Cablish & Gentile, CPAs, LLC MONTHLY NEWS MONTHLY UPDATE GIG WORKERS: HERE COMES AN ESTIMATED TAX DEADLINE & BUDGETING FOR BABY GIG WORKERS: HERE COMES AN ESTIMATED TAX DEADLINE If you’re a gig worker or otherwise self-employed, and you don’t have taxes withheld from a paycheck, you likely have to make quarterly estimated tax payments to the IRS. Be advised that the fourth quarter 2021 estimated tax payment deadline for individuals is coming up on Tuesday, January 18, 2022. A pay-as-you-go system If you do have some withholding from paychecks or payments you receive but you receive other types of income such as Social Security, prizes, rent, interest and dividends, you may still have to make estimated payments. And if you fail to make the required payments, you may be subject to a penalty as well as interest. Generally, you need to make estimated tax payments for 2021 if you expect withholding to be less than the smaller of 90% of your tax for 2021 or 100% of your 2020 tax. (The applicable amount is 110% of your 2020 tax if your 2020 adjusted gross income was more than $150,000, or $75,000 if married filing separately.) Sole proprietors, partners and S corporation shareholders generally must make estimated tax payments if they expect to owe $1,000 or more in tax when filing a tax return. Quarterly due dates If you’re new to estimated tax payments, be prepared to submit them throughout the year. The due dates are typically April 15, June 15, September 15 and January 15 of the following year. However, if the date falls on a weekend or holiday, the deadline is the next business day. Estimated tax is calculated by factoring in expected gross income, taxable income, deductions and credits for the year. The easiest way to pay estimated tax is electronically through the Electronic Federal Tax Payment System. You can also pay estimated tax by check or money order using the Estimated Tax Payment Voucher, or by credit or debit card. Seasonal businesses Most individuals make estimated tax payments in the four installments. You simply determine the required annual payment, divide the number by four and make four equal payments by the due dates. However, you may be able to make smaller payments during some quarters under an “annualized income method.” This can be useful to people whose income isn’t uniform over the year, perhaps because of a seasonal business. You may also want to use the annualized income method if a large portion of your income comes from capital gains on the sale of securities that you sell at various times during the year. The correct amount Estimated tax payments are just like paying a traditional tax bill in that you want to fulfill your obligation without overpaying the federal government. Contact our firm with any questions you may have about setting up estimated tax payments or using the annualized income method. BUDGETING FOR BABY Babies bring joy and excitement. They also bring substantial adjustments to the family budget! According to U.S. News and World Report, after adjusting for inflation, it costs about $267,233 in 2021 dollars to raise a baby to age 18 (based on previously published Bureau of Labor Statistics data). That’s a daunting number, to be sure. Fortunately, there are some things you can do to, shall we say, pacify the challenge. Check your insurance Life and disability insurance are critical. Life insurance provides financial protection if an income-earner in your family dies. Term insurance can be a cost-effective option. It offers protection for a specific period, such as 20 years (at which point many children will be relatively self-sufficient, and the loss of income less harmful). Of course, you’ll also need to ensure that your will names a guardian to look after your children in case of your death while they’re still minors. Disability insurance provides financial protection if a breadwinner becomes disabled and no longer can earn a living. While some employers offer disability insurance, the policies often don’t provide enough income to cover all expenses. And Social Security disability benefits might not offer the protection you expect. For instance, to obtain the benefits, the breadwinner typically must be unable to work at any job. So, consider purchasing your own policy that will pay if you can’t continue in your current job. The distinction might make a difference. Review tax breaks Eligible parents can receive a valuable Child Tax Credit. And if you pay a caregiver to watch your baby so you can work, you may be able to claim the dependent care credit. For 2021, depending on your income, this can be up to 50% of eligible childcare expenses, up to $8,000 for one child, or $16,000 for two or more. The caregiver typically can’t be a dependent, your spouse or a parent of the child. Another option is a dependent care Flexible Spending Account (FSA). This is an employer-sponsored program that allows parents to set aside up to $10,500 (for 2021) pretax annually (up to $5,250 if you’re married and file separately) to cover