It's January, which means it is time to close the calendar on 2024 and welcome in a new year. Our commitment to strategic tax management and planning is vital for setting a positive tone for the months ahead. This month we'll discuss starting on the right foot for the 2025 tax year. We’ll take a closer look into essential tax guidance for surviving spouses as well as the key differences between Traditional and Roth IRAs. We’ve also broken down the latest developments in Beneficial Ownership Information reporting. 

Davidson Fox December Recap:

We wrapped up 2024 by celebrating our one-year anniversary at our new location on Lewis Road in Binghamton AND Seneca Street in Ithaca!  It's been a year of significant change for all of us, but we couldn't be happier with our new locations.  The transition has been smooth, and we're excited about the future in these amazing spaces!  

Our team celebrated this year's holiday party at Cortese, and it definitely didn't disappoint!  It's a day we look forward to every year - an opportunity to unwind with our team and their significant others, enjoy a delicious meal, and take part in fun activities away from the office. 

Once again, we were spoiled!  Mark, Jesse, and Tera surprised us with a thoughtful holiday gift 'just because.'  In addition to throwing us the best holiday party, they also gave us a heartfelt letter, an eye massager, and a portable speaker.  Their generosity and thoughtfulness never fail to amaze us - and it's just one more reason why we're proud to be part of one of the top 100 accounting firms to work for.  We're incredibly grateful for everything they do to take such great care of us.

JANUARY

2025 is here, and tax season will be here before you know it!  Start gathering your documents now, and be sure to schedule your appointment with us before time runs out.  Let's make this tax season stress-free!

DON'T FORGET - we also handle payroll!  Whether it's tax season or year-round support, we're here to help with all your accounting needs.  

Stay informed on the latest tax news by following us on social media!  We share updates, tips, and important information to keep you ahead of the game.

Monitoring your financial plans closely is crucial as we kick off the new year. We encourage you to reach out if you're contemplating significant financial changes or if you wish to discuss methods to enhance your financial well-being in the coming year.

Our team is prepared to support you, your colleagues, and your loved ones as we embark on this new journey. We are dedicated to discovering and leveraging new opportunities to boost our clients' financial success. As always, we greatly appreciate your feedback and referrals, and we eagerly anticipate continuing our partnership throughout the year.

• W-4 Updates
• W-9 Collection
• Estimated Tax Payments
• Charitable Contributions
• Required Minimum Distributions
• Gifting
• Retirement Plan Contributions
• Beneficiaries
• Reasonable Compensation
• Business-Vehicle Mileage
• College Tuition Plans
• Record Keeping

Individuals and small businesses should consider various ways of starting off on the right foot for the 2025 tax year.

W-4 Updates — If you are employed, then your employer takes the information from your Internal Revenue Service (IRS) Form W-4 and applies it to the IRS's withholding tables to determine the amount of income tax to withhold from your wages in each payroll period.

If your 2024 refund or balance due turns out not to be the desired amount, you may want to consider adjusting your withholding based on your projected tax for 2025. If you need assistance, please call this office.

W-9 Collection — If you are operating a business, then you are required to issue a Form 1099-NEC to each service provider to which you have paid at least $600 during a given year. It is a good practice to collect a completed W-9 form from every service provider (even if you are paying less than $600), as you may use that provider again later in the yearand may have difficulty getting a W-9 after the fact—especially from providers that do not plan to report all of their income for the year.

Estimated Tax Payments — If you are self-employed, then you prepay each year's taxes in quarterly estimated payments by sending 1040-ES payment vouchers or making electronic payments. For the2025 tax year, the first three payments are due on April 15, June 16, and September 15,2025, and the final payment is due on January 15. 2026. Generally, these payments are based on the prior year's taxable income; if you expect any significant changes in either income or deductions relative to the previous year, please contact this office for help in adjusting your payments accordingly.

Charitable Contributions — If you marginally itemize your deductions, then you can employ the bunching strategy, which involves taking the standard deduction one year but itemizing your deductions in the next. However, you must make this decision early in the year so that you can make two years' worth of charitable contributions in the bunching year.

Required Minimum Distributions — Each year, if you are 73 or older, you must take a required minimum distribution from each of your retirement accounts or face a substantial penalty. By taking this distribution early in the year, you can ensure that you do not forget and accidentally subject yourself to penalties.

Gifting —If you are looking to reduce your estate-tax exposure or if you just want to give some money to family members, know that each year, you can gift up to an inflation-adjusted amount, which for 2025 is $19,000, to each of an unlimited number of beneficiaries without affecting your lifetime estate-tax exclusion amount or paying a gift tax.

Retirement Plan Contributions — Review your retirement-plan contributions to determine whether you can afford to increase your contribution amounts and to make sure that you are taking full advantage of your employer's contributions to the plan.

Beneficiaries — Marriages, divorces, births, deaths, and even family clashes all affect whom you include as a beneficiary. It is good practice to periodically review not just your will or trust but also your retirement plans, insurance policies, property holdings, bank accounts, and other investments to be sure that your beneficiary designations are up to date.

Reasonable Compensation — With the advent a few years ago of the 20% pass-through deduction, which is available to most businesses other than C corporations, theissue of reasonable compensation took on new importance, particularly for shareholders of S corporations. This has been a contentious issue in the past, as it has allowed shareholders who are not just investors but who are actually working in the business to take a minimum salary (or no salary at all) so that all their income passed through the K-1 as investment income. This strategy allows such shareholders and the S corporation to avoid payroll taxes on income thatshould be treated as W-2 compensation. A number of issues factor into a discussion of reasonable compensation, including comparisons to others working in similar businesses and to employees within the same business, as well as the cost of living in the business's locale. This is a subjective amount, and it generally must be determined by a firm that specializes in making such determinations.

Business-Vehicle Mileage — Generally, vehicles with business use also have some amount of nondeductible personal use in a given year. It is always a good practice to record a vehicle's mileage at the beginning and at the end of each year so as to determine its total mileage for that year. The total mileage figure is then used when prorating the personal- and business-use expenses related to that vehicle.

College Tuition Plans — Contribute to your child's Section 529 plan as soon as possible; the funds begin accumulating earnings as soon as they are in the account, which is important because the student will likely begin using that money at age 18 or 19.

Record Keeping — Only a few of the tax-related actions that you take during a year will benefit yourself or others. The most important of these actions is keeping timely and accurate tax records; for businesses in particular, this is of the utmost importance. Those who have well-documented income and expense records generally come out on top when the IRS challenges them.

If you have any questions related to your taxes or if would like an appointment for tax projections or tax planning, please contact this office.

The Headline Drama, in Plain English

• A Court Steps In: The injunction effectively puts the brakes on the IRS/FinCEN from enforcing certain parts of the BOI reporting rules.
  
  
• Whiplash-Worthy Moves: These rules have been ping-ponging through the courts, leaving small business owners everywhere asking, “Wait, does this apply to me or not?”
  
  
• Implication for Small Businesses: If you were scrambling to submit your beneficial ownership info by that looming deadline, the good news is… you might get to kick back for a bit. The bad news? This temporary pause doesn’t mean the law disappears—it’s just on hold.

Why Should You Care (And Not Just Roll Your Eyes)?

Look, it’s tempting to toss this news in the “government drama” trash bin and get back to that never-ending inbox. But ignoring BOI could be risky:

1. Potential Penalties
   When (or if) enforcement restarts, the rules might come back with a vengeance. And no, the feds aren’t shy about serving up fines.
   
   
2. Compliance Whiplash
   One day, the regs are in effect. Next day, they’re out. It’s like trying to dance to a DJ with a faulty turntable. The music stops, starts, speeds up—and you’re left stepping on your own toes.
   
   
3. Business As Usual?
   With the injunction reinstated, you get a breather… for now. But we all know how short-lived these “pauses” can be.
   
   

If you’re feeling a little too cozy right now—don’t. This injunction won’t last forever. The next ruling could flip the script again. If that happens, you’ll want your ducks (or beneficial owners) in a row.

What Should You Do Next?

