Sandy Clark's Income Taxes

Quarterly Estimated Tax Payments - Reminder

If you are making quarterly estimated tax payments to the IRS, the due date for the September 1st - December 31st, 2023 quarter of year is Monday, January 15th, 2024.

For payments made using IRS Direct Pay, you can make payments until 11:45PM EST, and for payments using a credit or debit card, payments can be made up to midnight on the due date.

New Tax Credit Rules for a Clean Vehicle Purchase in 2024 - Did You Know?

Starting January 1, 2024, buyers of new and used electric (EV), plug-in hybrid (PHEV) and fuel cell vehicles may be able to transfer the Clean Vehicle Credit to a car dealer in exchange for a lower price. These new tax credit rules will make clean vehicles affordable for a wider range of taxpayers, who previously had to wait until the next tax filing season to get the benefit of the credit.

The amount of the Clean Vehicle Credit depends on a variety of factors, including battery size and the origin of critical components. The maximum credit is $4,000 for used vehicles and $7,500 for new vehicles. You can find a complete list of EVs, PHEVs and fuel cell vehicles that qualify for the credit at the U.S. Dept. of Energy website (link below). If you transfer a Clean Vehicle Credit to a dealer, the dealer must provide a financial benefit equal to the credit amount, such as a price reduction.

For both new and used vehicles, the Clean Vehicle Credit is subject to income limits. A tax professional can help you determine whether you qualify for the credit, and what the credit amount might be for a particular vehicle.

Search for Eligible Clean Vehicles: https://fueleconomy.gov/feg/tax2023.shtml

Delayed Implementation of New 1099-K Rules – Did You Know?

Under a new rule enacted in 2021, third-party payment processors must issue a Form 1099-K to any individual who receives $600 or more in payments for goods or services during a year. However, IRS officials have noted that this rule could potentially cause widespread confusion, since many transactions completed through online payment platforms have no tax impacts. Examples of non-taxable transactions include settling up with friends and selling used personal items.

Therefore, the IRS will not enforce the new rules for tax year 2023. Instead, third-party payment processors may operate under the prior rules, only sending 1099-K forms to users who received over $20,000 in payments through over 200 transactions. In addition, 2024 will serve as a phase-in year, with the 1099-K reporting threshold set at $5,000.

Regardless of 1099 reporting rules, payments received through third-party platforms for self-employment activities or selling goods for profit are generally taxable income. A tax professional can help you properly report your 2023 income, and prepare for the future implementation of a lower threshold for 1099-K forms.

Preparing for Tax Filing Season

A new year and filing season for 2023 tax returns will soon be upon us. A little advance preparation can help prevent stressful tax time surprises. Here are some reminders of important steps you can take now to set yourself up for a more worry-free tax filing:

- Do one last withholding checkup. Time is running out to adjust your paycheck withholding to make sure you have paid enough tax throughout 2023. You can use the IRS Withholding Estimator tool (link below) to make sure your numbers are on track.
- If your name changed in 2023, report the change to the Social Security Administration (link below) as soon as possible.
- Locate your bank account information, including both your account number and the bank routing number, so you can receive your tax refund by direct deposit.
- Watch for year-end income statements, especially in late January and early February. These statements may include W-2 forms, along with 1099-NEC, 1099-MISC, 1099-INT, 1099-G and other 1099 forms. Note that some of these forms may come by mail, while others may be sent to you electronically. Keep all of the forms together and organized.
- Organize records for tax deductions and credits. These records may include Form 1095-A (Health Insurance Marketplace Statement), tuition statements (Form 1098-T), medical bills, mortgage interest statements, and home energy improvement or clean vehicle receipts or invoices.

IRS Withholding Estimator: https://www.irs.gov/individuals/tax-withholding-estimator
Social Security Administration (SSA): https://www.ssa.gov/

'Tis the Season for Important Tax Paperwork

Keeping your records organized will help make sure you don't miss out on valuable deductions when it is time to file. Many taxpayers will receive year-end income statements from employers, banks, stock issuers and other sources in January and early February.

