Davidson Fox & Company LLP  

May 2023 Newsletter


Just because the first tax deadlines have passed doesn't mean we stop thinking about ways to cut down your tax bill. 

This edition of our newsletter covers crucial tax law changes, finance tips if you lose your job, business cash flow strategies, freelancer booking tips, recordkeeping guidelines for saving old tax records, and much more. 

We had a great tax season!  Albeit our busiest time of year, we finished strong with over 1,500 tax returns filed.  Thank you to all our clients who make our jobs worth doing - we wouldn't be here without you!  

Our crew got together to celebrate after the deadline with a party at the Binghamton Club for us and our spouses.  We had awesome food, relaxed conversations and did some bowling.  Thank you to the Partners who treated us to a great evening.  Pictured below are some from our crew and our loved ones, enjoying less-stress after a busy and productive deadline.

We are excited to be sponsors of the Greater Binghamton Chamber of Commerce Bridge Run!  The run is on Sunday, May 7th this year.  Come down and watch the runners or join everyone at the finish line.  Race starts in downtown Binghamton by the Mirabito Stadium and finishes on Fayette Street.  5 bridges, 2 rivers, one community!  There will be adult beverages, a kids fun-run around the bases at the stadium, live music and giveaways.  You won't want to miss the fun.  Register at binghamtonbridgerun.org or visit the Chambers website for more information.

You can also find us at Beer Tree Brewing Company in Port Crane on Tuesday, May 23rd for their 9th Annual Pintwood Derby!  Friendly competition paired with food and adult beverages makes this competition worth attending.  Build your own pinewood derby car or team up with friends to race down the track to see who comes out on top.  The event is open to everyone so mark your calendars.  We will be there to defend our title... granted we are defending last place but there's no where to go but up from here.  Credit is due to Michelle and her car "Cheese Louise" which landed her this last place trophy in 2021.

Business and individual life events happen year-round. Careful planning can make a big difference in your tax and financial outcome. Feel free to reach out before you make any decisions. 

We are here if you or your colleagues, family, or friends need help. We will continue monitoring the latest opportunities to keep our clients prosperous. Your kind reviews, and referrals are appreciated.


Davidson Fox

Roundup of Individual Tax Changes For 2023

Article Highlights:

  • Required Minimum Distributions (RMD)
  • Excess Accumulation Penalty
  • Military Spouse Retirement Plan Participation
  • Clean Vehicle Credit
  • Credit For Previously Owned Clean Vehicles
  • Early Distribution Penalty Exceptions
  • Credit For Energy Efficient Home Modifications
  • Home Solar Energy Credit
  • Credit For Small Employer Pension Plan Startup Costs
  • Nanny Retirement Contributions
  • Qualified Charitable Distributions

Two recently passed pieces of tax legislation have brought about several tax changes for 2023 that may affect you. The legislation includes the Inflation Reduction Act and the Secure 2.0 Act. Here is a condensed summary of those changes. Check over the list and see if any of the new rules apply to you.

  • Required Minimum Distributions (RMD) — For 2023 the age at which individuals must begin taking distributions from their traditional IRAs and retirement plans is 73, up from 72 in 2022.

  • Excess Accumulation Penalty — This is the penalty for failing to take an RMD. In the past, this penalty was a draconian 50% of the amount that should have been withdrawn for the year but wasn't. Beginning in 2023 the penalty has been reduced to 25%, and if a corrective distribution is timely made the penalty drops to 10%.

  • Military Spouse Retirement Plan Participation — In the past, because of frequent military moves, a military spouse often failed to qualify to contribute to an employer's retirement plan. Beginning in 2023, a military spouse can participate in their employer's plan starting 2 months after their employment begins and and will be immediately 100% vested in all employer contributions.

    In return, the employer receives a tax credit equal to $200 per military spouse, and 100% of all employer contributions (up to $300) made to the plan on behalf of the military spouse. The result is a maximum tax credit of $500 for the employer. This credit applies for 3 years with respect to each military spouse.

  • Clean Vehicle Credit — Although the credit can still be as much $7,500, this credit has significantly changed. For 2023, to qualify for the credit, among other requirements, the vehicle's final assembly must be in North America. In addition, the manufacturer's suggested retail price (MSRP) cannot be more than $80,000 for a pickup, van, or SUV and not more than $55,000 for other vehicles. To qualify, a purchaser's adjusted gross income (AGI) must be $300,000 or less for married taxpayers filing jointly, $225,000 for head of household filers, and $150,000 for others.

  • Credit For Previously Owned Clean Vehicles - This credit has not been available in prior years. A previouslyowned clean vehicle (in other words, a used vehicle) is a formerly owned vehicle that is a model year at least two years earlier than the calendar year in which the taxpayer acquires it. Also it cannot be a vehicle for which a previous credit has been allowed, and it must be acquired from a dealer for a purchase price of $25,000 or less. The available credit is the lesser of $4,000 or 30% of the vehicle's price.To qualify, a purchaser's income is limited — their AGI must be no more than $150,000 for married taxpayers filing jointly, $112,500 for heads of household and $75,000 for others.

  • Early Distribution Penalty Exceptions - Current law imposes a 10% additional tax on early (generally before age 59½) distributions from tax-preferred retirement accounts such as traditional IRAs and 401(k) plans, unless an exception provided in the law applies. Several new exceptions to the penalty begin in 2023.

    o   In case of a distribution to a terminally ill individual.
    o   For public safety officers at least age 50 or with at least 25 years of service with the employer sponsoring the plan, whichever comes first.
    o   For corrections officersor forensic security employees providing for the care, custody, and control of forensic patientswho are employees of state and local governments.
    o   In the case of a federally declared disaster. 

     The permanent rules allow up to $22,000 to be distributed from employer retirement plans or IRAs for affected individuals.
     Such distributions are not subject to the early distribution 10% additional tax and are considered as gross income over 3 years.
     Distributions can be repaid to a tax preferred retirement account.
     Additionally, amounts distributed prior to the disaster to purchase a home can be recontributed.

    o   For corrective IRA distributions including the excessive contribution and any earnings allocable to that contribution.
    o   The exception already applies for births and adoptions. Starting in 2023, recontributions of the distributed amounts are permitted within 3 years.
    o   For private sector firefighters, extends the age 50 rule (is age 55 for others).
    o   For domestic abuse survivors for distributions of the lesser of $20,000 or 50% of the retirement account balance.*

    * Distributions may be repaid at any time during the 3-year period beginning on the day after the date on which such distribution was received.*

  • Credit For Energy Efficient Home Modifications - This provision provides a non-refundable tax credit for certain energy-saving improvements to a taxpayer's home. The has been modified through 2032.

