Tax Topics Simplified
Federal Failure to Pay Penalty (FTP)
April 18, 2022, was a deadline by which 2021 individual income tax returns had to be filed. If additional time was needed to complete the tax return, extension to file had to be requested by the filling Form 4868 with the Internal Revenue Service. With the filling of the Form 4868 additional six months are granted to a taxpayer to file the tax return (by October 15th). Please keep in mind the extension is extension to file not extension to pay tax. If the tax due for 2021 was not paid by April 18, 2022, Failure to Pay penalties would start accruing. The Failure to Pay Penalty is 0.5% of the unpaid taxes for each month or part of a month that tax remains unpaid. The penalty won’t exceed 25% of unpaid taxes. The tax is due on the return due date, even if extension was filed.
News you can use
Social Security increase expected to be highest since 1981
Due to current inflation social security checks could jump 8.6% which would be the biggest hike since 1981. This projection is based on most recent U.S. inflation numbers. CPI for April rose 8.3% from year ago. Increase in social Security benefits of approximately $142, per month for seniors could provide some relief to keep up with surging cost of gas and groceries. For a full article click on the link below.
IRS Destroyed 30 million unprocessed informational returns
Last week the Internal Revenue Service has announced that they have destroyed approximately 30 million unprocessed informational returns. The IRS’s inability to process backlogs of paper-filed tax returns that had built up during COVID-19 pandemic contributed to its decision to destroy about 30 million paper filed informational returns. Examples of informational return would be: Form 1099-MISC, Form 1098 etc. Informational returns are used to conduct post-processing compliance matches. Where if someone received a 1099 but did not report it on their tax return the IRS would be able to match informational return against the returns of taxpayers with respect to whom those informational returns were filed. The IRS stated that there are no negative taxpayer consequences for this move that they made.
Interesting Facts
States that do not tax retirement money
Did you know that there are states that do not tax retirement income at all? Some states do not have state income tax and as such do not tax any of the income however, there are states that have state income tax yet still do not tax IRA or 401k distributions. States that do not tax distributions from 401(k) or IRAs (if not taken early) are: Illinois, Mississippi, New Hampshire & Pennsylvania. For a full list of 14 states that do not tax retirement income click on the link below.
What income is exempt from Louisiana state income tax?
Louisiana is not as generous as some other states when it comes to taxing the retirement money. Louisiana does not tax Federal or Louisiana state retirement benefits. The most common retirement benefits that I come across that are exempt from Louisiana state income tax are military and teachers’ retirement. Louisiana does allow persons 65 years or older to exclude up to $6,000 of annual retirement income regardless of source (401k) distribution or IRS distributions. Louisiana also allows taxable portion of social security income to be exempt for state income tax purposes. For the full list of retirement sources which are exempt from Louisiana state income tax click on the link below.
Louisiana State Income Tax Rates for 2022
Louisiana has decided to lower its state income tax rates for 2022. See the image above for tax brackets and tax rates for 2022 and years after.
Couple lives on cruise ship
I came across an interesting article that I would like to share with y’all. A couple from Seattle Washington have started their journey of living on a cruise ship since May 2021, which they say is a lot cheaper than owning a home in their hometown. The average price of a home in Seattle, Washington is $958,027 which could come with a mortgage that cost around $50,000 a year. It costs the couple $88 per night to live on a cruise ship, that is $32,120 a year which is a lot less than would be a mortgage per year, plus they do not have to worry about buying groceries, gas, and paying other utilities. This idea seems very interesting.
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