Download Volume 13, Issue 4 Document Here

TaxTips
Volume 13, Issue 4
Distribution 8/12/2023; Publication 8/15/2023

Navigating the Gig Economy: Tax Challenges for Workers and Businesses
The gig economy refers to a labor market characterized by short-term contracts or freelance work as opposed to permanent jobs. It encompasses a wide range of industries, from ride-sharing and food delivery services to freelance writing and graphic design. Instead of being classified as traditional employees, many workers in the gig economy are considered independent contractors or self-employed individuals.

Tax Challenges for Independent Contractors
As an independent contractor, one of the primary challenges is managing taxes. Unlike employees who receive a regular paycheck with taxes withheld by their employers, independent contractors are responsible for calculating and paying their own taxes. This means that they need to set aside a portion of their earnings to cover income taxes, as well as self-employment taxes (which is the equivalent of Social Security and Medicare taxes withheld and paid by an employer).

Moreover, independent contractors may not have access to the same tax benefits as employees. For example, they may not be eligible for certain deductions, such as those related to employee benefits, health insurance premiums, or retirement plans. This can make it more difficult for independent contractors to reduce their taxable income and overall tax liability.

Another complication for independent contractors is deducting business expenses. In traditional employment, employees may be able to get pre-tax reimbursement/deductions for certain work-related expenses, such as transportation costs or home office expenses. However, independent contractors must carefully track and document their business-related expenses to claim deductions against their contractor income.

Common business expenses that independent contractors may incur include equipment or tools, software subscriptions, licensing costs, marketing expenses, and professional development costs. Keeping detailed records of these expenses is essential for accurately reporting deductions and minimizing taxable income.

Tax Challenges for Businesses
On the flip side, businesses that hire independent contractors also face tax challenges in the gig economy. When companies hire employees, they are typically responsible for withholding and remitting payroll taxes on behalf of their workers. However, when they engage independent contractors, the tax obligations differ.

Businesses that hire independent contractors are not generally required to withhold payroll taxes for them. Instead, independent contractors are responsible for reporting and paying their own self-employment taxes, which include Social Security and Medicare taxes. However, in some cases, businesses are required to comply with backup withholding rules when independent contractors provide the wrong Taxpayer Identification Number (TIN) or incorrectly report income on a tax return, which means that the business must withhold a certain percentage from all future payments to that contractor and deposit the withholdings directly with the IRS. Furthermore, misclassifying employees as independent contractors can lead to severe tax consequences and potential legal issues for businesses – IRS can assess back payroll taxes for payments that are later deemed as wages, and there can be legal ramifications for not providing certain benefits to those who are truly employees but being disguised as independent contractors. Therefore, businesses must ensure compliance with tax rules and laws surrounding worker classification.

Tax Compliance and Future Considerations
To navigate the tax challenges in the gig economy, both workers and businesses should prioritize tax compliance and proactive planning. Independent contractors should set aside a portion of their earnings to cover taxes and consult with tax professionals or use tax software to ensure accurate reporting. Keeping organized records of business expenses is crucial for maximizing deductions and reducing taxable income.

Businesses, on the other hand, should carefully review worker classification to ensure compliance with tax laws. Consulting with legal and tax professionals can help businesses determine whether a worker should be treated as an employee or an independent contractor. This can help avoid potentially costly penalties and liabilities associated with misclassification.

***

Tweets

Insert a link to your newsletter, website, or blog before you post these:

Our latest blog: “Navigating the Gig Economy: Tax Challenges for Workers and Businesses” is available now! Subscribe here: [link]

The gig economy refers to a labor market characterized by short-term contracts or freelance work as opposed to permanent jobs: [link]

Instead of being classified as traditional employees, many workers in the gig economy are considered independent contractors or self-employed individuals. Learn more in our latest blog article: [link]

As an independent contractor, one of the primary challenges is managing taxes. Learn more here: [link]

Independent contractors may not have access to the same tax benefits as employees, including being eligible for certain deductions. Find out more in our latest blog article: [link]

A large complication for independent contractors is deducting business expenses. Learn more here: [link]

Common business expenses that independent contractors may incur include equipment or tools, software subscriptions, licensing costs, marketing expenses, and professional development costs. Learn more in our latest blog article: [link]

To navigate the tax challenges in the gig economy, both workers and businesses should prioritize tax compliance and proactive planning. Learn more here: [link]

Download Volume 13, Issue 3 Document Here

TaxTips
Volume 13, Issue 3
8/1/203

Understanding Tax Fraud: Consequences and Penalties
Tax fraud is a serious offense that involves intentionally evading or misrepresenting information on tax returns to avoid paying the correct amount of taxes. In the United States, it is taken very seriously by both federal and state authorities, and anyone caught engaging in such activities could be subject to significant penalties and even criminal charges, including possible prison time.

Tax fraud occurs when individuals or businesses use deliberate deception to reduce their tax liability. It is important to note that tax fraud is different from tax avoidance, which involves using legal strategies to reduce tax exposure. Furthermore, making an honest mistake on a tax return is not considered tax fraud. Intentional and willful acts of deception are necessary to classify an action as fraudulent.

