Category: Tax Tips and Tricks

Taxes are confusing and cause many taxpayers stress come tax season but PriorTax is here to help. Learn the tax tips and tricks to get you through the preparation process. You could be missing out on more money from the IRS which is why we want to help. We’ll let you know about hidden deductions and rare credits to report on your tax return to maximize your refund. Don’t hesitate to leave a comment on our blog if you have a question about your tax situation. Also, check back here for new tips and tricks throughout the tax season because our team is on the lookout!

Archive for the ‘Tax Tips and Tricks’ Category

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.

tax deductions

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.

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.

2024 New Tax Brackets

Posted by admin on November 16, 2023
Last modified: November 20, 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

2024 new tax brackets

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.

401(K) and IRA for Tax and Investing

Posted by admin on November 9, 2023
Last modified: November 10, 2023

With the upcoming taxes, it’s a great opportunity to begin improving and make this year top the previous one. A popular resolution that many tend to need to catch up on is a more significant savings amount in your 401k or IRA.

When it comes to your retirement years, what you save and invest today will have a major impact. Fortunately, there are some great retirement plans that come with substantial tax advantages.

For most of us, our resources are limited when it comes to funding retirement accounts. It is no surprise, then that so many of us are seeking out ways to maximize our contributions in order to provide ourselves with a better life once we retire.

The Difference Between IRA or 401(k)

When it comes to retirement savings options, 401(k) and IRAs are some of the most notable vehicles. Through a 401(k) offered by employers, individuals can put away their pre-taxed dollars for retirement. It’s a great way to both plan ahead for the future and lower one’s taxable income in the present.

In addition, some employers are willing to provide matching funds for what you deposit throughout the year.


What Makes 401(k) an Effective Investing Tool and for Minimizing Your Tax?

401(k)s are an effective investing option due to the benefits associated with them. Additionally, IRAs offer two options – traditional and Roth. With a traditional IRA, taxes must be paid upon withdrawing the funds in retirement; however, with a Roth IRA, taxes are paid when money is initially put into the account, and withdrawals are tax-free during retirement.

Asking yourself a few key questions can be hugely beneficial to helping you increase your retirement savings.

What is 401(k) Matching by your Employer?

Maximizing your 401k contributions with a match from your Employer is an excellent way to build up savings for the future. Typically, this matching percentage is based on a certain amount of your pre-tax salary. Doing so will provide extra funds to make retirement much more secure and comfortable.

Your Employer could be offering a fantastic benefit – a dollar-per-dollar match of your contributions up to 5% of your gross pay. That means they’ll double any money you put in without you having to lift a finger! It’s like getting free cash; all it takes is investing in yourself.

Are You Taking Full Advantage of Your 401(k)?

In order to retain employees, employers may make it mandatory for individuals to stay with the company for a predetermined amount of time before they can access full benefits. This includes access to the Employer’s share of matching contributions that would otherwise be unavailable.

When considering your 401k contributions, you should consider your long-term employment plans. For instance, those who are already vested or content in their current job may opt for the maximum contribution to receive the employer match. In contrast, those considering moving on from their current role could decide that an IRA might be a better fit for their savings.

There are Various 401(k)s to Choose from

While 401ks offer the convenience of having an employer make decisions on your behalf, IRAs provide much more control over how you invest and save for retirement. You have the option to choose from a variety of low-cost index funds, allowing you to customize it according to your own needs and requirements.

Before you decide to invest in your 401(k), make sure you take a few minutes to review the investment options available. Even though there may be some good choices on the table, it’s important to be aware of all possibilities before making a decision.

Invest and Save on Tax by Vesting in 401k and IRA.

Need help deciding what to do? Here’s one idea that could be just right for you: divide your investments between two accounts. To ensure you get the maximum match from your Employer, chat with Human Resources and ensure enough is taken out of each paycheck. Reach out to our Dedicated Tax Professionals for free to walk you through from start to finish.

Investigating the rules and regulations provided by the IRS when contributing to an IRA is crucial. Additionally, don’t forget to make use of spousal IRA contributions! It is important to ensure that your contributions meet all requirements and standards the Internal Revenue Service sets forth.

