Category: Tax and Life Changes

Life changes and your taxes go hand in hand; believe it or not. That being said, it’s easy to forget about your tax return as a newlywed or when you’re welcoming a newborn into the family. Be aware that many of these changes also make you eligible for deductions and credits on your tax return. In some cases, you may need to update your W-4 form as well. PriorTax will keep you up to date on what to do when these life changes occur. You won’t be left in the dark.

Check back here for answers to your questions about how these changes affect your taxes.

Archive for the ‘Tax and Life Changes’ Category

The 2024 E-File is Now Open. File Early with our Free Dedicated Tax Professional

Posted by admin on February 1, 2024

Last modified: February 1, 2024

The commencement of the 2024 tax filing season was marked by the Internal Revenue Service (IRS) on January 29, as they began accepting and processing the 2024 Efile for 2023 tax returns. It is a well-known fact that many taxpayers choose to postpone filing their taxes until the eleventh hour. Nevertheless, it begs the question: why delay such an important task?

When it comes to improving your financial situation, few things make as much of an impact as your tax refund. Last year, the IRS reported that around 65% of tax filers received a refund, an average amount exceeding $3,000. To ensure you receive your refund promptly, filing your tax return as soon as possible is advisable. Take advantage of PriorTax’s early opening to Efile both your current and past year taxes, maximizing your potential refund.

Are you looking for some motivation to Efile your taxes early? Be sure to do it before the last minute of the April 15, 2024, tax deadline. Instead, please take advantage of these four compelling reasons to start working on your taxes today and electronically submit your 2023 tax return with the assistance of our experienced tax expert, all at no cost to you.

1. Begin Your 2024 Efile for 2023 Tax Refund Today

Filing your taxes early and getting your refund sooner can be a smart financial move, especially considering the impact that last year’s events and the current year can have on your finances.

According to the Internal Revenue Service (IRS), taxpayers who file their taxes electronically and opt for direct deposit can expect to receive their tax refunds within 21 days or less, provided there are no complications with their tax return. Additionally, the potential for larger refunds may arise due to the various tax deductions and credits associated with moves made during the year.

2. Filing online for 2024 EFile is good, but with our Dedicated Tax Professional is Better

Achieving a seamless and precise tax filing experience with PriorTax E-File has always been challenging. By conveniently assembling your tax documents, you can gain access to an interactive platform where you will be prompted to provide essential information about yourself, ensuring that you receive the highest possible tax refund. With PriorTax diligently scouring through an extensive range of nearly 400 tax deductions and credits, you can rest assured knowing that you will receive every dollar you rightfully deserve, thanks to the accuracy of your answers.

Instead of going elsewhere to handle your taxes, there is no need when you have the opportunity to receive comprehensive guidance or have your taxes completed by our dedicated tax professional, all free of charge.

3. PriorTax Dedicated Tax Professional Will Do your Taxes from Start to Finish

When it comes to handling your taxes, there is an option to seek assistance from a knowledgeable tax expert. By connecting with a PriorTax free tax expert, your 2024 tax filing process can be efficiently completed within a short timeframe. Whether it be a full day or even as quick as 30 minutes, your taxes will be taken care of from beginning to end.

4. It’s Time to Find your Dedicated Tax Professional

Even if you find yourself in debt to the IRS, there is a compelling incentive to prioritize the early filing of your tax return. By submitting your return sooner rather than later, you are granted the luxury of delaying payment of any outstanding taxes until the mid-April filing deadline.

By taking the proactive step of starting your tax preparations ahead of time, you will have ample opportunity to strategize on how best to fulfill your financial obligations or explore alternative solutions if you owe a balance. Additionally, an appealing option to consider is contributing towards your Individual Retirement Account (IRA) for the year 2023 before the tax deadline on April 15, 2024.

Tags: 2023 e-file, 2023 efile, 2024 E-file, 2024 Efile
Category: Tax and Life Changes, Tax News, Tax Year 2023, Taxes for Prior Years
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2024 LLC Business Tax Deadline

Posted by admin on January 25, 2024

Last modified: January 25, 2024

Important Tax Dates for LLC Business in 2024

Small business owners often find limited liability companies (LLCs) to be an attractive business structure. One of the primary advantages of an LLC is the liability protection it offers owners against business debts. Additionally, this business entity allows for flexibility in business tax deadline and tax filing and payment methods.

Due to the adaptable nature of Limited Liability Companies (LLCs), they are not bound by a specific tax deadline. Instead, the timing of their tax filing is influenced by several factors.

How Does LLC File Taxes?

LLCs stand out from other business structures due to their state-level creation. When an individual or group establishes an LLC, their state recognizes the business as a corporation. However, the IRS maintains its classification of a sole proprietorship for businesses owned by one person and a partnership for businesses with multiple owners.

In the realm of business entities, both sole proprietorships and partnerships stand as disregarded or pass-through entities. They earned this status due to their unique characteristic of profits passing through to the owners, who report them on their personal tax returns. The essence lies in the fact that these entities do not incur corporate income tax. LLCs, when classified as either of these entities, can reap the advantages of the protective shield offered by corporations against liability while escaping the burden of double taxation.

Unlike sole proprietorships and partnerships, LLCs are exempt from the burdensome tax filing process. Additionally, they can choose between being classified as an S corporation or a C corporation.

The optimal decision for you is contingent upon various factors. For instance, opting to establish a corporation can lead to financial savings in terms of self-employment taxes but necessitates more rigorous reporting.

If you need clarification on the appropriate filing status for your LLC, seeking the guidance of a CPA or tax expert can help you navigate the decision-making process effectively. By subscribing to a Bench premium membership, you gain unlimited and convenient access to consultations with experienced tax professionals who will guide you on every aspect of your situation.

Main Tax Filing Deadlines for Business Taxes

Regarding tax forms, the designated filing date is the 15th day of each month. However, if this day lands on a weekend or holiday, the deadline is pushed forward to the following business day. Rest assured, the IRS has no intention of shortening the time you have to file your taxes.

