Dear Client ,
As the 2024 tax filing season commences, we want to inform you about the latest developments and key highlights to ensure a smooth filing process. Here's a summary of the recent tax-related updates:
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The quickest method to receive a tax refund is to file your return early, submit it electronically, and request that the refund be directly deposited into your account. While the IRS has enhanced its processing of paper returns, delays are still possible. Most refunds are issued by the IRS within 21 days, but certain refunds may face delays. Those claiming the Earned Income Tax Credit or the refundable Child Tax Credit may have to wait until at least late February for their refunds, and potentially longer if they file paper returns. Additionally, procedures aimed at detecting tax identity theft and refund fraud could lead to further delays.
E-filing your tax return early can also safeguard you against tax-related identity theft. Thieves often use stolen taxpayer identification numbers to submit fraudulent returns and claim improper refunds early in the filing season. They do this hoping that the IRS receives these fake returns before legitimate taxpayers submit theirs. By e-filing early, there's a higher chance that the IRS will process your legitimate return before any fraudulent one.
Apply for an identity-protection PIN as extra protection from identity theft. The IP PIN is a six-digit number assigned by the IRS to help verify a taxpayer’s identity. To apply for an IP PIN, use the “Get an IP PIN” tool on the Service’s website. IP PINs are valid for one calendar year, so you can’t use the one you had last year.
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A Dash to the Finish Line!
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Mark your calendars, as January 31st isn't just a date; it's a red-letter deadline for two crucial tasks:
- Forms W-2 (Wage and Tax Statements) and W-3 (Transmittal of Wage and Tax Statements): Ensure these reach the Social Security Administration by the deadline to avoid unnecessary delays and penalties.
- Form 1099-NEC (Nonemployee Compensation): Remember those independent contractors you collaborated with? Their forms also need to reach the IRS by January 31st. Timely filing isn't just routine; it's the linchpin for accurate income verification and smooth refunds.
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Not filing correct information returns on time can result in significant fines. For returns due in 2024, the basic penalty is $310 for each Form 1099, W-2, etc. A lower penalty applies if corrections are made by August 1. The fine increases dramatically to $630 or more if the IRS proves intentional rule disregard. However, small errors are often exempt from penalties. For mistakes of $100 or less, or $25 or less for withheld tax, there are no penalties, and a corrected form isn't needed unless requested by the payee within 30 days or by October 15, according to the IRS's final regulations.
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2024 Federal Income Tax Brackets and Rates for Single Filers, Married Couples Filing Jointly, and Heads of Households:
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| Tax Rate |
For Single Filers |
For Married Individuals Filing Joint Returns |
For Heads of Households |
| 10% |
$0 to $11,600 |
$0 to $23,200 |
$0 to $16,550 |
| 12% |
$11,600 to $47,150 |
$23,200 to $94,300 |
$16,550 to $63,100 |
| 22% |
$47,150 to $100,525 |
$94,300 to $201,050 |
$63,100 to $100,500 |
| 24% |
$100,525 to $191,950 |
$201,050 to $383,900 |
$100,500 to $191,950 |
| 32% |
$191,950 to $243,725 |
$383,900 to $487,450 |
$191,950 to $243,700 |
| 35% |
$243,725 to $609,350 |
$487,450 to $731,200 |
$243,700 to $609,350 |
| 37% |
$609,350 or more |
$731,200 or more |
$609,350 or more |
Source : Internal Revenue Service, "Revenue Precedure 2023-34"
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2024 Standard Deductions:
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| For Married Individuals Filing Joint Returns |
For Heads of Households |
| Single |
$14,600 |
| Married |
$29,200 |
| Head of Houshold |
$21,900 |
| Additional Amount for Married Seniors |
$1,550 |
| Additional Amount for Unmarried Seniors |
$1,950 |
Source : Internal Revenue Service, "Revenue Precedure 2023-34"
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2024 Capital Gains Tax Brackets:
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For Unmarried Individuals, Texable Income Over |
For Married Individuals Filing Joint Returns, Texable Income Over |
For Heads of Households, Texable Income Over |
| 0% |
0% |
0% |
0% |
| 15% |
$47,050 |
$94,050 |
$63,000 |
| 20% |
$518,900 |
$583,750 |
$551,350 |
Source : Internal Revenue Service, "Revenue Precedure 2023-34"
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2024 Qualified Business Income Deductions Thresholds:
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| Filing Status |
Threshold |
| Unmaried Individuals |
$191,950 |
| Married Filing Jointly |
$383,900 |
Source : Internal Revenue Service, "Revenue Precedure 2023-34"
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The IRS's Criminal Investigation (CID) division is increasingly active, initiating 2,676 investigations in 2023, up from 2,558 in 2022. Annually, the CID prosecutes around 70% of its cases and boasts a conviction rate of nearly 90%. For 2024, the CID is focusing on several key areas: cybercrimes and digital assets, abusive international tax schemes, payroll tax fraud, corrupt tax preparers, and COVID-related scams.
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Beware of Cyber Chameleons Rise!
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As the 2024 tax filing season nears, the IRS and its partners caution against an expected increase in client. Be alert to various tactics used by scammers, such as phishing emails, malware attacks, and fraudulent support calls.