    The previous lifetime credit limit of $500 has been replaced with anannual maximum creditof $1,200, and the credit percentage increased from 10% to 30%. Although not a complete list, the following are annual credit limits that apply to various energy-efficient improvements:

    o   $600 for credits with respect to residential energy property expenditures, windows, and skylights.
    o   $250 for any exterior door ($500 total for all exterior doors).
    o   $300 forresidential qualified energy property expenses.
    o   Notwithstanding these limitations, a $2,000 annual limit applies with respect to amounts paid or incurred for specified heat pumps, heat pump water heaters, and biomass stoves and boilers.
    o   $150 for a home energy audit.
    o   The new law addsair sealing insulation as a creditable expense.

    Under the new law, the one making the improvements and claiming the credit need only be a resident of the home and not necessarily the owner.

  • Home Solar Energy Credit — Beginning in 2023 the credit returns to 30% and is extended through 2034, though the credit rate drops to 26% and 22%, respectively, for years 2032 and 2034. The change includes a credit for battery storage technology of at least 3 KW hours.

  • Credit for Small Employer Retirement Plan Start-up Costs — Under prior law, small businesses (100 or fewer employees) qualify for a nonrefundable credit for administrative and retirement education expenses when adopting a new qualified defined benefit or defined contribution plan.

    Beginning in 2023 a new category was added (50 employees or fewer) and the credit percentage was increased from 50% to 100% and applies for 4 years with the credit percentage reduced to 75%, 50%, and 25% in those succeeding years. The maximum credit per year per employee is $1,000.

  • Nanny Retirement Contributions — Beginning in 2023, employers of domestic employees (e.g., nannies) are allowed to provide retirement benefits for them under a Simplified Employee Pension ("SEP") plan.

  • Qualified Charitable Distributions - Under existing law a taxpayer is allowed to makea Qualified Charitable Distribution (QCD) of up to a total of $100,000 each year that is transferred from their traditional IRA to qualified charities of their choice. The QCD offsets their RMD, up to the amount of the RMD.

    Beginning in 2023, taxpayers will be allowed to make a one-time, $50,000 distribution to charities through charitable gift annuities, charitable remainder unitrusts, and charitable remainder annuity trusts.

If you would like details related to any of these provisions, please give this office a call. 


Don't Get Hit with IRS Underpayment Penalties

Article Highlights:

  • Pay-as-You-Earn System
  • Withholding and Payment Forms
  • IRS On-line Withholding Estimator
  • Situations Triggering Underpayments
  • Safe Harbor Payments
  • True Safe Harbor

Under federal law, taxpayers must pay taxes during the year as they earn or receive income, or they can find themselves falling victim to substantial underpayment penalties. Even worse, they may have spent the money, and when tax time comes are unable to pay their past taxes and spiral into financial distress.

To facilitate the pay-as-you-earn concept, the government has provided several means of assisting taxpayers in meeting that requirement. These include: 

  • Payroll withholding for employees - W-4;

  • Pension withholding for retirees – W-4P;

  • Voluntary withholding for Unemployment and Social Security benefits - W-4V; and

  • Estimated tax payments for self-employed individuals and those with other sources of income not covered by withholding – Form 1040-ES.

Employees with primarily wage income can use the IRS online tool, the Tax Withholding Estimator, to determine if their withholding closely matches their projected tax liability or if they need to adjust their tax withholding by providing a revised Form W-4 to their employer.

Employees and those with significant income from other sources, multiple jobs, rentals, side gigs, children subject to the kiddie tax, capital gains, etc., may find it appropriate to consult with this office for a more sophisticated tax projection and estimate of needed withholding and/or estimated tax payments.

Individuals should also check their tax withholding and estimated payments when:

  • Changes in tax law affect their situation.

  • They experience a lifestyle or financial change like marriage, divorce, birth or adoption of a child, home purchase, retirement, or filed chapter 11 bankruptcy.

  • They change jobs or have a change in wage income, such as when the taxpayer or their spouse starts or stops working or starts or stops a second job.

  • They have taxable income not subject to withholding, such as interest, dividends, capital gains, self-employment and gig economy income, and IRA distributions.

  • Reviewing their planned deductions or eligible tax credits, including items like medical expenses, taxes, interest expense, gifts to charity, dependent care expenses, education credit, Child Tax Credit or Earned Income Tax Credit.

  • Nonresident alien taxpayers should determine their tax withholding using the special instructions in Notice 1392, Supplemental Form W-4 Instructions for Nonresident Aliens.

Once an individual has determined they need to change their tax withholding, the individual should complete a new Form W-4 to give to their employer. Individuals with other types of income should provide the payor with either a new Form W-4P or Form W-4V, as applicable. Those making estimated payments can mail the payment along with the Form 1040-ES to the address included on the form or use the IRS on-line payment system to make a payment electronically.

When a taxpayer fails to prepay a safe harbor (minimum) amount, they can be subject to the underpayment penalty. This nondeductible interest penalty is higher than what might be earned from a bank. The penalty is applied quarterly, so for example, making a fourth quarter estimated payment only reduces the fourth-quarter penalty. However, withholding is treated as paid ratably throughout the year, so increasing withholding at the end of the year can reduce the penalties for the earlier quarters. This can be accomplished with cooperative employers or by taking an unqualified distribution from a pension plan, which will be subject to 20% withholding, and then returning the gross amount of the distribution to the plan within the 60-day statutory rollover limit.

Federal law and most states have so-called safe harbor rules, meaning if you comply with the rules, you won’t be penalized. There are two Federal safe harbor amounts that apply when the payments are made evenly throughout the year.

  1. The first safe harbor is based on the tax owed in the current year. If your payments equal or exceed 90% of your current year’s tax liability, you can escape a penalty. 

  2. The second safe harbor—and the one taxpayers rely on most often—is based on your tax in the immediately preceding tax year. If your current year’s payments equal or exceed 100% of the amount of your prior year’s tax, you can escape a penalty, regardless of the amount of tax you may owe when you file your current year’s return. If your prior year’s adjusted gross income was more than $150,000 ($75,000 if you file married separate status), then your payments for the current year must be 110% of the prior year’s tax to meet the safe harbor amount.

There is also a “de minimis amount due” of $1,000. If the amount owed is less than $1,000 the underpayment penalties do not apply.

Where taxpayers get into trouble is when their income goes up or their withholding goes down for the current year versus the prior year. Examples are having a substantial increase in income, such as when investments are cashed in, thereby increasing income but without any corresponding withholding or estimated payments. Another frequently encountered situation is when a taxpayer retires and their payroll income is replaced with pension and Social Security income without adequate withholding. Taxpayers who don’t recognize these types of situations often find themselves substantially underpaid and subject to the underpayment penalty when tax time comes around.

The bottom line is that 100% (or 110% for upper-income taxpayers) of your prior year’s total tax is the only true safe harbor because it is based on the prior year’s tax (a known amount), whereas the 90% of the current year’s tax amount is a variable based on the income for the current year, and often that amount isn’t determined until it is too late to adjust the prepayment amounts.