1. Stay Informed: Laws change fast. Keep an ear to the ground (or, you know, your inbox) for the latest updates.

2. Gather Your Paperwork: Even if you’re not submitting anything tomorrow, start organizing beneficial ownership details. Because if the rules get reactivated, you’ll be ahead of the game.

3. Talk to a Pro: Got questions? Talk to this office or attorney. They’re paid to be paranoid about this stuff, so you don’t have to be.

What’s Next

Fifth Circuit will hear oral arguments on the merits of the injunction on March 25, 2025, following which we should have more clarity.

Final Thoughts

Honestly, “Oops, they did it again” might as well be the official theme song for BOI enforcement. For now, take advantage of the lull to prepare. Because if history has taught us anything, it’s that these rules tend to come roaring back—and you’ll be thankful you already have your ducks lined up in neat, well-documented rows.

TL;DR

• BOI enforcement is paused, not gone.
  
  
• Small businesses get breathing room.
  
  
• Keep an eye on the courts, because this could flip again any minute.

Need help making sense of it all?  Reach out for a quick consult. Because the only thing worse than this back-and-forth… is being caught off-guard when it changes again.

• Standard Mileage Rates for 2025
• Business, Charitable, Medical and Moving Rates
• Important Considerations for 2025
• Switching Between the Actual Expense and Standard Mileage Rate Methods
• Employer Reimbursements
• Employee Deductions Suspended
• Special Allowances for SUVs

As it does every year, the Internal Revenue Service recently announced the inflation- adjusted 2025 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical, or moving purposes.

Beginning on Jan. 1, 2025, the standard mileage rates for the use of a car (or a van, pickup or panel truck) are:

• 70 cents per mile for business miles driven (including a 33-cent-per-mile allocation for depreciation). This is up from 67cents per mile in 2024; 
  
  
• 21 cents per mile driven for medical, down from 22 cents per mile same as 2024; and
  
  
• 14 cents per mile driven in service of charitable organizations.

The business standard mileage rate is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. The rate for using an automobile while performing services for a charitable organization is statutorily set (it can only be changed by Congressional action) and has been 14 cents per mile for over 25 years.

When using a personal vehicle while performing services for a charitable organization, and instead of using the 14 cents a mile method, a taxpayer who itemizes their deductions can deduct directly-related out-of-pocket expenses, such as the cost of gas and oil. However, the expenses of general repair and maintenance, depreciation, registration fees, or the costs of tires or insurance aren’t deductible.

Important Considerations for Business Use of a Vehicle – Taxpayers always have the option of calculating the actual costs of using their vehicle for business rather than using the standard mileage rates. In addition to volatile fuel prices, the bonus depreciation as well as increased depreciation limitations for passenger autos may make using the actual expense method worthwhile during the first year a vehicle is placed in business service. While the bonus depreciation rate had been 100% during 2018-2022, it was 80% for 2023, 60% for 2024 and will be 40% for vehicles put in service in 2025.

However, the standard mileage rates cannot be used if you have used the actual method (using Sec. 179, bonus depreciation and/or MACRS depreciation) in previous years. This rule is applied on a vehicle-by-vehicle basis. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles simultaneously.

What business owners using the standard mileage rate frequently overlook is that parking and tolls, as well as state and local property taxes paid for the vehicle and attributable to business use, may be deducted in addition to the standard mileage rate.

Employer Reimbursement – When employers reimburse employees for business-related car expenses using the standard mileage allowance method for each substantiated employment-connected business mile, the reimbursement is tax-free if the employee substantiates to the employer the time, place, mileage and purpose of employment-connected business travel.

The Tax Cuts and Jobs Act eliminated employee business expenses as an itemized deduction, effective for 2018 through 2025. Therefore, during these years employees may not take a deduction on their federal returns for unreimbursed employment-related use of their autos, light trucks, or vans.

However, self-employed taxpayers can still deduct the business use of a vehicle. Regardless of whether the standard mileage rate or actual expense method is used, a self-employed taxpayer may also deduct the business use portion of interest paid on an auto loan on their Schedule C.

Faster Write-Offs for Heavy Sport Utility Vehicles (SUVs) – Many of today’s SUVs weigh more than 6,000 pounds and are therefore not subject to the limit rules on luxury auto depreciation; taxpayers with these vehicles can utilize both the Section 179 expense deduction (up to a maximum of $31,300 in 2025)  and the bonus depreciation (the Section 179 deduction must be applied before the bonus depreciation) to produce a sizable first-year tax deduction. However, the vehicle cannot exceed a gross unloaded vehicle weight of 14,000 pounds. Caution: Business autos are 5-year class life property. If the taxpayer subsequently disposes of the vehicle before the end of the 5-year period, as many do, a portion of the Section 179 expense deduction will be recaptured and must be added back to the taxpayer’s income (SE income for self-employed individuals). The future ramifications of deducting all or a significant portion of the vehicle’s cost using Section 179 should be considered.

If you have questions related to the best methods of deducting the business use of your vehicle or the documentation required, please give this office a call.

• Social Security Number
• Child Tax Credit
• Child and Dependent Care Credit
• Adoption Tax Credit
• Earned Income Tax Credit
• Credit for Other Dependents
• American Opportunity Tax Credit
• Lifetime Learning Credit

Parents have special tax situations and benefits. Tax breaks for parenting expenses can result in a lower tax bill and a higher refund. Here are some key things new parents need to know.

To begin with, for parents to take advantage of most of the child-related tax benefits, the child must have a Social Security Number (SSN), which serves as their Taxpayer Identification Number (TIN).

It's advisable to obtain an SSN for a child as soon as possible after birth. This can typically be done through the hospital's birth registration process by requesting a Social Security card as part of the birth certificate paperwork. If this wasn't done, one can apply for an SSN for a child at any Social Security office by providing proof of the child's U.S. citizenship, age, and identity, as well as proof of the parent’s identity.

Having an SSN for the child not only allows parents to claim various tax benefits but is also necessary for other purposes, such as opening a bank account for them, obtaining medical coverage, and applying for government services.

Here’s an overview of tax credits available for children and certain other dependents:

• Child Tax Credit - Taxpayers who claim at least one child as their dependent on their tax return may be eligible for the Child Tax Credit (CTC). The CTC is a significant component of the United States tax code designed to provide financial relief to taxpayers who are raising children. This credit aims to reduce the tax liability of families, making it easier for them to manage the costs associated with raising children. Over the years, the CTC has undergone various changes, with significant expansions and modifications aimed at increasing support for families, especially those with lower incomes.
  
  The Child Tax Credit for 2024 is currently set at $2,000 for each qualifying child, with the credit beginning to phase out when the parent’s modified adjusted gross income exceeds $200,000 ($400,000 for joint filers).
  
  A taxpayer, in 2024, who is unable to claim the full amount of the child tax credit because their income tax liability is less than the credit amount, is allowed to take up to $1,700 of the tax credit as a refundable credit, referred to as the additional child tax credit.
  
  Beginning with the year that a child turns age 17, no child credit can be claimed for that child. Instead, the Credit for Other Dependents, discussed below, is available.
  
  There is legislation pending in Congress that will, if passed, further enhance the child credit.
  
  
• Child and Dependent Care Credit - The Child and Dependent Care Credit is a tax benefit designed to aid taxpayers who incur expenses for the care of a child younger than 13, spouse, or dependent, enabling the taxpayer to work or actively seek employment. This credit is particularly beneficial for parents or guardians of children under the age of 13, or for those caring for a dependent who is unable to care for themselves due to a disability.
  
  To qualify for the credit, the taxpayer (and their spouse, if filing jointly) must be gainfully employed or actively seeking work. The only exception is if the taxpayer or spouse is disabled or a full-time student; in these cases, certain allowances are made.
  
  The credit ranges from 20% to 35% of eligible childcare expenses, depending on the taxpayer's adjusted gross income (AGI). For one child or dependent, up to $3,000 of the expenses are considered for the credit, and for two or more children or dependents, the cap is $6,000. Therefore, the maximum credit can range from $600 to $1,050 for one child and from $1,200 to $2,100 for two or more children, based on the taxpayer's income.
  
