Year: 2025

2021 Tax Changes For Personal Filing

Before you know it, tax season will be here, and unless you’re an accountant or working for the IRS, you’re probably not too excited to look at W2s. As it goes, personal taxes will be a little bit different than it has been in previous years. 2022 brings with it new rules and changes that may take you by surprise if you’re not prepared early in the season. What specific new tax changes should you watch out for before you send in your return?

The Expanded Child Tax Credit

Was your family eligible for the expanded child tax credit? The American Rescue Plan boosted the credit to $3,000 for families with children 17 years of age or younger. In addition, an extra $600 was made available for children under 6 years of age to help families struggling during the pandemic.

While millions of Americans received advanced credits, some filers ended up earning more than expected in 2021 and may need to pay some of the credit back. How do you know if you may need to pay back some (if not all) of the credit?

Recipients can also easily check their advanced payments on the IRS website and determine whether they qualified for the payments received.

Health Insurance Premiums

In March 2021, Congress increased health insurance premium subsidies, capping premiums at 8.5 percent of household income, helping millions of Americans save money on their monthly premiums.

Did you get a raise or a new job in 2021, meaning an increase in wages? If so, your subsidies may not have been appropriately reflected throughout the year. What does this mean?

Similar to the child tax credit, 2022 filers may owe money back. Take time now to get an estimate of how much money you may need to set aside come tax season to offset these subsidies.

Required Minimum Distributions

In 2020, the CARES Act waived required minimum distributions, meaning that retirement plan participants, IRA owners (including beneficiaries) did not have to take RMDS from their IRAs.

The waiver has since ended, as did the RMD age, which changed to 72 from 70.5 years of age. If you’re unsure of the rules, deadlines, and requirements, visit the IRS’s site, check by plan, and learn about potential penalties.

Donohoo Can Handle Your Taxes

We realize these changing tax rules are hard to follow and stay on top of year after year. Donohoo Accounting Services is here to help make tax season easy for you while also helping you find every tax deduction you are entitled to.

When it comes time to file your 2021 taxes, you don’t have to do it on your own. We have been filing tax returns for individuals in the Greater Cincinnati area and beyond for more than 20 years, and our team is well versed in tax laws and rules, saving you time and money. Contact us today to schedule your free consultation! For more tips and our latest updates, check us out on Facebook, Twitter or LinkedIn!

Donohoo Accounting Services

2021 Tax Changes For Businesses

Filing taxes for your small business is likely one of your least favorite things about being your own boss. Tax season might be months away, but now is the time to determine if you will need any extensions. Plus, waiting until the week before the deadline might increase your risk of making a mistake and getting unwanted attention from the IRS!

Work-From-Home Related Deductions

Were you working from home for a majority of 2021 due to the pandemic? If so, you might have loved the quick commute from your bedroom to the home office and being able to spend more time in comfortable clothes.

You may be eligible for a home office deduction, adding extra money to your pocket. A home office deduction is usually reserved for those who are not employed by a company that provides a W2, but if you’re self-employed or an independent contractor, it might be worth looking into, as it could save you hundreds of dollars.

Paycheck Protection Program Loans

In 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act helped small business owners keep their heads above water during shutdowns, layoffs, and COVID surges by offering Paycheck Protection Program (PPP) loans.

These loans were used on business expenses like payroll, mortgages, utilities, rent, but became effectively exhausted in May 2021. Were you one of the business owners who were eligible and received loans in the first part of 2021? If you’re looking into having your loans forgiven, you must submit a loan forgiveness application and have it approved by the Small Business Administration.

Charitable Donation Deductions

2021 has been a hard year for us all as we worked to recover as a nation in the midst of a pandemic. Many non-profits and shelters found themselves in dire need of supplies to help feed and clothe those who were laid off or struggling to make ends meet.

Did your restaurant or food-related business donate to food banks or shelters during 2021 to help feed others in need? If so, you may qualify for an increased deduction limit on your 2021 taxes if you meet certain requirements outlined by the IRS.

Donohoo Can Handle Your Taxes

Donohoo Accounting Services is here to help make tax season easy for your small business by finding every tax deduction you are entitled to, saving you time that can be spent focusing on keeping your business running.

We have been filing tax returns for small businesses in the Greater Cincinnati area and beyond for more than 20 years, and our team is well versed in tax laws and rules, saving you time and money. Contact us today to schedule your free consultation! For more tips and our latest updates, check us out on Facebook, Twitter or LinkedIn!

