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10 common tax terms explained

If discussing taxes tends to leave you confused and overwhelmed, you are not alone. The tax industry comes with it’s own language, including an array of terminology and jargon that is not used in day-to-day life. Without understanding these terms, filling for taxes may feel like an impossible task. That is why at Bennett CPA, simplicity is one of my core values. As a premier certified public accountant, I know firsthand how confusing taxes can be. That is why I am committed to simplifying the complexities of taxes to help you better understand and be prepared for your taxes. With my personalized tax services, I will partner with you through informative one-on-one consultations to ease any confusion, and allow you to be a part of the tax planning process.

If you are preparing to have a tax consultation, or simply wish to expand your knowledge on taxes, you may want to know a few common tax terms. Each of these terms are regularly used in tax documents and by...

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Retirement is a significant milestone in life, one that most begin planning for when they receive their first job. In between dreaming of an RV road trip and hoping for more time with your grandchildren, paying taxes is probably the last thing you want to consider when planning for your retirement. At Bennett CPA, it’s our mission to provide personalized tax services to individuals across Colorado Springs so they can focus on what matters: making plans for their future.

Whether you are planning for your retirement or have already retired, there are a few things you can do to reduce your retirement taxes. While you will no longer be taxed on your income, the funds that you remove from most of your retirement accounts will be. Our knowledgeable team at Bennett CPA understands that paying taxes is the last thing you want to spend your hard-earned retirement funds on. For this reason, we have compiled a list of a few ways we save our retired clients money from being spent on excess taxes.

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Being a small business owner most likely means that you are used to doing everything yourself. While that may be ideal as you expertly run your business, it isn’t when paying taxes. At Bennett CPA we won’t let you take on the complexities of small business taxes on your own. As tax experts, our team of experienced professionals have partnered with small businesses throughout Colorado Springs to alleviate the burden and stress that comes with the planning and paying for taxes.

Filing for taxes is a process that many choose to ignore until tax season. The reason for this is most likely due to the complex nature of taxes that leaves most small business owners feeling intimidated. However, at Bennett CPA we believe that taxes can be made easy when they are broken into small and manageable steps. Try implementing these tips into your small business tax preparation to optimize your finances and avoid unforeseen trouble when paying your taxes.

1. Correctly Classify Your Business

An...

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There are many aspects that will affect how you file your taxes, including what category of worker you fall under. At Bennett CPA, we are passionate about helping the residents and business owners of Colorado Springs file their taxes efficiently. One of the biggest questions people have when it comes to their taxes is understanding the differences between the taxes of an independent contractor and an employee. We are here to help walk you through the differences between an independent contractor’s taxes and an employee's taxes.

Differences Between 1099 Contractors And W-2 Employees

The type of tax form that will need to be completed depends on if workers are independent contractors or employees. Self-employed workers, also known as independent contractors, must fill out a 1099 form to report their annual income. On the other hand, employees are given a W-2 filled out by their employer that includes all the required information needed to report your wages and payroll taxes.

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Tax planning can be difficult, especially during a pandemic. As a premier certified public accountant in Colorado Springs, Bennett CPA is passionate about ensuring all businesses and individuals are prepared and equipped for their yearly taxes. Tax laws are constantly changing, and even minute differences can impact your finances from year to year. CPAs are experiencing many Coronavirus-related questions this year, including questions regarding relief for retirement plans and IRAs.

In our current climate, many people are questioning whether they are able to repay Coronavirus-related retirement distributions. These distributions have the ability to immensely impact people’s financial health, so it is important to understand whether or not they can be repaid. In an effort to better serve my clients in Colorado Springs, I...

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One of the best ways you can minimize your tax liability is by claiming all of your deductions. While there are some tax deductions that are commonly known, there are others that many people miss when preparing their taxes. As a licensed CPA in Colorado Springs, I understand the struggle of trying to figure out which tax deductions you can claim. When people file their taxes, the ultimate goal is to owe as little money as possible or better yet, be eligible to receive a refund. At Bennett CPA, I will make sure to find all of the eligible deductions you can claim on your business taxes and your personal taxes. Some important tax deductions to be aware of include the following:

1. Charitable Gifts

Many taxpayers know they can deduct the large charitable gifts they donate each year. But even the little things add up, and you can deduct more than just the money...

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It can be difficult to stay up to date with tax laws, especially when it is common for them to be amended annually. At Bennett CPA, I understand the importance of continually researching and being prepared every tax season. As a licensed CPA providing individual tax services and business tax services in Colorado Springs, I am equipped with the knowledge to help you navigate tax changes and how they might impact your family and business. Starting summer 2021, there are some notable changes to the Child Tax Credit.

What Are Advance Payments?

Advance Child Tax Credit payments are early payments from the IRS totaling 50 percent of the estimated amount you can claim on your 2021 tax return. For 2021, the credit amount is $3,600 annually for children under six years old, and $3,000 for children between the ages of...

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Understanding tax laws and the way they change means being well prepared for every upcoming tax season. As a top-rated CPA in Colorado Springs, I understand how crucial it is to continuously research and educate myself on tax laws. You need all of the details so you can stay informed. Here are 5 of the biggest tax changes to be aware of in 2021, and how they might impact you.