There are several common forms of tax fraud:

1. Underreporting Income: Willful failure to report all or a portion of earned income is one of the most prevalent forms of tax fraud. This can involve unreported cash payments, offshore accounts, or even failure to report income derived from illegal activity.
2. Inflating Deductions or Expenses: While the Internal Revenue Code allows taxpayers to claim certain expenses against their income before calculating their tax liability, reporting excessive deductions or inflating expenses beyond what is allowed by law is another story. This may involve fabricating or exaggerating business expenses, charitable contributions, or personal deductions.
3. Falsifying Documents: Creating false documents or altering existing ones to support fraudulent claims on tax returns is a serious offense. This can include forging receipts, invoices, or other financial records, destroying pertinent documentation, as well as knowingly filing an incorrect tax return.

Legal Ramifications and Penalties
Engaging in tax fraud can lead to severe legal consequences and penalties. The Internal Revenue Service has the authority to pursue civil and criminal charges against tax fraud offenders. Here are some of the potential penalties:

1. Civil Penalties: The IRS can impose civil penalties, which are financial sanctions, on individuals found guilty of tax fraud. These penalties may include fines, interest on unpaid taxes, and additional fees based on the amount of tax owed.
2. Criminal Charges: In more serious cases, tax fraud can result in criminal charges. If convicted, individuals may face imprisonment, substantial fines, or both. The severity of the penalties depends on the extent of the fraud, the amount of taxes evaded, and the individual's criminal history.
3. Asset Seizure: The government may seize assets, such as bank accounts, real estate, vehicles, or other property, to recover unpaid taxes resulting from tax fraud. This can have long-lasting financial consequences for the offender.
4. Reputation and Professional Consequences: Tax fraud convictions can harm an individual's reputation and result in the loss of professional licenses, difficulty securing future employment, and damage to personal and business relationships.

Tax fraud is a serious offense that undermines the integrity of the tax system and affects society as a whole. It is crucial to understand and fulfill tax obligations honestly and accurately. If you have concerns or questions regarding your tax situation, it is advisable to consult a qualified tax professional or seek guidance from the appropriate tax authorities.

***

Tweets

Insert a link to your newsletter, website, or blog before you post these:

Our latest blog: “Understanding Tax Fraud: Consequences and Penalties” is available now! Subscribe here: [link]

Making an honest mistake on a tax return is not considered tax fraud: [link]

There are several common forms of tax fraud, including underreporting Income. Learn more in our latest blog article: [link]

Tax fraud is different from tax avoidance, which involves using legal strategies to reduce tax exposure. Learn more here: [link]

There are several common forms of tax fraud, including inflating deductions or expenses. Find out more in our latest blog article: [link]

There are several common forms of tax fraud, including falsifying documents. Learn more here: [link]

Engaging in tax fraud can lead to severe legal consequences and penalties. Learn more in our latest blog article: [link]

The Internal Revenue Service has the authority to pursue civil and criminal charges against tax fraud offenders. Learn more here: [link]

Download Volume 13, Issue 2 Document Here

TaxTip
Volume 13, Issue 2
Distribution 7/12/2023; Publication 7/15/2023

The Digital Transformation of Taxes: Making Filing, Compliance, and Audits Easier Than Ever
Tax season has traditionally been a stressful time for many Americans, involving stacks of paperwork, confusing forms, and difficult-to-understand terminology. Tax authorities have also historically struggled with overseeing and ensuring taxpayer compliance. However, thanks to the digital revolution, tax digitalization is now transforming the way we handle the tax return and compliance process. 

Simplified Tax Filing
The days of wrestling with mountains of forms and deciphering complex tax jargon are long gone! The digitalization of tax systems has introduced user-friendly online platforms that simplify the process of tax filing. These platforms guide taxpayers through a step-by-step process, prompting them to enter the necessary information and calculate their tax obligations accurately. With the help of built-in error checks and real-time calculations, the risk of making mistakes is significantly reduced. These platforms also enable taxpayers to file their returns conveniently from the comfort of their homes or offices, and they are accessible via computers, tablets, and smartphones, allowing individuals to file their taxes using a device of their choice. Additionally, online platforms often offer built-in customer support, ensuring taxpayers can receive assistance whenever needed.

Automation: Saving Time and Effort
Technology has played a vital role in automating various aspects of tax administration. Many tax systems use automation to streamline repetitive tasks, such as data entry and calculations. For example, automated systems can directly import financial data from various sources, such as employers, banks, and investment platforms, eliminating the need for manual data entry. This saves time and effort (and possibly cost for those who outsource tax preparation) and reduces the chances of human error.

Enhanced Compliance
With the implementation of digital tax systems, along with a more simplified process for taxpayers, compliance oversight by IRS and state tax departments has also become more efficient and effective. Tax authorities can use sophisticated algorithms and data analytics to detect potential non-compliance patterns and anomalies. This allows them to identify taxpayers who may have made errors or intentionally evaded taxes. By leveraging technology, tax authorities can ensure that everyone contributes their fair share and maintain a level playing field.

