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How to Pay Your Taxes Online

Published on by MBJ Accounting

No need to find your checkbook to pay taxes this year. The IRS and U.S. Treasury has begun a transition to electronic payments, as required by Executive Order 14247, Modernizing Payments To and From America’s Bank Account.

We’ve outlined the steps below that you’ll need to take to pay your taxes online. Click the links to jump to each section, or keep scrolling.

person paying their taxes online

Making Federal Estimate Payments

Follow these steps if you are making estimate payments in 2026 in advance of filing your 2026 return. Go to irs.gov/payments in your web browser and navigate to the buttons to pay with a bank account or with a debit or credit card.

2026 Quarterly Estimated Tax Due Dates 

  • Payment 1: Wednesday, April 15, 2026 (for income January 1 – March 31, 2026)
  • Payment 2: Monday, June 15, 2026 (for income April 1 – May 31, 2026)
  • Payment 3: Tuesday, September 15, 2026 (for income June 1 – August 31, 2026)
  • Payment 4: Friday, January 15, 2027 (for income September 1 – December 31, 2026) 

Direct Pay with a Bank Account

  1. From the IRS payment home page, click the button to select this option.
  2. Under personal tax payments, click the button to pay individual tax.
    Then, click “make a payment.”
  3. Under Reason for Payment, select Estimated Tax.
  4. Under Apply Payment To, select 1040ES (for 1040, 1040A, 1040EZ).
  5. Under Tax Period for Payment, select 2026.
  6. Click the continue button in the next two screens.
  7. Under Tax Year for Verification, select the most recent year you have filed a return.
    Note that this section is for verifying your identity and is not related to the tax year that you selected to make the payment for in the previous screen. The purpose of this step is to compare the information you enter in the fields to what was previously filed, ensuring you are who you say you are.
  8. Under Filing Status, choose the option that matches the information on the verified tax return you selected above.
    For example, if you are recently divorced, but were married in the year you selected, you should select Married Filing Jointly.
  9. Under first name, put the first name on the verified return of the year you selected. For Married Filing Jointly, this would be the husband’s first name or the Taxpayer name.
  10. Under last name, put the last name of the taxpayer you entered above.
  11. Enter the last name again to confirm.
  12. Enter the social security number of the husband for Married Filing Jointly or taxpayer.
  13. Enter the number again to confirm.
  14. Under Date of Birth, enter the date of birth of the husband for Married Filing Jointly or taxpayer.
  15. Complete the country of residence, street address, city, state and zip code based on the verified tax year that you selected above.
    Areas like apartment or PO Box can be left blank if they do not apply to you.
  16. Click the box next to “I accept the Privacy Act and Paperwork Reduction Act” and click continue.
  17. Under Payment Amount, enter how much you want to pay for the quarter.
  18. Enter the amount again to confirm.
  19. Under Payment Date, enter the date you would like the payment to be withdrawn from your bank account.
    For more information press the little “?” beside the box
  20. Under Routing Number, enter the routing number to your payment bank account. The name of your bank should populate below.
  21. Under Account Number, enter the account number to your payment bank account.
  22. Enter the account number again to confirm.
  23. Under Account Type, select the type of account your chosen payment is.
  24. If you would like to receive confirmation via email, complete the optional steps below. You do not have to complete this section to make your payment
    1. Click the box next to “I would like to receive email confirmation notifications and agree to the Email Terms of Service.”
    1. Enter your email address.
    1. Enter your email address again to confirm.
  25. Click continue.
  26. In the pop-up window titled Disclosure Authorization, select “I Agree”
  27. Review that the information you entered is correct.
  28. Enter your first name, last name and social security number.
  29. Click the box next to “I Accept the Debit Authorization Agreement.”
  30. Click submit.
  31. Print your confirmation if possible. You can also take a screenshot if you are paying on a phone or tablet.

Debit or Credit Card Payment (Fee Associated)

  1. From the IRS payment home page, click the button to select this option.
  2. Select the Pay1040 payment option (left).
    This is the lower fee option for paying with a standard credit card. The directions below apply to the Pay1040 option, but ACI Payments, Inc. has a lower fee for a debit card transaction.
  3. A new window from Pay1040 will open.
  4. Select the Pay Now button on the left.
  5. Ensure that Personal is selected under Tax Category.
  6. Under Tax Form, choose Form 1040 Series, then select Form 1040-ES Estimated Tax.
  7. Under Payment Amount, enter how much you want to pay for the quarter.
  8. In the Primary Social Security Number line, enter the number of the husband for Married Filing Jointly or your number.
  9. Enter the number again to the left to confirm.
  10. In the Spouse’s Social Security Number line, enter the number of the wife for Married Filing Jointly.
  11. Enter the number again to the left to confirm.
  12. Complete the contact information, remembering that the primary taxpayer for Married Filing Jointly is the husband.
  13. Note that you do not have to have an email address to complete the contact information.
  14. Click Next and complete the payment card information.
  15. Submit the card payment.
  16. Print your confirmation if possible. You can also take a screenshot if you are paying on a phone or tablet.

