The Inflation Reduction Act

Inflation Reduction Act Tax News

This information on The Inflation Reduction Act is shared from The Journal of Accountancy article, A deeper dive into the Inflation Reduction Act’s tax provisions

The budget reconciliation bill, P.L. 117-169, known as the Inflation Reduction Act, was signed into law on Aug. 16. It includes numerous tax provisions, including new corporate taxes. It also contains numerous clean-energy-related tax incentives and money for IRS enforcement and other initiatives.

Corporate Alternative Minimum Tax

The new corporate AMT is based on book income rather than taxable income. Specifically, it imposes a 15% tax on the excess of the corporation’s adjusted financial statement income over its corporate AMT foreign tax credit for the year.

Excise Tax on the Repurchase of Corporate Stock

The act introduces a new 1% excise tax on corporate stock repurchases (new Sec. 4501). Covered corporations must pay the tax on the fair market value (FMV) of any stock the corporation repurchases during the tax year.

Clean Energy Provisions for Individuals

The Sec. 25C nonbusiness energy property credit is extended through 2032 and is renamed the energy-efficient home improvement credit. The amount of the 25C credit is changed from a $500 maximum lifetime credit to a credit of up to $1,200 per year.

Clean Vehicle Credits

The act also removes the limitation on the number of vehicles eligible for the credit, so electric vehicles purchased from manufacturers that had formerly reached their cap will now be eligible for the $7,500 credit. It also imposes a new requirement that a percentage of critical minerals used in the car must have been extracted or processed in the United States or in a country with which the United States has a free trade agreement or recycled in North America.

Clean Energy Manufacturing

The act extends the Sec. 48C advanced energy project credit by making allocations for up to $10 billion more in awards for qualified investments, effective Jan. 1, 2023. To encourage the clean production of electricity, the act creates a new credit for the production of electricity at qualified facilities placed in service after Dec. 31, 2024, with a greenhouse gas emissions rate of zero.

Energy Provisions for Businesses

The Sec. 45 credit for electricity produced from certain renewable sources (including geothermal, solar, and wind facilities) is extended through 2024. Sec. 48 is also amended to provide an increase in the energy credit for qualified solar and wind facilities placed in service in connection with low-income communities. The act creates a zero-emission nuclear power production credit and introduces an alternative deduction under Sec. 179D for taxpayers that retrofit property to be more energy efficient.

Treating clean energy tax credits as payments

Under new Sec. 6417, eligible taxpayers can elect to treat a multitude of eligible energy credits as tax payments. These range from alternative fuel refueling property credits to clean electricity investment credits. Under new Sec. 6418, eligible taxpayers generally can transfer these credits (except the qualified commercial vehicle credit) in any tax year to another taxpayer.

To make sure you maximize your refund, consider having your taxes done by a professional tax expert who will know all the relevant tax laws for your situation.

Georgen Scarborough Associates provides tax preparation services. If you need help or advice filing your tax return and reaping the benefits of the latest tax laws, please contact one of our tax preparation experts today.

5 Ways Your Non-Profit Can Save Money

Tax preparation for non-profit businesses

Is your non-profit organization experiencing cash-flow problems? Tax preparation is one way you can save money. Find out other ways to save money here.

  • Reuse and recycle material

Some non-profits require materials daily. These include t-shirts and posters for fundraising events. Although necessary, creating new material all the time can add up to costs in the long run. Save money by reusing and recycling material where possible. Ask staff to reuse dry clean t-shirts, table cloths, and covers and reuse posters where possible to save cash.

  • Recruit volunteers

Volunteers are a great option when you’re short-staffed. A lot of people want to help out non-profits that mean something to them and will be happy to do so without a paycheck. Make sure you provide them with reasons to join your non-profit, such as showing them how they will be helping others. You can also offer unpaid internships to younger members and provide them with a letter of completion at the end of the year to help them enter the workforce.

  • Try to go paperless

The cost of ink, paper, and even pens can start to add up. Apart from saving the environment, going paperless will reduce a lot of costs. Try investing in digital solutions and filing systems such as QuickBooks which make sorting documents easier and will save you money in the long term. Quickbooks is easy to learn but if you need a QuickBooks advisor, Georgen Scarborough can help out.

Did you know you can save money by hiring a professional such as an accountant to handle your taxes? It may seem tempting to do it yourself but an accountant can find you tax breaks you didn’t even know you had with a non-profit organization. Apart from that, they can also help you to reduce unnecessary expenses and provide you with tax advice.

Georgen Scarborough has professional tax accountants who can help you with your taxes, accounting, and finance. 

Give us a call today for tax preparation for your non-profit organization!

How to Avoid a Tax Audit

1-Nobody wants to be audited

Nobody wants to be audited. Thankfully there are ways to avoid a tax audit. Read on for ways to keep your business in the good books with the IRS. 

