- Required Minimum Distributions are back in 2021. Distributions must be made by December 31, 2021.
- Business meals provided by restaurants are 100% deductible for 2021 and 2022.
- Meals purchased from an establishment that sells primarily prepackaged foods or beverages not requiring immediate consumption are not eligible. Also, meal purchases from eating facilities on the business’ premises used to provide meals to employees will not be eligible for the deduction.
- Unemployment compensation is once again taxable for 2021.
- Couples who are married filing jointly will be able to deduct up to $600 of charitable cash contributions “above-the-line” on their joint 2021 tax return.
Under the Tax Cuts and Jobs Act, only individuals who are self-employed are allowed to deduct expenses that relate to their home office.
What are the Advance Child Tax Credit payments?
For the year 2021, half of the annual Child Tax Credit will be received in the form of 6 monthly cash payments from July 2021 to December 2021.
How do I receive the Advance Child Tax Credit Payments?
File your 2020 tax return as soon as possible, as this will be used to determine if you are eligible to receive the payment. Your 2019 tax return information will be used if your 2020 return has not been filed.
How much will I receive?
Each qualifying child age 5 or younger will receive $300 per month for 6 months: $1,800 in total which is half of the annual Child Tax Credit of $3,600 for this age group
Each qualifying child age 6 to 17 will receive $250 per month for 6 months: $1,500 in total which is half of the annual Child Tax Credit of $3,000 for this age group
The advance payment program is currently only in effect for half of the calendar year: July 2021 to December 2021. The other half of the credit will be accounted for and reconciled when you file your 2021 tax return.
When and how will I receive the payments?
- Payment dates:
- Your payments will be directly deposited if your bank information has been used for:
- 2020 or 2019 tax refund or payment
- other benefits from a federal agency such as Social Security, Department of Veterans Affairs, or Railroad Retirement Board
If there is no record of bank information, the payments will be sent by mail.
Why would I want to unenroll?
If you expect to earn significantly more income in 2021 than you did in 2020, you should consider opting out. The full child tax credit will be available to individuals who earn up to $75,000 (phased out at $95,000) and couples earning up to $150,000 (phased out at $170,000).
If you do not opt out and your income is higher than the eligibility requirements to receive the Child Tax Credit, you will have to report the excess Child Tax Credit amount received on your tax return which may reduce your refund or increase the amount of taxes you owe.
How do I unenroll from the advance payments?
Use the Child Tax Credit Update Portal (CTC UP) to unenroll from the advanced payments. Make sure to unenroll by the midnight of the following dates:
If you choose to unenroll, BOTH PARTNERS (if married filing jointly) must unenroll. Re-enrolling may be available in late September 2021.
How do I update my information for receiving this payment?
To update your information:
- Go to Child Tax Credit Update Portal (CTC UP) at IRS.gov
- Use the portal to update the following:
- Bank information
- Election out of Advance Child Tax Credit payments
- In the future, you will also be able to use the Portal to update:
- Marital status
- Number of qualifying children
- Use the portal to update the following:
Do I need to keep track of the payments that I received?
The IRS will be sending out Letter 6419 in January 2022 providing the total amount of 2021 disbursements. This information should be provided to your tax preparer.
The IRS has issued updated deprecation limits. For luxury passenger cars, SUVs, trucks, and vans placed in service in 2021; the depreciation caps are as follows:
- $10,200 for the first year without bonus depreciation
- $18,200 for the first year with bonus depreciation
- $16,400 for the second year
- $9,800 for the third year
- $5,860 for the fourth through sixth year
Certain vehicles are exempt from the depreciation caps:
- Cars with an unloaded gross vehicle weight greater than 6,000 pounds
- SUVS, trucks and vans with a gross vehicle weight rating of greater than 6,000 pounds
Audits are generally requested by lenders, key stakeholders, grantors, investors, regulatory requirement, and by organizational documents.
Audits provides a level of assurance that the financial statements and related notes are fairly stated. The auditor performs various audit tests, based on audit risk assessments of the entity, in order to issue an opinion on the financial statements.
Other reduced levels of assurance on financial statements are reviewed financial statements, with limited assurance and the compilation with the lowest level of assurance.
Reviewed financial statements, including notes to the financial statements are tested using analytic tests and inquiry, and provides limited assurance.
Compiled financial statements can include notes to the financial statements or can be omitted, and have no assurance.
The value of a business is often determined by the expected future cash flows. Attributes that also help determine the value of a business include:
- History of cash flows
- Growth potential
- The age of the business
- Market share
- Barriers to entry
- Risk of the industry
- Financial condition
- Regulatory environment
The estate tax exemption is $11.70 and $11.58 million for 2021 and 2020 respectively. The annual exclusion for gifts is $15,000 for both 2021 and 2020.
