As we surround ourselves in the holiday season, gather with friends and family, and remember the birth of Jesus this Christmas, we also prepare for the end of another year. And as we approach another tax season, we would like to help ensure that you are best prepared for it by giving you some information you should find quite helpful. Of course, there will always be areas unique to your situation, but here are a few items that we see year after year that may affect you:
Health Insurance:
You are technically still required to carry health insurance coverage for each member of your family for the entire year, though there is no longer any penalty for not doing so. Importantly, if you purchased health insurance from the marketplace, we need a copy of the 1095-A you receive for the year. On a related note, also let us know if you made any contributions to or received any distributions from a health savings account during the year.
Charitable Contributions:
Depending on how much you give to charities during the year, you may have a significant tax benefit from these donation. In order to take the benefit, your own records (bank statement, check copy, credit card statement, etc.) will suffice for cash contributions less than $250, but any cash contributions over $250 require a receipt from the donee organization. Also, if any goods or services were received (i.e. charity dinner), you should have a receipt from the organization stating the value of that good or service. You need a receipt for all non-cash donations such as clothing, household goods, etc. Remember, it is up to you, to determine the value of the goods you donated; the donee organization, your tax preparer, the IRS, etc. cannot determine a value of these goods for you. If you need assistance in the valuation, many tools are available like the valuation guide on Goodwill’s website: http://www.goodwill.org/wp-content/uploads/2010/12/Donation_Valuation_Guide.pdf . We also have this guide available on our website at www.heritageaccounting.net . While we don’t need the receipts in order to prepare your return, we do need to know, at minimum, what was donated, the donation date, the donee and the value of the goods donated. We need this information for each donation throughout the year.
Make sure you have a business and not a hobby:
In order to take business expenses, you must have an activity that the IRS recognizes as a business. One indicator the IRS looks for in identifying a business is consistent and continuing losses. If you do not show a profit year after year, the IRS is more likely to limit or disallow the losses. On a related note, if you have not received any income from sales, you most likely do not yet have a business. Please refer to Code Section 183 for further guidance.
Dependents:
You may claim credits for dependents who have been under your care for most of the year, and this credit amount has increased for most taxpayers for the 2021 tax year. Please note that half of these credits may have been sent to you already from July through December of this year. We will need to know how much you received in these advanced credits so we can reconcile them on your return and keep you and the IRS on good terms. The IRS will send letter 6419 that states the amount of advance credits you received. Please note that in rare circumstances, you may need to repay some of the advanced credit. If you have children, parents or other dependents you would like to claim your tax return, we will need to know the name, SSN, birth date, and how many months they lived with you during the year, for each dependent. If you have a joint custody agreement, you may also need to provide a copy of your Form 8332. If you or your dependent(s) paid tuition for higher education during the year, you will need to provide both the 1098-T from the institution and receipts substantiating your payments and/or loans.
If you have any questions about any of these items, please call us and we will be happy to discuss them with you.
From all of us here at
-Heritage Accounting and Tax Services
MERRY CHRISTMAS!
<><