Avoid Accounting Errors 

A simple accounting error can turn into an audit if you aren’t careful. Make sure your calculations are correct. Avoid mathematical errors by hiring a professional accountant to help you out and double-check your numbers. 

Always Sign your Tax Returns 

A lot of people surprisingly forget to sign their tax returns. A failure to sign your returns will raise flags for the IRS. They might wonder why you did not sign and what you are hiding from them.

Don’t Underreport your Income 

Leaving out a sale from an asset or side income might be tempting but it can get you in trouble. If you get caught not reporting income, you can be forced to pay back taxes for it, which includes interest on your income tax. You can’t just get caught through your audit but you risk getting caught if someone who paid you for a product or service is audited and they link the cash back to you.

Don’t Underestimate your Deductions

Another temptation would be to deduct tax from a home office. Although some items are reasonable, don’t overestimate your expenses. Deducting a high amount for your rent for example should signal a red flag. Only deduct what you use for your business.

Don’t Fail to Hire a Professional 

It is best to hire a professional to assist you with your financial statements and audits to ensure that you are calculating your tax correctly. 

Avoid a tax audit by hiring the professionals at Georgen Scarborough – give us a call today!

How Summer Jobs Help Teens

Hiring a teen for a summer job can help them to gain valuable skills. Here’s how summer jobs help teens, as well as how we can help you with tax preparation for teens. 

Why include teens in job programs and internships?

1.  It teaches teens responsibility 

Some teens do not yet realize the hard work needed to become successful. Helping them to enter the workplace and introducing them to corporate life will teach them how to earn their money and the responsibilities that come with having a job. They will learn how to accept feedback and the value of teamwork, among other responsibilities.

2.  A summer job teaches valuable skills

Teens can learn valuable skills such as good ethics and time management through summer jobs. These lessons are important as they enter adulthood and learn to be responsible working adults. 

3. Build teens’ self-esteem 

Teens are growing up in a digital age where they tend to compare themselves to others on social media. Their self-esteem can take a dive but with a job, they can grow their confidence and feel better about their achievements in life. 

4. Jobs provide independence 

A summer job is a good way for teens to gain independence from their parents. Earning their own money will help them to save up for college or eventually start their own business. They will also learn to be tax-abiding citizens. 

How can we help you with tax preparation for summer jobs?

If you are hiring teens even for summer jobs, or your teen is looking for a summer job, you will need to check the tax implications. At Georgen Scarborough, we help families and businesses with their tax preparation, payroll services, and financial audits. We can help you to sort out your tax documents and help your business with payroll for teens. 

For more information on our tax preparation and accounting services, call us today!

Tax Considerations When Forming a Business Entity

1-tax considerations wehn choosing a business entity

Tax preparations can be complicated. The type of tax you pay will depend on the type of business entity you have. If you need to know whether you are on the right track or if you plan on changing your business structure, this guide will help you out. 

Tax Considerations According to a Business Entity 

Regardless of whether you own a sole proprietorship or a limited liability company, you are going to need to pay tax, but will you have to file for tax as an individual or business entity? You might decide to change your business based on tax implications, or your financial status. Before you decide, here are some tax considerations for each business type.  

  • Sole proprietorship 

A sole proprietorship owned-business is probably the least complicated when it comes to filing taxes. According to the IRS, you would not be taxed as a business entity but rather as a business owner. What this means is your business assets and liabilities belong to you and you will have to pay individual taxes on these. 

  • General partnership 

A partnership operates similarly to a sole proprietorship. It is also not taxable as a business entity. All the owners will legally have the responsibility to pay tax on their terms. Income tax is paid according to the partner’s tax rates and not a partnership income tax. 

  • Limited liability company 

Limited liability companies (LLCs) are treated as partnerships, unless it elects to be treated as a corporation. LLCs’ tax considerations work according to the personal tax returns of the owners. All income and loss and tax due are paid by individuals. 

  • C corporations

Corporations can be complicated and costly in comparison with LLCs and partnerships. A regular corporation or C corporation has to pay corporate income tax that is taxed at the corporate level. They are also subject to potential double taxation. Double taxation occurs on taxable dividends, i.e., the profits of the business that are distributed to owners. What this implies is that the Corporation will have to pay tax on its profits and the individual shareholders will pay tax on the dividends they receive. Let’s not forget that you also need to pay taxes if you receive a salary from the Corporation.

  • S corporation 

S corporations are a little less complicated as the IRS treats them as a pass-through entity for tax purposes. Shareholders will pay tax on the income of the business as individuals.

Tax preparation can be overwhelming for any business entity but at Georgen Scarborough, we handle all your tax considerations, financial statements, and audits. From your estate and trust tax preparation to LLC tax preparation, we can ensure that your business’s taxes and accounting are taken care of. 