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In 2024, the first-year bonus depreciation has decreased from 80% to 60% for qualifying business assets with a 20-year life or less. However, the expensing limit is increased to $1,220,000, phasing out when asset purchases exceed $3,050,000. Unlike bonus depreciation, the total expensed amount cannot exceed the business's taxable income.
Starting in 2024, more companies are eligible to use the cash method of accounting. C corporations with average annual gross receipts of $30 million or less over the past three years can adopt this method. This threshold also applies to partnerships and LLCs with C corporation owners.
In 2024, the standard mileage rate for business driving is set at 67 cents per mile. For medical travel and military moves, the rate is 21 cents per mile. The rate for charitable driving remains fixed by law at 14 cents a mile.
The 20% qualified business income deduction introduced in the 2017 tax law comes with a stricter penalty for errors. This deduction is available to self-employed individuals and pass-through entities (LLCs, partnerships, S corporations, and some trusts) but with limits for high earners. Less known is the easier imposition of IRS penalties for incorrect claims of this deduction. The penalty for substantial tax understatement in these cases is applied if the error exceeds $5,000 or 5% of the correct tax, lower than the standard 10% threshold.
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Beneficial Ownership Reporting:
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A new beneficial ownership reporting regime for small firms begins in 2024. It’s run by the Financial Crimes Enforcement Network. Certain corporations, LLCs and other entities must report information about themselves and their beneficial owners to FinCEN. There are lots of exceptions to reporting, including one for operating firms with over 20 full-timers, over $5 million in gross receipts, and a U.S. physical office.
Entities in existence before 2024 have until Dec. 31, 2024, to file their report. Entities formed after 2023 have 90 days after the date of formation to comply. Reporting will be done electronically through FinCEN’s website.
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IRS Operational Status and Government Shutdown Avoidance:
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The IRS will begin processing 2023 tax returns from Jan. 29 and is currently fully operational. However, a possible government shutdown in early March could disrupt their services. While lawmakers are trying to prevent this, the effect on tax assistance remains unclear. At SK Financial CPA, we are committed to efficient tax services despite these challenges. We urge you to submit your documents promptly to help ensure accurate filings and minimize any impact on your tax assistance services.
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Bipartisan Tax Deal Overview:
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Congressional tax writers have reached a bipartisan agreement, which includes temporary revivals of desired tax breaks for businesses. Some key provisions include expensing domestic R&D costs, restoring 100% bonus depreciation, and easing interest deduction limitations for large companies. Additionally, enhancements to the refundable portion of the child tax credit are proposed.
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Where Do the Candidates Stand on Taxes?
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| Characteristic |
Joe Biden (D) |
Donald Trump (R) |
| Business Taxes |
Increase the corporate income tax rate to 28%. |
Maintain the 21% corporate income tax rate from the 2017 TCJA. |
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Increase the GILTI tax rate from 10.5% to 21% |
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Expand the net investment income tax to nonpassive business income. |
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Raise taxes on the fossil fuel industry. |
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| Capital Gains & Dividend Taxes |
Tax long-term capital gains and dividends at ordinary income rates for income above $1 million |
No tax policies proposed. |
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Tax unrealized capital gains at death above a $5 million exemption ($10 million for joint filers). |
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Impose a minimum effective tax rate of 20% on an expanded measure of income, including unrealized capital gains, for households with net wealth above $100 million. |
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| Credits, Deductions, and Exemptions |
Make the Child Tax Credit fully refundable permanently. |
No tax policies proposed. |
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Increase the Child Tax Credit to $3,600 for young children and $3,000 for older children, make it fully refundable. |
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Increase the Earned Income Tax Credit for workers without qualifying children permanently. |
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Expand premium tax credits permanently. |
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| Estate and Wealth Taxes |
Tighten rules related to the estate tax. |
Make the expiring estate tax cuts from the 2017 TCJA permanent. |
| Excise Taxes |
Increase the stock buyback excise tax to 4%. |
Tax large private university endowments. |
| Individual Income Taxes |
Increase the net investment income tax and Medicare tax to reach 5% on income above $400,000. |
Make the expiring individual income tax cuts from the 2017 TCJA permanent. |
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Increase top individual income tax rate to 39.6% on income above $400,000 for single filers and $450,000 for joint filers. |
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Extend the expiring individual income tax changes from the 2017 TCJA for taxpayers making under $400,000. |
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| Payroll Taxes |
No tax policies proposed. |
No tax policies proposed. |
| Tariffs and Trade |
No tax policies proposed. |
Impose a universal baseline tariff on all U.S. imports. |
| Other |
No tax policies proposed. |
No tax policies proposed. |
Source : Tax Foundation
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Stay connected with the SK Financial community through our social media channels! Engage in discussions, share experiences, and ask questions. We believe in a collaborative approach to financial well-being, and our online space fosters a supportive and informative environment for everyone.
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Schedule a free consultation with one of our tax experts! During this no-obligation conversation, we'll discuss your individual needs and answer any questions you have. This is a great opportunity to explore how SK Financial can personalize your tax strategy and maximize your financial advantage.
Together, let's create a tax season that's informed, empowered, and beneficial for everyone. Remember, SK Financial is your trusted partner every step of the way.
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