It’s vital that you don’t postpone investing for your retirement any longer. Taking action now can make a big difference in years to come – so get started while you still can! You will be grateful for yourself in the future as you reap all sorts of rewards from your decision to start investing now.

11 Strategies to Lower Your Tax Bill

Posted by admin on November 2, 2023
Last modified: November 6, 2023

It is no secret that nobody wants to end up with an unpredicted tax bill. To help make sure that doesn’t happen, here are 11 tactics you can use to reduce your overall tax burden throughout 2023. While utilizing some of these 11 strategies may necessitate itemizing tax deductions instead of taking the standard tax deduction, it could be well worth it to lower your tax.

In addition to tax deductions and tax credits, other means of tax optimization can be particularly advantageous to lower your tax. These approaches have become increasingly popular in recent times, so let’s look at some of them.

Also a Dedicated Tax Professional can walk you through your tax filing from start to finish for free.

1. Re-evaluate and Slight Adjustments to Your W-4

Adjust your W-4 before it’s too late. This form is critical, as it tells your employer how much tax to deduct from every paycheck. This year, you may have been surprised by a large tax bill. However, you can take steps to ensure that doesn’t happen again. Increase your tax withholding amount so when it comes time to file taxes, the refund or payment due is lower than it would have been. In comparison, those who got a sizable refund should reduce their withholding as they could be living on less of their paycheck throughout the year otherwise. You can adjust your W-4 at any given moment.

2. Maximize Your 401(k)

You can use 401(k)s to lower your tax bills. Contributions to a 401(k) made directly from your paycheck are not taxable by the IRS. By 2023, you can contribute up to $22,500 annually to one of these accounts. This provides a significant tax savings opportunity for individuals.

Regardless of your age, the idea of contributing to a retirement fund is something worth considering. For those 50 or older in 2023, you can contribute an additional $7,500. 401(k)s are the most common type of retirement accounts sponsored by employers, and even self-employed people can open their own.

lower your tax

3. Options from the IRA

When planning for retirement, two primary options are Roth IRAs and traditional IRAs. Depending upon one’s income level and whether they or their spouse have a retirement plan at work, contributions to a traditional IRA may be eligible for a tax deduction.

In the 2023 tax year, those who are married and filing jointly may be unable to deduct their contributions to a retirement plan at work should their modified adjusted gross income exceed $136,000. It should be noted that this is only applicable in cases where a retirement plan covers the taxpayer through employment.

Contribution limits for an IRA in 2023 are set at either $6,500 annually or $7,500 for individuals 50 or older. Although the calendar year has already begun, you still have until the tax filing deadline to make contributions from the prior year’s income.

4. Save Up for College Ahead

Parents eager to save for their child’s tuition may be able to receive a tax break. A popular choice is the 529 plan, an educational savings account operated by a state or educational institution. While contributions are not deductible on federal taxes, some states may allow for deductions when contributing to their 529 plans. It’s important to be mindful of the gift tax limit, which currently stands at $17,000 per beneficiary in 2023 and beyond.

5. For the Employers, Use the FSA 

Taking advantage of a flexible spending account can be a great way to save on taxes. Your employer may offer an FSA, and every year, you can deposit up to $3,050 in pre-tax dollars from your paycheck into this account. This can be a smart move when it comes to lowering your tax bill.

The money allocated each year for medical and dental expenses can be used to purchase items such as first aid, bandages, breast pumps, pregnancy test kits, and acupuncture related to healthcare. These goods apply not only to yourself but also to your designated dependents. Employers may enable the funds to roll over into the following year.

6. Use your Dependent Care FSA Account

A great way to pay less taxes in 2023 is by using a Dependent Care FSA Account. Employers often offer these unique FSAs, and the IRS will not include up to $5,000 of your salary when it is diverted into one of these accounts. You can then exclude this from paying taxes on that total amount.

For parents of young children, there may be significant advantages to their employers’ benefit plans. Usually, allowable uses are daycare, before- and after-school care, preschool and day camps. It is possible elder care could be included as well. However, it is important to review the documents pertaining to your plan for complete information about what is covered.