The timing of your filing date is also influenced by your choice of a non-traditional fiscal year. Typically, companies utilize the calendar year as their fiscal year, concluding their financial statements on December 31. Adopting the calendar year as your fiscal year can offer certain advantages, such as synchronizing your business taxes with your personal taxes.

Choosing a different fiscal year can prove advantageous for businesses that experience seasonal fluctuations in their operations, such as farms and schools. By aligning their tax season with the conclusion of their busiest period, these entities can reap the benefits of this strategic decision.

Depending on how the IRS categorizes your business, the month you file will vary if you do not opt for a different fiscal year. Your LLC has four distinct filing types, each with its specific deadline.

How PriorTax Can Help

Mastering your tax filing starts with being aware of important tax due dates. However, expecting you to dedicate 10,000 hours to acquire this skill is unrealistic.

From the moment you join forces with PriorTax’s knowledgeable and Dedicated Tax Professionals, your tax obligations will be expertly handled from the beginning to the end of the year. Upon finalizing your financial records, we equip you with a comprehensive year-end financial package, including all the necessary guidance to effortlessly complete your tax filing and secure the maximum tax refund available to you.

LLC Sole Proprietorship Tax Deadline

In the event that one person owns an LLC, the IRS considers it to be a sole proprietorship. As part of the IRS Form 1040, your individual income tax return, you will report your business income on Schedule C. Consequently, your business taxes will be filed simultaneously with your income taxes.

In order to meet the tax requirements for the year 2023, specifically for filings in 2024, limited liability companies (LLCs)

LLC Partnership Tax Deadline

When multiple individuals own an LLC, the IRS considers it a partnership. As a result, it is necessary to fill out IRS Form 1065, which serves as the partnership return. This form allows you to disclose the business’s income and expenses over the year.

In order to ensure proper financial reporting, the LLC (or the entity that files Form 1065) distributes a document called Schedule K-1 to its shareholders. This document contains all the necessary income and expenses information obtained from the Income and Expenses section of Form 1065. Subsequently, shareholders are responsible for submitting their personal income tax return along with Schedule K-1 and paying any partnership taxes owed.

To comply with the requirements for 2024, it is important for limited liability companies (LLCs) operating as partnerships to submit their Form 1065 by March 15. However, if an extension is granted, the deadline for filing is extended until September 15.

S Corporation Tax Deadline

When your LLC successfully submits Tax Form 2553 within the specified timeframe for the fiscal year you are currently filing; the IRS recognizes your entity as an S corporation. As pass-through entities, S corporations require shareholders to report the business’s profits or losses on their personal income tax return.

When reporting your business’s income and expenses, completing IRS Form 1120S is a must. Just like partnerships, Form 1120S requires the completion of Schedule K-1, which is used to report the income share of each shareholder.

In order to meet the tax obligations for the year 2024, it is necessary for LLCs operating as S corporations to complete and file Form 1120S by March 15. However, if an extension is granted, the deadline for filing is extended to September 15.

C Corporation Tax Deadline

When your LLC makes the decision to be treated as a corporation by submitting Form 8832 (which we will discuss in further detail later), the IRS will classify your business as a C corporation. When it comes to taxation, businesses often encounter the concept of double taxation. This occurs when the business pays a flat corporate federal income tax, and the various shareholders will be taxed on their earnings when reporting their personal income taxes. This results in a duplication of tax payments, leading to the term “double taxation.”

In the world of corporate tax filing, one cannot escape the clutches of IRS Form 1120. This formidable document serves as the vessel through which C corporations submit their income tax returns. Once the taxable income is calculated, it falls under the jurisdiction of a 21% flat federal corporate income tax rate. But that’s not all – the state corporate income tax adds another layer of complexity, with rates varying between 1% to 12%.

In order to ensure compliance with the tax regulations for 2024, it is imperative for Limited Liability Companies (LLCs) that have chosen to file as C corporations to submit their Form 1120 by April 15. With an extension, the deadline for tax filing is Oct. 15.

Tags: 2024 LLC Business Tax Deadline, Business Tax Deadline, Business Tax Deadlines for 2024
Category: Tax and Life Changes, Tax Deadlines, Tax for Business, Tax Tips and Tricks, Tax Year 2023
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8 Very Commonly Overlooked Tax Deductions and Tax Credits

Posted by admin on November 30, 2023

Last modified: November 30, 2023

Taxpayers tend to overlook certain tax deductions, tax credits, and even tax exemptions that can help them pay less in taxes. Understanding these available tax breaks is important so that you are not leaving money on the table come tax season.

People only sometimes take full advantage of the possible opportunities to reduce tax bills. The ever-changing landscape of federal and state laws can make it challenging to keep up with all the available deductions, credits, and exemptions. Here, we have gathered 16 overlooked options for saving money on taxes – so if you qualify for any of these reliefs, you could be leaving more cash in your wallet this year!

Most importantly, reach out to locate your free dedicated tax professional from PriorTax to walk you through your tax filing from start to finish. Get in touch with your tax professional now.

Gambling Losses Tax Deduction

The Internal Revenue Service (IRS) allows a tax deduction for gambling losses for those who choose to itemize deductions. However, these write-offs are only available up to the amount of any gambling wins that were declared as taxable income. Additionally, it’s important to recognize that other forms of wagering can be taken into account when claiming deductions related to gambling, such as non-winning bingo tickets or lottery expenses.

If you believe that this tax deduction is the right move for you, be certain to save all of your gambling receipts – such as losing tickets. The IRS also recommends to keep a daily log of your gambling activity. This should include details like the date and type of bet, where it was placed, the names of those with you when wagering, and how much was won or lost in each instance.

Child and Dependent Care Tax Credit

The financial burden of childcare can be difficult to bear for many families. Fortunately, the child and dependent care tax credit is available to help lessen this expense’s impact on a household budget.

If your family requires childcare for children under 13 years old or a disabled dependent of any age, 2022 could be the time to claim a non-refundable tax credit. This credit can provide up to 35% or $3,000 of qualifying expenses for one child and $6,000 maximum for two or more qualifying children.