1. Child Tax Credit Changes

There are some important changes happening with the Child Tax Credit. These changes can help families receive advance payments of the Child Tax Credit this summer. Starting July 15, the IRS will pay half of the total amount in advance monthly payments. When you go to file your 2021 income taxes, you will be able to claim the other half. For children ages 05, the tax credit is $3,600 (previously $2,000). And for children ages 6-17, the tax credit is $3,000 (previously $2,000). You can...

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Here at Bennett CPA in Colorado Springs, we believe in providing you with all the information you need surrounding taxes so you can stay informed. Whether you are preparing for tax season or looking to understand new legislation, our goal is to help you understand the ins and outs of your taxes.

The COVID-19 pandemic changed many things for people all over the country in the past year. More than 9 million workers lost their jobs due to the pandemic, and we are still recovering from the financial impact. On March 11, 2021, the American Rescue Plan Act (ARP) was signed into action. This act is designed to support workers across the United States who need extra support during this difficult time.

What Does The American Rescue Plan Do?

The goal of the ARP is to provide direct relief to Americans in the wake of the pandemic. The American Rescue Plan gives relief to many...

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Monday, May 17 was the official tax return deadline for 2021. The IRS has asked taxpayers to file early if possible, due to their own enormous backlog of returns they are sorting through. But even with a month’s extension, many people still struggled to get everything in order and file their returns by then. And whether you are filing late or have forgotten to file your taxes altogether, not staying on top of your taxes can cost you dearly.

This is why at Bennett CPA LLC, we are prepared to help people with all of their tax needs in Colorado Springs. We provide individual tax planning strategies unique to you, to help you take charge of your wealth. No matter what tax questions you have--about the late tax refund for this year or preparing to file next year’s on time--Bennett CPA is here to answer them. Whether it was due to a family emergency, lost documents, or even procrastination, if your taxes are late, read on to find out what...

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Paycheck Protection Program (PPP) is a business loan program that’s designed to provide an incentive for small businesses, in order to keep their employees on payroll. It was started in 2020 through the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to help small businesses, self-employed individuals, some nonprofits, and sole proprietors continue to pay workers.

At Bennett CPA LLC, we are invested in helping small businesses succeed by offering consulting services, tax planning and preparation, and more for individuals and businesses in Colorado Springs. While the PPP program originally closed in late summer last year, it opened back up in 2021 and more businesses are able to apply by May 31st. Would your business benefit from applying for a PPP loan? Should you apply for a PPP loan? We can answer your questions so you can make an educated decision about what’s best for your business.

Who Qualifies for PPP Loans?

There are a number of...

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Bennett CPA LLC is a top-rated tax preparation company in Colorado Springs where we take pride in providing straightforward and simple solutions for our clients. We understand that everyone is going through difficult times, and we aim to take the burden of tax preparation off your shoulders. Whether you have a question about your business taxes or are unsure if you qualify for certain tax breaks, our team is here to answer all of your questions.

Filing your taxes this year may seem more confusing than ever, because of the ambiguity surrounding the filing deadlines. On March 17th, Tax Day for 2021 was officially extended from April 15th to May 17th. This is an automatic action, and citizens do not have to file any paperwork in order to receive the extension. In an effort to help you stay on schedule, the team at Bennett CPA LLC has included some important tax filing...

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As a local business in Colorado Springs, we strive to provide our clients with affordable and high-quality tax services. Bennett CPA LLC understands how quickly taxes can become confusing, and that is why we are here to provide you with the knowledge necessary to make informed tax decisions. As an experienced CPA, Merrill Bennett is able to assist you throughout your entire tax process, from figuring out which tax forms you need to navigating a tax extension.

As an expert in the field, Merrill Bennett is here to answer all of your questions, including, “What is a child tax credit?” It can be extremely confusing navigating your taxes, while trying to determine if you qualify for any advancements or tax breaks. At Bennett CPA LLC, our goal is to provide you with all of the resources necessary to prepare for and navigate tax season.

What Is A Child Tax Credit?

Many stimulus packages have been presented during the pandemic. One of these stimulus packages proposed that the child tax credit be...

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Finding the right CPA for your business is a crucial step toward maximizing your tax profile. When looking for a tax consultant, you can narrow down candidates quickly with focused questions.

As a small business ourselves, Bennett CPA LLC realizes that every part of a company needs to be operating correctly for continued success. If one piece is out of place, it will cause issues for the whole organization. Finding a professional CPA that works with your business to produce seamless results is critical.

What to Look for in a CPA

Many business owners do not realize what important tax questions they are missing the answers to. In addition, the benefits of hiring a CPA for accounting and tax services are not limited to tax season alone. A professional CPA goes above and beyond filing your return with options for tax planning and preparation to strengthen your business’ yearly financial...

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As the United States continues to adopt legislation focused around COVID-19 and tax credits, it can be difficult to keep up with all the changes. While trying to file your taxes for 2020, you may have stumbled across the 7202 form. Today, we are going to explain what this form is, who it applies to, and what it does.

