Weekly Update: December 22nd, 2023 Countdown to Christmas Continues🎄- IRS Voluntary Disclosure for Those Who Have Been Naughty 🎁
Holiday season is here and going strong with homes lit up inside and out, community sponsored decorations and oh so many “feel good” holiday movies 🎥 and series to watch on our favorite streaming platform. So many times we say life imitates art and art imitates life, so I thought I would share a holiday happy ending story that began last November…
After wadding/scanning through the selection of holiday movies I realized my grand-dog Sampson 🐶 might be a prime candidate to inspire one for thanksgiving 2024. Any producers out there willing to license the rights to the screenplay Sampsons Dog Days? Check out Sampsons Instagram @sampsonsdogdays – he has over 500 followers.
His storyline: adopted by co-foster parents, Sampson moved from his comfortable homes in Atlanta in December 2022 and has been living the life of a typical southern California teen including an unpaid internship at a local medical device startup, daily runs on the beach and weekly hikes on local trails or outings to the weekly Oceanside Sunset Market. Jessie set up Sampson’s Instagram account so his co-parent Matt back in Atlanta could see how much he was enjoying life in California. FYI their original agreement called for Sampson to remain in Atlanta with Matt if/when Jessie moved, but Matt as a loving parent felt that Sampson’s life in Southern California would be amazing (I think we all want to join him) and suggested she take him with her when they moved.
His recent sunset photos inspired this post…
We here in NY have wonderful sunrises that I love sharing…
Even during recent stormy days ⛈️🌦️☔…
But just this week I convinced Raquel to join me on a late afternoon walk…
I hope your holiday season is jam packed with plans to visit family and friends and maybe you are creating your own screenplay for a feel-good holiday movie, or maybe planning on a marathon of Bing Crosby movies starting with White Christmas …Michigan must be lovely this time of year all that snow ❄️☃️🏔️…
WEEKLY TAKE AWAY
Just this week we were patting ourselves on the back. We had been proactive by:
- Updating annual tax season master lists
- Updating annual email blasts for client reminders
- Scheduling “lunch-n-learns” to review tax law updates
- tweaking our annual email notification blasts
- updating our e-file passwords within the IRS e-file “IRIS system”
- ordering reams of paper ( yes we are “LESS paper” not paperless here)
- ordering the “RED” set of IRS information which get mailed to the IRS
One of the red sets of forms came with a bright yellow coversheet announcing a change in the IRS transmission requirements “Warning… IRS no longer accepting paper filing…”. Opps, sometimes being proactive backfires. We had a had a quick huddle type meeting, returned the forms and ordered additional e-file capability services with our business software provider. At least being proactive with our annual process review allowed us to pivot on this portion of the process and be comfortable as we updated this portion of our work process. Spoiler alert: See tax planning below for updates on 2023 tax year 1099 filing requirements
TAX ISSUES/TAX PLANNING
2023 IRS Filing Requirements for Form 1099
We have alreted our clients via a recent email blast to the 2023 IRS updated requirements regarding the filing of 1099 forms and the penalties they are imposing have been increased Here is the IRS link and an exercpt of our blast:
As in prior years, this reporting requirement is related to payments made during the course of the year as you conduct your business HOWEVER please take note of the following if you fall within the updated guidance:
- For 2023 forms the filing deadline is January 31st 2024
- Starting with the tax year 2023, if you have 10 or more information returns, you must file them electronically.
- any non-corporate entity or business or provider of services who received a total of $600 or more from you during the year for services provided to your business, including rent and repairs paid by your business (this includes your landlord and any LLC’s )
- any attorney or law firm who received payments of $600 for the year for work provided for your business-whether they practice as a sole proprietor, partnership, PLLC, or corporation
- any physician, medical provider, or medical practice who received payments of $600 or more for the year for work provided for your business-whether they practice as a sole proprietor, partnership, PLLC, or corporation
Imposed penalties: IRS LATE FEE ($60-630 per form) or IRS NON-FILING FEE– ($630) per information return (that means for each vendor).
Follow this link for the IRS “fill-in version” of the W-9 PDF: http://www.irs.gov/pub/irs-pdf/fw9.pdf
IRS Announces ERC Voluntary Disclosure Program
Just yesterday the IRS announced it’s long awaited employee retention credit (ERC) voluntary disclosure program. The Employee Retention Credit Voluntary Disclosure Program (ERC-VDP) which runs through March 22, 2024 lets employers who received ERCs but are ineligible for them pay back the credits at a discounted rate. Here is the link to the IRS FAQ. Start by contacting your tax professional and check the IRS eligibility list via this link.