  To be eligible for the credit, the care provider cannot be the taxpayer's spouse, the parent of the qualifying individual if the taxpayer's child is under age 13, a dependent of the taxpayer, or the taxpayer's child who is under age 19.
  
  The credit is nonrefundable, meaning it can reduce the taxpayer's owed taxes to zero, but the excess amount will not be paid out as a refund.
  
  If the taxpayer's employer provides dependent care benefits, these can be excluded from income up to certain limits ($5,000 for most, but with specific rules for lower amounts if there is only one qualifying person). However, any amount excluded from income reduces the eligible expenses for the credit.
  
  
• Adoption Tax Credit -The adoption tax credit is designed to help offset the costs associated with the adoption process. This credit allows taxpayers to claim a credit for qualified adoption expenses (QAE) they incur while adopting a child.
  
  The amount of the credit is subject to annual inflation adjustments. For 2024, the maximum amount that can be claimed is the lesser of the QAE or $16,810 per child. This amount is the same for both the credit and the exclusion for employer-provided adoption benefits mentioned below. For the adoption of a child with special needs, the full credit amount ($16,810 in 2024) is allowed in the tax year in which the adoption becomes final, regardless of the actual expenses incurred.
  
  The eligible expenses include reasonable and necessary adoption fees, court costs, attorney fees, traveling expenses (including amounts spent for meals and lodging while away from home), and other expenses directly related to the legal adoption of an eligible child. Expenses related to the adoption of a spouse's child do not qualify.
  
  If an employer provides adoption assistance, parents may be able to exclude some of those benefits from their income. The maximum exclusion amount is the same as the credit amount, and it phases out at the same income levels. However, credit cannot be claimed for any employer-reimbursed adoption expense.
  
  The credit and exclusion begin to phase out in 2024 for taxpayers with modified adjusted gross income (MAGI) above $252,150 and are completely phased out for taxpayers with MAGI above $292,150. These levels are adjusted annually for inflation. While most phaseout thresholds and caps associated with tax benefits vary by filing status, those for the adoption credit and employer-provided adoption benefits are the same for all filing statuses.
   
• Earned Income Tax Credit - The federal Earned Income Tax Credit  (EITC) is a benefit designed for low- to moderate-income working individuals and families, particularly those with children. The amount of EITC benefit that can be received depends on a worker’s income, filing status, and the number of qualifying children. The credit is designed to encourage and reward work, as well as to offset some of the increased living expenses and federal payroll taxes for eligible workers.
  
  To qualify for the EITC, a parent must have earned income from working for someone, running or owning a business or farm, and meet certain basic rules, as well as have a child that meets all the “qualifying child” rules. Additional rules apply for workers without a qualifying child.
  
  The credit is somewhat complicated, and the following is an overview of the maximum credits available based on the number of qualifying children and the adjusted gross income or earned income amounts where the EITC is totally phased out. These amounts are inflation adjusted annually and the amounts shown are for 2024.
  
  

  Number of Qualifying Children	None	One	Two	Three
  Maximum EITC	$632	$4,213	$6,960	$7,830
  Credit Totally Phased Out at AGI  Or Earned Income of:	-	-	-	-
  Married Filing Joint	$25,511	$56,004	$62,688	$66,819
  Other Filing Statuses*	$18,591	$49,084	$55,768	$59,899
  *Individuals filing as Married Filing Separate do not qualify for the credit

  
  
  The EITC is a refundable tax credit, meaning if the amount of the credit is more than the amount of tax owed, a taxpayer can receive the difference as a refund.
  
  
• Credit for Other Dependents - The Credit for Other Dependents is a non-refundable tax credit introduced as part of the Tax Cuts and Jobs Act for tax years 2018 through 2025. This credit is designed to provide financial relief to taxpayers who support dependents who do not qualify for the Child Tax Credit (CTC).
  
  The credit is available for each dependent who does not qualify for the Child Tax Credit. This includes:
  
  
  · Dependents who are children but do not meet the criteria for the Child Tax Credit, such as those who do not have a Social Security Number (SSN) but have an Individual Taxpayer Identification Number (ITIN) or an Adoption Taxpayer Identification Number (ATIN).
  
  · Children who turn 17 before the end of the tax year.
  
  · Non-Child Dependents such as parents or other relatives who meet certain criteria.
  
  The credit amount is $500 for each eligible dependent, but it is non-refundable, meaning it can reduce a tax liability to zero, but none of the credit's value can be received as a refund if it exceeds the tax liability.
  
  Like the Child Tax Credit, the Credit for Other Dependents may phase out at higher income levels.
  
  
• American Opportunity Tax Credit - The American Opportunity Tax Credit (AOTC) offers significant tax benefits for taxpayers who incur qualified education expenses for eligible students, generally their children, typically for those pursuing higher education.
  
  For the tax year 2024, the AOTC allows a credit of up to $2,500 per eligible student. This credit is calculated based on 100% of the first $2,000 of qualified education expenses paid for each eligible student, plus 25% of the next $2,000 of such expenses.
  
  A quirk of this credit is that the one claiming the student also gets to claim the AOTC even if someone else pays the qualified education expenses, such as a grandparent.
  
  One of the most beneficial aspects of the AOTC is that it is partially refundable. Up to 40% of the credit (up to $1,000) may be refundable. This means that even if no tax is owed, there is the potential to receive a refund of up to $1,000 per eligible student.
  
  To qualify for the AOTC, there are specific eligibility requirements related to the student, the type of expenses that qualify, and the educational institution. The student must be pursuing a degree or other recognized education credential, be enrolled at least half-time for at least one academic period beginning in the tax year, and not have finished the first four years of higher education at the beginning of the tax year.
  
  The AOTC can only be claimed for a maximum of four tax years per eligible student. This limitation ensures that the credit supports the initial years of higher education.
  
  The amount of the AOTC that can be claimed may be limited by the modified adjusted gross income (MAGI). For unmarried taxpayers the credit begins to phase out when the MAGI reaches $80,000 and is fully phased out when it reaches $90,000. For married taxpayers filing jointly the phase out range is $160,000 to $180,000.
  
  
• Lifetime Learning Credit - The Lifetime Learning Credit (LLC) is a tax credit that offers significant benefits for a taxpayer who is paying for higher education expenses, for themself, their spouse, or a dependent child.
  
  The student does not need to be pursuing a degree or be enrolled at least half-time.
  
  The LLC allows taxpayers to claim 20% of the first $10,000 of qualified tuition and related expenses paid during the tax year, resulting in a maximum credit of $2,000 per tax return, not per student. Qualified expenses for the LLC are not as flexible as those for the AOTC and only include tuition and fees required for enrollment or attendance at an eligible educational institution.
  
  The LLC is non-refundable. This means it can reduce the tax liability to zero, but there won't be a refund if the credit amount exceeds the tax liability. The Lifetime Learning Credit is also subject to the same MAGI phaseout as the AOTC.
  
  Unlike the AOTC, there is no limit on the number of years the LLC can be claimed. This makes it particularly valuable for students who are in graduate school, taking professional degree courses, or enrolled in job skill improvement courses, as well as for those taking longer to complete their undergraduate degrees.
  
  If qualified education expenses are paid for more than one student in the same year, there is the flexibility to choose different credits for different students.

Some states also have their own versions of the credits. If you have not been taking advantage of these credits in the past, generally the returns for the past three years can be amended to claim the credits. Please contact this office for assistance or if you have questions about any of the tax benefits included in this article.

• The Role of Beneficiaries
• Life Events That Necessitate Updates
• Why Regular Reviews Are Essential
• The Complexity of Naming a Trust as a Beneficiary

In the realm of estate planning, naming beneficiaries is a critical step that ensures your assets are distributed according to your wishes after your passing. However, the process doesn't end with simply naming beneficiaries; it's equally important to keep these designations up to date. Life events such as divorce, marriage, and death can significantly impact your estate plan, making regular reviews essential. Additionally, while trusts are valuable estate planning tools, naming them as beneficiaries can sometimes lead to complications. Here's why keeping your beneficiary designations current is crucial and why naming a trust as a beneficiary might not always be the best choice.