7. Maximize Your HSA

For those with high-deductible health care plans, one way to reduce taxes is to open a health savings account. Money put into an HSA is exempt from taxes when deposited and tax-free when used for qualified medical expenses.

In 2023, individuals who have self-only high-deductible health coverage can contribute to tax deduction up to $3,850 to their Health Savings Account (HSA). Families with the same type of cover can invest up to $7,750. Folks aged 55 and higher are entitled to an additional contribution allowance of $1,000. Establishing an HSA is possible through your workplace or other banking institutions.

8. Explore if you Qualitfy for the EITC

Do you believe your earnings in 2023 will amount to less than $63,398? In this case, it could be a great idea to investigate whether you’re eligible for an Earned Income Tax Credit(EITC). This valuable tax break could potentially offer credits of up to almost $7,500 depending on your financial status (marital and children)

Rather than simply reducing how much of your income is subject to taxation, as with tax deductions, getting tax credits can be even more beneficial by providing real savings. In fact, should the credit result in your total tax bill coming to less than zero, it’s possible for the IRS to refund some or all of the money back to you.

9. Charity and Donations

People can get a tax deduction for contributions to charity, and these don’t even have to be in the form of money. Items such as clothes, food, sports equipment, or other household goods that have been given away are all valid items to deduct from taxes – as long as you get a receipt from a legitimate organization.

As you prepare to do your taxes in 2023, consider itemizing your deductions. Doing so can allow you to receive a charitable contribution tax deduction of up to 60% of your adjusted gross income. To make sure that all donations are accounted for correctly, create an itemized list of any items donated prior to dropping them off at places like Goodwill. With the help of tax software programs, these donations could potentially add up to substantial deductions.

10. Collect and File Your Qalitifed Medical Expenses

It’s important to keep documents related to hospital stays or costly medical or dental care for the 2023 tax year. But to lower your tax bills, know that your medical expenses that are qualified which exceed 7.5% of your adjusted gross income can be tax deducted from that year’s taxes.

Thus, your adjusted gross income is $40,000. In that case, above $3,000 of your medical costs – representing 7.5% of your AGI – may be deductible. Suppose you had $10,000 in medical bills; then you could claim deductions on the sum of $7,000.

11. Prepare and File in a Timely Manner

By the end of the year, there can be a dramatic difference in tax implications depending on when you make certain purchases. Therefore, it is wise to analyze whether an expense can be paid before December 31st instead of waiting until January for increased tax benefits. To illustrate this concept, consider how making your mortgage payment at the end of the year could provide additional interest deductions compared to when it would have been processed in January.

Regarding tax season, one should be conscious of being close to the medical-expense deduction threshold.

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

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.


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.

November 16. A New Extended 2023 California Tax Extension Deadline

Posted by admin on October 19, 2023
Last modified: October 23, 2023

Taxpayers in California have been offered an California Tax Extension of the 2023 tax deadline. Here’s what you need to be aware of concerning the extra time the Internal Revenue Service (IRS) gives.

This year, California was met with an unfortunate tragedy as unparalleled snowfall and widespread flooding wreaked havoc on the state. In response to this natural disaster, the Internal Revenue Service (IRS) granted residents affected by the storms an extension to their 2022 tax filing deadlines in 2023.

Are you concerned about the news but unsure what it means?

Don’t worry. PriorTax free Dedicated Tax Professionals are here to help break down which counties are involved and when key dates should be kept in mind and to give you advice on how to go about filing a claim due to this catastrophic event. And remember – we can be there for you when it’s time!

As of October 16, 2023, The IRS has officially extended federal tax deadlines for Californian taxpayers to November 16. This applies to all (55 Counties) but three counties in California – Lassen, Modoc, and Shasta – which were declared disaster areas by FEMA over the course of several months.

California’s Franchise Tax Board has granted an additional extension on filing and payment of state taxes for tax year 2022 to accommodate those affected by disaster areas. Those living in covered disaster areas have until November 16, 2023, to submit their returns. This allowance follows suit with federal tax deadline changes.

