Infinity CPA Group LLC

Maximizing the Tax Benefit of Charitable Deductions

Your charitable contribution deductions are still a great tax savings tool, but they now require more planning. Now is a great time to look at this area as part of your tax planning exercise.

BACKGROUND

Typically, cash and non-cash charitable donations can be deducted on an itemized return. But with the standard deduction now $12,950 for single filers and $25,900 for married joint filers, itemizing this year is less beneficial for most of us.

This is especially so because many other itemizable deductions have been reduced as well, including miscellaneous itemized deductions, state and local tax deductions, and home loan interest deductions.

LEVERAGE CHARITABLE TAX PLANNING

If you want to donate and get beneficial tax treatment, you can still make it work. Here's how:

UNDERSTAND THE ABOVE-THE-LINE DEDUCTION EXPIRED. Unless Congress acts the $300 above the line deduction for charitable contributions ($600 joint filers) expired at the end of 2021. So now charitable donation deductions are only available if you itemize your deductions.

CONDUCT A YEAR-END TAX FORECAST. Plan now to see how close the amount of all your yearly itemizable items will come to exceeding your standard deduction threshold.

BUNDLE TWO-IN-ONE. Consider bundling two years of charitable giving into one year. This will allow you to maximize your itemizations in one year, while using the tax savings of the standard deduction in the other year to help pay for your donations. Still not enough? Consider bundling three years of giving into one!

MAXIMIZE YOUR CHARITABLE DEDUCTION. When you can take advantage of the charitable deduction, consider donating appreciated stock held longer than one year. This is a better alternative than writing a check as you avoid paying capital gains and you can deduct the fair market value of the stock as a donation.

LOOK INTO A DONOR ADVISED FUND. When you establish this account, you receive an immediate charitable deduction for your contributions, the contributions are then invested, and you can grant the funds to qualified charities over time.

Itemized deduction rules have changed, but you can still take advantage of the tax deductibility of your charitable giving. You simply need to adjust your tax planning. Call if you'd like to discuss this or any other tax-planning strategies.

TAX DAY IS HERE!
Last-minute details, tips and freebies

With the individual tax-filing deadline on Monday, April 18, now is the time to complete all filing arrangements and payments. If you have not already done so, ask yourself these questions before it’s too late to act:

1. DO YOU NEED TO SIGN YOUR E-FILE AUTHORIZATION FORM? IRS Form 8879 needs to be signed by you before your taxes can be e-filed. If filing jointly, your spouse needs to sign as well. If you haven’t already, please return the signed form ASAP to ensure that your taxes can be e-filed on time.

2. DO YOU OWE TAXES ON YOUR 2021 TAX RETURN? If yes, make your tax payment now! The IRS has several payment options on their website. If mailing a payment, include Form 1040-V and ensure the mail is postmarked on or before April 18. Sending the payment certified mail will ensure you have proof of timely payment. Late payments, even by one day, are subject to IRS penalties and interest.

3 DO YOU NEED MORE TIME TO FILE? If you are not ready to file your taxes before the initial April 18 deadline, you can file for a six-month extension. Be aware that it is only an extension of time to file — not an extension of time to pay taxes you owe. You still need to pay all taxes by April 18.

4. DO YOU NEED TO DEPOSIT FUNDS IN YOUR IRA or HSA? Did you claim an IRA or HSA contribution on your tax return? In order for the deduction to be valid for 2021, all deposits to those accounts need to be made by April 18. Once completed, save proof of the contribution with your 2021 tax files.

5. DO YOU NEED TO MAKE AN ESTIMATED TAX PAYMENT? The first quarter estimated tax payment for 2022 is also due on April 18. If you owe taxes for 2021, making 2022 estimated payments might make sense for you. A quick way to determine a first payment is to divide the taxes you paid by four, and then adjust the amount for any paycheck withholdings. Send your payment along with Form 1040-ES to the IRS by April 18. Then, schedule a tax-planning meeting to determine the best approach for the remainder of the year.

6. DO YOU LIKE FREE STUFF? Who doesn't?! From free sub sandwiches and smoothies to discounted furniture and delivery services, tax day deals are out there waiting to be found. Check out the list from hey it's free to see if there are any deals you can enjoy!

If you miss a deadline, file your return and pay the taxes as soon as you can to stop accruing interest and penalties.

APRIL FOOLS! YOU'VE BEEN SCAMMED.
Great tips to identify scams BEFORE they happen

In honor of the traditional day of practical jokes and harmless antics, instead of chasing the hottest new tax scam, why not arm yourself with traits that will help identify even the most recent version of them. Here is what you need to know:

YOU ARE A TARGET

While virtually anyone can be a target of scams, thieves usually target those that are most likely to respond. So if you fit into one of these categories, your scam meter should go way up:

* ELDERLY. Why: High trust, generally less tech savvy
* STUDENTS. Why: Low income, high debt, and lack of street smarts
* IMMIGRANTS. Why: Easy to threaten residence status, lower understanding of processes
* HEAVY SOCIAL MEDIA USERS. Why: More willing to give away their identity and to click on things.

