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Disaster Preparedness – 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.

Many Americans May Qualify for Higher Education Tax Credits – Did You Know? (2/2)

If you pay higher education expenses like college or trade school tuition for yourself, your spouse or your dependent, then you may qualify for a tax credit in 2024.

The Lifetime Learning Credit (LLC) is available for an eligible student in your household at any stage of postsecondary education, including taking one or more courses to improve job skills. If you meet the eligibility requirements, which include income limits, you may claim a credit of up to $2,000 for tuition and school fees. Unlike the American Opportunity Tax Credit (AOTC), the LLC is nonrefundable, so if your credit amount exceeds the tax you owe, you cannot receive the excess credit as a refund.

To claim either the LLC or AOTC, you must obtain Form 1098-T (Tuition Statement) from a qualifying educational institution. A tax professional can help you determine whether you qualify for higher education tax benefits, and if so, help you claim them on your tax return next spring.

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, 2024 quarter of year is September 16th, 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.

Many Americans May Qualify for Higher Education Tax Credits – Did You Know? (1/2)

If you pay higher education expenses like college or trade school tuition for yourself, your spouse or your dependent, then you may qualify for a tax credit in 2024.

The American Opportunity Tax Credit (AOTC) is available for students who are pursuing a degree or similar credential, and have not completed four years of postsecondary education. If you meet the eligibility requirements, which include income limits, you may claim a credit of up to $2,500 per eligible student in your household for tuition and school fees. The credit is partially refundable, so if your credit amount exceeds the tax you owe, you could receive up to 40% of the excess credit as an IRS refund.

In order to claim the credit, you must obtain Form 1098-T (Tuition Statement) from an eligible education institution. A tax professional can help you determine whether you qualify for the AOTC or other benefits for higher education costs, and if so, help you claim them next spring.

Late Summer Tax Checkup – Did You Know?

Every year, millions of Americans face the disappointment of an unexpectedly large tax bill in the spring. Often, those bills occur because people did not adequately plan for the tax impacts of their activities the previous summer. A late summer or early fall tax checkup can help you stay up to date with your payments, protecting you from disheartening April surprises.

Here are some key questions to consider when reviewing your tax situation:
- Did you take on a seasonal or part-time job for the summer?
- Did you earn summer income as a gig worker, freelancer or independent contractor?
- Did you receive other income not subject to tax withholding, such as interest or dividends?
- Did you sell valuable assets like antiques, cryptocurrency, artwork, jewelry, collectibles, stocks or musical instruments at a gain?
- Did your tax filing status change (for example, because you got married)?

Any of these circumstances could result in your regular paycheck withholding being insufficient to cover your tax obligations. You can use the IRS Withholding Estimator tool (link below) to check whether your payments are staying on track. If not, you may need to submit a new Form W-4 to your employer to request extra withholding, or make quarterly estimated tax payments. A tax professional can help you analyze your tax circumstances now, so you can make the right moves to bring about a favorable outcome later.

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

Summer Day Camp Expenses May Be Eligible for a Tax Credit – Did You Know?

Parents who paid for their children under the age of 13 to attend summer day camps may qualify to claim the Child and Dependent Care Credit on their 2024 tax returns. This credit provides assistance for parents who pay care expenses for a qualifying child so that they can work or seek work. You may also be able to claim the credit for day camp or other care costs for a dependent age 13 or older with a permanent disability. Note that expenses associated with sending children to overnight summer camps generally do NOT qualify for this credit.

To qualify for the Child and Dependent Care Credit, you must have earned income, and your adjusted gross income (AGI) must not exceed limits set by the IRS. Typically, the credit covers 20-35% of qualifying day camp or other childcare expenses, up to a maximum of $3,000 for one child or $6,000 for two or more children. Your exact credit amount may depend on factors such as your spouse's income and whether you received any reimbursement for childcare costs from a state agency or other source.

When claiming the Child and Dependent Care Credit, you generally must provide the name and taxpayer identification number (TIN) of the day camp or care provider on your tax return. In most cases, married taxpayers must file a joint return in order to get the credit, although exceptions exist for cases where spouses live apart. A tax professional can help you determine whether your summer day camp or other childcare expenses qualify for this valuable credit, and if so, help you maximize your credit amount.

Bogus "Self Employment Tax Credit" – Did You Know?