The most common documents include:

- W-2 forms from your employers, showing your wages and any taxes withheld
- Forms 1099-INT and 1099-DIV showing your interest and dividend income
- Forms 1099-MISC and 1099-NEC showing gig economy and other self-employment earnings, along with rents, royalties and other miscellaneous income
- Records of virtual currency (including crypto) transactions
- Charity donation receipts
- Health Insurance statements (like Form 1095)
- Proof of qualifying educational expenses (like Form 1098-T)
- Mortgage interest statements

Healthcare Open Enrollment Deadline on December 15

This week is the last week to register for the HealthCare.gov open enrollment period with the deadline being Friday, December 15th, 2023. Once the Open Enrollment period is over, you will only be able to enroll if there's a qualifying life event for the Special Enrollment Period.

Enrollment can be done at https://Healthcare.gov, and a simple checklist of documents you'll need can be found here: https://marketplace.cms.gov/outreach-and-education/marketplace-application-checklist.pdf.

Saver's Credit for 2023 Retirement Plan Contributions – Did You Know?

The Retirement Savings Contributions Credit, commonly known as the Saver's Credit, helps low- and middle-income taxpayers set aside money for retirement. Eligible taxpayers may claim a tax credit of up to $1,000 (up to $2,000 for joint filers) for their contributions to traditional or Roth IRAs, or to certain workplace retirement arrangements like 401(k) and 403(b) plans.

Eligibility for the Saver's Credit depends on a taxpayer's adjusted gross income (AGI) and filing status. The 2023 AGI limits are $73,000 for married couples filing jointly, $54,750 for head of household filers, and $36,500 for single filers and married individuals filing separately. Those with lower incomes may receive a larger credit amount. Note that some taxpayers qualify to claim both the Saver's Credit and the tax deduction for traditional IRA contributions.

In order to receive the credit for 2023, you must contribute to a 401(k), 403(b) or similar qualified plan by December 31. However, you may make 2023 IRA contributions through April 15, 2024. A tax professional can help you determine whether you qualify to claim the Saver's Credit, and if so, help you get the greatest benefit from the credit.

Giving Tuesday and Charitable Donations - Did You Know?

Millions of Americans will contribute to their favorite charities on Giving Tuesday (November 28), and throughout the holiday season. Charitable donations are often described as tax-deductible, but whether you can claim a deduction for your contribution depends on several factors.

You generally must itemize deductions on your tax return to claim a deduction for charitable donations, therefore your donation will not be deductible if you use the standard deduction. If you do itemize deductions, you may generally deduct donations of money or property to any eligible tax-exempt charity. If you are unsure whether an organization qualifies to receive tax-deductible donations, the IRS Tax-Exempt Organization Search tool (link below) can help.

Tax-Exempt Organization Search: https://www.irs.gov/charities-non-profits/tax-exempt-organization-search

Required E-Filing for Form 8300 for Businesses Starting January 1st – Did You Know?

Taxpayers engaged in a trade or business generally must file IRS/FinCEN Form 8300 anytime they receive more than $10,000 in cash in a single transaction or related transactions. Currently, taxpayers have the option of filing this form either electronically or on paper. However, the IRS recently announced that most business taxpayers will be required to e-file Form 8300 (Report of Cash Payments Over $10,000) beginning January 1st, 2024.

For the purpose of determining whether a Form 8300 must be filed, transactions are generally "related" if they involve the same customer and occur within a 24-hour period. However, transactions that occur further apart in time may still be considered related if there was good reason to know that they were part of a series of connected transactions. For example, the future purchase of additional items or services might be negotiated during the original sale.

Some exceptions to the Form 8300 electronic filing requirement will exist when the rule takes effect on January 1. For example, businesses required to file fewer than 10 other information returns annually may typically continue filing Form 8300 on paper. The IRS will also offer exemptions and waivers in cases where electronic filing would cause hardship for a taxpayer, or violate their religious beliefs. A business tax professional can help you determine when and how you must file Form 8300, and help you complete and submit the form in a timely manner.

Renewing ITINs - Did You Know?

Individual Taxpayer Identification Numbers are used for taxpayers who are required for U.S. tax purposes to have a U.S. taxpayer identification number but do not qualify to get a social security number.

If you use an ITIN, you should check if it expires this year. If it does, information about how to renew your ITIN can be found at: https://www.irs.gov/forms-pubs/about-form-w-7. Keeping your ITIN current helps avoid tax refund and processing delays. If you are only using your ITIN for informational returns like Forms 1099, you may not need to renew.

