Windham Region Chamber of Commerce

IRS Tips

by

STANDARD MILEAGE RATES FOR 2022 & OTHER MILEAGE TAX INFO

The Internal Revenue Service today issued the 2022 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2022, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 58.5 cents per mile driven for business use, up 2.5 cents from the rate for 2021,
• 18 cents per mile driven for medical, or moving purposes for qualified active-duty members of the Armed Forces, up 2 cents from the rate for 2021 and
• 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2021.

The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details see Moving Expenses for Members of the Armed Forces.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Taxpayers can use the standard mileage rate but must opt to use it in the first year the car is available for business use. Then, in later years, they can choose either the standard mileage rate or actual expenses. Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.

Notice 22-03, contains the optional 2022 standard mileage rates, as well as the maximum automobile cost used to calculate the allowance under a fixed and variable rate (FAVR) plan. In addition, the notice provides the maximum fair market value of employer-provided automobiles first made available to employees for personal use in calendar year 2022 for which employers may use the fleet-average valuation rule in or the vehicle cents-per-mile valuation rule.

by

DO YOU OWE ANY CT TAXES FROM 2020 OR BEFORE? THERE IS HELP

The pandemic has been tough on us all, but now’s the time to get right. If you owe back taxes for periods up to and including 2020, the State of CT Department of Revenue Services is offering a limited window of opportunity to pay up at reduced interest with no penalties and no criminal prosecution.

The Connecticut tax amnesty program begins Monday, November 1, 2021, and ends Monday, January 31, 2022.

Benefits of enrolling in this program include:

  • Reduction of the interest by 75%.
  • Elimination of all penalties associated with liabilities satisfied under the Connecticut tax amnesty program.
  • Avoidance of criminal prosecution.

Any tax period ending on or before December 31, 2020 is eligible for this assistance. There is no limit on how far back an applicant may go in reporting back taxes.

The following are eligible:

  • Individuals or businesses that owe taxes and are required by law to file a tax return with DRS – within an eligible tax period – but have not filed. Individuals or businesses that previously filed a tax return with DRS – for an eligible tax period – but did not report all the tax that was due.
  • Individuals or businesses that currently have an unpaid tax liability with DRS that includes tax and penalty and/or interest.
  • Individuals or businesses currently under audit by DRS for periods ending on or before December 31, 2020.
  • Any individual or business with a protest pending before DRS’s Appellate Division.
  • Any individual taxpayer or business currently pursuing civil litigation with DRS.

The following taxpayers are not eligible to participate:

  • Anyone currently under criminal investigation by DRS.
  • Anyone who is party to any criminal litigation pending as of November 1, 2021.
  • Anyone who is party to a closing agreement with DRS.
  • Anyone who has made an Offer of Compromise that has been accepted by DRS.
  • Anyone who is party to a managed audit agreement.

As a general rule, most taxes administered by DRS are eligible for amnesty. Examples of taxes administered by DRS that are eligible:

  • Business use tax
  • Cigarette tax
  • Corporation business tax
  • Gift tax
  • Income tax (individuals, estates, and trusts)
  • Individual use tax
  • Motor vehicle fuels tax
  • Sales and use tax
  • Withholding tax
  • Pass-through entity tax

Connecticut motor carrier road tax (IFTA) is not eligible.

For more information or to enroll in the program GO HERE.

by

GIG PERFORMERS-MUST REPORT INCOME

In 2020, many people joined the gig economy to help make ends meet during the pandemic. Whether it’s a side business or a primary source of income, all taxpayers need to understand how their gig work affects their taxes. The bottom line is taxpayers must report gig economy income on their tax return.

Here’s a quick overview of the gig economy:

The gig economy is also referred to as the on-demand, sharing or access economy. People involved in the gig economy earn income as a freelancer, independent worker or employee. They use technology known as online platforms to connect them with customers to provide goods or services. This includes things like renting out a home or spare bedroom and providing delivery services.

Here are some things taxpayers should know about the gig economy and taxes:

• Money earned through this work is usually taxable.
• There are tax implications for both the company providing the platform and the individual performing the services.
• This income is usually taxable even if the:

– Taxpayer providing the service doesn’t receive an information return, like a Form 1099-NEC, Form 1099-MISC, Form 1099-K, or Form W-2.
– Activity is only part-time or side work.
– Taxpayer is paid in cash.

• People working in the gig economy are generally required to pay:

– Income taxes.
– Federal Insurance Contribution Act or Self-Employment Contribution Act tax.
– Additional Medicare taxes.

• Independent contractors may be able to deduct business expenses. These taxpayers should double check the rules around deducting expenses related to use of things like their car or house. They should remember to keep records of their business expenses.
• Special rules usually apply to rental property also used as a residence during the tax year. Taxpayers should remember that rental income is generally fully taxable.
• Workers who do not have taxes withheld from their pay have two ways to pay their taxes in advance. Here are these two options:

– Gig economy workers who have another job where their employer withholds taxes from their paycheck can fill out and submit a new Form W-4. The employee does this to request that the other employer withholds additional taxes from their paycheck. This additional withholding can help cover the taxes owed from their gig economy work.
– The gig economy worker can make quarterly estimated tax payments. They do this to pay their taxes and any self-employment taxes owed throughout the year.