The Role of Beneficiaries

Beneficiaries are individuals or entities designated to receive assets from your estate, life insurance policies, retirement accounts, and other financial instruments upon your death. Properly naming beneficiaries ensures that your assets are transferred smoothly and according to your wishes, bypassing the often lengthy and costly probate process.

Life Events That Necessitate Updates

1. Divorce: After a divorce, failing to update your beneficiary designations can result in unintended consequences, such as an ex-spouse receiving assets you intended for someone else. It's crucial to review and revise your designations to reflect your current wishes.
   
   
2. Marriage: Marriage often brings new priorities and responsibilities. Updating your beneficiaries to include your spouse or other family members ensures that your estate plan aligns with your new life circumstances.
   
   
3. Death: If a named beneficiary passes away, it's essential to update your designations to prevent complications and ensure that your assets are distributed to your intended recipients.

Why Regular Reviews Are Essential

Life is dynamic, and your estate plan should reflect your current situation and wishes. Regularly reviewing and updating your beneficiary designations can prevent disputes among heirs, ensure that your assets are distributed as you intend, and provide peace of mind knowing that your loved ones are taken care of.

Imagine leaving your hard-earned assets to someone you no longer wish to benefit, simply because you forgot to update your documents. Regularly reviewing and updating your beneficiaries ensures your assets go exactly where you want them to.

The Complexity of Naming a Trust as a Beneficiary

While trusts are powerful tools for managing and distributing assets, naming a trust as a beneficiary can introduce complexities:

1. Tax Implications: Trusts can be subject to different tax rules than individuals, potentially leading to higher taxes on distributions. Consulting with a tax professional can help you understand the implications.
   
   
2. Administrative Burden: Trusts require ongoing management and administration, which can be burdensome and costly. Naming a trust as a beneficiary may necessitate additional legal, administrative, and tax preparation work.
   
   
3. Specificity and Flexibility: Trusts are designed to manage assets according to specific terms. If your goals or circumstances change, altering the terms of a trust can be more complicated than updating individual beneficiary designations.

Naming beneficiaries and keeping them up to date is a vital component of effective estate planning. By regularly reviewing your designations and considering the implications of naming a trust as a beneficiary, you can ensure that your estate plan reflects your current wishes and provides for your loved ones in the way you intend. Consulting with estate planning professionals can provide valuable guidance and help you navigate the complexities of beneficiary designations and trust management.

• The 50% Deductibility Rule
• When the 50% Deductibility Rule Applies
• Exceptions to the 50% Deductibility Rule
• Planning Around the 50% Disallowance Rule
• Ordinary and Necessary Requirement
• Business Connection and Lavish or Extravagant Rules
• Taxpayer Presence Requirement
• Substantiation Requirements
• Food and Beverage Provided During Entertainment Events
• Specific Exceptions Where Meal Expenses May Be Fully Deductible
• Nonemployee Prizes and Awards
• Advertising or Goodwill
• Examples Included in the Tax Code

The deductibility of meal expenses for employers and business entities is a nuanced area of tax law that requires careful consideration of various rules and exceptions. This article explores the intricacies of meal expense deductions, focusing on when the 50% deductibility rule applies, exceptions to this rule, and strategies for planning around these limitations.

The 50% Deductibility Rule - The general rule under the Internal Revenue Code (IRC) Section 274(n) is that only 50% of meal expenses are deductible. This rule applies to most business meal expenses, including those incurred during business travel or meetings with clients. The rationale behind this limitation is to prevent excessive deductions that could arise from lavish spending under the guise of business activities.

When the 50% Deductibility Rule Applies:

1. Business Meals with Clients - When meals are provided to current or potential business clients, the 50% rule typically applies. The meal must be directly related to the active conduct of business, and the taxpayer or an employee must be present.
   
   
2. Business Meals with Employees - Meals provided to employees during business meetings or training sessions are also subject to the 50% limitation. However, there are exceptions, such as meals provided for the convenience of the employer, which may be fully deductible under certain conditions.
   
   
3. Meals During Business Travel - Expenses for meals incurred while traveling for business purposes are generally subject to the 50% rule. This includes meals consumed during conferences, seminars, or other business-related travel.

Exceptions to the 50% Deductibility Rule

1. De Minimis Fringe Benefits - Meals that qualify as de minimis fringe benefits, such as occasional meals provided to employees, may be fully deductible. These are typically small, infrequent, and provided for the convenience of the employer.
   
   
2. Meals Included in Employee Income - If the value of the meal is included in the employee's gross income as compensation, the employer may deduct 100% of the cost.
   
   
3. Recreational or Social Activities - Meals provided during recreational or social activities primarily for the benefit of employees, such as holiday parties or company picnics, are fully deductible.
   
   
4. Meals Provided on Business Premises - Meals provided on the employer's business premises for the convenience of the employer, such as in-house cafeterias, may be fully deductible until 2025, after which the deduction is disallowed.

Planning Around the 50% Disallowance Rule - To maximize deductions, businesses can plan around the 50% disallowance rule by:

• Separating Meal and Entertainment Costs: When meals are provided during entertainment events, ensure that the cost of food and beverages is stated separately from the entertainment costs on invoices or receipts. This allows the meal portion to remain deductible even if the entertainment is not.
  
  
• Utilizing Per Diem Rates: For business travel, using per diem rates can simplify the substantiation process and ensure compliance with deduction limits.
  
  
• Leveraging Exceptions: Take advantage of exceptions to the 50% rule, such as de minimis fringe benefits and meals included in employee income, to increase deductible expenses.

Ordinary and Necessary Requirement - For meal expenses to be deductible, they must be ordinary and necessary expenses incurred in carrying on a trade or business. An ordinary expense is one that is common and accepted in the business, while a necessary expense is one that is helpful and appropriate for the business.

Business Connection and Lavish or Extravagant Rules - The meal expense must have a direct business connection, meaning it should be directly related to or associated with the active conduct of the business. Additionally, the expense must not be lavish or extravagant under the circumstances. The IRS does not provide specific dollar limits, but the expense should be reasonable considering the business context.

The term lavish or extravagant is frequently used in the tax code. Unfortunately, nowhere in the Code are the terms lavish or extravagant defined in a measurable way. For example, in relation to business meals, the code says lavish or extravagant under the circumstances. So, it boils down to a facts and circumstances determination.

IRS Publication 463 has this to say about lavish and extravagant: “Meal expenses won't be disallowed merely because they are more than a fixed dollar amount or because the meals take place at deluxe restaurants, hotels, or resorts.

Taxpayer Presence Requirement - For a meal expense to be deductible, the taxpayer or an employee of the taxpayer must be present at the meal. This requirement ensures that the meal is directly related to business activities and not merely a personal expense.

Substantiation Requirements - To claim a deduction for meal expenses, businesses must maintain adequate records to substantiate the expense. This includes documentation of the amount, time, place, business purpose, and business relationship of the individuals involved. Receipts, invoices, and detailed records are essential for compliance with IRS requirements.

Food and Beverage Provided During Entertainment Events - Under the Tax Cuts and Jobs Act (TCJA), entertainment expenses are generally not deductible. However, if food and beverages are provided during an entertainment event and are purchased separately, the meal portion may still be deductible under the 50% rule provided they meet the ordinary and necessary business expense criteria.

Specific Exceptions Where Meal Expenses May be Fully Deductible - Specific exceptions to the 50% reduction rule include:

• Expenses Treated as Compensation: If meal expenses are treated as compensation to the recipient and included in their income, they may be fully deductible.
  
  
• Expenses for Goods or Services Sold to Customers: If the meal expenses are part of a bona fide transaction with customers, they may be fully deductible.

Nonemployee Prizes and Awards - Meal expenses related to nonemployee prizes and awards may be deductible if they are directly related to the business and meet the ordinary and necessary criteria. However, these expenses must be carefully documented and substantiated.

