Dear client,

As we wrap up 2021, it’s important to take a closer look at your tax and financial plans. This year likely brought challenges and disruptions that significantly impacted your personal and financial situation –– a continued global pandemic, several significant natural disasters, new tax laws and political shifts. Now is the time to take a closer look at your current tax strategies to make sure they are still meeting your needs and take any last-minute steps that could save you money.

We’re here to help you take a fresh look at the health of your tax and financial well-being. Please contact us at your earliest convenience to discuss your situation so we can develop a customized plan. In the meantime, here’s a look at some issues to consider as we approach year-end.

Year-end Planning Moves for Individuals

Key tax considerations from recent tax legislation: Many tax provisions were implemented under the American Rescue Plan Act that was enacted in March 2021. This act aimed to help individuals and businesses deal with the COVID-19 pandemic and its ongoing economic disruption. Also, some tax provisions were passed late in December 2020 that will impact this filing season. Below is a summary of the highlights in recent tax law changes to help you plan.

Economic impact payments(EIPs) The American Rescue Plan Act created a new round of EIPs that were sent to qualifying individuals. As with last year’s stimulus payments, the EIPs were set up as advance payments of a recovery rebate tax credit. If you qualified for EIPs, you should have received these payments already. However, if the IRS owes you more, this additional amount will be captured and claimed on your 2021 income tax return and we can help you plan for any modification now.

If you received an EIP as an advance payment, you should receive a letter from the IRS. Keep this for record-keeping purposes to help us determine any potential adjustment.

Child tax credit As part of the American Rescue Plan Act, there were many important changes to the child tax credit, such as the credit:

• Amount has increased for certain taxpayers
• Is fully refundable (meaning taxpayers will receive a refund of the credit even if they don’t owe the IRS)
• May be partially received in monthly payments
• Is applicable to children age 17 and younger

The IRS began paying half of the credit in advance monthly payments beginning in July –– some taxpayers chose to opt out of the advance payments, and some may have complexities that require additional analysis. We’ll be here to help you navigate any questions to make sure you get the best benefit for your family.

Charitable contribution deductions Individuals who do not itemize their deductions can take a deduction of up to $300 ($600 for joint filers). Such contributions must be made in cash and made to qualified organizations. Taxpayers who itemize can continue to deduct qualifying donations. In addition, taxpayers can claim a charitable deduction up to 100% of their adjusted gross income (AGI) in 2021 (up from 60%). There are many tax planning strategies we can discuss with you in this area.

Required minimum distributions (RMDs) RMDs are the minimum amount you must annually withdraw from your retirement accounts (e.g., 401(k) or IRA) if you meet certain criteria. For 2021, you must take a distribution if you are age 72 by the end of the year (or age 70½ if you reach that age before Jan. 1, 2020). Planning ahead to determine the tax consequences of RMDs is important, especially for those who are in their first year of RMDs.

Unemployment compensation Another thing to note that's different in 2021 is the treatment of unemployment compensation. There is no exclusion from income. The $10,200 income tax exclusion that a taxpayer may have received in 2020 is no longer available in 2021. We can help you plan for any potential impacts of this change.

State tax obligations related to teleworking arrangements The pandemic has spawned changes in how people work, and more people are permanently working from home (i.e., teleworking). Such remote working arrangements could potentially have tax implications that should be considered by you and your employer.

Fraudulent activity remains a significant threat Our firm takes data security seriously and we think you should as well. Fraudsters continue to refine their techniques and tax identity theft remains a significant concern. Beware if you:

• Receive a notice or letter from the IRS regarding a tax return, tax bill or income that doesn’t apply to you
• Get an unsolicited email or another form of communication asking for your bank account number, other financial details or personal information
• Receive a robocall insisting you must call back and settle your tax bill

Make sure you’re taking steps to keep your personal financial information safe. Let us know if you have questions or concerns about how to go about this.

Virtual currency/cryptocurrency Virtual currency transactions are becoming more common. There are many different types of virtual currencies, such as Bitcoin, Ethereum and non-fungible tokens (NFTs). The sale or exchange of virtual currencies, the use of such currencies to pay for goods or services, or holding such currencies as an investment, generally has tax impacts. We can help you understand those consequences.

Additional tax and retirement planning considerations We recommend you review your retirement situation at least annually. That includes making the most of tax-advantaged retirement saving options, such as traditional IRAs, Roth IRAs and company retirement plans. It’s also advisable to take advantage of health savings accounts (HSAs) that can help you reduce your taxes and save for your future. We can help you determine whether you’re on target to reach your retirement goals.