That being said, there are times when using the 100%/110% safe harbor method doesn’t make a lot of financial sense. For example, let’s say that in the prior year, you had a large one-time payment of income that boosted up your tax to $25,000, which is $10,000 more than you normally pay. You know that you won’t have that extra income in the current year. Rather than rely on the 100%/110% of prior tax safe harbor, where you’d be prepaying $10,000 more than your current year’s tax is likely to be, it may be appropriate to use the 90% of current-year tax safe harbor, determined by making a projection of your current year tax, and as the year goes along, monitoring your income and the tax paid in to be sure you are on track to reach the 90% goal.

Unlike employees, a self-employed individual must either estimate his or her net earnings for the year (or use the 100%/110% safe harbor) and pay taxes on a quarterly basis according to that estimate or safe harbor. Failure to do so will result in interest penalties.

Although these payments are called “quarterly” estimates, the periods they cover do not usually coincide with a calendar quarter.

Quarter Period Covered Months Due Date*
First January through March 3 April 15
Second April and May 2 June 15
Third June through August 3 September 15
Fourth September through December 4 January 15

 * If the due date falls on a Saturday, Sunday, or holiday, the payment is due on the next business day.

The rules discussed apply to federal pre-payments. The rules vary for the states.

Please contact this office for assistance. If you have a substantial increase in income, you should contact this office promptly so that your withholding or estimated tax payments can be adjusted to avoid a penalty.

Not Required to File a Tax Return? Reasons You May Want to Anyway!

Article Highlights:

  • Filing Thresholds
  • Tax Withholding
  • Tax Credits
  • Earned Income Tax Credit
  • Child Tax Credit
  • American Opportunity Tax Credit

Generally, individuals are required to file a tax return for a year if their income exceeds the standard deduction for their filing status for that year. But even if they are not required to file it may be beneficial to do so. They could be missing out on huge refunds.

The standard deduction is inflation adjusted each year and the table illustrates the standard deductions for 2023.

There are two exceptions: married individuals filing separately must file if their gross income is $5 or more and self-employed individuals must file if their gross self-employment income is $400 or more.

Filing Status 2023 Standard Deduction
Married Taxpayers Filing Jointly $25,900
Surviving Spouse $25,900
Head of Household $19,400
Single $12,950

Additional amounts are added to the amounts above for each filer (and spouse if filing jointly) who is age 65 and over or blind. These additional amounts are $1,500 for married individuals filing jointly and a surviving spouse; $1,850 for others.

Just because someone is not required to file a return does not mean they shouldn’t. Failing to file a return could end up leaving large sums of money on the table. Here are some examples.

  • Tax Withholding – Most individuals who have wage income also have federal income tax withheld on their earnings. That withheld tax would be 100% refundable if the worker isn’t required to file a return.

  • A tax credit is a dollar-for-dollar offset against the tax liability. Some credits can only reduce a tax liability to zero, while others as discussed below are refundable, meaning if the credit is more than the individual’s tax any excess credit is refundable. So if an individual is not required to file and therefore owes no tax and qualifies for one or more refundable credits, it may be in their best interest to file and take advantage of the credit(s).

  • Earned Income Tax Credit (EITC) –The EITC is for people who work but have lower incomes. If you qualify, it could be worth up to $6,935 in 2022. The credit is a fully refundable credit, so individuals can receive the full amount of the credit even if they do not owe any taxes.

    If you were employed for at least part of 2022, you may be eligible for the EITC based on these general requirements and earned less than:

    o   $16,480 ($22,610 if married filing jointly) and have no qualifying children.
    o   $43,492 ($49,622 if married filing jointly) and have one qualifying child.
    o   $49,399 ($55,529 if married filing jointly) and have two qualifying children.
    o   $53,057 ($59,187 if married filing jointly) and have more than two qualifying children.

  • Child Tax Credit (CTC) - This is a per child credit that phases out for higher income taxpayers but is available to all categories of taxpayers that are not required to file. The full credit is $2,000 per child, but the refundable amount is limited to a maximum amount of $1,500 for 2022 ($1,600 for 2023).

  • American Opportunity Tax Credit (AOTC) – The AOTC provides a credit of up to $2,500 per year per eligible student with higher education expenses. Up to 40% of the AOTC is refundable, even when there is no tax liability. Thus, it can result in a refund of as much as $1,000 (40% of $2,500).

    Generally, an eligible student for the AOTC can be the filer and spouse and their dependents that are enrolled at an eligible educational institution for at least one academic period (semester, trimester, quarter) during the year.

    If someone other than the filer, a spouse or their claimed dependent directly makes a payment to an eligible educational institution for a student’s qualified tuition and related expenses, then the filer is treated as paying the expenses and qualifies for the credit.

Thus even if not required to file, individuals could still have a refund in the thousands of dollars. The IRS has indicated that about 25% of those eligible for the EITC fail to claim it. Individuals should not miss out on the refundable credits simply because they are not required to file. If you are one of those that is not required to file, contact this office to see if you can benefit by filing and for assistance in preparing the return. If you didn’t file in prior years, you may have refunds for those years as well.

Benefits of Qualified Opportunity Funds Waning

Article Highlights:

  • Qualified Opportunity Fund
  • Qualified Opportunity Zones
  • Deferred Gains
  • 5- and 7-Year Holding Periods
  • 2026 End of Deferral
  • 0-Year Holding Period 

A Qualified Opportunity Fund (QOF) is an investment vehicle which is organized as a corporation or a partnership for the purpose of investing in qualified opportunity zone property acquired after December 31, 2017. The QOF must hold at least 90% of its assets in qualified opportunity zone (QOZ) property but a taxpayer may not invest directly in QOZ property.

Qualified Opportunity Zones (QOZ)are population census tracts that are generally in low-income communities and that were specifically designated as QOZs after being nominated by the governor of the state or territory in which the community is located and approved by the Treasury Secretary, who then certified the community as a QOZ. The purpose of a QOZ is to spur economic growth and job creation in low-income communities while providing tax benefits to investors.

Starting back in 2018, a taxpayer who had a capital gain on the sale or exchange of any property to an unrelated party could elect to defer, and potentially partially exclude, the gain from gross income if the gain was reinvested in a Qualified Opportunity Fund (QOF) within 180 days of the sale or exchange. Unlike Sec 1031 deferrals (tax deferred exchanges), only the amount of the gain, not the amount of the proceeds of sale, needed to be reinvested to defer the gain.

As an incentive to invest inQualified Opportunity Funds, the basis of the QOF investment was increased by 10% of the deferred gain if the taxpayer retained the QOF investment for 5 years. That was increased to 15% if the QOF was retained for 7 years. In other words, if the investment was held at least 5 years, 10% of the original gain is excluded, or if held 7 years, 15% of the original gain is excluded.