Scammers have been spreading misinformation through ads and social media posts about a supposed Self Employment Tax Credit, which they claim people can use to get massive IRS refunds. In reality, no such credit even exists. The scammers charge fees to prepare tax returns, on which they actually file bogus claims for the specialized Credit for Sick and Family Leave, which was only available for 2020 and 2021.

In reality, only a small number of self-employed people who experienced very specific COVID-related circumstances qualify for the Credit for Sick and Family Leave. IRS personnel flag suspicious credit claims for investigation. In the end, people who get lured in by these scammers have to repay their tax refunds, with penalties and interest charges added. Meanwhile, the scammers disappear with the fees they collect to file false tax returns.

Remember, if a tax credit or tax refund claim sounds too good to be true, it usually is. A trusted tax professional can help you determine whether you missed any legitimate credits on your past tax returns, and if so, help you file amended returns to claim your refunds.

Teachers: Make Sure to Save Receipts for Classroom Supplies to Get a Tax Benefit

If you are a teacher gearing up for the new school year, you may be able to reduce your tax bill by keeping records of your expenses. Classroom teachers and certain other school employees may qualify to deduct the cost of classroom supplies on their tax returns. The Educator Expense Deduction is an "above the line" deduction, which means that you may claim it even if you do not itemize deductions on your return.

Eligible teachers and classroom staff may deduct up to $300 in classroom expenses (up to $600 for joint filers who are both educators) for tax year 2024. Qualifying expenses may include the cost of typical school supplies like books, paper, writing utensils and rulers, along with athletic supplies for courses in health or physical education. You may also be able to deduct unreimbursed costs to participate in professional development workshops or courses.

You must maintain complete records of all deductible expenses, such as itemized receipts or invoices. A tax professional can help you determine whether you qualify for the Educator Expense Deduction, and if so, help you claim it on your tax return next spring.

Checking Eligibility Before Transferring Clean Vehicle Credit to a Dealer – Did You Know?

For the first time in 2024, people who purchase or lease vehicles that qualify for the Clean Vehicle Credit (CVC) may transfer the credit to a registered seller (usually a dealership). The transferred credit may be used as a down payment, or exchanged for a reduction in the vehicle price. However, you may only claim and transfer a CVC if you meet the eligibility requirements.

Most importantly, for at least one the years 2023 and 2024, your adjusted gross income (AGI) must not exceed the limit for your filing status. The current AGI limits are $300,000 for joint filers, $225,000 for head of household filers and $150,000 for all other filing statuses. In addition, you must use any vehicle you purchase using a transferred CVC predominantly for personal (not business) purposes.

People who transfer a CVC to a vehicle dealer in 2024 must report the credit amount and verify their credit eligibility on their 2024 tax returns. Those with AGIs above the limit will need to repay the credit and may face added IRS penalties. Note that an invalid CVC must be repaid directly to the IRS by the person who claimed and transferred the credit, not by the vehicle dealer. A tax professional can help you determine whether you qualify for the CVC, and if so, whether transferring your credit to a dealer makes sense for you.

Disaster Tax Relief Available – Did You Know?

People who live in areas affected by federally declared disasters like hurricanes, wildfires, flooding and severe storms may qualify for special tax relief programs. The most common forms of relief offered include extended deadlines to file and/or pay taxes, along with free access to copies of past returns for those who lost critical records.

There is typically no need to apply for these programs, as the relief is granted automatically to all eligible people. The IRS Disaster Relief webpage (link below) can help you determine whether you qualify for deadline extensions, or other benefits that make the road of recovery a little easier to navigate.

IRS Disaster Relief Page: https://www.irs.gov/newsroom/tax-relief-in-disaster-situations

Standard Mileage Rates for 2024 – Did You Know?

Below are the 2024 standard mileage rates for vehicle uses that qualify for a tax deduction. These rates apply for most passenger vehicles, including cars, vans, SUVs and pickup trucks.

- 67 cents per mile for business use of a vehicle (1.5 cents increase from 2023)
- 21 cents per mile for certain medical purposes or moving purposes for qualified active-duty Armed Forces members (1 cent decrease from 2023)
- 14 cents per mile for vehicle use for qualifying charitable work (unchanged)

In most cases, taxpayers who qualify to claim a vehicle expense deduction may either use the standard mileage rate or actual expenses to figure their deduction. However, if you use your car or truck for business, you generally must use the standard rate for the first year you put the vehicle in service if you want to preserve this option for future years.