Advertising or Goodwill - Meals provided as part of advertising or goodwill efforts, such as promotional events or client appreciation dinners, may be deductible if they are directly related to business activities and not lavish or extravagant.

Examples Included in the Tax Code

• Business meal for a client: G takes M, her long-term advertising client, out to lunch. During lunch, they discuss M’s new advertising campaign. G may deduct the cost of the meal, subject to the 50% limitation.
  
  
• Business meal for an employee: G takes J, her employee, to lunch. While eating lunch, they discuss J’s annual performance review. G may deduct the cost of the meal, subject to the 50% limitation.
  
  
• Food and beverages incurred at entertainment event: H, an attorney specializing in estate planning, invites M, a CPA, and L, a potential client, to a football game. While at the game, H pays for all of M’s and L’s refreshments. The cost of the game tickets are nondeductible entertainment expenses. The cost of the refreshments purchased separately at the game are deductible business meal expenses, subject to the 50%limitation.
  
  
• Variation A: H invites M and L to share his company suite for the game, where they have access to food and beverages. The cost of the food and beverages is included in the suite package and is not invoiced separately. The entire cost of the outing is considered a nondeductible entertainment expense.
  
  
• Variation B: The cost of the food and beverages is stated separately in the invoice for the company suite and reflects the venue’s usual selling price for food and beverages if purchased separately. The cost of the suite is still a nondeductible entertainment expense, but the cost of the food and beverages is a deductible meal expense, subject to the 50% limitation.

State Differences: Not all states conform to the federal limitations on meal deductions and the suspension of the deduction for employee business expenses as an itemized deduction. Contact this office about variations from federal rules for your state.

In summary, the deductibility of meal expenses for employers and business entities involves navigating a complex set of rules and exceptions. By understanding when the 50% deductibility rule applies, leveraging exceptions, and maintaining proper documentation, businesses can effectively manage their meal expense deductions. Many of the current provisions and limitations established by the TCJA expire after 2025. Thus, it is important for businesses to monitor tax laws as they evolve, especially with the sunsetting of TCJA, to comply with any changes and maximize deductions. Contact this office with questions or assistance with your tax filings.

If this sounds familiar, you're not alone. During filing season, the IRS sends out millions of notices, often leaving taxpayers confused, stressed, and scrambling for answers. But here's the good news: an IRS letter doesn't have to spell disaster.

In this post, we'll break down why you might receive an IRS notice, why it's crucial to act quickly, and how working with a tax professional can turn this frustrating process into a manageable one.

First, take a deep breath. An IRS letter doesn't automatically mean you're in trouble. Notices are issued for various reasons, and many are easily resolved. Some common triggers include:

• Missing Documents
  Did you forget to report income from a 1099? Overlook a form? The IRS often flags discrepancies between what's reported and what they receive from employers or financial institutions.
  
  
• Mismatched Information
  Even a small typo—like a misspelled name or an incorrect Social Security number—can trigger a notice.
  
  
• Underpayment Notices
  If the IRS believes you owe taxes, you might receive a CP14 notice detailing the balance due.
  
  
• Math Errors
  Miscalculations on your return, no matter how small, are a common reason for IRS correspondence.

Knowing why the IRS is reaching out is the first step to resolving the issue efficiently.

When it comes to IRS notices, time is not on your side. Ignoring a letter can lead to escalating problems:

• Penalties and Interest
  The longer you wait to respond, the more fines and interest can pile up.
  
  
• Delayed Refunds
  If the issue involves your refund, failing to act promptly can stall the payout.
  
  
• Potential Enforcement Actions
  In extreme cases, unresolved issues could lead to liens, levies, or wage garnishments.

By acting quickly, you can often minimize these risks and resolve the matter before it escalates.

Sometimes, the IRS gets it wrong. With the ongoing backlog of cases, errors in notices aren't uncommon. If you believe a notice is inaccurate, here's what to do:

1. Verify the Details
   Cross-check the information in the notice with your records. The IRS website provides explanations for each type of notice, which can help clarify the issue.
   
   
2. Gather Documentation
   If you're disputing the notice, you'll need evidence to support your claim—whether that's a corrected W-2, receipts, or prior correspondence with the IRS.
   
   
3. Respond in Writing
   Write a clear, concise response explaining the error and attach copies of supporting documents.
   
   
4. Keep Copies of Everything
   Always keep records of your communications with the IRS, including copies of the notice, your response, and any supporting documentation.

 How Our Office Can Help

Navigating IRS notices can be overwhelming, especially during filing season when the stakes are higher. Here's how we can make it easier:

• Identify the Issue
  We'll review the notice, decode the IRS jargon, and determine exactly what's needed to resolve it.
  
  
• Ensure Accurate Responses
  Filing the right response the first time can save you time and frustration. We'll prepare all necessary documentation and correspondence on your behalf.
  
  
• Advocate for You
  If the IRS made a mistake, we'll stand by you to ensure your case is handled fairly and resolved as quickly as possible.
  
  
• Keep You Updated
  With the IRS backlog, some resolutions take time. We'll monitor your case and provide updates every step of the way.

The IRS has made progress in reducing its backlog, but delays are still expected, especially during filing season. This means:

• Notices may take longer to resolve.
  
  
• Refund delays are possible if your return is flagged.
  
  
• Patience and proactive communication are key to avoiding unnecessary stress.

Dealing with an IRS notice doesn't have to feel like navigating a minefield. At our practice, we specialize in turning IRS chaos into clarity.

If you've received a letter or suspect an error, don't wait. Contact us today to get the expert help you need to resolve your issue quickly and confidently. Let us handle the IRS, so you can focus on what matters most—your business and peace of mind.

• Filing Status in the Year of Death
• Filing Status After the Year of Death
• Inherited Basis Adjustments
• Establishing Inherited Basis
• Future Home Sale and Gain Exclusion
• Notifications to Social Security Administration and Payers of Pensions
• Estate Tax Considerations and Portability Election
• Changing Titles
• Trust Issues
• Understanding the Treatment of Tax Attributes for Surviving Spouses

The death of a spouse is a profoundly challenging time, both emotionally and financially. Amidst the grieving process, surviving spouses must also navigate a complex array of tax issues. Understanding these tax implications is crucial to ensuring compliance and optimizing financial outcomes. This article explores the key tax considerations for surviving spouses, including filing status, inherited basis adjustments, home sale exclusions, notifications to relevant agencies, estate tax considerations, and trust issues.

Filing Status in the Year of Death - In the year of a spouse's death, and provided the surviving spouse has not remarried, the surviving spouse has three filing status options, the one most often used being to file a joint tax return with the deceased spouse. This option is generally more favorable than filing as a single individual, as it allows for higher income thresholds and deductions. If the surviving spouse chooses not to file jointly, they may file as married filing separately or, if they qualify, as head of household.

To file as head of household, the surviving spouse must be unmarried, and have a qualifying person living with them for more than half the year. This is typically a dependent child, stepchild, or foster child. Another requirement is that the surviving spouse paid more than half of the cost of keeping up a home for the year.

Filing Status After the Year of Death - In the years following the spouse's death, the surviving spouse's filing status will depend on their circumstances. If the surviving spouse has not remarried and has a dependent child, they may qualify as a "Qualifying Surviving Spouse" for up to two years after the year of the spouse's death. This status offers similar benefits to filing jointly. If the surviving spouse does not qualify for this status, they may file as head of household if they have a qualifying dependent as discussed earlier, or as a single individual if they do not.

Inherited Basis Adjustments - When a spouse passes away, the surviving spouse may receive an adjustment in basis for the inherited assets, which can significantly affect future capital gains taxes. The extent of this basis adjustment depends on how the title to the assets was held:

1. Sole Ownership by the Deceased Spouse: If the deceased spouse solely owned an asset, the surviving spouse typically receives a full step-up in basis. This means the asset's basis is adjusted to its fair market value on the date of the deceased spouse's death. This adjustment can reduce or eliminate capital gains taxes if the asset is sold shortly after the spouse's death.
   