Digital Audits: A Streamlined Process
Digitalization has also revolutionized the audit process, making it less invasive and time-consuming. In the past, audits often involved extensive document gathering and in-person meetings. However, digital systems now allow taxpayers to submit supporting documents electronically, reducing the need for physical paperwork, and tax authorities can conduct virtual audits so that taxpayers do not need to be present in person. This streamlines the process, saves time, and reduces the burden on both taxpayers and auditors.

Tax digitalization in the United States has revolutionized the way we approach taxes, bringing convenience, efficiency, and accuracy to the forefront. Embracing the digital transformation of taxes allows individuals and businesses to save time, reduce errors, and contribute to a fairer and more transparent tax system.

***

Tweets 

Insert a link to your newsletter, website, or blog before you post these: 

Our latest blog: “The Digital Transformation of Taxes: Making Filing, Compliance, and Audits Easier Than Ever” is available now! Subscribe here: [link]

Thanks to the digital revolution, tax digitalization is now transforming the way we handle the tax return and compliance process. Learn more in our latest blog article: [link]

The digitalization of tax systems has introduced user-friendly online platforms that simplify the process of tax filing. Learn more in our latest blog article: [link]

With the implementation of digital tax systems, along with a more simplified process for taxpayers, compliance oversight by IRS and state tax departments has also become more efficient and effective. Learn more here: [link]

By leveraging technology, tax authorities can ensure that everyone contributes their fair share and maintain a level playing field. Find out more in our latest blog article: [link]

#TaxTip Digital systems now allow taxpayers to submit supporting documents electronically, reducing the need for physical paperwork, and tax authorities can conduct virtual audits so that taxpayers do not need to be present in person. Learn more here: [link]

Tax digitalization in the United States has revolutionized the way we approach taxes, bringing convenience, efficiency, and accuracy to the forefront. Learn more in our latest blog article: [link]

The days of wrestling with mountains of forms and deciphering complex tax jargon are long gone! Learn more here: [link]

Download Volume 13, Issue 1 Document Here

TaxTips
Volume 13, Issue 1
7/1/2023

Navigating the World of Digital Taxes in the United States: Unraveling the Complexities of the Digital Economy
As technology has continued to advance and transform, our lives have become intertwined with digital goods and services. We buy e-books, stream movies, subscribe to online music platforms, and even seek services from freelancers through online platforms. The digital economy has revolutionized the way we live, work, and connect with one another.

Taxation of Digital Goods
Digital goods encompass a wide range of products (such as digital music, videos, online games, etc.), and when it comes to taxing these goods, in the United States they are generally treated similarly to physical goods. Unlike in certain other countries, there is currently no Value Added Tax (VAT) at either the Federal or State level on such assets in the United States. However, many states apply sales tax to digital goods based on the location of the buyer (like how they tax traditional products), but these tax laws vary from state to state. For example, some states have identified which digital goods are subject to sales tax, and if a digital good doesn’t fall into one of the specific categories, the product is not subject to tax in the state. Alternatively, some other states take the position that any property “perceptible to the senses” falls within the definition of tangible personal property and would therefore be subject to sales tax, and many digital goods would meet that classification.

Taxation of Digital Services
Digital services include streaming platforms, cloud storage, software-as-a-service (SaaS), online courses, and various subscription-based services. Taxation of digital services can involve a patchwork of different rules, and the landscape is constantly evolving. For example, some states have proposed imposing gross revenue taxes on certain digital activities, and some levy sales tax on such services based on the location of the customer. However, due to the dynamic nature of the digital economy, tax laws regarding these services are subject to change, so it's advisable to stay informed about the latest regulations in your jurisdiction.

Taxation of Online Platforms
Online platforms that facilitate digital transactions, like e-commerce marketplaces or gig economy platforms, have also come under scrutiny for tax purposes. In the United States, online platforms are generally not directly responsible for collecting and remitting taxes on behalf of their users. Instead, individuals and businesses using these platforms are typically responsible for reporting and paying taxes on their earnings. The IRS has been very clear that income earned from such platforms is reportable on a tax return and subject to income tax, even if the income is:

•          From part-time, temporary, or side work
•          Not reported on an information return form, like a 1099-MISC, 1099-K, or 1099-NEC
•          Paid in any form, including cash, property, goods, or virtual currency

Challenges of the Digital Economy
Taxing the digital economy presents unique challenges due to its global and borderless nature. One of the main challenges is identifying the appropriate jurisdiction to tax digital transactions, especially when goods or services are provided across state or national borders. Many states/jurisdictions have not addressed the matter of how to source digital goods and services, and the lack of a uniform rule opens the door for possible double taxation because two different jurisdictions could be legally entitled to tax the same digital transaction. This issue has prompted discussions at the international level to develop a framework for taxing digital activities.

In response to these challenges, some countries have introduced or proposed digital services taxes (DSTs) aimed at taxing revenue generated by multinational digital companies, so that those jurisdictions have increased taxing rights over the profits of such companies that sell into their local markets. However, the implementation and impact of such taxes remain subject to ongoing debate and negotiation.

