Mesa Money Minute

Economic Nexus

The Supreme Court decision in Wayfair vs. South Dakota brought to the forefront a concept known as Economic Nexus. What this concept is referring to is essentially, where are you for tax purposes. With the explosion of remote work as well as the continued growth of ecommerce, this concept is more challenging than it once was. For example, if your company is based in Colorado but you have an employee working remotely from their home in Michigan, where is that employee considered to be? Conver...

Teaching Kids About Money - High Schoolers

Vacation Rentals

Vacation rentals are common in ski areas in Colorado. A vacation rental is defined as a property that is rented at least 15 days and used for personal purposes. Certain expenses that are directly related to renting the property, such as advertising or agent's fees, can be fully deducted. Other expenses on such a vacation rental must be prorated according to the rental days compared to the personal days used. Any day you spend working on the rental property, such as cleaning or making repairs...

Teaching Kids About Money - Middle Schoolers

Rental Real Estate - Deductible Expenses

Continuing our discussion from last month on rental real estate investments. What expenses are deductible against your rental real estate income? The IRS allows expenses to be deducted from your rental income that are necessary to the management of the property. This will include the usual things like advertising, property taxes, landlord's insurance, and mortgage interest. However, did you know you can also take a portion of the cost of the building each year as an expense? This is called d...

Teaching Kids about Money - Younger Children

Rental Real Estate - Partial Personal Use

Here in Colorado it's common for people to both rent out a property and use it for personal purposes. This could be the case with a vacation rental or in a situation where you're renting a portion of your home but using the other portion for personal purposes.  IRS rules state that if the rental use is less than 15 days, this is not income and expenses are not allowed. If the rental use is more than 14 days, then you must report the rent income and you can report the proportional expenses ag...

Cutting Subscription Costs

Reducing Energy Costs

Tips for Cutting Your Food Budget

Cutting Costs with Miscellaneous Budget Category

Taxability of Rental Income

With the real estate market boom recently, a lot of folks are investing in rental properties. Now's a good time to discuss the taxability of rental income. A common misconception is that if your rental expenses are greater than your rental income, you don't have to report it. Not only are you still required to report rental losses, but you may be missing out on valuable tax benefits from a loss on your rental investment. Rental income is generally considered "investment income", with some ex...

Choice of Entity

Starting a new business? One of the first things you will need to do is decide on what type of entity you'll set up - sole proprietorship, corporation, partnership, limited liability company or another type. Sole proprietorships have the benefit of simplicity - there are no legal forms to file in Colorado and they do not require a separate income tax return. However, they can be more expensive in self-employment taxes and don't offer as much liability protection for the owner. Corporations a...

Steps to Starting a Business

It's the great resignation and a lot of people are opting to start their own businesses. If you are one of them, there are a few steps to take to get going. First, make an appointment with an attorney specializing in business law. They can advise you on the best way to structure your start up and can help you draft the documents you need. Then, meet with an accountant. They will also give their two cents about your entity structure and help you get your accounting systems in place to make su...

Employee Retention Tax Credit

There's still time to claim your Employee Retention Tax Credits (ERTC's)! Although the program is only available for wages paid through September 30, 2021, you still have time to file and claim the credit for wages paid before that date. The ERTC offers a credit of 50% of eligible wages paid, up to $10,000 per employee per year, for 2020. For 2021, the credit is 70% of eligible wages paid, up to $10,000 per employee per quarter. What this means is there is a potential credit available of up ...

Upcoming Deadlines

Reminder of some important upcoming tax deadlines. Fourth quarter 2021 individual and calendar year business estimated tax payments are due on January 18, 2022. Pay on time to avoid possible penalties and surprise tax bills. Fourth quarter 2021 payroll tax reports are due January 31. W-2's are due to the SSA and the recipients on January 31. 1099's are due to the IRS and the recipients by January 31.

Special Letters from the IRS

The IRS will be sending out two letters to certain individuals with information needed to file their 2021 tax returns. People who received the Advanced Child Tax Credit will receive Letter 6419 sometime between late December and mid January, which will include the total amount of the credit and the number of qualifying children. People who received the third Economic Impact Payment (stimulus payment) will receive letter 6475, which will help people determine if they are entitled to and shoul...

