It gives us at Sterling Hawthorne no greater joy than the opportunity to wish you a Merry Christmas and Happy New Year. Thank you for choosing our services. It truly is clients like you that not only make our job great and make Sterling Hawthorne the service that it is today. Christmas is a wonderful time in which our hearts are filled with joy and that is why we must share it with you. We thank you for your continued support and we look forward to serving you in the coming year. We hope that the new year will bring you happiness and success.
Warm wishes this Christmas and this New Year.
Jay, Sean, Christine, Jordan, Thao, LeAwna, and Sunnye
Sterling Hawthorne Group
5750 Rufe Snow Dr, Ste 119
NRH, 76180
Ph: 817-428-6005
Sterlinghawthorne.com
Please visit our website sterlinghawthorne.com for a more comprehensive write up of changes in 2021 and beyond. The activity from this year is more than can be included in the Christmas letter.
The schedule of tax due dates is returning to the regular schedule. Business returns (partnerships and S-Corporations) are due March 15. Personal and C-Corporations are due April 15. Beginning in mid to late January office hours will extended to 9 to 6 Monday through Friday.
For those who prefer not to come to the office or office hours do not meet your schedule please use our secure client portal (Verifyle). We can accept your tax documents online, communicate via email or phone calls and then utilize e-signatures to complete the return. This will save you time by eliminating the trips to the office.
The table below shows the maximum income for zero and 15% long term capital gains rates for 2021 and 2022. Anything above the maximum 15% rate amount would be taxed at 20%.
Long Term Capital Gains Rates 2022
| Filing Status | Maximum Zero Rate Amount 2021 | Maximum 15% Rate Amount 2021 | Maximum Zero Rate Amount 2022 | Maximum 15% Rate Amount 2022 |
| Married Filing Jointly & Surviving Spouses | $80,800 | $501,600 | $83,350 | $517,200 |
| Married Filing Separately | $40,400 | $250,800 | $41,675 | $258,600 |
| Head of Household | $54,100 | $473,750 | $55,800 | $488,500 |
| Individual Taxpayer | $40,400 | $445,850 | $41,675 | $459,750 |
| Trusts and Estates | $2,700 | $13,250 | $2,800 | $13,700 |
Standard deduction table
| Filing Status | Standard Deduction 2021 | Standard Deduction 2022 |
| Single | $12,550 | $12,950 |
| Married Filing Jointly or Qualifying Widow(er) | $25,100 | $25,900 |
| Married Filing Separately | $12,550 | $12,950 |
| Head of Household | $18,800 | $19,400 |
Tax Year 2021 Tax Brackets
| Taxable Income Brackets and Rates | |||
| Rate | Single Filers | Married Joint Filers | Head of Household Filers |
| 10% | $0 to $9,950 | $0 to $19,900 | $0 to $14,200 |
| 12% | $9,951 to $40,525 | $19,901 to $81,050 | $14,201 to $54,200 |
| 22% | $40,526 to $86,375 | $81,051 to $172,750 | $54,201 to $86,350 |
| 24% | $86,376 to $164,925 | $172,751 to $329,850 | $86,351 to $164,900 |
| 32% | $164,926 to $209,425 | $329,851 to $418,850 | $164,901 to $209,400 |
| 35% | $209,426 to $523,600 | $418,851 to $628,300 | $209,401 to $523,600 |
| 37% | $523,601+ | $628,301+ | $523,601+ |
Tax Year 2022 Tax Brackets
| Table 1. 2020 Taxable Income Brackets and Rates | |||
| Rate | Single Filers | Married Joint Filers | Head of Household Filers |
| 10% | $0 to $10,275 | $0 to $20,550 | $0 to $14,650 |
| 12% | $10,275 to $41,775 | $20,550 to $83,550 | $14,650 to $55,900 |
| 22% | $41,775 to $89,075 | $83,550 to $178,150 | $55,900 to $89,050 |
| 24% | $89,075 to $170,050 | $178,150 to $340,100 | $89,050 to $170,050 |
| 32% | $170,050 to $215,950 | $340,100 to $431,900 | $170,050 to $215,950 |
| 35% | $215,950 to $539,900 | $431,900 to $647,850 | $215,950 to $539,900 |
| 37% | $539,900+ | $647,850+ | $539,900+ |
Retirement Accounts Limits
| Account Type | 2021 Limit | 2022 Limit |
| Traditional IRA | $6,000 | $6,000 |
| Roth IRA | $6,000 | $6,000 |
| Health Saving Account (HSA) | $3,600 self / $7,200 fam | $3,650 self / $7,300 fam |
| Employee 401(k) Contribution | $19,500 | $20,500 |
| Solo 401(k) | $58,000 | $61,000 |
| SEP IRA | $58,000 | $61,000 |
Mileage rates for 2021 are $0.56/mile for business, $0.16/mile for medical purposes and $0.14/mile for charitable purposes. The 2022 rates are not available at this time.
