www.vickerytax.com
Phone: Main 678-268-7452

Yikes! You Have a Large Refund

Good news, that is sometimes not so good

For some reason, some believe it is better to receive than give when it comes to filing taxes. While that may help your savings account, it is not always a great idea. Here’s why.

• You are giving the IRS an interest-free loan. Granted, interest rates are pretty low, but every dollar you earn money on, is one more dollar of yours and one less of Uncle Sam’s.
• Debt costs a lot. While interest on savings is low, the same is not necessarily true for credit card and other forms of debt. Why not lower your withholdings throughout the year and use the extra money to pay down your debt?
• IRS identity theft is common. The longer you have your money in the hands of the IRS, the higher the chance some unsavory character is going to try to get it for themselves. Should this happen to you, the IRS will fix the problem….eventually. In the meantime, there is paperwork and tons of hurdles to overcome while your refund is delayed.
• You could fund something else. Instead of money being parked at the IRS, you could be investing in your retirement or funding a Health Savings Account to pay for medical expenses in pre-tax dollars! So in addition to saving money in interest, you could actually be lowering your tax bill!

Let’s face it, sometimes knowing you get a refund versus a tax bill is less stressful. But, for the savvy taxpayer you can possible accomplish both!

www.vickerytax.com
Phone: Main 678-268-7452

Review Your Social Security Earnings Report

Most of us go through life without being concerned with, or ever checking on, our Social Security records. We assume the money deducted each payday and an equal amount paid in by our employer is applied properly to this valuable retirement benefit.

Ignoring is problematic

The Social Security Administration (SSA) receives a vast amount of paperwork each year. They can and do make errors and omissions. Unfortunately, the only way these problems are caught is if YOU catch them. Waiting until retirement may be too late to correct an error made 10 to 20 years back. Common problems and their impact are:

• Incorrect amounts. If the SSA does not receive a W-2 wage statement from an employer, you will not see credit for these earnings. Result: Your Social Security retirement check amount averages your life-time earnings. If you have earnings that are missing, your retirement check will be permanently lower!
• Missing earnings. In addition receiving credit for earnings, you also need to work a certain number of quarters to be eligible for retirement benefits. These missing earnings reports reduce your number of working quarters. Mess up here and you may not qualify for benefits at all!
• The three-year correction time limit. Per the SSA, an earnings record can be corrected at any time up to three years, three months, and 15 days after the year in which the wages were paid or the self-employment income was derived. While there are exceptions for fraud and obvious clerical errors, why risk the hassle by not finding errors and fixing them when they happen?

Action to take

Thankfully, it is now easier to confirm the accuracy of your account as the SSA has an online tool that allows you to review your historic earnings statements online at www.ssa.gov.
To use the tool, you will need to go through an online signup process that includes many safety measures to ensure your identity is protected.
If you see an error on your statement, you should immediately correct it. You can do this by contacting the SSA:

Telephone:

1.800.772.1213

By mail:

Social Security Administration Office of Earnings Operations
PO Box 33026
Baltimore, MD 21290-3026

The message? Since you are receiving a new W-2 right now, make reviewing your Social Security retirement account part of your annual tax filing experience.

www.vickerytax.com
Phone: Main 678-268-7452

IRS Identity Theft Program NOW OPEN!
New one-time use PIN option available for all

The IRS is expanding a pilot program that uses Identity Protection Personal Information Numbers (IP PINs) to provide an extra layer of security for all taxpayers. Here is what you need to know.

IP PIN program details

The IRS’s IP PIN program is an additional layer of security to ensure your tax identity and withholdings are not stolen. When you register in the program, the IRS will mail you a six-digit numeric IP PIN. You must enter this number on your tax return or the return will be rejected. It is a one-time use IP PIN. In other words, you will receive a new number every year.

So why get an IP PIN?

The IRS uses the IP PIN to better verify your identity. It can prevent clever hackers from using your Social Security number to file fraudulent returns or access returns you’ve already filed.
Keep in mind that if you choose to get an IP PIN, you’ll need to use an IP PIN for all future filings. While the IRS is planning to add the ability to opt out of the program, it is not yet available. So once you are in the program, you must stay in it. If need be, you can still paper file your tax return if you lose your IP PIN.