As our world continues to embrace the digital revolution, understanding the taxation of digital goods, services, and online platforms becomes increasingly important. While taxation rules and regulations can be complex and subject to change, adopting a proactive approach and seeking professional advice can help individuals and businesses navigate the digital tax landscape more effectively and be prepared for a continuing unpredictable tax environment.

***

Tweets

Insert a link to your newsletter, website, or blog before you post these:

Our latest blog: “Navigating the World of Digital Taxes in the United States: Unraveling the Complexities of the Digital Economy” is available now! Subscribe here: [link]

Download Volume 12, Issue 17 Document Here

Tax Tips
Volume 12, Issue 17
For distribution 2/17/23; publication 2/20/23

The Inflation Reduction Act: Healthcare, Business, and Other Provisions

The Inflation Reduction Act of 2022 (the “Act”) includes a range of new tax rules addressing various areas. While one of its significant goals is to address climate change and jump-start clean energy production via expanded electric vehicle and energy efficiency credits, the Act also includes other provisions intended to address inflation by reducing the amount of government spending, imposing new revenue streams, and decreasing healthcare costs for Americans.

In this article, we’ll cover the non-energy provisions of the Act that affect your taxes.

Healthcare Provisions in the Act

The Affordable Care Act program is extended through 2025. With additional funding, this is expected to allow higher-income households to qualify for the Premium Tax Credit, as well as increase the subsidy for lower-income households.

The Act limits annual out-of-pocket costs of prescription drugs for seniors on Medicare to an estimated $4,000 by 2024 and $2,000 by 2025. Additionally, Medicare is able to negotiate certain prescription prices with drugmakers. Other Medicare benefits are expanded, including free vaccines and $35 per month insulin costs, by 2023.

Business Tax Provisions

Effective for tax years beginning on or after January 1, 2023, C corporations with average adjusted financial statement income greater than $1 billion over any consecutive three years will now pay a minimum 15% tax on corporate book income.

The Act creates a 1% excise tax on the value of publicly-traded stock that is repurchased by the corporation or certain subsidiaries, effective after December 31, 2022. This new tax excludes buybacks of less than $1 million, repurchases connected to contributions to retirement savings plans, repurchases treated as dividends, and certain other transactions.

The limitation on pass-through net business losses for noncorporate taxpayers that was enacted in the 2017 Tax Cuts and Jobs Act (TCJA) is extended through 2028. The business loss deduction in 2022 is limited to $540,000 for joint filers and $270,000 for all other filers.

Increased R&D credits are provided for eligible start-up businesses that elect to apply the credits against employer payroll tax liability instead of income tax. The eligible amount is increased from $250,000 to $500,000, effective January 1, 2023.

Other Provisions

The Act provides nearly $80 billion in additional funding to the IRS over the next ten years. Last year, social media posted that IRS would be hiring 87,000 armed personnel with this money. This is not true. This extra funding will increase hiring, but the new employees will work in operations, systems, and taxpayer services as well as collections. As of this writing, only four percent of IRS employees work in the Criminal Investigation Division.

As always, if you have any questions about any of these changes, feel free to reach out any time.

***

Tweets

Insert a link to your newsletter, website or blog before you post these:

Our latest blog: “The Inflation Reduction Act: Healthcare, Business, and Other Provisions” is available now! Subscribe here: [link]

Want to know more about the non-energy provisions of the Act that affect your taxes? Learn more in our latest blog article: [link]  

The Inflation Reduction Act includes provisions intended to address inflation by reducing the amount of government spending, imposing new revenue streams, and decreasing healthcare costs for Americans. Learn more in our latest blog article: [link]

#BusinessTip:After 2023, taxpayers can elect to transfer their electric vehicle (EV) credit to treat it as a payment to the dealer. Learn more here: [link]

With the Inflation Reduction Act of 2022, the Affordable Care Act program is extended through 2025. Learn more in our latest blog article: [link]

DID YOU KNOW… The Inflation Reduction Act of 2022 provides nearly $80 billion in additional funding to the IRS over the next ten years. Learn more here: [link]

If you want to know more about the business tax provisions in the Inflation Reduction Act of 2022, you’ll want to check out our latest blog article: [link]

Have questions about some of the provisions included in the Inflation Reduction Act of 2022? Check out our latest blog for more info: [link]

Download Volume 12, Issue 16 Document Here

Tax Tips
Volume 12, Issue 16
For distribution 2/6/23; publication 2/9/23

Income Tax Deductions vs. Tax Credits… Which One Is Better?

While a deduction can reduce the amount of taxable income, credits can directly reduce the amount of tax owed, so they offer a greater tax benefit. Sometimes, credits can be refundable, which means that they might generate a refund for you even when you don’t owe tax. Below are some examples of different types of credits and deductions available for individual taxpayers. Keep in mind that each credit and/or deduction has specific criteria that need to be met in order to qualify. 

