Local Business

DEMOTTE — Teddy and Selena Burns, owners of Burns Family Pizzeria in DeMotte, were the guest speakers at the April 26 DeMotte Kankakee Valley Rotary meeting.

National Business

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Waiting until the last minute to pay your taxes can cost you if you are expecting a refund, since the government hangs on to your money and receives more interest on it. However, if you owe money to the government, that same principle applies to you. Why not wait until the last minute?

There is no reason not to, as long as your return is postmarked or electronically submitted by May 17th, 2021, and your payments are submitted then as well. Extending your deadline to file does not extend your payment time. You are expected to pay the amount you owe, or your best estimate, by the May 17th deadline.

"Filing for an extension doesn't get you an extension to pay," confirms Betterment Head of Tax Eric Bronnenkant. "Let's say you don't pay by the deadline, well then you're still going to have to pay interest on that m...

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Contributing to a retirement account can be difficult for lower income households, but one can argue that it is even more important for those families to take advantage of all the retirement savings options that are possible. One of the lesser-known options applies directly to lower-income families – the credit for qualified retirement savings contributions, also known as the Saver's Credit. Note that this program is a tax credit and not a deduction, meaning that the amount you qualify for is subtracted directly from the taxes that you owe.

The credit applies to most retirement plans – 401(k)s, IRAs (both Roth and traditional), 403(b)s, 457(b)s, SIMPLE IRAs, SARSEPs, and other plans. It does not apply to rollover contributions, and any recent distributions that you received from these plans can reduce the amount of your credit. As of 2018, you may also take the credit for contributions to an Achi...

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Did your kids get a taste of the real world and decide that living off Mom and Dad was not so bad after all? Cheer up… you may still be able to claim them as dependents on your taxes.

In the past, dependents could save money on your taxes in two ways: through individual exemptions and the potential eligibility for certain tax credits. The Tax Cuts and Jobs Act (TCJA) removed the personal exemption from tax year 2018, but expanded the Child Tax Credit and kept the Dependent Care Credit in place, despite early talks of doing away with it. "The Dependent Care Credit can be very valuable. It was actually on the potential chopping block as far as the recent tax reform, but it survived," reports Betterment Head of Tax Eric Bronnenkant. "Let's say you have two kids, and let's say your employer offers a dependent care account, you're able to contribute up to $5,000 tax-free through your employ...

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Wouldn't it be nice if you could deduct your credit card debt from your taxes? For most Americans, that's just a dream that will never come true. However, some circumstances allow you to deduct some credit card debt – all related to using your card for business purposes.

The 2017 Tax Cuts and Jobs Act raised the standard deduction and eliminated or reduced certain itemized deductions as part of a tax simplification effort. It's critical for those who still itemize to take advantage of all possible deductions. Self-employed taxpayers and small business owners who rely heavily on credit cards may be able to save by taking advantage of credit-related deductions.

Credit card debt on personal purchases is not tax-deductible, thanks to the 1986 Tax Reform Act. However, three varieties of business-related credit card debt may be deductible.

Interest on credit ca...

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Procrastinator alert: your taxes are due! If you are nowhere near ready as the scary deadline approaches, you may file an extension with the IRS that gives you up to six more months to file your taxes. Filing an extension will spare you from late filing penalties — 5% of the amount of tax you owe for each month or partial month past the deadline. The extension is automatic — you do not have to send any justification or reasoning like "I have 5,000 wadded-up receipts crammed in a shoebox."

The IRS and Treasury Department have extended the 2021 tax filing and payment deadline from April 15th to May 17th, due to the COVID-19 pandemic.

To file an extension, fill out IRS Form 4868, "Application for Automatic Extension of Time to File U.S. Individual Tax Return" and submi...

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As much fun as it is to hold your tax refund check in your hands as you rub them together with glee, direct deposit is a simpler and faster method of receiving your refund. It may be safer as well. Not only will you be spared the possibility of someone stealing your check out of the mail, you will also be less tempted to spend it.

However, there is an even better way to avoid spending your refund. You can have it directly deposited into an individual retirement account (IRA) or purchase U.S. savings bonds with it. Some institutions may allow you to directly deposit your refund into other types of accounts such as 529 College Savings Plans or mutual funds.

