Dear Client,

📢 Welcome to our February 2024 Tax Update Newsletter! Stay in the loop with the latest tax insights and developments. From legislative updates to practical tips, we've got you covered!💡

New Tax Package on the Horizon
The 2024 filing season is underway with anticipated tax law changes. The House and Senate propose a package to enhance the child tax credit for lower-income families and revive business tax benefits temporarily. While the House passed the bill easily, the Senate faces hurdles. However, there's optimism for a bill aiding disaster victims and extending bonus depreciation benefits for businesses to pass into law.

Impact on IRS Processing
Passing the tax package could affect IRS return processing, especially due to retroactive changes in business deductions and tax credits. However, the IRS, with funds from 2022, is prepared to upgrade its systems within six weeks of new legislation. Filers claiming the increased child tax credit will have their returns automatically adjusted by the IRS, eliminating the need for manual changes.

Important Reminders for Taxpayers

Deadline Alert:
Individuals and calendar-year C corporations must file 2023 tax returns by April 15, with Maine and Massachusetts taxpayers having until April 17. Certain storm victims have extended deadlines.

Splitting Refunds:
Taxpayers can now request direct deposit refunds into up to three bank accounts and split refunds using Form 8888.

Reporting Digital Assets:
A new question on 2023 tax returns requires individuals and entities to disclose transactions involving digital assets such as cryptocurrencies and nonfungible tokens.

Combined State and Local Sales Tax Rates
Five states Alaska, Delaware, Montana, New Hampshire, and Oregon do not impose statewide sales taxes, with Alaska being unique for allowing local sales taxes.

Conversely, the states with the highest average combined state and local sales tax rates include Louisiana (9.56%), Tennessee (9.55%), Arkansas (9.45%), Washington (9.38%), and Alabama (9.29%), while those the lowest averages are Alaska (1.82%), Hawaii (4.50%), Wyoming (5.44%), Maine (5.50%), and Wisconsin (5.70%), showcasing a diverse range of sales tax policies across the United States.

Navigating Tax Disputes and Retirement Planning
IRS prioritizes shareholder-basis audits in S corporations for compliance. Divorcing spouses sharing 401(k) savings should use QDROs to avoid fines. Failure to make RMDs may result in excise taxes, with potential exceptions.

Medical Expenses and Deductions
If you are wondering whether you should claim the standard deduction on your Form 1040 or itemize your deductions? Itemizing may be helpful for people whose medical costs are high. A broad range of expenses, from doctor's fees to long-term care costs, are eligible for deduction as medical expenses. Recall that for medical expenses to qualify as deductible, they must surpass 7.5% of your Adjusted Gross Income (AGI).

Reporting Qualified Charitable Distributions (QCDs)
For taxpayers aged 70½ and older who made qualified charitable distributions from their IRAs in 2023, reporting these distributions on Form 1040 can be tricky. Remember to subtract the amount directly transferred to a charity from the total distributions reported on Form 1099-R and indicate "QCD" next to the corresponding line.

Business Vehicle Tax Breaks
Business owners investing in vehicles for their businesses can benefit from generous tax breaks in 2024. Depreciation caps for passenger automobiles have increased, and buyers of heavy SUVs and pickup trucks also qualify for significant expensing options.

Economic Forecasts

Tax Updates from Congress and IRS
Despite momentum in the House, a bipartisan tax bill has stalled in the Senate, with discussions ongoing. Meanwhile, the IRS is undergoing a redesign of letters and notices to simplify correspondence with taxpayers. Additionally, many individual tax identification numbers expired at the end of 2023, requiring renewal for those who needed to file taxes.

Tax Software Updates and Legal Matters

TurboTax Woes: Intuit, the parent company of TurboTax, faces legal scrutiny for deceptive marketing practices related to its free filing service, following a previous settlement over similar issues.

Reporting Digital Assets: The IRS delays a tax reporting rule on businesses' receipt of digital assets until regulations are published.

Explore our latest video covering useful tax season tips and a variety of other relevant topics. From maximizing deductions to navigating tax laws, our concise guide offers practical insights to optimize your financial strategy.

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At SK Financial CPA, we're committed to being your foremost resource for staying updated on the ever-evolving field of finance. Our mission is to provide you with precise, timely insights into legislative changes, practical strategies, and crucial tax reminders that shape your financial world. Trust us to keep you informed and empowered in navigating your financial journey with confidence.