The child and dependent care tax credit can provide financial assistance to those paying for the cost of taking care of dependents. This could include elderly parents who are claimed as dependents on an adult child’s tax return, for example. In such cases, any related expenses may qualify for the credit above.

State Income Tax Refund

Taxpayers Can Avoid Reporting State Income Tax Refund. As outlined on Schedule A of the IRS Form 1040, many individuals can avoid including their state income tax refund when filing their federal income tax return. This is because when you claim the standard deduction for state and local taxes on your most recent federal tax return, that refund isn’t considered taxable.

When reporting a state income tax refund, you should not include it on your tax return if you did not itemize deductions for the year you received the refund. This avoids making an unnecessary report of the income. But suppose you are still determining whether the Form 1099-G related to your state income tax refund is taxable or not. In that case, consulting a professional might be wise to determine its taxable status.

Out-of-Pocket Charitable Tax Deductions

Giving to Charity Can Be Rewarded. You may be aware of the possibility of deducting larger charitable gifts that you made, such as by check or payroll deductions. However, it is worth noting that lesser amounts can still make a difference and should not be overlooked. In addition, you can also claim out-of-pocket expenses incurred while working for a charitable organization.

When it comes to charitable contributions, even something as simple as providing the ingredients for a meal prepared for a soup kitchen run by a nonprofit organization or buying stamps for a school’s fundraising effort can qualify. In other words, spending money supporting these causes is just as valid and beneficial to the cause as an outright donation.

It is important to maintain documentation of your charitable contributions. If the total value of your donations is $250 or higher, you must acquire a receipt verifying the contribution from the charity in question. In addition, for travel-related expenses associated with charitable activities, you are eligible to write off 14 cents per mile as well as parking fees and tolls.

State Sales Taxes

A deduction for state sales taxes can be a real boon for those who reside in states that don’t levy income taxes. If you opt to itemize deductions, you have the option of deducting either state taxes or your state and local sales taxes, whichever one offers the best financial relief.

Those who pay state income taxes can write off sales taxes in certain situations. The Internal Revenue Service (IRS) has a calculator that can help residents of different states figure out how much they can deduct, considering their income and applicable state and local tax rates. For instance, if you have made any large purchases like a vehicle, boat, or airplane, the calculator also includes the taxes paid on these items when figuring out total deductions for sales tax.

Regarding tax deductions, there is a limit for the amount of sales and property taxes that can be claimed – $10,000 annually ($5,000 if filing separately). Unfortunately, this amount includes both your local sales tax deduction and your local property taxes.

State Tax Paid for Previous Year

If you had to pay tax on your 2021 state income taxes, the cost is eligible to be used as a deduction when filing your 2022 federal return. Not only does this include the amount of taxes owed when filing, but it also takes into account any state income taxes taken out of your paycheck throughout the year or paid in quarterly estimated payments.

Additionally, the taxes withheld from your paycheck or paid in quarterly estimated payments should also be included. However, note that the deduction for state and local taxes is limited to $10,000 annually ($5,000 if married filing separately).

Dependent Tax Credit

You may not be aware, but claiming a dependent on your return can save you some money come tax time. The Dependent Tax Credit offers $500 for dependents who cannot qualify for the Child Tax Credit – such as children over 17 years old or elderly relatives in need of care in your home. So, if you have someone depending on you, remember to take advantage of this credit when filing!

It is crucial to be aware that for the 2022 tax year, the total of both the child credit and credit for other dependents may only be available when your adjusted gross income is $200,000. If filing jointly as a married couple, this number goes up to $400,000.

Tags: tax credits, tax deduction, tax deductions, tax exemptions
Category: Tax and Life Changes, Tax Deductions and Credits, Tax for Business, Tax Tips and Tricks
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1099-K for TPSO Reporting Delay For Tax Year 2023

Posted by admin on November 23, 2023

Last modified: November 23, 2023

IRS Announced 1099-K Form for TPSO Reporting Delay For Tax Year 2023

The IRS has announced a postponement of Form 1099-K reporting requirements for third-party platforms in 2023. Instead, the current threshold of $5,000 will be implemented in 2024 as a gradual transition period.

For the upcoming tax season, the IRS has pushed back its initial reporting threshold for third-party settlement organizations (TPSOs) to take effect. The American Rescue Plan 2021 requires that transactions over $600 in Tax Year 2023 not be reported on IRS Form 1099-K by TPSOs or the payee. This decision affects popular companies such as Venmo and PayPal.

The IRS has ruled that the existing 1099-K reporting threshold for the tax year 2023 will remain the same, being payments of more than $20,000 in total from over 200 individual transactions.

Here are the Details of the 1099-K Form Reporting Delay

To minimize taxpayer misconception and confusion, the IRS issued Notice 2023-74, announcing that the new $600 Form 1099-K reporting threshold for third-party settlement organizations has been postponed until calendar year 2023. The decision was based on an analysis of feedback from taxpayers, tax professionals, as well as payment processors.

To reduce potential confusion, the IRS has declared that 2023 is to be viewed as a transition year regarding the new law. The agency will only require reporting if a taxpayer receives more than $20,000 and they have engaged in more than 200 transactions during that year. This has been put into effect due to the estimated 44 million Forms 1099-K being sent out to unsuspecting taxpayers who may not owe any tax.

In order to ensure stakeholder certainty and help individual taxpayers comprehend the intricacies of the new provision, the IRS is proposing a phase-in for the $600 reporting threshold in 2024. This would involve setting a threshold of $5,000 for tax year 2024 as stipulated by the American Rescue Plan (ARP).

In response to the valuable input of those within the tax community, the IRS is mulling over potential updates to Form 1040 and its associated schedules for 2024. Making changes to this essential form – which serves over 150 million taxpayers annually – requires much consideration and analysis, hence why these changes are planned for 2024 to gain further feedback from stakeholders.