Paying Federal Income Tax Returns

Follow these steps if you are paying in 2026 for last year’s income taxes. Go to irs.gov/payments in your web browser and navigate to the buttons to pay with a bank account or with a debit or credit card.

Direct Pay with a Bank Account

  1. From the IRS payment home page, click the button to select this option.
  2. Under personal tax payments, click the button to pay individual tax.
    Then, click “make a payment.”
  3. Under Reason for Payment, select Balance Due.
  4. Under Apply Payment To, select Income Tax – Form 1040.
  5. Under Tax Period for Payment, select 2025.
  6. Click the continue button in the next two screens.
  7. Under Tax Year for Verification, select the most recent year you have filed a return.
    Note that this section is for verifying your identity and is not related to the tax year that you selected to make the payment for in the previous screen. The purpose of this step is to compare the information you enter in the fields to what was previously filed, ensuring you are who you say you are.
  8. Under Filing Status, choose the option that matches the information on the verified tax return you selected above.
    For example, if you are recently divorced, but were married in the year you selected, you should select Married Filing Jointly.
  9. Under first name, put the first name on the verified return of the year you selected. For Married Filing Jointly, this would be the husband’s first name or the Taxpayer name.
  10. Under last name, put the last name of the taxpayer you entered above.
  11. Enter the last name again to confirm.
  12. Enter the social security number of the husband for Married Filing Jointly or taxpayer.
  13. Enter the number again to confirm.
  14. Under Date of Birth, enter the date of birth of the husband for Married Filing Jointly or taxpayer.
  15. Complete the country of residence, street address, city, state and zip code based on the verified tax year that you selected above.
    Areas like apartment or PO Box can be left blank if they do not apply to you.
  16. Click the box next to “I accept the Privacy Act and Paperwork Reduction Act” and click continue.
  17. Under Payment Amount, enter how much you want to pay, which should be the amount owed on your return from MBJ Accounting, unless you have arranged for a payment plan.
  18. Enter the amount again to confirm.
  19. Under Payment Date, enter the date you would like the payment to be withdrawn from your bank account.
    For more information press the little “?” beside the box
  20. Under Routing Number, enter the routing number to your payment bank account. The name of your bank should populate below.
  21. Under Account Number, enter the account number to your payment bank account.
  22. Enter the account number again to confirm.
  23. Under Account Type, select the type of account your chosen payment is.
  24. If you would like to receive confirmation via email, complete the optional steps below. You do not have to complete this section to make your payment
    • Click the box next to “I would like to receive email confirmation notifications and agree to the Email Terms of Service.”
    • Enter your email address.
    • Enter your email address again to confirm.
  25. Click continue.
  26. In the pop-up window titled Disclosure Authorization, select “I Agree”
  27. Review that the information you entered is correct.
  28. Enter your first name, last name and social security number.
  29. Click the box next to “I Accept the Debit Authorization Agreement.”
  30. Click submit.
  31. Print your confirmation if possible. You can also take a screenshot if you are paying on a phone or tablet.

Debit or Credit Card Payment (Fee Associated)

  1. From the IRS payment home page, click the button to select this option.
  2. Select the Pay1040 payment option (left).
    This is the lower fee option for paying with a standard credit card. The directions below apply to the Pay1040 option, but ACI Payments, Inc. has a lower fee for a debit card transaction.
  3. A new window from Pay1040 will open.
  4. Select the Pay Now button on the left.
  5. Ensure that Personal is selected under Tax Category.
  6. Under Tax Form, choose Form 1040 Series, then select Current Tax Return Year – 2025.
  7. Under Payment Amount, enter how much you want to pay, which should be the amount owed on your return from MBJ Accounting, unless you have arranged for a payment plan.
  8. In the Primary Social Security Number line, enter the number of the husband for Married Filing Jointly or your number.
  9. Enter the number again to the left to confirm.
  10. In the Spouse’s Social Security Number line, enter the number of the wife for Married Filing Jointly.
  11. Enter the number again to the left to confirm.
  12. Complete the contact information, remembering that the primary taxpayer for Married Filing Jointly is the husband.
  13. Note that you do not have to have an email address to complete the contact information.
  14. Click Next and complete the payment card information.
  15. Submit the card payment.
  16. Print your confirmation if possible. You can also take a screenshot if you are paying on a phone or tablet.

