By: Morgan Hunt, CPA
As the end of the year quickly approaches, we want to remind you of things to consider before
December 31 and to provide you with some important reminders as you prepare for the tax filing season.
Protect Your Personal Information – Identity Theft continues to be an issue for the IRS and state tax authorities. The IRS and state do not initiate contact by email or phone unless they have previously contacted you by mail regarding a matter. No legitimate organization will ever ask for sensitive information through emails or other unsecured methods.
Here are some steps you can follow to protect your information:
- Please forward all notices to us so we can review and respond expeditiously to the IRS or State Tax.
- Do not open attachments in suspicious emails.
- Read your credit card, banking, and health insurance statements carefully and often – watch for even the smallest charge that appears.
- Shred any documents with personal and financial.
- Beware of phishing scams requesting you update or verify your accounts.
- Obtain an Identity Protection PIN from the IRS at the following website: https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin
Secure emails from our office – We use a secure portal system called Share File to send and receive sensitive information electronically. If you wish to send us information securely using Share File, please contact us to send you the link.
Unexpected refund checks – If you receive an unexpected tax refund, DO NOT deposit or cash the check until you discuss it with us. If the overpayment should have been applied to your estimated taxes, the refund may cause you to be subject to underpayment penalties. The check can be returned to avoid incurring any penalties.
Tax Law Updates – We continue to provide up to date information on our website and our News You Can Use e-blasts including the 2024 Year-End Tax Planning Guide, other articles and planning tips for individuals and businesses, financial tools, and any late breaking tax news. Please visit our website www.SuttleCPAs.com (if you do not have access to our website and want us to send a copy of the 2024 Year-End Tax Planning report, please let us know). If you are not receiving our email e-blasts please subscribe to our newsletter on our website or contact us and we will make sure you are on the contact list.
The information below is general in nature. You should consult with us before acting upon the information to be sure of the tax ramifications based on your specific situation.
2024 Tax Projections – If you have had any changes to your income, deductions or withholding that could significantly alter your 2024 estimated taxes, please contact our office as soon as possible. It is important that you review your projected tax and projected tax withholding from all sources for the current year.
Bonus depreciation phase out begins – Beginning in 2023, there is an annual reduction in the bonus depreciation deduction allowed for taxpayers under the Tax Cuts and Jobs Act of 2017. For any assets placed into service in 2024 that qualify for bonus depreciation, only 60% of their cost can be deducted this year versus 80% for 2023. The deduction will continue to reduce by 20% annually through 2026.
Required minimum distribution rules changed – The SECURE 2.0 Act, passed in 2022, increased the starting age for RMDs from 72 to 73 as of January 1, 2023. Just a reminder, if you are 70½ you can take advantage of the exclusion for direct charitable donations of IRA funds (up to $105,000). This exclusion is not available to non-IRA accounts.
Roth IRA conversions – If you expect your 2024 income is lower than usual or if you expect your income in 2025 to push you into a higher tax bracket, a Roth IRA conversion may be an advantageous way to convert traditional-IRA money invested in any beaten-down stocks (or mutual funds) into a Roth IRA in 2024 if eligible to do so. Keep in mind that the conversion will increase your income for 2024, possibly reducing tax breaks subject to phase-out at higher AGI levels. This may be desirable, however, for those potentially subject to higher tax rates under pending legislation.
Year-end investment moves – Tax considerations should not drive your investment decisions. However, it is worth considering the tax implications of any year-end investment decisions you make. If you have capital gains from sales of investments, you may want to consider selling securities in loss positions to reduce your tax. If you plan to make substantial donations by selling stock, consider donating appreciated stock or digital assets. You will receive a deduction for the stock’s fair market value and will not have a reportable capital gain.
Deduction timing – Tax planning has become more complex due to the uncertainty of whether Congress will pass any Legislation and when it might pass and become law. When paying deductible items, you should pay them in the year (2024 vs. 2025) you expect to be in a higher tax bracket. Keep the following in mind: An expense is only deductible in the year it is paid for cash basis taxpayers. Expenses paid in 2024 by credit card are deductible when posted, even though you pay your credit card bill in 2025.
Retirement Plans – There are several types of retirement plans available for self-employed individuals and small businesses. Some of the plans must be established by December 31. If you plan to set up a 2024 plan, please give us a call to discuss which plan would be best for your business.
Taxes – If itemizing, you may deduct up to $10,000 ($5,000 if married filing separately) for a combination of property taxes and both state and local income taxes or sales taxes. Therefore, it is not tax advantageous to prepay your fourth quarter state estimate if you are already over the $10,000 limit.
WV Motor Vehicle Property Tax Adjustment Credit – West Virginia has implemented a new tax credit for motor vehicle taxes paid on time to be credited to your WV tax liability. You will receive a tax credit certificate in January 2025 from the WV Tax Division or online (tax.wv.gov). Please provide this form to us to claim this credit.
Charitable Contributions – The IRS may be conducting more audits related to charitable contribution values and required documentation especially for non-cash contributions. Be sure you are receiving the required documentation (letter confirming no goods or services were received) from the charity for all gifts of $250 or more. Visit our website for more information.
