tax year 2021 maximum Earned Income Credit amount is $6,728 for qualifying taxpayers who have three or more qualifying children, up from a total of $6,660 for tax year 2020. The revenue procedure contains a table providing maximum Earned Income Credit amount for other categories, income thresholds and phase-outs.
• For tax year 2021, the monthly limitation for the qualified transportation fringe benefit remains $270, as is the monthly limitation for qualified parking.
• For the taxable years beginning in 2021, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements remains $2,750. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $550, an increase of $50 from taxable years beginning in 2020.
• For tax year 2021, participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,400, up $50 from tax year 2020; but not more than $3,600, an increase of $50 from tax year 2020. For self-only coverage, the maximum out-of-pocket expense amount is $4,800, up $50 from 2020. For tax year 2021, participants with family coverage, the floor for the annual deductible is $4,800, up from $4,750 in 2020; however, the deductible cannot be more than $7,150, up $50 from the limit for tax year 2020. For family coverage, the out-of-pocket expense limit is $8,750 for tax year 2021, an increase of $100 from tax year 2020.
• For tax year 2021, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $119,000, up from $118,000 for tax year 2020.
• For tax year 2021, the foreign earned income exclusion is $108,700 up from $107,600 for tax year 2020.
• Estates of decedents who die during 2021 have a basic exclusion amount of $11,700,000, up from a total of $11,580,000 for estates of decedents who died in 2020.
• The annual exclusion for gifts is $15,000 for calendar year 2021, as it was for calendar year 2020.
• The maximum credit allowed for adoptions for tax year 2021 is the amount of qualified adoption expenses up to $14,440, up from $14,300 for 2020.

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation.

Are you able file your taxes or comprehend what you owe Uncle Sam? There is a strong chance you’re confused about tax regulations. On the bright side, we’ve compiled a list of answers to 5 common tax questions you may be asking — including if you should hire a tax preparer, if you should file if you’re a college student, when you’ll receive your tax refund and more.

1. Should I hire a tax preparer?

If you choose to hire a tax professional is subject to your comfort level with the tax-filing procedure and the convolution of your return. If you’re seeking a tax preparer with a greater degree of experience, consider a CPA or E.A. Both professionals are required pass specific exams to get licensed.

2. What is the standard deduction?

The standard deduction is an allocated amount of money of which you aren’t taxed. The total of the standard deduction that you claim is subject on your tax status and the year that you’re filing. Taxes filed in 2019, the standard deduction $12,000 for filing single and $24,000 for married couples filing together.

3. When will my tax refund get to me?

When your tax refund will get to you is subject on how and when you filed. According to the IRS 90% of federal tax refunds are distributed within twenty-one days, and details are usually available within a day from when the IRS receives an e-filed tax return or 4 weeks following them receiving a traditional paper return. Utilize the IRS Where’s My Refund? device and the IRS2Go app to track it.

4. Should I file taxes if I’m enrolled in college?

Prior to you filing taxes as a student going to college, think about your income and if your parents will claim you as a dependent on their taxes. Students that earn less than $12,000 don’t need to file a tax return but might still gain from filing if taxes were withheld from their paycheck or want to claim specific tax benefits like the American opportunity tax credit.

5. How can I get the largest tax refund this year?

To receive the largest tax refund this year, begin to think about your tax circumstances early, preferably prior to the tax year ending. Next, consider how to make the most out of deductions through itemizing if you’re able to, declare tax credits and deductions in which you qualify for and give to your retirement accounts. When your tax situation is convoluted, think about working with an experience tax preparer.

6. How do I select the preferable tax-filing software?

When evaluating the preferable tax-filing software for your circumstance, think about the costs and services offered. A great place to begin is with the dozen software businesses that work alongside the IRS-affiliated Free File Alliance. They are IRS approved and satisfy specific security and privacy conditions.

7. Who is established as a dependent on my taxes?

Dependents may include qualifying children, family members and other people that you support. Dependents need to satisfy certain age, income and housing conditions.

8. How can I evade IRS tax scams?

Evade typical IRS tax scams by handling suspicious or out of left field communications from alleged IRS officials with a healthy suspicion. The IRS will usually reach out by regular mail first, so be cautious of e-mails, any texts or phone calls insisting to be from the IRS. Additionally, be vigilant for poor grammar, threats of calling the police and demands for payments through gift cards or wire transfers.

9. Should I choose direct deposit?

Yes, when you want to get your tax refund as fast as possible, choosing direct deposit can be faster than, for instance, petitioning a check to be mailed out.

10. Can I decrease my chances of getting audited?

To decrease the chance of a tax audit, make sure there are no errors, disclose all of your income, retain correct records and stay away from illegal or inappropriate tax moves like exaggerating charitable donations.

Whereas these answers to common tax questions may help you begin in fulfilling your tax responsibilities, you might still have questions as you start to file your return. If you see any questions you do not see on this list, contact us and we will be more than happy to answer them.

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation.