We should be made aware of several updates for the 2022 tax season. In particular, we should take note of three significant changes related to advanced child care credit. First, child care credit has been raised to a maximum of $3000, and up to $3500 if the child is under 5. In addition, you can now receive an advance on child care credit that would be distributed over the last six months of the year, from July through December of 2021. Finally, you can pay back the taxes on money withdrawn from your IRA, 401(k), or a retirement account over three years if you took it out due to a COVID-related expense.
As an additional note, it is worth mentioning that it’s not beneficial to itemize deductions for most people. Even if you take the standard deduction, you are allowed to take $600 as a deduction for charitable contributions.
I Should Be Getting A Larger Tax Credit This Year. Why Is My Refund Less Or Why Do I Owe The IRS?
Many people are receiving larger refunds this year than in the past. If you receive a large amount of money that you did not anticipate at the beginning of the year, or when you elected to get your child care tax credit in advance, your child tax credit will be lowered. Thus, you may have been overpaid for the child tax credit. If this occurs, your overall tax credit may be reduced. You could even have to repay an amount from the tax credit you have been granted.
The Employee Retention Credit Ended Early. How Might This Impact Businesses Filing Taxes This Year?
Over four bills impacted the employee retention credit. Retention credit was initially scheduled to end in the second quarter of 2021, but legislation extended the period through the end of 2021.
It is important to note that within the fourth quarter of 2021, the only thing that can be credited is the Medicare portion of employer-paid taxes. The social security portion that the employer pays is not credited. This policy is an employment tax offset and only applies to employer-paid social security taxes or Medicare taxes.
What Federal, Economic, And Tax Changes Are Likely To Come Out Of Congress?
Two significant possible upcoming changes in the laws are currently in discussion. On the one hand, legislation is considering changing how capital gains are taxed. The Biden administration wants to do away with allowing the “step-up” basis on inherited property and wishes to raise the brackets for capital gains taxes. On the other hand, legislation is also considering how to lower the lifetime unified credit effectively. The lifetime unified credit refers to the limit on how much you can make before paying inheritance taxes or gift taxes. Right now, that’s about $11.5 million, and Congress would like to lower that to less than $1 million.
Why Is Estate Planning Critical For Entrepreneurs And Business Owners?
There are several reasons estate planning is essential to starting your business. One is to preserve your business after your death. That can be accomplished by structuring a business strategically or by creating trusts. Another significant benefit of structuring your business strategically is protection from liability as a personal owner.
When Should I Start To Plan For My Business?
You can never predict what life throws at you. It’s best to begin planning for your future immediately upon opening a business. No matter what step in opening a business you are in, if you start your estate plan now, your estate plan will grow and change to continue protecting your best interests.
For more information on 2022 Tax Season In State Of South Carolina, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (864) 271-7940 today.