Credits for Individuals

•          Child Tax Credit
•          Dependent Care Credit
•          Earned Income Tax Credit
•          Adoption Credit
•          Saver’s Credit
•          Foreign Tax Credit
•          Excess Social Security and RRTA tax withheld
•          Credit for Tax on Undistributed Capital Gain
•          Credit for Prior Year Minimum Tax
•          Residential Energy Credits
•          Plug-in Electric Drive Vehicle Credit
•          Premium Tax Credit (marketplace health care insurance credit)
•          American Opportunity Credit and Lifetime Learning Credit

If you feel you might qualify for one of these credits, be sure to ask your tax preparer about them. 

Deductions for Individuals

The IRS provides each taxpayer with a standard deduction that reduces their adjusted gross income so they pay less tax. The amounts change each year, and are determined by filing status. In the 2022 tax year, here is a sampling of the standard deduction amounts.

Single; Married Filing Separately                                                                            $12,950

Married Filing Jointly; Qualifying Widow(er)                                                        $25,900

Head of Household                                                                                                  $19,400

Most taxpayers take the standard deduction, but the law allows you to take more if you have more qualifying deductions than the limits above. These are called itemized deductions and can include personal property tax, real estate tax, sales tax, charitable contributions, gambling losses, interest expense, home mortgage interest paid, and moving expenses, to name a few.

Students and teachers may be able to take education deductions, which include student loan interest paid, work-related educational expenses, and educational expenses paid by a teacher.

Self-employed individuals can claim work-related deductions related to business expenses, business use of car, and business use of home on Schedule C.

Health care deductions, such as medical and dental expenses or Health Savings Account (HSA) contributions can be deductible to those who participate in these plans.

For investors, deductions may include sale of home, Individual Retirement Arrangement (IRA) contributions, capital losses, bad debts, qualified opportunity zone investments, and debt forgiveness.

If you’d like to study deductions and credits on your own, the IRS website is a wealth of knowledge. If you don’t want to do that, you can always ask your tax professional. Filling out your tax organizer in a complete and thorough manner is the very first step to helping your tax pro identify the plethora of credits and deductions you may qualify for. 

***

Tweets

Insert a link to your newsletter, website or blog before you post these:

Our latest blog: “Income Tax Deductions vs. Tax Credits… Which One Is Better?” is available now! Subscribe here: [link]

Do you know the different types of credits and deductions available for individual taxpayers? Learn about them in our latest blog article: [link]  

The Child Tax Credit, Dependent Care Credit, Earned Income Tax Credit, and Adoption Credit are just some of the few tax credits available to qualified individual taxpayers. Learn more in our latest blog article: [link]

#BusinessTip: While a deduction can reduce the amount of taxable income, credits can directly reduce the amount of tax owed, so they offer a greater tax benefit. Learn more here: [link]

The IRS provides each taxpayer with a standard deduction that reduces their adjusted gross income so they pay less tax. This amount changes yearly and is dependent on filing status. Learn more in our latest blog article: [link]

DID YOU KNOW…while most taxpayers take the standardized deduction, the law allows you to take more if you have more qualifying deductions than the limits set by the standardized amount. These are known as itemized deductions. Learn more here: [link]

Filling out a tax organizer in a complete and thorough manner is the very first step to helping your tax pro identify the plethora of credits and deductions you may qualify for. Learn more about tax credits and deductions here: [link]

Keep in mind that each tax credit and/or deduction has specific criteria that need to be met in order to qualify. Find out more in our latest blog: [link]

Download Volume 12, Issue 15 Document Here

Tax Tips
Volume 12, Issue 15
For distribution 1/23/23; publication 1/26/23

The Inflation Reduction Act: Energy Efficiency Credits and Provisions

The Inflation Reduction Act of 2022 (the “Act”) was recently passed, and it includes a range of new tax rules addressing various areas, including healthcare, energy, and tax measures. With one of its significant goals being to address climate change and jump-start clean energy production, the Act created a significant number of renewable energy sector benefits, including extended and expanded energy-efficiency credits and provisions.

If you have made any energy-related improvements to your home, let your tax professional know so they can consult with you on whether your investments qualify for these credits. Here is a brief rundown.

Expanded Credit for Home Energy Efficiency Improvements

Although the IRC 25C nonbusiness energy property credit already existed for various home energy efficiency improvements, the impact was limited because of it only applying to primary residences and being subject to a lifetime limitation of $500 for each taxpayer. The Act extends the previous credit for another year through the end of 2022 and expands the credit significantly beginning in 2023. Starting in 2023, the following new rules apply:

1.      The credit has a $1,200 annual limitation with no lifetime limit for most qualifying improvements.
2.      The credit is equal to 30 percent of the property’s cost.
3.      Certain subcategories under the $1,200 cap have their own annual limits - $600 for windows, $500 for exterior doors ($250 per door), $600 for energy equipment, and $150 for home energy audits. Heat pumps and biomass stoves have a $2,000 annual limit instead of $1,200.
4.      The credit can be claimed for improvements to any dwelling unit, not just a residence, and can include installation and enhanced wiring costs.