IRS Form 8888, "Allocation of Refund," allows you to split your refund into a...

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Caring for an elderly relative can be rewarding, but incredibly difficult – as well as expensive. However, it may be possible to recoup some of the costs through income tax savings.

There are two general approaches to tax savings on elder care costs – taking medical deductions that can be itemized and claiming a dependent care credit that can be subtracted directly from the taxes you owe.

First, you must determine if your elderly relative qualifies as a dependent. Full details are listed in IRS Publication 501, "Dependents, Standard Deduction, and Filing Information," but the primary criteria are that they must be a relative, you must be providing over half of their support, and their gross 2020 income must be less than $4,300.

The definition of relatives includes stepparents and in-laws. They do not...

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MoneyTips

When you use your car for both personal and business reasons and you are not fully reimbursed through your employer for the business expenses, you can deduct those costs from your taxes. How do you go about claiming these deductions? Assuming that you itemize, you have two general paths:

  • Standard Mileage Method – The IRS prints flat rates of reimbursement per mile driven for each calendar year. For business use of your vehicle in tax year 2020, the standard mileage rate is 57.5 cents per mile, down from the 2019 value of 58 cents per mile.
  • Actual Expense Method – Rather than calculate an average based on miles, you can calculate the actual expenses related to the non-personal use including gas, oil, maintenance costs, depreciation, tolls, parking fees, insurance, and other applicable exp...

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A stable income is critical to a comfortable retirement – as is limiting the amount of that income that you give to Uncle Sam. Maximizing retirement income and minimizing taxes requires advance planning – as illustrated in these seven tips.

1. Use a Roth IRA

Because Roth IRAs are funded with post-tax dollars, they are flexible retirement income sources and excellent for plugging retirement income gaps. You may draw contributions out at any time and earnings may be withdrawn tax-free if you are at least age 59½ and have had the account for at least five years.

Roth IRA contributions are less attractive when you are in higher-earning years where a high tax bracket applies. Contribute to a Roth IRA when tax conditions are favorable or convert a traditional IRA to a Roth IRA in a year where your adjusted gross income (AGI) is low, taking the tax hit while you'r...

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In general, deducting pet expenses on your tax return can get you into hot water with the Internal Revenue Service (IRS). Usually pet expenses will not hold up should the IRS audit you. However, specific cases exist that allow you to take legitimate tax deductions for spending on your pet.

Regardless of how you justify your pet deductions, make sure that you have receipts and documentation for all expenses you claim on your tax return or they will be disallowed.

Guard Pets

Guard animals could pass muster for a deduction for your business. If you consider deducting your pet as a guard animal, make sure that they actually perform guard duties. Your pet's breed should be one that is often considered that of a typical guard animal. For instance, a pit bull could be considered a guard dog while a Chihuahua probably would not.

It would be beneficial if you could pr...

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MoneyTips

What two words cause the most panic to Americans? There are probably a hundred funny responses running through your mind right now, but we were thinking of a less humorous response: "IRS audit."

Your odds of avoiding an audit are usually pretty good. The IRS reviewed 771,095 in fiscal year (FY) 2019, resulting in a low audit rate of 0.4%. Raising red flags in your return are likely to increase your odds of being audited. Some of these cannot be avoided, but others are essentially errors in judgment.

  • You Are Wealthy – The IRS disproportionately audits wealthier Americans. Why? As the famous bank robber Willie Sutton allegedly said, "Because that's where the money is." Think of it as a return on investment of IRS time. As Betterment Head of Tax Eric Bronnenkant puts it, "The IRS audits wealthy people because they're the ones who are the most likely to get an adjustment out of it."

    While there may be an element of ROI involved, the...

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By Eric Olsen, Executive Director, HELPS Nonprofit Law Firm

At this time of year, creditors sometimes send out what is called a Form 1099-C. They email it to the Internal Revenue Service (IRS) and copy the person who owes them debt. The form tells the IRS that they, the company who is owed the debt, has tried (unsuccessfully) to collect and the unpaid debt is now "written off."

