Lilax Accounting

Committed to excellence in accounting, Lilax Accounting is your trusted partner in financial success. "

Dear Valued Clients,
As we usher in the New Year, we want to take a moment to express our heartfelt gratitude for the trust and partnership you have bestowed upon us. The past year has been a journey of shared successes and challenges, and we are genuinely thankful for the opportunity to serve you. Your confidence in Lilax Accounting has been the driving force behind our commitment to excellence. As we embrace the possibilities of the coming year, we extend our warmest wishes for your continued prosperity and success. Thank you for choosing us as your financial ally. Cheers to a year filled with growth, prosperity, and continued collaboration.

Best Regards,

Laxman Ghimire, CPA
Lilax Accounting

CA Minimum Wage:
The minimum wage in California, effective January 1, 2024, is $16.00/hour for all employers*.

https://www.dir.ca.gov/dlse/minimum_wage.htm #:~:text=The%20minimum%20wage%20in%20California,have%20a%20higher%20minimum%20wage.

California sick pay update!
California recently expanded the Paid Sick Leave (PSL) guaranteed to workers, which will take effect on January 1, 2024. Governor Gavin Newsom signed SB 616, which guarantees employees five paid sick days per year, up from three days previously. An employee can take paid sick leave if the employee has worked in California for the same employer for 30 or more days in a given year since being hired.
Accrued paid sick days must carry over to the following year of employment. However, an employer may limit an employee’s use of accrued paid sick days to 40 hours or 5 days in each year of employment, calendar year, or 12-month period. No accrual or carryover is required if the full amount of leave is received at the beginning of each year of employment, calendar year, or 12-month period. The term “full amount of leave” means 5 days to 40 hours.
Employers must notify all employees who are covered in writing of the availability of paid sick leave upon hire.

For existing businesses, the Corporate Transparency Act (CTA) goes into effect on January 1, 2024, and imposes a brand-new federal filing requirement on most corporations,
limited liability companies, and limited partnerships and on certain other business entities.

No later than December 31, 2024, all non-exempt business entities must file a beneficial owner information report (BOI report) with the Financial Crimes Enforcement Network (FinCEN)—the Treasury Department’s financial intelligence unit.

These BOI reports must disclose the identities and provide contact information for all of the entity’s “beneficial owners”: the humans who either (1) control 25 percent of the ownership interests in the entity or (2) exercise substantial control over the entity.

Your BOI report must contain all the following information for each beneficial owner”:

• Full legal name
• Date of birth
• Complete current residential street address
• A unique identifying number from either a current U.S. passport, state or local ID document, or driver’s license or, if the individual has none of those, a foreign passport
• An image of the document from which the unique identifying number was obtained

FinCEN will create a new database called BOSS (Beneficial Ownership Secure System) for the BOI and will deploy the BOI to help law enforcement agencies prevent the use of anonymous shell companies for money laundering, tax evasion, terrorism, and other illegal purposes. It will not make the BOI reports publicly available.

The CTA applies only to business entities formed by filing a document with a state Secretary of State or similar official, such as corporations and LLCs. It also applies to foreign business entities that register to do business in the United States.

Some businesses are exempt from the CTA, including

• larger businesses with 20 or more employees and $5 million in receipts, and
• businesses already heavily regulated by the government, such as publicly traded corporations, banks, insurance companies, nonprofits, and others.

The CTA does not apply to sole proprietors or general partnerships in most states. But it does apply to single-member LLCs, even though the tax code disregards such entities and taxes them on Schedule C, E, or F of Form 1040.

The initial BOI report filing does not expire, and you don’t need to renew it. But you have an ongoing duty to keep the BOI report up to date by reporting any changes to FinCEN within 30 days.

Failure to comply can result in hefty monetary penalties and up to two years in prison.

Here is some important information regarding the net investment income tax (NIIT), which may be relevant to your financial situation.

NIIT Overview

The NIIT is a 3.8 percent tax that applies if your modified adjusted gross income (MAGI) exceeds $200,000 (single filers), $250,000 (married, filing jointly), or $125,000 (married, filing separately). It targets the lesser of your net investment income or the amount your MAGI exceeds the thresholds.

What Qualifies as Net Investment Income?

Net investment income includes income from investments (such as interest, dividends, and annuities), net rental income, and income from businesses in which you don’t materially participate. It does not include wages, self-employment income, tax-exempt income, and distributions from qualified retirement plans.

Reducing or Avoiding the NIIT

To mitigate the NIIT, it’s crucial to understand what’s triggering it—your net investment income or your MAGI. Here are some strategies:

1. Invest in municipal bonds. Pick bonds that are exempt from NIIT and from federal and state taxes.
2. Donate appreciated assets. The correct asset donation avoids the NIIT and provides a tax deduction.
3. Avoid selling appreciated stock. Buy growth stocks that don’t pay dividends, and hold them.
4. Utilize Section 1031. It avoids MAGI and net investment income, and defers taxes.
5. Invest in life insurance and annuities. This typically defers tax until withdrawal.
6. Harvest investment losses. This can offset gains and reduce taxable income.
7. Invest in rental real estate. Structured correctly, this can minimize taxable income.