Making Indiana State Estimate Payments

Follow these steps if you are paying in 2026 in advance of filing your 2026 return. Go to intime.dor.in.gov in your web browser and navigate to the buttons to pay with a bank account or with a debit or credit card.

Note: You must have an email address to pay Indiana State taxes online.

 2026 Quarterly Estimated Tax Due Dates

  • Payment 1: Wednesday, April 15, 2026 (for income January 1 – March 31, 2026)
  • Payment 2: Monday, June 15, 2026 (for income April 1 – May 31, 2026)
  • Payment 3: Tuesday, September 15, 2026 (for income June 1 – August 31, 2026)
  • Payment 4: Friday, January 15, 2027 (for income September 1 – December 31, 2026)

Direct Pay with a Bank Account

  1. Go to intime.dor.in.gov and locate the middle box on your screen.
  2. Select Make a Payment in the Payments box.
  3. Locate the Non-bill Payments box.
  4. Select Bank Payment to pay with a bank account without fees.
  5. Indicate that you are making an individual payment and click next.
  6. Under identification type, choose social security number.
  7. Enter the social security number for the primary taxpayer, which is the husband for Married Filing Jointly.
  8. Enter the number again to confirm.
  9. Under first name, put the first name for the primary taxpayer, which is the husband for Married Filing Jointly.
  10. Under last name, put the last name for the primary taxpayer, which is the husband for Married Filing Jointly.
  11. Complete the phone information and click next.
  12. Complete the address information and then click the blue link to verify the address. Once the address has been verified, select next.
  13. Select Estimated Payment.
  14. Select the end date for the quarter you are paying.
    • Payment 1: March 31, 2026
    • Payment 2: May 31, 2026
    • Payment 3: August 31, 2026
    • Payment 4: December 31, 2026
  15. Select your County of Residence from the drop-down menu.
  16. Under Amount, enter how much you want to pay for the quarter.
  17. Enter your email address and click next.
  18. Confirm that the amount is what you want to pay.
  19. Under Routing Number, enter the routing number to your payment bank account. The name of your bank should populate below.
  20. Under Account Number, enter the account number to your payment bank account.
  21. Enter the account number again to confirm.
  22. Under Account Type, select the type of account your chosen payment bank account is.
  23. Click next and confirm submission.
  24. Print your confirmation if possible. You can also take a screenshot if you are paying on a phone or tablet. You will also receive an email confirmation.

Debit or Credit Card Payment (Fee Associated)

  1. Go to intime.dor.in.gov and locate the middle box on your screen.
  2. Select Make a Payment in the Payments box.
  3. Locate the Non-bill Payments box.
  4. Select Credit Card to pay with a credit or debit card. You will pay a transaction fee.
  5. Indicate that you are making an individual payment and click next.
  6. Under identification type, choose social security number.
  7. Enter the social security number for the primary taxpayer, which is the husband for Married Filing Jointly.
  8. Enter the number again to confirm.
  9. Under first name, put the first name for the primary taxpayer, which is the husband for Married Filing Jointly.
  10. Under last name, put the last name for the primary taxpayer, which is the husband for Married Filing Jointly.
  11. Complete the phone information and click next.
  12. Complete the address information and then click the blue link to verify the address. Once the address has been verified, select next.
  13. Select Estimated Payment.
  14. Select the end date for the quarter you are paying.
    • Payment 1: March 31, 2026
    • Payment 2: May 31, 2026
    • Payment 3: August 31, 2026
    • Payment 4: December 31, 2026
  15. Select your County of Residence from the drop down menu.
  16. Under Amount, enter how much you want to pay for the quarter.
  17. Enter your email address and click next.
  18. Click next again once you have reviewed the fee structure.
  19. Confirm that the amount is what you want to pay and click Pay.
  20. You will be redirected to a third-party payment processor to complete your card payment.

Paying Indiana State Income Tax Returns

Follow these steps if you are paying in 2026 for last year’s state income taxes. Go to intime.dor.in.gov in your web browser and navigate to the buttons to pay with a bank account or with a debit or credit card.

Note: You must have an email address to pay Indiana State taxes online.

