Bob's Blog

Bob's January Blog

The new year has arrived which mens that it is time to prepare to file your income tax returns.  While gathering information for your 2021 income tax return may be the priorioty for many people, it is also important to look forward to 2022.  There are several things which I believe are important to note as we move forward in 2022.

First, one of the biggest issues I have found is the lack of adequate record keeping on the part of taxpayers.  This is primarily related to individuals reporting self-employment income (Schedule C) and rental income (Schedule E).  In reporting these activities it is critical to maintain accurate records of the expenses related to the activities.  This means keeping track of the actual expenses incurred in the activity by type of expense.  It is also important to keep the receipts for these expenditures.  Since most businesses provide receipt printed on a type of thermal paper, which may fade over time, I recommend making photo copies or scanning and saving copies of the receipts.  In the event of an audit, the IRS will request copies of the receipts and will only approve legitimate expenses which can be substantiated with legible receipts.  

Another area of concern deals with the deductibility of expenses related to the business use of personal automobiles related to their business use by self-employed individuals.  The IRS requires taxpayers maintain a contemporaneous mileage log to support the business use of personal automobiles.  Merely approximating the business use at the end of the year is not acceptable.  This is a fairly complex issue.  If this applies to you, please feel free to contact me.

Finally, the IRS has released the standard mileage rates for use in 2022.  These rates are as follows:

    Business use = 58.5 cents per mile (up from 56 cents per mile for 2021)

    Medical or moving use = 18 cents per mile (up from 16 cents per mile for 2021)

    Charitable use = 14 cents per mile (this rate is set by statute and does not change)

I look forward to seeing you again this year.  Please call me to set an appointment or for any questions you may have.

Bob's December Blog

First, I would like to wish all of you a Merry Christmas and a Happy New Year!  No matter how you celebrate and observe the Holidays, I wish you and your family all the joy and happiness for the Season.

As the year draws to a close, there are several things you may want to consider for the upcoming tax season and your tax filing for 2021.  These include the following:

1. Be on the lookout for tax information that will be sent to you in the mail.  If you have been receiving the Advance Child Tax Credit payments in 2021, the IRS will be sending a Letter 6149 in January 2022 showing the total amount you received in 2021.  It is essential that you reconcile the amount received with the amount to which you are entitled for 2021 when you file your 2021 tax return.  If you recweived more that the amount to which you are entitled, you will have to repay the excess when you file the return for 2021.

2. You should also be aware that the IRS will be sending a Letter 6475 in January 2022 reporting the amount of the third Economic Impact Payment and, if elegible, any Plus-Up Payments received as early as March 2021.  Again, you will need to reconcile tha amount actually received in 2021 with the amount to which you were entitled.  If you did not received the full amount the which you were entitled, youwill be able to claim the difference on your 2021 income tax return.  

3. Even if you are not entitled to itemize your deductions, you may still be entitled to a deduction of up to $300 for donations to qualified charities over and above the standard deduction.  (Note, contributions used as Arizona tax credit donations do not qualify for this extra deduction.  See my November Blog posting for additional information about Arizona tax credit donations).

4. If you are subject to a Required Minimum Distribution from an IRA account, you can offset all or some of the taxable income by having the trustee make distributions directly to a charitable organization.  These donations cannot be used for your itemized deductions or for the $300 charitable deduction mentioned above, but will reduce your taxable income, even if you are not entitled to itemize deductions.

5. If you have investment accounts that are not part of a retirement account, you should discuss the status of these accounts and the amount of any capital gains or losses that will be reported on your income tax return.  Under certain circumstances, you may want to consider taking some losses to offset any capital gains that will be taxable in 2021.

This is just a sampling of things you may want to consider before the end of the year.  If you have additional questions or concerns, you can feel free to contact me at your convenience.

Again, I wish you and your families all the best as the year draws to a close.

Bob's November Blog

Welcome to the first of my blog postings.  The main blog page will show a monthly newsletter, whereas, this page will contain items which I consider to be of special interest and importance. As you may have noticed, this is a new, redesigned web site for Robert E. Hinske CPA, PC.  In addition to an updated site, I have included several new pages containing useful information and tools for your use.  The first of these is the “Links” page which contains a variety of links to government web sites.  You can easily link to the Internal Revenue Service or Arizona Department of Revenue to check on the status of your income tax refunds.  There is also a link to the Social Security Administration.  Next, is the page titled “Financial Calculators.”  This page contains 40 useful and free financial calculators.  These can provide assistance in the areas tax calculations, retirement and planning tools, personal finance, business calculators, home ownership, loan calculators and vehicle financing.  Please take a few minutes to review this page.

Don’t forget the Arizona State tax credit donations to reduce your Arizona income taxes.

The State of Arizona has a rather unique system to encourage taxpayers to donate to a variety of charities in exchange for a dollar-for-dollar credit against the taxpayer’s Arizona income taxes.  There are several categories of charities, with each category having its own requirements and limits.  The following is a summary of the main categories and the related maximum amount of donation that will qualify for the credit each year.  A taxpayer may elect to make donations to organizations in all, some or none of the categories.  The credit for each category is limited by the maximum for the category and the total amount of credit from all categories is limited to the total Arizona income tax for the taxpayer for the year.   

Category

Single

Joint

Arizona Qualified Charitable Organization

$400

$800

Arizona Qualified Foster Care Organization

500

1,000

Arizona Public School

200

400

Arizona Private School Tuition Organization           

 

 

      Original Credit

611

1,221

      Plus Credit

    608

 1,214

           Total Private School Tuition Org

 1,219

 2,435

                 Total for all available categories

 $2,319

 $4,635

 

Please be aware that the main limitation on the amount of tax credit donations that can be used in a given year is limit to the amount of total Arizona income tax as shown on the taxpayer’s return.  For example, if a single taxpayer contributes the maximum amount allowable to organizations qualifying in each of the categories for a total of $2,319.  Furthermore, assume that the taxpayer’s total Arizona income tax was only $2,100.  The taxpayer would be able to use $2,100 of the credit to reduce the Arizona tax to $0 but would have to carry the remaining $219 to the next tax year.  I understand that this may seem to be a bit confusing.  Please do not hesitate to call me for further clarification.

Don’t be a procrastinator when it comes to tax planning.

All too often, taxpayer’s put off tax planning until after the end of the year.  Then, once they realize that they owe more taxes than they ever thought possible, they want to “do something” to reduce the liability.  While there may be a few things that can be done after the end of the year, they are limited.  If you have an unusual event, such as the sale of assets or an increase in income, don’t wait, do the planning before the end of the year.  If you believe that you might have a tax problem, don’t wait, feel free to give me a call so that we can assess the situation and make plans to deal with the taxes.