Two tax credits may apply to your tax situation if you have children, and one of those will potentially increase if pending tax legislation passes…
Recently, we gave you a list of payroll considerations for year-end. If you missed it, you can read all about it here on our blog. In this article, we’ll cover non-payroll issues to be aware of as you navigate year-end.
Let’s start with changes to Form 1099 for 2020
If you make payments to non-employees, those payments are no longer reported on Form 1099-MISC in Box 7, but on the new Form 1099-NEC. You can find instructions for Form 1099-MISC and Form 1099-NEC by clicking here.
Now is the time to make sure you have all vendor information such as correct name, address, and FEIN. You should have a Form W-9 on file for each vendor so you’re not overwhelmed at the last minute.
February 1 is the new January 31
Because January 31, 2021 falls on a Sunday, the deadline for 2020 Forms W-2 and 1099 is Monday, February 1, 2021 instead.
Prepare for filing Forms W-2
Now is the time to verify or update employee information like names, addresses and Social Security numbers. Be aware that automatic extensions of time to file Forms W-2 are not available. The IRS will only grant extensions for very specific reasons. Details can be found on the instructions for Form 8809, Application for Time to File Information Returns.
Reporting unclaimed property
Businesses must report unclaimed property to the state each year. Unclaimed property may include (but is not limited to) such items as dormant savings and checking accounts, uncashed payroll checks, vendor checks, security deposits, refunds, customer/patient overpayments, accounts receivable credit balances and insurance proceeds.
Changes to entities, officers, or directors
Please let us know when you form a new entity, have changes to your current entity structure, or make changes to officers, board of directors or ownership. These changes can impact your income tax returns and payroll reporting.
If you’re a cash basis company
Please notify us of fixed assets placed in service on or before December 31 (whether or not the item has been paid for). Also, be aware that Employer FICA expense must be PAID by December 31 to claim a current year deduction. And if you pay expenditures for your company using a company credit card prior to December 31, please provide us with this information.
Adoption Tax Credit
This one doesn’t come up very often, but if you or someone you know has adopted, be aware of this credit. Taxpayers can receive a tax credit for all qualifying adoption expenses up to $14,300 in 2020. This figure increases to $14,440 for 2021. Taxpayers may also exclude from income qualified adoption expenses paid or reimbursed by an employer, up to the same limit as the credit. Taxpayers may use the tax credit and the income exclusion but cannot claim the same expenses for both. For more information, refer to the IRS Tax Topic page.
Getting a jump on tax season
Click here to visit the IRS recommendations on preparing for your tax filing.