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Federal Per Diem Rates Updated for FY 2022
Per diem rates have been updated for FY 2022 and are effective October 1, 2021. These allowances substantiate the amount of ordinary and necessary business expenses paid or incurred while traveling away from home and include lodging, meal, and incidental expenses, as well as meal and incidental expenses only.
Taxpayers are not required to use a method described in this revenue procedure. Instead, they may substantiate actual allowable expenses provided they maintain adequate records.
As a reminder, the TCJA suspended the miscellaneous itemized deduction that employees could take for non-reimbursed business expenses. Certain individuals such as the self-employed, Armed Forces reservists, and qualified performing artists that deduct unreimbursed expenses for travel away from home may still use per diem rates for meals and incidental expenses, or incidental expenses only.
Special meal and incidental expenses rates for taxpayers in the transportation industry are $69 for any location in the continental United States and $74 for any locality outside the continental U.S. The rate for the incidental-expenses-only deduction is $5 per day and applies to any travel locale inside or outside the continental United States.
Per diem rates and the list of high-cost localities for purposes of the high-low substantiation method are also updated. For travel to any high-cost locality, per diem rates are $296. The per diem rate is $202 for travel to any other locality within the continental U.S. The amount that is treated as paid for meals is $74 for travel to any high-cost locale and $64 for travel to any other locality within the continental U.S. Travel to areas on the list of high-cost localities have a federal per diem rate of $249 or more.
Please call the office if you have any questions about per diem rates.
IRAs: Terms to Know
IRAs, or Individual Retirement Arrangements, provide tax incentives for people to make investments that can provide financial security for their retirement. To help people better understand this type of retirement savings account, here’s a basic overview of terms to know:
Contribution. The money that someone puts into their IRA. There are annual limits to contributions depending on their age and the type of IRA. Generally, a taxpayer or their spouse must have earned income to contribute to an IRA.
Distribution. The amount that someone withdraws from their IRA.
Withdrawals. Taxpayers may face a 10% penalty and a tax bill if they withdraw money before age 59 ½ unless they qualify for an exception.
Required distribution. There are requirements for withdrawing from an IRA:
- Someone generally must start taking withdrawals from their IRA when they reach age 70 1/2.
- Per the 2019 SECURE Act, if a person’s 70th birthday is on or after July 1, 2019, they do not have to take withdrawals until age 72.
- Special distribution rules apply for IRA beneficiaries.
Traditional IRA. An IRA where contributions may be tax-deductible. Generally, the amounts in a traditional IRA are not taxed until they are withdrawn.
Roth IRA. This type of IRA that is subject to the same rules as a traditional IRA but with certain exceptions:
- A taxpayer cannot deduct contributions to a Roth IRA.
- Qualified distributions are tax-free.
- Roth IRAs do not require withdrawals until after the death of the owner.
Savings Incentive Match Plan for Employees. This is commonly known as a SIMPLE IRA. Employees and employers may contribute to traditional IRAs set up for employees. It may work well as a start-up retirement savings plan for small employers.
Simplified Employee Pension. This is known as a SEP-IRA. An employer can make contributions toward their own retirement and their employees’ retirement. The employee owns and controls a SEP.
Rollover IRA. This is when the IRA owner receives a payment from their retirement plan and deposits it into a different IRA within 60 days.
It’s essential to understand the tax implications of your retirement planning choices. If you haven’t started saving for retirement, call the office and speak to a tax professional who will help you figure out a plan that works for you.
E-Signatures Extended for Many Tax Forms
To help reduce the burden to taxpayers brought about by the coronavirus pandemic, the use of electronic or digital signatures on certain paper forms they normally cannot file electronically have been extended through December 31, 2021. Let’s take a look at what this means for taxpayers:
Types of acceptable electronic signatures
An electronic signature is a way to get approval on electronic documents. There are a number of ways to do this. Acceptable electronic signature methods include:
- A typed name typed on a signature block
- A scanned or digitized image of a handwritten signature that’s attached to an electronic record
- A handwritten signature input onto an electronic signature pad
- A handwritten signature, mark or command input on a display screen with a stylus device
- A signature created by a third-party software
The type of technology a taxpayer must use to capture an electronic signature is not specified; the IRS will accept images of signatures (scanned or photographed) including common file types supported by Microsoft 365 such as tiff, jpg, jpeg, pdf, Microsoft Office suite or Zip.
E-signatures on certain paper-filed forms
Electronic or digital signatures are typically allowed on paper forms that cannot be filed using IRS e-file. Some of these forms are listed below. For a complete list, please call the office.