Those located in counties announced by the IRS on January 10, January 24, and March 17 as disaster areas are allowed the benefit of an extended deadline to submit their taxes. Unfortunately, those living and conducting business in Lassen, Modoc, and Shasta counties won’t have this reprieve.

california tax extension

California Tax Extension Deadline 2023

Generally, the timeline for paying your federal taxes remains fixed. But in the event of catastrophic occurrences, you are eligible for an extended payment period. As long as your address is one of those located in a declared disaster area, additional time is granted without having to request it formally.

Apart from requesting a California tax extension, you could be eligible to take advantage of a disaster loss deduction on your taxes should your property have been affected by the stormy weather. Further information on this subject can be found below on this page.

In California, those living in federally declared disaster areas included in one or more of three separate declarations have until November 16, 2023, to file and pay their taxes. This date serves as a deadline for taxpayers living under these conditions.

California Disaster Information

In times of stress, such as when suffering property damage from a major storm, filing for a tax extension can be quite beneficial. This extra time will allow you to focus on more pressing tasks, like filling out insurance reports or making necessary repairs.

Although it can be heartbreaking to suffer a loss due to the storms, there is hope: You can apply for a disaster-related tax deduction for either the 2022 or 2023 tax year as long as the federal government has designated your area as an official disaster zone.

For those who have experienced loss due to a disaster in 2022, it is wise to begin collecting and submitting the necessary documents before the 2023 California tax deadline on November 16. This could necessitate obtaining appraisals, filing insurance claims, and other proceedings for determining the worth of your property. Therefore, beginning this administrative work ahead may prove beneficial as it can take time for all these steps to be completed fully.

What are The New Extended Tax and Payment Deadlines for California Storm Victims?

Due to multiple FEMA declarations concerning severe storms, flash flooding, mudslides and landslides that took place over a certain period, tax filing and payment deadlines have been extended until November 16, 2023. All individuals and businesses in the affected area thus have additional time to submit their taxes originally due during this period.

2022 Individual and Business Returns:

Eligible taxpayers can now take advantage of extended deadlines for filing their 2022 returns and contributing to their IRAs and health savings accounts. Their returns, including business and personal income taxes, were originally due on March and April, but are now required by November 16, 2023. This allows for an eight-month extension of the original deadline.

Quarterly Estimated Tax Payment:

The 4th quarter estimated 2022 and 2023 income year payments have been postponed until November 16, 2023. This means individual taxpayers are exempt from making their fourth quarter payment on January 17, 2023. Instead, they can include this with their income return when filed by November 16.

Quarterly Payroll and Excise Tax Returns:

After assessing the current financial situation, I found that the due date for payroll and excise tax returns, which are usually due on May 1, July 31, and October 31, has been extended until November 16, 2023. Furthermore, no penalties will be imposed on payments made between January 8-23, 2023, as long as these deposits occur on or before the 23rd.

What Do I Need To Do to File on a New Extended Tax Extension Deadline?

Taxpayers in a disaster area do not need to contact the IRS for filing and penalty relief, as this is automatically extended. However, there may be instances where affected individuals receive late payment or filing charges with due dates that fall during a postponement period; in such cases, it would be advantageous to call up the number stated on the notice and seek a reduction of penalty.

If impacted, how can I claim a casualty and property loss on my taxes?

Those who experienced damage from a disaster but have not been previously insured or reimbursed can declare the losses on their tax return either for the year in which it occurred (2023) or even go back to the prior year’s return (2022). Additionally, any personal property losses that is not covered by insurance can be deducted, too.

When you are filing your taxes concerning the California disaster loss, clearly note the Disaster Designation- “California, severe winter storms, flooding, landslides, and mudslides” – at the top of the form. Writing it out in bold is a good way to ensure that all details will be taken into account.

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.

tax on reselling

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.


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.

What is Tax Extension Filing Deadline and What happens in October?

