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4 Most Important Tax Benefits for Having Dependents in Your Family

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When you start working on your tax planning strategies for the past year, you’ll inevitably see the word “dependent” come up. The term may seem a little vague at first, but a dependent is simply someone who depended on you for their care and income last year. Our children are often the people who come to mind when we think of dependents, but they’re by no means the only people you can claim as dependents.  In fact, there are two distinct categories of dependents: qualifying children and qualifying relatives.  Qualifying children can be your son, daughter, stepchild, adopted child, foster child, brother, sister, half-brother, half-sister, stepsister or stepbrother, grandchild, niece or nephew. However, there are more age and residency criteria that qualifying children must meet, which you can read about here . Qualifying relatives, on the other hand, don’t have to be children. They can even be your boyfriend or girlfriend in certain cases where your significant other is unemployed or in

The Most Common Tax Forms For Small Business Owners

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2020 was a very different year for most of us—so much so that the IRS has officially pushed back the deadline for filing your 2020 taxes from the traditional April 15th to May 17th.  However, some things, like the forms business owners need to file their taxes, haven’t changed. If you’re doing basic accounting for a small business, trying to juggle all those tax forms in the spring can be a full-time job. But it gets a whole lot easier if you know what you’re looking for and what you need to do with each form.  With that in mind, here’s a guide to some of the most important tax forms you’ll need to keep an eye out for, whether you’re a sole proprietor or have dozens of people on your payroll.  Tax Forms For Small Business Owners Form W-2 The official name of the W-2 form is the Wage and Tax Statement, and if you pay any employee more than $600 in a given year, then you owe them a W-2 form by January 31st of the following year, at the latest. The IRS requires employers to submit these

How to Stay Away from the Dark Side While Considering a C Corporation

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Back in 1980, over 50% of businesses filed as C Corporations or a corporation in which the shareholders are taxed separately from the entity.  However, the number of businesses choosing the structure of a C-corp has been steadily declining, and most U.S. businesses today do not pay the corporate income tax. Instead, they’re what’s known as pass-through businesses , because the profits they make a pass through to the owners and end up being taxed at individual income tax rates. If you have a sole proprietorship, partnership, S-corp, or limited liability company, then your business is probably a pass-through entity.  However, with the reduction of the corporate tax rate to 21% via the Tax Cuts and Jobs Act (TCJA) of 2017, the idea of a C corporation may be more appealing to those who would otherwise form a pass-through business. After all, when you start doing tax planning for your small business, doesn’t a 21% corporate rate look more attractive than the maximum individual rate of 37%?

Do You Want to Know Where Your Tax Refund Is? How To Check Your Refund Status

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It’s that time of year. The sun is shining, the days have gotten longer, flowers are blooming. It can only mean one thing: tax season is here.  For Americans, that means you’re likely gathering up your documents including W2’s and 1099s, and preparing to file. Or, if you’re an early bird, you’re patiently awaiting the long-awaited tax refund. But how can you find out if your tax refund is on its way? What’s the status and will it arrive via mail or direct deposit? The good news is, in recent years, thanks to digitalization, the IRS has made tracking tax returns a much easier process. And in this guide, we’ll look at how to find out where your tax return is and when you can expect it. E-File Update It pays to e-file.  E-filing, or submitting your taxes virtually, is already well underway. The IRS began accepting tax returns on Friday, February 12, 2021. So if you’re ready to send your tax return in, go right ahead. The sooner you file, the sooner you may see a refund. That said, the IR

First-Time Investor? Here’s What You Need to Know About Taxes

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With the advent of apps and web services geared toward casual, amateur investors—Robinhood, Acorns, and Zacks Trade, for example—the number of people trying their hand at trading stocks is increasing daily.  This can be a great way to make some money and enjoy yourself while doing it. But if you’re not prepared come tax time, you could find that you owe more money than you bargained for thanks to your trading habit.  If you’re just getting into investing, here’s what you need to know about taxes.  Keep records of your transactions While the app or brokerage you use will maintain reliable records, it’s a good idea to keep your own in case something happens. After all, companies do get cyber hacked, have outages, and sometimes lose data. If that were to happen around tax time, you could end up without the information you need to file properly.  The things you should track include:  What stocks you’ve purchased Number of shares What you’ve sold Dates of all transactions Cost basis  The sa

6 Tax-smart College Savings Strategies That Can Be Helpful For The Parents

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The average all-in cost — tuition and fees — to attend a private, four-year college in the 2018-19 academic year was $35,830, according to Business Insider . That’s enough money to make any parent anxious. Families with more than one child have to worry about the compounding cost of their children’s education. The point? All the more reason to start saving early and use any tax-smart options at your disposal as soon as possible.  Luckily, there are several options. By using the right federal income tax breaks, parents can help put their children on the right foot forward for their future. In this guide, we’ll look at 6 college savings strategies and the pros and cons of each so that parents can make the best plan possible.   Coverdell Education Savings Account Also known as the Education IRA, the Coverdell Education Savings Account (CESA) is similar to a 529 Plan, a college savings plan that offers tax and financial aid benefits that we’ll review next. And that’s a great thing because

3 Things You Need To Know About Divorce-related Tax Issues For Small-business Owners

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As if getting a divorce isn’t hard enough, there are financial ramifications to consider. Who gets the house? How do you separate your finances? These issues are compounded when a couple owns a business together. A divorce can bring about all kinds of tax consequences and anyone considering ending their marriage needs to think about all of them.  The good news is, some options help make a post-divorce tax situation better. It means doing your homework and looking closely at all of your assets, but with some hard work and thoughtful preparation, you can end a marriage without losing a small business.  Here we’ll look at three things to keep top of mind about divorce-related tax issues for small-business owners. Tax-Free Transfer Rule The good news, generally speaking, if you and your spouse are both U.S. citizens, you can divide up assets without incurring a federal income tax consequence. This is thanks to the tax-free transfer rule.   When an asset falls under this rule, whichever spo