It’s amazing how different things can feel as soon as we arrive at this week on the calendar. Life was just going along through the year, one week often feeling not much different than another, then suddenly it is holiday season, the year is almost over, and everything takes on a new tinge. When you add that quick switch to the concept of Thanksgiving and it becomes impossible to not do some introspective thinking.
So, as we all get into that mindset, let me first wish that it is a comfortable place for you. And if it is not, then I offer a second wish that you are moving in a direction that leads to increased comfort so that it becomes one. But also, let this be a chance for us to give an expression of thanks to you for being here with us. We have all heard too much about how wild life has been since last year, but we are hearing so much of that because it is true. This has affected the work we do in many ways – some good, some bad – and that makes it even more heartening that you have stuck with us. The end of a year can feel like a steep downhill for us as we look toward finishing things up before the tax season ends. When things are moving that fast, though, it becomes more important to take a moment to reflect. So in the spirit of this week, let us do that by offering a genuine thank you to all of our clients and those who visit with us here. Warmly, Josh Bousquet Connect to Us ~ Facebook ~ Twitter
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It is a good general rule to know that if anyone receives money for a good or service, the IRS wants to know about it. Income is taxable, no matter how it is received. This basic tenet is reasonable and understandable, but as more people use more money in new ways, it can take a while for some of the rules around that to make complete sense.
This has been most noticeable in recent years when it comes to cryptocurrency. No matter whether you think of it as an investment or another type of currency, if it is worth more than you paid for it, there’s an amount in there that is taxable and the IRS has been working on cracking down on getting its share of that. Beginning next year, it will start to have its hands deeper in payment apps, as well. Your first question may be just what is a payment app? The answer is probably simpler than you realize, for most of us have used something along the lines of PayPal or Venmo to send and/or receive money. At the same time, you may be surprised to think that this could affect your tax picture if you mainly use it to pay someone back when they go pick up coffee. If that is all you use such platforms for, though, then don’t worry, you will not be affected by this. What will be changing is payment app providers will have to start reporting if a user’s business transactions total $600 or more a year. If you want to get into the weeds on this, you can read this recent article from CNN. This isn’t the space to get into deep details, but I do want to highlight a couple takeaways from this: The biggest thing is that this is not making any sort of transaction newly taxable. Rather, this is being put in place because the IRS is trying to track down transactions that are already taxable and may be slipping through the cracks. So if you are already paying taxes on everything you should be, this is not increasing your tax burden. The next thing to know about this, though, is that it might be making things messier for some and placing the burden on the taxpayer to find a way through that mess. First, it’s possible that one could receive a 1099 from a payment app for transactions that should not be taxable. It could then fall to the taxpayer to have to explain that to the IRS. It’s also possible that you will receive a 1099 from a payment app and also a 1099 from a client for the same transaction. Again, it would then fall to the taxpayer to explain to the IRS that they are not covering separate events and reflect the same money. So don’t be afraid that this is going to increase your tax obligation in any way, but be aware that you may need to be vigilant to ensure that this reported on your tax return in the right way. Even if this isn’t going into action until next year, I wanted to mention it now so that we can be ready to help you handle this in the right way. Warmly, Josh Bousquet Connect to Us ~ Facebook ~ Twitter I have written a lot recently about this being the time when you must start thinking about big moves you can make if you still want to really affect your tax picture. Granted, this is a discussion that is not for everyone. You need to have a certain amount of money (and possibly in the right places) for some of that to really matter. For this week, though, I want to talk about a smaller thing that everyone can do.
Tax laws are currently set up that you usually cannot claim a deduction for charitable contributions unless you are itemizing your deductions. Legislation passed during the coronavirus pandemic, however, allowed for everyone to claim some of that deduction for tax year 2020 and it will now continue through the 2021 tax year. This allows an individual to claim up to $300, with married people filing a joint return qualifying for up to $600. Now sure, as I intimated above, this is not a huge amount of money and not being taxed on a few hundred dollars isn’t going to result in you getting some massive windfall of a tax refund. I do still want to highlight the availability of this deduction, though, as an extra little impetus to do an extra little good during this time of year when many could use it. First, I don’t want this to be such a push as to be asking those who cannot afford it to donate money they do not have. Your obligation then is to take care of yourself and any family depending on you. Beyond that, though, if you can give, please do. Chances are really good that you will feel better about putting the money there than in your next few coffees. So if you do have enough to give, give to something meaningful to you. Is there an organization doing something in your local area that you admire? Have you or someone in your family personally benefitted from the work of a charitable group? Do you feel a pull to a cause every time you hear about it but have never actually donated to it? No matter where you fall, no matter how you feel, there are connections that can be found which will leave you feeling happy and satisfied with where a donation goes. And all of that is even before you get that little tax benefit at the end of it. So how can you lose? Warmly, Josh Bousquet Connect to Us ~ Facebook ~ Twitter Over the past couple of weeks, I have been writing about looking forward to next tax season and getting a hold on your situation while there is still time. This week, I wanted to change the focus a bit to those who may be paying taxes for the first time.
I first started thinking about this group because of this recent article, which discusses how some NCAA athletes may be receiving payments for the first time. We are still in the early stages of seeing how (and how much) these athletes are going to be paid, but I am sure the tax implications of what they receive are going to be a surprise for some. Ideally, their institutions would provide some guidance on this, but how much of it, how good it is, and how well people listen are certain to vary. Now this may feel like a small group of people, and the high-profile ones certainly will be a limited batch. The amount of people who have to pay taxes for the first time each year, though, is still pretty vast. As we get older, paying taxes (and having them withheld from our paychecks) just becomes part of the process and many do not give it a second thought. I think many of us, though, can still remember when we were younger and had to enter that so very ‘adult’ world. Traditionally, this was not necessarily a trying experience. You filled out a form when you got your first job, some amount of money was taken out of your pay, and then when it came tax filing, you found someone who could help you with that part of it. With more and more people making money in new ways, though, this can get complicated. After all, it’s not only the NCAA’s ‘real’ sports that come with payouts, others are making money in Esports, as well. Add in delivery drivers and other types of ever more available freelance work and you build a larger and larger group of younger people with a cloudier and cloudier tax picture than the one seen by previous generations. Let this then be a call to not only give some thought to your tax picture as we approach the end of the year, but to also think if there are people in your life who may not have had to have these thoughts before. And if there are, give them a nudge to do so. For to them, those potential unpleasant surprises at filing time may be even more surprising if they didn’t appreciate that they were even possible. Warmly, Josh Bousquet Connect to Us ~ Facebook ~ Twitter |
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