Seniors are often told by their tax preparers that they now have to pay taxes on the debt contained in the 1099-C, as it is now considered income they received. This is almost always NOT the case and I shudder to think of all the taxes that have been paid because of a 1099-C when it wasn't necessary. Often, you don’t have to pay if you know what to do.

The rule is that to the extent a person is insolvent, meaning their debts exceed their assets, they DO NOT OWE TAX. IRS Form 9...

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The Tax Cuts and Jobs Act (TCJA) of 2017 gave most Americans a break on their upcoming taxes – but you don't need legislation to cut your taxes even further with sound investment strategies that focus on tax optimization.

Here are a few ways to help yourself at Uncle Sam's expense.

1. Shift Toward Capital Gains – The TCJA narrowed the gap between individual tax rates and capital gains taxes, but it's still preferable from a tax perspective to have investments that rely on price appreciation for returns instead of income generation. Returns on the former are taxed at the capital gains rate (15-20%, with a few exceptions) while returns on the latter are taxed per the standard income brackets.

2. Qualified Pass-Through Income – The TCJA also handed a huge, albeit temporary, gift to many small-business owners by allowing a 20% tax d...

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Does your ability to pass on your wealth to your heirs depend on where you live ... and die? Indeed, it does. Federal estate taxes apply no matter where you live within the U.S., but eighteen states subject their citizens to estate taxes or inheritance taxes. The difference between the two is that estate taxes are subtracted from an estate before it is dispersed to the heirs, while the inheritance tax applies to the heirs — even if they live in a different state than the deceased.

Inheritance taxes only apply in six states: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. All of these states completely exempt spouses from paying inheritance tax, and New Jersey exempts domestic partners, too. Children and siblings are also often exempted. Nebraska and Pennsylvania are the only states where children and grandchildren...

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MoneyTips

Thanks to the Affordable Care Act (ACA), you should receive 1095 forms along with the W-2, 1099, and other tax forms that you receive from employers and financial institutions. The 1095 forms verify your health care insurance status for tax purposes. 1095-A forms debuted in 2015, while taxpayers received 1095-B or 1095-C forms for the first time in 2016.

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Form 1095-A is issued through the Federal Health Insurance Marketplace for those who purchased health insurance through the marketplace. Effectively, it is your proof of insurance if you are receiving insurance outside of an employer. All consumers who received cost assistance through the marketplace need the 1095-A form to be able to file their taxes properly.

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MoneyTips

Let's assume that you drew the short straw on the 2020 tax cuts, and you owe Uncle Sam this year. How do you plan to pay? There are plenty of ways other than the old-fashioned check submitted with a paper tax return.

If you file electronically, why not pay electronically? Electronic Funds Withdrawal (EFW) is available whenever you e-file your taxes.

When you e-file your taxes through commercial software, a paid tax preparer, or the IRS Free File program, simply submit an EFW payment request. You'll provide bank account information so funds may be withdrawn from your account directly. If you e-file early, you can schedule the funds to be paid at a later date (but before the due date for your return).

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Social Security is generally considered a tax-free benefit, but that is not always the case. Depending on the amount of alternate income that you have in retirement and your filing status, you could owe taxes on up to 85% of your Social Security benefits.

If you receive Social Security or Social Security Disability Insurance (SSDI) income, you will also receive a Form SSA-1099 from the government. This form tells you the total amount of your benefits but does not tell you if any of your benefits are taxable, or at what percentage.

You can IRS Free File to e-file your return (if you make no more than $72,000), and the software will figure the taxable component of your benefits for you. However, you can get a reasonable estimate by combining half of your Social Security benefits with all other income (includi...

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With businesses and individuals taking steps to return to normal living, there's a lot of pent up consumer demand to spend. The new term "revenge shopping" implies that consumers will be making up for lost time with a boom in products and experiences they couldn't purchase during the lockdown.

The National Retail Federation estimates that retail sales will increase between 6.5 to 8.2 percent this year over last year to a total of $4.4 trillion, exceeding the 4.4 percent average during the previous five years. Of those who plan to indulge in a few revenge purchases, the 2021 McKinsey consumer sentiment report found that around half of consumers admit to being pandemic-fatigued and intend to splurge on things like high-end fashion, beauty, and electronics.