Digital assets – If you have bought, sold, received, sent, transferred, or otherwise transacted with digital assets please let us know. There will be additional work required to capture and report this data within your tax return. Note that digital assets are treated as property by the IRS and therefore digital asset transactions may result in short-term or long-term capital gains.
Make year-end friends and family gifts before December 31 – A person can make gifts to any other person (related and non-related) totaling up to $18,000 for 2024 ($19,000 for 2025) without requiring a gift tax return or starting to use the lifetime exemption. The 2024 annual exclusion amount increases to $36,000 per donee if the donor and spouse make gifts to the donee ($38,000 for 2025), including gift splitting. The unused exclusion does not carry over to the next year. Direct payment to the provider for education and medical expenses do not count against the annual exclusion. The 2024 lifetime estate and gift tax exemption is $13.61 million ($27.22 if married). The 2025 lifetime estate and gift tax exemption will be $13.99 million ($27.98 if married). It is anticipated this lifetime amount will be much lower in future years and will revert back to the prior law’s $7 million (to be adjusted for inflation) after 2025.
Special rules allow a donor to contribute more than $18,000 in the current year to a §529 College Savings Plan and have the annual exclusion for up to four subsequent years apply without incurring any gift tax. The contribution to a 529 Plan may also entitle you to a state income tax deduction if you contribute to a plan sponsored by your state of residence. Keep in mind, 529 contribution maximums vary by state.
Carryover tax basis – For gifted property, the donee has the same income tax basis and holding period as the donor. There are special rules if the fair market value of the asset at the time of the gift is lower than the adjusted basis. Generally, the tax basis of inherited property is the fair market value on the date of death. These rules may be changed with any new tax laws.
Review All Planning Documents – Each year as you gather and organize your tax information, it is the perfect time to review all of your estate planning documents – wills, trusts, powers of attorney, medical directives, etc. – to account for births, deaths, divorce and other changes which have occurred. It is also important to review your beneficiary designations included in your life insurance policies, annuities, IRAs, and other retirement plans.
Beneficial Ownership Information (BOI) Reporting – There is a new federal reporting requirement that affects most businesses and the penalties for not complying are significant. If your business can be defined as a “reporting company” under the Corporate Transparency Act (CTA), you may need to comply with new beneficial ownership information (BOI) reporting rules that took effect on January 1, 2024. Depending on when your business was (or is) first organized, your due date can be 30 days, 90 days, January 1, 2025, or already passed. You can find more information on our website.
UPDATE: On Tuesday, December 3, 2024, a federal district court in Texas halted the requirement to report BOI under the CTA citing that it is likely unconstitutional. This is currently under review by FinCEN and the ruling has been appealed by the Department of Justice. More to come!
Filing Forms 1099 – If you have paid over $600 in your trade or business to an individual or other entity (excluding corporations) you may have Form 1099 filing requirements. Form 1099s are due January 31 to the recipient and IRS. If you need our assistance with your filing requirements, please let us know. You will be asked on your tax return if all required Forms 1099 were filed. The IRS will impose a per form penalty if you do not file a Form 1099 when required. As you prepare your business for year-end, please review your vendors to determine if this rule applies to you.
TAX SEASON REMINDERS
Individual Tax Organizers – Your 2024 Tax Organizer, customized from your prior year return information, will be mailed to you in the coming weeks. Additional information regarding your tax data and documents will be included.
Remember, you do not need to transcribe information already contained on the tax documents. Use the Organizer as a guide to be sure you have everything or to note new items and those that did not reoccur this year. We will pick up the details from the tax documents. If you have some information in another form (Excel schedules, QuickBooks reports, etc.), you can provide those schedules in lieu of entering the detail in the related section of the Organizer.
Please provide the original copies of all tax documents. We use a scan technology in which copies do not work as well. This includes Forms W-2’s, 1099’s, 1098’s, K-1’s, and complete year-end brokerage statements. We will return all original documents to you.
The Organizer and your tax data must be returned to our office by March 10, 2025. All tax documents, with the exception of Schedule K-1s and certain brokerage statements, should be received by then. Please hold your information until complete, with those limited exceptions. Tax information received after the deadline may require an extension of time to file the returns.
Safe Send – We are encouraging our clients to use a program called Safe Send Returns to electronically deliver and sign their tax returns. If you choose this method of delivery, you will not receive a bound, paper copy of your return (unless you request it). We will have additional information on this in your year-end tax Organizer packet.
Tax Season Office Hours – Monday through Friday from 8:30 a.m. to 5:00 p.m. We are available by appointment outside of regular office hours.
Satisfaction and Referrals – Our goal is to provide the highest level of professional service. If this is not happening, please let us know so we can correct any problems. Thank you for your referrals. If you know of others who will benefit from the service we provide, please let them know. We appreciate your confidence.
To continue receiving this year-end newsletter, please be sure we have your current email address by subscribing to our newsletter on the home page of our website www.SuttleCPAs.com.
Best Wishes for a Happy Holiday Season and a Healthy and Prosperous New Year!
Our offices will be closed:
December 24th, 25thand January 1st