Here are a few more tax and financial planning items to discuss with us:

• Let us know about any major changes in your life such as marriages or divorces, births or deaths in the family, job or employment changes, starting a business and significant expenditures (real estate purchases, college tuition payments, etc.).
• Consider tax benefits related to using capital losses to offset realized gains –– and move any gains to the lowest tax brackets, if possible.
• Make sure you’re appropriately planning for estate and gift tax purposes. There is an annual exclusion for gifts ($15,000 per donee, $30,000 for married couples) to help save on potential future estate taxes.
• Consider Sec. 529 plans to help save for education; there can be income tax benefits to do so, and we can help you with any questions.
• Consider any updates needed to insurance policies or beneficiary designations.
• Discuss tax consequences of converting traditional IRAs to Roth IRAs.
• Let’s review withholding and estimated tax payments and assess any liquidity needs.

Year-end Planning Moves for Small Businesses

Key tax considerations from recent tax legislation. Many tax provisions were implemented under the American Rescue Plan Act that was enacted in March 2021. This act aimed to help individuals and businesses deal with the COVID-19 pandemic and its ongoing economic disruption. Also, some tax provisions were passed late in December 2020 that will impact this filing season. Below is a summary of the highlights in recent tax law changes to help you plan.

Employee retention credit (ERC) The ERC encourages businesses to keep employees on their payroll during the pandemic. The ERC is a refundable payroll tax credit that may be claimed by eligible employers who pay qualified wages to qualifying employees. Changes were made with legislation to allow businesses to qualify for both Paycheck Protection Program (PPP) loans and the ERC.

Contact us to see if you could benefit from these programs.

Family and sick leave credits The American Rescue Plan Act extended the family and sick leave credits to Sept. 30, 2021. These credits are intended to compensate employers and self-employed people for coronavirus-related paid sick and family and medical leave.

Small Business Administration (SBA) loans Though the PPP ended on May 31, 2021, existing borrowers may be eligible for PPP loan forgiveness. Even though the PPP loan forgiveness is not taxable for federal purposes, there may be state implications. There are also other COVID-19 relief measures offered through the SBA. We can help you navigate the tax and financial complexities of these programs.

State tax obligations related to teleworking arrangements The pandemic has changed how people work, and more people are permanently working from home (i.e., teleworking). Such remote working arrangements could potentially have state tax implications that should be considered. We can help you determine any filing or payment obligations.

Fraudulent activity remains a significant threat. Our firm takes data security seriously and your business should as well. Fraudsters continue to refine their techniques and tax identity theft remains a significant concern. Beware if you:

• Receive a notice or letter from the IRS regarding a tax return, tax bill or income that doesn’t apply to you
• Get an unsolicited email or another form of communication asking for confidential information such as payroll or employee data
• Receive a robocall insisting you must call back and settle your tax bill

Make sure you’re taking steps to keep financial information safe. Let us know if you have any questions or concerns about how to go about this.

Partnership audit and adjustment rules New audit and adjustment rules are in effect. Careful planning today will help mitigate any unfavorable consequences on both the entity and the partners themselves. Also, be aware that even if your business isn’t a partnership, you’ll want to evaluate the effect these new rules could have if you’ve invested in any partnership.

Virtual currency/cryptocurrency Virtual currency transactions are becoming more common. There are many different types of virtual currencies, such as Bitcoin, Ethereum and non-fungible tokens (NFTs). The sale or exchange of virtual currencies, the use of such currencies to pay for goods or services, or holding such currencies as an investment, generally has tax impacts. This is a very complex area, but we can help you work through the reporting requirements and tax consequences.

Other tax matters to note

• Business meals –– There is a 100% deduction (rather than the prior 50%) for expenses paid for food or beverages provided by a restaurant. This provision is effective for expenses incurred after Dec. 31, 2020 and expires at the end of 2022.
• Purchases of property and equipment –– With tax-favorable options available to businesses, many purchases can be completely written off in the year they are placed in service. Plus, there are tax-favorable rules that permit qualified improvement property to qualify for 15-year depreciation and, therefore, also be eligible for 100% first-year bonus depreciation. Let us help you receive the best tax treatment.
• Net operating losses –– If you have significant losses from 2018 to 2020, you may be able to carry those losses back up to five years, which can significantly impact a prior year where there was a tax liability.
• Methods of accounting –– More businesses can use the cash method of accounting. This can be helpful for cashflow purposes and is generally easier to apply than the accrual method of accounting. There are qualifications that must be met, but we can help you understand if your business would benefit.
• Preparing for disasters –– Do you have a disaster recovery plan in place for your business and, if so, have you updated it recently? We can help you review your plan, especially as it relates to financial information.
• Sales and use tax considerations –– States are continuing to make changes to their sales and use tax laws and filing requirements following the U.S. Supreme Court ruling in the case South Dakota v. Wayfair, Inc. Please ask us how this case impacts your business.
• Retirement plans –– Have you revisited your company’s retirement plan lately? Take a look at the many retirement savings options to make sure that you are taking advantage of tax deductions as well as providing opportunities for owners and employees to save for retirement.