IRS Extends Deadline for Colorado Wildfire Victims

The IRS has announced that it will provide tax deadline relief to taxpayers affected by the Colorado wildfires which began on December 30. People who lived or had a business in the affected area will have until May 16, 2022, to file and pay taxes that are due between January 1 and April 18. This includes the fourth quarter estimate payment due on January 18, business tax returns due on March 18, individual tax returns and payment dues on April 18, and IRA contribution due on April 18. Quarte...

Tax Provisions in the Infrastructure Bill

President Biden signed HR 3684 the Infrastructure Investment and Jobs Act into law on November 15. While this legislation doesn't contain as many tax provisions as the other bill currently on the hill, the Build Back Better Act, there are some important changes to be aware of. The Employee Retention Tax Credit or ERTC was ended early. Wages paid after September 30 do not qualify, however there is still time to apply for the credit for 2020 and the first three quarters of 2021. There is a new...

Special Charitable Deduction

December is a time for giving! Many individuals make most of their charitable contributions in December. Ordinarily, people who choose to take the standard deduction cannot claim a deduction for their charitable contributions. But a temporary law change now permits them to claim a limited deduction on their 2021 federal income tax return for cash contributions made to qualifying charitable organizations. Nearly nine in 10 taxpayers now take the standard deduction and could potentially qualif...

Harvesting gains and losses

It's tax planning season! As the end of the year approaches, one of the most popular questions my clients ask is, do I need to do anything before the end of the year to minimize my taxes? One popular strategy is harvesting capital gains or losses. What this means is that if you have an investment portfolio, you may have what are called unrealized gains or losses. This simply means the change in your investments' value since you bought it. "Harvesting" means selling that asset so that you can...

Tax Exempt Interest

The Internal Revenue Code states that all income, "from whatever source derived", is taxable. It provides for a few exceptions to this rule, and one of the exceptions is state and local municipal bond interest. What this means is that if you buy a bond from a state or local government; for example, to build a new high school, the interest you earn on that bond is not taxable to you for federal purposes. Holding Municipal bonds, and funds that contain municipal bonds, is a popular investment ...

Year End Tax Planning

2021 is rapidly coming to a close! The last couple of months of the year are an excellent time to revisit your tax plan and make any last-minute adjustments. It's a good time to estimate your 2021 tax liability based on how you've done in the year so far, to be prepared for any extra payments that may be needed. There are online tools to do this such as the one on efile.com, or get with your CPA. Review your charitable goals and make any additional gifts by December 31. If you haven't comple...

Lumping Donations

 | Today on Mesa Money Minute "Lumping donations"  I'm Donna Morrall, a Certified Financial Planner with Clear Waters Financial Network.

529 Accounts

Today on Mesa Money Minute "529 Accounts for College"  I'm Donna Morrall, a Certified Financial Planner with Clear Waters Financial Network.

Gifting Limits

 | Today on Mesa Money Minute "Gifting Limits"  I'm Donna Morrall, a Certified Financial Planner with Clear Waters Financial Network.  

How to Take Advantage of Compounding

Requirement Minimum Distributions

 | Today on Mesa Money Minute "Required minimum distributions and gifting"  I'm Donna Morrall, a Certified Financial Planner with Clear Waters Financial Network.

Compounding Interest - the Downside

Charitable Annuities and Trusts

Compounding Interest

Roth IRA Accounts for Kids

 | Today on Mesa Money Minute "Roth Accounts for Kids"  I'm Donna Morrall, a Certified Financial Planner with Clear Waters Financial Network.

Identity Protection PINs

Tax return fraud has been on the rise over the last few years. We hear about fraudsters filing a false return using someone else's identity, and having the refund redirected to their own account. To combat this type of fraud, the IRS is taking steps such as sending out a letter requesting people call them or log in online to verify their identity. Sometimes these letters are random, but other times they are triggered by a change in your tax return, such as a larger refund than usual. One way...

