New Tax Laws - Linkenheimer LLP CPAs & Advisors

California Tax Law Changes Await Governor’s Signature

Governor Newsom is expected to sign SB 113 soon, which contains several tax-related changes that impact 2021 tax returns and the current filing season.

Expansion of the Pass-through Entity (PTE) Tax for Additional Relief from State and Local Tax (SALT) Deduction Limits In 2021, California established an elective PTE tax framework to allow certain California taxpayers to pay their California personal income tax in a way that provides relief from the current $10,000 federal limit on individual SALT deductions. While implementing the new framework, limitations were identified that would prevent taxpayers from realizing the full intended benefit of the PTE tax and subsequent credit. SB 113 address some of these issues:

For taxable years on or after Jan. 1, 2021:
- Clarification that a taxpayer can apply the full PTE credit against their California tax liability as originally intended without limitation due to tentative minimum tax.
- Expansion of eligible taxpayers to include tiered partnerships and those that own their share of a business through a disregarded entity, such as a single-member LLC.
- Clarify that PTE tax provisions can apply to guaranteed payments as part of the distributive share of net income from an entity.

[…]

By Linkenheimer LLP|2022-02-08T23:50:01+00:00February 8th, 2022|CA tax, california, New Tax Laws, ppp|0 Comments

Smooth Sailing: Tips To Speed Processing And Avoid Hassles This Tax Season

The IRS began accepting 2021 individual tax returns on January 24. If you haven’t prepared yet for tax season, here are three quick tips to help speed processing and avoid hassles.

Tip 1. Contact us soon for an appointment to prepare your tax return.

Tip 2. Gather all documents needed to prepare an accurate return. This includes W-2 and 1099 forms. In addition, you may have received statements or letters in connection with Economic Impact Payments (EIPs) or advance Child Tax Credit (CTC) payments.

Letter 6419, 2021 Total Advance Child Tax Credit Payments, tells taxpayers who received CTC payments how much they received. Since the advance payments represented about one-half of the total credit, taxpayers who received CTC payments need to file a return to collect the rest of the credit. Letter 6475, Your Third Economic Impact Payment, tells taxpayers who received an EIP in 2021 the amount of that payment. Taxpayers […]

By Linkenheimer LLP|2022-01-28T21:03:23+00:00January 28th, 2022|New Tax Laws, tax planning, tax time|0 Comments

Numerous Tax Limits Affecting Businesses Have Increased For 2022

Many tax limits that affect businesses are annually indexed for inflation, and a number of them have increased for 2022. Here’s a rundown of those that may be important to you and your business.

Social Security tax

The amount of an employee’s earnings that is subject to Social Security tax is capped for 2022 at $147,000 (up from $142,800 in 2021).

Deductions

Standard business mileage rate, per mile: 58.5 cents (up from 56 cents in 2021)
Section 179 expensing:
- Limit: $1.08 million (up from $1.05 million in 2021)
- Phaseout: $2.7 million (up from $2.62 million)
Income-based phase-out for certain limits on the Sec. 199A qualified business income deduction begins at:
- Married filing jointly: $340,100 (up from $329,800 in 2021)
- Single filers: $170,050 (up from $164,900)

Business meals

In 2022 and 2021, the deduction for eligible business-related food and beverage expenses provided by a restaurant is 100% (up from 50% in 2020).

Retirement plans

Employee contributions to 401(k) plans: $20,500 (up from $19,500 in 2021)
Catch-up contributions to 401(k) plans: $6,500 (unchanged)
Employee contributions to SIMPLEs: $14,000 (up from $13,500)
Catch-up contributions to SIMPLEs: $3,000 (unchanged)
Combined employer/employee contributions to defined contribution plans: $61,000 (up from $58,000)
Maximum compensation […]

By Linkenheimer LLP|2022-01-19T23:55:14+00:00January 19th, 2022|deduction, deductions, New Tax Laws, retirement, tax planning|0 Comments

How Will Revised Tax Limits Affect Your 2022 Taxes?

While Congress didn’t pass the Build Back Better Act in 2021, there are still tax changes that may affect your tax situation for this year. That’s because some tax figures are adjusted annually for inflation.

If you’re like most people, you’re probably more concerned about your 2021 tax bill right now than you are about your 2022 tax situation. That’s understandable because your 2021 individual tax return is generally due to be filed by April 18 (unless you file an extension).

However, it’s a good idea to acquaint yourself with tax amounts that may have changed for 2022. Below are some Q&As about tax amounts for this year.

I have a 401(k) plan through my job. How much can I contribute to it?

For 2022, you can contribute up to $20,500 (up from $19,500 in 2021) to a 401(k) or 403(b) plan. You can make an additional $6,500 catch-up contribution if you’re age 50 or older.

By Linkenheimer LLP|2022-01-13T21:59:48+00:00January 13th, 2022|New Tax Laws, tax implications, tax planning|0 Comments

Defer Tax with a Like-Kind Exchange

Do you want to sell commercial or investment real estate that has appreciated significantly? One way to defer a tax bill on the gain is with a Section 1031 “like-kind” exchange where you exchange the property rather than sell it. With real estate prices up in some markets (and higher resulting tax bills), the like-kind exchange strategy may be attractive.

A like-kind exchange is any exchange of real property held for investment or for productive use in your trade or business (relinquished property) for like-kind investment, trade or business real property (replacement property).

For these purposes, like-kind is broadly defined, and most real property is considered to be like-kind with other real property. However, neither the relinquished property nor the replacement property can be real property held primarily for sale.

Important change

Under the Tax Cuts and Jobs Act, tax-deferred Section 1031 treatment is no longer allowed for exchanges of personal property — such as equipment […]

By Linkenheimer LLP|2022-01-07T22:02:30+00:00January 7th, 2022|1031, investment, New Tax Laws, tcja|0 Comments