Looming potential legislation With potential tax changes looming as Congress debates proposals in President Biden’s “Build Back Better” agenda, there remains uncertainty in how this will impact taxpayers. As legislation continues to evolve, and if it passes, we’ll contact you to discuss how changes impact your tax and financial plan.

Year-end planning equals fewer surprises There are many other opportunities to discuss as year-end approaches. And, many times, there may be strategies such as deferral or acceleration of income, prepayment or deferral of expenses, etc., that can help you save taxes and strengthen your financial position.

Whether it’s working toward a business succession plan or getting answers to your tax and financial planning questions, we’re here for you. Please contact our office today to set up your year-end review. As always, planning ahead can help you minimize your tax bill and position you for greater success.

Conclusion

This letter only covers some of the year-end tax planning moves that could potentially benefit you, your loved ones, and your business. Please contact us if you have questions, want more information, or would like us to help in designing a year-end planning package that delivers the best tax results for your particular circumstances.

Dear client,

As we wrap up 2021, it’s important to take a closer look at your tax and financial plans. This year likely brought challenges and disruptions that significantly impacted your personal and financial situation –– a continued global pandemic with the new Omicron variant, several significant natural disasters, new tax laws and political shifts. Now is the time to take a closer look at your current tax strategies to make sure they are still meeting your needs and take any last-minute steps that could save you money.

Here are the 2021 tax rate tables:

Individual income tax brackets for 2021

Rate	Single	Married filing jointly (and surviving spouses)	Head of household	Married filing seperately
10%	Up to $9,950	Up to $19,900	Up to $14,200	Up to $9,950
12%	$9,951 to $40,525	$19,901 to $81,050	$14,201 to $54,200	$9,951 to $40,525
22%	$40,526 to $86,375	$81,051 to $172,750	$54,201 to $86,350	$40,526 to $86,375
24%	$86,376 to $164,925	$172,751 to $329,850	$86,351 to $164,900	$86,376 to $164,925
32%	$164,926 to $209,425	$329,851 to $418,850	$164,901 to $209,400	$164,926 to $209,425
35%	$209,426 to $523,600	$418,851 to $628,300	$209,426 to $523,600	$209,426 to $314,150
37%	$523,601+	$628,301+	$523,601+	$314,151+

Dividend and capital gains rates for 2021

Qualified dividends and gapital gains tax rate	Single filers	Joint filers	Head of household	Married filing seperately
0%	Up to $40,400	Up to $80,800	Up to $54,100	Up to $40,400
15%	$40,401 to $445,850	$80,801 to $501,600	$54,101 to $473,750	$40,401 to $250,800
20%	$445,851+	$501,601+	$473,751+	$250,801+

Washington will impose 7% tax on certain long term capital gains that exceed $250,000 annually per household. Federal capital loss carry forward will be allowed. Note that trusts that are nongrantor trusts will not be subject to this capital gains tax, but Washington beneficiaries of nongrantor trusts who receive allocations of long-term capital gain would be subject to the tax.

Looming on the horizon is the Build Back Better Act (BBBA). The bill passed the House and is in the Senate for vote. Here is a brief outline of some of the tax provisions:

• Creating a 5% surtax on individuals with a modified adjusted gross income (MAGI) that exceeds $10 million ($5 million for married taxpayers filing separately). It adds another 3% surtax on MAGI exceeding $25 million ($12.5 million for married taxpayers filing separately). The surtax would take effect for 2022.
• Expanding the 3.8T NIIT tax to apply to the trade or business income of high-income individuals, regardless of whether they’re actively involved in the business. The income thresholds are over $500,000 for joint filers, over $400,000 for single filers.
• Increasing the Tax Cuts and Jobs Act (TCJA) to raise the cap on state income/property tax deduction from $10,000 to $80,000 ($40,000 for married taxpayers filing separately) for tax years 2021 through 2031. The limit would return to $10,000 in 2032.
• Disallowing the 75% and 100% exclusion of gain from the sale of qualified small business stock if the taxpayer's AGI is over $400,000 or if the taxpayer is a trust or estate.
• Prohibiting all employee after-tax contributions in qualified plans and after-tax IRA contributions from being converted to a Roth IRA regardless of income level, effective for distributions, transfers, and contributions made after Dec. 31, 2021.
• Eliminating Roth conversions for both IRAs and employer-sponsored plans for single taxpayers (or taxpayers married filing separately) with taxable income over $400,000, married taxpayers filing jointly with taxable income over $450,000, and heads of household with taxable income over $425,000 (all indexed for inflation). This provision applies to distributions, transfers, and contributions made in tax years beginning after Dec. 31, 2031.
• Imposing a 15% minimum tax on the profits of corporations that report over $1 billion in profits to shareholders.