Form 1099 Misc has changed in tax year 2020. Box 7 (nonemployee compensation) moved to its own Form-NEC. Payments of $600 or more should be reported on this form. Due date is January 31st.
Stimulus Payments
If you did not receive the third stimulus payment of $1,400 per eligible individual it may be received as a refundable tax credit on the 2021 tax return provided you meet the criteria. The $1,400 does not count as taxable income. We will need to know the information of the credits received.
Child Tax Credit (CTC) and Advanced Child Tax Credit (ACTC)
The new American Rescue Plan Act (ARPA) made changes to the CTC and ACTC for only tax year 2021. The qualifying child now includes those who are 17 or younger instead of 16 and younger. The credit is raised to $3,600 per child for qualifying children under the age of 6 and to $3,000 per child for qualifying children ages 6 through 17. Before 2021, the credit was worth up to $2,000 per eligible child, and children 17 years and older were not eligible for the credit. The amount is fully refundable meaning that it can be refunded even if you owe no taxes. The income qualifications for this are phased out for single filers with MAGI above $75,000, head of household with MAGI above $112,500, and for married filing jointly with MAGI above $150,000. If you are above the thresholds then the $2,000 CTC phaseout rules apply (single-$200,000, and MFJ-$400,000).
For 2021 only, eligible taxpayers automatically received half the CTC in six monthly installments. The other half of the CTC will be credited in the 2021 income tax return. Taxpayers who received the advance payments will receive Letter 6419 from the IRS. It will need to be included in your tax papers that we receive. If you opted out of the ACTC you will not receive the letter. The ACTC will reduce the credit in the tax return and may cause you to receive and smaller refund or even owe for 2021.
Child and Dependent Care Credits
You may be able to claim the child and dependent care credit if you paid for the care of a qualifying individual so that you could work or attend school. If you are married both spouses must have worked and earned income. Self-employed losses do not count. The credit is generally a percentage of the amount of work-related expenses you paid to a care provider for the care of a qualifying individual. The percentage depends on your adjusted gross income. For the 2021 tax year, the credit amount begins to phase out when the AGI reaches $125,000. Between $125,000 and $183,000 the credit is phased out to 50%. Above this the credit is 20% and completely phases out above $483,000. Work-related expenses qualifying for the credit are those paid for the care of a qualifying individual to enable you to work or actively look for work. The expenses qualifying for the credit must be reduced by the amount of any dependent care benefits provided by your employer that you exclude from gross income.
The total expenses qualifying for the child and dependent care credit increased for 2021 to $4,000 (for one qualifying individual) or at $8,000 (for two or more qualifying individuals).
Unemployment Income
Unemployment income is fully taxable for 2021.
Social Security
In 2021, benefits are reduced for those who are under full retirement age if earnings exceed $18,960/year ($19,500 in 2022). In the year full retirement is reached earnings are limited to $50,520/ year ($51,960 in 2022). No limit applies in the years after full retirement age.
Estates and Gifts
The exclusion for the Estates of decedents who die during 2021 is $11.7 million, up from $11.58 million for those who died in 2020. The annual exclusion for gifts is $15,000 for 2021, the same as it was for calendar 2020.
Charitable Gifts
The Taxpayer Certainty and Disaster Tax Relief Act of 2020 extended two charitable giving changes enacted by the Cares Act. It increased limits of cash donations to 100% of your AG for 2021. Gifts to donor advised funds and private nonoperating foundations are excluded. Nonitemizers can also write off up to $300 ($600 for married filing jointly) of charitable cash contributions above the line.
Energy Credits
The residential solar credit is 26% for 2021. It drops to 22% in 2023. Same apples to geothermal heat pumps, residential wind turbines and fuel cell property. Certain other items such as water heaters, heat pumps, air conditioners, energy efficient doors and windows and a few other items may qualify for residential energy credits of up to 10% with limits ranging to $500 or less.
Adoption of a Child
For 2021, the adoption credit can be taken on up to $14,660 expenses per qualified child. The full credit is available for a special-needs adoption, even if it costs less. The credit begins to phase out for filers with modified AGIs over $216,660 and disappears at $256,660.
Services offered in addition to Tax Preparation
We also offer more consulting services such as data analytics using different business intelligence (BI) tools to solve more complex business problems for our clients. This side of the business has been expanding recently and we foresee BI services growing more in the future.
Sterling Hawthorne Group currently offers business consulting and tax planning for clients. We also offer Financial Advisory Services through Sterling Hawthorne Wealth Management for both personal and business clients. The services provide expertise for clients’ decisions around their money matters, personal finances, and investments as well as tax planning and tax filings.
Sterling Hawthorne Group, 5750 Rufe Snow Dr, Ste 119, NRH 76180, Ph: 817-428-6005
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