Tax season is already here before you know it. Happy New Year, and hope everyone is off to a good start!
Here are some deadlines to prepare and watch out for:
- Individuals:
- 4th Quarter Estimated Taxes for 2023, Due 1/16/24
- Last day for filing 6 month extensions, Due 4/15/24
- Taxes Due 4/15/24
- Businesses:
- Pass-Through Entities for calendar year, (Partnerships & S-Corps.) Deadline for 2023, Due 3/15/24
- Corporate taxes for calendar year, Due 3/15/24.
Everyone needs to read the following updates:
IRS raised their interest rates. Hint: Don’t underpay those quarterly estimated taxes, if you want to avoid high interest rates!
- 2023 interest rates for 1st, 2nd, and 3rd Quarter are 7%
- 2023 interest rates for 4th Quarter is 8%
- 2024 1st Quarter is 8%
Corporate Transparency Act:
Beginning January 1, 2024, all current LLCs, S-corps, LP, LLPs, Business trusts, etc. are required to file Beneficial Owner Information report. (Big exception is large C corporations are exempt from this.) All new companies must file within 90s days. All current companies must file by 12/31/24. Any changes must be filed within 30 days.
The Beneficial Owner Information report basically contains the owner’s name, tax ID, birthdate, government passport or driver’s license, and address. Who qualifies as a beneficial owner? Anyone who owns or exercises substantial control (at least 25%) over a reporting company.
What happens if you don’t comply? Civil penalties are up to $500 each day of violation. Criminal penalties including imprisonment for up to two years, and or a fine up to $10,000. In plain language, if you’ve registered an LLC, even if it’s taxed as a sole proprietor, you need to register for BOI to be in compliance of Corporate Transparency Act. Example: If Mary Sue registers her company in the Commonwealth of Massachusetts as an LLC on 1/2/24, she has 90 days to register for BOI.
The Corporate Transparency Act applies to all 50 states, Indian tribes, and territories. Why was this law created? US government is trying to address illicit finance and national security threats from corruption.
More information about this can be found here. If your company or entity is required to file BOI report, you can access it on the FINCEN website. If you need assistance in filing BOI report, please contact me.
Housekeeping for Individuals:
If you haven’t already, please go to www.irs.gov and register for your tax account. By doing so, it allows the taxpayer to be able to look at prior year returns, reviewing IRS tax balances, and keeping all of the IRS tax communications in one place. The IRS tax account also allows the individual to submit electronic versions of the power of attorney in a secure manner, in case the tax professional may need to represent him/her.
Sharing tax documents securely
Data Security is a big topic for everyone in the tax and financial world right now. In effort to keep our clients safe, we ask that you to never share confidential information over email.
For Patterson Business Solutions established clients: you can share documents securely by:
- Client Portal: Verifyle
- Client Portal: Link by Intuit.
- Snail Mail
- Fax
- Drop off in person by appointment. To schedule drop off, please use this link.
New clients: Please schedule an initial appointment online. After our first consultation, I will email you invitation to a client portal, and request for an initial $200 software retainer per return. By collecting software fees up front, it helps keep costs down and allows me to maintain affordable rates for everyone. I can take Venmo or check in the mail for the retainer.
1099-Ks
For taxpayers who received 1099-ks, technically anything over $600 is the reporting threshold in 2023. However, IRS is treating 2023 as a transition year. So reporting requirements for 2023 will be if the taxpayer receives over $20,000 and has over 200 transactions.
Energy Residential Credits and Electric Vehicles
Federal government has extended Energy Efficient Home Improvement Credit. through 2032. So homeowners can take advantages of all the tax savings related to exterior windows, skylights, exterior doors, heat pumps, HVACs, water heaters, furnaces, boilers, solar roofing tiles and even home energy audits. Sometimes the labor costs are not included in the tax credit, it depends. Please have a copy of the home improvement receipt handy for your tax accountant.
Due to manufacturer limitations, only the first 200,000 electric vehicles were qualified for Clean Vehicle credit from 2023-2032. So if you bought a Tesla in 2023, chances are it’s already used up. However, we can try to apply for Federal tax credits on the plug-in Electric and Fuel Cell electric vehicles purchased in 2023 and after. To claim your new or used clean vehicle credit, please provide your VIN. You can find the VIN by opening the front driver’s door, or looking for original car sticker.
Massachusetts Millionaire 4% Surtax
MA is subject to a 4% surtax for income over $1 Million. Why is this an issue for middleclass? When you sell a home in MA, real estate can be really expensive. It can be really easy to trigger the Millionaire 4% surtax, if you’ve sold the family home in 2023 and add regular working income. (There was one tiny reprieve, estate returns, the surtax starts after $2M. )
MA Millionaire 4% surtax applies to: residents, non-residents, trust and estates, clubs and organizations not for profit. One method of mitigating heavy taxes, is to have married couple file separately to reduce the $1 Million threshold. If the couple files separately for MA, it’s best to file separately on Federal return as well. Another suggestion is to consider spreading the payment out as an installment sale agreement. Careful tax and estate planning can help MA residents avoid this expensive tax bill.