Getting your IP PIN

You can use special IRS tools to obtain an IP PIN and verify your identity through a two-factor authentication process. Go to the Get an IP PIN page on the IRS website to get started.

To get the IP PIN, you will be asked to register for an online account with the IRS. The process to open the account requires an independent ID verification prior to establishing the account. Once approved, you can then register for the program.

Final thoughts

Remember, a new IP PIN is generated for every filing season. It may be retrieved mid-January by logging into your account.

If you have experienced ID theft, the IRS automatically puts you into this program. So the IRS will continue to issue new IP PINs to taxpayers who have already been victimized by tax-related identity theft.

Remember, if you are in the program, you must protect this number. Do not tell it to anyone other than those who need the information to file a tax return. Also know that the IRS will never ask you for this number, so do not give it out.

www.vickerytax.com
Phone: Main 678-268-7452

Alert: Look for New 1099 NEC
Your 1099’s are coming soon

Virtually every small business, including sole-proprietors, must issue at least one 1099 each year. And this year there is a new one called the 1099 NEC. Here is a summary of the most common of these informational tax forms that you will need to file your tax return this year.

The Form 1099

The Form 1099 is an informational tax form that captures economic activity that is then reported to you and the tax authorities. The primary purpose of the form is to ensure you are reporting your taxable income. The forms are typically required to be sent to you on or before January 31st each year. The same information is due to the IRS on or before February 28th (March 30th if the form is filed electronically).

The 1099 NEC

Beginning this year, nonemployee compensation will be reported to you on 1099 NEC. In prior years, this income was reported in box 7 of form 1099 MISC. So if you are a consultant or work for Uber or any other gig economy job, you will need to look for this form.

Common 1099 Forms

To help navigate the numerous forms here is a list of what you can expect to receive.

1099 INT: This is the form you receive for interest earned. You should expect one of these for every bank account that pays interest, no matter the dollar amount of interest.

1099 DIV: This form captures dividends paid to you. Correct classification of dividends on this form is crucial. Tax rates are lower for qualified ordinary dividends versus other types of dividend payments.

1099 B: You will receive this form if you sell stocks or mutual funds. This tells the IRS to look for possible taxable investment sales.

1099 MISC: This is the default catch all 1099 for income earned when you are not an employee. This form is provided to independent contractors and attorneys for gross compensation. If you are a sole proprietor, each of your customers that are billed over $600 should be sending you one of these forms.

1099 R: You will receive this form if you have distributions from a qualified retirement account during the year.

1099 G: This form captures governmental payments to you. You may receive one of these if you receive a state tax refund.

1099 SA: This form captures distributions from health reimbursement accounts like HSA’s and MSA’s.

What you need to know

• Use the information in this tip to ensure you are receiving the necessary 1099’s to file your tax return.
• To be sure, create a list to confirm receipt of the necessary 1099’s. Missing 1099’s is a common reason for a delay in filing your tax return.
• There are other types of 1099’s. If you receive a 1099 and are not sure what the form is, ask for clarification.
• When you receive the form, double check the accuracy of the form. If there are errors, try to get them corrected as soon as possible.

Remember, the IRS receives these forms. Their computers will run a cross-check against your return to ensure you have not omitted any of them.

www.vickerytax.com
Phone: Main 678-268-7452

2021 Retirement Plan Limits

As part of your 2021 tax planning, now is the time to review funding your retirement accounts. By establishing your contribution goals at the beginning of each year, the financial impact of saving for your future should be more manageable. Here are annual contribution limits for 2021:

Take action

If you have not already done so, please consider:

• Reviewing and adjusting your periodic contributions to your retirement savings accounts to take full advantage of the tax advantaged limits
• Setting up new accounts for a spouse or dependent(s)
• Using this time to review the status of your retirement plan
• Reviewing contributions to other tax-advantaged plans including flexible spending accounts and health savings accounts