For professional tax preparation, you can trust, give our team of experts a call today!

Get ahead on your 2022 tax filing

Get ahead on your 2022 tax filing

The deadline for your 2022 tax filing is only a few months away. You may think that’s plenty of time, but it is always better to start early, be prepared. It’s even better to file early if you can. Here are a few pro tips to help you avoid the last-minute stresses of tax season.

Tips to stay ahead on your tax return in 2022

For most people, a frantic, last-minute rush is par for the course when it comes to filing their tax returns. However, there really is no need to manage your taxes in this way. By taking a few simple steps early in the season, you can ensure that your taxes are wrapped up efficiently, accurately, and without stress. Here are four simple steps to help you stay ahead.

  • Organize your records: The best way to avoid last-minute stress is to ensure that all your tax documents are collected, collated, and filed at all times. This includes pay stubs, receipts, etc. Don’t leave paperwork at the bottom of a desk drawer. Nor should you save your electronic documents in a haphazard way. This will have you searching for hours through folders and email attachments to get them in order. Organize everything as you go.
  • Set up an online IRS account: With an online IRS account, you can get immediate access to your tax records without having to reach out by phone or email. Then you can work faster and more accurately as you prepare your taxes.
  • Check on the annual changes to tax rates and deductions: At the end of each year, the IRS announces rate adjustments. Make sure you stay on top of these so you can file accurately and timely.
  • Get the help of a CPA: One of the best ways to rid yourself of the stress of filing your taxes is to leave the job to a professional. A certified public accountant knows all the rates and regulations, will be able to guide you through the filing procedure, and will know what it takes to file on time and with the most benefit to you.   

As you prepare your taxes for the coming year, reach out to Georgen Scarborough for help. We are a firm of CPAs based in Vienna, Virginia. Contact us if you need help with your 2022 tax filing.

Learn more about current ax laws in the Wall Street Journal’s Tax Guide 2022.

Tax inflation adjustments for 2022

Tax inflation adjustments for 2022

At the end of last year, the IRS announced its latest set of tax inflation adjustments for 2022. It is very important that both individual taxpayers and businesses familiarize themselves with these changes so that they can make the necessary provisions for their tax filing and payments in the coming year. Here is a brief look at the most important adjustments.

Adjusted tax rates for 2022

Among the most important new provisions for the new tax year are the following:

  • The standard deduction for married couples filing jointly has risen by $800 from $25,100 to $25,900.
  • The standard deduction for individual taxpayers has risen to $12,950 (up $400)
  • The maximum Earned Income Credit has also risen. It now stands at $6,935—a $207 rise from the previous year.
  • As of 2022, the dollar limitation for employee salary reductions for health flexible spending arrangements increases to $2,850.
  • The foreign earned income exclusion is $112,000, as opposed to $108,700 in 2021.
  • Deceased estates (for people who pass away during 2022) have a basic exclusion amount of $12,060,000, up from a total of $11,700,000 for estates of decedents who died in 2021.
  • The annual exclusion for gifts increases to $16,000 for 2022, up from $15,000 for 2021.

It is advisable to get the assistance of an experienced certified public accountant (CPA) to help you manage your taxes in 2022. CPAs always have a complete grasp of the new tax limits, rates and regulations, and will know exactly how to apply them to your income and tax requirements. Georgen Scarborough is a firm of CPAs based in Vienna, Virginia. Contact us if you need help managing the tax inflation adjustments for 2022.

Top 10 Reasons to Hire a Tax Professional

Top 10 Reasons to Hire a Tax Professional

Tax season has officially begun. And, after the past two years, the stress of filing tax returns and gathering documents is one that many people don’t want to deal with. Here are 10 reasons why you should be using the services of a tax professional this year: 

Ten Reasons to Use a Tax Professional

Accuracy

The tax code can be complicated. Plus, any errors made when filing your return can be costly; legally and financially. This is why we pay tax professionals. Tax professionals keep you up-to-date with the tax code and have the necessary expertise to ensure accuracy in your tax returns.

Can keep you updated

The tax professional can update you on any IRS tax changes or tax law changes. 

You may get a higher return

A tax professional can get you the highest return possible by ensuring you don’t accidentally miss any deductions. 

Saves you time

Normally, it takes between 8 and 10 hours to compile a complete tax return. If you have a busy schedule, a tax professional is a great resource to free up this valuable time. Time is money after all. 

Expert Advice

Tax professionals can answer any questions you may have and help you make smarter decisions to ensure maximum tax savings and returns. 

Saves you money

If your tax preparer finds just one deduction you may have missed, it could easily cover their fee. Not to mention, the more deductions they help you find, the higher your return will be. They can also recommend ways for you to save on your taxes and increase your returns. 