   
2. Joint Tenancy with Right of Survivorship: In cases where the asset was held in joint tenancy with right of survivorship, the surviving spouse generally receives a step-up in basis for the deceased spouse's share of the asset. For example, if a home was jointly owned, the basis of the deceased spouse's half is stepped up to its fair market value at the spouse's time of death, while the surviving spouse's half retains its original basis.
   
   
3. Community Property States: In community property states, both halves of community property receive a step-up in basis upon the death of one spouse, regardless of which spouse's name is on the title. This means the entire property is adjusted to its fair market value at the time of death, providing a significant tax advantage for the surviving spouse.
   
   
4. Tenancy by the Entirety: Like joint tenancy, in states that recognize tenancy by the entirety, the surviving spouse receives a step-up in basis for the deceased spouse's share of the property.

The rationale behind these basis adjustments is to align the tax basis of inherited assets with their current market value, thereby reducing the potential capital gains tax burden on the surviving spouse. This adjustment reflects the change in ownership and the economic reality that the surviving spouse is now the sole owner of the asset.

Establishing Inherited Basis - To establish the inherited basis, it is often necessary to obtain a qualified appraisal of the assets as of the date of death. This appraisal serves as documentation for the basis and is crucial for accurately calculating capital gains or losses upon the future sale of the assets.

Future Home Sale and Gain Exclusion - Surviving spouses may benefit from the home gain exclusion, which allows for the exclusion of up to $500,000 of gain from the sale of a primary residence, provided the sale occurs within two years of the spouse's death and the requirements for the exclusion were met prior to the death. This exclusion can be a valuable tool for minimizing taxes on the sale of a home, although in most cases any gain within the two years is likely to be minimal because of the basis step-up provision. After the two-year period has elapsed, the exclusion drops to $250,000.

Notifications to Social Security Administration and Payers of Pensions - It is imperative for the surviving spouse to notify the Social Security Administration (SSA) of the spouse's death to adjust benefits accordingly. Usually, the funeral home will notify SSA, but just to be on the safe side, the surviving spouse should contact SSA as well. Similarly, any payers of pensions or retirement plans must be informed to ensure proper distribution of benefits and to avoid potential overpayments which would have to be repaid.

Estate Tax Considerations and Portability Election - If the deceased spouse's estate exceeds the federal estate tax exemption, an estate tax return may be required. Even if the estate is below the exemption threshold, filing an estate tax return can be beneficial to elect portability. Portability allows the surviving spouse to utilize the deceased spouse's unused estate tax exemption, potentially reducing estate taxes upon the surviving spouse's death.

Changing Titles - To prevent future complications, it is essential to change the title of jointly held assets to the survivor's name alone. This includes real estate, vehicles, and financial accounts. Properly updating titles ensures clear ownership and facilitates future transactions.

Trust Issues - Living Trusts and Other Trusts - Many couples establish living trusts to manage their assets. Upon the death of one spouse, the trust may split into two separate trusts: one revocable and one irrevocable. The irrevocable trust typically requires a separate tax return. Understanding the terms of the trust and its tax implications is crucial for compliance and effective estate planning.

Understanding the Treatment of Tax Attributes for Surviving Spouses - In addition to the primary tax considerations, surviving spouses must also be aware of how tax attributes are treated following the death of a spouse. Tax attributes include various tax-related characteristics such as net operating losses, capital loss carryovers, and passive activity losses. This can be complicated based upon whether the attributes are related to a specific spouse or jointly.

Beneficiary Designations - Surviving spouses should also review and update their own beneficiary designations on life insurance policies, retirement accounts, and wills.

Budgeting - Creating a new budget to reflect changes in income and expenses can help manage financial stability during this transition.

The tax issues facing surviving spouses are multifaceted and require careful consideration. By understanding filing status options, inherited basis adjustments, home sale exclusions, and other critical tax matters, surviving spouses can navigate this challenging period with greater confidence and financial security.

Contact this office for professional tax assistance to ensure compliance and optimize financial outcomes during this difficult time.

Payroll might seem like just another line item in your business operations, but in reality, it’s a cornerstone of your success. Let’s explore why payroll compliance isn’t just about numbers—it's about protecting your business, saving time, and maintaining employee morale.

Payroll compliance isn’t just about cutting checks—it’s a balancing act between federal, state, and even local regulations. There are tax withholding rules to follow, deadlines to meet, and ever-changing legislation to keep up with.

Miss a step? The penalties can be severe. According to the IRS, payroll errors account for billions in fines each year. Late filings, misclassified employees, and incorrect withholdings can quickly drain your budget—not to mention the headaches of fixing those mistakes.

But compliance isn’t just about avoiding penalties. It’s also about building trust. When payroll is accurate and on time, your employees feel secure, valued, and motivated to perform at their best.

Let’s face it: Payroll isn’t simple, and the risks are real. Here are some of the most common mistakes we see small and midsize businesses make:

1. Misclassifying Employees
   Is that worker an independent contractor or an employee? It’s not always clear-cut, but the IRS has strict guidelines, and misclassification can lead to back taxes, fines, and lawsuits.
   
   
2. Failing to Track State-Specific Laws
   Wage and hour laws can vary widely by state—and even city. For instance, some states require meal breaks, while others have specific overtime rules. If you’re not careful, you could face costly disputes.
   
   
3. Overlooking Deadlines
   Payroll taxes have hard deadlines. Late filings can trigger automatic penalties, while repeat offenses may invite a deeper IRS audit.
   
   
4. Neglecting Records
   Maintaining organized payroll records isn’t optional—it’s required by law. Whether it’s employee tax forms, timekeeping logs, or payroll reports, disorganization can spell trouble in an audit.

Running a business is hard enough without payroll consuming hours of your week. Many SMB owners tell us they’re overwhelmed by the time it takes to calculate taxes, file reports, and manage deductions. And if you’re not an expert? That time doubles as you sift through confusing IRS instructions and ever-changing state laws.

Wouldn’t it be easier to focus on growing your business and let someone else handle the complexity?

This is where we come in. Partnering with a payroll-savvy tax professional transforms compliance from a headache into a streamlined process. Here’s how:

• Expertise in Federal and State Regulations
  We stay on top of the rules so you don’t have to. From proper classifications to ensuring deadlines are met, we handle it all.
  
  
• Accurate, Stress-Free Processing
  Say goodbye to miscalculations and IRS penalties. With a professional in your corner, your payroll is always accurate, compliant, and on time.
  
  
• Time Savings
  By outsourcing payroll, you free up hours each week—time better spent on growing your business.
  
  
• Customized Support
  No two businesses are the same. We tailor our services to meet your unique needs, ensuring every box is checked.

What happens if you don’t prioritize payroll compliance? The risks are too significant to ignore:

• Costly fines
• IRS audits
•  Damaged employee relationships
• Reputational harm

The good news? Avoiding these pitfalls is as simple as getting the right help.

At our firm, we help make payroll painless. Whether you’re struggling with compliance, overwhelmed by time-consuming tasks, or just tired of the stress, we’re here to help.

Contact us today to ensure your payroll is compliant, accurate, and seamless. Together, we’ll protect your business and strengthen employee trust—one paycheck at a time.

This is where savvy planning, tax-advantaged tools, and a willingness to act now—not later—can make all the difference. Let's unpack the strategies that can supercharge your savings.

Catch-Up Contributions: The Encore Your Savings Need

Imagine you're at a concert. The lights dim, the crowd cheers, and the band rolls out an encore performance that blows the roof off. That's what catch-up contributions are for your retirement savings—a second chance to amplify your game.

If you're 50 or older, the IRS lets you sock away more than the standard limit into your 401(k), 403(b) Tax-sheltered Annuities, SIMPLE Plans, or IRA. For 2024, the inflation-adjusted catch-up contributions are:

• 401(k) Plans: Adds an extra $7,500 on top of the $23,000 (23,500 in 2025) regular limit. 
  
  
• 403(b) Plans: Adds an extra $7,500 on top of the $23,000 (23,500 in 2025) regular limit. 
  
  
• SIMPLE Plans: Adds an extra $3,500 on top of the $16,000 ($16,500 in 2025) regular limit.
   