With the Washington tax on long term capital gains and these potential future tax increases, many have asked if they should sell investments to lock in the gain before end of 2021. Whether to sell an investment should be driven by your overall investment strategy, not as a reaction to a tax law change. However, if you are planning to sell long-term capital gains assets in 2022 and the gains will exceed $250,000, you might discuss with your investment advisor whether selling before end of 2021 makes sense to avoid the Washington capital gains tax.

Here are some year-end planning ideas and some checklist items:

• Don’t forget to take your RMD (required minimum distributions) before year end. For those turning 72 in 2021, you have until April 1, 2022 to take your first RMD.
• Withholdings - the IRS requires prepayment of 110% of your 2020 taxes or 90% of your 2021 via payroll withholding or quarterly payments. Now is a great time to look at your projected tax. Doing this will help avoid unwanted penalties/interest as well as help you plan for cash flow needs. Adjust your withholding if needed before the end of the year.
• You can make a salary deferral to a retirement plan to reduce taxable income. Make sure your total salary deferral contributions do not exceed the $19,500 ($26,000 if over 50) limit for 2021.
• Considering that we’re currently in a low tax environment and income tax rates will likely be higher in the future, you might want to consider the Roth IRA conversion strategy, especially in light of the potential change in BBBA. Please keep in mind the conversion is a taxable event, so careful planning is needed. Also note the 2018 Tax Reform now disallows recharacterization (undo the conversion).
• Qualified business income deduction - If you own a business or a rental property, you may qualify for this deduction (a potential 20% deduction on business profit). The deduction can be limited based on taxable income, which means that planning for minimizing income can be important.
• If you have investments with an unrealized loss, consider whether you should realize those losses by selling the investments before the end of the year, especially if you have capital gains to offset. If you like the stock and want to buy it back, be aware of the wash sale rules, which is 30 days before and after the sale.
• To the extent you can control the timing of your medical expenses, group them into the same tax year so they will exceed the yearly threshold to deduct them. The threshold is 7.5% of your adjusted gross income.
• If you are thinking about making gifts to charities, consider appreciated securities. With the increase in standard deduction, if you are borderline with the standard deduction vs. itemized, you may want to consider “bunching” your donations in certain years, so that in a year of high donation, you take the higher itemized deduction; in a year of low donation, you take the standard deduction. If you are unsure which charities to give yet, or won’t be itemizing next year, but want the tax deduction this year, consider a donor advised fund (DAF).
• Make your charitable donation via RMD if you are required to take RMD, the limit is $100,000.
• If you paid household employees $2,300 or more, the payroll tax filings are due by 1/31/2022.
• The annual gift exclusion amount for 2021 is $15,000 per person; it will increase to $16,000 in 2022.

For more tax planning tips and recent tax updates, please visit our website at www.bolsoncpa.com or contact us.

Getting Ready for Taxes

We want to make tax filings easy for you. We have developed the schedule below for you to use so the return preparation process can be efficient and effective.

January 21, 2022	Engagement letters will be sent via DocuSign. Organizers are uploaded to your portal for you to access. Please use the tax organizers to minimize errors caused by omitted data. If you have received paper organizers in the past, they will be in the mail the same week
February 1 - March 1, 2022	You may upload, drop off or mail in your tax data. If mailing, be sure to retain copies in case of misdirected mails. Other ways to get us your tax data is by faxing or emailing. Please password protect sensitive documents when emailing. Due to social distancing rules, we may ask you to wait in the lobby or in your car if many clients drop by at the same time.
March 1, 2022	We must have the bulk of your tax data in order to prepare your tax return for filing by April 15, 2022.
April 1, 2022	We need your final open items, such as missing K-1s, to complete your return by April 15, 2022. This is also the deadline for you to provide us data if you want us to calculate extension payment(s).
April 15, 2022	Taxes must be paid, and returns or extensions filed; first 2022 estimated tax payment is due.
June 15, 2022	Your second 2022 estimated tax payment is due.
September 15, 2022	Your third 2022 estimated tax payment is due; if you are on extension, we need every last bit of your tax data!
October 15, 2022	Extended tax returns are due.

We do our best to work on tax returns whenever we receive your data, but we may not be able to complete returns by IRS deadlines when the data is submitted late. Our turnaround time for completion is 2–3 weeks. The turnaround for tax data received from late February on is typically about 3-4 weeks, please plan ahead.

We Appreciate Referrals

We appreciate your trust and confidence in us and will take good care of everyone you send us.

Privacy

We respect your privacy. The personal, non-public information we collect about you has been derived from information that you have provided to us directly or indirectly and from transactions with us. We do not disclose personal information about you to anyone outside our firm, except at your specific request, as required by law, or to our software vendors in resolving an IT issue.