Michael Gray, CPA's Tax and Business Insight
March 3, 2022
© 2022 by Michael C. Gray
ISSN 1539-395X
A monthly report to help you prepare for your financial future, keep more of what you earn by minimizing your taxes, and build an extraordinary business!
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Table of Contents
- Happy St. Patrick's Day!
- February celebrations
- Trust distribution deadline is March 6, 2022.
- Remember federal income tax returns for calendar-year S corporations and partnerships are due March 15.
- The election to be an S corporation for calendar-year corporations is also due March 15.
- Due date for 2021 individual, calendar year estates and trusts, and calendar year corporation income tax returns is April 18, 2022.
- Remember that an estimated tax payment is also due on April 18.
- Remember the second California real estate tax payment is due April 11.
- Cutoff for preparing tax returns will soon be here!
- Make your tax return preparation interview appointment now.
- Remember to compute the Recovery Rebate Credit on your individual income tax return.
- Remember to reconcile the 2021 Child Tax Credit and advance Child Tax Credit payments received on your 2021 federal individual income tax return.
- Your 2020 individual income tax return still hasn't been processed?
- New California tax form for COVID-19-related benefits.
- Taxpayers with LIFO inventories are in a tough spot.
- Proposed regulations issued for required minimum distributions.
- Do you sell services or software to CPAs?
- Do you love Disney?
- Attention Accountants! Speed up processing your 2020 business closings!
- Attention business owners with remote workers or remote customers!
- Check my blog for coronavirus-related tax developments.
- Please share your good experiences with Michael Gray, CPA.
- Financial Insider Weekly past episodes.
- Visit our new book review: Start With No
- Follow me on social media!
- Check out my blogs.
- PS Marché Aux Fleurs
- Subscribe/Remove from Michael Gray, CPA's Tax & Business Insight
Minerva Siemer with her sand octopus at Natural Bridges beach Happy St. Patrick's Day!
St. Patrick's Day is the occasion when all Americans celebrate being Irish! This year it falls on Tuesday, March 17. It's time for the wearin' of the green! The luck of the Irish be with ye!
Did you know that St. Patrick used the THREE-leafed clover as an analogy for the Holy Trinity? The four-leaf clover is actually an American tradition.
Family celebrations.
My sister Arlene Gray McLean and my brothers-in-law Wade Allison and Lane Johnston, are celebrating birthdays this month. Happy Birthdays!
Trust distribution deadline is March 6, 2022.
Estates and irrevocable trusts for which the trustee has discretion for making distributions can elect to treat distributions made within 65 days after the year-end as made during the previous year. Distributions generally reduce taxable income for the estate or trust and carry taxable income to the beneficiaries of the estate or trust, who might have a lower marginal tax bracket. For 2021 calendar year trusts and estates, the deadline for making a distribution to make the election is March 6, 2022. Trustees and executors should consult with their tax advisor about whether their trust or estate and its beneficiaries would benefit from making such an election.
Remember federal income tax returns for calendar-year S corporations and partnerships are due March 15.
(Federal income tax returns for calendar-year C corporations are due April 18.)
The election to be an S corporation for calendar-year corporations is also due March 15.
Due date for 2021 individual, calendar year estates and trusts, and calendar year corporation income tax returns is April 18, 2022.
Remember that an estimated tax payment is also due on April 18.
The first 2022 estimated tax payment for individuals and most other calendar year entities is also due on April 18, 2022. The penalties for late payment of estimated taxes are computed as simple interest, but the interest rate has been increasing. The federal estimated payment can be based on 25% of last year's tax liability. California "front loads" the first estimated tax payment as 30% of last year's tax liability. California taxpayers with taxable income of $1 million or more must make their estimated tax payments based on their actual income and deductions.
Remember the second California real estate tax payment is due April 11.
There is a nasty penalty for paying real estate taxes late, and the date slips past us because we're thinking about April 18. Why not make this payment now, so you don't forget it?
Cutoff for preparing tax returns will soon be here!
If you provide complete information for preparing your 2021 income tax returns by March 15, your tax returns should be finished in time to file them by April 18. Otherwise, an extension form should be submitted with a payment of any estimated balance of tax by April 18.
Make your tax return preparation interview appointment now.
There is still time for a few personal interview appointments for preparing 2020 individual income tax returns. Many clients send their information without having an interview, but if you need that personal attention, you should schedule your interview appointment now. Contact Ms. Thi Nguyen, CPA at thi@atl-cpa.com.
Remember to compute the Recovery Rebate Credit on your individual income tax return.
The amount of your Recovery Rebate Credit is computed based on the facts on your 2021 federal income tax return. The credit is reduced for any Economic Impact Payments that you received during 2021 and early 2022. Some taxpayers who didn't receive Economic Impact Payments will qualify for the Recovery Rebate Credit and should file a 2021 federal income tax return, even if it otherwise isn't required. Remember to report this item on your 2021 federal income tax returns or to provide the amounts of the payments that your received to your tax return preparer.
Remember to reconcile the 2021 Child Tax Credit and advance Child Tax Credit payments received on your 2021 federal individual income tax return.
Your 2020 individual income tax return still hasn't been processed?
The IRS still hasn't processed all of the 2020 individual income tax returns that it has received. The IRS says you can still e-file your 2021 individual income tax return. Enter $0 for last year's adjusted gross income with the efile information for your 2021 individual income tax return.
