We hope this finds you all well and enjoying a happy and healthy holiday season. 2021 has found a lot of bright spots but still has us navigating through many peaks and valleys. We still face a good deal of uncertainty about our economy and what the tax landscape will look like for future tax years. We know many of you continue to go through personal challenges as well and our thoughts are with you.
We thank you very much for your loyalty throughout this time.
Professionally, we continue to experience many challenges with constantly evolving tax law changes and their complex tax impacts. The IRS, state and local revenue authorities continue to experience significant delays in processing tax returns, applying payments, and corresponding with taxpayers.
What’s New?
We have a new team member! We enthusiastically welcome Carolyn Correia to our team. You will undoubtedly be hearing from Carolyn at some point. We went searching for an office manager and gained not only that but also an experienced tax professional and QuickBooks ProAdvisor; we truly hit the staffing jackpot! Carolyn will serve her primary role managing both client relationships and workflow in the office but will also be assisting with tax preparation and bookkeeping. She has been with us almost two months and has already made a huge impact.
We are trying to make the process for providing information and working with us as easy as possible. This year, you will be receiving the following documents in December:
- Engagement Letter
- 1099 Reporting Information and Tools
We have a new and streamlined process for completing your comprehensive questionnaire online! Notably there will be no cumbersome organizer you have to go through and complete on your own. We have found that this leads to more frustration and redundancy than it does time savings for you or value add for us. Our thoughtful and dynamic questionnaire will guide you through answers and updates and the end result will be a customized list of documents we will need to prepare your tax returns.
The online questionnaire will be available around January 5th.
After much thought and deliberation, we have determined it necessary to increase fees this year beyond our normal standard nominal increases. Tax law continues to be complex and voluminous and requires constant training and education. In addition, we continue to see additional forms and taxes as part of the compliance landscape.
In order to continue to provide the valuable comprehensive services we strive to consistently provide and to keep pace with the rising costs of third-party vendors, suppliers and staffing costs, you should expect to see average fee increases of 15%-25%. Our hourly rate for 2021 for services outside of tax preparation is $175/hr. There will be minimums on new tax returns but we are making every attempt to minimize this for current clients.
This is always a hard decision and we understand the impact it has. We are hopeful that you will understand this essential adjustment for the future of our business so that we can continue working with you as a valued advisor. If this prompts you to look for another tax professional, please let us know right away as we do have limited spots available and a lengthy wait list.
Important Deadlines and Tax Tips
Many of these tips are time-sensitive and you may need to take action by December 31, 2021. We will be sending out more 2021 tax season specific information in early January. Please contact our office with any questions.
Important Deadlines
December 15 – Health Care Enrollment – Last day for open enrollment for Healthcare through Healthcare.gov.
December 31 – Last Day to Make IRA Withdrawals – This is the last day to take Required Minimum Distributions or do Roth conversions. Please check with your financial advisor about your specific situation.
December 31 – Last Day to Pay Deductible Expenses for 2021 – Last day to pay deductible expenses for 2021 (does not apply to IRA, SEP or Keogh contributions, all of which can be made in 2022 subject to other deadlines).
December 31 – LAST DAY OF THE YEAR! – If the actions you wish to take cannot be completed in a single day or the office you need to transact with is closed, you should consider taking action earlier than December 31.
Important Tax Updates & Tips:
Take Tax Advantage of Low Income Year/Low Tax Rates – It may be beneficial to move income to 2021 if your income decreased and while tax rates are both known and lower than historical or anticipated future rates. This could include conversions to a Roth IRA.
Consider Loss Harvesting to Offset Large Capital Gains – Please consult your financial advisor to see if this is a viable strategy for you.
Charitable Gift Donations – More Americans than ever are depending on charitable organizations. Make your donations by December 31st to count for the 2021 tax year. Consider setting up a Donor Advised Fund if you want to make a large donation this year but decide the allocation in future years.
Other Ways to Prepare:
- Report any name or address change
Taxpayers who moved should notify the IRS of their new address. They should also notify the Social Security Administration of any name change. - Renew expiring ITINs
Certain Individual Taxpayer Identification Numbers expire at the end of this year. Taxpayers can visit the ITIN page on IRS.gov for more information on which numbers need renewal. - Unemployment Benefits – Unemployment benefits were heavily utilized again this year. You should expect to receive a 1099-G and for this to affect your tax return as there is no exemption this year. You can pull these from your state revenue websites by the end of January.
- Virtual Currency – The IRS is starting to develop more strenuous reporting standards and requirements. Please make sure to track your transactions appropriately and provide them to us with your tax information. We suggest looking at the information that is available to you early and often to see which gaps you might need to fill in.
- Create Online Accounts – With many revenue agencies having more remote work arrangements, it is good to have online accounts to correspond with these agencies. Every taxpayer should have an online account setup at https://www.irs.gov/payments/your-online-account. Pull transcripts that reflect estimated and applied payments and any stimulus payments received in 2021. We suggest having an active account with Revenue Online for our Oregon taxpayers or an account with your state revenue division for our out-of-state taxpayers. https://revenueonline.dor.oregon.gov/tap/_/. If you are subject to any business or local tax in Multnomah County/City of Portland, you will also want an account with that local agency https://www.portlandoregon.gov/revenue/.
- Keep track of and plan for Advanced Child Tax Credits – Child tax credits and dependent care credits are larger this year than ever before. However, many taxpayers received up to 50% of their child tax credit in advance. This could affect your refund/balance due on your federal taxes.
Taxpayer Security – The IRS continues to focus its resources on maintaining the integrity and security of taxpayer data. At our office, we take every precaution to maintain the integrity of your sensitive data. If you ever have any questions, please contact our office. If you are expecting an Identity Protection PIN from the IRS, you should receive this letter in December or January. We cannot electronically file your return without this. If you don’t receive your notice, please research this as early as possible.
S-Corp Medical Insurance Reporting and Other Coronavirus Relief Payroll Items – Do not forget to report your S-corp Officer 2% fringe benefits to your payroll company for inclusion on your W-2 by December 31, 2021. This includes health insurance paid from the business on your behalf as well as certain other fringe benefits. This is critical to being able to deduct these benefits as well as your calculations around Officers’ Compensation. Please contact your payroll provider with any questions or our office for additional assistance. In addition, if you think that credits or deferrals apply to your 2021 payroll expenses, please provide that information to us with the rest of your tax return information.
PPP Loans – Please provide information on the status of forgiveness for any loans obtained in 2021. This applies to both first and second draws.
We thank you for your continued loyalty!
Your Dedicated BOK Accounting Team