The ITINs of taxpayers who have not used them to file a federal return at least once in the past three years will expire on December 31, 2023. ITINs with middle digits (the fourth and fifth positions) "70," "71," "72," "73," "74," "75," "76," "77," "78," "79," "80," "81," "82," "83," "84," "85," "86," "87," or "88" have expired. Additionally, ITINs with middle digits "90," "91," "92," "94," "95," "96," "97," "98," or "99," if assigned before 2013, are also expired.

Withdrawing Employee Retention Credit Claims – Did You Know?

Congress created the Employee Retention Credit (ERC) in 2020 to help businesses that were either closed by government order or lost substantial revenue during the Covid pandemic. Unfortunately, the program became a target for tax scammers, who aggressively push business owners who do not qualify for the ERC into filing bogus credit claims.

To protect businesses from the scams, the IRS has halted processing of new ERC claims through at least December 31. However, scammers have responded by changing their tactics, now pushing business owners into costly loans in anticipation of ERC refunds that will never come.

During the processing moratorium, taxpayers who may have been tricked into claiming the ERC without meeting the eligibility rules may be able to withdraw their claims without risk of penalty. These business owners may withdraw their applications if their ERC claim has not yet been processed, or if they received an ERC refund but have not yet cashed or deposited the check.

Instructions for the withdrawal process may be found on the IRS Withdraw My ERC webpage (link below). Special instructions apply for businesses that have been notified of an IRS audit of their ERC applications.

A trusted business tax professional can help you determine whether your business qualifies for the ERC, and either file a legitimate claim or withdraw a questionable application.

Withdraw My ERC Guide: https://www.irs.gov/newsroom/withdraw-an-employee-retention-credit-erc-claim

2024 Healthcare Open Enrollment - Did You Know?

The 2024 open enrollment period for Marketplace health insurance starts on November 1, 2023, and ends December 15, 2023. Plans will start January 1, 2024.

Once the Open Enrollment period is over, you will only be able to enroll if there's a qualifying life event for the Special Enrollment Period.

Enrollment can be done at https://healthcare.gov, and a simple checklist of documents you'll need can be found here: https://marketplace.cms.gov/outreach-and-education/marketplace-application-checklist.pdf.

Name Changes - Did You Know?

A name change can affect your taxes. As all the names on a tax return must match Social Security Administration (SSA) records, a name mismatch can delay your tax refund.

Report Name Changes: Got married and now using a new spouse's last name or hyphenate a name? Divorced and now back to using a former last name? In either case, you should notify the SSA of a name change. That way the new name on IRS records will match the SSA records.

Make Dependent's Name Change: Notify the SSA if a dependent had a name change. For example, if you adopted a child and the child's last name changed. If the child does not have a Social Security number, you may use an Adoption Taxpayer Identification Number on your tax return. An ATIN is a temporary number. Apply for an ATIN by filing Form W-7A with the IRS.

Get a New SS Card: File Form SS-5, Application for a Social Security Card. The form is on SSA.gov or by calling 800-772-1213.

Art Donation Tax Scams – Did You Know?

As part of ongoing efforts to protect taxpayers, the IRS recently issued warnings about a scam centered on fraudulent tax deductions for art donations. Promoters of this scheme persuade taxpayers to buy works of art at supposedly deeply discounted prices. The buyers are told that they can donate the art to a charity after a year or more, and receive a large tax deduction by claiming a value far higher than the price they paid. The promoters often recommend shifty art appraisers who are in on the scam, along with specific charities to accept the donations.

Taxpayers may generally deduct legitimate charitable donations of art, but any valuation over $5,000 must be supported by a written appraisal from a qualified art appraiser. Many people who have fallen for this scam now find themselves facing substantial additional tax assessments, along with IRS penalties and interest charges.

Remember: If the tax deal sounds too good to be true, there is likely a scammer after you. A tax professional can help you plan your charitable donations, and claim the appropriate tax benefits.

IRS Third Party Authorizations – Did You Know?

