I-Cash Can Become Your Cash

I-Cash is the unclaimed property program in Illinois. It safeguards property that is unclaimed, such as unpaid life insurance benefits and forgotten bank accounts. The state treasurer is required to return the money to the public whenever they can.

During the pandemic, I-Cash returned $226 million in lost or misplaced money to about 174,000 people. This was beneficial to those struggling economically during the Covid Pandemic.

There are continuing efforts to improve the I-Cash system that will hopefully make it an easier and more efficient process. With these advancements over the past five years, almost 1.2 billion dollars has been paid out to those who filled claims.

Since the program is growing, there are now paperless claims. Additionally, legislators working in concert with the treasurer have sent unclaimed property checks to qualify members who hadn’t even filed a claim.

There is still more unclaimed property that is updated twice every year. If you want to file a claim, click the link!

https://icash.illinoistreasurer.gov

Fill your stomach while keeping your bank account fuller

Times have changed and so have IRS regulations, again. Thanks to the IRS you now get the chance to write off 100% of your business meals instead of the usual 50%. There are some things you will need to consider while trying to put the deduction into action. 

In order to qualify for the full deduction, you need a restaurant to provide you with the food or beverages but you do not have to pay the restaurant directly. This means that DoorDash or Uber Eats meals will be eligible for deduction. 

Your business meal must be tax code Section 162 ordinary and necessary business expenses, and they must not be subject to disallowance under tax code 274. Additionally, you may not deduct lavish or extravagant meals but they will not be basing this on the total dollar amount nor the restaurant itself. Furthermore, you must be at said business meal and you must be dining with a person who you could foresee engaging in business with, such as a customer, supplier, employee, or client. 

As earlier stated, this deduction requires a restaurant, which is defined in more detail by the IRS. According to the IRS, a restaurant is “ a business that prepares and sells food or beverages to retail customers for immediate consumption, regardless of whether the food or beverages are consumed on the business premises.” It is not “ a business that primarily sells pre-packaged food or beverages, not for immediate consumption” including, but not limited to,  grocery stores, liquor stores, and vending machines. Any business meals that do not fit this requirement are still eligible for the 50% deduction.

If you pay for a per diem meal or pay your employees a per diem, you can only deduce 50%. However, if you deduct the actual expense of the meal instead of the per diem you may apply the 100% deduction.

Overall, this is a large incentive for businesses to support IRS-approved restaurants and to move away from per diems. Who doesn’t like a 100% deduction? 

https://bradfordtaxinstitute.com/Content/Deduct-100-Percent-of-Your-Business-Meals-under-New-Rules.aspx

Delayed Tax Refunds

As of June 5, the IRS reported there are more than 18 million 2020 returns in its pipeline to be processed, and a few million others yet to be finalized from 2019. This past year has been extraordinary, the least of which being the COVID public health crisis and widespread unemployment. In addition, a series of stimulus payments from the federal government to help people navigate COVID financial woes was also managed by the IRS, and to ensure all eligible citizens received stimulus money, the IRS told Americans that everyone should file a tax return. Between more returns, unemployment amendments, issuing stimulus money and processing regular returns, the IRS has had its work cut out for it. Like many businesses during the pandemic, the IRS also had obstacles to overcome like switching its workforce from onsite to virtual and operating with a reduced staff.

If you have not received your refund 21 days after filing, it is likely that it is under further review. This happens more frequently when a return includes a recovery rebate credit, suspicion of identity theft or fraud, a claim for an earned income credit or other criteria that will ping a return for a manual review.

If you receive any correspondence from the IRS regarding your return, please contact us with a copy of the letter you received, and we can guide you through that. Unfortunately, due to the delays in processing, some notices are being sent by the IRS despite timely follow-up by you, or your accountant on your behalf. At this point, I am as powerless as you to speed up the IRS process, so patience is our best option right now.

6 Ways Income Taxes Will Be Different in 2021

Every year brings some degree of change regarding filing income taxes. While 2020 taxes are a done deal, it’s never too early to begin thinking about the next tax year. To help you be prepared for next year’s filing, here are 6 Ways Income Taxes Will Be Different for 2021.

Standard Deduction Increase

Standard deductions reduce the amount of your income that is subject to federal tax. Most taxpayers do not have enough deductions to itemize, so they take the standard deduction. Annual adjustments for inflation cause the standard deduction to increase slightly each tax year. For 2021, here are the standard deductions and the amount of the increase from the prior year.

  • Married filing jointly $25,100, up $300
  • Single and married filing separately $12,550, up $150
  • Head of household $18,800, up $150

While itemizing is more work, if your itemized deductions exceed the standard deduction allowance for your tax filing category, itemizing makes sense.

Higher Tax Brackets

You already know the more money you earn, the more you pay in taxes. How much you earn, your income, along with your filing status, determines your tax bracket. There are seven tax brackets with the top tax rate being 37 percent for taxable income over $518,400. Brackets are adjusted annually to account for inflation. For 2021, tax bracket thresholds were increased by about 1 percent over 2020 levels.