Direct Pay with a Bank Account

  1. Go to intime.dor.in.gov and locate the middle box on your screen.
  2. Select Make a Payment in the Payments box.
  3. Locate the Non-bill Payments box.
  4. Select Bank Payment to pay with a bank account without fees.
  5. Indicate that you are making an individual payment and click next.
  6. Under identification type, choose social security number.
  7. Enter the social security number for the primary taxpayer, which is the husband for Married Filing Jointly.
  8. Enter the number again to confirm.
  9. Under first name, put the first name for the primary taxpayer, which is the husband for Married Filing Jointly.
  10. Under last name, put the last name for the primary taxpayer, which is the husband for Married Filing Jointly.
  11. Complete the phone information and click next.
  12. Complete the address information and then click the blue link to verify the address. Once the address has been verified, select next.
  13. Select Return Payment and it will autofill the date of December 31, 2025.
  14. Under Amount, enter how much you want to pay, which should be the amount owed on your return from MBJ Accounting, unless you have arranged for a payment plan.
  15. Enter your email address and click next.
  16. Confirm that the amount is what you want to pay.
  17. Under Routing Number, enter the routing number to your payment bank account. The name of your bank should populate below.
  18. Under Account Number, enter the account number to your payment bank account.
  19. Enter the account number again to confirm.
  20. Under Account Type, select the type of account your chosen payment bank account is.
  21. Click next and confirm submission.
  22. Print your confirmation if possible. You can also take a screenshot if you are paying on a phone or tablet. You will also receive an email confirmation.

Debit or Credit Card Payment (Fee Associated)

  1. Go to intime.dor.in.gov and locate the middle box on your screen.
  2. Select Make a Payment in the Payments box.
  3. Locate the Non-bill Payments box.
  4. Select Credit Card to pay with a credit or debit card. You will pay a transaction fee.
  5. Indicate that you are making an individual payment and click next.
  6. Under identification type, choose social security number.
  7. Enter the social security number for the primary taxpayer, which is the husband for Married Filing Jointly.
  8. Enter the number again to confirm.
  9. Under first name, put the first name for the primary taxpayer, which is the husband for Married Filing Jointly.
  10. Under last name, put the last name for the primary taxpayer, which is the husband for Married Filing Jointly.
  11. Complete the phone information and click next.
  12. Complete the address information and then click the blue link to verify the address. Once the address has been verified, select next.
  13. Select Return Payment and it will autofill the date of December 31, 2025.
  14. Under Amount, enter how much you want to pay, which should be the amount owed on your return from MBJ Accounting, unless you have arranged for a payment plan.
  15. Enter your email address and click next.
  16. Click next again once you have reviewed the fee structure.
  17. Confirm that the amount is what you want to pay and click Pay.
  18. You will be redirected to a third-party payment processor to complete your card payment.

Notes about State of Illinois Payments

  1. To make estimate payments or pay income tax returns for the State of Illinois, go to mytax.illinois.gov.
  2. Select the Make an Individual Income Tax Payment button in the Individuals box, which is the first box on the left of the screen.
  3. Use the social security number that has been previously used to file a return and use the link to look up your IL-PIN if needed.
  4. Follow the steps to complete your estimate payment or income tax return.

person paying their taxes online

Internal Revenue Service Shifts to Digital Refunds and Payments

Published on by MBJ Accounting

No need to find your checkbook to pay taxes this year. The IRS and U.S. Treasury has begun a transition to electronic payments, as required by Executive Order 14247, Modernizing Payments To and From America’s Bank Account. This change represents a major step in a broader federal initiative to transition all eligible payments to secure electronic delivery.

How Taxpayers Can Prepare for Electronic Refunds

  • Provide accurate banking information (routing and account number) when filing your return.
  • Open a free or low-cost bank or credit union account if you do not already have one. Resources and account options can be found at FDIC.gov/GetBanked and MyCreditUnion.gov.
  • Use certain mobile apps or prepaid debit cards that provide routing and account numbers. Taxpayers should verify the correct numbers with their financial institution or app provider.

For more information on refund options and timelines, visit irs.gov/refunds.

How to Prepare for Electronic Payments

Taxpayers can begin adopting electronic payment methods now by using:

  • IRS Direct Pay: Pay directly from your bank account with no fees.
  • Electronic Federal Tax Payment System (EFTPS): For individuals, businesses, and payroll providers.
  • IRS2Go app: Make secure mobile payments.
  • Debit or credit card options, or supported digital wallets.

To avoid payment-related delays, taxpayers are encouraged to keep their contact information, account details and communication preferences up to date.

What You Need to Know:  Beneficial Ownership Information Reporting

Published on by MBJ Accounting

In 2021, Congress passed the Corporate Transparency Act, developing a new beneficial ownership information reporting requirement effective January 1, 2024.  This new law is designed to create transparency around business ownership in an effort to prevent bad actors from committing illegal activities – like money laundering, tax fraud, etc. – behind shell companies or other obscure business structures.

Simply put, it means that companies must report who owns them, either directly or indirectly.  And, it only takes a moment to complete.