Beginning in 2022, the American Rescue Plan has mandated that any third-party settlement organizations (TPSOs), including digital payment apps and online marketplaces, must report payments of more than $600 for goods and services on a Form 1099-K. This form will be sent to taxpayers and the Internal Revenue Service (IRS) to assist them in correctly completing their tax returns. Prior to this regulation, only transactions that amounted to more than $20,000 through at least 200 sales per annum were required to submit such paperwork.

The IRS Temporarily Delayed the New 1099-K Requirement.

When it comes to personal transactions such as presents for a birthday or special occasion, sharing the cost of a car ride or dinner with someone, or paying another person for a household expense, there is no need to file any reports. These payments do not incur taxes and should not be recorded on Form 1099-K.

Though it may seem odd, many individuals who make casual sales of goods and services – like used clothes, furniture, and other household items – might receive a Form 1099-K in the mail, even if these sales produce no taxable income. In fact, it is not uncommon for those selling such goods to take a loss.

The IRS has determined to push back the date for the reporting requirements and set a threshold of $5,000 for 2024 in light of the difficulty in identifying these transactions. They are asking for input on the dollar amount as well as any other aspects on how to focus on taxable trades. In particular, they seek feedback concerning the chosen threshold of $5,000 for the 2024 tax year.

PriorTax understands the importance of properly managing the expansion of information reporting that is to take place due to the new thresholds set for Form 1099-K. In addition, it is vital that both taxpayers and our tax professionals have all the necessary resources to help them understand and comply with these changes. This increased reporting leads to a higher rate of tax compliance.

Tags: 1099-K, 1099-K Delay, TPSO
Category: Tax and Life Changes, Tax for Business, Tax News, Tax Tips and Tricks, Tax Year 2023
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2024 New Tax Brackets

Posted by admin on November 16, 2023

Last modified: December 21, 2023

Significant Changes for 2024 New Tax Brackets.

The Internal Revenue Service has taken steps to ensure that the new 2024 tax brackets reflect the current consumer price index. This 5.4% upward adjustment is especially notable compared to the 7% increase from last year, one of the most considerable adjustments the IRS has made in recent years. The new limits for 2024 will be set according to this formula and should accurately account for inflation developments in our current economy.

In anticipation of 2024, taxpayers should be aware of new income limits for IRS tax brackets. To account for inflation, these thresholds have been adjusted from previous years, which may provide a much-needed financial break to those filing taxes in 2024. Here’s how to keep up with your bracket.

Year after year, taxpayers are affected by changes to tax brackets and other areas, such as retirement fund contribution limits due to inflation. This variation helps prevent so-called “bracket creep,” which is when a person’s earnings puts them in a higher income tax bracket while their basic standard of living remains unchanged. To combat this situation, annual adjustments are made by the Internal Revenue Service (IRS).

Taxpayers may benefit from the higher thresholds, as more of their taxable income will likely fall into a lower tax bracket. Therefore, these earners can get some respite from taxes when filing their 2024 taxes in early 2025.

New Tax brackets for the 2023 tax year, taxes which are due in 2024

The New 2024 Tax Brackets

For tax year 2024, U.S. taxpayers can expect an uptick in their federal income taxes. With seven rates set by the 2017 Tax Cuts and Job Act, people filing either individually or as married couples will see a 5.4% increase in their brackets across each of these bands: 10%, 12%, 22%, 24%, 32%, 35% and 37%.

The New 2024 Tax Brackets for married couples filing jointly

Filing jointly as a married couple in the United States has distinct tax consequences; depending on one’s taxable income, various rates apply. For instance, any income up to $23,200 would be taxed at 10%, while any above $731,200 would see the highest rate of 37%.

When it comes to taxes in the United States, there often needs to be more understanding about how they are calculated. Contrary to popular belief, the highest tax rate an individual may be subject to isn’t applied to every dollar of their income. Instead, progressive tax rates are used, which means that each tax bracket a person falls under will have its applicable rate.

For the 2024 new tax bracket, the federal government has shifted some of taxpayers’ income into lower tax brackets. For instance, single filers with taxable income up to $11,600 will pay 10% in taxes that year – a full $600 more than they would have paid in 2023 when the same bracket was limited to the first $11,000.

2024 New Tax Brackets for Single Filers

In order to keep up with inflation, U.S. tax law dictates that income limits for each bracket must increase annually. As of this year, those limits have gone up by 5.4%.

The marginal rate is the maximum taxation that you are liable for. However what counts is the effective tax rate, which encompasses all of the taxes imposed on different parts of one’s income. Essentially, this amount reflects a person’s actual rate of taxation.

The new 2024 tax brackets for head-of-household filers

For head-of-household filers, their 2024 tax brackets have been established. Individuals filing taxes as a head of household will face a 10% rate on their first $16,550 taxable income. Any income above that threshold will be taxed at 37%, beginning at $609,350.

2024 New Tax Standard Deduction

As of 2024, taxpayers will see an increase in their standard deduction, according to a report from IRS. Specifically, married couples filing jointly will see an extra $1,500 – bringing their total up to $29,200. This is a boost of 5.4%.

For the upcoming tax season, taxpayers who are unmarried and filing separately will receive a standard deduction of $14,600 – an improvement of $750 from last year. Meanwhile, heads of households can count on a boost in their standard deduction to $21,900 – up by $1,100 compared to 2019 taxes.

How to Determine Your New 2024 Tax Bracket

When it comes to taxation, understanding your marginal tax bracket is crucial. You’ll need to calculate your highest taxable income as accurately as possible to do this.

Consider a married couple bringing in an annual gross income of $150,000. After subtracting the 2024 standard deduction, they are left with taxable income worth $120,800. Therefore, the marginal tax rate applicable to them would be 22%.

However, their effective tax rate is much lower:

When it comes to taxes, individuals get a break when it pertains to their first $23,200 of income. While their effective tax rate is significantly lower than average, people who make between $23,200 and $94,300 will still be expected to pay 12%, amassing a total of $8,532 in taxes. Those with incomes ranging from $94,300 to $120,800 would be lucky enough to enjoy a much lower effective tax rate. For this bracket, taxes amount to 22%, which adds up to $5,830. Together, their federal income taxes would come to $16,682 – an effective rate of 14%.

