Many taxpayers opt for the standard deduction, but sometimes itemizing your deductions is the better choice – often resulting in a lower tax bill. Whether you bought a house, refinanced your current home, or had extensive gambling losses, you may be able to take advantage of tax breaks for taxpayers who itemize. Here’s what to keep in mind:

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The partners and staff of Wheeler Accountants, LLP, are pleased to announce the successful completion of an independent peer review of its accounting and auditing practice. Wheeler Accountants, LLP is a member of the Private Companies Practice Section (PCPS) and Government Audit Quality Center (GAQC) of the American Institute of Certified Public Accountants (AICPA). In conjunction with these memberships, our firm has an outside peer review of our quality control procedures every three years. These reviews include a broad spectrum of engagements. We have consistently received the highest ratings in our peer reviews.

To see a copy of our latest peer review report, please click here.

Everyone wants to save money on their taxes, and retirees and older adults are no exception. If you’re 50 or older, here are six tax tips that could help you do just that.

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When COVID-19 struck, many employers quickly switched to a work-from-home model for their employees. Many of them began working in a state other than where their office was located. While some workers have returned to their offices, as the pandemic drags on, more offices continue to work remotely with no back-to-office dates in sight.

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If you’re conscientious about financial reporting, you may already have a sense of your company’s worth, but in some instances, you might need a formal business valuation, such as:
•Certain transactions: Are you selling your business? Planning an IPO? Need financing?
•Tax purposes: This includes estate planning, stock option distribution, and S Corporation conversions.
•Litigation: Often needed in cases like bankruptcy, divorce, and damage determinations.

While there isn’t a single formula for valuing a business, there are generally accepted measures that will give you a valid assessment of your company’s worth. Here are three tips that you can use to give your business a more accurate valuation:

• Take a Close Look at How Your Business Operates

Does it incorporate the most tax-efficient structure? Have sales been lagging, or are you selling most of your merchandise to only a few customers? If so, consider jump-starting your sales effort by bringing in an experienced consultant who can help.

Do you have several products that are not selling well? Maybe it’s time to remove them from your inventory. Redesign your catalog to give it a fresh new look and make a point of discussing any new and exciting product lines with your existing customer base.

It might also be time to give your physical properties a spring cleaning. Even minor upgrades such as a new coat of paint will increase your business valuation.

• Tangible and Intangible Assets

Keep in mind that business valuation is not just an exercise in numbers where you subtract your liabilities from your assets. It’s also based on the value of your intangible assets.

It’s easy to figure out the numbers for the value of your real estate and fixtures, but what is your intellectual property worth? Do you hold any patents or trademarks? And what about your business relationships or the reputation you’ve established with existing clients and in the community? Don’t forget about key long-term employees whose in-depth knowledge about your business also adds value to its net worth.

• Choose Your Appraisal Team Carefully

Don’t try to do it yourself by turning to the Internet or reading a few books. You may eventually need to bring in experts like a business broker and an attorney, but your first step should be to contact an experienced tax professional with the expertise you need to arrive at a fair valuation of your business.

If you need a business valuation for whatever reason, please don’t hesitate to call and speak to a tax and accounting professional who can help:

San Jose: (408) 252-1800

Watsonville: (831) 726-8500

Taxpayers who adopted or started the adoption process in 2021 may qualify for the adoption credit. This credit can be applied to international, domestic private, and public foster care adoption; however, taxpayers who adopt their spouse’s child cannot claim this credit.

Here are eight facts to help people understand the adoption tax credit and whether they can claim it when filing their taxes:

1. The maximum adoption credit taxpayers can claim on their 2021 tax return is $14,440 per eligible child.
2. There are income limits that could affect the amount of the credit. The income limit on the adoption credit or exclusion is based on your modified adjusted gross income (MAGI). If your MAGI amount for 2021 falls between certain dollar limits, your credit or exclusion is subject to a phaseout (is reduced or eliminated). For tax year 2021, the MAGI phaseout begins at $216,660 and ends at $256,660. In other words, if your MAGI amount is below $216,660 for 2021, you can take the full credit, but if your MAGI amount for 2021 is $256,660 or more, your credit will be zero.
3. Taxpayers should complete Form 8839, Qualified Adoption Expenses. This form is used to figure how much credit they can claim on their tax return.
4. An eligible child must be younger than 18. If the adopted person is older, they must be unable to take care of themselves physically.
5. This credit is non-refundable. This means the amount of the credit is limited to the taxpayer’s taxes due for 2021. Any credit leftover from their owed 2021 taxes can be carried forward for up to five years.
6. Qualified expenses include:
   •Reasonable and necessary adoption fees.
   •Court costs and legal fees.
   •Adoption related travel expenses like meals and lodging.
   •Other expenses directly related to the legal adoption of an eligible child.
7. In some cases, a registered domestic partner may pay the adoption expenses. If they live in a state that allows a same-sex second parent or co-parent to adopt their partner’s child, these may also be considered qualified expenses.
8. Expenses may also qualify even if the taxpayer pays them before an eligible child is identified. For example, some future adoptive parents pay for a home study at the beginning of the adoption process. These parents can claim the fees as qualified adoption expenses.

