2021 Tax Update

IMPORTANT TAX PLANNING TIPS FOR FILING YOUR 20212 PERSONAL TAX RETURN

Standard business mileage rates are 65 cents per mile for 2021 and 58.5 cents per mile for 2022.

Keep accurate records of charitable donations, even those under $250. All contributions of over $250 each must be supported by documentation from the receiving charitable organization. IRS is cracking down on frivolous charitable deductions. All cash contributions will now require a cancelled check or a receipt from the qualified charity. Look for the Salvation Army or Goodwill Industries valuation guide for a list of fair market values on various items. If your item is not listed Goodwill Industries has suggested taking 33% of the original cost. Non-cash donations of clothing or household items must now be in good or better condition. Be sure to provide description of each item, original cost, date acquired, date of contribution, FMV, along with the valuation method used. If you volunteer for a charitable organization, and you buy supplies, the cost is deductible. If you wear a uniform or special equipment for example as a hospital volunteer, the costs for apparel and cleaning bills can qualify as charitable contributions.


PAV Note: The 2022 “Gift tax exclusion“ is $16,000.

Please note the "Kiddie Tax Rules". The “Kiddie tax” will include children age 18 and children who are full-time student ages 19-23 who do not provide more than half of their own support with earned income. The investment income limit for 2021 is $2,300 and the election to report income on a parent’s return is available if the child's gross income is less than $11,000.

PAV Note: "Child and Dependent Care Credit" might apply to summer day camp.

The form 8938 “Statement of Specific Foreign Financial Assets” must be filed to disclose foreign assets of over $50,000 or $100,000 if married filing joint. These reporting requirements are in addition to form TC F 90-22.1, Report of Foreign Bank and Financial Accounts, which applies when a U.S. person has a financial interest in, or a signature authority over, foreign financial accounts that exceed $10,000.

The American Opportunity credit allows for a credit of up to $2500 for up to four years for post-secondary education for the 2021 tax year. This credit is now refundable and "course materials" are included as qualifying expenses. The Lifetime Learning credit is 20% of the first $10,000 of qualified expenses and there is no limit on the number of years that this credit can be taken for each student.

The required minimum distribution (RMD), for those over age 72, is required for the 2021 tax year. The distribution amount is calculated per applicable IRS life expectancy tables.

You have until April 15 to make IRA contributions for 2021. You may be able to take advantage of a maximum IRA contribution of typically $6,000, but if you turn age 50 during 2021 a higher maximum contribution of $7,000 is permitted. Be sure to consider other types of retirement plans such as SEP, Simple IRA, 401(k), defined contribution, defined benefit or other plans that may be available or applicable to your situation.



YEAR END TAX CHECKLIST
* Review investments and determine whether to liquidate any holdings.
* Estimate your tax liability and determine if estimated tax payments should be made.
* Conduct a final tax planning review to reduce current year taxes.
* Make any final year end cash or non-cash contributions.
* Make final retirement plan contributions or distributions.
* Think about making any final gifts to meet your annual gift giving limits.
* Begin initial review to organize your tax records.
* Call us with any questions or concerns.
* Check our website for information.

You may qualify for a variety of tax credits.


* Earned Income Credit - for low-income working families.

* Child & Dependent Care Credit
* Child Tax Credit

* Credit for the Elderly and Disabled

* American Opportunity Credit - a max credit of up to $2,500 for the first four years of post-secondary education
* Lifetime Learning Credit

The tax filing due date for filing or extending 2021 tax returns Monday April 18th 2022.

Tax organizers are mailed out in mid-December. If you did not receive one, please let us know and we will forward one to you immediately. Electronic organizers are also available upon request. In closing, we want to thank everyone for your continued use of our services and your many referrals.

Best wishes for the New Year
.

PETER A VASS CPA INC

e-mail: pav@neo.rr.com
Website: www.vasscpa.com

Ph: 330-945-9100
Fax: 330-945-9081