Extended Residential Clean Energy Credit

The IRC 25D residential energy efficiency property credit is also an existing credit already available, but while it originally allowed a 30 percent credit (mostly used for solar systems and related costs), it was reduced to 26 percent in recent years and was scheduled for additional reductions and eventual expiration. The Act renamed the credit to the residential clean energy credit and brought the credit back up to 30 percent starting in 2022, and it also extended the credit through 2034 (with reduced percentages in 2033 and 2034). It will completely expire in 2035 unless Congress continues it.

Clean Energy Credits for Businesses and Investors

This credit is similar to the residential credit for individuals, with the business investment tax credit for solar and other renewable energy technologies reduced from 30 percent to 26 percent in recent years and scheduled for further reductions and expiration. The Act brings this back to 30 percent for projects completed in 2022, 2023, and 2024 and is expanded to include energy storage technologies. For 2025 and beyond, the 30 percent credit still applies for geothermal projects, but it will also require projects to meet certain wage and apprenticeship standards and use source materials from within the United States. This will apply to such projects that start construction through 2034, but the credit will start to phase out for projects beginning after 2032 (26 percent for 2033 and 22 percent for 2034).

High-Efficiency Electric Home Rebate Program

While not a credit, this provision of the Act will create a program to award rebates to individuals or families who purchase certain energy-efficient improvements. Participants must earn less than 150 percent of the median income where they live to qualify. The rebate amounts will depend on the category of improvement or upgrade: for example, a stove, cooktop, range, or heat pump clothes dryer could qualify for a rebate of $840, while a rebate for a heat pump for space heating and cooling could be as high as $8,000. The percentage of the property’s cost awarded as a credit will vary depending on income level, and each family will be limited to no more than $14,000 in total rebates under the program. This program will run through 2031.

Other

There are other credits and incentives available under the Act to encourage production of electricity using clean energy and reduce carbon emissions – however, above are some of the most common provisions. Consult with your tax professional to learn more!

***

Tweets

Insert a link to your newsletter, website or blog before you post these:

Our latest blog: “The Inflation Reduction Act: Energy Efficiency Credits and Provisions” is available now! Subscribe here: [link]

If you have made any energy-related improvements to your home, let your tax professional know so they can consult with you on whether your investments qualify for these credits. Learn more in our latest blog article: [link]  

The Inflation Reduction Act of 2022 created a significant number of renewable energy sector benefits, including extended and expanded energy-efficiency credits and provisions. Learn more in our latest blog article: [link]

#BusinessTip: The Inflation Reduction Act of 2022 brings the business investment tax credit for solar and other renewable energy technologies back up to 30 percent for projects completed in 2022 through 2024 and is expanded to include energy storage technologies. Learn more here: [link]

Starting in 2023, new rules have been applied for the nonbusiness energy property credit. This includes allowing the credit to be claimed for improvements to any dwelling unit, not just a residence. Learn more in our latest blog article: [link]

DID YOU KNOW… There is now a provision in the Inflation Reduction Act of 2022 that will create a program to award rebates to individuals or families who purchase certain energy-efficient improvements. Learn more here: [link]

There are many credits and incentives available under the Act to encourage production of electricity using clean energy and reduce carbon emissions. Check out some of the most common ones in our latest blog article: [link]

Have you made any energy-related improvements to your home? You may qualify for energy-efficiency credits! Find out more in our latest blog: [link]

Download Volume 12, Issue 14 Document Here

Tax Tips
Volume 12, Issue 14
For distribution 1/9/23; publication 1/12/23

The Inflation Reduction Act: Electric Vehicle Credits

Are you considering buying an electric vehicle in 2023? The rules have recently changed, due to the passage of the Inflation Reduction Act of 2022 (the “Act”) in the summer of 2022. This bill included a range of new tax rules addressing various areas, and one of its significant goals was to address climate change and jump-start clean energy production. In this article, we’ll specifically cover the portion of the bill that includes updates to the electric vehicle credits available.

Under the Act, existing electric vehicle (EV) credits have been expanded and modified. Although credits of up to $7,500 on the purchase of a new EV have been available for several years (with some limitations), the existing rules have been changed to make them more available to middle income taxpayers while also ramping up domestic manufacturing of EVs and their related components such as batteries.

Overall, there are now three EV tax credits available:

1.      [Revised] IRC 30D qualified plug-in vehicle credit, renamed to the clean vehicle credit
The maximum credit remains at $7,500; however, there are income limits for qualifying automobiles placed in service after December 31, 2022.

Any vehicle placed in service after August 16, 2022 must have final assembly in North America in order to qualify (with a transition rule for any contracts entered into between January 1, 2022 and August 15, 2022).

After 2023, taxpayers can elect to transfer their credit to treat it as a payment to the dealer.

When purchasing an EV, be sure to request for your salesperson to give you the necessary tax information you need! For some manufacturers, the assembly location may vary depending on the specific vehicle and trim, and for that reason, it’s advised to ask the salesperson for the VIN of the car that you plan to purchase.  