However, any gain deferred into a QOF becomes taxable the earlier of when the QOF investment is sold or December 31, 2026. Thus, if an individual invests in a QOF in 2023, that only leaves 4 years before the deferred gain becomes taxable at the end 2026. This means an investor just now investing in a QOF doesn’t have enough time to hold the investment the required 5 or 7 years to benefit from the 10% or 15% step up in basis when the deferral has to be reported on the 2026 return. However, the gain deferral is still available and is not taxable until the 2026 return is filed.

As illustrated nearby, to meet the meet the 7-year holding requirement the QOF must have been purchased before 1/1/2020 and prior to 1/1/2022 to meet the 5-year holding period.

One benefit remains. If the QOF is held for 10 years or longer before it is sold, the taxpayer can elect to increase the basis to the fair market value amount. The effect of this adjustment is that none of the appreciation since the QOF was purchased is taxable when it is sold. This provision applies only to the investment in the QOF that was made with deferred capital gains.

Please give this office a call if you have questions. 

Looking for Quick Cash? Try to Avoid Retirement Savings

Article Highlights:

  • Early-Withdrawal Penalties
  • Reduction in Retirement Savings
  •  Exceptions from the Early-Withdrawal Penalty

If you find yourself looking for a quick source of cash, your retirement savings may look like a tempting option. However, if you are under age 59½ and withdraw money from a traditional IRA or qualified retirement account, you will likely pay both income tax and a 10% early-distribution tax (also referred to as a penalty) on any previously untaxed money that you take out. Withdrawals you make from a SIMPLE IRA before age 59½ and those you make during the 2-year rollover restriction period after establishing the SIMPLE IRA may be subject to a 25% additional early-distribution tax instead of the normal 10%. The 2-year period is measured from the first day that contributions are deposited. These penalties are just what you’d pay on your federal return; your state may also charge an early-withdrawal penalty in addition to the regular state income tax.

Thus, before making any withdrawals from an IRA or other retirement plan—including a 401(k) plan, a 403(b) tax-sheltered annuity plan, or a self-employed retirement plan—carefully consider the resulting decrease in retirement savings and increase in taxes and penalties.

There are several exceptions to the 10% early-distribution tax; these depend on whether the money you withdraw is from an IRA or a retirement plan. However, even if you are not subject to the 10% penalty, you will still have to pay taxes on the distribution.

The SECURE 2.0 Act, passed by Congress and signed into law by the President in December of 2022, added several new exceptions. The following exceptions may help you avoid the penalty; the first 2 are new.

  • Exception for Terminal Illness - This applies in the case of a distribution from a qualified plan to an employee who is terminally ill on or after the date on which the employee has been certified by a physician as having a terminal illness which can reasonably be expected to result in death in 84 months or less after the date of the certification.

  • Penalty Exception for Domestic Abuse - A domestic abuse survivor may need to access his or her money in their retirement account for various reasons, such as escaping an unsafe situation. Retirement plans can permit participants that self-certify that they experienced domestic abuse to withdraw a small amount of money not subject to the 10% early withdrawal penalty and not to exceed the lesser of:

    o   $10,000, or

    o   50% of the present value of the nonforfeitable accrued benefit of the employee under the plan.

    A distribution is an eligible distribution if it is made during the 1-year period beginning on any date on which the individual is a victim of domestic abuse by a spouse or domestic partner.

    Domestic abuse means physical, psychological, sexual, emotional, or economic abuse, including efforts to control, isolate, humiliate, or intimidate the victim, or to undermine the victim’s ability to reason independently including by means of abuse of the victim’s child or another family member living in the household.

    A distribution in this case may be repaid at any time during the 3-year period beginning on the day after the date on which the distribution was received.

  • 60-Day Rollover to Another Qualified Plan – A taxpayer can avoid both the income tax and the penalty on an early distribution if the distribution is rolled over into aneligible retirement plan within 60 days of receipt.

    Some taxpayers use the 60-day rollover provision as a source for a short-term loan. However, there are built-in hazards for the 60-day rule:

    o    One rollover per 12 months rule – IRA rollovers are limited to one per 12-month period. Any other than the one would be considered a taxable distribution unless another exception applies.

    o    Twenty percent withholding rule – Another barrier to completing a 60-day rollover is the mandatory 20% withholding of federal income tax requirement when a qualified plan distribution isn’t transferred trustee-to-trustee. Because 20% of the distribution went to withholding tax, the taxpayer only received 80% of the funds and cannot recoup the withholding until filing time. Thus, they would have to make up the 20% from other sources to complete a 100% rollover.  

    A distribution from a qualified retirement plan or IRA that is transferred directly by the trustee of the plan to the trustee of another qualified plan or to another IRA does not count as a rollover and does not trigger the once-per-year rollover limitation and are not subject to withholding.

  • Withdrawals from any retirement plan to pay medical expenses—Amounts withdrawn to pay unreimbursed medical expenses are exempt from penalty if they would be deductible on Schedule A during the year and if they exceed 7.5% of your adjusted gross income. This is true even if you do notitemize.

  • Withdrawals from any retirement plan because of a disabilityYou areconsidered disabled if you can furnish proof that you cannot perform any substantial gainful activities because of a physical or mental condition. A physician must certify your condition:

    o Can be expected to result in death, or

    o Is expected to be of a long, continued, and indefinite duration.

  • IRA withdrawals by unemployed individuals to pay medical insurance premiums—The amount that is exempt from penalty cannot be more than the amount you paid during the year for medical insurance for yourself, your spouse, and your dependents. You also must have received unemployment compensation for at least 12 consecutive weeks during the year.

  • Childbirth and AdoptionFor distributions after 2019, a distribution to an individual is exempt if made during the one-yearperiod beginning on the date on which a child of the individual is born, or the date on which the legal adoption of an eligible adoptee is finalized. The maximum amount exempt from penalty is $5,000, and the amount applies to each spouse separately.       Such qualified birth or adoption distributions may be recontributed to an individual's applicable eligible retirement plans within three years subject to certain requirements.

  • IRA withdrawals to pay higher education expenses—Withdrawals made during the year for qualified higher education expenses for yourself, your spouse, or your children or grandchildren are exempt from the early-withdrawal penalty.

  • IRA withdrawals to buy, build, or rebuild a first homeGenerally, you are considered a first-time homebuyer for this exception if you had no present interest in a main home during the 2-year period leading up to the date the home was acquired, and the distribution must be used to buy, build, or rebuild that home. If you are married, your spouse must also meet this no-ownership requirement. This exception applies only to the first $10,000 of withdrawals used for this purpose. If married, you and your spouse can each withdraw up to $10,000 penalty-free from your respective IRA accounts.
  • IRA withdrawals annuitized over your lifetimeTo qualify, the withdrawals must continue unchanged for a minimum of 5 years, includingafter you reach age59½.

  • Separation from Service —To qualify, you must beseparated from service and be age 55 or older in that year (the lower limit is age 50 for qualified public-service employees such as police officers and firefighters) or elect to receive the money in substantially equal periodic payments after your separation from service. After 2022 this exception also applies toprivate sector firefighters.