New California tax form for COVID-19-related benefits.
Beginning with the 2021 tax year, taxpayers who benefited from a California exclusion from taxable income for various loans and grants must complete and file Form FTB 4197, Information on Tax Expenditure Items, with their 2021 California income tax returns.
Here is a list of benefits for which the form is required:
- Paycheck Protection Program loan forgiveness (Code PPP)
- Other loan forgiveness (Code OLF)
- EIDL advance grants (Code EIDL)
Taxpayers operating a cannabis business must also complete Form 4197.
The information required is the taxpayer name and tax identification number, and the applicable code for the loan or grant received.
(Spidell's California Taxletter, March, 2022, p. 8. "Did your client receive COVID-19-related benefits?")
Taxpayers with LIFO inventories are in a tough spot.
Auto dealers and other businesses with inventories accounted for using the LIFO (last in, first-out) method have found themselves in a tough spot. Thanks to the disruption of global supply chains, they haven't been able to replace inventory that has been sold. This results in taxable income from selling inventory with older, lower costs. Senate Democrats has asked Treasury Secretary Janet Yellen to extend relief to these taxpayers so they can replace their inventories when they become available without having to pay a tax on "recaptured LIFO reserves."
Proposed regulations issued for required minimum distributions.
The IRS has issued proposed regulations implementing changes for required minimum distributions from qualified retirement plans and IRAs under the SECURE Act of 2019.
According to the proposed regulations, distributions would be required for an inherited retirement account subject to the 5-year rule and the 10-year rule based on the life expectancy of the beneficiary starting with the year after the death of the plan participant with the balance distributed for the 5th year or 10th year, as applicable.
According to commenters, this method doesn't comply with the Internal Revenue Code and the previous regulations for the 5-year rule, because no distributions based on life expectancy should be required and the entire balance should be payable on the applicable 5th or 10th year.
A public hearing for the proposed regulations is scheduled for June 15, 2022. Written or electronic comments must be received by the IRS by May 25, 2022.
Tax advisors and administrators of retirement plans should study the proposed regulations.
(REG-105954-20.)
Do you sell services or software to CPAs?
Maybe I can help with writing promotional material and marketing ideas. Call me, Michael Gray, at 408-918-3161 or email mgray@taxtrimmers.com.
Do you love Disney?
I have created a Facebook group, called Disney Magic, for members to share Disney photos, experiences and tips. I am also posting developments for Disney films, television shows, and amusement parks there. If you are on Facebook, you can use this URL to join: https://www.facebook.com/groups/2006739209578437/, or search "Groups" on Facebook. You have to use the "join" button to join the group. This is a private group, and I will approve your membership.
Attention Accountants! Speed up processing your 2020 business closings!
Do you still have 2020 business income tax returns on extension that need to be done? Check out this trial balance software, EZ Trial Balance, that's super-easy to set up and use. There is a desktop version and an online version. The online version includes consolidations and ratio analysis for analytical review. http://www.eztrialbalance.com
Attention business owners with remote workers or remote customers!
Are you concerned about protecting your conversations and communications from hackers? Now there is a secure collaboration application including (unlimited) team member assignments, video conferencing (no Zoom bombing!), text messaging, voice messaging, PDF capture, electronic signature and large file transfer. Remote computer access feature is almost complete. Communications take place in a secure envelope. Cloud application so no installation is required on your computer network. Meets IRS security standards. http://www.securelycollaborate.com
Check my blog for coronavirus-related tax developments.
We have been sending most of my blog posts relating to coronavirus-related tax developments to you. You can find them at www.michaelgraycpa.com.
Please share your good experiences with Michael Gray, CPA.
As you know, more and more people are going to the internet to find information about service providers. We hope you will share some good words about experiences that you have had with our firm<. Some of the sites where you can share your experiences include yelp.com and siliconvalley.citysearch.com.
We use Angie's List to assess whether we're doing a good job keeping valued customers like you happy. Please visit AngiesList.com/Review/4258970 in order to grade our quality of work and customer service.
Financial Insider Weekly past episodes
After eight years of production, I have discontinued producing new interviews for Financial Insider Weekly. Doing the show has been a rewarding experience and I consider back episodes to be my legacy of financial literacy education to our community. Back episodes available at https://www.youtube.com/user/financialinsiderweek.
Michael Gray regrets he can no longer personally answer email questions. He will answer selected questions in this newsletter.
For your questions about dependent exemptions, see IRS Publication 501 at www.irs.gov.
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- Start With No Book Review at www.profitadvisors.com/startno.shtml
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I'm also on Facebook, LinkedIn, and Google+.
you can also follow me on other social media sites, Facebook, LinkedIn, and Google+.
Check out my blog.
I have also started a blog at www.michaelgraycpa.com. Check it out!
P.S.
My daughter and her husband, Holly and Dan Baker, have a Southern French Restaurant at 23 Ross Common, Ross, California, about 15 minutes north of the Golden Gate Bridge. The name of the restaurant is Marché Aux Fleurs and their website address is marcheauxfleursrestaurant.com. For the best meal of your life, call 415-925-9200 for a reservation and give them a try! For directions, visit our website at www.taxtrimmers.com/directions.shtml.
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