The Department of Energy has provided a VIN lookup tool that can be used to verify this information for a particular vehicle. Consumers can refer to a list published by to determine which models have final assembly in North America: https://afdc.energy.gov/laws/electric-vehicles-for-tax-credit 

2.      [New] IRC 25E previously-owned clean vehicle credit
A credit is now available for used EVs. Previously-owned clean vehicles placed in service after December 31, 2022 and before January 1, 2033 may qualify for the credit.

The credit is a nonrefundable credit equal to the lesser of $4,000 or 30% of the vehicle sale price.

There is also an income limit to qualify for this credit (with much lower limits than the 30D credit), and the sale price must be $25,000 or less.

3.      [New] IRC 45W qualified commercial clean vehicle credit
This credit is available for commercial clean vehicles placed in service after December 31, 2022 and before January 1, 2033. The credit is 15% of the vehicle’s basis but increases to 30% for a vehicle not powered by a gasoline or diesel combustion engine, and it cannot exceed $40,000 (with other possible limitations).

There is no income limitation to claim it, but there are other requirements regarding the vehicle type and type of clean energy used. A taxpayer cannot claim the credit for a vehicle for which the taxpayer received the IRC 30D credit (#1).

Check with your tax professional to learn more about the new/revised electric vehicle credits and how they impact your specific tax situation.

***

Tweets

Insert a link to your newsletter, website or blog before you post these:

Our latest blog: “The Inflation Reduction Act: Electric Vehicle Credits” is available now! Subscribe here: [link]

Are you considering buying an electric vehicle in 2023? Some rules have changed with the passage of the Inflation Reduction Act of 2022. Learn more in our latest blog article: [link]  

Under the Inflation Reduction Act of 2022, existing electric vehicle (EV) credits have been expanded and modified. Learn more in our latest blog article: [link]

#BusinessTip: After 2023, taxpayers can elect to transfer their electric vehicle (EV) credit to treat it as a payment to the dealer. Learn more here: [link]

A credit is now available for used EVs. Previously-owned clean vehicles placed in service after December 31, 2022 and before January 1, 2033 may qualify for the credit. Learn more in our latest blog article: [link]

DID YOU KNOW… There are now three EV tax credits available following the passage of the Inflation Reduction Act of 2022. Learn more here: [link]

If you’re thinking about buying an electric vehicle (EV) in 2023, you don’t want to miss the latest info on EV tax credits in our latest blog article: [link]

One of the significant goals of the Inflation Reduction Act of 2022 was to address climate change and jump-start clean energy production. Check out how it affects electric vehicles in our latest blog: [link]

Download Volume 12, Issue 13 Document Here

BizBoost News
Volume 12, Issue 13
For distribution 12/26/22; publication 12/29/22

Need to Correct Your Already-Filed Tax Return?

There is now a choice for tax professionals who need to make changes to a tax return that has already been filed with the IRS.

Superseding vs. Amended Tax Returns

You’re likely already familiar with the amended tax return. An amended return is filed subsequent to the originally-filed or superseding return and after the due date (including extensions).

Introducing the superseding return: A superseding return is a revision of an originally-filed return that is submitted within the current filing period (before that return’s due date, including extensions).

A superseding return “supersedes” (replaces) the original return rather than amending it.

When Should a Superseding Return Be Used?

Although the issue of superseding returns goes back to a court case from the 1940s, it has recently gained attention again, in part because of processing and guidance delays associated with the COVID-19 pandemic. Some of the more common situations that have come up where a superseding return could be relevant include:

•          There are additional reporting requirements that come out after submission of the original return, but before the due date, that must be addressed to ensure compliance (a more recent example of this relates to Payroll Protection Program (PPP) expense deductibility and disclosures).
•          A taxpayer expedites filing of their return (for example, to provide it for dependent financial aid purposes or, more recently, to take advantage of COVID-related stimulus payment/recovery rebate relief), and then receives a form or discovers missing information after-the-fact that must be factored into the return.
•          The IRS or State requires filing of a new form, but it is not finalized or available for e-file until after the original filing deadline, so the taxpayer files the return but must add the applicable form(s) later to ensure compliance (a recent example relates to new foreign reporting on Schedules K-2 and K-3).
•          A taxpayer files a return and neglects to make or change an important binding election; although the election cannot be made or revoked on an amended return, it can be on a superseding return because that return replaces the original filing and is generally treated as the original return (one example of this would be the de minimis safe harbor election, which must be made every year and is irrevocable).
•          A taxpayer erroneously files a blank or incomplete return and wants to avoid underreporting or other accuracy-related penalties.

When and How to File a Superseding Return

As noted, a superseding return must be filed on or before the due date for the current filing period, including extensions. Individual superseding returns must be paper filed, and the filing must include a whole new copy of the 1040 return with the applicable changes factored in (with all necessary schedules and attachments) and should have “SUPERSEDING RETURN” written across the top of the first page. Although individual superseding returns cannot be electronically filed, many tax programs now support e-filing of superseding corporate and partnership returns, which typically ensures faster processing.

It is important to note that although the recommendation is to file a superseding individual return on a regular 1040 form, as you would ordinarily file the original return, any amended personal returns that are filed before the due date (including extensions) will automatically be treated as superseding, so you also have the option to just file Form 1040-X.