- Form 706, U.S. Estate (and Generation-Skipping Transfer) Tax Return;
- Form 709, U.S. Gift (and Generation-Skipping Transfer) Tax Return;
- Form 1120-C, U.S. Income Tax Return for Cooperative Associations;
- Form 1120-H, U.S. Income Tax Return for Homeowners Associations;
- Form 1120-L, U.S. Life Insurance Company Income Tax Return;
- Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return;
- Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts;
- Form 1120-SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B);
- Form 1127, Application for Extension of Time for Payment of Tax Due to Undue Hardship;
- Form 1128, Application to Adopt, Change or Retain a Tax Year;
- Form 2678, Employer/Payer Appointment of Agent;
- Form 3115, Application for Change in Accounting Method;
- Form 4421, Declaration – Executor’s Commissions and Attorney’s Fees;
- Form 4768, Application for Extension of Time to File a Return and/or Pay U.S. Estate (and
- Generation-Skipping Transfer) Taxes;
- Form 8038-G, Information Return for Tax-Exempt Governmental Bonds;
- Form 8038-GC; Information Return for Small Tax-Exempt Governmental Bond Issues, Leases, and Installment Sales;
- Form 8283, Noncash Charitable Contributions;
- Form 8802, Application for U.S. Residency Certification;
- Form 8832, Entity Classification Election;
- Form 8971, Information Regarding Beneficiaries Acquiring Property from a Decedent.
Closing Your Business: A Tax Checklist
Many small businesses have closed due to COVID-19. If yours is one of them, you should be aware that there is more to closing a business than laying off employees, selling office furniture, and closing the doors – you must also take certain actions as required by the IRS to fulfill your tax obligations. For example, if you have employees, you must file final employment tax returns as well as make final federal tax deposits of these taxes. You will need to attach a statement to your return listing the name and address of the person that keeps the payroll records (this could be you or another person) as well. If you are disposing of business property, exchanging like-kind property, and/or changing the form of your business, you must file a return to report these actions too. You must also file an annual tax return for the year you go out of business.
Depending on your type of business structure, you may need to take the some or all of the following steps:
- File final federal tax deposits
- File final quarterly or annual employment tax form (Forms 94x)
- Issue final wage and withholding information to employees (Form W-2, Wage and Tax Statement)
- Report information from W-2s issued (Form W-3, Transmittal of Income and Tax Statements)
- File final tip income and allocated tips information return (Form 8027, Employer’s Annual Information
- Return of Tip Income and Allocated Tips)
- Report capital gains or losses
- Report partner’s/shareholder’s shares (Schedules K-1)
- File final employee pension/benefit plan
- Issue payment information to sub-contractors (Form 1099-MISC, Miscellaneous Income)
- Report information from 1099s issued Form 1096, Annual Summary and Transmittal of U.S. Information Returns)
- Report corporate dissolution or liquidation
- Consider allowing S corporation election to terminate
- Report business asset sales
- Report the sale or exchange of property used in your trade or business.
If you find yourself in the position of having to close your business, help is just a phone call away.
Reporting Gambling Income and Losses
If you aren’t in the trade or business of gambling, you should be aware that gambling winnings are fully taxable and must be reported as income on your tax return. Gambling income includes but isn’t limited to winnings from lotteries, raffles, horse races, and casinos, and also includes cash winnings and the fair market value of prizes, such as cars and trips. Here is what you need to know:
If you receive certain gambling winnings or have any gambling winnings subject to federal income tax withholding, you will be issued a Form W-2G, Certain Gambling Winnings. Gambling winnings are reported as “Other Income” on Schedule 1 of Form 1040 or Form 1040-SR. Winnings that aren’t reported on a Form W-2G should also be included. Depending on the amount of gambling winnings, you may be required to pay an estimated tax on that additional income. For additional information on withholding gambling winnings, please contact the office.
You may deduct gambling losses only if you itemize your deductions on Schedule A (Form 1040) and have kept a record of your winnings and losses. The amount of losses you deduct can’t be more than the amount of gambling income you reported on your return. You can claim your gambling losses up to the amount of winnings as “Other Itemized Deductions.”
As a nonresident alien of the United States for income tax purposes and you must file a tax return for U.S. source gambling winnings, using Form 1040-NR, U.S. Nonresident Alien Income Tax Return. Generally, nonresident aliens of the United States who aren’t residents of Canada can’t deduct gambling losses.
To deduct your losses, you must keep an accurate diary or similar record of your gambling winnings and losses and be able to provide receipts, tickets, statements, or other records that show the amount of both your winnings and losses. If you need assistance with this, don’t hesitate to call.