Winters-Smith Associates LLC

New Requirements for Energy Efficiency Credits Take Effect in 2025 – Did You Know?

The IRS offers a variety of tax credits to people who invest in home improvements that significantly reduce energy usage. These nonrefundable credits may total up to $3,200 for a particular year. A maximum credit of $2,000 is available for water heaters, heat pumps, boilers or biomass stoves that meet specific design and efficiency requirements. Meanwhile, qualifying homeowners may claim up to $1,200 in credits for other energy improvements like installing highly efficient exterior doors, windows or skylights.

Beginning January 1, 2025, only officially certified products will be eligible for these tax credits. The products must come from an IRS-approved manufacturer, and the manufacturer must label each product with a unique product identification number (PIN). Save these labels, because in order to claim a home efficiency credit, you will need to include the PIN of each eligible product on your 2025 tax return. If a contractor or retailer cannot show you a clearly displayed PIN on a particular product, then the product likely will not qualify for tax credits for energy efficiency.

2025 Healthcare Open Enrollment - Did You Know?

The 2025 open enrollment period for Marketplace health insurance starts on November 1, 2024, and ends December 15, 2024. Plans will start January 1, 2025. During this period, you will be able to enroll in, renew, or change health plans for the coming year.

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.

Hurricane Relief Charity Scams

Natural disasters like Hurricanes Helene and Milton bring out the best in American generosity, as millions of people seek to help those affected by the storms. Unfortunately, these tragedies also attract scammers looking to steal the money and identities of people who wish to donate to relief efforts.

If you get a phone call, text message or email from someone claiming to represent a hurricane relief charity, verify the legitimacy of the organization before providing any personal information. Request the organization's official name, mailing address and website address, and keep in mind that scammers use fake organization names that sound similar to real charities. You can use the IRS Tax Exempt Organization Search tool (TEOS, link below) to verify that you are dealing with an authentic charity, authorized to receive tax-deductible donations. If you cannot find the organization in the database or the person who contacted you refuses to answer your questions, do not donate or share sensitive information like your Social Security number (SSN) or credit card number. Instead, hang up immediately or delete the message.

TEOS tool: https://www.irs.gov/charities-non-profits/search-for-tax-exempt-organizations

Clean Energy Tax Credit Scams – Did You Know?

The Inflation Reduction Act 2022 made it possible for people to sell certain clean energy tax credits. In these credit transfers, both the seller and purchaser must meet strict eligibility requirements and file required paperwork with the IRS. Unfortunately, dishonest tax return preparers are actively encouraging people to ignore the rules and improperly claim purchased clean energy credits. These scammers lure people in with false claims that the credits may be used to reduce tax on a wide variety of income types.

In reality, purchased credits may generally only be used to offset tax on passive activity income, which most people do not have. Regardless of what a scammer tells them, anyone who attempts to use purchased tax credits inappropriately, or claims credits they did not actually purchase, may face additional tax assessments and IRS penalties. Meanwhile, the scammer disappears with the fees they collected to file an inaccurate return on the person's behalf.

A tax professional can help you determine whether purchasing clean energy credits would actually reduce your tax, and if so, help you complete and file all the required forms.

IRS Online Account – Did You Know?

Setting up a free IRS online account (link below) makes it possible to handle many tax-related tasks conveniently and securely. With an online account, you can readily check your tax balance, whether your payments have been processed, and the status of your tax return or refund. You can also submit electronic tax payments for fast, safe processing.

In addition, you can use your online account to request transcripts of past returns, or official letters verifying that you were not required to file. These records may come in handy for a variety of purposes, such as securing college financial aid, completing rental applications or claiming the Clean Vehicle Credit when purchasing a car or truck. The IRS may charge a service fee for transcript requests made by phone, mail or email, but with an online account, you can obtain these documents for free.

Link to access or set up your online IRS account:
https://www.irs.gov/payments/online-account-for-individuals.

The office is open this week, but we are still without phones or internet. If you need to get in touch with us, please use email or our cellphone numbers. Cellphone numbers are on our business cards.

The office remains closed. Got power back, but still no phones or internet. Tax deadlines have been extended until May.

October 15 is the 6-month Extension Deadline

With the exception of those eligible for tax deadline relief due to a federally declared disaster, everyone who requested a 6-month extension to file a 2023 tax return must file by October 15.

If you owe tax, remember that the automatic 6-month extension applies only to filing your return, not to paying tax. Generally, after the standard April filing deadline, unpaid tax balances begin accumulating interest charges that increase daily. Filing and paying as soon as possible will keep those charges to a minimum.

People who cannot pay their full tax balance now should still file as soon as possible. By proactively setting up a payment plan with the IRS, they can minimize late payment penalties.

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

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.

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New requirement for Businesses An important update from us.     NEWS FROM WINTERS-SMITH ASSOCIATES, LLC New Required Reporting for Businesses     Just another reminder of the new requirement to register your business for the BOI re

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.