7 Tax Changes You Need to Know for This Year

With the tax season fast approaching, many businesses and sole proprietors are starting to gather their paperwork for their 2021 taxes. A few changes are happening this year that everyone should be aware of.

We discuss these changes in this article so you are informed going into this tax season, but speak with your accountant or tax professional about your specific situation.

Tax Deadline is Extended

The filing deadline for this tax season is April 18th, 2022 – instead of April 15th. The due date this year is April 18th because of the Emancipation Day holiday in the District of Columbia — even if you don't live in the District of Columbia.

If you live in Maine or Massachusetts, you have until April 19th, 2022 because of the Patriots' Day holiday. If you need to request an extension you will have until Monday, October 17, 2022, to file. Also, you can now receive a direct deposit of your refund even if you file your 2021 return after November 30, 2022.

Stimulus Payments are Not Taxable

Any stimulus payments between 2020 and 2021 – called Economic Impact Payments (EIP) –  are not taxable for federal income tax purposes. If you received a third stimulus payment and the IRS sent you Notice 1444-C you will need this when you file, so hold onto it.

Although these payments are not taxable, they will reduce your recovery rebate credit. For instance, the third stimulus payment – issued starting in March 2021 and continuing through December 2021 – including the plus-up payments, were advance payments of the 2021 Recovery Rebate Credit.

If you received the third EIP, your Recovery Rebate Credit will be lower since you already received part of the payment. If you didn't qualify for the third EIP or got less than the full amount, you may be eligible to claim the 2021 Recovery Rebate Credit based on your 2021 tax year information.

SBA Loans and Grants are Not Considered Taxable Income

If you are one of the millions of business owners that received a Small Business Administration (SBA) Economic Injury Disaster Loan (EIDL) or an EIDL Advance (grant), there is good news for this tax season.

Taxes on these funds work like any other business loan taxation. In other words, funds you received from the EIDL are not reported as taxable business income on your tax return.

Standard Deductions Have Been Increased

For 2021, the standard deduction amount has increased for all filers. Here are the new amounts:

• Single or Married filing separately — $12,550 (up $150 from 2020)
• Married filing jointly or Qualifying widow(er) — $25,100 (up $300 from 2020)
• Head of household — $18,800 (up $150 from 2020)

If you elect not to itemize your deductions in 2021, you may qualify for a charitable contributions deduction of up to $300 ($600 in the case of a joint return), whereas previously, you had to itemize charitable contributions

Sick and Family Leave Credits Have Been Extended

The Families First Coronavirus Response Act (FFCRA) helped self-employed individuals affected by the pandemic. It provides paid sick leave and paid family leave credits equivalent to those that employers are required to provide their employees for qualified sick leave wages and qualified family leave wages.

The COVID-related Tax Relief Act of 2020 extended the period individuals can claim these credits through the end of March 2021. In other words, you can claim costs incurred through March of 2021.

First-year Depreciation Deduction Increases to 100% of Eligible Purchases

Businesses just starting up and filing the first-year depreciation deduction can now deduct 100% of the purchase price of eligible equipment and property purchases. Lawmakers are hoping this money will be invested back into the business itself and go towards hiring more workers.

New Reporting Requirements for Digital Payment Services

There is a new rule for virtual payments that will impact millions of small businesses. If you are a small business that takes digital payments through services like Paypal, Venmo, Zelle, etc., and that money goes into your bank account for goods or services, those parties must report that amount to the IRS if the amount is $600 or more in total.

While you should be reporting this income on your taxes, millions of freelancers, independent contracts, etc., receive small payments like this throughout the year, so sometimes these transactions are forgotten.

While this won't affect filing for 2021, business owners could see 1099K forms after January 31, 2023, for any payments received in 2022.

Get Your Taxes in Shape with Good Bookkeeping

Whether  you're new to business or have been in business for years, now's a good time to align with a reputable bookkeeping service. We've partnered with Bench and QuickBooks to get your books and taxes in top shape.

How Else Can Skip Help? Whether you need assistance navigating funding for your small business — like SBA loans, grants, or other financing options, or guidance with government-related services — like TSA PreCheck or DMV appointments, we’re ready to help. Become a member and skip the red tape.