All U.S. taxpayers have the right to designate a third party to work with the IRS on their behalf. In order to exercise this right, taxpayers must formally grant permission to the third party to represent them. This authorization may take several different forms:

Oral Disclosure: This level of permission simply authorizes the IRS to share the taxpayer's tax information with another person present on a phone call or in a meeting.

Third-party Designee: On their tax returns, taxpayers may designate a third party to discuss the return with the IRS. This authorization is limited to that specific return and year.

Tax Information Authorization: Taxpayers may appoint a third party to receive and review their confidential tax information for a specific type of tax for a designated time period.

Power Of Attorney: This designation authorizes a person or firm to represent the taxpayer in federal tax matters. The person or firm must be certified to practice before the IRS.

Oral disclosure and third-party designee permissions expire automatically. Taxpayers have the right to revoke tax information or power of attorney authorizations at any time, either by notifying the IRS of the revocation, or simply by appointing a new representative.

Filing and FBAR Extensions Deadline

For taxpayers who requested extensions to file various 2022 returns, the filing due date for those returns is October 16, 2023.

The October 16 deadline to file under an extension applies to several common returns, including:

2022 INDIVIDUAL INCOME TAXES:

Most individual taxpayers who requested an automatic extension to file their 2022 federal tax returns must file by October 16. However, additional extensions may be available to some taxpayers affected by recent disasters, including hurricanes and western wildfires. You can find a list of affected areas here: https://www.irs.gov/newsroom/tax-relief-in-disaster-situations.

2022 CORPORATE INCOME TAXES:

The October 16 deadline also applies to C corporations that requested an extension to file their 2022 corporate income tax returns (Form 1120).

FOREIGN BANK ACCOUNT REPORT (FBAR):

Many U.S. taxpayers, including individuals and businesses, must file an annual report of their foreign bank and other financial accounts, called an FBAR. Typically, filing an FBAR is necessary if the total value of a taxpayer's foreign accounts exceeds $10,000 at any time during the calendar year. However, certain accounts, such as those held within a qualified IRA or other retirement plan, may not need to be reported. Most taxpayers who are required to file a FBAR and have not yet done so must file by October 16.

Disaster Preparation Reminders – Did You Know?

September is National Preparedness Month, the perfect time for all Americans to check their readiness for storms, floods, fires and other disasters. To help with that checkup, the IRS recently reminded taxpayers of important steps to include in their disaster preparation plans.

Store key documents in a secure, waterproof and fireproof container. These documents include birth certificates and/or Certificates of Naturalization, Social Security cards, tax returns, home deeds and vehicle titles. If you do not have a suitable storage option in your home, you may wish to rent a safe deposit box. In either case, make copies of these documents and store the copies in a separate location from the originals, such as at a relative's home. You may also wish to scan documents if you have access to a secure digital storage option.

To facilitate making insurance claims and/or claiming disaster loss tax deductions, individuals and businesses should maintain accurate inventories of their valuables. One simple way to document your possessions is to regularly take photos or videos around your home. Store the photos or videos securely, and include written notes like the year, make and model of key items.

Recovering from a disaster is always challenging. However, the right preparation can make the process a little simpler, and less stressful.

IRS Fourth Quarter Interest Rates for 2023 – Did You Know?

The IRS recently announced an interest rate increase for the fourth quarter of this year, October 1 - December 31. For that period, the annual interest rate for individual taxpayers will rise to 8%. Individual taxpayers who owe overdue tax will be charged interest at an annual rate of 8% on any unpaid balance beginning October 1, with interest compounded daily.

If you have not yet paid your 2022 tax, or tax from a previous year, paying as much as you can as soon as possible will help minimize the effect of this rate increase.

Quarterly Estimated Tax Payments - Reminder

If you are making quarterly estimated tax payments to the IRS, the due date for the June 1st - August 31st, 2023 quarter of year is September 15th, 2023.

For payments made using IRS Direct Pay, you can make payments until 11:45PM EST, and for payments using a credit or debit card, payments can be made up to midnight on the due date.

Tax Planning and Possible Benefits for New Parents – Did You Know? (2/2)

If you welcome a new child to your home in 2023, whether through birth, adoption or taking in a relative like a grandchild, then you may qualify for new tax benefits. Now is the time to take steps to preserve your eligibility for these tax-saving opportunities.