Reduced risk of an audit

You lower your risk of an audit when you use tax preparation services. Plus, if you are audited or the IRS starts asking you questions, the preparer will know exactly how to answer the questions and deal with the IRS. 

Lowered Stress Levels

You no longer have to worry about filing the return yourself. Sometimes just knowing that you have professional assistance can reduce your stress levels. 

Human contact

You get a personal touch from using a tax professional that tax software cannot provide. Plus, no matter how advanced the software is, it cannot represent you in an audit. 

Current and future peace of mind

Tax professionals can equip you with the tools and knowledge to ensure that your current and future tax seasons go off without a hitch. They provide you with the best strategies to ensure you make smart tax-saving decisions. 

For expert, professional assistance with your 2022 tax returns, contact Georgen Scarborough Associates, PC, today.

Charitable donations tax deduction limit 2021

Charitable donations tax deduction limit 2021

The charitable donations tax deduction limit for 2021 contains provisions that enable businesses to help those in need. It also helps by claiming certain deductions against their tax bills. The CARES Act, together with the stimulus package signed into law at the end of 2020, makes several provisions in regard to charitable tax incentives. Are you planning your income, expenditures, and taxes for this year?  You should take careful note of the CARES Act and its stipulations. This will keep you informed of charitable donations tax deduction limits for 2021.  

How much can you deduct from charitable donations for 2021?

The CARES Act and the stimulus package allow for deductions of up to 100% of your adjusted gross income (AGI). This applies to cash contributions made in 2021. If you are itemizing your charitable donations, you can receive this deduction.

Also, the CARES Act allows for other deductions if you are not itemizing your cash contributions. It allows for an additional, “above-the-line” deduction for charitable gifts made in cash of up to $300. This provision is extended into 2021 for taxpayers filing separately. Plus, it increases the deduction to $600 for taxpayers filing jointly. 

Contributions to Donor-advised Funds

No changes have been made to existing deductions for contributions made to a donor-advised fund sponsor like Fidelity Charitable. So, you can still deduct up to 60% AGI in cash. Or, you can deduct up to 30% AGI in appreciated assets contributed to a donor-advised fund. Also unchanged are rules around Qualified Charitable Distributions (QCD). Surprisingly, these allow seniors over 70½ years of age to donate up to $100,000 in IRA assets directly to charity annually. Meanwhile, these donations of IRA assets would not count toward the distribution of taxable income.

Need help managing your charitable donations for 2021?

The assistance of an experienced certified public account (CPA) can help you manage your taxes, including the charitable donations tax deduction limit for 2021. Georgen Scarborough is a firm of CPAs based in Vienna, Virginia. Contact us if you need help with your taxes.

Best strategies in tax reporting for nonprofits

Best strategies in tax reporting for nonprofits G&A Expense allocation

Tax reporting for nonprofits

Being a charitable non-profit does exempt the organization from paying income taxes. However, it is important to file an annual information return every year. Most charitable nonprofits have an obligation to file an annual information return with the IRS. Read on to find out the nitty-gritties from Georgen Scarborough on how to report taxes for nonprofits.

How nonprofits file tax returns

The type of tax return filed by a nonprofit organization depends on its size and type. Learn which Form 990 is applicable for your nonprofit below.

Form 990-N

This is the simplest tax return. Form 990-N applies to small nonprofits with gross receipts of less than $50,000. This form must be submitted by the 15th day of the fifth month following the organization’s tax year.

Form 990-EZ

Nonprofits can submit Form 990-EZ when they meet certain conditions. Firstly, they would have annual gross receipts of less than $200,000, and secondly, assets of less than $500,000. They must report on:

  1.     Revenues, expenses, and changes in net assets. (Part 1)
  2.     Simplified balance sheet (Part 2)
  3.     Statement of program accomplishments (Part 3)
  4.     List of officers, directors, employees, and stakeholders (Part 4)
  5.     Miscellaneous questions (Part 5)
  6.     Only to be filled if the non-profit is exempt under 501 (c) (3) (Part 6)

Form 990

If you are a nonprofit with annual gross receipts of more than $200,000 and assets of $500,000, then you would submit a Form 990. Simply enough, page one of this form is similar to Form 990-EZ. However, Form 990 requires detailed information about the organization as well as additional attachments. This Form is open to the public. So, the organization’s Board or senior-most personnel should review and approve the information.

Not required to file

Certain organizations receive tax-exempt status from the IRS. These include:

  • religious or church-affiliated organizations
  • specific political organizations, or
  • black lung benefit trusts.

These do not need to submit a Form 990.  However, if they are engaged in unrelated business activities, a Form 990-T is required annually.

If you are a charitable nonprofit organization, contact Georgen Scarborough for more information on tax reporting for nonprofits.