A tax professional can help you determine whether the standard mileage rate or actual expenses will result in a larger deduction in your circumstances. Keep in mind that if you choose to deduct actual expenses, you will need to keep detailed records of all vehicle-related costs.

Transferring a Clean Vehicle Credit May Increase Your Tax Benefit – Did You Know?

Beginning in 2024, people who qualify for the Clean Vehicle Credit may transfer the credit to a registered dealership as a down payment, or in exchange for a discounted vehicle price. Vehicles eligible for the CVC include many fully electric cars and trucks (EVs), plug-in hybrids (PHEVs) and vehicles powered by fuel cells. Transferring a CVC to the vehicle seller will enable you to receive an immediate benefit from the credit, instead of having to wait to claim the credit on your 2024 tax return.

Some people will also receive a larger credit amount by transferring their CVCs. Since the CVC is not refundable, you cannot claim a credit amount on your tax return greater than the tax you owe. However, this restriction generally does not apply to transferred CVCs. Therefore, transferring your CVC may help you receive the maximum credit amount available. A tax professional can help you determine whether transferring a CVC to the vehicle seller would work to your advantage.

BOI Filing Requirement Scams - Did You Know?

Beginning in 2024, many businesses must file new beneficial ownership information (BOI) reports, which identify owners who exert control over and/or hold a significant financial stake in the company. Reporting companies must file these forms with the Treasury Department's Financial Crimes Enforcement (FinCEN).

Unfortunately, scammers are using this new filing requirement to attempt to steal money and sensitive information from businesses. If your business receives a message about a supposed FinCEN reporting obligation, examine it carefully and look for these telltale signs of a scam:

- Any request for payment: FinCEN does not charge a fee to file BOI reports.
- Messages with links to click on or QR codes to scan: Authentic FinCEN messages will not have these features.
- Any reference to an "Important Compliance Notice," "Form 4022" or a "U.S. Business Regulations Dept.": FinCEN does not use this terminology, and no such form or department exists.

Do not respond to any suspicious message requesting money or BOI from your company. If you are unsure whether a message is legitimate, contact FinCEN directly (fincen.gov) for more information.

Newlyweds Have Special Tax Considerations – Did You Know?

If you get married in 2024, you may need to update your tax planning and report new information to the IRS and Social Security Administration (SSA). In particular, newly married couples should:

- Report any name changes to the SSA and get a new Social Security Card (link below)
- Report any address changes to the IRS and the U.S. Postal Service
- Recheck their paycheck withholding and/or estimated tax payment amounts. Marriage can affect your tax rate, as well as your deductions and credits. You can use the IRS Withholding Calculator (link below) to make sure you are staying on track.

One of the biggest tax decisions you will need to make as a newly married couple is whether to file separate returns or file jointly. A tax professional can help you determine which status is most advantageous for you.

Social Security Administration: https://www.ssa.gov/myaccount/
IRS Withholding Estimator: https://apps.irs.gov/app/tax-withholding-estimator

Summer Jobs - Did You Know?

If you're currently working at a summer job or know a teen or student who is, here is a useful tax-saving tip:

Students and teenage employees normally have taxes withheld from their paychecks by their employer after filling out a Form W-4.

However, if the job is regarded as self-employment, like baby-sitting or lawn care can be, they should keep good records of all expenses to help maximize potential deductions.

In the case of lawn care, potential deductible expenses may include: business cards, fliers, fuel, equipment rentals, chemicals, work mileage, etc.

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.

Reducing Fees & Penalties - Did You Know?

If you are required to file your taxes, you should still file, even if you can't pay, as the failure-to-file penalty may be 10 times more than the failure-to-pay penalty. If you are unable to pay in full, try to file your tax return by the deadline of April 15th, 2024 and pay as much as you can. The IRS also has Installment Payment Plans available that you may qualify for.

In addition, April 15th is also the due date for Tax Year 2024 first quarter estimated tax payments for those making estimated payments.

Taxpayer Bill of Rights - Did You Know?

As a taxpayer, you have a set of ten fundamental rights that the IRS is obligated to protect:

1. The Right to be Informed.
2. The Right to Quality Service.
3. The Right to Pay No More Than the Correct Amount of Tax.
4. The Right to Challenge the IRS's Position and Be Heard.
5. The Right to Appeal an IRS Decision in an Independent Forum.
6. The Right to Finality.
7. The Right to Privacy.
8. The Right to Confidentiality.
9. The Right to Retain Representation.
10. The Right to a Fair and Just Tax System.

