Criminals and fraudsters often see disasters as an opportunity to take advantage of victims when they are the most vulnerable, as well as the generous taxpayers who want to help with relief efforts. Generally, these disaster scams start with unsolicited contact – typically a phone call, on social media, by email, or even in person. Reviewing the tips listed below will help taxpayers recognize a scam and avoid becoming a victim.

1. Some thieves pretend they are from a charity. They do this to get money or private information from well-intentioned taxpayers.
2. Bogus websites use names like legitimate charities. They do this scam to trick people into sending money or providing personal financial information.
3. Pretending to be the IRS. Scammers even claim to be working for – or on behalf of – the IRS. The thieves say they can help victims file casualty loss claims and get tax refunds.
4. Use a check or credit card. Taxpayers should always contribute by check or credit card to have a record of the tax-deductible donation if they choose to give money.
5. Avoid giving out personal information. Donors should not give out personal financial information to anyone who solicits a contribution. This includes things like Social Security numbers or credit card and bank account numbers and passwords.

Taxpayers should also be aware that sometimes when they search for a charity online, they may be directed to a website or social media page that is not affiliated with the actual charity. If in doubt, the best way to check an organization’s eligibility to receive tax-deductible charitable contributions is to visit the Tax Exempt Organization Search tool on the IRS website, IRS.gov. Donations to qualified charities are usually tax-deductible.

If you are a disaster victim, you can call the IRS toll-free disaster assistance line at 866-562-5227. When you call, you will be connected to a phone assistor who will answer questions about tax relief or disaster-related tax issues.

Finally, as a reminder, individual taxpayers can deduct up to $300, and married couples can deduct up to $600 in qualifying charitable contributions for tax year 2021. Itemizing is not necessary.

As always, don’t hesitate to contact the office if you have any questions about charitable contributions or disaster relief and how it affects your tax situation.

San Jose: (408) 252-1800

Watsonville: (831) 726-8500

Parents who share custody of their children may be confused about how the advance child tax credit payments are distributed. As such, the first step is to remember that these are advance payments of a tax credit that taxpayers expect to claim on their 2021 tax return. Understanding how the payments work will allow parents to unenroll, if they choose, and possibly avoid a possible tax bill when they file next year.

Let’s take a look at four of the most common questions about shared custody and the advance child tax credit payments:

1. How will the IRS decide which one receives the advance child tax credit payments if two parents share custody?

Who receives 2021 advance child tax credit payments is based on the information on the taxpayer’s 2020 tax return or their 2019 return if their 2020 tax return has not been processed. The parent who claimed the child tax credit on their 2020 return will receive the 2021 advance child tax credit payments.

2. If a parent is receiving 2021 advance child tax credit payments and they shouldn’t be, what should they do?

Parents who will not be eligible to claim the child tax credit when filing their 2021 tax return should go to IRS.gov and unenroll to stop receiving monthly payments. They can do this by using the Child Tax Credit Update Portal. Receiving monthly payments now could mean they have to return those payments when they file their tax return next year. If their custody situation changes and they are entitled to the child tax credit for 2021, they can claim the full amount when they file their tax return next year.

3. How will 2021 advance child tax credit payments be handled for parents who claim their child in alternate years on their tax return?

If the taxpayer claimed their child on their 2020 tax return, the IRS will automatically issue the advance payments to them. When they file their 2021 tax return, they may have to pay back the payments over the amount of the credit they’re entitled to claim. Some taxpayers may qualify for repayment protection and be excused from repaying some or all of the excess amount. Also, if a taxpayer won’t be claiming the child tax credit on their 2021 return, they should unenroll from receiving monthly payments using the Child Tax Credit Update Portal.

4. If one parent receives the advance child tax credit payments even though the other parent will be claiming the child tax credit on their 2021 tax return, will the parent claiming the qualifying child still be able to claim the full credit amount?

Yes. Taxpayers will be able to claim the full amount of the child tax credit on their 2021 tax return even if the other parent is receiving the advance child tax credit payments. The parent receiving the payments should unenroll, but their decision will not affect the other parent’s ability to claim the child tax credit.

If you share custody with another parent and need further clarification about this important tax issue, don’t hesitate to call.

San Jose: (408) 252-1800

Watsonville: (831) 726-8500

With the end of the year fast approaching, now is the time to take a closer look at tax planning strategies that could reduce your tax bill for 2021.

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Several end-of-year tax planning strategies are available to business owners to reduce their tax liability. Let’s take a look:

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While similar to FSAs (Flexible Savings Plans) in that both allow pretax contributions, Health Savings Accounts or HSAs offer taxpayers several additional tax benefits. Let’s take a look:

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We would like to congratulate Anh Diep as Wheeler’s employee of the quarter for Q3 2021!

Anh was the unanimous choice this quarter for several reasons. Anh has stepped up tremendously for the A&A team this past year- Helping to senior engagements, assisting in pre-audit planning, providing quick turnaround on review, and seeing her projects all the way through to completion. One common theme of celebrated employees this year has been demonstration of ownership of projects, from start to finish. When we own a project from start to finish, seeing it all the way through to completion, we are getting results. It’s this extra effort at the end of the project–despite snags, road blocks, seeming dead ends, etc.–that helps the team and makes things run more smoothly for all of us.

While overseas Anh continued to provide full support to her team, even offering to work US hours to be available as needed rather than on local time. On one of the firm’s key engagements this quarter, Anh was instrumental in providing fast turnaround and making the work a priority, understanding this was a very large and important transaction for our client.

Congratulations to Anh on being selected as our employee of the quarter for Q3 2021!

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.

San Jose: (408) 252-1800

Watsonville: (831) 726-8500

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:

1. A typed name typed on a signature block
2. A scanned or digitized image of a handwritten signature that’s attached to an electronic record
3. A handwritten signature input onto an electronic signature pad
4. A handwritten signature, mark or command input on a display screen with a stylus device
5. 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:

• 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.

For a complete list, please call the office.

San Jose: (408) 252-1800

Watsonville: (831) 726-8500

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.

San Jose: (408) 252-1800

Watsonville: (831) 726-8500