• IRAs: Adds an extra $1,000 on top of the $7,000 regular limit. 

If you're age 60, 61, 62, or 63 in years after 2024, a special tax provision increases the catch-up contribution limits for 401(k) and 403(b) plans to the greater of $10,000 or 50 percent more than the regular catch-up amount. Thus, beginning in 2025 the 401(k) and 403(b) catch-up amount for individuals aged 60 through 63 will be $11,250 (1.5 x $7,500). For SIMPLE plans, this special catch-up amount for 2025 will be $5,250 (1.5 x $3,500).  

Why it matters:

• If you've started saving late or had years of financial turbulence, this is your golden ticket to make up ground.
  
  
• Every extra dollar invested now has the potential to grow exponentially thanks to compounding.

Takeaway:
Max out your contributions. It's not just about saving more; it's about taking full advantage of what Uncle Sam allows. Choosing to skip this? It's like leaving free concert tickets on the table.

Health Savings Accounts (HSAs): Your Triple Tax Advantage

An HSA isn't just a savings account—it's your financial Swiss Army knife. With an HSA, you get tax benefits on three fronts:

1. Contributions are tax-deductible.

2. Growth is tax-free.

3. Withdrawals for qualified medical expenses? Also tax-free.

In 2024, individuals can contribute up to $4,150, and families up to $8,300. Plus, if you're over 55 and not enrolled in Medicare, tack on an extra $1,000 (computed on a monthly basis). For 2025, the amounts will be $4,300 and $8,500.

Here's the kicker: Unused HSA funds roll over year after year. By the time retirement hits, you can use your HSA to cover everything from Medicare premiums to out-of-pocket medical expenses.

Why it matters:
Medical expenses in retirement can feel like a bottomless pit. An HSA acts as your secret weapon, ready to soften the blow.

Takeaway:
Max out your HSA contributions annually. Treat it as a stealth retirement account. Future-you will thank you when those medical bills roll in.

Roth IRA Conversions: Tax-Free Growth, Forever

Think of a Roth IRA as the retirement unicorn—rare, magical, and oh-so-worth-it. Converting a traditional IRA to a Roth means paying taxes on the converted amount now so that your withdrawals in retirement are tax-free.

This move makes sense if:

• You anticipate being in a higher tax bracket later.
  
  
• You want to lock in today's tax rates before they potentially climb.

But timing is everything. You don't want to push yourself into a higher bracket this year. Strategic planning with a financial advisor can help you optimize your conversion strategy.

Why it matters:
Tax-free income in retirement? It's like having a financial cheat code.

Takeaway:
Start small. Convert portions of your IRA over time to avoid a tax hit. Bonus: Roth IRAs have no required minimum distributions (RMDs), so you stay in control.

Why Gen Xers Have an Edge

As a Gen Xer, you're a financial pioneer. You've navigated everything from pensions to 401(k)s to the emergence of robo-advisors. You understand adaptability—and now is the time to apply it to your retirement strategy.

Pro move: Use tech to track your contributions and calculate future growth.

Strategic Add-Ons: Beyond the Basics

If you're already maxing out your catch-up contributions and HSAs, consider these next-level moves:

• Diversify your portfolio: Mix in alternative investments like real estate or private equity.
  
  
• Leverage employer matches: If your employer offers matching contributions, don't leave free money on the table.
  
  
• Plan for tax law changes: Keep an eye on shifting tax policies and adjust your strategy proactively.

What's Your Next Move?

This isn't just about dreaming of retirement on a beach—it's about building the financial runway to get there.

Take action today:

1. Schedule time to review your contributions and savings.

2. Consult with a financial advisor to optimize strategies like Roth IRA conversions or HSA maximization.

3. Reach out to our office for personalized guidance that aligns with your goals.

Your 40s and 50s are your power years for retirement savings. Let's make every dollar work harder so you can retire smarter.

• Individual Retirement Accounts
• Traditional IRA vs. Roth IRA: Tax Treatment
• Age Limits and Contribution Rules
• Contribution Limits
• Income Limits for Traditional IRA Contributions
• Income Limits for Roth IRA Contributions
• Required Minimum Distributions (RMDs)
• Roth Aging and Conversion Strategies
• Spousal IRAs and Contribution Strategies
• The Importance of Retirement Savings Beyond Social Security

Individual Retirement Accounts (IRAs) are essential tools for retirement planning, offering tax advantages that can help you grow your savings over time. Two of the most popular types of IRAs are the Traditional IRA and the Roth IRA. While both serve the purpose of retirement savings, they have distinct differences that can significantly impact your financial planning. This article delves into these differences, contribution limits, the concept of Roth aging, conversion strategies, and other critical aspects to help you make informed decisions.

Tax Treatment:

• Traditional IRA: Contributions to a Traditional IRA are typically tax-deductible, meaning you can reduce your taxable income for the year you make the contribution. You don’t pay tax on the interest, dividends or other earnings as they are received. However, withdrawals during retirement are taxed as ordinary income.
  
  
• Roth IRA: Contributions to a Roth IRA are made with after-tax dollars, so they are not tax-deductible. The significant advantage is that qualified withdrawals during retirement are tax-free including any appreciation.

Age Limits and Contribution Rules:

• Traditional IRA: There is no age limit for contributions as of tax years after 2019. You can contribute as long as you have earned income or qualify for a spousal IRA.
  
  
• Roth IRA: Similarly, there is no age limit for Roth IRA contributions. However, the amount you can contribute may be limited based on your Modified Adjusted Gross Income (MAGI).

Contribution Limits: For 2024, the contribution limits for both Traditional and Roth IRAs are:

• Under Age 50: $7,000
  
  
• Age 50 or Older: $8,000 (this includes a $1,000 catch-up contribution)

Income Limits for 2024 Traditional IRA Contributions – There are no income limits unless the individual also actively participates in an employer’s retirement plan, in which case the deductibility of these contributions may be limited based on the taxpayer's modified adjusted gross income (MAGI) and filing status. If the taxpayer's income exceeds certain thresholds, the amount they can deduct may be reduced or eliminated entirely.

For 2024, if covered by an employer retirement plan, the deduction for contributions to a traditional IRA is phased out if the individual’s MAGI is:

• Between $77,000 and $86,999 for single filers or heads of household.
  
  
• Between $123,000 and $142,999 for married couples filing jointly (if the spouse making the IRA contribution is covered by a workplace retirement plan).
  
  
• Between $0 and $9,999 for married individuals filing separate.
  
  
• Between $230,000 and $239,999 for the nonactive spouse of a married couples filing jointly where the other spouse actively participates in an employer’s retirement plan.

If MAGI exceeds the top of the range, then none of the contribution is deductible. But this doesn’t mean that a contribution can’t be made to a Traditional IRA; it just wouldn’t be deductible. In this case, upon distribution, a percentage of the IRA attributed to nondeductible contributions won’t be taxable.

Income Limits for 2024 Roth IRA Contributions:

• Single Filers: The ability to contribute to a Roth IRA phases out between a MAGI of $146,000 and $160,999.
  
  
• Married Filing Jointly: The phase-out range is between $230,000 and $239,999.
  
  
• Married Filing Separately: The phase-out range is between $0 and $9,999.

Required Minimum Distributions (RMDs):

• Traditional IRA: You must start taking RMDs at age 73.
  
  
• Roth IRA: There are no RMDs during the account holder's lifetime, making it an excellent tool for estate planning.

Roth Aging and Conversion Strategies

• Roth Aging: The term "Roth aging" refers to the five-year rule that applies to Roth IRAs. To make tax-free withdrawals of earnings, the Roth IRA must be at least five years old, and the account holder must be at least 59½ years old. This rule emphasizes the importance of starting a Roth IRA early to maximize its tax-free growth potential.
  
  
• Converting a Traditional IRA to a Roth IRA: Converting a Traditional IRA to a Roth IRA can be a strategic move, especially if you expect to be in a higher tax bracket in retirement. The conversion involves transferring funds from a Traditional IRA to a Roth IRA and paying taxes on the converted amount. Here are some key points to consider: 

• Immediate Tax Liability: Older taxpayers may face a significant tax bill upon conversion, which could deplete their retirement savings.
  
