Freedom Accounting & Tax

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

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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.

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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.

Summer Home Upgrades and Kids' Activities May Bring Tax Benefits – Did You Know?

Some projects and activities that people typically undertake in summer may qualify for 2024 tax credits. For example, upgrades to keep your home cool and comfortable may be eligible for clean energy or energy efficiency credits. Examples of potentially qualifying improvements include Energy Star-rated windows and doors, solar-powered water heaters, and new central air conditioning units or ventilation systems. More information about these programs may be found on the IRS Home Energy Tax Credits webpage (link below).

In addition, if your children attend summer camps, day camps or childcare programs so that you can work, the Child and Dependent Care Credit may enable you to reclaim some of the cost. A tax professional can help you determine whether you qualify for these or other tax-saving programs, and if so, help you properly document expenses to preserve your eligibility.

Home Energy Credits: https://www.irs.gov/credits-deductions/home-energy-tax-credits

Let the training for 2024 begin

Overseas Tax Filing & Quarterly Installment Deadlines

If you are a U.S Citizen or Green Card Holder living abroad and have not filed your taxes yet, the deadline is coming up on Monday, June 17th, 2024.

If you are making quarterly estimated tax payments to the IRS, the due date for the April 1 – May 31 quarter of the year is also June 17th.

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.

Letters from the IRS - Did You Know?

If the IRS needs to contact a taxpayer, the agency will generally send a letter in the mail rather than emailing or calling. Taxpayers may receive IRS letters for many reasons, including:

- The taxpayer owes tax and did not pay it with their return or set up a payment plan.
- The IRS has a question about a tax return or needs more information to process it.
- The IRS has made an adjustment to a tax return or refund amount.
- The IRS needs to verify a taxpayer's identity.

If you receive an IRS letter in the mail, do not ignore it, but also do not panic. Some IRS notices do not require the taxpayer to take any action, while others advise the taxpayer of an issue that can be readily resolved. In many cases, you will not need to respond to the letter. For example, if an IRS notice simply informs you of a minor change made to your return or your refund amount, you can just file it with your tax records for future reference.

However, if the letter asks you to provide the IRS with additional information, you should respond as quickly as possible. Pay special attention to whether the notice includes a deadline to respond. Taxpayers who fail to reply to an IRS letter by a specified deadline may face penalties or forfeit their appeal rights.

You have the right to appeal any IRS decision about your tax return or the amount of tax you owe. If you do not understand an IRS notice or believe the IRS has made an error, a tax professional can help you figure out the situation and plan your next steps.

National 529 Day - Did You Know?

If you put money in a 529 account for education, withdrawal of earnings are tax-free if used for qualified educational expenses. Qualified educational expenses include tuition, fees, housing, meals and books. Many states offer a full or partial tax deduction for 529 plan contributions. They may also offer incentives and promotions to encourage families to open and contribute to 529 accounts today on National 529 Day.

The Tax Cuts and Jobs Act (TCJA) also expanded eligibility for 529 savings plans. Up to $10,000 per year may be used for Kindergarten through Grade 12 education (public, private, or religious schools).

Thanks to all those who did not make it back.

U.S. Citizens and Residents Living Abroad - Did You Know?

Generally, U.S. citizens and resident aliens must pay federal tax on their worldwide income, including income received while living outside the country. Even those who qualify to exclude foreign earned income for tax purposes, or to claim a credit for taxes paid to other countries to offset their U.S. tax liability, generally must still file a federal tax return.

People living abroad typically qualify for an automatic two-month extension to file, meaning that they may file their 2023 federal tax returns anytime through June 17, 2024. However, this extension applies only to filing, NOT to taxes owed. The IRS will generally add interest charges to any tax amounts not paid by the standard April filing deadline.

Remember also that if you own or control financial accounts based outside the U.S., you may need to report not only the income from those accounts, but also the account balances on your tax return. You may also have to file a special Foreign Bank Accounts Report (FBAR) form. You cannot include the FBAR with your tax return, as it must be filed with a different treasury department than the IRS. A tax professional can help you file your tax return and all other required reporting forms by the appropriate deadlines electronically, to ensure rapid processing.

Clean Vehicle Credit Dealer Transfer – Did You Know?

As of January 1, 2024, people who buy or lease cars or trucks that qualify for the Clean Vehicle Credit (CVC) may transfer the credit to an eligible seller (usually a dealership). The transferred credit may be used as a down payment, or exchanged for a reduction in the vehicle price. Eligible vehicles include many fully electric cars and trucks (EVs), plug-in hybrids (PHEVs) and vehicles powered by fuel cells.

To transfer the credit, you must present a government-issued photo ID, and provide the seller with information including your current address and valid taxpayer ID number. You will also need to sign a certification of eligibility for the CVC, along with pledges to file a 2024 tax return and to use the vehicle primarily for personal (not business) purposes within the U.S.

In turn, the dealer must certify that the vehicle meets IRS standards for the CVC, and provide you with documentation of the date of sale, selling price and other vehicle information. Store these documents securely, as you will need to refer to them when filing your federal tax return for 2024. A tax professional can help you determine whether transferring a CVC to the vehicle seller would make sense for you.

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K9s for Camo Discover who K9s for Camo is and how they provide service dogs to the men and women who fought for our country. Plus don’t miss their K9 Palooza happening May 16th at Alamo Drafthouse!! Get y…

Last weeks tax class is complete and now back to work. This has been a very busy year with PPP, Stimulus payments, and people filing multiple years who have not previously filed.

Second day of tax training.

Breaking News from the IRS
CHECK THE STATUS OF YOUR ECONOMIC IMPACT PAYMENT
The Treasury Department and the Internal Revenue Service (IRS) have released a new web tool that will allow taxpayers to update their direct deposit information to receive their stimulus checks (Economic Impact Payments) more quickly. This tool, which is now available, is available to those taxpayers who have filed 2018 and/or 2019 tax returns and is separate from the tool used by non-filers .
The new tool, Get My Payment, which is available now, will:
• Provide you with the status of your payment, including the date your payment is scheduled to be deposited into your bank account or mailed;
• Advise you of your payment type; and
• Allow eligible taxpayers a chance to provide bank account information to receive payments more quickly rather than waiting for a paper check. This feature will be unavailable if the Economic Impact Payment has already been scheduled for delivery.
Entering bank or financial account information will allow the IRS to deposit your payment directly into your account. Otherwise, your payment will be mailed to you as a paper check.

Should I Tap into my Retirement Funds?

When you are cash strapped, your retirement nest egg can look very tempting to solve your immediate financial problem. Is it ever a good idea?

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The IRS Says "Gotcha!" - Late filing of S corporation and partnership returns can be costly

Over the past few years, the IRS has penalizing late filers of sub S corporation and partnership tax returns. This despite the fact that late filing of the tax return does not typically impact the timely payment of the tax.

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Client Update Newsletter: February 2020

This month's newsletter has something for everyone, from the tax geek getting ready to file taxes, to those curious about the origin of Valentine's Day. Plus a recap of new tax laws!

news.resourcesforclients.com The 2019 tax filing season is in full swing. If you have not already done so, now is the time to collect your tax forms, organize your records and set a schedule to get your tax return completed.Deep in the Form 1040 instructions is an annual recap of federal income and how the money is spent. Since...

Where's My Tax Return? - Common items that are often forgotten

Wondering why your tax return is not finished? Often the delay can come from one or two items that were overlooked and are now needed to process your tax return....

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Great New Option to Reduce Student Loan Debt - Newly passed tax law could benefit many

In late 2019 the bill passed to keep the government open includes a number of hidden gems. This is one for anyone with a mountain of student debt.

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