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MoneyTips

It is an exciting time when you start your new business. You have so many things to think of that you may forget one of the most important aspects — taxes. Before you dive into the business world, take a few minutes to consider the tax aspects of your new business.

Your tax obligations are strongly affected by the type of business structure you choose. Typical business structures include sole proprietorships, partnerships, C Corporations, S Corporations, or Limited Liability Corporations (LLCs).

Sole proprietorships, partnerships, and LLCs are reported using personal tax returns because profits are passed through to the owners. Other corporate structures require filing a corporate tax return. Corporate structures generally shield personal accounts from business debt but come with varying levels of tax reporting and compl...

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MoneyTips

You have just received an inheritance. What do you do now? You could spend it on some extravagance, but you would be better off doing two things first: assessing the tax ramifications and thinking about some investment options.

"Death taxes" are somewhat misunderstood, as people can find the two types of death taxes confusing. Estate taxes apply to the front end of the wealth transfer process and are subtracted from the overall value of the estate. They only apply to huge estates and reduce the size of your inheritance upfront; you have no further tax obligation. The Tax Cuts and Jobs Act (TCJA) increased the estate tax lifetime exemption amounts to $11.58 million for single filers and $23.16 million for married couples filing jointly in tax year 2020.

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MoneyTips

The last few years have been difficult ones for the IRS with respect to security issues, and the agency is determined to improve security during this year's filing. Electronic filing is particularly vulnerable because of the speed of the process — it is a favorite method among thieves who steal information from taxpayers and file fraudulent tax returns in their name.

As Bankrate.com Senior VP and Chief Financial Analyst Greg McBride points out, "Tax ID fraud is one of those things where somebody can have your Social Security number and they could have been sitting on it for a while, and you would have no idea until they go and file a bogus tax return under your Social Security number. You only find out at the point where your legitimate return gets rejected." Protect your credit – protect your identity – protect yourself with a Tax Identity Theft

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MoneyTips

Chances are that if you have student loans, you need every bit of extra cash that you can get. Did you realize that your student loans might be able to generate some cash for you?

Under certain circumstances, you may be able to save on your tax bill by deducting the interest that you pay on your student loan. The total deduction from your taxable income could be as much as $2,500. As a final bonus, you do not have to itemize to claim this deduction.

To be eligible for the deduction, your loan must meet certain qualifications. It must have been made to cover qualified education expenses as defined in IRS Publication 970, including tuition, fees, and most room and board charges. The loan cannot have come from a relative or via a qualified employer plan, and the e...

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Taxpayers tend to shy away from taking the home office deduction, assuming that they will be targeted for increased scrutiny from the IRS. That is certainly possible, especially if your deductions are unusually large – but if you truly were entitled to the deduction, why wouldn't you take it?

You may feel that you have less incentive to itemize as the Tax Cuts and Jobs Act (TCJA) did away with many itemized deductions and nearly doubled the standard deduction. However, many self-employment deductions remain in place.

Assuming you reviewed IRS Publication 587, "Business Use of Your Home," and determined that you qualify, what are the home office expenses you can write off? They are covered in IRS Form 8829, "

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MoneyTips

Few things are more frightening than opening your mailbox and finding a letter from the Internal Revenue Service. You may wrack your brain wondering what you've done to receive an IRS notice. But there’s no need to pretend it didn't arrive or go on the lam.

Relax. The IRS sends out millions of letters each year for a variety of reasons. An IRS letter does not necessarily carry bad news – and if it does, ignoring it is not going to make the situation any better. Take a deep breath, resist the urge to panic, and follow these tips to help you get past your initial shock.

1. Read the Letter Promptly – Putting off opening the letter won't help you, and delaying can even cause you harm. In many cases, the IRS is simply seeking more information or clarification of some aspect of your tax return, which makes it time-sensitive by definition.

2. Check for Incorrect Information – Review the notice for any errors such as a misspel...

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MoneyTips

Since 2010, the Internal Revenue Service (IRS) budget has been cut by roughly 20%, and it now has 22% fewer employees than it did in 2010, making IRS customer service challenging, to say the least. The IRS subjected 8.8 million taxpayers to "courtesy disconnects" through the 2015 tax-filing season that ended in mid-2016. "Courtesy disconnects" are a euphemism for hanging up on taxpayers after a prolonged hold time. In the previous tax year, there were “only” 544,000 courtesy disconnects.