  • Emergency Expenses Withdrawal – The 10% penalty will not apply to certain distributions used for emergency expenses, which are unforeseeable or immediate financial needs relating to personal or family emergency expenses. Only one distribution is permissible per year of up to $1,000, and a taxpayer has the option to repay the distribution within 3 years. No further emergency distributions are permissible during the 3-year repayment period unless repayment occurs. CAUTION: This exception is not effective until after 2023.

You should be aware that the information provided above is an overview of the penalty exceptions, and that conditions other than those listed above may need to be met before qualifying for a particular exception. You are encouraged to contact this office before tapping your retirement funds for uses other than retirement. Distributions are most often subject to both normal taxes and other penalties, which can take a significant bite out of them. However, with carefully planned distributions, both the taxes and the penalties can be minimized. Please call for assistance.


What is the Difference Between an HSA and a Health FSA?

Article Highlights:

  • Flexible Spending Accounts
  • Common Features of an FSA
  • FSA Allowable Medical Expenses
  • Unused Amounts (Use It or Lose It)
  • HealthSavings Accounts
  • Enrolled in Medicare
  • Covered Under a High-deductible Health Plan
  • HSAContributions and Contribution Limits
  • HSA as a Supplemental Retirement Vehicle
  • FSA-HSA Comparison Table

The tax code provides two tax advantageous plans for taxpayers to pay medical expenses. One is a Flexible Spending Account (FSA) and the other is a Health Savings Account (HSA). The two are often misunderstood and their provisions are frequently mixed up by taxpayers who then fail to take advantage of the tax benefits available from these accounts.

This article explains the workings, qualifications, and tax benefits of each with a side-by-side comparison chart of the two programs. Both have a common theme: contribution to both is made withpre-tax dollars (they reduce taxable income) and distributions to pay qualified medical expenses are tax free.After that the two plans are quite different.

Flexible Spending Accounts (FSAs)

There are three types of FSAs: dependent care assistance, adoption assistance and medical care reimbursements. This article will only be dealing with the latter, often referred to as aHealth FSA.A Health Flexible Spending Account is part of a qualified cafeteria plan offered by an employer, that allows employees to contribute pre-tax dollars annually to be used by the employee to pay medical expenses of the employee, their spouse, and dependents during the year. The maximum contribution is annually inflation adjusted, and for 2023 is $3,050 (up from $2,850 in 2022).In the case of a married couple where each spouse has an FSA account with an employer, both can contribute the maximum.

Since an FSA is an employer plan, an employee cannot take it with them if they leave their employment. Thus, FSAs are not transferrable and cannot be rolled into an individual’s health savings plan.

Common Features of an FSA – Funds can be used for health insurance deductibles, copays, medication, and other health care related out-of-pocket costs. For ease of use, most FSA accounts come with a debit card. Employees can spend the money in the account before it’s fully funded.

FSA Allowable Medical Expenses Include Those For:

  • The diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body,
  • Prescription Drugs,
  • Medication available without a prescription (an over-the-counter medicine or drug) that is prescribed),
  • Insulin,
  • Transportation primarily for and essential to medical care,
  • Supplementary medical insurance for the aged,
  • Feminine menstrual products, and
  • Personal Protective Equipment (COVID)

No Double Dipping Medical expenses reimbursed from the FSA cannot be claimed as a Schedule A medical itemized deduction.

Unused Amounts (Use It or Lose It) – Unused amounts at the plan’s year end are generally forfeited by the employee. However, a plan can have either:

  • A grace period of up to 2½ months after the end of the plan year in which to use up the unused amount or
  • Allow up to 20% of the annual contribution limit ($610 for 2023)of unused amounts from the end of the plan year to be used to pay or reimburse qualified medical expenses in the following year.

Unused amounts more than the carryover amounts are forfeited (cannot be returned to the employee). The carryover amount does not reduce the maximum contribution amount allowed for the carryover year.

FSA participants need to pay close attention to their FSA account balances to ensure they do not forfeit any funds at year’s end.

Health Saving Accounts (HSAs)

Individuals must meet the following requirements to contribute to an HSA:

  • Not be claimed as a dependent on anyone else’s tax return.
  • Not be enrolled in Medicare.
  • Covered under a high-deductible health plan (HDHP) and not be coveredunder any other health plan which is not an HDHP, unless the other coverage is permitted insurance or coverage for accidents, disability, dental care, vision care, or long-term care.

Enrolled in Medicare – The IRS has interpreted being “enrolled in Medicare” to mean both eligibility for and enrollment in Medicare. An individual who is otherwise eligible, but who is not enrolled in Medicare Part A, may contribute to an HSA until the month enrolled in Medicare.

Covered Under a High-deductible Health Plan – HDHPs come in two varieties: Self-Only plans and Family plans. Use the flow chart below to determine if a plan qualifies as a high-deductible health plan.

HSA Contributions and Contribution Limits – Individuals may establish an HSA either independently or with their employer. If made with an employer, and the individual subsequently leaves the employment, the individual can roll the funds into their own HSA or take a taxable distribution subject to a 20% penalty.

In addition to the individual, others can make contributions to the HSA, including employers as well as other persons (e.g., family members) subject to the annual inflation adjusted contribution limits. Those limits for 2023 are:

  • $3,850 for self-only coverage
  • $7,750 for family coverage
  • $1,000 additional amount for those aged 55 and older.

An account holder gets the deduction for contributions to his HSA even if someone else (e.g., a family member) makes the contributions. Employercontributions to an HSA are excluded from the employee's income – so these contributions are not deducted on the employee’s tax return. Distributions for qualifying medical expenses are tax-free.

HSA Allowable Medical ExpensesGenerally the eligible medical expenses are the same as allowed for FSAs. The qualified medical expenses must be incurred only after the HSA has been established. Medical expenses paid or reimbursed by HSA distributions cannot also be claimed as a medical expense for itemized deduction purposes.

HSA as a Supplemental Retirement VehicleEstablishing and contributing to an HSA can be more than just a way for individuals to save taxes and gain control over their medical care expenditures. It can also be a retirement vehicle, especially for taxpayers who are maxed out on their other retirement plan options or who can’t contribute to an IRA because of the income limitations.

There is no requirement that medical expenses must be paid or reimbursed from the HSA, so a taxpayer can maximize tax-free growth in the account by using funds from other sources to pay routine medical costs. Later, distributions can be used tax-free to pay post-retirement medical expenses. Or, if used for non-medical purposes, a retiree aged 65 or older will pay income tax on the distribution, but not a penalty. Those younger than 65 who use their HSA funds for other than qualified medical purposes pay a penalty of 20% of the amount distributed in addition to income tax on the distribution. Unlike IRAs, no minimum distributions are required to be made from HSAs at any specific age.