Higher FSA, HSA Limits in 2024

In an effort to help taxpayers cover medical expenses, new regulations have been issued by the IRS, increasing limits for tax-advantaged accounts. Such accounts provide people with financial assistance when paying for related costs.

The Internal Revenue Service announced that in 2024, the limit for Flexible Spending Accounts (FSAs) will be increased to $3,200 from the current level of $3,050. These accounts allow individuals to set aside pre-tax dollars, which can then be used to pay for short-term health care expenses.

IRS recently announced modified limits for contributions to Health Savings Accounts (HSAs) for those with a high-deductible health care plan. Single taxpayers will be able to contribute up to $4,150 in 2024 – an increase of 7.8% from present limits. Similarly, families now have a contribution limit of $8,300 – a rise of 7.1%.

Individuals aged 55 and over can add an extra $1,000 to their health savings accounts (HSAs), a figure that remains unchanged from the previous year.

Tags: new tax bracket, new tax brackets, tax bracket, tax brackets, tax brackets 2024
Category: Tax and Life Changes, Tax Deadlines, Tax Deductions and Credits, Tax for Business, Tax Tips and Tricks, Tax Year 2023
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Basic Tax Planning with 5 Tax Strategies & Tax Filing Approaches

Posted by admin on October 26, 2023

Last modified: October 30, 2023

Fundamental 5 Tax Strategies & Tax Filing Concepts to an effective Tax Planning and Filing, such as being aware of your taxable bracket, understanding the basics of taxation, maintaining necessary documents, etc., are all essential for effective planning.

Maximizing the potential for financial advantage while obeying laws is the objective of effective taxation planning. By analyzing and arranging a person’s fiscal position, it is possible to minimize liabilities and maximize deductions efficiently.

Filing taxes can be a daunting task, yet getting familiar with the relevant rules has its rewards. Understanding some of the major principles involved in taxation planning and strategy may help you lessen your financial burden once it’s time to file. Here are some points to consider before making any significant monetary decisions.

Tax Planning 1. Tax Deductions VS. Tax Credits

When filing your taxes, you may be delighted to learn about the deduction and credit options available. Both can reduce the money owed in taxes, though they function differently. By understanding the distinction between them, it is possible to develop a great plan to lessen your overall burden.

When filing taxes, taxpayers have the opportunity to deduct certain expenditures. These deductions are subtracted from your total taxable income, reducing the amount you will pay in taxes.

In comparison to deductions, which are subtracted from your taxable income, a much more valuable benefit is a reduction in the actual amount of taxes you owe.

Tax Planning 2. Stay Up To Date on Any New Tax Deductions and Tax Credits

It is critical to remain aware of the numerous tax deductions and credits that are available. In total, there are several hundred options, so it’s essential to make sure you qualify for the ones you plan on claiming.

Tax Planning 3. Know Which Tax Bracket you Fall Into

It’s only possible to make plans for the future by understanding your current tax situation. As such, the first advice is to determine which federal tax bracket applies to your case.

There are good reasons why. Once your total income is calculated, tax deductions are subtracted to determine your taxable income. Consequently, the amount of your salary or overall earnings may not always equal your taxable income. Instead of simply calculating taxes by multiplying your tax bracket by your taxable income, the government takes a different approach. They split your taxable income into sections and apply the applicable rate to each section.

In contrast to a flat tax system, taxpayers in America face a progressive taxation system. This means those who make more pay taxes at higher rates, while those who earn less are subject to lower tax rates.
For the upcoming 2023 tax year in April, 2024, income is split up into seven distinct brackets. The rates range from 10% to 37% in increments of two and four percentage points.

Tax Planning 4. Standard Tax Deduction VS. Itemizing Tax Deduction

Standard Deduction

Regarding tax planning, one of the most important decisions you must make is whether to itemize your deductions or simply take the standard deduction. This choice can have huge implications for how much you owe in taxes.

The standard deduction is a way to make filing taxes easier and faster. This no-questions-asked tax break is a flat amount that many taxpayers take instead of itemizing deductions to simplify the process. In essence, it is a fast and straightforward option for reducing one’s taxable income.
Each year, the amount of the standard deduction is set by the United States legislative branch, and it is usually adjusted to account for inflation. Whether you are filing singly or jointly, your eligibility for the standard deduction varies; you can see in which bracket you fall concerning this particular tax benefit through the table below.

Itemize

Do you know why itemizing your taxes is important? By itemizing, rather than opting for the standard deduction, you can maximize your deductions on a tax return.

When tax planning, individuals should monitor their deductions throughout the year in order to determine whether itemizing is the best option. Usually, this choice hinges on whether the sum of their itemized deductions exceeds the standard deduction. Although itemizing can save money, it requires more effort and documentation than standard deductions. You must prove that you are eligible for any deductions taken when itemizing your taxes.

IRS Schedule A

When filing your taxes, Schedule A is the form used to list all itemized deductions. For those who own a home, there are advantages to itemizing that could result in more savings than the standard deduction would offer. Homeowners have access to tax deductions for mortgage interest and property taxes, which can quickly amount to more than what the standard deduction can provide.

For those who take the standard deduction on their federal tax returns, itemizing deductions for your state return may be worth considering. Fortunately, PriorTax provides Dedicated Tax Professionals for free with the ability to identify which tax deductions can be included and how their total amount compares to the standard deduction.

Tax Planning 5. Maintaining Prior Year Tax Records

When it comes to taxes, having records on hand is essential. Your tax return and the accompanying documentation should be kept secure in case of an audit. This is why it’s important to understand which documents are necessary for your taxation needs.

It is advisable to hang onto your records for at least three years due to the IRS’s time limit to carry out an audit on your return. Additionally, should you submit a claim for a tax credit or refund after filing your original return, those documents should also be kept for the same amount of time.

In certain situations, you may be required to maintain documents for an extended time, from six years to indefinitely. This is due to the Internal Revenue Service (IRS) having a longer limit on their auditing timeline in these cases. For example, the agency has up to six years when there was more than 25% income underreporting or seven years for writing off losses from worthless security. Furthermore, the IRS can audit indefinitely should they discover tax fraud or non-filing of any returns.

