12/26/2023
Happy New Year!
I’ll be ready to get started on your 2023 taxes when you are ready, beginning in early January. The tax filing due dates: 3/15 LLC/S corp, 4/15 individual/C corp. (New LLC/Corp filings required, see below.)
Feel free to email, fax, mail or upload your information when you are ready to complete your tax return. When we receive your 2023 tax information, we will follow up with a phone call to review. Mail in clients, be sure to send copies of your tax documents.
If you would like a checklist or an organizer, you can find it here: https://www.taxbucksinc.com/checklist
For those who prefer a more secure way to send/receive info: Secure File Pro, an encrypted document transfer site that we are using now. Send me a message via email prior to sending your info if you would like me to invite you and create a folder to use. If you have already used SecureFile to send me info, then all you need to do is login here: https://taxbucks.securefilepro.com/portal/#/login
Our tax season business hours are 8:00am to 6pm Monday through Saturday till April 15th. Major Credit Cards, checks and cash are accepted.
Updates:
CTA: Required Corporate Transparency Act info for all LLC & S/C corporation owners as well as info for those creating an LLC or corporation in 2024 here: https://www.taxbucksinc.com/corporate-transparency-act
1099K update: The IRS, again, delayed the implementation of the new 1099K lower threshold reporting rule. For 2023, 1099K payors should only be sending out a 1099K if you had 200 transactions and were paid 20,000 or more. Due to the uncertainty, the 1099k maybe be issued for any amount. Payors include money paid for goods or services via third party payment companies like Venmo, Paypal, Amazon, Square, etc.. If you receive a 1099K, please forward it along with your tax information so we can best handle it.
Last minute 2023 ideas:
- Bunching charitable contributions into one gift, rather than spreading out over the years. This is effective if you’re at or just below the itemizing threshold.
- Retirement accounts: 401k, 403b have until 12/31/23 to max out your plan. $22,500 maximum, $7,500 extra for those over 50. (IRA’s and SEP’s etc. have until tax filing due date to contribute for 2023) If you’re in a low tax bracket, consider a ROTH conversion.
- Consider harvesting capital gains or losses. Taking gains now may be a good option especially if you’re in a lower tax bracket for 2023 than you will be in 2024. Taking losses now could be helpful if you have other capital gains to offset.
- Businesses can prepay certain expenses OR delay expenses. If your business income will be higher in 2023, you may want to delay expenses into next year.
- 2023 mileage rates: 5c per mile for business, medical 22c per mile and charitable remains at 14c per mile. Be sure to get those mileage logs updated for your 2023 taxes.
New 2024 Highlights:
- CTA – Corporate Transparency Act. Applies to LLC and S/C corporation owners. Please see info here: https://www.taxbucksinc.com/corporate-transparency-act
- Retirement accounts: 401k, 403b, etc. Higher limit of $22,500 and an extra $7,500 for those 50 and over. IRA’s up to $6,500 and an extra $1000 for those 50 and over.
- As of Jan 2023, New Electric Car credits. Up to $7,500 per vehicle with new rules. No more threshold limit on certain vehicles: New battery requirements and final assembly of vehicle must be in North America. Higher cost EV’s don’t qualify if over 55k for cars and 80k for SUV’s, trucks & vans. Income can’t exceed 300k for marrieds, 225k for head of household and 150k for singles.
- Used Electric Car credits: Up to the lesser of $4,000 or 30% of the sale price. EV has to be 2 years old and purchased from a dealer. Income limit is 150k for marrieds, 112.5k for head of household and 75k for singles.
- Beginning in 2024, EV credits can be transferred to the dealer so buyers can take immediate advantage of the savings instead of waiting to file their tax returns.
- As of Jan 2023, Energy Efficient Home Improvement Credits have dramatically increased. HVAC, Windows/Doors, Solar & Electric Charging stations have larger credits.
- Business bonus depreciation drops to 80% of the asset cost, down from 100%.
- 1099K: The IRS is intending to use a $5,000 reporting threshold for 2024. We’ll wait and see what happens as they have changed the rules on this repeatedly over the past couple of years.
7/20/23 1099K
What to expect with the 1099K reporting for 2023.
If you received $600 or more in payments from Marketplaces (Ebay/Etsy), Payment services (Venmo/Zelle/Apple Pay), or Service sites (VRBO/Airbnb/Ticketmaster) you should be receiving a 1099K. There are many possible issues with this. Where to report it? Schedule C or other income? Can you offset the income with expenses? It can show both business and personal transactions. Risk of double counting income. Correcting the 1099K can be difficult.
- The 1099K shows gross payment amounts received by you.
- The IRS assumes these transactions are income.
- Personal payments may be included on the 1099K.
- Save the form. It will be needed to complete your tax returns. You will likely trigger a correspondence audit if it’s not reported.
- If it’s a business, you should keep track of expenses related to the 1099K so that you can reduce the taxable income.
- If you’re selling personal items on Ebay or other, keep track of your costs of items sold so that we can reduce your taxable income. These will now need to be reported, although they may not be taxable.
Some possible problems with the initial 1099K reporting:
- Double counted income: It’s possible that you may receive the 1099K and a 1099NEC from both the service provider and the payment company. (example: you receive a 1099NEC from the service provider and a 1099K from the payment company). In this case the IRS may assume your income is double what it should be. Keep track of your actual income received so we can report it correctly with your tax returns.
- Receiving income that isn’t taxable: You may get a 1099K from a service like Venmo if the person paying you doesn’t account for the income correctly. It’s important to let us know about it if this occurred.
- Blended business and personal transactions: The best way to be prepared for this is to keep good records of your business AND personal transactions so that we can list them accordingly on your tax returns.
12/16/21
SALT Workaround for CA. CA bill AB150 signed recently gives a ‘federal’ tax deduction opportunity for CA S corp, Multi-member LLC and Partnership owners.
How it works: The entity owner elects to pay a CA tax of 9.3% on their share of distributive income from their entity. That individual receives a credit of that tax towards their personal taxes. (They get the money back via their personal taxes). By doing this, the amount of elective 9.3% tax paid to CA is eligible for a federal tax deduction.
In order to claim a 2021 deduction, estimated elective entity tax needs to be paid by 12/31/21. This is tricky since we don’t yet know what your distributive income will be and there is little guidance as of now how overpayments and underpayments will be treated. My feeling is that whatever amount paid during 2021 should be eligible for the special CA treatment and the federal deduction assuming it’s not more than 9.3% of the distributive income.
The CA SALT Workaround works best for higher income taxpayers who also have a higher distributive profit coming from their entity. Since it’s based on entity profit, you have to have an entity profit to elect to pay this tax to CA. Ideally, you’re also in a high tax bracket so that you can claim all of the elective tax paid in the 1st year. If for some reason your elective tax is higher than your actual income tax, the extra is rolled forward for up to 5 years.
Feel free to contact me if you would like to discuss this option further. Due to my limited available time, I will be billing at my hourly rate for these discussions and work on this.
Reasons to become an accountant: