Bashir Krayem, CPA

01/16/2024

Tax Tips:

IRS Individual e-File Start Date

The Internal Revenue Service (IRS) announced in IR-2024-04 that they will begin accepting and processing 2024 individual tax returns on January 29, 2024.

The IRS began accepting business returns on January 11, 2024.

The 2024 individual filing season deadline is April 15, 2024.

Bashir Krayem, CPA

12/31/2023

12/11/2023

TAX TIPS:

Gather 2023 tax documents

Taxpayers should develop a record keeping system − electronic or paper − that keeps important information in one place. This includes year-end income documents like Forms W-2 from employers, Forms 1099 from banks or other payers, Forms 1099-K from third party payment networks, Forms 1099-NEC for nonemployee compensation, Forms 1099-MISC for miscellaneous income or Forms 1099-INT for interest paid, as well as records documenting all digital asset transactions.

When they have all their documentation, taxpayers are in the best position to file an accurate return and avoid processing or refund delays.

10/28/2022

Tax Tip:

Important info for people considering making early withdraws from retirement funds:

No matter how much people plan, unexpected events occur. Often, those events result in unplanned expenses. To cover these costs sometimes people, withdraw funds from their retirement savings early. While this may seem like an easy way to get cash quick, early withdrawals can come with heavy penalties and costly tax consequences. Here's some important info for people to consider before they dip into their hard-earned retirement savings.

Workplace retirement plans: 401(k), 403(b) and 457(b):

These plans can distribute benefits only when certain events occur. The plan's summary description should clearly state when a distribution can occur. It will also state if the plan allows hardship distributions, early withdrawals or loans.

Hardship distributions are withdrawals from a participant's account made because of an immediate and heavy financial need and it's limited to the amount necessary to satisfy that financial need. The need of the employee includes the need of the employee's spouse or dependent.

Hardship distributions are includible in gross income unless they consist of designated Roth contributions.

Distributions before the participant turns 65, or the plan's normal retirement age, if earlier, may result in an additional income tax of 10% of the amount withdrawn.

Repaying hardship distributions back to the plan or rolling it over to another plan or IRA isn't permitted.

Borrowers repay loans from these plans back to the retirement account. Borrowers should review the limits on loan amounts and other requirements. Taxes on this money don't occur if the loan meets the rules and repayment happens on schedule.

Required minimum distributions

Taxpayers must make required minimum distributions each year beginning with the year the taxpayer turns 72, 70 ½ if the taxpayer turned 70 ½ in 2019. People calculate the RMD by dividing the IRA account balance as of December 31 of the prior year by the applicable distribution period or life expectancy. RMDs are waived for 2020 due to COVID-19 relief provisions. Required minimum distributions are not required for Roth IRA.

IRAs and IRA-based plans

Individuals can take distributions from their IRA, SEP-IRA or SIMPLE-IRA at any time. Taxpayers do not need to show a hardship to take a distribution – they can just contact the financial institution managing the account.

Early distributions occur when individuals withdraw money from an Individual Retirement Account or retirement plan before age 59½.These retirement plan distributions are subject to income tax. Individuals must also pay an additional 10% early withdrawal tax unless an exception to the early distribution tax applies.

Regardless of age, the account holder must file a Form 1040 Individual Income Tax Return showing the amount of the withdrawal and complete and attach a Form 5329, Additional Taxes on Qualified Plans, Including IRAs, and Other Tax-Favored Accounts, to the tax return. These are requirements for early withdrawals and regular distributions.

Coronavirus-related distributions and loans
The CARES Act made it easier to access savings in IRAs and workplace retirement plans for those affected by the coronavirus.

Certain distributions made from January 1, 2020, through December 30, 2020, from IRAs or workplace retirement plans to qualified individuals may be treated as coronavirus-related distributions.

These distributions aren't subject to the 10% additional tax on early distributions, including the 25% additional tax on certain SIMPLE IRA distributions.

Repayment to an IRA or workplace retirement plan can occur within three years.
Taxpayers can include Coronavirus-related distributions in income over 3 years, one-third each year, or if elected, in the year of the distribution.

Divorce-related distributions

Early distributions taken from a traditional IRA to satisfy a divorce requirements or court order are subject to regular income tax requirements and the 10% additional tax unless there is a qualifying exception.

06/28/2022

TAX TIP FOR EMPLOYEES!

Consider reviewing your W-4 withholding.

Did you get a large tax refund this year? You may want to think about adjusting your withholding. Withholding is the tax your employer takes from your pay each check. To update them, simply re-file your W-4 form with your payroll department. You can choose to update it whenever you want to throughout the year.

05/23/2022

Tax Tip:

What is tax planning?

Tax planning is a process that helps you reduce the amount of taxes you’ll owe at the end of each year. There are a number of ways you can go about tax planning, but it primarily involves three basic methods: reducing your overall income, increasing your number of tax deductions throughout the year, and taking advantage of certain tax credits.

if you have any questions, don’t hesitate to contact our accounting firm for help.

01/03/2022

Tax Tip:

COVID Tax Tip 2021-187, December 16, 2021 — The IRS encourages taxpayers to get informed about topics related to filing their federal tax returns in 2022. These topics include special steps related to charitable contributions, economic impact payments and advance child tax credit payments.

11/09/2021

TAX TIP:

Good recordkeeping is an important part of running a small business. In fact, keeping good records helps business owners make sure their business stays successful.