Tags: tax credit, tax deduction, tax planning
Category: Tax and Life Changes, Tax Deadlines, Tax Deductions and Credits, Tax Tips and Tricks
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Tax Implications for Reselling

Posted by admin on October 12, 2023

Last modified: October 13, 2023

Reselling may be a viable option for those considering an additional side gig. However, before embarking on this venture, it is important to consider its potential impact on your tax situation. Reselling has advantages and disadvantages that must be weighed against one’s current circumstances.

Investigating some of the various side hustles available today may be an excellent opportunity to make extra money. For example, reselling is one popular way to make money on the side.

Retailers, such as department stores, grocery stores, automobile dealers, and catalog sellers, purchase goods for resale. Usually, the items that these resellers buy are only slightly altered before they are sold to the consumer. Typically, when retailers purchase those items, they do not have to pay a sales tax but must collect it when resold to the end user.

When running a reseller business, being aware of state sales tax laws is important. Unless an exemption applies, companies that maintain a physical presence within a state must collect taxes on items they sell there. This can surprise those who have yet to consider the possibility of operating in multiple states. Therefore, reviewing these taxes and regulations across state lines before engaging in commerce is essential.

One of the most common types of tax exemptions is a reseller exemption. This type of exemption, generally in the form of a resale certificate, allows merchants to purchase goods without having to pay taxes as long as they will be resold in the future. States typically provide their own format for such certificates or can accept an alternative one that meets local law’s required information criteria.

To ensure that your customers receive the appropriate resale exemption, obtaining a copy of their resale certificate is strongly recommended. This will help satisfy state auditors when they review the exemptions claimed. By having a valid and up-to-date certification on file, you can be sure you are compliant with all regulations.

Tax Filing Implications of Reselling

Before you decide to take up reselling, it is critical to understand the potential tax implications that come with it. Most notably, your net profit – gross profit less any costs incurred – will be considered taxable income according to federal, state, and local laws. Even though you may not receive a 1099 or other tax documents from your marketplace, such as Amazon, PayPal, eBay, etc., all of your earned income must still be stated, and the relevant taxes paid on parts are deemed taxable.

When making a purchase, some people may be exempt from paying sales tax, depending on their situation. Sales tax is usually applied to the customer by the merchant when purchasing an item for personal use. However, resellers who can prove that the item they’re buying will not be used for themselves may be able to make their purchase without having to pay any taxes. This generally requires registering with the relevant state government and the retailer in question.

Blanket Resale Certificates may help to maximize your tax.

Instead of selling to consumers, wholesalers typically distribute products to other businesses. As an expert wholesale reseller, you likely have numerous companies that regularly make exempt resale buys from you. To simplify such transactions for most customers, many states offer the option of using “blanket” resale certificates when ordering merchandise from vendors.

Having one blanket resale certificate can be incredibly convenient, allowing customers to make regular exempt purchases. However, the laws concerning collecting and maintaining valid certificates vary from state to state. It is recommended that you familiarize yourself with your home state’s regulations on this matter.

Gathering resale certificates from customers is an important task. You have to keep a log of all the valid and filled-out documents that were accepted in good faith. Once you are certain that you meet the criteria for accepting a certificate, you can give your customer’s order a resale exemption as well as the shipping costs.

When accepting trade-ins from customers to purchase new equipment, it is essential to be aware of each state’s regulations. Depending on where you are located, the value of a trade-in may or may not reduce the amount subject to sales tax. While there is no set definition of what qualifies as an acceptable trade-in, each state will have its own standards that must be followed.

Internal consumption may complicate your tax filing.

Using a resale certificate to buy inventory binds you to be accountable for any sales or use tax, which may apply once that property is resold. Consequently, should the inventory be used internally by yourself or your business, states view it as though it was sold and require you to pay applicable sales tax on its value.

An Example Case

After three months of attending sneaker events and showing off your 20 pairs of sneakers, you donate them to a local shop. To do this, you will need to pay use tax on each pair’s value when you initially purchased them.

In contrast, when you sell the demo sneaker at a demonstration, for tax purposes, the worth of the sneaker will be determined by deducting any discount given for its “used” status from the standard sales price.

Summary

For centuries, individuals have been reselling products as a side job. This practice has become even more popular recently. Fundamentally, it involves purchasing something affordable and then offering it to another customer for a higher cost.

When it comes to reselling products, you have a few options at your disposal. These include retail arbitrage, online arbitrage, or drop shipping. No matter which method you choose, it is vital to be aware of any associated tax implications and make sure that you report all net income or profit earned.

Never fear; you need not worry about all the intricacies of tax regulations. Your own PriorTax dedicated tax professional is here to provide free assistance and will take care of preparing, signing, and filing your taxes promptly and correctly. This way, you can have peace of mind that everything is done right.

Tags: resale, reseller, reselling, tax on reselling
Category: Tax and Life Changes, Tax Deductions and Credits, Tax for Business, Tax Tips and Tricks
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Hawaii Announces Some Details on Wildfire Tax Relief Plan

Posted by admin on September 7, 2023

Last modified: September 8, 2023

Wildfire Victims May be Eligible for Hawaii Tax Relief

Taxpayers affected by the wildfire disasters in Hawaii counties may now receive various forms of Hawaii tax relief, according to an announcement from the state’s Department of Taxation (DOT). The DOT has released details about how those affected can take advantage of this tax relief, which this article will go through in detail.

Hawaii DOT will give special consideration on a case-by-case basis to those taxpayers adversely affected. This includes extensions for tax filing and paying various taxes, such as general excise (sales tax), transient accommodations, net income, tobacco, and liquor; waivers of penalties and interest; or any other form of assistance due to interruptions in mail delivery.

For those submitting their taxes via paper, write “2023 Wildfire Relief” on the top center of the return. Meanwhile, when filing electronically through Hawaii Tax Online, one must send a message selecting “I have a 2023 Wildfire Relief Question” in order to receive relief.

