Welcome to 2022! 2021 was an unusually prosperous year as the economy roared back in spite of the ongoing pandemic: stock prices & wages rose, farmers enjoyed high yields & commodity prices, and the American Rescue Plan pumped economic stimulus into the economy. With that in mind, there are many things to be aware of as you gather your year-end tax documents.
1. Married couples can deduct up to $600 in charitable contributions from your taxable income, even if you take the standard deduction (up from $300 per tax return last year). You still need a written receipt for any donation of $250 or more. Donations to charity from IRAs, donor-advised funds, and gifts of grain remain popular ways to get a charitable donation deduction.
2. If you received advanced Child Tax Credits (CTC), you will receive a letter Form 6419 showing the amount of advanced payments you received. Even though it looks like a letter, it is a form that your tax preparer will need along with your W-2s, 1099s, and other tax reporting documents. This is necessary because the $1,000 to $1,600 CTC per child phases out above $150,000 AGI for married filing joint and above $75,000 AGI for single taxpayers. The base $2,000 CTC per child still phases out above $400,000 AGI for married filing joint and above $200,000 AGI for single taxpayers.
3. We will also need to report the third ($1,400) Economic Impact Payments that you should have received under the CARES act. Like the CTC, these funds are not taxable, but there is a phaseout, so you will have to pay some or all of it back if your income is above your threshold. In addition, if you should have received it, but didn't, it is available as a refundable credit.
4. All taxpayers must answer the question about whether they did any virtual currency (BitCoin, Ethereum, etc.) transactions in 2021.
5. IRS is continuing to crack down on shareholders in S-corporations and partnerships who take distributions in excess of basis without reporting it as taxable income. There is a new Form 7203 for reporting shareholder basis.
Please continue to be alert to tax scams. Do not respond to any phone calls or e-mails purporting to be from the IRS, Social Security, or the Iowa Dept. of Revenue – those agencies will make initial contact by mail. You are welcome to bring any such letter to our office for verification. Never include social security or bank account numbers in an unencrypted e-mail or in a phone call you did not initiate.
If you choose to have our office prepare and file your federal and state tax returns, you will need to sign and return the engagement agreement on the reverse side of this letter. All professionally prepared tax returns must be filed electronically (“e-file”). If you want to file your own tax return for free, here is the link: https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free
You are required to send a Form 1099 to any individual, partnership or LLC that you paid $600.00 or more for services, rent or interest in the course of your trade or business. Payments to cooperatives, banks and other corporate entities are excluded. Wages in excess of $150 in any quarter require the filing of Forms W-2 and W-3. If you would like us to prepare these forms, you will need to provide us with the information before January 27, 2022.
If you have questions on any of the above or other tax matters feel free to call, e-mail, or stop in. When you have your records ready, you may let us know and we will set up an appointment that is convenient for you. Evening or Saturday appointments can be arranged. If you want to e-mail us information securely, send us an e-mail and we will open a Trustifi® portal for encrypted transmissions.
Varley Law Office, PLC
Warren A. Varley • Attorneys-at-Law• Karen K. Varley
Phone: (515) 523-2456 [FAX 866-297-7985] E-mail: varleylaw@iabar.org