After 2019, the Section 179 limit is $1,000,000, for qualified property. 100% Bonus depreciation expires December 31, 2022. These deductions may be limited for state income tax purposes.
Several common tax “things” to be aware of include:
- The FICA wage base for 2021 is $142,800.
- The standard deduction amounts for 2021 are as follows:
- Married filing joint – $25,100
- Head of household – $18,800
- Single – $12,550
- An additional $1,350 standard deduction is available for taxpayers who are blind or age 65 or older.
- The business mileage rate for 2021 is 56 cents per mile.
- Per diem reimbursement for travel is found at https://www.gsa.gov/travel/plan-book/per-diem-rates and is now based on zip codes. Post September 30, 2020, the per diem rates for Fargo is $96 a day for lodging and $59 for meals and incidentals. For Minneapolis it is $148 a day for lodging and $79 a day for meals.
Employers with an average of 50 full-time and full-time equivalent employees or less are small businesses and not required to provide group health insurance covered to their employees in 2021.
Small Employers (average of 50 or less full-time employees)
May be eligible to buy coverage through the Small Business Health Options Program (SHOP Marketplace).
Employers who buy coverage through the SHOP Marketplace are required to file Form 1095-B to report coverage for employees.
Large Employers (average of 50 or more full-time employees)
Large employers are an applicable full-time employer and need to issue statements to employees and file an annual information return reporting whether and what health insurance you offered employees. Form 1095-C must be filed with the IRS for its full-time employees and must also furnish a similar statement to each of its full-time employees.
Regardless of size, all employers that provide self-insured health coverage to employees must file an annual return reporting certain information for each covered employee and provide the same information to covered individuals.
Beginning in 2019, the Tax Cuts and Jobs Act has eliminated the penalty imposed on individuals who are not covered by a health care plan that provides at least minimum essential coverage, as outlined in the Affordable Care Act.
Be aware of state mandates, however. Some states are enacting their own state-wide health care individual mandates.
- California (effective in 2020)
- Rhode Island (effective in 2020)
- The District of Columbia
- New Jersey
- Vermont (Vermont’s mandate takes effect in 2020, but it does not include a penalty for non-compliance, so it’s essentially the same as the current federal mandate)
How do I get the Premium Tax Credit?
The premium tax credit is a refundable credit that helps eligible individuals and families cover the premiums for their health insurance purchased through the Health Insurance Marketplace. You are eligible for the premium tax credit if you meet all of the following requirements:
- Have household income that falls within a certain range.
- Individuals up to $51,040
- Family of two up to $68,960
- Family of four up to $104,800
- Do not file a tax return using the filing status of Married Filing Separately.
- Cannot be claimed as a dependent by another person.
- Meet these additional requirements: In the same month, you or a family member:
- Have health insurance coverage through a Health Insurance Marketplace
- Are not able to get affordable coverage through an eligible employer-sponsored plan that provides minimum value.
- Are not eligible for coverage through a government program, like Medicaid, Medicare, CHIP or TRICARE.
- Pay the share of premiums not covered by advance credit payments.
The short answer is, it depends. Things to consider, when choosing the type or form of business entity:
- What is the business and how does it operate – is it an operating business or holding assets?
- What is the purpose of the business – is it your primary business, or is the business set up for a special purpose?
- What type of assets are held in the business?
- Does the business need to retain and build capital and what are its cash needs?
- Is it an existing business or a startup?
- What are the projections or expected income over the next 3 to 5 years?
Knowing the answer to these questions will be helpful in choosing the most advantageous entity type for your business. Please contact us and we can assist you in making this decision.
The following holding periods are suggestion only. Federal, state, institution rules, and regulations may apply.
|ACCOUNTING RECORDS||RETENTION PERIOD|
|Accounts payable||7 years|
|Accounts receivable||7 years|
|Chart of accounts||Permanent|
|Expense records||7 years|
|Financial statements (annual)||Permanent|
|Fixed asset purchases||Permanent|
|Inventory records||7 years|
|Loan payment schedules||7 years|
|Purchase orders (1 copy)||7 years|
|Sales records||7 years|
|Bank reconciliations||2 years|
|Bank statements||7 years|
|Canceled checks||7 years|
|Electronic payment records||7 years|
|Contracts – major||Permanent|
|Contracts – minor||Life + 4 years|
|Insurance policies||Life + 3 years|
|Employee files (ex-employees)||7 years|
|Employment applications||3 years|
|Employment taxes||7 years|
|Payroll records||7 years|
|Pension/profit sharing plans||Permanent|
|REAL PROPERTY RECORDS|
|Lease payment records||Life + 4 years|
|Real estate purchases||Permanent|