Those needing assistance due to the wildfire disaster should be sure to include a concise explanation when filing for tax relief. This statement should articulate what kind of help is requested and how the devastation has impacted their ability to meet tax obligations.

Individuals, businesses, and others can be considered “adversely affected taxpayers” when they cannot file tax returns or make payments due to the wildfire disaster.

The governor has declared certain areas to be disaster zones. Consequently, any funds from a property or casualty insurance policy resulting from the damage or loss of inventory utilized in a business within such an area are excused from General Excise Tax (GET).

For those affected by the Hawaii wildfires, there are specific tax relief regulations regarding Payment and Filing Relief and Extensions, Collections Relief and Extensions, and Taxability and Deduction.

Details on Payment Relief, Filing Relief, and Filing Extensions

Tax Filing Deadlines Extended for All Taxpayers?

Whether tax deadlines are extended for every taxpayer cannot be answered in the affirmative. Instead, the Department of Taxation (“Department”) has established that requests for tax filing extensions and waivers of late payment penalties and interest can be assessed on a case-by-case basis.

How do I request a waiver of penalties and interest from the Tax Relief?

Are you facing financial hardship due to the Hawaii wildfire disaster? Requesting a waiver of penalties and interest could be the solution. When filing by paper, add “2023 Wildfire Relief” to the top center of your return. Additionally, include with your tax filing a statement that explains why you have been adversely affected by the event.

When electronically filing, please be sure to get in touch with a free dedicated tax professional to help you explain how the wildfire disaster is negatively impacting you to the DOT of Hawaii.

I could not file on time due to a lack of electricity or internet due to the wildfires. Is that a good cause for a tax filing extension request?

Absolutely. Due to the devastating wildfires, tax filing can be delayed as a lack of electricity and internet made it impossible. Showing that you were affected by the fires would make you eligible to request a waiver or extension on penalties or interest.

Will this tax relief stay available? How soon will the DOT stop accepting requests for tax relief?

For what duration is relief available? As long as the Director determines necessary to counteract the effect of the wildfires, the Department will carry on considering requests for aid.

Do I still need to pay estimated taxes?

Should I submit estimated taxes? The answer is a resounding Yes. Even with the aftermath of the 2023 Hawaii wildfires, you may request extra time to make the necessary payments. To learn how to go about it, get in touch with our free, dedicated tax professional.

Is there any relief for taxpayers impacted by the Maui and Hawaii wildfires already under an installment payment agreement with the DOT?

Taxpayers will be obligated to resume installment payments following their payment plan. For further details, please get in touch with a dedicated PriorTax Tax Professional for free support from start to finish.

Taxpayers must restart their installment payments in order to comply with their current plan. Please reach out to your assigned collector for more info. If you do not have a contact detail, such as an email or a number, please call a relevant office and ask them to contact your collector.

Is tax relief available for a taxpayer with a property lien impacted by the Hawaii wildfires?

Those property owners affected by the wildfires in Hawaii may be wondering how they can access relief from their property lien dues. At present, the Department will not be providing a release of these liens. However, they could qualify for other forms of assistance, such as waiving interest during this difficult period. Get in touch with a free, dedicated Tax Professional to support your tax relief.

Details on Taxability and Deduction

Damages and Losses from Hawaii Wildfire Enable to Deduct from Tax Returns?

Which damages and losses can I declare on my taxes? We recommend that taxpayers speak with a dedicated tax professional or the IRS to determine suitable tax deductions. Concerning Hawaii income tax, the DOT aligns with section 165 of the Internal Revenue Code, addressed in Publication 547 from the Internal Revenue Service. Please refer to Tax Announcement 2023-03, under section II, to further investigate casualty loss claims.

Is the tax relief taxable?

Regarding taxation, one question lingers: Are tax relief payments taxable? It varies depending on the source of the funds and the purpose for which they are used. To elaborate further, please look at Tax Announcement 2023-03 and section IV to learn more about disaster relief payments.

Are donations to Hawaii Wildfire tax deductible?

The answer is yes. You may deduct donations from your taxes, but only under certain conditions. All donations and gifts from registered and qualified non-profit organizations will be eligible for tax deductions. However, contributions made to individuals or unregistered groups do not qualify. It is necessary to provide proof of the donation to receive the deduction on your taxes.

Tags: hawaii tax, hawaii tax relief, tax relief
Category: Tax and Life Changes, Tax Deductions and Credits, Tax News
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IRS Announces Tax Relief for Hawaii Wildfire Victims

Posted by admin on August 31, 2023

Last modified: August 31, 2023

The Internal Revenue Service (IRS) has issued a declaration of tax relief to those affected by the wildfires that began on August 8, 2023, in parts of Hawaii. Individuals and businesses affected have until February 15, 2024, to file returns and make required payments. Consideration is given to victims of the wildfire destruction in these areas of Hawaii.

In response to the damage caused by the Hawaii wildfire, FEMA has declared a disaster in Maui and Hawaii counties. As a result of this declaration, those who live or operate businesses in the affected areas are eligible for federal tax relief.

In response to a declared disaster, it has been made possible for those affected to postpone their filing and tax payment deadlines. An example is when deadlines falling between August 8, 2023, and February 15, 2024, can be extended with special permission from the IRS.

The Internal Revenue Service (IRS) has issued a grace period extending to February 15, 2024, for all affected individuals and businesses who need more time to file tax returns between January 1, 2021 and April 18, 2023. This stipulation includes 2022 individual income tax returns, with an original due date of October.

The February 15, 2024, deadline also applies to:

Quarterly estimated tax payments, which are normally due on September 15, 2023, and January 16, 2024.
Excise tax returns and quarterly payroll which are normally due on October 31, 2023, and January 31, 2024.

Businesses whose 2022 tax extension dates have elapsed or will soon elapse by September 15 (i.e., calendar-year partnerships and S corporations) and October 16 (calendar-year corporations) are eligible for the February 15, 2024 deadline for filing taxes.

On or after August 8, 2023, and before September 7, 2023, any late payroll or excise tax payments will receive abatement as long as the deposit is made by the said date.