Posted by admin on October 5, 2023
Last modified: October 6, 2023

For those involved with businesses across the U.S. and Canada, it is important to stay abreast of crucial income tax extension deadline in October 16. Whether you possess U.S. citizenship, are a Green Card Holder living in Canada, or own a business with U.S. interests, staying aware of key dates can greatly benefit your tax compliance efforts.

Time is quickly running out for those who requested an extension on their taxes. Failure to meet this deadline can have significant repercussions, and it’s important to note that this year’s tax day fell on April 18 rather than its typical date of April 15 due to a Saturday being a non-business day.

With the 18th tax extension deadline for Federal Income Tax filing quickly approaching, many taxpayers have looked to get an extension. Online research has revealed that more and more people are interested in getting an extension to complete their 2022 taxes. But it’s important to note that you will have limited time to finish your tax return accurately once this extension is granted. It is also essential to be aware of the possible penalties you may incur should you miss this filing date.

With October 15 falling on a Sunday, taxpayers seeking an extension of their taxes will need to remember that they now have until Monday, October 16. Failure to meet this new deadline comes with two possible penalties, depending on your circumstances.

tax extension deadline

For those who have failed to file their return on time, two penalties come into play: the failure to file a penalty and the failure to pay a penalty. However, those who have properly applied for an extension can handle the former. It is important that taxes be completed and filed as soon as possible after October 16 in order to avoid incurring any further interest or penalties due to a missed April deadline.

Although you applied for an extension back in April, October 16 is the final date you can pay your taxes. This is the cutoff point for those who requested an extension. Of course, there are still alternatives available to taxpayers from the Internal Revenue Service (IRS) should they still need to meet their tax bill.

The Internal Revenue Service offers a payment plan that enables individuals to pay taxes in manageable pieces. You can set up an installment agreement on its website to explore this option further. Furthermore, PriorTax dedicated tax professionals are available to assist you for free when filing your tax return.

For U.S. expats living abroad, determining U.S. tax filing deadlines can be a complex task; that is why PriorTax provides a free Dedicated Tax Professional to help. For instance, U.S. citizens or residents who live in Canada normally have an April 15 (or April 18 in 2023) deadline for tax filing an income tax return with the IRS. However, those whose tax home and abode are outside the United States and Puerto Rico are automatically given an extension until June 15.

In order to extend the filing deadline past the original date of April 15, individuals must take affirmative action by submitting Form 4868 for an automatic extension until October 15 (October 16, 2023). Alternatively, a carefully prepared letter can be sent to the IRS providing a valid explanation and potentially garnering another two months of leeway until December 15 with IRS approval. Yet another form, Form 2350, is available for U.S. expats who require extra time to meet certain Foreign Earned Income Exclusion requirements; this extends their filing deadline appropriately.

For U.S. Resident Individuals Tax Forms for Filing by Tax Extension Filing Deadline

Depending on what documents are to be presented, affirmative action may have needed to be taken in order for the original date to be pushed back.

  • Tax Form 1040 – U.S. Individual Income Tax Return
  • Tax Form 2555 – Foreign Earned Income
  • Tax Form 3520 – Annual Tax Return To Report Documented Transactions With Foreign Trusts and Receipts of Foreign Gifts
  • Tax Form 5471 – Information Return of U.S. Persons With Respect To Certain Foreign Corporations
  • Tax Form 8621 – Information Return by a Shareholder of a Foreign Passive Investment Company or Qualified Electing Fund
  • Tax Form 8938 – Statement of Foreign Financial Assets
  • Tax Form 709 – United States Gift (and Generation-Skipping Transfer) Tax Return
  • FinCEN Tax Form 114 – Report of Foreign Bank and Financial Accounts (FBAR)

U.S. Nonresident Alien Individuals Tax Forms for Filing by Tax Extension Filing Deadline

  • Tax Form 1040-NR – U.S. Nonresident Alien Income Tax Return
  • Tax Form 8833 – Treaty-Based Return Position Disclosure
  • Tax Form 8840 – Closer Connection Exception Statement for Aliens

For U.S. Entity Businesses Tax Forms for Tax Extension Filing Deadline

The following are tax forms you may consider when preparing for filing tax extension by October 16, 2023,

  • Tax Form 1120 – U.S. Corporation Income Tax Return
  • Tax Form 5472 – Information Tax Return of a 25% Foreign-Owned Foreign Corporation or a U.S. Corporation Conducted in a U.S. Trade or Business
  • Tax Form 1041 – U.S. Income Tax Return for Estates and Trusts

Contact PriorTax to find your free dedicated tax professional today to help you from start to finish to file your complex 2022 tax by October 16 to avoid any penalties. 