The Taxpayer Bill of Rights ensures that the IRS must fairly review any objections a taxpayer raises to an IRS decision. Before objecting to an IRS letter, taxpayers should remember that tax refunds may also be adjusted for a variety of non-tax reasons, such as past-due child support. If you feel strongly that an IRS adjustment to your tax return is incorrect or unfair, a tax professional can review your return with you to determine whether you may have a basis for appealing the decision.

More information can be found in IRS Publication 1: Your Rights as a Taxpayer, available here: https://www.irs.gov/pub/irs-pdf/p1.pdf.

Tax Debt Settlement Scams – Did You Know?

When a taxpayer owes more tax than they can pay without extreme hardship, the IRS sometimes accepts an offer-in-compromise (OIC). Under an OIC agreement, the taxpayer may settle their tax debt for less than the full amount owed.

However, the IRS warns taxpayers to watch out for "OIC mills," agencies that churn out stacks of OIC applications, costing the taxpayers they supposedly represent thousands of dollars. Many of these agencies make unrealistic claims in radio, TV and internet ads about settling tax debts for "pennies on the dollar." Often, a taxpayer gets talked into paying an OIC mill to file an application that the agency knows will be rejected, because the taxpayer does not qualify for the OIC program. Even when the IRS accepts an application from an OIC mill, the excessive fees charged by the agency may still cause the taxpayer financial harm.

If you are considering an OIC to settle your tax bills, do not believe the hype. You may check your eligibility using the IRS' Offer In Compromise Pre-Qualifier tool with the link below. Working with a trusted tax professional can also determine whether you qualify for the OIC program, as well as help you prepare an application with a better chance of being accepted.

Offer In Compromise Pre-Qualifier tool: https://irs.treasury.gov/oic_pre_qualifier/

Credits and Deductions Changes This Filing Season – Did You Know?

As the April 15th filing deadline approaches, the IRS recently reminded taxpayers of several key tax law changes that took effect in 2023. Taxpayers should review these changes to avoid making errors on their returns.

Standard deduction amounts increased significantly from 2022 to 2023, up to $13,850 for single and married filing separately status, $20,800 for heads of household, and $27,700 for joint filers and qualifying surviving spouses. The maximum Additional Child Tax Credit, which is the refundable part of the Child Tax Credit (CTC), also increased to $1,600 for 2023.

Congress is considering legislation that would retroactively enhance the CTC itself. However, there is no need to wait for the result of those discussions to file your return. If a law change entitles you to a larger 2023 CTC than you have claimed, the IRS will automatically adjust your return, and send you a refund for the added credit amount.

A tax professional can help you determine how the 2023 credit and deduction rules affect your taxes, and file your return electronically to get your refund as rapidly as possible.

Facing tax issues can be overwhelming, but you don't have to do it alone. Our specialized tax resolution services provide the support and expertise needed to navigate challenging situations.

Non-deductible Wellness Expenses – Did You Know?

The IRS recently issued a reminder that personal expenses for general health and wellness usually do not qualify as medical expenses for tax purposes. These costs typically cannot be claimed as itemized deductions, and are not eligible for reimbursement through a health flexible spending arrangement (FSA), health savings account (HSA) or similar tax-advantaged account.

Examples of non-deductible, non-reimbursable health and wellness purchases include healthy foods for weight or blood sugar management. Dishonest companies aggressively market food and wellness products, claiming that these items become eligible for FSA/HSA reimbursement when the seller provides a doctor's note to the buyer. In reality, a doctor's note generally does not change an ineligible expense into an eligible one.

Requests for FSA reimbursement based on these bogus marketing claims typically get denied, and may jeopardize the tax advantages of FSAs and similar plans. If you are unsure whether a particular health expense qualifies for reimbursement, check with your workplace benefits plan administrator before making the purchase.

Recognizing Scams: The IRS Does NOT Contact Taxpayers in These Ways

Scammers often claim to represent the IRS in order to steal identities or money. You can better protect yourself by learning how to distinguish legitimate IRS communications from fraudulent messages or calls. As a starting point, it is important to know that there are some types of messages that the IRS never sends.

With the exception of verification codes for secure online account login, the IRS does not contact people or businesses about tax issues via text or SMS messages. The IRS also does not send messages to taxpayers through social media platforms or chat services.