Here are some things small business owners should remember about recordkeeping:

Good records will help business owners:
Monitor the progress of their business
Prepare financial statements
Identify income sources
Keep track of expenses
Prepare tax returns and support items reported on tax returns
Small business owners may choose any recordkeeping system that fits their business. They should choose one that clearly shows income and expenses. Except in a few cases, the law does not require special kinds of records.
How long an owner should keep a document depends on several factors. These factors include the action, expense and event recorded in the document. The IRS generally suggests taxpayers keep records for three years.

A good recordkeeping system includes a summary of all business transactions. Businesses usually record these transactions in books called journals and ledgers, which business owners can buy at an office supply store, or keep them electronically. All requirements that apply to hard copy books and records also apply to electronic business records.
The responsibility to validate information on tax returns is known as the burden of proof. Small business owners must be able to prove expenses to deduct them.
Business owners should keep all records of employment taxes for at least four years.
Businesses that keep paper records should keep them in a secure location, preferably under lock and key, such as a desk drawer or a safe.
Businesses that keep records electronically on a computer should always have an electronic back-up, in case the hard drive crashes.

09/24/2021

TAX TIP:
Small business owners should see if they qualify for the home office deduction

Here are some things to help taxpayers understand the home office deduction and whether they can claim it:
Employees are not eligible to claim the home office deduction.
The home office deduction, reported on Form 8829, is available to both homeowners and renters.

There are certain expenses taxpayers can deduct. They include mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent.

Taxpayers must meet specific requirements to claim home expenses as a deduction. Even then, the deductible amount of these types of expenses may be limited.

The term "home" for purposes of this deduction:
Includes a house, apartment, condominium, mobile home, boat or similar property which provide basic living accommodations.
A separate structure on the property such as an unattached garage, studio, barn or greenhouse.

Any portion of a home used exclusively as a hotel, motel, inn or similar establishment does NOT qualify as a "home" and, therefore, does not qualify for a home office deduction.

Generally, there are two basic requirements for the taxpayer's home to qualify as a deduction:

There must be exclusive use of a portion of the home for conducting business on a regular basis. For example, a taxpayer who uses an extra room to run their business can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business.

The home must be the taxpayer's principal place of business. A taxpayer can also meet this requirement if administrative or management activities are conducted at the home and there is no other location to perform these duties. Therefore, someone who conducts business outside of their home but also uses their home to conduct business may still qualify for a home office deduction.

A portion of a home that is used exclusively for conducting business on a regular basis but not used as the principal place of business, will qualify for a home office deduction if either patients, clients or customers are met in the home or there is a separate structure that is used exclusively for conducting business on a regular basis.

Taxpayers who qualify may choose one of two methods to calculate their home office expense deduction:

Using the simplified method consisting of a rate of $5 per square foot for business use of the home which is limited to a maximum size of 300 square feet and a maximum deduction $1,500.

Using the regular method whereby deductions for a home office are based on the percentage of the home devoted to business use.
Any use a whole room or part of a room for conducting their business will involve figuring out the percentage of the home used for business activities to deduct indirect expenses. Direct expenses are deducted in full.

06/22/2021

TAX TIP:

The first step of good tax planning is good recordkeeping

Year-round tax planning is for everyone. An important part of that is recordkeeping. Gathering tax documents throughout the year and having an organized recordkeeping system can make it easier when it comes to filing a tax return or understanding a letter from the IRS.

Good records help:

Identify sources of income.

Taxpayers may receive money or property from a variety of sources. The records can identify the sources of income and help separate business from nonbusiness income and taxable from nontaxable income.

Keep track of expenses.

Taxpayers can use records to identify expenses for which they can claim a deduction. This will help determine whether to itemize deductions at filing. It may also help them discover potentially overlooked deductions or credits.

Prepare tax returns.

Good records help taxpayers file their tax return quickly and accurately. Throughout the year, they should add tax records to their files as they receive them to make preparing a tax return easier.

Support items reported on tax returns.

Well-organized records make it easier to prepare a tax return and help provide answers if the return is selected for examination or if the taxpayer receives an IRS notice.
In general, the IRS suggests that taxpayers keep records for three years from the date they filed the tax return. Taxpayers should develop a system that keeps all their important information together. They can use a software program for electronic recordkeeping. They could also store paper documents in labeled folders.

Records to keep include:

Tax-related records.
This includes wage and earning statements from all employers or payers, interest and dividend statements from banks, certain government payments like unemployment compensation, other income documents and records of virtual currency transactions. Taxpayers should also keep receipts, canceled checks, and other documents – electronic or paper - that support income, a deduction, or a credit reported on their tax return.

IRS letters, notices and prior year tax returns.

Taxpayers should keep copies of prior year tax returns and notices or letters they receive from the IRS. These include adjustment notices when an action is taken on the taxpayer’s account, Economic Impact Payment notices, and letters about advance payments of the 2021 child tax credit. Taxpayers who receive 2021 advance child tax credit payments will receive a letter early next year that provides the amount of payments they received in 2021. Taxpayers should refer to this letter when filing their 2021 tax return in 2022.

Property records.

Taxpayers should also keep records relating to property they dispose of or sell. They must keep these records to figure their basis for computing gain or loss.

Business income and expenses.

For business taxpayers, there's no particular method of bookkeeping they must use. However, taxpayers should find a method that clearly and accurately reflects their gross income and expenses. Taxpayers who have employees must keep all employment tax records for at least four years after the tax is due or paid, whichever is later.

Health insurance.

Taxpayers should keep records of their own and their family members' health care insurance coverage. If they're claiming the premium tax credit, they’ll need information about any advance credit payments received through the Health Insurance Marketplace and the premiums they paid.