FSA-HSA Comparison Table

The following table compares the key differences between Health Flexible Spending Accounts and Health Savings Accounts:

As you can see, either an FSA or HSA can help you pay your out-of-pocket medical expenses. On top of that, contributions are made on a pre-tax basis directly reducing your taxable income. If in an employer plan, in addition to reducing your taxable income, contributions reduce payroll taxes. Plus an HSA can be a supplemental retirement vehicle.

Please give this office a call if we can help you utilize the tax benefits of a health FSA or an HSA.


Have You Lost Your Job? Here's What You Need to Know About Taxes

In 2022 alone, there were approximately 15.4 million layoffs in the United States as per one recent study. About 6.9 million of them happened in the last half of the year, from August to December. It's also worth noting that this is certainly nothing new. It has been estimated that about 40% of people have been laid off (or fired) from a job at least once in their lifetime, and about half the country experiences full-blown layoff anxiety on a regular basis.

Whether you are laid off or fired, the chances are high that you will quickly find yourself on unemployment. While this can absolutely provide some much-needed financial relief at an important part of your life, there are some things about potential tax implications that you'll definitely want to be aware of moving forward.

Losing Your Job and Taxes: Breaking Things Down

Whenever people find themselves on unemployment, one of the first things they often ask themselves is whether that money is taxable. To put it simply, it likely is.

When you fill out your income taxes the following year, the IRS will require you to report any unemployment income that you received. You will do this with Form 1099-G. The vast majority of all states do tax this type of unemployment income, so it's likely that you'll have to pay something on it. The only exception to that is those states that don't have any income taxes at all or those that have laws on the book that make unemployment benefits separate from regular income as far as tax purposes are concerned.

When it comes to actually paying any money owed from your unemployment benefits, one of the easiest ways to do it actually involves a choice that you'll make when you sign up in the first place. At that time, you'll be able to request that the government take 10% out of each check for the express purpose of being used to pay your taxes. If you don't want to do that, you can also make estimated payments on a quarterly basis - similar to what you would do if you were self-employed.

Note that if you choose to go that second route, you will make estimated payments four times - on April 15, on June 15, on September 15, and on January 15.Note that if the 15thfalls on a Saturday, Sunday, or Holiday the due date moves to the next business day.

Additional Considerations About Unemployment Benefits and Income Taxes

Another critical thing to remember when it comes to unemployment benefits and your taxes is that signing up at all could impact your ability to get certain other tax credits that you might be depending on. The primary example of this is the Earned Income Tax Credit, otherwise known as the EITC.

Many people don't realize that unemployment benefits are not actually considered to be earned income. Because of this, depending on how much money you received in unemployment, it could reduce your EITC amount - or prevent you from getting it at all.

The EITC is worth up to a maximum of $6,935, for example. Your credit amount may be reduced to the point where you don't get it at all. The same is true of the Child Tax Credit or CTC, which is worth $2,000 per child for your 2022 taxes.

Finally, it's important to understand that if you're on unemployment due to the sudden loss of a job, it's entirely possible that you took advantage of other government benefits throughout the year as well. Maybe you needed housing or childcare subsidies, for example, or you're on SNAP benefits. If you're worried that they're taxable like unemployment benefits, don't be - this typically is not the case.

Having said that, filing your income taxes can certainly be a complicated scenario in the best of years, but it is especially so once you start to enter things like unemployment benefits into the equation. This is why, if you have any questions, it's always important to consult the help of trained financial professionals. They can eliminate all the guessing and confusion from the equation, allowing you access to every last dollar that you're entitled to with as few potential issues as possible.

If you'd like to find out more information about unemployment benefits and the potential tax implications they bring with them, or if you have any additional questions you'd like to discuss with someone in a bit more detail, please don't hesitate to contact us today.

The Gen Z Freelance Movement and the Tax and Bookkeeping Challenges That Come With It

If it seems like more and more employees are turning to freelance work these days, you're not imagining things. According to one recent study, there are currently 73.3 million freelancers in the United States alone. The fast-paced mobile era that we're now living in, coupled with the advent of the fabled "Gig Economy" and companies like Uber and Lyft, have certainly helped bring this about. But what is fascinating isn't necessarily how many freelance workers there are - it's who, exactly, is doing the freelancing.


Another study indicated that Generation Z in particular seems particularly fascinated by the idea of striking out on their own, with 53% of them having chosen self-employment of this nature in most cases. Approximately 50% of all Generation Z respondents to one survey, meaning those who fall between the ages of 18 and 22), engaged in freelance work of some kind.

It makes sense that people would want to have more control over their own employment and their ability to earn a living. That doesn't mean it is easier than "traditional employment," however - especially when it comes to the financial side of the equation. Bookkeeping and especially taxes present significant challenges that people need to understand before choosing to go down this path moving forward.

The Financial Side of Generation Z and Freelancing: An Overview

One of the biggest challenges that freelance workers of all generations have to deal with has to do with the idea of paying self-employment taxes.

Not only is it easy to suddenly find yourself working a freelance job - it can also happen very quickly. This is true to the point where someone may have made the decision without taking the time to research what the long-term implications actually are. One of the most pressing of those is self-employment taxes. In addition to whatever it is decided that you owe by way of income tax, you'll owe an additional 15.3% on the first $160,200 of net profits no matter what.

This money is designed to cover Social Security and Medicare taxes - factors that are usually handled by a traditional employer. In a freelance situation, that burden falls on you. If you're not aware that you have to pay this amount, or if you're not able to accurately estimate what it might be given your income, it could end in a significantly larger tax bill than you had assumed you'd be facing.

Along the same lines, many new freelancers in particular are surprised to find out that they're supposed to pay taxes throughout the year - not just once like everyone else. Indeed, quarterly estimated tax payments are mandatory and if you don't handle this, you could be hit with penalties before you even have a chance to properly file.

If you get hit with a large tax bill at the end of the year because you hadn't been paying quarterly, you could always ask for a monthly payment plan with the IRS to settle your balance. Note, however, that this does not mean that your next round of estimated tax payments won't immediately come due. This is a situation where it is easy to fall behind on your taxes and, with penalties and interest, watch that "Past Due Balance" grow and grow. Even though things will be "fine" from a certain perspective so long as you keep up with your agreed-upon monthly payments, it could still be difficult to "get ahead" once again.

For many freelance employees, figuring out what deductions they're allowed to take given their job is not just a tax challenge - it's a general bookkeeping one as well. This will largely depend on what type of freelance work you're doing. If you're working for a company like Lyft or Uber, for example, you should be tracking the miles you drive while you're on the clock. You'll be able to deduct a portion of not only your gas but also your maintenance and insurance costs based on that information. But you can only do so if you've been tracking it accurately all along.

Typically, expenses fall into two distinct categories. "Ordinary" expenses are those that are common and that are traditionally accepted for your business. "Necessary" expenses, on the other hand, are those that are deemed "necessary" for your business.

The aforementioned business mileage while working for a ride-sharing company would be a common expense, for example. The same is true of any dues that you have to pay to even take the job, or subscriptions that are being paid out to organizations related to your business. Necessary expenses would be certain tools and other pieces of equipment that you cannot perform your job without.