At Bennett CPA LLC, we understand the difficulties of filing taxes as a self-employed individual or as a small business. Compared to a person who is traditionally employed, there are many more forms to be aware of. By utilizing our tax help in Colorado Springs, the filing process becomes clear, simple, and easy.

Form 7202 Explained

The first and most important question to address is “what is form 7202 used for?” This document is a way for self-employed individuals to get tax credits for missing work due to the coronavirus. It has two options. The first is that if you contracted the virus and missed work,...

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Many people only think of taxes when they need to file for their yearly returns. This is not ideal. People who strive to achieve financial longevity need to implement a tax plan. By utilizing an evolving and customized tax strategy, you are able to control your future financial health.

At Bennett CPA LLC, we understand how overwhelming taxes can be. Thinking about the future and establishing a working plan to ensure long-term financial health is difficult to do alone. Let Merrill Bennett, a CPA in Colorado Springs, help you build an actionable strategy to maximize your returns and save you money.

What is a Tax Planning?

Before jumping into the benefits of tax planning for individuals, it is important to understand exactly what a plan is. Essentially, a tax strategy is a way for you to take control of your returns and save money in the long-term. In most cases, the main goal of a well-developed plan is to maximize the income you keep by minimizing...

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Due to the regulated nature of our tax structure, filing laws are continually changing. Each year various tax forms are shortened, expanded, and updated by the IRS. Since most people do not specialize in taxes or have formal training, it can be difficult to keep up with every single adjustment. Utilizing tax software alone can lead to a fog of uncertainty when you file your taxes. Did you do them correctly? Will you get audited? Choosing a professionally certified CPA is a great way to ensure you have done your taxes correctly.

As a CPA in Colorado Springs, Bennett CPA LLC strives to alleviate the confusion surrounding filing. Our team specializes in tax planning and preparation for the most intricate situations. We provide comprehensive tax services so you know your filings have been completed correctly the first time. Below are some reasons why hiring a CPA is better than using tax software:

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As you are preparing your 2020 business tax return on Schedule C you may be surprised by one of the notifications from your tax preparation software: 'Taxpayer may qualify for Form 7202 sick leave and family leave credit' or something along those lines.

Your first question is 'what is this credit', followed immediately by 'do I qualify for this' and finally, 'how much is this credit'?

This is the Sick Leave and Family Leave Credit for coronavirus-related absence from your business, either quarantining and receiving care yourself OR providing care for a dependent who is required to quarantine, receive care or due to a closure of a school or care facility. The take-away here is that you were unable to perform services due to these circumstances.

The credit rate differs for these two types of leave (sick aka self as compared to family leave). For care you required, you can receive a credit up to $511 per day, up to 10 days, For care you provided to another, you can receive a credit up to $200 per day (subject to limitations).

The amount of...

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The adoption tax credit in 2020 is up to $14,300 - depending on your specific circumstances - for a child whose adoption is finalized in 2020. So the question is 'Can I claim this adoption tax credit' and 'What qualifies me for claiming this credit'?

As with most accounting and tax questions, the answer is 'It depends on your specific circumstances'. The adoption tax credit falls into two categories - domestic and foreign adoptions - with a subcategory under domestic adoptions for those deemed as 'special needs'. The definition of 'special needs' for purposes of the adoption tax credit can be boiled down to whether or not the child receives support through the adoption assistance program (sometimes called an adoption stipend). If the child does not receive this support then the credit will be limited to the qualified adoption expenses incurred.

The North American Council on Adoptable Children (NACAC) has additional information and a more detailed description of scenarios and who qualifies that can be accessed ...

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The IRS recently provided notice of when they would start processing individual income tax returns for the 2020 tax-year: February 12, 2021. While this may seem a lot later than most years, this is only a ~2 week delay compared to 2020's filing season as it started on January 27, 2020. Also keep in mind that while the IRS will not start processing these returns until February 12th, you can prepare and submit your tax returns whether that is through self-prep software or a tax preparer so when filing season starts in earnest you can be ready to file immediately.

The IRS anticipates individuals claiming refunds should receive these within 21 days, with some special exceptions for those individuals claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC). This delay in accepting and processing returns with these credits is to hopefully minimize refunds being issued for fraudulently filed returns.

As you begin putting together your 2020 tax documentation don't forget to include any unemployment income you may have received in 2020. This...

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As a small business owner or someone looking into starting your own business, you have no doubt come across articles about making the S election, form 2553 and why it makes sense to be taxed this way as you research how the business should be set up. For a lot of small businesses the S election can make sense from a cost-benefit standpoint, however, due to the passage of the TCJA at the end of 2017, making the S election shouldn't be a foregone conclusion.

Unfortunately - as with a lot of tax and accounting questions - the answer really depends on the specifics of your circumstances (below are just a few):

  1. How profitable you anticipate your business will be in the near future
  2. Whether or not you will have employees
  3. What your 'reasonable compensation' would be if you were taxed as an S corporation
  4. Any additional w-2 wages you may receive from 3rd-party employer(s)

All this to say, when determining whether or not to make the S election for your LLC, partnership or C corporation, it all requires looking at...

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