For more information on the gig economy, taxpayers can visit the Gig Economy Tax Center.

by

BEWARE OF “GHOST” TAX PREPARERS

“Ghost” tax preparers are a problem and the Chamber receives several complaints every year of this fraud.  Unfortunately we cannot help except to give them information of the process of making a complaint to the IRS.  We do have several members that are reputable and we recommend:  H&R Block (several locations throughout our region-just tell them where you live) 860-423-1076 and Padgett Business Services-Jeff Kreyssig 401-783-4500.  Both companies are wonderful and can meet with you for both your personal or business taxes.  Please read the rest of this story so you are NOT A VICTIM OF GHOSTS!

The Internal Revenue Service reminds taxpayers to avoid “ghost” tax return preparers whose refusal to sign returns can cause a frightening array of problems. It is important to file a valid, accurate tax return because the taxpayer is ultimately responsible for it.

Ghost preparers get their scary name because they don’t sign tax returns they prepare. Like a ghost, they try to be invisible to the fact they’ve prepared the return and will print the return and get the taxpayer to sign and mail it. For e-filed returns, the ghost preparer will prepare but refuse to digitally sign it as the paid preparer.

By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a valid Preparer Tax Identification Number, or PTIN. Paid preparers must sign and include their PTIN on the return. Not signing a return is a red flag that the paid preparer may be looking to make a fast buck by promising a big refund or charging fees based on the size of the refund.

Unscrupulous tax return preparers may also:

  • Require payment in cash only and not provide a receipt.
  • Invent income to qualify their clients for tax credits.
  • Claim fake deductions to boost the size of the refund.
  • Direct refunds into their bank account, not the taxpayer’s account.

The IRS urges taxpayers to choose a tax return preparer wisely. The Choosing a Tax Professional page on IRS.gov has information about tax preparer credentials and qualifications. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help identify many preparers by type of credential or qualification.

No matter who prepares the return, the IRS urges taxpayers to review it carefully and ask questions about anything not clear before signing. Taxpayers should verify both their routing and bank account number on the completed tax return for any direct deposit refund. And taxpayers should watch out for preparers putting their bank account information onto the returns.

Taxpayers can report preparer misconduct to the IRS using IRS Form 14157, Complaint: Tax Return Preparer. If a taxpayer suspects a tax preparer filed or changed their tax return without their consent, they should file Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit.

by

US DOL FINAL RULE ON EMPLOYEE TIPS

The US Department of Labor has ruled the following:

Employers cannot keep tips their employees receive, nor can they allow managers or supervisors to keep any portion of those tips.

The agency issued a final rule that addressed changes made to the Fair Labor Standards Act by the Consolidated Appropriations Act of 2018.

It said:  prohibits employers or managers from keeping any part of employees’ tips, regardless of whether the employer takes a credit for tips earned by workers toward its minimum wage obligation to those employees under the FLSA.

“This final rule provides clarity and flexibility for employers and could increase pay for back-of-the house workers, like cooks and dishwashers, who have been excluded from participating in tip pools in the past,” Wage and Hour administrator Cheryl Stanton said in a statement.

“Newly allowed tip sharing may incentivize the inclusion of these previously excluded workers and reduce wage disparities among all workers who contribute to customers’ experience.”

Clarification

By clarifying the rule, the department said it’s helping employers and workers throughout food service industries.

The agency said the final rule also largely codifies its guidance on an employer’s ability to claim the tip credit when workers do tipped and non-tipped duties, clarifying when employers can continue to claim the tip credit while the employee performs duties that do not generate tips.

The guidance clarifies which non-tipped duties are considered related to a tip-producing occupation.

The CAA did not impact established regulations that apply to employers who take a tip credit under the FLSA.

Tip Pools

An employer who claims a tip credit must ensure that a mandatory “traditional” tip pool includes only workers who customarily and regularly receive tips, meaning employees such as cooks or dishwashers aren’t included.

However, the CAA removed the regulatory restrictions on an employer’s ability to require tip pooling when it does not take a tip credit and instead pays tipped employees the full minimum wage in direct wages.

Those employers may now implement mandatory nontraditional tip pools, which can include employees such as cooks and dishwashers.

The final rule takes effect 60 days after publication in the Federal Register.

source:  CBIA

by

AS OF 2020 BUSINESS ENTITY TAX IS ELIMINATED

The Business Entity Tax was a $250 tax every 2 years that every business had to file. The last one that you got a bill for was for the years 2017-2018. You will not get a bill for 2019-2020. You do not have to do anything to stop getting billed for this. However, if you owe this tax from previous years, you will still owe it for those years and you should pay it asap. Effective July 1, 2020, the filing fee for annual reports will increase from $20 to $80 for LLCs, LPs, and LLPs. To take advantage of the $20 filing fee, file all past due annual reports prior to July 1, 2020. Because of the elimination of the BET, the filing fee increase still results in a net savings for businesses of $65/annually.