ACTION: If one of these groups describes you, understand you will be subject to a scam…probably every year. If not, then understand who you need to coach for heightened awareness.

HINTS TO IDENTIFY SCAMS

While not a sure-fire way to avoid all types of scams, if you follow these hints to identify scams, the likelihood of being a victim lowers dramatically.

* Personal information is requested via email, web, or phone.
* The contact comes to you, and not the other way around.
* Emails ask you to click on something.
* You are asked to visit a website.
* Initial contact from the “IRS” is anything other than mail.
* You feel threatened.
* Fear is used as a tactic.

NEVER GIVE THEM YOUR KEYS

You would never give your car keys to a complete stranger. So keep that thought in your mind as it relates to your identity, and your money. Drive your own car when it comes to the IRS by controlling the process. You do this by:

* UNDERSTANDING. Initial contact with the IRS and their collection agents always uses the mail. So never respond via email or web or phone.

* NOT TAKING THE BAIT. Any non-mail initial contact is met by hanging up the phone or deleting the email. And NEVER click on any links in an email or go to a website directed by a stranger.

* INDEPENDENT CONFIRMATION. Never respond directly unless a trusted expert handles the correspondence for you. In addition, ask any IRS agent for their pocket commission and HSPD-12 card. Then go to www.irs.gov, get the appropriate phone number and call them for confirmation that the person or form is legitimate.

* IGNORE, NON-MAIL, NON-FEDERAL. Scammers know it is harder to scam with an IRS ID, so they will claim to be from the state, local law enforcement, Social Security and even the Taxpayer Advocate Service. IN ALL CASES, either ignore or hang up the phone. Then independently look up the number of the agency and call them directly to confirm the validity of the claim. If they say they are legit, ask for mail confirmation, but DO NOT give them your address, they should already have it.

* PAYMENT ONLY GOES ONE PLACE. Finally, all IRS payments are made out to the US Treasury and sent via approved addresses or direct deposit. This can be found on www.irs.gov. There are no exceptions to this. So do not give credit card information, buy gift cards, send a check to anyone other than approved addresses, or pay anyone other than the US Treasury.

Remember, your best defense is a good offense, so call immediately if you need help. And now you really can have a happy April Fools Day!

Internal Revenue Service | An official website of the United States government Pay your taxes. Get your refund status. Find IRS forms and answers to tax questions. We help you understand and meet your federal tax responsibilities.

DO YOU NEED TO FILE A TAX RETURN?
GETTING THIS WRONG CAN COST YOU

One of the more common tax questions is whether you need to file a federal tax return this year. The answer is: it depends. But not filing a tax return when you should can cost you plenty. Here are some quick tips to help you determine your answer.

INCOME THRESHOLDS MATTER

If your gross income is less than the federal standard deduction you usually do NOT need to file a tax return. This is because the deduction effectively eliminates any taxable income. The amounts for 2021 are:

* Married filing joint: $25,100
* Head of household: $18,800
* Unmarried (single): $12,550

OVER THE AGE OF 65

If you or your spouse are over the age of 65 the income required to file a tax return goes up by $1,350 (Married) to $1,700 (Single/Head of Household) for each of you that meets the age threshold. So a single person, age 65 or older, for example, does not need to file a federal tax return if their gross income is $14,250 or below.

NOT SO QUICK! THERE ARE EXCEPTIONS

Like most tax laws, there are exceptions to the income limits mentioned above. Here are some of the more common situations where filing a tax return still makes sense.

* YOU HAVE FEDERAL OR STATE WITHHOLDINGS. The ONLY way to get money back that was withheld from a paycheck or a Form 1099 is to file a tax return. If you do not do so within three years, your refund will be absorbed by the government. While the IRS is quick to let you know that you owe them money, there is no such program to let you know that a refund is due to you.

* YOU ARE ELIGIBLE FOR A REFUNDABLE CREDIT. Refundable credits will pay you money even if you don’t owe income tax. For example, if you have a tax liability of $750, but you are eligible for a $1,000 tax credit, you normally can only receive the $750 tax benefit. But with a refundable tax credit you can receive the additional $250, even without a tax liability. The most common examples of refundable credits are the Child Tax Credit, the Earned Income Tax Credit and the American Opportunity Tax Credit.

* IF YOU ARE A DEPENDENT. Special filing rules apply if you are a dependent on someone else’s tax return. If this is the case, filing rules vary depending on your age, your earned income (like wages) and your unearned income (like interest income). In this case it is usually best to conduct a review of your situation.

* THERE ARE INCENTIVES OUT THERE. With the numerous economic stimulus payments, the enhanced Earned Income Tax Credit and higher Child Tax Credit payments this year, it may make financial sense to file a tax return to maximize your benefit. The only way to know for sure is to review your tax situation.

* OTHER REASONS. Sometimes filing a tax return can be used for other purposes. This includes using your tax return to obtain financing or to receive college financial aid. Another reason is to limit the amount of time your tax return can be audited. Once a tax return is filed, the audit time limit clock starts. After 3 to 4 years, most tax returns can no longer be audited by the IRS. However, if the return is not filed, this audit clock never starts.