qualified childcare expenses. It’s important to note that you can’t use both the credit and the FSA for the same expenses. Start saving for college early The sooner you start saving for your baby’s education, the more you can leverage the value of compounding. If you save $200 per month starting at your baby’s birth and earn a 6% return, you’ll have nearly $78,000 in 18 years! One of the best options, potentially, is a Section 529 education savings plan. It allows you to save for college expenses, as well as K-12 tuition expenses. Contributions aren’t tax-deductible for federal purposes, but many states offer tax benefits. Withdrawals used for qualified education expenses (limited to $10,000 per year for K-12 tuition) aren’t subject to federal income tax, and typically not subject to state income tax. Get expert advice Whether you have a baby on the way or your family expanded earlier in the year, it’s important to make sure you’re taking the right steps to ensure your child’s financial security. We can offer advice to help you evaluate various options and maximize your tax savings. ARCHIVE OF PAST MONTHLY NEWSLETTERS Nov 2021 Is Disability Income Taxable? & 4 Ways to Withdraw Cash From a Corporation Oct 2021 Being Prepared For An IRS Audit & The Deductibility of Medical Expenses Sep 2021 Which Business Website Costs Are Deductible? & Energize Tax Savings With An EV Credit Aug 2021 Know the Nuances of the Nanny Tax & 5 Key Points About Bonus Depreciation Jul 2021 Curtailing Cryptocurrency Tax Surprises & A Tax Quirk of Being a Business Partner Jun 2021 2 More Ways Parents Are Benefitting From the American Rescue Plan Act & Revisiting Worker Classification Rules May 2021 3 Things to Know After Filing Your Tax Return & The Tax Treatment of Start-up Expenses Apr 2021 ARPA Provides More Than Just Direct Payments to Taxpayers & Can Your Business Benefit From the Enhanced Employee Retention Credit? Mar 2021 Claiming the Home Office Deduction & How the CAA Affects Education Funding Feb 2021 PPP Loans: What 2020 Borrowers Need to Know in 2021 & Why the Child Tax Credit is so Valuable Jan 2021 How COVID-19 Legislation May Affect Your Taxes & 6 Key Tax Q&As for 2021 Dec 2020 Handle Mutual Funds Carefully at Year End & Intrafamily Loans and a Family Bank Nov 2020 Catching Up On Catch-up Contributions & The Tax Impact of Business Property Remediation Oct 2020 Is It Time for a Cost Segregation Study? & Beware of “Wash Sales” When Selling Securities Sep 2020 AMT Less “Toothy” But May Still Take A Bite & College Savings Showdown: 529s vs. Roth IRAs Aug 2020 Risks vs. Benefits of Life Insurance Loans & With Glitch Fixed, Consider Business Property Upgrades Jul 2020 Keeping Up With the Net Operating Loss Rules & Charitable Giving in a Time of Crisis Jun 2020 Protecting Yourself from Opportunistic Fraud & Can You Qualify for the Payroll Tax Credit? May 2020 New Break Temporarily Makes Retirement Plan Withdrawals Less Taxing & How Employers Can Get Some Financial Relief with the Retention Tax Credit Apr 2020 April 2020 – Special COVID-19 Update Apr 2020 Seniors: Medicare Premiums Could Lower Your Tax Bill & Protect Your Estate with These Two Essential Documents Mar 2020 Gig Workers, Know Your Tax Responsibilities & The 2019 Gift Tax Return Deadline is Almost Here, Too Feb 2020 The TCJA Effect: Qualified Residence Interest & Careful Tax Planning Required for Incentive Stock Options Jan 2020 Do You Know Your Tax Bracket? & Every Business Owner Needs an Exit Strategy Dec 2019 Year-End Tax and Financial To-Do List for Individuals & Pump the Brakes Before Donating That Vehicle to Charity Nov 2019 Act Now to Save 2019 Taxes on Your Investments & Living the Dream of Early Retirement Oct 2019 Is "Bunching" Medical Expenses Still Feasible in 2019? & Mortgage Matters: To Pay Down or Not To Pay Down Sep 2019 The Tax Cost of Divorce Has Risen for Many & Double Up on Tax Benefits by Donating Appreciated Artwork Aug 2019 Know a Teacher? Tell Them About This Tax Break & Planning for the Net Investment Income Tax Jul 2019 No Surprises: Why You Should Check Your Tax Bracket & Estate Planning Portability Lives on Under The TCJA Jun 2019 Consider the Tax Advantages of Qualified Small Business Stock & Vacation Homes: Do You Understand the Tax Nuances? May 2019 Innocent Spouse Rules Offer Protection Under Some Circumstances & Send Your Kids to Day Camp and You May Get a Tax Break Apr 2019 Business vs Hobby: The Tax Rules Have Changed & Are Income Taxes Taking a Bite Out of Your Trusts? Mar 2019 Weigh the Tax Impact of Income vs. Growth When Investing & Deducting Charitable Gifts Depends on a Variety of Factors Feb 2019 Multistate Resident? Watch Out for Double Taxation & Fewer Taxpayers to Qualify for Home Office Deduction Jan 2019 Laying the Groundwork for Your 2018 Tax Return & Installment Sales: A Viable Option for Transferring Assets CLIENT LOGIN Login SUBSCRIBE TO OUR NEWSLETTER Submit Home About Us Services Client Login Contact Glossary Links © 2021 Cablish & Gentile, CPAs, LLC All Rights Reserved.