While the IRS may communicate with a taxpayer via email, the messages will not ask the taxpayer to provide personal or financial information by replying or clicking on a link. All official IRS emails will originate from an address ending in irs.gov. If you are not 100% certain that an email claiming to be from the IRS is legitimate, do not reply and do not click any links in the message. Instead, delete the message and call the IRS directly for more information.

Earned Income Credit Eligibility - Did You Know?

The Earned Income Tax Credit (EITC) provides vital assistance to low- and middle-income workers and their families. Unfortunately, the IRS estimates that up to 20% of eligible individuals do not claim the EITC, potentially costing them thousands of dollars a year. For eligible workers with qualifying children, the maximum EITC amount for tax year 2023 is $7,430, up nearly $500 from 2022. Eligible workers without dependents may receive a credit of up to $600.

To qualify for the EITC, you must have earned income, and you and your qualifying children (and your spouse if you file a joint return) must all have Social Security numbers. Your adjusted gross income (AGI) must be below the limit for your filing status and number of children. For example, the 2023 AGI for a taxpayer with two qualifying children cannot exceed $52,918 if the taxpayer files under single or head of household status, or $59,478 if the taxpayer files a joint tax return. In addition, you cannot have more than $11,000 in investment income.

Because the EITC is fully refundable, you may receive the credit as an IRS refund even if you owe no tax. However, you must file a tax return to claim the credit. A tax professional can help you determine whether you qualify for the EITC, and if so, help you file a return electronically to get your refund as quickly as possible.

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.

Refund Amounts - Did You Know?

If your refund amount is different than stated on the filed tax return, part or all of your refund may have been used to pay off (offset) past-due federal tax, student loans, state income tax or other past-due debts.

You'll receive a notice from the IRS if such an offset occurs that will show the original tax refund amount, the offset amount, as well as the name, address and telephone number of the agency receiving the payment.

If you haven't received your refund yet, you may be able to check the status using the IRS' "Where's my Refund?" tool: https://www.irs.gov/refunds.

Recipients of the Healthcare Premium Tax Credit Must File Form 8962 – Did You Know?

The health insurance Premium Tax Credit (PTC) helps millions of Americans with affordable healthcare. Most people who qualify for the credit receive it as a reduction in their monthly insurance premiums, known as the Advance Premium Tax Credit (APTC). If you purchased coverage through the Insurance Marketplace, watch your mail for IRS Form 1095-A (Health Insurance Marketplace Statement). This form shows whether you received the APTC during 2023.

The IRS requires all recipients of the APTC to file a 2023 tax return that includes Form 8962 (Premium Tax Credit), even if they would not otherwise have to file. On this form, you will reconcile your APTC premium reductions with your actual PTC amount for the year. If your credit amount exceeds those premium reductions, you may claim the excess credit as either a decrease in your tax or increase in your tax refund. However, if your premium reductions were greater than your actual PTC, you may need to repay part of the APTC.

If you qualified for the PTC in 2023 but did not receive APTC premium reductions, you may be able to claim claim your entire credit amount on Form 8962. A tax professional can help you complete the form, and file your return electronically to receive your refund as quickly as possible.

Common Tax Filing Errors – Did You Know? (2/2)

Every year, many taxpayers may make mistakes on their returns that cause IRS processing delays. Be sure to also check for the following:

Math Mistakes:
Even mathematicians sometimes make errors in simple addition and subtraction, and some of the calculations required for 1040 schedules can be complicated. Thoroughly double-check every bit of math on your return.

Incorrect Filing Status (Single, Married Filing Jointly, etc.):
The IRS will not accept a return showing a filing status that you are not eligible to claim. If you qualify for more than one status (for example, filing jointly or separately if you are married), the option you choose may significantly change your tax.

Incorrectly Figuring Credits or Deductions:
Once you determine that you qualify for a tax deduction or credit, you must carefully compute the amount that you can claim. Many taxpayers fail to take into account income limitations (including the calculations that must be made if your income falls within a “phase-out” range) and other restrictions. Others claim less than they could, or miss out on deductions and credits entirely by not filing the required forms and schedules.

Expired ITIN:
Those who file their IRS returns using individual tax identification numbers (ITINs) must keep in mind that ITINs periodically expire. Although a return filed with an expired ITIN may be accepted, the IRS generally will not allow any of the exemptions or tax credits claimed. The taxpayer must renew their ITIN in order to obtain the full refund that they are owed.

To avoid costly mistakes, a tax professional can help prepare or check your return and file it electronically. A tax pro might also help you claim deductions and credits that you would otherwise miss.