Some of these challenges are the reason why, according to another recent study, 70% of people see freelancing as a viable career option when it exists alongside a traditional 9 to 5 job. Have a traditional employer handle at least some of the tax burden in a way that makes things easier overall. That doesn't mean you can get away with not thinking about bookkeeping and taxes at all, however, as the universal challenges outlined above go a long way towards proving.

If nothing else, all of this serves as an important reminder of why people need to enlist the help of an experienced financial professional to handle bookkeeping, tax, and related challenges. It's clear that the instinct to "do it all themselves" is a strong one within Generation Z. If it wasn't, they wouldn't be collectively so passionate about freelance work in the first place.

But this is one of those situations where it is extraordinarily easy to "get things wrong" and if you do, you could wind up in a financial situation that is difficult to recover from. Enlisting the help of a financial professional can help prevent these problems from happening early on, allowing Generation Z (and everyone else, for that matter) to enjoy all the benefits of freelancing with as few of the potential downsides as possible.

Want to Improve Your Cash Flow? Shorten the Amount of Time it Takes to Get Paid

To say that things are uncertain right now when it comes to the economy is, in all probability, a bit of an understatement.

Inflation is at levels we haven't seen in decades. Employment costs are rising across the board. Materials in a number of industries are more expensive than ever - if you can even get them at all thanks to still-ongoing issues with the fragile global supply chain.

All of these issues can make it difficult for organizations to tackle one of their most essential challenges of all: cash flow. According to one recent study, approximately 82% of all businesses that fail do so due to poor cash flow management or just a general misunderstanding of the idea itself.

Thankfully, this is only a hurdle if you allow it to be. Modernizing your back office processes can, among other things, help to dramatically reduce the amount of time it takes to get paid. That in turn can help with any current or potential cash flow issues, which is an excellent position to be in.

Improving Cash Flow, One Change at a Time

By far, one of the best ways to reduce the amount of time it takes to get paid by clients and other vendors involves asking for payment deposits at the beginning of any new business relationship.

This particular method helps to accomplish a few different things all at once. For starters, if a client owes you $1,000 for a job that has already been completed, they're more likely to settle the total balance if they've already paid $250 of it versus having paid none of it. If they've already put forth a deposit before any work even started, they're motivated to quickly see things through to completion and are less likely to delay things any longer than they need to.

It's also a great way to help get at least some money coming in the door all the time so if a client does end up paying the remaining balance late, you were able to get at least part of it ahead of time.

Another option that you'll want to leverage has to do with switching to digital invoices. If you haven't already done so, understand in no uncertain terms that this is no longer a recommendation - it is a requirement.

Think about it from a purely logistical perspective if nothing else. If you send an invoice to a client via USPS and it takes five business days to reach them, and then another five days pass before they act on it, and then another five days pass before you finally receive that payment check in the mail, that's 15 full days (at an absolute minimum) where your money was in limbo. A digital invoice, on the other hand, can be sent in seconds and paid just as quickly. Not only that, but you're freeing up the valuable time of your back-office employees so that they can focus on more important matters.

Not only that, but a lot of digital invoicing systems also integrate with a lot of the financial software that you're likely already using. So you'll have less paperwork to keep track of on your end and you'll be able to easily see who has paid and who hasn't (thus requiring a phone call to follow up). This will lead to more accurate financial statements overall, giving you a better foundation for making actionable decisions moving forward.

Finally, if you want to motivate people to pay you quickly, you need to give them as many options as possible when it comes to precisely that. The easier it is for someone to take your desired step, the more likely they are to take it.

Many businesses got away with just accepting cash or checks in the past but those days are no more. You should also, at a minimum, accept credit and debit cards. You could even choose to explore certain digital payment options like PayPal, Zelle, and others. Give people the chance to pay on their own terms and they're less likely to delay the process any longer than necessary.

In the end, addressing cash flow concerns is not something that you "do once and forget about." It's an ongoing process that you must remain proactive about or else economic uncertainty (not to mention client or vendor uncertainty) could exacerbate things significantly. But by taking steps like asking for payment deposits, embracing digital invoices, and offering more options when it comes to paying, you can reduce the amount of time it takes to get paid at all - thus improving cash flow along the way.

When Can You Dump Old Tax Records?

Article Highlights:

  • General statute is 3 years
  • Some states are longer
  • Fraud, failure to file and other issues can extend the statute
  • Keeping the actual return

Taxpayers often question how long records must be kept and the amount of time IRS has to audit a return after it is filed.

It all depends on the circumstances! In many cases, the federal statute of limitations can be used to help you determine how long to keep records. With certain exceptions, the statute for assessing additional tax is 3 years from the return due date or the date the return was filed, whichever is later. However, the statute of limitations for many states is one year longer than the federal limitation. The reason for this is that the IRS provides state taxing authorities with federal audit results. The extra time on the state statute gives states adequate time to assess tax based on any federal tax adjustments that also apply to the state return.

In addition to lengthened state statutes clouding the recordkeeping issue, the federal 3-year rule has several exceptions:

  • The assessment period is extended to 6 years instead of 3 years if a taxpayer omits from gross income an amount that is more than 25 percent of the income reported on a tax return.

  • The IRS can assess additional tax with no time limit if a taxpayer: (a) doesn't file a return; (b) files a false or fraudulent return to evade tax; or (c) deliberately tries to evade tax in any other manner.

  • The IRS gets an unlimited time to assess additional tax when a taxpayer files an unsigned return.

If no exception applies to you, for federal purposes, you can probably discard most of your tax records that are more than 3 years old; add a year or so to that if you live in a state with a longer statute.

Examples: Susan filed her 2020 tax return before the due date of April 15, 2021. She will be able to safely dispose of most of her records after April 15, 2024. On the other hand, Don filed his 2020 return on June 1, 2020. He needs to keep his records at least until June 1, 2024. In both cases, the taxpayers may opt to keep their records a year or two longer if their states have a statute of limitations longer than 3 years.

Important note: Even if you discard backup records, never throw away your file copy of any tax return (including W-2s). Often the return itself provides data that can be used in future tax return calculations or to prove amounts related to property.You should keep certain records for longer than 3 years. These records include:

  • Stock acquisition data. If you own stock in a corporation, keep the purchase records for at least 4 years after the year you sell the stock. This data will be needed to prove the amount of profit (or loss) you had on the sale. Although brokers are now required in most cases to keep purchase records and report the information to the IRS when the stock is sold, it is still a good idea for you to maintain your own records, as you the taxpayer are ultimately responsible for proving the cost to the IRS if your return is audited.

  • Stock and mutual fund statements where you reinvest dividends. Many taxpayers use the dividends they receive from a stock or mutual fund to buy more shares of the same stock or fund. The reinvested amounts add to basis in the property and reduce gain when it is finally sold. Keep statements at least 4 years after the final sale.