Questions about whether you qualify for the adoption tax credit? Help is just a phone call away.

San Jose: (408) 252-1800

Watsonville: (831) 726-8500

When completing a tax return, taxpayers have two options: take the standard deduction or itemize their deductions. Most taxpayers use the option that gives them the lowest overall tax. Due to all the tax law changes in recent years, including increases to the standard deduction, that means taking the standard deduction – but not always. Let’s look at a few details about these two options.

Standard deduction

The standard deduction amount increases slightly every year, and it varies by filing status. Factors that affect the standard deduction amount include the taxpayer’s filing status, whether they are 65 or older or blind, and whether another taxpayer can claim them as a dependent. Taxpayers who are age 65 or older on the last day of the year and don’t itemize deductions are entitled to a higher standard deduction.

Most filers who use Form 1040, U.S. Individual Income Tax Return, can find their standard deduction on the first page of the form. For most filers of Form 1040-SR, U.S. Tax Return for Seniors, the standard deduction, is on page 4 of that form.

Not all taxpayers can take a standard deduction. Those taxpayers include:
•A married individual filing as married filing separately whose spouse itemizes deductions – if one spouse itemizes on a separate return, both must itemize.
•An individual who files a tax return for a period of less than 12 months. This is uncommon and could be due to a change in their annual accounting period.
•An individual who was a nonresident alien or a dual-status alien during the year. However, nonresident aliens who are married to a U.S. citizen or resident alien can take the standard deduction in certain situations.

Itemized deductions

Taxpayers choose to itemize deductions should file Schedule A, Form 1040, Itemized Deductions. Itemized deductions that taxpayers may claim include:
•State and local income or sales taxes
•Real estate and personal property taxes
•Home mortgage interest
•Mortgage insurance premiums on a home mortgage
•Personal casualty and theft losses from a federally declared disaster
•Gifts to a qualified charity
•Unreimbursed medical and dental expenses that exceed 7.5% of adjusted gross income

Some itemized deductions, such as the deduction for taxes, may be limited. For more information on these limitations or any other questions, don’t hesitate to contact the office.

San Jose: (408) 252-1800

Watsonville: (831) 726-8500

The IRS began issuing Letter 6475, Your Third Economic Impact Payment, to EIP recipients in late January. This letter helps Economic Impact Payment recipients determine if they are entitled to and should claim the recovery rebate credit on their 2021 tax returns when they file in 2022. It contains information that can reduce errors and delays and help taxpayers or tax professionals prepare their 2021 federal tax returns.

Anyone who receives this letter should keep it. Do not throw it away.

Letter 6475 only applies to the third round of Economic Impact Payments issued in March through December of 2021. The third round of Economic Impact Payments, including “plus-up” payments, were advance payments of the 2021 recovery rebate credit claimed on a 2021 tax return.

Plus-up payments were additional payments the IRS sent to people who received a third Economic Impact Payment based on a 2019 tax return or information received from the Social Security Administration, Railroad Retirement Board, or Veterans Affairs. Plus-up payments were also sent to people who were eligible for a larger amount based on their 2020 tax return.

Most eligible people have already received the payments. However, some people could be missing their stimulus payments and be able to claim a recovery rebate credit for 2020 or 2021, if eligible. This includes people who don’t normally need to file a tax return.

As a reminder, never throw away any letters you receive from the IRS, including those related to Economic Impact Payments. Keep these letters with your tax records because they include important information that can help you quickly and accurately file your tax return or resolve a tax dispute.

If you think you are missing an economic impact payment, please call the office to find out if you are eligible to claim a recovery rebate credit for 2020 or 2021.

San Jose: (408) 252-1800

Watsonville: (831) 726-8500

This quarter’s employee spotlight is shared by staff accountants Ryan Niederer and Felix Feng. Both Ryan and Felix exemplified the “Wheeler Way” in 2021’s fourth quarter, owning their assignments and seeing them through to completion.

Felix was a reliable team-player in Corporate work, training staff and seniors, and adding new software to his repertoire. He took initiative in retrieving information from clients, verifying and updating his projects without prompt from the partners or managers.

Ryan showed the same initiative last fall, stepping up to a large volume of client work and demonstrating exceptional patience through his training with the team.

A big congratulations to Ryan & Felix for being selected as Q4 2021’s Employees of the Quarter!

Every year, it’s a sure bet that there will be changes to current tax law, and this year is no different. From standard deductions to health savings accounts and tax rate schedules, here’s a checklist of tax changes to help you plan the year ahead.

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