904-356-0349 info@nedjacksontax.com

The New W-4

2020 was a year that yielded many changes; among those, were your W-4 forms. You may or may not have known about this, as it wasn’t required you fill out a new form. However, there are some changes to be aware of that could affect your upcoming tax return.

Out with the Old, In with the New

We’ve all heard it before, the age old saying, “If it ain’t broke, don’t fix it.” So why did they? As the W-4 was created to help you break even, they’ve attempted to make things simpler and more accurate. And while the new form may be simpler in number of steps, it can feel a bit more complicated in comparison to the old form, we knew and loved. Let’s go through the form step by step to ensure you’re filling this out accurately.

Step 1

Much like the old form W-4, step 1 is basic demographic information. One of the major differences is the filing status. If you notice, the filing status options are as follows:

• Single or Married filing Separately
• Married filing jointly (or qualifying widow(er))
• Head of Household

Of course, you’ll want to select accordingly. It’s important to mention here, if you are married filing jointly and don’t include all other income, it will put you in a lower tax bracket, resulting in a lesser amount being withheld. Next, you will observe they emphasize to complete steps 2-4 ONLY if they apply to you. Don’t worry; Ned already knows your next question; Does it apply to me? Visit ‘Step 2-4’ to find out.

Step 2-4

 

You’ll want to complete step 2 if you hold more than one job or are married filing jointly and your spouse also works. The correct amount of withholding will be dependent upon income from all your jobs (and your spouses’ jobs) combined. If you have only two jobs, you’ll be able to select the box under 2c, but it may also be a good idea to complete the ‘Multiple Jobs Worksheet’ on page 3, to get an accurate idea of how you will come out when filing your taxes.

Now, for those who have children you will use step 3 to claim your dependents; those under the age of 17, and all other dependents. You’ll add the amounts listed in a and b, and you’ll list the total amount in c.

We will look at step 4 in three parts (a, b and c).

4a) If you’re a taxpayer that normally carries interest, dividends and retirement that won’t have withholding, you may want to consider reporting it early.

4b) If you’re a taxpayer who knows you’re able to itemize and won’t be taking the standard deduction, you can report your average deduction amount here, so less withholding will be taken out.

4c) If you’d like any additional withholding taken each pay period, as ‘insurance’, you’ll place that amount here.

Finishing up, you’ll need to complete step 5, which is just your signature and the date. Once this form is completed and submitted to your employer, you’ll want to check and make sure the correct amount of withholding is being taken out. You can do this, by checking your paper or electronic paycheck stubs/statements.

We hope you find this information helpful as you begin to prepare for the upcoming tax season. Listed below, you will find some links with commonly asked questions about the new form W-4. And as always, the information for our main office downtown will be listed as well. Don’t forget to check back for more!

LINKS

http://www.irs.gov/newsroom/faqs-on-the-2020-form-w-4

Ned Jackson Downtown Office
Address
255 N Liberty Street
Jacksonville, FL 32202

Phone
(904) 356-0349

Email
info@nedjacksontax.com

Tax Liabilities and Marketplace Insurance

Since 2010, The Health Insurance Marketplace (or Exchange) has been giving private insurance companies a run for their money with their affordable healthcare plans. It was introduced to help low-income families have affordable access to healthcare, as a part of the Affordable Care Act, more commonly known as ‘Obamacare.’ Admirable as it may be, there are some things you may not know about the Marketplace as it relates to your income taxes. Don’t worry, that’s what we are here for! Keep reading for all of Ned’s need-to-knows as they relate to the Marketplace.

First, if you’re not enrolled in Marketplace but need to, you’ll want to visit www.healthcare.gov. On the site, you’ll be able to check when open enrollment is, enroll for coverage, and create an account so you can check the status of your enrollment and make premium payments. Additionally, you will be able to check if your life event qualifies you and your family for a plan change, or a special enrollment period. If you’re not sure if you have marketplace insurance or not, you can access your states marketplace number via google.

Next, you’ll want to be careful when you enroll for Marketplace that you’re reporting an accurate estimate of your income for the year as well as any projected changes to your family size. If this information is reported incorrectly, when filing your taxes, you will be required to pay back some or all the premiums that were subsidized over the period of the year, having the potential to drastically change your amount owed or refund amount. You can avoid this, by keeping up with income projections throughout the year, and reporting expected increases in income and household size to the marketplace, if applicable, as soon and as often as the information is made available to you.

Lastly, if you have purchased health care insurance through the Marketplace, you should receive a Form 1095-A Health Insurance Marketplace Statement at the beginning of the tax filing season. If for some reason you do not receive this form by mail, you will be able to access it through your account at www.healthcare.gov. This form reports the total monthly health insurance premiums paid to the insurance company you selected through the Marketplace for you and your family. In turn, this helps your tax firm correctly report the subsidy for you and your family members.

