Key 2024 inflation-adjusted tax amounts for individuals
The IRS recently announced various 2024 inflation-adjusted federal tax amounts that affect individual taxpayers. Here are the inflation-adjusted standard deduction numbers for 2024 for those who don’t itemize: $14,600 for single filers (up from $13,850 in 2023); $29,200 for married joint filers (up from $27,700); and $21,900 for heads of household (up from $20,800). Older taxpayers and those who are blind are entitled to additional standard deduction allowances. In 2024 for those age 65 or older or blind, the amounts will be: $1,550 for a married taxpayer (up from $1,500 in 2023) and $1,950 for a single filer or head of household (up from $1,850 for 2023).
Smaller companies: Explore pooled employer plans for retirement benefits
Smaller businesses may struggle with the financial and administrative burdens of sponsoring their own retirement plans. Thanks to the Setting Every Community Up for Retirement Enhancement Act of 2019, however, a relatively new solution is available: pooled employer plans (PEPs). PEPs are a variation on an existing retirement plan model, multiple employer plans (MEPs), which are qualified plans maintained by two or more employers. But properly designed PEPs avoid some of the restrictive rules that can negatively impact MEPs. PEPs are available from “pooled plan providers,” which include financial services companies, insurers and third-party administrators. Contact us for further info.
There still may be time to reduce your small business 2023 tax bill
In the midst of the holiday whirlwind, don’t forget to take steps to cut the 2023 tax liability for your business. There’s still time to implement a few strategies. For example, you can charge expenses normally paid early in the year on your credit card before Jan. 1. That way, you can claim the deduction for 2023 even though you don’t pay the bill until 2024. Are you thinking about purchasing heavy vehicles, equipment, machinery or office equipment early in the new year? Buy them now and place them in service by Dec. 31, and you can deduct 80% of the cost as bonus depreciation. Or take advantage of the Section 179 first-year depreciation deduction, if eligible. Questions? Contact us.
Some businesses may have an easier path to financial statements
Privately held businesses may not need to incur the cost or effort that goes with formally audited financial statements. You could, for example, opt for a financial statement preparation. This is when a CPA, who’s not even necessarily independent from your company, prepares financial statements using an acceptable financial reporting framework. A preparation provides no formal assurance of accuracy but may be useful for internal purposes. There’s also a compilation. It doesn’t provide assurance either but includes a report indicating that a CPA has read the financial statements and evaluated whether they’re free from obvious material errors. Contact us for help with this important decision.
11 Exceptions to the 10% penalty tax on early IRA withdrawals
If you’re facing a serious cash shortfall, one possible solution is to take an early withdrawal from your traditional IRA. That means one before you’ve reached age 59½. Unless one of these or other exceptions applies, there will be a 10% penalty tax on the taxable portion of a traditional IRA withdrawal taken before age 59½: 1) for qualified medical expenses; 2) after disability; 3) for eligible higher education expenses; 4) for a first-time home purchase, subject to a $10,000 lifetime limit; 5) for health insurance premiums while unemployed; and 6) for birth or adoption expenses. These are only some of the exceptions and each of them has requirements. Contact us for more details.
A cost segregation study may cut taxes and boost cash flow
Is your business depreciating over 30 years the entire cost of constructing the building that houses your enterprise? If so, consider a cost segregation study. It may allow you to accelerate depreciation deductions on certain items, thereby reducing taxes and boosting cash flow. And under current law, the potential benefits are now even greater than they used to be due to enhancements to certain depreciation tax breaks. You may even be able to get the benefit of faster depreciation for items that were incorrectly claimed. But cost segregation studies aren’t the best move for every business. Contact us to determine whether this strategy would work for your business.
Is your business subject to the new BOI reporting rules?
If your business can be defined as a “reporting company” under the Corporate Transparency Act, you may need to comply with new beneficial ownership information reporting rules that take effect on January 1, 2024. Reporting companies must provide information about their “beneficial owners” to the Financial Crimes Enforcement Network, a bureau of the U.S. Department of the Treasury. A beneficial owner is someone who, directly or indirectly, exercises substantial control over a reporting company, or who owns or controls at least 25% of its interests. Indirect control is often exhibited by a senior officer or person with authority over senior officers. Contact us for more information.
What you need to know about restricted stock awards and taxes
Restricted stock awards are a popular way for companies to offer equity-oriented executive compensation. Some businesses offer them instead of stock option awards. In a typical restricted stock deal, you receive company stock subject to restrictions (the most common restriction is that you must continue working for the company until a certain date). The major tax planning consideration is deciding whether or not to make a special Section 83(b) election. If you make the election, you’ll be taxed at the time you receive your restricted stock award instead of later when the restricted shares vest. Consult with us before making that decision.
Choosing a business entity: Which way to go?
If you’re starting a business or thinking about changing your existing entity, you need to determine what works best for you. Should you operate as a C corporation or a pass-through entity such as a sole proprietorship, partnership, LLC or S corporation? There are many issues to consider. Currently, the corporate federal income tax is imposed at a flat 21%, while individual federal income tax rates go up to 37%. The rate difference may be alleviated by the qualified business income (QBI) deduction available to eligible pass-through entity owners that are individuals, and some estates and trusts. (The QBI deduction is scheduled to expire in 2026.) We can answer questions about your situation.
Businesses: Know who your privileged users are … and aren’t
Most business owners are aware of the danger of external parties hacking into their networks. But don’t overlook internal risks; namely, your “privileged users.” These are people with “elevated” security access to your company’s enterprise systems and sensitive data. Typically, this includes IT staff. But members of the leadership team, as well as the accounting and sales departments, may also qualify. To best protect your business, you may want to implement a formal privileged user policy. It should set forth rules and procedures for who gets to be a privileged user, precisely what kind of access each such user is allowed, and how your company tracks and revokes privileged-user status.