What Kind of Information Has to be Reported?

The form requires simple information that you would be used to including on tax preparation documents, like the company name, address and Employer Identification Number (EIN as well as the company owner’s legal name Social Security Number (SSN) and contact information.

This information is collected by the United States Treasury’s Financial Crimes Enforcement Network, known as FinCEN.

What is a Beneficial Owner?

A beneficial owner either exercises substantial control over a company or owns, either directly or indirectly, at least 25 percent of it.

Do All Companies Have to Complete the Reporting?

While most small business owners will have to file, there are exemptions from the Corporate Transparency Act.  FinCEN has outlined the exemptions here. 

Who Can Access this Company Data?

Beneficial ownership information reported to FinCEN will be stored in a secure, non-public database using rigorous information security methods and controls.

Certain Federal, State, local, Tribal and foreign officials will be able to request beneficial ownership information for authorized activities related to national security, intelligence and law enforcement. Financial institutions will have access to beneficial ownership information in certain circumstances, with the consent of the reporting company.

How Long Do I Have to File?

If your business was established prior to January 1, 2024, you will have until January 1, 2025 to complete the beneficial ownership information reporting.  Businesses established on January 1, 2024 or after must file within 90 days of inception.  Those established on or after January 1, 2025 have 30 days to report.

How Do I Complete the Report?

The report is easily completed through FinCEN’s e-filing website and should only take a few minutes to complete.  There is no fee to file, nor is there an annual reporting requirement.

Additional reports must only be filed if there is a material change in beneficial owner information. The following are examples as to when an additional report must be filed:

  • A change in ownership of the company.
  • A change in address of one (or more) of the owners.
  • An inaccuracy is discovered in the initial report.

What If I Need to Change It?

If a report was filed incorrectly, a corrected report must be filed within 30 days.  This is easily done through the same e-filing website.

What is the Penalty for Not Filing?

Hefty civil and criminal penalties can be imposed on companies that fail to file a complete report, so take a few moments to complete your report today!

Key Terms to Know:

  • Reporting Company:  The entity – such as your small business – that is required to file a Beneficial Ownership Information report.
  • Beneficial Owner:  An individual substantially controlling a company, owning or controlling 25 percent or more of the ownership interests of a company, or both.
  • Company Applicant:  The person completing the report.

Issuing 1099s: What You Need to Know

Published on by MBJ Accounting

The Internal Revenue Service requires that Form 1099s are issued by January 31.  This means that you can’t wait until tax time to determine if you need to be issuing these important documents.

What Is a 1099?

A Form 1099 refers to one in a series of IRS tax forms used to document income other than those outlined by a Form W-2, which includes salaries, wages and tips.  The IRS requires a business to issue a Form 1099 when services are rendered for a cost of $600 or more annually.

So, what does this mean for you?  If you are a contractor, you may be familiar with a 1099 as the form your client issues as proof of the services you have provided.  What you may not have considered is when your business needs to be the one issuing the form(s).

How Do I Determine if I Need to Issue a 1099?

Form 1099(s) are generated by businesses.  If you earn a salary or hourly wages by working for a company that is not your own and are issued a W-2 at the end of each year to file your personal taxes, you don’t need to worry about filing a Form 1099. 

However, if you are self-employed, receive income directly from your clients or customers or file a separate business schedule with your taxes annually, you should determine if any of your expenses require you to issue a 1099.  Thus, if you are a hairstylist, provide childcare services, conduct in-home sales or do lawncare on the side – as just a few examples – keep reading.

Specifically, the IRS requires a Form 1099 be issued when the following four conditions are met:

  1. You made a payment to someone who is not your employee;
  2. You made a payment for services in the course of your trade or business;
  3. You made a payment to an individual, partnership, estate, or in some cases, a corporation; and
  4. You made payments to the payee of at least $600 during the year.

If your business meets these four criteria, the next step is to determine if the payment was for a qualifying expense.

What Type of Expenses Qualify for 1099s?

Any time that you pay a non-employee for a service-related expense of $600 or more, you should issue a Form 1099.  Review your company’s records to see if you have paid any vendor more than $600 for any type of service or labor.  This does not apply to the purchase of goods, but rather, services such as:

  • Attorney Fees
  • Bookkeeping
  • Booth / Business Rental Space
  • Cleaning Services
  • Consultation Services
  • Graphic Design
  • Inspections
  • Lawncare
  • Maintenance / Repairs
  • Marketing Consultation
  • Professional Photography
  • Tax Advising and Tax Preparation Services

These are just some common examples of the types of services for which your business might use a separate, non-employee contractor.  For example, if you purchased a company vehicle for $20,000, you would not need to issue a 1099.  However, if you paid $20,000 in maintenance and repair for your fleet of company vehicles over the course of the year, you would want to issue a 1099 to your mechanic.

Rent is another type of expense that can require a 1099.  If you rent a specific space to conduct your trade – like a booth at a hair salon or an office in a multi-tenant building, you should include your landlord among your vendors needing a Form 1099.  Conversely, individuals working from a home office generally capture rent expenses elsewhere on their tax returns.

If you purchased a company vehicle for $20,000, you would not need to issue a 1099.  However, if you paid $20,000 in maintenance and repair for your fleet of company vehicles over the course of the year, you would want to issue a 1099 to your mechanic.

Does My Vendor Require a 1099?

Once you’ve determined what expenses may qualify for a Form 1099, you next need to assess what type of vendor or contractor you utilized.  If the individual or company providing your service is incorporated, you do not need to issue a Form 1099.  However, if your vendor is a sole proprietor, an LLC, LLP or PC, you’ll need to issue a 1099.

There are some exceptions to this rule, especially with attorneys.  When in doubt, contact your vendor directly to determine if you should issue a 1099. 

While you’re at it, be sure that you have the necessary information to issue the 1099, including the contractor’s legal name, what type of legal entity the vendor is and their Employee Identification Number (EIN) or Social Security Number.  The easiest way to collect this information, is to have your vendor complete a Form W-9.  Click here for a blank form that you can send. 

It is a best practice to collect this information when you issue the payment, so you may have already collected it.  However, it’s best to double check that none of their information has changed and always have a signed W9 on file.

How Did You Pay the Vendor?

The last step when determining whether to issue a Form 1099 is to establish exactly how much you paid and how you issued the payment.  If you provided payment through your bank account, such as with a check, debit card transaction or automatic payment, you will need to issue the 1099.  On the other hand, if you provided payment through a third-party service like PayPal, or with a credit card, the merchant is responsible for issuing a Form 1099K.

What Is the Benefit of Issuing a 1099?

The process of issuing Form 1099(s) can be complicated, especially if your company uses multiple contractors and vendors.  The IRS does require this documentation for services rendered in excess of $600, and your vendors will probably be depending on the information to file their own tax returns.  Thus, it’s important to take 1099s into consideration early in the year to ensure that you are issuing them in a timely manner. 

This can also help you avoid paying penalties to the IRS.  Specifically, if you do not issue a 1099 for the 2019 tax year by January 31, 2020, you will owe:

  • $50 per 1099 if filed not more than 30 days late
  • $110 per 1099 if filed 30+ days late but before August 1
  • $270 per 1099 if filed after August 1

Additionally, if you intentionally fail to file a 1099, then there are additional consequences.  Click here to see the full penalty schedule.

In many cases, it can be advantageous for you and your company to file Form 1099(s) as it provides documentation of expenses incurred in the course of your trade or business.  This frequently indicates a tax write-off, so it does work in your favor to take a good look at whether you should issue 1099s.

There are actually 10+ different types of Form 1099, so it is best to consult a tax professional when issuing these forms.  Contact us as soon as possible if you think that you need to issue 1099s for your small business.  We’re here to help make tax season as easy as possible for you.

Tax Benefits of Logging Mileage

Published on by MBJ Accounting

Driving for work can be tedious, but you may come to appreciate your car time when tax season rolls around next year.

If you use your own vehicle travel from the office to a work site, from the office to a second place of business or drive for business-related errands, you can deduct your mileage.  With the start of the new year, it is important to keep careful track of the total miles you drive for business during a tax year – especially since the standard mileage allowance for business driving increased in 2022. 

There are two ways taxpayers can account for their mileage deductions:

  • Take the standard mileage deduction by maintaining a log of qualifying mileage driving.  For the 2022 tax year, the rate is 58.5 cents per mile for business use, up 2.5 cents from 2021.
  • You can also deduct actual vehicle expenses by retaining all receipts and other relevant documentation related to the cost of your business driving.

Either way, you will have to report the total miles the vehicle was driven during the tax year on a specific form, so take note of your odometer reading as early in the year as possible.

To take the standard deduction, keep a detailed log of miles driven.  Business vehicle write-offs can be a red flag for an audit, so be sure to record the odometer reading as well as the purpose of the trip, the starting location, ending location and date. 

If you choose to track actual expenses instead, keep copies of your receipts, including the date, amount and description of service.  You’ll need to organize these receipts into groups including gas, service, repairs, insurance and depreciation.

You can also claim the cost of parking and tolls, so keep those receipts as well.

Note that if you expensed your vehicle, you cannot also claim a mileage deduction.

Medical travel and military moves are also tax deductible – with a two-cent increase in 2022, up to 18 cents per mile.  Charitable driving is also tax deductible, at a fixed rate of 14 cents per mile.

2022 Tax Filing Season:  What You Need to Know

Published on by MBJ Accounting

In an announcement sent January 10 by the Internal Revenue Service, the agency outlined a number of key points to help taxpayers know what to expect in advance of the April 18 tax deadline.  We’ve cut the jargon and distilled it down to make it easy for you:

  • The IRS will begin accepting and processing 2021 tax returns on Monday, January 24, 2022.
  • The filing to submit 2021 tax returns and payments or to file an extension is Monday, April 18, 2022 for most taxpayers, including those in Indiana and Illinois.  Those requesting an extension have until Monday, October 17 to file.

  • Due to COVID-era tax changes and broader pandemic challenges, the IRS is behind on processing 2020 returns.  Generally, you will not need to wait for your 2020 return to be fully processed before filing your 2021 documentation.

  • Because of this backlog, people are encouraged to use online resources before calling.

  • Additionally, to avoid delays in processing, you should avoid filing paper returns whenever possible.  The IRS anticipates most taxpayers will receive their refund within 21 days of when they file electronically if they choose direct deposit and there are no issues with their returns.

  • Watch for the mail for letters about advance Child Tax Credit payments and third Economic Impact (stimulus) payments. 

    • The IRS started sending Letter 6419, 2021 advance Child Tax Credit, in late December 2021 and continues to do so in January.  Please keep this letter and provide to MBJ Accounting with your 2021 tax documentation.  Eligible taxpayers who received advance Child Tax Credit payments should file a 2021 tax return to receive the second half of the credit.

    • The IRS will begin issuing Letter 6475, Your Third Economic Impact Payment, to individuals who received a third payment in 2021 in late January.  While most eligible people already received their stimulus payments, this letter will help you  determine if you are eligible to claim a missing payment.  Please keep this letter and provide to MBJ Accounting with your 2021 documentation.

Remember, in order to ensure a timely return, please submit your documentation electronically by Monday, March 14.  We are happy to make appointments to answer any questions you may have.

Is Your Retirement Account Helping Your Tax Return?

Published on by MBJ Accounting

We all dream of retirement – especially on days when the alarm goes off too early. But could your retirement account be helping you with your tax return now? Things have changed since last year. Here are some things to consider before you file your 2021 tax return.

Check Your Tax Credit Qualification

Depending on your adjusted income, you may qualify for a tax credit for making certain contributions to your IRA or employer-sponsored retirement plan. Read more about the Saver Credit eligibility to see if you could take a credit of up to $1,000.

Avoid Paying an Early Withdrawal Penalty

If you withdraw from your retirement accounts before age 59 ½, you are subject to income taxes plus an additional 10 percent early withdrawal tax. However, due to the COVID-19 pandemic, in 2020 there were many exceptions that waived this fee. Most of them have been reduced at this point, but you can still avoid paying an early withdrawal penalty if you are using the funds for post-secondary education or as a first-time homebuyer. Click here to learn more about exceptions to tax on early distributions.

Rollover Your Retirement after a Job Change

If the post-pandemic economy has you changing jobs, avoid income tax by transferring your 401(k) directly to another 401(k) or IRA. Without a direct transfer, 20 percent of the amount withdrawn will be withheld for income taxes and you could also owe the early withdrawal penalty.

Don’t Forget about Required Minimum Distributions

If you are age 72, your retirement account may feature required minimum distributions. This is an increase from the previous 70 ½ age requirement. While this was waived in 2020 due to COVID, that is not the case for 2021. The penalty for missing a required minimum distribution is 50 percent of the amount that should have been withdrawn – in addition to the income tax due. Consider directing your required minimum distribution to the charity or church of your choice to avoid tax liability.

Dodge Double Distributions

Avoid increased income taxes by ensuring you do not take two distributions in one year. You are required to take your first minimum distribution by April 1 of the year after you turn 72 (or 70 ½ if you were born before July 1, 1949). Following this distribution, subsequent withdrawals must be taken by December 31 each year. This could mean that you end up with two distributions in the same tax year if you wait until the April deadline, which could bump you into a higher tax bracket.

Similarly, by taking smaller distributions before age 62 can help spread your tax bill over multiple years, rather than dramatically increasing your taxable income once you turn 72. This would all depend on your other income at those ages.

If you have questions regarding how your retirement account could be influencing your income taxes, don’t hesitate to contact MBJ Accounting about setting up an appointment.

Itemized Deductions vs. Standard Deduction: Which is Best for You?