Disaster Area Tax Extension Deadline on October 16

Posted by admin on September 28, 2023
Last modified: September 28, 2023

October 16 2023 tax extension deadline has moved from May 15 2023 for disaster area taxpayers in California, Georgia and Alabama.

The IRS has recently announced an tax extension deadline for disaster-area taxpayers in certain parts of California, Georgia and Alabama. Taxpayers from those areas have until October 16, 2023, to make tax returns and payments. This deadline was previously set for the 15th of the month of April.

Millions of taxpayers take advantage of the opportunity to request an extension from the IRS every April. By submitting Form 4868, these individuals have bought themselves six additional months to complete their 2022 tax returns before the due date.

When it comes to the tax extension deadline, you should be aware of a few things. While filing a tax extension may grant you more time to submit your return, it does not give you an additional window to pay your taxes – they were still due in April. Consequently, make sure you file by October 16 at the latest or else you could face additional charges and fees.

tax extension deadline

Automatic Tax Extension Deadline to October 16 for disaster areas

Earlier this year, IRS has declared an extension to the tax filing deadline for individuals and businesses in damaged areas of California, Georgia and Alabama. This change allows citizens in these regions until October 16 of, 2023 to take care of their federal taxes, which was previously set for May 15.

For areas hit by disasters, relief is being provided to those designated by FEMA in three states. Depending on each disaster, there are four distinct declarations with their respective start dates and other details listed on IRS’s Tax Relief in Disaster Situations page. This document contains a comprehensive list of localities eligible for this assistance as well as pertinent information specific to these situations. (

Recent relief has delayed certain tax filing and payment deadlines until October 16 for most calendar-year 2022 individual and business returns, including those for individual income tax, various business returns, and returns of tax-exempt organizations. By postponing these respective due dates from their original dates of April 18, March 15, and May 15, respectively, taxpayers have been given more time to submit relevant documentation.

The October 16 deadline has been extended for taxpayers wishing to make 2022 contributions to their IRAs and health savings accounts.

As a bonus, those employed as farmers who usually submit their tax returns on March 1 will now have an extended period of time to complete this task.

Those who owe estimated taxes for 2022’s fourth quarter are in luck, as they now have until October 16 to make this payment, originally due on January 17, 2023. This means that individuals can avoid making this full payment earlier and instead include it when filing their return before October 16.

By October 16, 2023, estimated tax payments due on April 18, June 15 and September 15 must be paid. Quarterly payroll and excise tax returns that would usually be due on January 31, April 30, and July 31 are also required to meet this deadline.

When you contact your free dedicated tax professional, taxpayers in areas affected by natural disasters can find information regarding various returns, payments, and tax-related actions that are eligible for additional time. Extension paperwork is not required to be filed, nor do they need to call IRS to receive an extended period of time.

Individuals with an address of record in an affected disaster area will get filing and penalty relief from the IRS automatically. They don’t need to call for this assistance. That being said, any person who gets a late tax filing or payment penalty notice from the IRS with due dates inside the postponement period should contact them using details on the notice to request abatement of the penalty.

The IRS is taking extra measures to help those affected by the disaster who may not necessarily live within the affected area. However, they still need access to their necessary records during the postponement period. Those taxpayers can contact PriorTax’s free dedicated tax professionals for support and assistance. This includes individuals or organizations that are affiliated with a government or philanthropic organization and helping with disaster relief activities.

Victims of a federally declared disaster area who sustained uninsured or unsalvaged losses can select to declare such damages on either the present year’s return or the preceding year’s return. Find your dedicated tax professional for more information and to walk you through the process from start to finish.