Answers to your tax season questions
The IRS will open the 2024 tax return filing season on Jan. 29. The deadline for filing a 2023 return or requesting an extension is April 15 for most people (April 17 in Maine and Massachusetts). You may want to file early rather than procrastinating. It can potentially protect you from tax identity theft. In these scams, a thief uses another person’s personal information to file a fraudulent return early in the filing season and claim a fake refund. One question you may have is: When will W-2s and 1099s arrive? Jan. 31 is the deadline for employers to file 2023 W-2s and, generally, for businesses to file 1099s for 2023 interest, dividends, independent contractor payments and other payments.
The kiddie tax could affect your children until they’re young adults
The “kiddie tax” can cause some of a child’s unearned income to be taxed at the parent’s higher marginal federal income tax rates instead of at the usually much lower rates that a child would otherwise pay. For purposes of this federal income tax provision, a “child” can be up to 23 years old. The kiddie tax is only assessed on a child’s or young adult’s unearned income. That usually means interest, dividends and capital gains. These types of income often come from custodial accounts that parents and grandparents set up and fund for younger children. Earned income from a job or self-employment is never subject to the kiddie tax. Other rules apply. Contact us if you want more information.
Does your business have employees who get tips? You may qualify for a tax credit
If you’re an employer with a business where tipping is routine when providing food and beverages, you may qualify for a federal tax credit involving the Social Security and Medicare (FICA) taxes that you pay on your employees’ tip income. The credit is claimed as part of the general business credit. It’s equal to the employer’s share of FICA taxes paid on tip income in excess of what’s needed to bring your employee’s wages up to $5.15 per hour. In other words, no credit is available to the extent the tip income just brings the employee up to $5.15 per hour, calculated monthly. Other rules may apply. Contact us if you have any questions about this potentially valuable tax break.
Defer a current tax bill with a like-kind exchange
If you’re interested in selling commercial or investment real estate that has appreciated significantly, one way to defer a tax bill on the gain is with a Section 1031 “like-kind” exchange. With this transaction, you exchange the property rather than sell it. A like-kind exchange is any exchange of real property held for investment or for productive use in your trade or business for like-kind investment, trade or business real property. Like-kind exchanges can be an attractive tax-deferred way to dispose of real property if you anticipate a large tax bill and meet the requirements. Contact us if you have questions or would like to discuss the strategy further.
It’s possible (but not easy) to claim a medical expense tax deduction
One of your 2024 resolutions may be to maintain good health. Can you deduct your out-of-pocket medical costs on your tax return? It depends. Medical expenses can be deducted only to the extent unreimbursed costs exceed 7.5% of your adjusted gross income. Plus, medical costs are deductible only if you itemize, which means that your itemized deductions must exceed your standard deduction. Eligible costs include hospital and doctor bills. They also include: health insurance premiums, eyeglasses, hearing aids, most dental work, prescriptions, smoking-cessation programs and some costs of transportation to get to and from medical appointments. We can assess if you can claim a deduction.
Perform an operational review to see how well your business is running
In M&A, business buyers perform operational due diligence to identify the strengths and weaknesses of a target company’s day-to-day activities. Business owners can perform an operational review to glean the same insights. Business buyers typically evaluate three primary areas: 1) Production/operations, to identify performance gaps, cost-cutting opportunities and productivity improvements. 2) Selling, general & administrative items, to determine whether the company’s operating expenses are too high or low. 3) Human resources, to determine the reasonability and sustainability of things such as compensation, benefits and staff relations. Contact us for help performing an operational review.
3 types of internal benchmarking reports for businesses
Business owners, within your company’s financial statements lies a treasure trove of insights that can help you spot trends, both positive and negative. Here are three types of internal benchmarking reports that can help you make these discoveries: 1) Horizontal analysis, which is a comparison of two or more sets of financial statements with differences expressed in dollar amounts or percentages. 2) Vertical analysis, whereby each line item of a single set of financial statements is converted to a percentage of another item (often revenue or total assets). 3) Ratio analysis, which depicts relationships between various items on a company’s financial statements. Contact us for more info.
Don’t overlook taxes when contemplating a move to another state
When you retire, you may want to move to another state, perhaps because the weather is more temperate or because you want to be closer to family members. Don’t forget to factor state and local taxes into the equation. It may seem like a state with no income tax is a wise choice, but you should also consider property and sales taxes, as well as any state estate taxes. If you move to a new state and want to escape taxes in the state you came from, it’s important to establish legal domicile in the new location. Take steps such as changing your mailing address, and registering to vote and getting a driver’s license in the new state. We can answer any questions and file required tax returns.
The standard business mileage rate will be going up slightly in 2024
The optional standard mileage rate used to calculate the deductible cost of operating a vehicle for business will be going up slightly in 2024, by 1.5 cents per mile. The IRS recently announced that the cents-per-mile rate for the business use of a car, van, pickup or panel truck will be 67 cents. The increased tax deduction partly reflects the price of gas. On Dec. 21, the national average price of a gallon of regular gas was $3.12, compared with $3.10 a year earlier, according to AAA Gas Prices. The standard rate is useful if you don’t want to keep track of actual vehicle-related expenses. But you still must record certain information, such as the mileage, dates and destinations of trips.
POLK & ASSOCIATES EXPANDS REACH AND STRENGTHENS TEAM WITH STRATEGIC MERGER
New merger bolster expertise, experience and industry-specific knowledge in key core competencies Bingham Farms, MI – November 1, 2023 – Polk & Associates (POLK) announces a strategic merger with Apartment Data Corporation that bolsters core and expands practices such as Valuation Services, Audit and Assurance, Business Acquisition, CAS, Estate and Succession Planning and Tax Planning […]
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