Published on by MBJ Accounting

If you’ve been used to tracking down every receipt for a donation to Goodwill to ensure you receive the maximum tax refund, the 2018 tax reform may have you questioning the best way to file your taxes. While your accountant will ultimately determine if you have enough deductions to be beneficial, educating yourself on the law will help you understand what documentation is worth the effort of obtaining when it’s time to file.

What Are the Benefits of Tax Deductions?

All citizens pay taxes according to the amount of money they earned in a given tax year.  The amount owed varies depending on the income bracket that your household falls under.  By documenting significant expenses – which has generally been done through itemized deductions in the past, you can show that you didn’t actually have access to as much money as you earned, because of your expenses.  This can lower your taxable income and thus the amount of taxes you are required to pay.

Recent tax reforms significantly shifted this process for individuals, dramatically changing the guidelines for tax deductions.

What is the Tax Cuts and Jobs Act of 2017?

The Tax Cuts and Jobs Act was passed into law at the end of 2017, amending the Internal Revenue Code of 1986.  This tax reform legislation impacts nearly all taxpayers.  Major components relating to itemized deductions of the new law include:

  • Reduced tax rates for both businesses and individuals
  • Increasing the standard deduction and family tax credits
  • Limiting state and local income tax (including property tax) deductions
  • Further limiting mortgage interest deductions

What Does this Mean for Me?

With this new legislation, the standard deduction increased for the 2018 Tax Year and then again with inflation for 2019.  The following threshold now applies as you prepare to file your taxes from last year:

  • $12,200 for individuals
  • $18,350 for heads of household
  • $24,400 for married couples filing jointly and surviving spouses

This means that every individual filing taxes and claiming themselves automatically receive $12,200 in deductions and refers to “taking the standard deduction.”  In this case, unless you have deductions above and beyond the $12,200 standard for an individual, it does not make sense for you to itemize your deductions.

Every individual filing taxes and claiming themselves automatically receive $12,200 in deductions and refers to “taking the standard deduction.”  In this case, unless you have deductions above and beyond the $12,200 standard for an individual, it does not make sense for you to itemize your deductions.

How Do I Know If My Deductions are above the Standard?

In most cases, the following elements are tax deductions that could be itemized.  You can see the full list on the IRS website here.

  • Mortgage interest
  • Medical expenses (more than 7.5 percent of your Adjusted Gross Income)
  • Excise tax with car registrations (in the state of Indiana)
  • State and local income taxes, including property taxes
  • Charitable contributions

That being said, if you have documentation of expenses in these areas that are above the standard deduction, an itemized filing may still make sense for you.

Medical Expenses
For example, almost everyone has some type of medical expense.  These costs can be part of the itemized deductions but must be over 7.5 percent of your total income to be beneficial from a tax perspective.  Thus, only major / catastrophic medical issues such as nursing home care or cancer treatment are typically worth itemizing.

State and Local Taxes
Another area that saw significant change is the deductions for state and local taxes, which also includes property tax.  There is now a $10,000 cap for all these areas, meaning that you’re only permitted to deduct $10,000 of state and local taxes – including real estate taxes – regardless of how much you paid.

While there is a cap for the amount of state and local taxes that you can deduct on your federal return, property taxes are an important component of filing your state tax return.  Thus, its important to share the amount of money you paid in property taxes for a given tax year – and the corresponding documentation – with your accountant.

Charitable Contributions
In the past you may have kept track of every dollar you put in the church offering plate or every time you supported a school fundraiser for tax purposes.  Now, unless your charitable contributions in conjunction with your other itemized deductions are above the standard deduction, it is no longer necessary to keep such meticulous records.  To compensate, some donors have moved to an “every other year” method, making larger, two-year donations so that they can qualify for the deduction the year of their gift and then take only the standard deduction the following year.

Remember that Itemized Deductions are Separate from Work-Related Deductions

These itemized expenses that have been discussed thus far are only one type of tax deduction.  If you have a small business, the expenses you incur in order to do your work are not included as part of this calculation.  These are tracked on a separate tax schedule, so you should be sure to continue to track business-related expenses.  The same may be said for education-related expenses, such as student loan interest, and investment-related deductions. 

Conclusion

The new standard deduction amount means that itemization no longer makes sense for most individuals.  So before you start digging through purses and pants pockets for receipts, do some quick math to determine if your expenses will be higher than the standard threshold. 

If itemization remains the best choice for you, make sure that you have all your documentation in order.  Refer to our handy checklist (insert link) for guidance.

Changes in deductions are just a few of the significant differences in the new tax law.  Contact us now for help navigating all components of the tax reform to ensure that you receive the maximum refund with the least headache.