Category: Tax Tips -Feb 2024

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February 2024 Tax Tips -Feb 2024

Upcoming Tax Due Dates

Upcoming Tax Due Dates

February 15

Individuals: File a new Form W-4 to continue exemption for another year if you claimed exemption from federal income tax withholding in 2023.

Businesses: Provide Form 1099-B, 1099-S and certain Forms 1099-MISC (those in which payments in Box 8 or Box 10 are being reported) to recipients.

Employers: Deposit Social Security, Medicare and withheld income taxes for January if the monthly deposit rule applies.

Employers: Deposit nonpayroll withheld income tax for January if the monthly deposit rule applies.

February 28

Businesses: File Form 1098, Form 1099 (other than those with a January 31 deadline), Form W-2G and transmittal Form 1096 for interest, dividends and miscellaneous payments made during 2023. (Electronic filers can defer filing to April 1.)

March 11

Individuals: Report February tip income of $20 or more to employers (Form 4070).

Feb 2024

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February 2024 Tax Tips -Feb 2024

ERC Voluntary Disclosure Program Available for a Limited Time

ERC Voluntary Disclosure Program Available for a Limited Time

As part of an ongoing initiative to combat questionable Employee Retention Credit (ERC) claims, the IRS has launched a voluntary disclosure program. It allows eligible businesses to pay back money they received after filing ERC claims in error.

The disclosure program runs through March 22, 2024, and requires only 80% of the claim received to be repaid. It’s part of a larger IRS effort to stop aggressive marketing around the ERC that misled some employers into filing claims they were ineligible for.

The IRS has another program that allows employers to withdraw pending ERC claims with no interest or penalty. More than $100 million in withdrawals has already been received.

Feb 2024

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February 2024 Tax Tips -Feb 2024

Deductions vs. Credits: What’s the Difference?

Deductions vs. Credits: What's the Difference?

One of the most common misunderstandings about filing an income tax return is the difference between deductions and credits. Deductions reduce the amount of a taxpayer’s income before tax is calculated. For example, on your individual return, you can either take the standard deduction or itemize deductions, if it will reduce your taxable income more. Credits, on the other hand, reduce the actual tax due, dollar-for-dollar, generally making them more valuable than deductions.

For example, the tax savings from a $1,000 deduction would depend on your tax bracket; it would save you $150 if you’re in the 15% tax bracket but it would save you $350 if you’re in the 35% tax bracket. A $1,000 credit, on the other hand would save you $1,000 in taxes regardless of your tax bracket. (These examples assume no income-based phaseout or limit applies to the deduction or credit.)

Some credits, such as the Child Tax Credit, are partially or fully refundable. This means that if a taxpayer’s tax liability is less than the amount of the credit, the taxpayer can possibly receive the difference as a refund.

Feb 2024

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February 2024 Tax Tips -Feb 2024

There May Still Be Time to Lower Your 2023 Tax Bill

There May Still Be Time to Lower Your 2023 Tax Bill

If you’re preparing to file your 2023 tax return, you may still be able to lower your tax bill – or increase your refund. If you qualify, you can make a deductible contribution to a traditional IRA right up until the original filing deadline, April 15, 2024, and see tax savings on your 2023 return.

For eligible taxpayers, the 2023 contribution limit has increased to $6,500, or $7,500 for taxpayers aged 50 and up on Dec. 31, 2023. If you’re a small business owner, you can establish and contribute to a Simplified Employee Pension (SEP) plan up to the extended due date of your return. The maximum SEP contribution you can make for 2023 is $66,000.

What determines eligibility? To make a fully deductible contribution to a traditional IRA, you (and your spouse, if you’re married) must not be active participants in an employer-sponsored retirement plan or, if you are, your 2023 modified adjusted gross income (MAGI) must not exceed the applicable limits:

  • For single taxpayers covered by a workplace plan, $73,000 (partial deduction available up to $83,000 MAGI).
  • For a married couple filing jointly, where the spouse making IRA contributions is covered by a workplace plan, $116,000 (partial deduction available up to $136,000 MAGI).
  • If the spouse making the IRA contributions isn’t covered by a workplace plan but his or her spouse is, $218,000 (partial deduction available up to $228,000 MAGI).

For married couples filing separately, where at least one spouse is covered by a workplace plan, the ability to deduct IRA contributions is extremely limited.

Contact the office if you want more information about this important topic to help you save the maximum tax-advantaged amount for retirement.

Feb 2024

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