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2022 Payroll Tax Changes

August 12, 2022 by Adam O'Feeney CPA

coffee cup and Payroll

Payroll and Social Security Wage Base

The biggest change for 2022 in regard to payroll taxes is the increase in the Social Security annual wage base. Wages are subject to a 6.2% Social Security tax. In 2022, it jumped from $142,800 in 2021 to $147,000.

The Medicare tax remains the same at 1.45%. However, any wages or self-employment income you earn over $200,000 ($250,000 if married filing jointly) are subject to an additional 0.9% Medicare tax on your income tax return.

Household Employee Payroll

If your family pays a household employee (a nanny, for example) at least $2,400 during 2022, you are required to withhold Social Security and Medicare taxes from their pay and remit it to the IRS. You would prepare a Schedule H with your income tax return.

As their employer, you will also be required to issue them a W-2 and pay your own set of quarterly payroll taxes. A payroll service can assist you in handling these tasks and filing the proper payroll tax returns. To understand how this may affect your personal situation, consult with a CironeFriedberg tax advisor.  

If you need assistance or have any questions on the information in this article, please call your CironeFriedberg professional. You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Stamford) or email us at info@cironefriedberg.com.

Filed Under: Payroll taxes Tagged With: employees, household employee, payroll, schedule H, socials security, w-2, wages

Good News for Teachers’ Taxes

August 1, 2022 by Adam O'Feeney CPA

classroom

If you are a teacher or eligible educator, you may have to reach into your own pockets for your classroom needs.

AdoptAClassroom.org first began surveying teachers in 2015. Their data shows that what teachers spend out of pocket for school supplies has increased 25%. According to their 2021 survey, teachers spent an average of $750 on school supplies out of pocket, with 30% of them spending $1,000 or more on school supplies.

In 2021 the teacher’s expense deduction was capped at $250. For the 2022 tax year, the maximum deduction jumps to $300 (or $600 for a married couple filing a joint return where both spouses are eligible educators).

These eligible expenses may include items such as, COVID-19 protective gear, books, supplies and other materials used.

Keep in mind this is an “above-the-line” deduction, and therefore you do not have to itemize to claim it.  

If you need assistance or have any questions on the information in this article, please call your CironeFriedberg professional. You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Stamford) or email us at info@cironefriedberg.com.

Filed Under: Individual Taxes, Tax Deductions Tagged With: deuctions, school supplies, teacher expenses, teachers

2022 Connecticut Child Tax Rebate: Apply Through July 2022

July 28, 2022 by Adam O'Feeney CPA

three happy children

In May, Governor Lamont signed into law the 2022 Connecticut Child Tax Rebate, which is intended to help families with children. Connecticut families can now apply online through July 31 to receive a state tax rebate. The tax credit will provide eligible households $250 per child for up to three children ($750).

ELIGIBILITY

To be eligible for this rebate, applicants must meet all of the following requirements:

  • Must be a resident of Connecticut
  • Must have claimed at least one child as a dependent on your 2021 federal income tax return who was 18 years of age or younger
  • Must meet certain income thresholds

INCOME THRESHOLDS

The income limits are based on the filing status from your 2021 federal income tax return.

  • If the filing status from your 2021 federal income tax return was Single or Married Filing Separately, you may be eligible for the Child Tax Rebate if your income was less than or equal to $100,000.  If your income was between $100,000 and $110,000, you may be eligible for a reduced credit.
  • If the filing status from your 2021 federal income tax return was Head of Household, you may be eligible for the Child Tax Rebate if your income was less than or equal to $160,000.  If your income was between $160,000 and $170,000, you may be eligible for a reduced credit.
  • If the filing status from your 2021 federal income tax return was Married Filing Jointly or Qualifying Widow(er), you may be eligible for the Child Tax Rebate if your income was less than or equal to $200,000. If your income was between $200,000 and $210,000, you may be eligible for a reduced credit.
  • If you fall within the income limits described above and you otherwise qualify for the Child Tax Rebate, you will be eligible for a rebate up to $250 per qualifying child (up to a maximum of three children and a maximum amount of $750).

Note: If your 2021 federal income tax return is on extension, you are currently not eligible for the child tax rebate. If you file your 2021 federal income return prior to July 31, 2022, you may be eligible for the credit.

Qualified applicants can expect to begin receiving rebate checks beginning in late August.

Apply online for the 2022 CT Child Tax Rebate Application. CLICK HERE.

Filed Under: Individual Taxes, Tax Deductions Tagged With: child tax rebate

IRS Increases Mileage Rate Midyear

July 18, 2022 by Adam O'Feeney CPA

car odometer and cash

The IRS has announced an increase in the optional standard mileage rate for the final six months of 2022. Taxpayers may use the optional standard mileage rates to calculate the deductible costs of operating an automobile for business and certain other purposes.

For the final half of 2022, the standard mileage rate for business travel will be 62.5 cents per mile, up 4 cents from the rate effective at the start of the year. The new rate for deductible medical or moving expenses (available only for active-duty members of the military) will be 22 cents for the remainder of 2022, up 4 cents from the rate effective at the start of 2022. These new rates are in effect from July 1, 2022.

