Owe Taxes and Can’t Pay by the Due Date?
The vast majority of Americans get a tax refund from the IRS each spring, but what if you are one of those who end ends up owing?
The IRS encourages you to pay the full amount of your tax liability on time by imposing significant penalties and interest on late payments if you don’t. So if you are unable to pay the tax you owe, it is generally in your best interest to make other arrangements to obtain the funds for paying your taxes rather than be subjected to the government’s penalties and interest. Here are a few options to consider. Although they all have negative connotations, they are all better than the penalties and interest the IRS could impose, not to mention the time and headache of dealing with IRS communications and the possibility of wage, bank account and asset levies.
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Many companies, as an incentive to employees to help grow the companies’ market value, will offer stock options to key employees. The options give the employee the right to buy up to a specified number of shares of the company’s stock at a future date at a specific price. Generally, options are not immediately vested and must be held for a period of time before they can be exercised. Then, at some later date, and assuming the stock price has appreciated to a value higher than the option price of the stock, the employee can excise the options (buy the shares), paying the lower option price for the stock rather than the current market price. This gives the employee the opportunity to participate in the growth of the company through gains from the sale of the stock without the risk of ownership.
The IRS announced on March 31, that it will take steps to automatically refund money this spring and summer to people who filed their tax return reporting unemployment compensation before the recent law change made by the American Rescue Plan Act.
Thanks to some very liberal tax laws written to encourage investment in personal tangible equipment, including information technology (IT) equipment, many businesses will be able to expense (write off as a tax deduction) all such assets purchased and placed in service before the end of the tax year. For businesses using the accrual method of accounting, the purchase must have been completed and the equipment placed in service before the company’s year-end.
They say that everybody has at least one good novel in them, and many people feel the same way about ideas for a successful business. If you are considering diving into the world of entrepreneurship, it’s a good idea to pause for a moment, take a deep breath, and let your head take over before your heart leads you astray. There’s certainly a chance that your business idea is a good one and you’ll be highly successful, but it’s a good idea to evaluate, research, and analyze before you quit your day job. Here are steps to follow to ensure that you’re proceeding with care and caution.
An increased child tax credit is part of President Biden’s stimulus package to help tackle the coronavirus pandemic and stimulate the economy. This stimulus package, which was passed by Congress on March 10, 2021, and is known as the American Rescue Plan Act, will provide lower-income parents with substantial financial assistance and support various other efforts to stimulate the economy. Even though the benefit of a tax credit traditionally isn’t available until after the tax return for the year has been filed, for 2021, the IRS will pay a portion of the credit in advance in the form of monthly payments from July through December.
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As part of the CARES Act, the requirement for older taxpayers to take required minimum distributions (RMDs) from their retirement plans was waived for 2020. This primarily was due to the anticipated drop in value for most investments as a result of the economic effects of COVID-19, which actually did not materialize.
Raising money through Internet crowdfunding sites prompts questions about the taxability of the money raised. A number of sites host money-raising projects for fees generally ranging from 5 to 9%, including GoFundMe, Kickstarter, and Indiegogo. Each site specifies its own charges, limitations, and withdrawal processes. The money raised may or may not be taxable depending what the purpose of the fundraising campaign was.
Obviously, the still-ongoing COVID-19 pandemic has been a major challenge for all of us since it kicked into high gear in March of 2020. In the months since, millions of people have found themselves out of a job and the ones that remained were suddenly faced with working remotely for the foreseeable future.