  
• Shorter Time Horizon: With less time to benefit from tax-free growth, the immediate tax hit may not be offset by future tax savings.
  
  
• Impact on Social Security and Medicare: The increased taxable income from the conversion could affect the taxation of Social Security benefits and the cost of Medicare premiums.

Spousal IRAs and Contribution Strategies

• Spousal IRAs: A Spousal IRA allows a working spouse to contribute to an IRA on behalf of a non-working or low-earning spouse. This can be either a Traditional or Roth IRA. The contribution limits are the same as for individual IRAs, and the working spouse's income must be sufficient to cover the contributions for both spouses.

The Importance of Retirement Savings Beyond Social Security

Relying solely on Social Security for retirement income is risky. Social Security benefits are designed to replace only a portion of your pre-retirement income, and the future of these benefits is uncertain due to demographic and economic factors. Here are some reasons why additional retirement savings are crucial:

• Rising Costs: Healthcare and living expenses continue to rise, and Social Security may not keep pace with inflation.
  
  
• Longevity: People are living longer, increasing the need for a more substantial retirement nest egg.
  
  
• Quality of Life: Additional savings can provide a more comfortable and secure retirement, allowing for travel, hobbies, and other activities.

Choosing between a Traditional IRA and a Roth IRA depends on your current financial situation, future income expectations, and retirement goals. Understanding the differences, contribution limits, and conversion strategies can help you make informed decisions that align with your long-term financial plan. While Traditional IRAs offer immediate tax benefits, Roth IRAs provide tax-free growth and withdrawals, making them a powerful tool for retirement savings. Additionally, considering spousal IRAs and the importance of saving beyond Social Security can further enhance your retirement security.

Have additional questions or need assistance making your decision? Contact this office.

Here’s everything you need to know about this collaboration and what it means for small business owners using Amazon.

The Amazon-QuickBooks Partnership at a Glance

Amazon has announced a partnership with Intuit’s QuickBooks to offer enhanced financial tools for third-party sellers. Per CNBC, the new tools are expected to be available by “mid-2025” for all Amazon sellers. The integration is designed to:

• Automatically sync sales data from Amazon into QuickBooks.
  
  
• Simplify expense tracking by categorizing fees, commissions, and other charges directly within the software.
  
  
• Provide better insights into profitability and cash flow.

This collaboration is part of Amazon’s broader initiative to support third-party sellers, who accounted for 60% of its $400 billion in global sales last year, according to the same CNBC report.

How This Helps Small Business Owners

Managing finances can be one of the most challenging aspects of running an e-commerce business. For Amazon sellers, tracking fees, taxes, shipping costs, and inventory expenses often requires juggling multiple tools and platforms.

With the Amazon-QuickBooks integration, sellers can:

1. Save Time on Bookkeeping
   The direct data sync between Amazon and QuickBooks eliminates manual entry, reducing the risk of errors and freeing up time for business growth.

2. Streamline Tax Preparation
   Automatically categorized expenses and sales reports make tax season less stressful. Sellers can easily pull profit and loss statements to prepare for filing.

3. Gain Better Financial Visibility
   QuickBooks’ real-time insights allow sellers to track their cash flow, profitability, and expenses at a glance, empowering better financial decisions.

Key Features of the Integration

The partnership brings several features that will benefit Amazon sellers directly:

• Automated Data Import: Sales, fees, and refunds from Amazon sync automatically with QuickBooks.
  
  
• Expense Categorization: Seller fees, shipping costs, and other Amazon-related expenses are automatically categorized for easier financial reporting.
  
  
• Real-Time Reporting: Access up-to-date financial information, including cash flow and profit margins.
  
  
• Tax Tools: Generate reports and summaries to simplify quarterly and annual tax filings.

Why Now?

The timing of this partnership is significant. As e-commerce continues to grow post-pandemic, many small businesses have turned to platforms like Amazon to reach larger audiences. However, with growth comes complexity—especially in managing finances.

This move reflects Amazon’s recognition of the logistical challenges many of its sellers face and the brand’s commitment to providing tools that make running an online business easier.

Among the many benefits of the QuickBooks-Amazon partnership are:

• A Simpler Tax Season: Connecting your Amazon accounts to QuickBooks will make for easier reconciliation and tax preparation for tax professionals.
  
  
• More Accurate Data: Automated imports reduce discrepancies, leading to cleaner books.
  
  
• Improved Collaboration: Real-time data access allows accountants and clients to work together more efficiently.

How to Get Started

Amazon sellers can integrate QuickBooks by navigating to their Seller Central account and following these steps:

1. Go to the Partner Network section and select QuickBooks.

2. Follow the prompts to link your Amazon account to QuickBooks.

3. Configure your settings to sync data automatically.

For those new to QuickBooks, Intuit offers setup assistance to ensure a smooth transition. Our office can also help you move smoothly into using QuickBooks. Simply call us to get started.

The Amazon-QuickBooks partnership represents a significant step forward for small business owners and third-party sellers, offering tools that simplify financial management. This integration promises to make 2025 – and beyond – more productive and financially sound for Amazon’s massive seller base.

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

On December 23, 2024, the Fifth Circuit Court of Appeals lifted the FinCEN Beneficial Owner Information (BOI) reporting injunction and FinCEN set new reporting deadlines. Then on December 26, 2024, a federal court of appeals officially reinstated an injunction blocking the reporting deadline for Beneficial Ownership Information (BOI). Stay tuned for further court actions.  

January 15 - Employer’s Monthly Deposit Due -

If you are an employer and the monthly deposit rules apply, January 15 is the due date for you to make your deposit of Social Security, Medicare, and withheld income tax for December 2024.

This is also the due date for the nonpayroll withholding deposit for December 2024 if the monthly deposit rule applies. Employment tax deposits must be made electronically (no paper coupons), except employers with a deposit liability under $2,500 for a return period may remit payments quarterly or annually with the return.

If you are a business or rental property owner and paid $600 or more to individuals (other than employees) as nonemployee compensation during 2024, you are required to provide Form 1099-NEC to those workers by January 31.  “Nonemployee compensation” can mean payments for services performed for your business or rental by an individual who is not your employee, commissions, professional fees and materials, prizes and awards for services provided, fish purchases for cash, and payments for an oil and gas working interest. To avoid a penalty, copies of the 1099-NECs also need to be sent to the IRS by January 31, 2025. The 1099-NECs must be submitted on optically scannable (OCR) forms. This firm prepares 1099s in OCR format for submission to the IRS with the 1096 submittal form. This service provides both recipient and file copies for your records. A business or individual who is required to file 10 or more information returns (i.e., 1099s and W-2s among others) must file those forms electronically. Please call this office for preparation assistance. 

January 31 - All Businesses - File 1099s - 

Give annual information statements to recipients of certain payments made during 2024. Use the appropriate version of Form 1099 or other information return. Form 1099 can be issued electronically with the consent of the recipient. Payments that may be covered include the following.

• Cash payments for fish (or other aquatic life) purchased from anyone engaged in the trade or business of catching fish.
• Compensation for workers who aren't considered employees (including fishing boat proceeds to crew members).
• Dividends and other corporate distributions
• Interest
• Rent
• Royalties
• Payments of Indian gaming profits to tribal members
• Profit-sharing distributions
• Retirement plan distributions
• Original issue discount
• Prizes and awards
• Medical and health care payments
• Debt cancellation (treated as payment to debtor)
• Cash payments over $10,000 (See Form 8300)

January 31 - File Form 945 -

File Form 945 to report income tax withheld for 2024 on all nonpayroll items, including backup withholding and withholding on pensions, annuities, IRAs, gambling winnings, and payments of Indian gaming profits to tribal members. Deposit or pay any undeposited tax. (If your tax liability is less than $2,500, you can pay it in full with a timely filed return.) If you deposited the tax for the year timely, properly, and in full, you have until February 210 to file the return.

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