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
Showing posts from April, 2021
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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
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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%?