  • Tangible property purchase and improvement records. Keep records of home, investment, rental property, or business property acquisitions AND related capital improvements for at least 4 years after the underlying property is sold.

As we become more and more a paperless society, you may wonder if you must keep the paper version of the records mentioned in this article. No, you don't — the paper documents can be scanned and maintained on your computer or in the cloud. But if you do convert the records to electronic files, be sure to maintain a back-up that can be retrieved if you have a computer crash or cyber attack that takes over your computer.

If you have questions about what records to retain and what you can dispose of now, please give this office a call.



Why You Should Be Using Tags in QuickBooks Online, and How to Create Them

QuickBooks Online is a great tool for creating, storing, and sending sales and purchase forms, and for building detailed customer and vendor profiles. Maybe that’s all you want it to do. But to get the most out of this web-based accounting application, you should really be using its classification tools so you can view related transactions as groups and learn how specific parts of your business are doing.

Tags are the newest tool for this task. They’re customizable labels that allow you to track whatever you want, for whatever elements of your business that you want to track. You could determine how much you’re making and spending on different jobs. You could also track transactions related to, for example, ad campaigns, sales reps, and project managers. You’ll create and store tags as groups that you can view on one page. You can add them on the fly, and even run specialized reports. They’re extremely flexible tools that help you analyze your business in unique ways.

How Are They Different?

You may have encountered tags in other applications. In QuickBooks Online, they’re different from the other classification tools provided. You’ll assign categories to transactions primarily for tax purposes (how much did you spend on advertising or utilities or deductible meals?). Classes help you separate groups of income and expenses for job costing, budgeting, etc. And locations allow you to track income, expenses, and assets by geographic locations.

Tags, on the other hand, are unlimited. You can track virtually any related sets of transactions.

How Do You Create Tags?

Before you can start creating tags, you have to create a Group to assign them to. Click the gear icon in the upper right and select Tags under Lists. This will take you to the Tags home page. Click New and then Tag group. A vertical pane will slide out from the right. Choose a Group name and specify a color. Click Save. Add a tag in the Tag name field and click Add


Once you’ve created a group, you can start adding tags.

Keep adding tags until you have all you want. You can always add more later. When you’re finished, click Done. Back at the Tags home page, you’ll see your new group listed.

How Do You Use Tags In Transactions?

Tags have no impact on your accounting books. They simply provide information to you in lists and reports.

Let’s say you run a small clothing store. You want to be able to see quickly which seasons have the most sales and which employees sell the most. You could create two groups: Clothing seasons and Employees. You want to create sales receipts to compare seasonal and by-employee sales.

Click New in the upper left corner and select Sales receipt under Customer. Select the Customer name or + Add new. Or leave it blank since it’s not required here. Check the date. Click in the Tags field to open your options there. Choose the season and the employee. You are allowed to assign as many tags as you like to a transaction, but only one for each group. Complete the rest of the receipt and save the receipt. You can add tags to any transaction that contains a field for them. 

You can add tags to any transaction that contains a field for them.

 If you go back to the Tags home page, you’ll see that each of the tags you just assigned contain an entry for 1 transaction in the Transaction column. Click Run report to see a Profit and Loss by Tag Group report. You’ll also find this report when you click Reports in the toolbar. In addition, you’ll find the Transaction List by Tag Group report. And you can always return to the Tags home page to see your groups, tags, and related transactions in list view.

What If You Don’t Want To Track Tags?

If you don’t plan to use tags (at least not right away), you can turn the tag field off on transactions. Click the gear icon in the upper right, then select Account and settings. Click the Sales tab in the toolbar. At the bottom of the first section here, Sales form content, you’ll see Tags. Click it, then click the on/off button until the green area disappears. Then click Save. Click the Expenses tab and turn off the line that reads Show Tags field on expense and purchase forms. Click Save.

Make Use of QuickBooks Online’s Classification Tools

Like we said earlier, QuickBooks Online works great for creating records and transactions and running reports. But you’ll understand just how powerful it is at making connections between related data by using classes, categories, locations, and now, tags. Still confused about the differences between these tools and how you would use them to get the information you need? Let’s set up a session to go over them and to answer other questions you might have about QuickBooks Online.


May 2023 Individual Due Dates

May 10 -  Report Tips to Employer

If you are an employee who works for tips and received more than $20 in tips during April, you are required to report them to your employer on IRS Form 4070 no later than May 10. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 8 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed.

May 31 - Final Due Date for IRA Trustees to Issue Form 5498

Final due date for IRA trustees to issue Form 5498, providing IRA owners with the fair market value (FMV) of their IRA accounts as of December 31, 2022. The FMV of an IRA on the last day of the prior year (Dec 31, 2022) is used to determine the required minimum distribution (RMD) that must be taken from the IRA if you are age 72 or older during 2023.

Weekends & Holidays:

If a due date falls on a Saturday, Sunday or legal holiday, the due date is automatically extended until the next business day that is not itself a legal holiday. 

Disaster Area Extensions:

Please note that when a geographical area is designated as a disaster area, due dates will be extended. For more information whether an area has been designated a disaster area and the filing extension dates visit the following websites:

FEMA: https://www.fema.gov/disaster/declarations
IRS: https://www.irs.gov/newsroom/tax-relief-in-disaster-situations

For example, disaster-area taxpayers in most of California and parts of Alabama and Georgia now have until Oct. 16, 2023, to file various federal individual and business tax returns and make tax payments.




May 2023 Business Due Dates

May 1 - Federal Unemployment Tax

Deposit the tax owed through March if it is more than $500.

May 10 - Social Security, Medicare and Withheld Income Tax

File Form 941 for the first quarter of 2023. This due date applies only if you deposited the tax for the quarter in full and on time.

May 15 - Employer’s Monthly Deposit Due

If you are an employer and the monthly deposit rules apply, May 15 is the due date for you to make your deposit of Social Security, Medicare and withheld income tax for April 2023. This is also the due date for the non-payroll withholding deposit for April 2023 if the monthly deposit rule applies.

Weekends & Holidays:

If a due date falls on a Saturday, Sunday or legal holiday, the due date is automatically extended until the next business day that is not itself a legal holiday.

Disaster Area Extensions:

Please note that when a geographical area is designated as a disaster area, due dates will be extended. For more information whether an area has been designated a disaster area and the filing extension dates visit the following websites:

FEMA: https://www.fema.gov/disaster/declarations
IRS: https://www.irs.gov/newsroom/tax-relief-in-disaster-situations

For example, disaster-area taxpayers in most of California and parts of Alabama and Georgia now have until Oct. 16, 2023, to file various federal individual and business tax returns and make tax payments.

Davidson Fox & Company LLP
53 Chenango St. 3rd Floor
Binghamton, NY 13901
Ph: (607) 722-5386
Copyright ©2023 Davidson Fox & Company LLP All rights reserved.