Even if a taxpayer managed to get through, he or she wasted lots of precious time just waiting to speak to an IRS representative. In the 2020 fiscal year, IRS received more than 100 million calls on its toll-free telephone lines, but only about 24 million were answered by IRS employees. Taxpayers who got through had to wait an average of 18 minutes on hold. A report from the office of the National Taxpayer Advocate blamed budget cuts, outdated information technology, and insufficient staff...

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MoneyTips

Are you planning on joining the gig economy and becoming self-employed? Are you embarking on retirement after years with a traditional employer? We wish you the best, and, along with the IRS, we remind you to pay your quarterly income taxes.

Without an employer to submit payments regularly out of your paycheck, you are now responsible for paying your own taxes in increments to fulfill America's pay-as-you-go tax requirements. You must make quarterly estimated tax payments if you expect to owe taxes of at least $1,000 for the year.

Underpayment of estimated taxes is on the increase, according to analysis of IRS data. The IRS found that the number of taxpayers incurring penalties related to estimated taxes jumped from 7.2 million in 2010 to 10 million in 2017, an increase of nearly 40%. Making matters worse, the Wall Street Journal reports that the potential number of filers owing penalties may be greater than the overall number of taxpayers filing estimated taxes ...

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MoneyTips

Claiming dependents on your taxes is usually a fairly straightforward procedure, but in some cases, more than one person (or couple filing jointly) will claim someone as a dependent, muddying the process. The most common example is when divorced or separated parents both want to claim their children as dependents for tax purposes.

Dependents can have a large impact on taxes — not just from the ability to claim Head of Household filing status, but also through tax credits such as the Child Tax Credit, the Child and Dependent Care Tax Credit, and the Earned Income Tax Credit. Both the qualification and the amount of potential credit are affected by the dependents that you can claim.

Although the Tax Cuts and Jobs Act (TCJA) removed the personal exemption, it retained the Dependent Care Credit and d...

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MoneyTips

Your smartphone is probably full of fun apps, but we have one more app to add to help you deal with a painful task: your taxes. Did you know that the IRS has a free smartphone app to help taxpayers handle basic tax-related functions? They do, and it has been in existence since 2011.

The IRS2Go mobile app can be downloaded from Amazon, Google Play, or the Apple App Store. The latest version, IRS2Go 5.4.7, is available for Amazon and Android 7.0 or up operating systems, and on iPhone and iPad devices running iOS10.0 or later.

Why would you want to be able to access IRS information on your smartphone? You can perform a variety of useful tasks and seek tax information anywhere that your mobile phone has access to a signal. Here are a few examples of the available IRS services.

  • Check Your Refund – Once the IRS has acknowledged receipt of your e-filed return, you can start checking the status of your refund 24 hours after th...

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MoneyTips

Are you tired of working for others? Being your own boss can be very rewarding both financially and spiritually, but there are challenges associated with freelance work. Taxes are one of the most difficult aspects because self-employment brings a special set of tests.

Freelancers work as independent contractors and those who employ them are not required to withhold payroll taxes (such as Medicare and Social Security contributions). As both employer and employee (technically, you employ yourself), you must contribute both sets of taxes — the normal income tax that you would pay on your income as an employee and the "self-employment tax" that covers Medicare and Social Security contributions.

You must estimate and pay this tax quarterly to approximate the monthly flow of payroll taxes that the government would receive from an employer. Estimated taxe...

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MoneyTips

Do you plan to "retire in place" and stay in your current area, or are you interested in retiring in a different state? In either case, you may want to consult an annual study by WalletHub if retirement is imminent.

The study ranked all 50 states using 41 statistical metrics that were weighted and grouped into three major categories important to retirees: affordability, quality of life, and healthcare. You may be surprised at some of the states in both the best and worst categories. Let's start with the top five.

1. Florida – You knew it had to be high on the list, didn't you? In terms of affordability, Florida came fourth, dropping from last year's second place. Florida also placed sixth in terms of quality of life, overcoming its 28th-ranked healthcare rating.

2. Colorado – Holding second place ove...

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