Adoptive parents may qualify for the Adoption Tax Credit for eligible expenses incurred during the adoption process. If you cannot yet obtain a Social Security number (SSN) for the adopted child, you will need an adoption taxpayer identification number (ATIN) to claim the credit.

If you pay for childcare services for your new child so that you can work or attend school, you may qualify for the Child and Dependent Care Credit. This credit can be as much as 35% of eligible care expenses, but you must keep detailed records of those costs. In addition, if your child does not meet the eligibility requirements for the Child Tax Credit (for example, because the child has an individual taxpayer ID number instead of an SSN), you may be able to claim the Credit for Other Dependents.

A tax professional can help you determine whether you may qualify for these credits or other tax benefits available to expanding families. Because a new child can affect your taxes in so many ways, it is a good idea to check up on your paycheck withholding amounts. The IRS Withholding Estimator (link below) helps you figure out how much tax should be withheld from your pay, and also provides instructions to request a change in your withholding if necessary.

IRS Withholding Estimator: https://www.irs.gov/individuals/tax-withholding-estimator

Tax Planning and Possible Benefits for New Parents – Did You Know? (1/2)

If you welcome a new child to your home in 2023, whether through birth, adoption or taking in a relative like a grandchild, then you may qualify for new tax benefits. However, there are some important steps to take now to preserve your eligibility for these opportunities.

First, if possible, obtain a Social Security number (SSN) for your new child. In most cases, you can request an SSN when you file for a birth certificate. If the child does not qualify for an SSN for any reason, then you can generally obtain an individual taxpayer identification number (ITIN) instead. Having a tax identification number for your child ensures that the IRS can verify the change in your household size, which may affect your taxes in a number of ways.

Two of the most valuable tax benefits that may be available to new parents are the Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC). You must have an SSN for each of your dependent children in order to claim these credits. The CTC is a per-child credit, so even if you received the credit in past years, your credit amount may increase with a new child in 2023. For the EITC, both the credit amount and the income limit increase as the number of qualifying children increases (up to 3 children). Therefore, the addition of a new child in 2023 could make you eligible for the credit even if you were not eligible in previous years.

A tax professional can help you determine whether you may qualify for the CTC and/or EITC, and if so, what steps you should take now to preserve your eligibility for the credits.

Impersonation of IRS Personnel – Did You Know?

Criminals constantly develop new tax-related scams to steal taxpayers' money and/or identities. Taxpayers can protect themselves by learning some of the tricks these scammers employ. Here are three of the most common ways that scammers try to impersonate the IRS.

- BY MAIL. Scammers may send a letter on what appears to be official IRS letterhead paper, typically delivered in a cardboard envelope. The letter includes bogus contact information that connects the taxpayer to the scammers instead of the IRS. Many of these letters include the phrase, "in relation to your unclaimed refund." Official IRS communications do not use this language.

- BY EMAIL OR TEXT MESSAGE. Many scammers send email or text messages where they claim to work for the IRS, offering to help a taxpayer claim a refund or fix a tax problem. These messages often include links to bogus websites that exist only to steal a taxpayer's personal information, and/or trick them into paying a fraudulent fee.

- IN PERSON. Some scam artists come right to a taxpayer's door, claiming to be IRS agents and sometimes displaying fake ID badges. The IRS recently announced that it is ending nearly all unannounced in-person visits to taxpayers. In most cases, the taxpayer will instead receive a letter inviting them to set up an in-person appointment. Therefore, so-called IRS agents who arrive without warning are likely to be scammers.

In any situation where there are signs of a possible scam, do not reply to the message, click on any links or allow suspected impostors into your home. Instead, call an official IRS number like 1-800-829-1040 to inquire about the matter.

End of Most Unannounced IRS Visits to Taxpayers – Did You Know?

The Commissioner of the IRS recently reported that the agency will discontinue nearly all unannounced visits to homes and businesses by revenue officers. This policy change is expected to improve safety, reduce confusion by allowing taxpayers to better prepare to meet with IRS personnel, and help protect taxpayers from scammers who impersonate IRS agents.

Previously, unarmed revenue officers have made unannounced visits to certain taxpayers, to work with them to resolve tax debts and/or file delinquent returns. Effectively immediately, those visits will generally be replaced with a mailed letter to set up a meeting, labeled IRS Letter 725-B. Taxpayers who receive this letter should follow the instructions to make an appointment.