Other Strategies

• Active participation in business. It avoids classifying income as net investment income.
• Short-term rentals and real estate professional status. These also avoid classifying income as net investment income.
• Alternative marital status. Though this option may seem extreme, two single taxpayers have a higher MAGI threshold than a married couple.
• Retirement plan investments. These can reduce MAGI.
• IRA conversions. Converting traditional IRAs to Roth IRAs may trigger the NIIT but can have long-term tax benefits.
• Installment sales. They can level out MAGI over time.

The NIIT can be complex, but strategic planning can significantly reduce its impact. If you want to discuss the NIIT, please don’t hesitate to contact me.

Here is well written overview of BOI Report ( Corporate transparency act).

What Is a BOI Report and Do You Need to File One? Most registered businesses will have a new BOI report in 2024. Let's review what it is and if you need to submit a report in 2024.

https://www.corpnet.com/blog/do-you-need-file-boi-report/ #:~:text=The%20BOI%20report%20is%20designed,own%20or%20control%20a%20company).

Deadline to Apply for Small Business Grants in LA County Extended!

Economic Opportunity Grants Economic Opportunity Grant (EOG) will award more than $54 million across 6,800 grants to organizations in Los Angeles County adversely affected by COVID-19.

Top tax planning strategies:
1. Maximize retirement contributions to reduce taxable income and benefit from tax-advantaged accounts like 401(k)s and IRAs.
2. Take advantage of tax-advantaged accounts like HSAs and FSAs for healthcare and dependent care expenses.
3. Use tax loss harvesting to offset capital gains by selling investments that have declined in value.
4. Identify and claim tax deductions for expenses like mortgage interest, state and local taxes, medical expenses, and charitable contributions.
5. Time income and expenses strategically to reduce taxable income in higher tax years.
6. Keep organized records of business expenses to maximize deductions if you're self-employed.
7. Consider tax-efficient investments like index funds and tax-managed mutual funds.
8. Review estate planning strategies to minimize estate taxes and efficiently transfer wealth to the next generation.

Remember to consult with a tax professional to tailor these strategies to your specific situation and stay up to date with any changes in tax laws.

Setting up a business can be a complex process, involving legal and financial considerations. It's important to consult with professionals, such as a Certified Public Accountant (CPA), to ensure that you are taking the right steps to establish your business properly.

When it comes to taxes and financials, a CPA can help you understand your tax liabilities, identify deductions and credits that may be available to you, and develop strategies to minimize your tax liability. They can also help you with financial planning, budgeting, and forecasting to ensure that your business is on the right track.

To maximize your business tax credit, it's important to understand what tax credits are available to you and how to qualify for them. Some common business tax credits include the Research and Development Tax Credit, the Work Opportunity Tax Credit, and the Small Business Health Care Tax Credit. A CPA can help you determine which credits you are eligible for and develop strategies to maximize them.

Working with a CPA can be a valuable investment for your business, helping you to navigate complex financial and tax issues and set your business up for success.

Are you looking for ways to minimize your tax liabilities and maximize your financial benefits? Look no further than our tax planning services!

Our team of experienced professionals will work with you to analyze your financial situation and develop a personalized tax plan that meets your specific needs and goals. We understand the intricacies of tax laws and regulations and will help you take advantage of all available deductions and credits to minimize your tax liabilities.

We provide a range of tax planning services, including:

Year-round tax planning to minimize your tax liabilities
Tax preparation and filing for individuals and businesses
Estate and trust tax planning
Retirement planning and tax strategies
Tax-efficient investment planning
Business tax planning and structuring
Don't wait until tax season to start thinking about your taxes. Contact us today to learn how our tax planning services can help you save money and achieve your financial goals.

Watch out for Employee Retention Credit schemes;

Employers: Watch out for Employee Retention Credit schemes | Internal Revenue Service IRS Tax Tip 2023-44, April 4, 2023 — The IRS and tax professionals continue to see third parties aggressively promoting Employee Retention Credit schemes on radio and online.

https://www.irs.gov/newsroom/irs-opens-2023-dirty-dozen-with-warning-about-employee-retention-credit-claims-increased-scrutiny-follows-aggressive-promoters-making-offers-too-good-to-be-true

IRS opens 2023 Dirty Dozen with warning about Employee Retention Credit claims; increased scrutiny follows aggressive promoters making offers too good to be true | Internal Revenue Service IR-2023-49, March 20, 2023 — In a further warning to people and businesses, the Internal Revenue Service added widely circulating promoter claims involving Employee Retention Credits as a new entry in the annual Dirty Dozen list of tax scams.