We hope you find this information helpful as you begin to prepare for the upcoming tax season. Listed below, you will find some links with commonly asked questions about the marketplace. And as always, the information for our main office downtown will be listed as well. Don’t forget to check back for more!

LINKS
https://www.healthcare.gov
https://www.irs.gov/affordable-care-act/individuals-and-families/the-health-insurance-marketplace

Ned Jackson Downtown Office
Address
255 N Liberty Street
Jacksonville, FL 32202

Phone
(904) 356-0349

Email
info@nedjacksontax.com

Tax Breaks; Expiring and Phasing Out

First, let’s talk about tax extenders. You may know them as ‘tax provisions’ or ‘tax breaks.’ What are they, and how do they effect you? The most common of the tax extenders is the Child Tax Credit. Don’t worry, it isn’t going anywhere. However, you do need to be aware of a few things. Here’s what we know! With the American Rescue Plan expansion having ended, the child tax credit will be reverting to its original design. According to the U.S Department of The Treasury, the credit will be going back to $2000 per child, as opposed to the $3600 or $3000 (depending on the age of your child) credit given in the tax year 2021. Additionally, after tax year 2023 17-year-olds will be excluded as they were in previous years, making only children 16 and younger eligible.

While the child tax credit may be here to stay (for now), there are some tax breaks that will be expiring at year-end. Business owners, these are for you! When you file in 2023, it will be the last year you can write off 100% of restaurant meals, barring the cost is justified. Don’t panic! As far as we know and have been told by the IRS, you will still be eligible to deduct 50% in coming tax years. Next up; depreciation. Now this isn’t so much an expiration, as it is a phase out. This will be the last year you will be able to write-off 100% bonus depreciation for the cost of new and used qualifying business assets of 20 years or less, as it will drop to 80% in 2023. Finally, the tax credit for installing solar panels, solar-powered water heaters, and so forth in your home will be falling from 26% to 23% next year. Ultimately, congress could act to extend these breaks, and if they do, we will update you. As for now, this is the latest information we have. We hope you find this information helpful as you begin to prepare for the upcoming tax season. If you have any questions, the information for our downtown office will be listed below and don’t forget to check back for more!

Ned Jackson Downtown Office

Address
255 N Liberty Street
Jacksonville, FL 32202

Phone
(904) 356-0349

Email
info@nedjacksontax.com

https://home.treasury.gov/policy-issues/coronavirus/assistance-for-american-families-and-workers/child-tax-credit
https://www.irs.gov/newsroom/for-national-small-business-week-plan-now-to-take-advantage-of-tax-benefits-for-2022-enhanced-deduction-for-business-meals-home-office-deduction-and-more

Advanced Child Tax Credit

Advanced Child Tax Credit

IRS will be issuing letter 6419 for total “Advanced Child Tax Credit” received for the 2021 tax year. This letter is required when filing your taxes.

Unlike the stimulus payments issued in 2020 and 2021, the advance payments of the child tax credit must be reconciled on the 2021 return. If you were not eligible for the credit in 2021, the advance payments will need to be repaid with the 2021 return. In January, the IRS will be mailing out Letter 6419 showing the total amount of advance payments your received. This letter will be needed to prepare your 2021 returns.

family-taxes

You have the ability to stop advance payments, or make changes to your banking information within the Child Tax Credit Update Portal. In order to do so, you must unenroll or make changes 3 days before the first Thursday of next month by 11:59 p.m. Eastern Time. You do not need to unenroll each month.

2021 Stimulus Payment

It is important that you review your bank records to ensure that you received your 2021 stimulus payment. If you did not receive the full amount, you may be entitled to a credit on your tax return.

****IRS has stated that incorrect reporting of totals can delay tax returns up to 6 weeks.

Changes for 2021

Changes for 2021

American Rescue Plan Act of 2021:

  • For 2021 ONLY: The age for taxpayers without children to claim the EIC payment has been lowered from age 25yrs old to age 19 years old. (However full time students must be 24 years old to receive the EIC)  Maximum age is 65 years old.
  • For 2021 ONLY: Child Tax Credit (CTC) increases from $2000 per child under age 18 to $3600 for children under 6 years old, and $3000 for children 6 to 18 years old. (Unless you opted out of monthly payments, you will automatically receive the Advanced Payments (First payment was July 15,2021)
  • Advanced Child Tax Credit Payment Online Tools: IRS has launched new tools to help manage and monitor the advanced CTC payments. In January of 2022 IRS will send a letter 6419 that will provide the total amount of Advanced CTC payments that have been disbursed during 2021.
  • Charitable Contributions: For tax year 2021 Contributions can be taken by individuals $300 (MFJ $600) for non itemizing tax filers.(CASH DONATIONS ONLY).
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