Koss Consulting Group

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.