Year-End Planning: Solo 401K
Just this week I received an email asking about Solo 401K plans and then of course this deferred income opportunity popped up in a Forbes article – is that karma or AI? Either way, most people are familiar with the term 401K as a way to save for retirement while reducing current taxable wages on their W-2. The solo 401K works in a similar manner allowing self-employed business owners to establish a plan where they can wear two (2) hats, “business owner and employee”. Under the terms of the solo 401K: they can elect to defer a portion of their self-employment income as the active worker in the business and they can match a certain amount as the owner of that business (nonelective contribution.
- Self-employed individuals must make a special computation to determine the maximum amount of the elective deferrals and nonelective contributions
- A business owner with no common-law employees doesn’t need to perform nondiscrimination testing for the plan, since there are no employees who could have received disparate benefits.
- A one-participant 401(k) plan is generally required to file an annual report on Form 5500-EZ if it has $250,000 or more in assets at the end of the year. A one-participant plan with fewer assets may be exempt from the annual filing requirement.
- For 2023, that limit is $66,000 and up to $69,000 in 2024
- Catch-up contributions of an additional $7,500 in both 2024 and 2023 are available for those over 50
Remember we never advise making a decision in a vacuum as you may leave yourself open to “unintended consequences”, for example a business owner who is also employed by a second company and participating in its 401(k) plan should bear in mind that the limits on elective deferrals are by person, not by plan. Learn more via this IRS link and contact your tax adviser for advice and careful considerations before jumping in.
According to the S & P Global Survey: US Business Activity Picks Up in December
U.S. business activity picked up in December amid rising orders and demand for workers, which could further help to allay fears of a sharp slowdown in economic growth in the fourth quarter. S&P Global said on Friday that its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, increased to a five-month high of 51.0 this month from 50.7 in November. A reading above 50 indicates expansion in the private sector.
The Federal Reserve IssueD FOMC Statement Last Week
Recent indicators suggest that growth of economic activity has slowed from its strong pace in the third quarter. Job gains have moderated since earlier in the year but remain strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run.
2023: American Consumer 1, Economists 0
According to this recent article by U.S.News and World Reports “The economy proved just about everyone wrong as it turned out far better than expected with robust economic growth and a labor market that refused to buckle. Now, inflation is on track to come back down close to the 2% Fed’s annual goal. But it could be 2025 before that level is reached. A recent consumer sentiment survey from the University of Michigan shows that Americans reduced their expectations for inflation over the next 12 months sharply in November, to 3.1% from 4.5% a month earlier.
“Inflation cycles are still being driven heavily by pandemic-related supply distortions,” Neil Shearing, group chief economist at Capital Economics, wrote in the firm’s 2024 outlook. “This is one reason why we have argued that the post-COVID inflation scare is more analogous to the inflation shock that followed World War Two than the inflationary surges of the 1970s.”
Shearing does not see a return to the deflationary period and near-zero interest rate regime that preceded the pandemic.
“But 2024 is likely to be the year where core inflation finally moves back towards central banks’ comfort zone of around 2%.”
U.S. Labor Market Resilience Keeps Economy Afload as Year Ends
According to this recent article by Reuters “The number of Americans filing new claims for unemployment benefits rose marginally last week, the latest suggestion that the economy was regaining some momentum as the year winds down…
- IRS resources for stimulus payments:
- IRS information about the Advance Child Tax Credit Payments
- The best source for up-to-date and accurate health information is the Center for Disease Control (CDC)
- Our prior blog posts, videos and prior weekly newsletters
- Entrepreneur put together a listing of free tech resources for remote work
- The Consumer Financial Protection Bureau has warnings about COVID-related scams
- The New York Times has an online newsletter on K-12 and higher education
- The Wall Street Journal has a collection of articles on education
- The Louvre has digitized 482,000 artworks from its collection
- How to create a strong password
We sincerely hope that you and your family are well and remain well. If you have any questions or concerns, don’t hesitate to reach out to us. We are here for you.
If you need help with your accounting, want to create a tax minimization plan, want to discuss your business growth plan or your finances, are concerned about retirement goals or need to be held accountable for your 90 day action plan, contact us for a complimentary discovery session or an appointment to just get started
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