Going forward, unannounced visits will generally only occur with the most serious tax cases. A tax professional can help taxpayers who receive Letter 725-B, or face another tax problem, get ready to meet with IRS agents and work toward resolving the issue.

Summer Life Events and Taxes – Did You Know? (2/2)

People often make life changes during the summer, both short-term and long-term. Many of these changes may require adjustments to your tax planning, and some create opportunities for significant tax savings.

Students who work part-time over the summer may have more federal income tax withheld from their pay than they owe. Make sure that working youngsters in your home are prepared to file a federal tax return next spring to claim any refund they have coming. Taxpayers of all ages who take on gig economy work should also be aware that they may owe self-employment tax. In general, any extra income may necessitate adjusting your withholding or estimated tax payments. The IRS Withholding Estimator tool (link below) can help you with the calculations.

Summer home improvements projects that reduce energy use, like installing Energy Star-certified windows, may make you eligible for the Energy Efficient Home Improvement Credit. Tax credits also exist for clean energy conversions, like installing rooftop solar panels. All of these tax-reducing opportunities require carefully documenting each expense.

A tax professional can help you determine whether you qualify for tax savings based on your summer activities.

IRS Withholding Estimator: https://www.irs.gov/individuals/tax-withholding-estimator

Summer Life Events and Taxes – Did You Know? (1/2)

People often make life changes during the summer, both short-term and long-term. Many of these changes may require adjustments to your tax planning, and some create opportunities for significant tax savings.

If you get married this summer or fall, taking a few steps now will help keep your tax filing simple next spring. First, make sure to report any name changes to the Social Security Administration. Second, if your new life together involves a relocation, notify the IRS of your new address. Also remember that marriage means a change in your tax filing status, which may necessitate an adjustment to your tax withholding or estimated tax payments. The IRS Withholding Estimator (link below) can help you stay on track.

Summertime can also mean paying for additional childcare so you can work, or sending your kids to summer camps. If you qualify, you may be able to claim the Child and Dependent Care Credit for a portion of these expenses. A tax professional can help you determine how summer life changes may affect your taxes, and how to best take advantage of tax saving opportunities.

IRS Withholding Estimator: https://www.irs.gov/individuals/tax-withholding-estimator

Educator Expense Deduction – Did You Know?

If you are an eligible educator, you may deduct up to $300 from trade or business expenses. Joint return filers who are both educators may deduct up to $300 per spouse.

You may qualify for this deduction if you work as a teacher, counselor, principal or aide for grades K-12 in a public or private school. You generally must work at the school for at least 900 hours during the school year.

Eligible classroom expenses include:
- Books, supplies and materials that you purchase for classroom use
- Classroom equipment, including computers, peripherals and software
- Items such as hand sanitizer and masks purchased to prevent the spread of COVID-19

Tuition and fees for professional development courses may also qualify for the Educator Expense Deduction. However, you may get a larger tax benefit by claiming the Lifelong Learning Credit or a different deduction for these costs. A tax professional can help you find the most advantageous way to report all your qualified expenses.

Hobby or Business - Did You Know?

Recent years have seen a rise in the number of people pursuing “side hustles,” such as delivery driving, dog walking and online craft selling. Many of these activities could be classified as either hobbies or business ventures, depending on how you pursue them. Since different tax rules apply for businesses and hobbies, it is important to know how the IRS will likely classify your side gig. The IRS considers a variety of questions, including:

- Do you depend on the activity for your livelihood?
- Do you pursue the activity in a professional, businesslike manner, and keep detailed records?
- Is the activity currently profitable for you, and if not, is there good reason to believe it will become consistently profitable in future years?
- Do you have the knowledge and skills needed to pursue the activity as a business?
- Do you approach the activity in a way that shows the intent to make a profit, such as changing methods to boost revenues?

In many cases, business income is subject to both income and self-employment tax, whereas hobbies may be subject to income tax. However, pursuing an activity as a business may enable you to reduce your taxable income by deducting business expenses, such as supplies, business vehicle use, and home office costs. A tax professional can help you determine how your side gigs should be classified, and how to account for that classification in your tax planning.