Divorce - Attorneys, Mediators and Collaborators

Divorce - Stay Grounded With a Plan

Target Date Funds

What Are ETF's?

Saving vs. Investing

Divorce Paperwork

Investing - Is it Too Late?

How to Prepare for Divorce

Capital Gains Taxes

The concept of capital gains and the taxes levied on them is an important one to consider if you are an investor or own any property that may grow in value. Capital gains are produced by the sale or exchange of a capital asset. A capital asset is any asset held by a taxpayer, with exceptions for assets held in the course of a trade or business and certain intellectual property. The amount of a gain or loss is the difference between the sales price and the taxpayer's adjusted basis (or cost) ...

Limitations on QBI deduction

Last week we discussed how to calculate the Qualified Business Income Deduction, or QBID. This week we're diving into some of the limitations for the deduction. Taxpayers who have a household taxable income greater than certain thresholds, are subject to what is known as the wage and investment limit. For 2021, the threshold amounts are $326,600 for married taxpayers and $163,300 for everyone else. The limit is the greater of 50% of W-2 wages or 25% of the W-2 wages paid by the business plus...

Calculating QBID

We discussed what the Qualified Business Income Deduction is a couple of months ago. To refresh your mind, it is a deduction for certain small business of 20% of their net income. Professional assistance is recommended to calculate the QBID; however, in a nutshell, the deduction is equal to 20% of the Qualified Business Income, or QBI. QBI is the net amount of income from a trade or business, reduced by the deductible portion of SE tax, the self-employed health insurance deduction, and deduc...

What is the QBI deduction?

The Tax Cuts and Jobs Act of 2017 put into a place a new business deduction for pass-through entities called the Qualified Business Income Deduction or QBID. Basically the QBID is a deduction for 20% of the income generated by pass through business entities including sole proprietorships, partnerships, LLC's and S-Corps. The idea behind this deduction was to provide a tax cut for small- and medium-sized businesses to compete with the corporate tax rate reduction to 21%. There are many limita...

Other Colorado Subtractions

The State of Colorado calculates taxable income by starting with federal taxable income and then making certain additions and subtractions for items that it feels should be taxed differently than they are at the federal level. We discussed the Pension Subtraction on a previous episode, but there are several other subtractions. You can subtract Interest on US Government Bonds (be sure and check the documentation that came with your 1099-DIV to see if any US Government interest is included in ...

Advanced Child Tax Credit

Among the many changes that have happened within the IRS, the one change that is grabbing attention is the Advance Child Tax Credit Payment which began last month. This means that if you have eligible dependents you may receive advanced monthly payments of the increased Child Tax Credit that you would normally see on your tax return at year end. This can result in some tax planning issues if you are not careful. This is not another stimulus payment. This is the IRS sending you your refund ea...

Stimulus Payments

What's the deal with the stimulus payments? There has been much confusion around the three Economic Impact (stimulus) Payments issued to most Americans over the last 12 months or so. Technically the first two payments are an advance on a refundable credit to be reported on your 2020 tax return and the third payment is an advance on a refundable credit to be reported on your 2021 tax return. So, although they are not taxable income, you will need to know the amount of payment you received so ...

Tax Refund Delays

The IRS is swamped. As it struggles to manage processing issues due to the pandemic and last-minute changes from the latest tax breaks approved by Congress, there’s one painful consequence for many Americans: a potential delay in receiving their tax refund. In 2020, the IRS closed its offices due to the pandemic. This created a backlog of unprocessed paper 2019 tax returns the IRS is still catching upon—and that’s not even counting the high-volume of 2020 tax returns being submitted. The IRS...

Check the Status of Your Refund

One of the more common questions we get from our clients is when they might expect their refund. The best way to check your federal refund is to go to www.irs.gov/wheresmyrefund. With a few bits of information from your tax return, the website can provide the status of your refund. If you are on a mobile device, you can use the IRS2Go app to check your refund status. The state of Colorado has a similar option at www.colorado.gov/revenueonline. While most refunds are issued in less than 21 da...