January 2022

Upcoming dates:

January 18

– 4th quarter installment of 2021 estimated income tax is due for individuals, calendar-year corporations and calendar-year trusts & estates

The new year is upon us and so is another tax filing season.

With all the late breaking tax law changes, advance payments of the child tax credit, and several stimulus payments, this year’s tax return may be a bit chaotic. But your situation does not have to be. Included in this month’s newsletter are some tips to help your tax journey be a smooth one.

Also included are some timely updates to retirement plan contribution limits for 2022 and a great list of ideas to help your small business prepare for the upcoming tax season.

Plan Your Retirement Savings Goals for 2022

There’s good news for your retirement accounts in 2022! The IRS recently announced that you can contribute more pre-tax money to several retirement plans in 2022. Take a look at the following contribution limits for several of the more popular retirement plans:

What You Can Do

• Look for your retirement savings plan from the table and note the annual savings limit of the plan. If you are 50 years or older, add the catch-up amount to your potential savings total.
• Then make adjustments to your employer provided retirement savings plan as soon as possible in 2022 to adjust your contribution amount.
• Double check to ensure you are taking full advantage of any employee matching contributions into your account.
• Use this time to review and re-balance your investment choices as appropriate for your situation.
• Set up new accounts for a spouse and/or dependents. Enable them to take advantage of the higher limits, too.
• Consider IRAs. Many employees maintain employer-provided plans without realizing they could also establish a traditional or Roth IRA. Use this time to review your situation and see if these additional accounts might benefit you or someone else in your family.
• Review contributions to other tax-advantaged plans, including flexible spending accounts (FSAs) and health savings accounts (HSAs).

Now is a great time to make 2022 a year to remember for retirement savings!

Small Business Tax Return To-Do-List

Eight ideas to make filing your tax return easier

Consider these suggestions for helping to make tax season smooth sailing this year for your small business:

1. Make your estimated tax payments. Tuesday, January 18th is the due date to make your 4th quarter payment for the 2021 tax year. Now is also the time to create an initial estimate for first quarter 2022 tax payments. The due date for this payment is Monday, April 18.
2. Reconcile your bank accounts. Preparing an accurate tax return starts with accurate books. Reconciling your bank accounts is the first step in this process. Consider it the cornerstone on which you build your financials and your tax return. Up-to-date cash accounts will also give you confidence that you’re not over-reporting (or under-reporting!) income on your tax return.
3. Organize those nasty credit card statements. If you use credit cards for your business, develop an expense report for these expenditures, if you have not already done so. The report should recap the credit card bill and place the transactions in the correct expense accounts. Attach actual copies of the expenses in the credit card statement. You will need this to support any sales tax paid in case of an audit. Use this exercise to show you are only including business-related expenses by reimbursing your business for any personal use of the card.
4. Reconcile accounts payable. One of the first tax deadlines for many businesses is issuing 1099 forms to vendors and contractors at the end of January. Get your accounts payable and cash disbursements up-to-date so you have an accurate account of which vendors you paid.
5. Get your information reporting in order. Now identify anyone you paid during the year that will need a 1099. Look for vendors that are not incorporated like consultants or those in the gig economy and don’t forget your attorneys. You will need names, addresses, identification numbers (like Social Security numbers) and amounts billed. Send out W-9s as soon as possible to request missing information.
6. File employee-related tax forms. If you have employees, file all necessary W-2 and W-3 forms, along with the applicable federal and state payroll returns (Forms 940 and 941). Do this as soon as possible in January to allow time to identify any potential problems.
7. Compile a list of major purchases. Prepare a list of any purchases you made during 2021 that resulted in your business receiving an invoice for $2,500 or more. Once the list is compiled, find detailed invoices that support the purchase and create a fixed asset file. This spending will be needed to determine if you wish to depreciate the purchase over time, take advantage of bonus depreciation, or expense the purchase using code section 179. Your choices create a great tax planning tool.
8. Review the impact of COVID-19. There are a number of federal and state initiatives that will need to be considered when filing your 2021 tax return. If you received payroll credits for employee retention or have a Paycheck Protection Program loan that needs to be accounted for this year, be prepared with the details. It will be important to correctly account for these funds.

Should you need help, please reach out for assistance.

Ideas to Improve Your Financial Health in 2022

A new year. New resolutions. Here are five ideas to consider to help improve your financial health in the upcoming year.

1. Save more for retirement. Plan for the future by feathering your retirement nest egg. For instance, you can contribute up to $20,500 to a 401(k) account in 2022, plus another $6,500 if you’re age 50 or older. Plus, your company may provide matching contributions up to a stated percentage of compensation. And you can supplement this account with contributions to IRAs and/or other qualified plans.
2. Update your estate plan. Now is a good time to review your will and make any necessary adjustments. For example, your will may need to be updated due to births, deaths, marriages or divorces in the family or other changes in your personal circumstances. Also review trust documents, powers of attorney (POAs) and healthcare directives or create new ones to facilitate your estate plan.
3. Rebalance your portfolio. Due to the volatility of equity markets, it’s easy for a portfolio to lose balance against your investment objectives. To bring things back to where you want, review your investments periodically and reallocate funds to reflect your main objectives, risk tolerance, and other personal preferences. This will put you in a better position to handle the ups and downs of the markets.
4. Review, consolidate, and lower debt levels. One sure-fire method for improving your financial health is to spend less and save more. Start by chipping away at any existing debts. This may mean giving up some luxuries, but it’s generally well worth it in the long run. Pay extra attention to debts with high interest charges like credit card debt. If possible, consider consolidating several of these debts into one or two obligations if you can lower your interest rate in the process.
5. Contingency planning. No one can foresee every twist and turn that 2022 will take. To avoid potential financial hardship, look to improve your emergency fund by setting aside enough funds to pay for six months or more of your expenses in case of events like a job loss or a severe health issue.

These five tips can help you thrive in 2022!

Small Business: Coping with Shortages and Delays

As we enter the New Year, businesses continue to be hampered by a near-unprecedented lack of supplies and materials. Besides items that have received widespread national attention like toilet paper and computer chips for cars, the slowdown in the supply chain is affecting everything from electronic devices to couches to sneakers—and plenty in between.

To complicate matters for businesses operating in a competitive environment, the supply chain disruption is being compounded by a tight labor market, especially for drivers and other delivery people. It all adds up to long delays, reduced profits, and frustration for everyone involved.

What can your small business do? Consider these practical suggestions.

• Communicate with empathy. The worst thing you can do is clam up when customers start questioning orders or complaining about backlogs. Be upfront about the problems you’re facing.
• Underpromise and overdeliver. It’s better to lower expectations than it is to set a high bar that can’t be reached. Don’t make promises you can’t keep. Customers will be pleasantly surprised if you exceed your initial estimates.
• Be creative about pricing. If your production costs are shooting through the roof, it should be reflected in your pricing structure. Of course, you can’t pass on the entire extra cost to customers, but factor increases into the equation.
• Rethink lead times. If you can afford to do it, order supplies for several months ahead of time. Stock up on essentials for your business when you can.
• Find new partners. Your business may be forced to turn to different suppliers or vendors. If you can fund quality materials, expand your business contacts and regular resources.
• Think outside the box. Try a different approach that may mitigate the shortages. For example, you might find a suitable and available replacement for a product component. Don’t just accept the status quo.

Finally, use a healthy dose of common sense to navigate through this crisis. Your business advisors can provide assistance.

As always, should you have any questions or concerns regarding your tax situation please feel free to call.