Dear Client,

Welcome to this edition of our tax and financial insights newsletter! In this issue, we cover the latest updates from the IRS, including extended tax deadlines for storm-affected areas, drought relief measures for farmers, and new developments in U.S. tax policy. You'll also find valuable information on upcoming changes to retirement savings incentives, the Sustainable Aviation Fuel credit, and important tax adjustments for 2025.

Disaster Relief for Hurricanes Helene, Milton, and Other Declared Disasters

Taxpayers affected by Hurricanes Helene and Milton have additional time to claim personal losses not covered by insurance on their 2023 or 2024 returns. The IRS has extended filing deadlines for victims of Hurricane Helene to May 1, 2025, with similar relief expected for those impacted by Hurricane Milton. The relief includes extended deadlines for payroll and excise tax filings, as well as estimated tax payments due in January and April 2025. This extended relief provides valuable time for businesses and individuals to assess and recover from the financial impact of these disasters.

U.S. China Economic Competition: Tax Policy Recommendations
To enhance U.S. competitiveness against China, experts recommend reinstating full expensing for R&D investments and maintaining corporate tax rates. These changes aim to boost domestic investment and drive innovation.

Rebuilding Financial Records After a Natural Disaster
Natural disasters can devastate personal and financial records, making it difficult for individuals to seek federal assistance or file insurance claims. Reconstructing tax and financial records is critical in these situations. Taxpayers can obtain free transcripts through the IRS’s Get Transcript tool, while financial and property records can be retrieved from banks, title companies, or county assessors. For additional assistance, the IRS offers resources such as Publication 547, and individuals can visit DisasterAssistance.gov for further guidance. Ensuring that you have access to these vital records will make the recovery process smoother and allow for timely claims and filings.

Corporate Transparency Act: Reporting Requirements
The Corporate Transparency Act (CTA) mandates that many small businesses, including corporations and LLCs, report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). Entities established before 2024 must comply by December 31, 2024, while newly formed entities in 2024 must report within 90 days. Penalties for noncompliance can reach up to $591 per day, making it crucial for businesses to stay compliant. Ongoing litigation may affect the implementation of the CTA, but businesses are advised to prepare for compliance as FinCEN continues to move forward with these new requirements. The Act aims to prevent money laundering and strengthen transparency in corporate ownership structures.

IRS Grants Filing Exception for Tax-Exempt Organizations on Form 4626
The Department of the Treasury and the IRS have announced that tax-exempt organizations are exempt from filing Form 4626, Alternative Minimum Tax—Corporations, for the 2023 tax year. While the Inflation Reduction Act of 2022 introduced a 15% alternative minimum tax (AMT) on corporations, this filing exception gives tax-exempt organizations additional time to comply. Organizations should still maintain records for compliance and report any AMT liability on Form 990-T, Part II, Line 5, if applicable. Feedback on the proposed regulations is due by December 12, 2024.

IRS Highlights Success of Form 1023-EZ
The IRS continues to highlight the success of Form 1023-EZ, a simplified application process for small organizations seeking 501(c)(3) tax-exempt status. However, concerns remain regarding insufficient oversight. Stakeholders are calling for additional documentation to ensure proper assessments of tax-exempt eligibility, particularly as applications have increased significantly. If your organization is considering applying for tax-exempt status, be sure to carefully review the documentation requirements to avoid delays or potential rejections.

Tax Court Rulings: Key Updates on Business Deductions
Several recent Tax Court rulings may affect your business’s tax deductions:

The Court ruled that LLC owners can deduct legal fees incurred in criminal cases, provided the fees are directly related to the business.
Depreciation deductions have been allowed for restaurateurs on build-outs based on recalculated asset values.
New per diem rates for business travel in 2025 are set at $319 for high-cost areas and $225 for other locations. These rulings provide greater clarity on what can be claimed as deductible expenses and highlight the importance of accurate record-keeping and reporting.

IRS Increases Scrutiny of Captive Insurance Companies
The IRS is closely examining small captive insurance companies, disallowing premium deductions in cases without legitimate insurance arrangements. Businesses should ensure compliance as audits in this area continue.

IRS Updates Basis Reporting Rules for Estates
The IRS has updated basis reporting rules for estates, simplifying the process for executors and heirs. Executors must report the value of inherited assets using Form 8971, but heirs are no longer required to report new owners or tax bases when gifting inherited property. These changes reduce the administrative burden on families managing estates and provide clearer guidelines for the reporting of inherited assets.

Warning Against Hurricane Charity Scams

In the wake of Hurricanes Milton and Helene, the IRS has issued warnings about fraudulent charities exploiting the generosity of those looking to help. Taxpayers are urged to verify charitable organizations using the Tax Exempt Organization Search (TEOS) tool on IRS.gov before making any donations. This due diligence will help protect against scams and ensure that your contributions are going to legitimate causes.

Proposed Regulations for Tribal Owned Entities
The Treasury and IRS propose that tribal-owned entities won’t owe federal income tax and may qualify for energy credits. Public comments are open until January 17, 2025.

Upcoming Changes to Retirement Savings Incentives
Starting in 2027, significant changes will be introduced to retirement savings incentives for lower-income individuals contributing to retirement accounts such as IRAs, 401(k)s, 403(b)s, or SEPs. Currently, the Saver’s Credit offers a tax credit of up to $2,000 for joint filers and $1,000 for single filers, with contribution matches capped at 50%, 20%, or 10%, depending on adjusted gross income (AGI). The Saver’s Credit fully phases out at the following AGI thresholds for the 2024 tax year:

$38,250 for single filers
$57,375 for heads of household
$76,500 for joint filers

In 2027, the Saver’s Credit will be replaced by a 50% government match on contributions up to $2,000 per person, directly deposited into the individual’s retirement account. The income thresholds to qualify for this match will remain the same, adjusted annually for inflation. These changes, introduced under the SECURE 2.0 Act, aim to support retirement savings for lower-income individuals better, providing more direct and tangible benefits for long-term financial security.

Drought Relief for Farmers and Ranchers
Farmers and ranchers affected by drought can defer gains from livestock sales, with relief available in 41 states under Notice 2024-70. This allows them to manage financial responsibilities while replacing livestock.

New Sustainable Aviation Fuel Credit
The IRS and Treasury introduced a credit for sustainable aviation fuel under Notice 2024-74, offering $1.25 to $1.75 per gallon for fuels meeting a 50% emissions reduction, supporting both environmental goals and tax savings.

Drought Relief for Florida Livestock Operators
Florida livestock operators affected by drought can defer gains on livestock sales until the end of 2025, offering financial relief as they replace livestock and manage their tax liabilities.

IRS Extends Tax Deadlines for Illinois and Pennsylvania
The IRS has extended tax deadlines to February 3, 2025, for businesses and individuals in Illinois and Pennsylvania affected by severe storms and flooding. This extension provides extra time for filing federal returns and making tax payments.

As we wrap up this edition, we hope these insights help you stay ahead of important tax updates and financial planning strategies. Whether you're navigating deadline extensions, exploring new tax credits, or planning for the year ahead, SK Financial CPA is here to support you every step of the way.

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