When a taxpayer is subject to a late tax filing or late payment penalty notice from the IRS that had an original or extended due date during the postponement period, they should contact the number on the notification for the IRS to waive any charges.

Taxpayers affected by a covered disaster area can receive filing and payment relief from the IRS, provided they reside or have business in those areas. Those located outside of such regions should contact a dedicated PriorTax Tax Professional to benefit from this tax relief.

Who are Affected Taxpayers from Hawaii Wildfire?

Individuals and businesses affected by the covered disaster area, including tax-exempt organizations, are eligible for postponement of time to file tax returns, pay taxes, and perform other time-sensitive acts. This also extends to those who do not physically reside within the area but whose records necessary to meet a deadline lie within it. Thus, they, too, are entitled to some form of relief.

All those providing and receiving help during times of tragedy have the right to compensation for any damages incurred as a result of the disaster. That is why anyone affiliated with an official government or charitable organization assisting people affected by a disaster area is eligible for relief.

Taxpayers affected by the August 8, 2023 date will receive some relief from the Internal Revenue Service (IRS), as they can now file all relevant tax documents until February 15, 2024. This includes individual and corporate income tax returns, partnership and S Corporation returns, estate/gift/generation-skipping transfer taxes, annual information for tax-exempt organizations, and employment/excise taxes with either an original or extended due date up through February 15 of this year.

Taxpayers with estimated tax payments due between August 8, 2023, and February 15, 2024, now have an extension until February 15, 2024, to make those payments without facing any penalties for late payment. Those estimates must be paid before the end of that period to avoid penalty charges.

Declaring Casualty Losses from Hawaii Wildfire

For individuals impacted by a federally declared disaster, the option to declare casualty losses on their federal tax return for either the year of the occurrence or the previous year is available. Taxpayers who have selected this option and are reporting these losses on their 2022 returns have extended time until October 15, 2024, to make that choice.

Hawaii Wildfires have caused some taxpayers to seek out the disaster loss on their tax return. Make sure to state “Hawaii Wildfire” and the FEMA disaster declaration number, DR-4724-HI, at the top of your form. A PriorTax Tax Professional can assist individuals through this process from start to finish.

Other Possible Tax Reliefs

Taxpayers affected by disasters may find financial aid within their retirement plans or IRAs. For example, they could qualify for a special disaster distribution to spread the income over three years and avoid the extra 10% early distribution tax.

Those who pay taxes could qualify for a hardship withdrawal in certain instances. Every plan or IRA has separate rules and guidelines that must be adhered to by its participants.

The IRS may provide additional disaster relief in the future.

Taxpayers dealing with the repercussions of a disaster that the IRS has contacted in regard to a collection or examination should make their situation clear to the agency so that they can be given appropriate consideration.

Tags: hawaii state tax return, hawaii wildfire, hawaii wildfire tax
Category: Tax and Life Changes, Tax Deadlines, Tax Deductions and Credits, Tax for Business, Tax News
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Are You Receiving a Smaller Tax Refund

Posted by admin on August 17, 2023

Last modified: August 18, 2023

Could There be Unforeseen Instances in Getting a Smaller Tax Refund?

Reach out to one of our dedicated Tax Professionals at PriorTax should you believe the debt is not owed or there is a discrepancy in the amount taken from your refund. A Free dedicated Tax Professional could sort out the difference between your return and the original tax refund when you received a smaller tax refund.

The tax refund I received is less than expected. Why am I getting a smaller tax refund?

Are you concerned about the amount of your smaller tax return refund? We’ll assist you in understanding why the refund from your taxes is less than anticipated.

It is pretty normal for this to occur, often resulting from the IRS utilizing a portion of your refund money to cover any outstanding government debts that are owed.

In many cases, the IRS will use a portion of an individual’s tax refund to cover any unpaid government debts. These could range from overdue federal tax payments to student loan repayments and more. Other examples include past-due child support, outstanding state income taxes, fraudulent unemployment compensation wages or contributions due to a state fund, and SBA loan repayments.

HUD (Department of Housing and Urban Development ) loan repayments
Managing unpaid taxes comes under IRS jurisdiction, while any other debts are handled by the Department of Treasury’s Bureau of Fiscal Services (BFS). You may receive a notice from BFS detailing why your tax refund is less than what you expected should part or all of it be used to settle a debt.

When part or all of your anticipated tax refund is allocated to pay off a debt, BFS will provide notification to clarify the details. This notice will explain the initial refund amount, offset amount (the portion they are taking), and details of the agency that is receiving payment such as its address and phone number.

But, Did You Get More in Tax Refund instead of less?

You May Have Overpaid Withholding Taxes

Believe it or not, getting money back from the IRS is only sometimes good. That may seem odd, but it’s true. Receiving a refund can have implications that may ultimately cost you more in the end.

Nobody likes giving Uncle Sam a loan without collecting interest, yet this may be the situation you are in with your payroll taxes. Too much is likely being withheld, meaning you could be getting more of your money back. To ensure you’re not missing out, it’s wise to double-check your withholding amounts. That way, you can use the funds how and when you want to – rather than doing a last-minute scramble when tax season comes around.

One way to review your withholding taxes is with an IRS Tax Estimator. You’ll need to have pay stubs and any other paperwork related to income on hand. Once you put in all that information, it can tell you what your tax liability looks like.

Once you obtain results from this estimator, it’s possible to decide whether or not filing a new W-4 form should be submitted to your employer.

One way to guarantee success at tax time is to look into withholding. Doing this makes it possible to ensure the proper amount of taxes are taken out and avoid any unpleasant surprises when filing. Additionally, this can help you decide whether you should change the amount of taxes deducted from each paycheck.

Instead of allowing Uncle Sam to loan you money, make sure your withholding is accurate by periodically checking it. Waiting until the end of the year can lead to over-withholding and an unnecessary loan from the government.

Tags: smaller tax refund, tax refund
Category: Tax and Life Changes, Tax Tips and Tricks, Taxes for Prior Years
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