Additionally, some tax professionals recommend the strategy of filing extensions for all clients each year, even if the plan is to file prior to the original filing deadline, because if a taxpayer files a return by the original due date and discovers an error after that date, but before the extended due date, a superseding return can still be submitted. This is not an option for returns that were not put on extension – once the initial deadline passes, only an amended return can be submitted to report any changes.

If you’d like to discuss this topic and how it might affect your tax return filing, please reach out any time. 

***

Tweets

Insert a link to your newsletter, website or blog before you post these:

Our latest blog: “Need to Correct Your Already-Filed Tax Return?” is available now! Subscribe here: [link]

There is now a new choice for tax professionals who need to make changes to a tax return that has already been filed with the IRS. Learn more in our latest blog article: [link]  

Introducing the superseding return: A superseding return is a revision of an originally-filed return that is submitted within the current filing period (before that return’s due date, including extensions). Learn more in our latest blog article: [link]

#BusinessTip:Although individual superseding returns cannot be electronically filed, many tax programs now support e-filing of superseding corporate and partnership returns, which typically ensures faster processing. Learn more here: [link]

Do you know the difference between superseding and amended tax returns? Learn the differences and which one is best for you in our latest blog article: [link]

DID YOU KNOW… An amended return is filed subsequent to the originally-filed or superseding return and after the due date (including extensions). A superseding return “supersedes” (replaces) the original return rather than amending it. Learn more here: [link]

Although the issue of superseding returns goes back to a court case from the 1940s, it has recently gained attention again, in part because of processing and guidance delays associated with the COVID-19 pandemic. Learn some of the more common situations that have come up where a superseding return could be relevant in our latest blog article: [link]

Have you learned about superseding tax returns yet? This return is different from an amended return in many ways. Sign up for our newsletter to learn more: [link]

Download Volume 12, Issue 12 Document Here

BizBoost News
Volume 12, Issue 12
For distribution 12/12/22; publication 12/15/22

End of the Year Tax Reminders for Business Owners

Performing these tasks at year-end will help your tax professional prepare your return accurately, plus it will make your tax professional very happy when you have these answers at the ready!

·         Write down the odometer reading on the vehicles you use for business. It is important to know what percent you are using the vehicle for business and what percent you are using for personal. You should have a mileage log, but even if you just write down your odometer once a year, you’ll know how many total miles you drove for the year.

·         If you carry inventory, you are required to do a count once a year showing the value.

·         If you have payroll, verify if your EDD employment rate has changed for the upcoming year. You should have received a letter with the percentage in early December.

·         Collect any W-9s from vendors. Verify if you paid anyone over $600 that will require a 1099. You will also need to send out a 1096. Visit the IRS website to order forms: https://www.irs.gov/businesses/online-ordering-for-information-returns-and-employer-returns

·         Back up data from the computer. Double check the backups are copying correctly.

·         Update service account passwords and who has access to them. For security reasons, it is important to periodically update passwords and review/reassess which individuals have access to them.

·         Copy thermal receipts. Many receipts that you get from office supply stores, gas, etc., are on thermal paper. The image will fade over time. Make a copy of the receipt because if you are audited, the IRS will want to see the details, not the credit card statement. Better yet, scan all of your receipts into a document management system and toss the paper.

·         Verify when corporate minutes will be due for the coming year and mark the calendar.

·         Review your business plan and make any necessary changes. What do you project your gross revenue to be for the upcoming year? How will that compare with the current year? What will you do to increase your profits?

·         If you use QuickBooks, set the closing date and password on QuickBooks file.

Getting these necessary clerical tasks out of the way will make it easier for everyone.

***

Tweets

Insert a link to your newsletter, website or blog before you post these:

Our latest blog: “End of the Year Tax Reminders for Business Owners” is available now! Subscribe here: [link]

We’ve compiled a list of tasks to perform at year-end that will help your tax professional prepare your return accurately. It will also make your tax professional very happy when you have these answers at the ready! Learn more in our latest blog article: [link]  

A few things you can do to prepare for tax season are:

•Write down the odometer reading on the vehicles you use for business

•If you carry inventory, you are required to do a count once a year showing the value

•If you have payroll, verify if your EDD employment rate has changed for the upcoming year

Learn more in our latest blog article: [link]

#BusinessTip: Do these things at year-end to prepare for tax season:

•Verify when corporate minutes will be due for the coming year and mark the calendar

•Review your business plan and make any necessary changes

•If you use QuickBooks, set the closing date and password on QuickBooks file

Find more tips here: [link]

Are you prepared for tax season? It’s never too early to get started! We’ve compiled a list of things you can start doing now. Getting these necessary clerical tasks out of the way will make it easier for everyone: [link]

DID YOU KNOW… There are numerous things you can start doing now to make tax season easier. Learn more in our latest blog article: [link]

We have a couple end of year tax reminders for business owners! Find the full list in our latest blog article: [link]

Do you know what you can do to prepare for tax season, now? Sign up for our newsletter to access the full list of year-end to-dos that will make your upcoming tax season much easier! [link]