Capital gains

When you sell an investment like real estate, stocks, or bonds, for more than you paid the net profit you make is taxed as either short- or long-term capital gains. If you held your investment for less than one year, you pay short-term capital gains. For investments held more than one year and one day, the capital gains tax on the profit you made is long-term. Short-term capital gains are taxed like regular income and up to $3,000 of short-term losses can be deducted. However, long-term capital gains are taxed different rates (0 – 20 percent) depending on taxable income and marital status.

For example, if you’re single and your income is below $40,400 in 2021, you fall into the 0 percent capital gains tax bracket. However, if you’re single and earn between $40,401 and $445,850, you move into the 15 percent bracket. Above that, it’s the 20 percent bracket for you.

The 0 percent bracket is approximately double for married couples ($80,800), but above that, brackets are close to the single filer brackets (15 percent up to $501,600 and 20 percent above that).

Individual Tax Credits

Tax credits lower your overall tax bill. There are quite a few credits to consider, but the most popular ones are the earned income tax credit, the saver’s tax credit, and the lifetime learning tax credit.

Earned income credit is for low- and middle-income taxpayers and is based on income, filing status, and number of children, although taxpayers without children can qualify. For 2021, the earned income credit ranges are up very slightly over 2020 and range from $543 to $6,728. Some criteria for the credit are having at least $1 of earned income, investment income must be $3,650 or less. Other stipulations apply, so check with your tax preparer to see if you qualify.

Saver’s credit is also designed for low- and middle-income taxpayers and is to encourage retirement contributions. Taxpayer adjusted gross income (AGI) must be less than $33,000 in 2021 (up slightly from $32,500 in 2020) to qualify for the credit for single or married filing separately. Married filing jointly AGI must be less than $66,000 in 2021 (up from $65,000 in 2020).

Lifetime learning credit is for taxpayers who incur education expenses during the year. There was little change in this credit for 2021. Married filing jointly income limits increased $1,000 (from $118,000 to $119,000 for full credit and from $138,000 to $139,000 for partial credit). Other filing statuses will see no change for 2021.

Alternative Minimum Tax

The AMT exemption amount for 2021 is $73,600 for singles and $114,600 for married couples filing jointly. This is a change from 2020 when the exemption amount was $72,900 and $113,400 for married couples filing jointly.

Fringe Benefits, Medical Savings Accounts, and Estates

Most employee fringe benefits allowances for 2021 will continue at their 2020 levels; however, changes occur in health savings account (HSA) contributions, which increase by $50 for single and $100 for families from 2020.

The maximum out-of-pocket amounts for high-deductible health plans (HDHP) increases by $100 for single and $200 for families.

The federal estate tax targets the amount of wealth you can pass along when you die. It is no concern unless your estate is worth more than $11.7 million when you die. That figure is up from $11.58 million in 2020.

Retirement Plans

Contributions for 401(k) plans will not change from 2020 top off amount of $19,500 with a $6,500 catch-up contribution allowed for individuals 50 or older. Maximum contributions from all sources (employer and employee) rise by $1,000.


Of course, these are an overview of changes for the 2021 tax year. To be sure you’re up to speed on all the tax changes that impact you, be sure to speak to your trusted accountant.

PPP Alert January 2021

Did you miss out on the first two opportunities to receive your tax-free Paycheck Protection Program (PPP) cash?

 

Many did miss out. Why?

One reason: the word “loan.”

Who wants a loan? No one. Well, almost no one

But who wants a cash gift, tax-free?

 

If you do, read on for the details. But first, you should know that the big picture works like this:

 

  1. You obtain your PPP tax-free monies from a lender (it’s called a “loan,” but watch that word disappear as you read this letter).
  2. You spend all the PPP money on yourself if you are self-employed or operate as a partnership; on payroll (including pay to you, if that applies); and on other covered expenses such as rent, interest, utilities, operations, property damage, suppliers, and worker protection.
  3. You apply for loan forgiveness and achieve 100 percent loan forgiveness, which is easy-peasy when you spend 60 percent or more of the money on payroll (and yourself if you are self-employed or a partner in a partnership).
  4. You deduct the expenses that you paid with the PPP loan monies that were forgiven.

 

New Money on the Table

The new COVID-19 stimulus act sets aside $35 billion for first-time PPP applicants, with $15 billion of that made in loans for first-time applicants with 10 employees or fewer or made in amounts less than $250,000 to businesses in low-income areas.

 

New Deadline

The new deadline of March 31, 2021, replaces the expired deadline of August 8, 2020.

 

The monies available in this new round of PPP funding are on a first-come, first-served basis. Don’t procrastinate. Get your application for your first-time PPP monies in place now.

 

If you would like to discuss the PPP, please call our office at 847-593-7558.