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4 Financial Prerequisites For Buying A Home (Especially In 2021)

Buying a home is one of the largest purchases that most individuals will make in their lifetime. And if you’re like many new homebuyers, this may not be your first or last home purchase. Americans are moving homes at quicker rates than ever. With the housing market hot after the pandemic slump, knowing if you have the proper financial prerequisites is even more essential.

If you’re considering buying a home in the next few months, keep reading to learn all about what you need to guarantee you successfully close on the house of your dreams.

Qualifying For A Mortgage
The first, and most important step in home buying is qualifying for a mortgage. The mortgage is how you will pay for your home over time, so qualifying for a sustainable, low interest rate and payment is essential. To determine if you qualify, lenders will look at your monthly income, savings accounts, current level of debt, and your credit score.

Monthly Income
To prove your monthly income, you’ll need to prove at least two years of steady monthly employment, either through paystubs (for employees) or with business documents and tax papers (for self-employed loan applicants). Loan programs usually don’t have a minimum income needed in order to qualify for a mortgage, but there may be a maximum income allowed, so be sure to research this before you apply.

Savings Account
Along with showing that you are reliable with your money, your savings account will prove that you are able to cover any applicable down payment and closing costs for your new home. Not all loan programs require you to make a down payment, though, and many sellers will help to cover the closing costs, so low savings balances do not necessarily disqualify you from a loan.

Debt
High amounts of personal debt can be a make-or-break factor in qualifying for a loan. This is because mortgage lenders estimate that your monthly payments should be no more than 30 percent of your monthly income. If you have outstanding debts to pay, you may already be reaching a 30 percent threshold without an additional payment. Regardless of your circumstance, your lender will calculate a debt-to-income ratio to determine how much additional debt you are able to take on.

Credit Score
Your credit score is one of the most important pieces in qualifying for a loan, and a history of late payments or bankruptcy can automatically disqualify you for a certain time period afterward. That being said, many lenders offer loans for credit scores as low as 580 by looking at other factors. If you, like many Americans, paid down a significant amount of credit card debt during the pandemic shelter-in-place mandates, then now may be the perfect time to buy.

If you have questions about the financial prerequisites of buying a home, Donohoo Accounting Services can help! We have been preparing tax returns and helping clients with their financial issues for more than 20 years. Contact us today for a free consultation with one of our experts! For more tips and our latest updates, check us out on Facebook, Twitter or LinkedIn!

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5 Tips To Save For Retirement If You Started Later In Life

Mornings on the beach, golfing with friends, picking up an old hobby… retirement is an exciting life stage for many Americans. However, if, for whatever reason, you started later than most in your retirement savings, you may feel like you’ll never be able to achieve that much-deserved reprieve.

If this applies to you, don’t worry. If you’re starting late, you’re not alone, and there are countless strategies out there to help maximize savings in the time you have left. Above all, know that it’s not too late to save — and the best time to start is now.

Figure Out How Much Savings You’ll Need
Experts suggest withdrawing no more than 3-4 percent of your savings for each year of your retirement. Calculate your year budget and expenses, and multiply that by the number of years you’ll be in retirement to determine a baseline savings amount. For example, if your yearly budget is $30,000, and you expect to be in retirement for 20 years, you should set a goal of $600,000 for your savings.

Use Compounding Interest To Play Catch-Up
When you start saving in your first years of employment, it’s harder to contribute more than the minimum amount. This is because your income and wages are usually at their lowest. If you’re starting later, your presumably higher income can help you to contribute more per month, which will help you in the long run due to compounding interest.

Don’t Take On Too Much Risk
Traditional retirement accounts offer a 7 percent return on your investment. While there are other investment options that may offer you more return on your investment, you may also lose your principal at a time when it is incredibly risky. Consider diversifying your portfolio and, if you do invest in more risky options, make sure you have enough saved in other places to protect you in case of emergency.

Pay Down Your Debts Now
Though it may be tempting to focus all your extra income on saving for retirement, it’s important not to forget about your present-day debts. These balances will only increase over time, so paying them down now will save you money and hassle in the long run. Improving your credit score will also allow you to (hopefully!) pay less interest if you decide to purchase a new home during your retirement.

Take On A Balanced Approach
As stated before, there are many tempting ways to make a quick buck that may be tantalizing if you are starting your retirement savings later. However, losing your principal investment at this point could be devastating. Remember that along with your own investment, you may be eligible for Social Security from the federal government, and you can continue to collect on other investments even after retirement.

If you’re still feeling confused or conflicted about saving for retirement, an expert at Donohoo Accounting Services can help. We’ve been assisting our clients with their financial and tax needs for more than two decades. Contact us today to schedule your free consultation! For more tips and our latest updates, check us out on Facebook, Twitter or LinkedIn!

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