The 14 cents per mile rate for charitable organizations remains unchanged, as it is set by statute. In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2022.

The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

Prices Drive Change

“The IRS is adjusting the standard mileage rates to better reflect the recent increase in fuel prices,” said IRS Commissioner Chuck Rettig. “We are aware a number of unusual factors have come into play involving fuel costs, and we are taking this special step to help taxpayers, businesses and others who use this rate.”

While fuel costs are a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs, according to the IRS.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage. Taxpayers continue to have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates, although this does require extensive recordkeeping.

Midyear increases in the optional mileage rates are rare; the last time the IRS made such an increase was in 2011.

If you need assistance or have any questions on the information in this article, please call your CironeFriedberg professional. You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Stamford) or email us at info@cironefriedberg.com.

Filed Under: Business Taxes Tagged With: expenses, gas prices, gasoline, IRS, mileage, mileage rates

Know the Difference Between Cash and Accrual

July 1, 2022 by Adam O'Feeney CPA

cash and coins in hands

Every business has to keep track of cash flow, but there’s more than one way to do it. Review the basics before you decide what the appropriate method is for your business.

Cash method of accounting

In this system, you record income as cash is received and expenses as cash is paid out. You don’t make a note of any invoices or bills you send, but instead record income when you actually have the money in hand.  Cash accounting is convenient and reliable, allowing management to keep tabs on revenue and expenses without a great deal of bookkeeping. You don’t have to pay income tax on any money that hasn’t been received yet, helping improve cash flow and ensuring that your business has funds available for tax payments. If you’re a sole proprietorship or a very small business, this keeps your business afloat when cash flow is restricted.

If your business has average gross receipts of less than $26 million over the previous three years (or over the period of existence if less) and doesn’t maintain large inventories or sell merchandise directly to consumers, the cash method of accounting might be the best choice for you. It’s a simple system, similar to how you might track your personal finances.

Of course, there are disadvantages. It’s hard to tell whether high cash flow in a particular month is a result of work done in that month or you’re receiving delayed revenue from a previous month. And there are no records of accounts receivable or accounts payable, creating difficulties when you don’t receive immediate payment or have outstanding bills.

Also, it doesn’t conform to generally accepted accounting principles, the standard framework that accountants must adhere to when preparing financial statements. If your business really takes off, you’ll have to update your accounting practices. If you think you could get larger, then you should consider the accrual method.

Accrual method of accounting

This system provides a clearer picture of a company’s overall finances. The business records income when it is earned and expenses when they are billed, no matter when the money is received. This gives business owners a longer-term view of how the company is faring, showing how much money it’s earned and spent in a specific time and providing a clearer gauge of when business speeds up or slows down.

Even though it requires more intensive bookkeeping, accrual accounting gives owners a more realistic idea of income and expenses over a specific time, providing a better understanding of consumer spending habits and allowing you to better plan for peak months. Its complexity may mean you need some bookkeeping help, either in-house or outsourced.

Also, the system may give an inaccurate picture of your short-term financial situation. You’ll have to track cash flow separately to make sure you can cover bills month to month because accrual accounts for money that hasn’t come in yet. Indeed, you need very careful bookkeeping practices; your books could show a large amount of revenue when your bank account is empty.

Which method you choose is ultimately a management decision, depending on your business goals, the resources you have available, and your firm’s size and financial requirements. It’s wise to speak with an accountant and tax professional in your decision-making process.

As a business owner, you need to focus on growing and tending to your business. Put the accounting in our hands. CironeFriedberg’s Outsourced Financial Services team can provide accounting solutions tailored to your needs. Learn more about our Client Accounting Services and how they may fit into your business.

If you need assistance or have any questions on the information in this article, please call your CironeFriedberg professional. You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Stamford) or email us at info@cironefriedberg.com.

Filed Under: Business Taxes, Small Business Tagged With: accrual, accrual method, bookkeeping, cash method, GAAP

Changes Affecting Venmo and PayPal Business Transactions in 2022

June 22, 2022 by Adam O'Feeney CPA

shopping cart with venmo and paypal logos

Many small business owners are familiar with third-party payment settlement networks such as Venmo and PayPal.  Starting with the 2022 tax year, individuals and businesses using payment settlement networks will receive a form 1099-K that will reflect the gross amount of money received for goods or services if they are paid over $600, regardless of the number of transactions.

Previously, this form was only issued to a recipient receiving over $20,000 in gross receipts and with over 200 transactions. The gross amount does not take into account any adjustments such as, discounts, fees, refunded amounts, or any others.

If you are an individual who uses these payment settlement networks for non-business transactions and wondering if you will receive a 1099-K, you are not alone. Keep in mind that the form 1099-K only reports income received for goods or services and therefore does not apply for any non-business family and friend transactions.  

If you need assistance or have any questions on the information in this article, please call your CironeFriedberg professional. You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Stamford) or email us at info@cironefriedberg.com.

Filed Under: Business Taxes Tagged With: 1099-k, digital cash, merchant fees, payment settlement networks, PayPal, Venmo

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