It’s TaxQuips time from TaxMama.com® – Today TaxMama® wants talk to you about steps to take this month, and things to watch out for – even if they are annoying.
2022 came rushing upon us so quickly. Did you also feel that it was just January of 2021 – and suddenly, we’re facing another new year? I blinked!
Let’s look at the some of the good and bad things that we are facing.
1) The IRS has significantly increased their online access for both taxpayers and tax professionals. (See our Good-Bye 2021 issue for details on how to use that access.)
This is a good thing – because we no longer have to wait for 6-12 weeks to activate a power of attorney or information authorization request. It can now be nearly instantaneous.
2) The IRS has locked the W-4 estimator while they re-tool for the new year. Considering that the IRS has always recommended that employees file a new W-4 with their employers early in January, that’s a bit short-sighted.
Meanwhile, you can use the W-4 estimators at Turbo Tax and H&R Block.
3) And speaking of IRS income reporting, I am hearing from tax pros that they are getting bombarded with frantic phone calls from clients who have just learned that they are getting 1099s from all the payment platforms for all transactions totaling $600 or more during 2021 (Paypal, Square, Zelle, Etsy, AirBnB, GooglePay, Apple, and others).
I don’t know why this is such a shock, it was announced in the middle of last year that this was coming. Why? Because when those platforms only issued the 1099-K for 200 transactions and $20,000, those people who didn’t get the 1099s, didn’t report the income. That’s billions of dollars of unreported income.
Folks, the money you get paid on those platforms IS generally taxable.
If you have related expenses, you can deduct the business expenses – just like any other business.
4) Speaking of 1099s – January is the month that all those forms need to be sent to anyone who provided services of $600 or more last year. Be sure you have their correct name, mailing address and Social Security number or Taxpayer ID number.
The request to get the Form W-9 filled out in January often results in rage and fury (worse than rage – sometimes leading to violence), and sometimes, refusal to provide that information. Why? Weren’t these people planning to report their income?
Solution for 2022 payments to service providers – get them to fill out that W-9 this month; or before they get the first payment in 2022. For more notes on my perspective and advice on this issue, read my answer about what to do THIS MONTH, when a contractor refuses to provide their SSN or TIN.
5) Estimated tax payments are due by January 18th. (The 15th falls on a weekend. The 17th is Martin Luther King, Jr. Day) When making your payments, please pay electronically. I am still hearing horror stories about people who mailed their checks months ago and the IRS still hasn’t recorded the payments in their accounts. And worse, the IRS Collections division is starting to issue lien notices and levy demands.
6) Student Financial Aid (FAFSA) forms are often due in January or February for the coming year. FAFSA requires tax information. Even if the parents are separated or divorced, generally the application requires the financial information of both parents. Beware of assets belonging to the student – like Sec 529 accounts in their own names, IRAs, and Coverdell IRAs. You will need to provide a projection of the 2021 information. Don’t make this complicated. Use your logic based on your own financial activities for the year to fill out the form. You may have to modify later in the year, once the tax return is filed – and perhaps give FAFSA a copy.
Incidentally, the IRS JUST announced that the nation’s tax season will start on Monday, Jan. 24, 2022, when the tax agency will begin accepting and processing 2021 tax year returns.
And TaxMama’s 2022-2023 Tax Calendar is up, ready for you to use.
Whew! That’s enough for now.
And remember, you can find answers to all kinds of questions about taxes and business issues, and EA Education, free. Where? Where else? At http://iTaxMama.com/AskQuestion
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