Carol A. Reithmiller, CPA, PLLC

11/11/2024

Business Year End Suggestions

First, look at your current Profit and loss statement and compare it to last year’s (prior year to date comparison). How are you doing? Are your income increases and resultant expenses in line? Why or why not? What do you think will occur in 2025?

Now that the election is behind us, we can make a rough assumption that the corporate tax rate will remain flat, so we need to rely on the profit to determine when we need to reduce income.

If you believe that the 2024 income will be higher (than 2025) – you can do the following to reduce it:

Look at making needed acquisitions in 2024:
Computer Hardware
Computer Software
Updating Office or Warehouse space
Automobiles ($12,400 depreciation without bonus, $20,400 with bonus). Remember to track the mileage.
Charity – Gifts made from C Corporations are taken on the business return. All other gifts pass through to the individual owner. Remember that the gift must be given to a qualified charity, not to an individual. Stale or obsolete inventory can also be donated. Call me to discuss.
Make year-end bonuses in 2024 – through payroll. Can issue a separate check to hand out.
Client gifts – limited to $25 each.
Employee parties are fully deductible (must be reasonable)

Is it time to purchase a building instead of renting? We have some unique offers from banks where they will pay some of your closing fees. Also, the SBA 7(a) loan rates have been lowered.

The QBI deduction, where 20% on your net business income needs to be considered when making the above calculations.

Last…

The final 2024 tax estimates are due on January 15, 2025. Take advantage of paying the State component through your business if a S-Corporation or a Partnership.

As always, we are here to assist you.

10/25/2024

Identity Theft and Taxes

As we all know, identity theft is so rampart that it does not even make the news anymore. Sadly, I’ve had free credit protection for years due to numerous security breaches. That being said, what if your tax identification was stolen? That is a whole other matter.

The IRS has a FREE program (you know free is for me). If you enroll, you get an IP PIN sent to you every year. You will need to provide me with that code before we can electronically file your tax returns. If you do not give me the IP PIN, then your return is rejected. This stops the bad guys from filing a counterfeit or fraudulent return.

To request the IP PIN, you have to sign up for IRS Online Account, Online account for individuals | Internal Revenue Service . Once you have created an account, click on Your Profile. Scroll down until the bottom of the page until you see Identity Protection PIN. Click on the blue button – Enroll in IP PIN.

Sign in or create an online account. Review the amount you owe, balance for each tax year, payment history, tax records and more.

10/23/2024

IRS announced the new 2025 limits

• Standard deductions: For single taxpayers and married individuals filing separately for tax year 2025, the standard deduction climbs to $15,000 for 2025, an increase of $400 from 2024. For married couples filing jointly, the standard deduction rises to $30,000, an increase of $800 from tax year 2024. For heads of households, the standard deduction will be $22,500 for tax year 2024, an increase of $600 from the amount for tax year 2024.
• Marginal rates: For tax year 2025, the top tax rate remains 37% for individual single taxpayers with incomes greater than $626,350 ($751,600 for married couples filing jointly). The other rates are:
• 35% for incomes over $250,525 ($501,050 for married couples filing jointly);
• 32% for incomes over $197,300 ($394,600 for married couples filing jointly);
• 24% for incomes over $103,350 ($206,700 for married couples filing jointly);
• 22% for incomes over $48,475 ($96,950 for married couples filing jointly);
• 12% for incomes over $11,925 ($23,850 for married couples filing jointly); and,
• 10% for incomes $11,925 or less ($23,850 or less for married couples filing jointly).
• Alternative minimum tax exemption amounts: For tax year 2025, the exemption amount for unmarried individuals increases to $88,100 ($68,650 for married individuals filing separately) and starts to phase out at $626,350. For married couples filing jointly, the exemption amount rises to $137,000 and starts to phase out at $1,252,700.
• Earned Income Tax Credits: For qualifying taxpayers who have three or more qualifying children, the tax year 2025 maximum Earned Income Tax Credit amount is $8,046, an increase from $7,830 for tax year 2024. The revenue procedure includes a table providing the maximum EITC amount for other categories, income thresholds and phase-outs.
• Qualified transportation fringe benefit: For tax year 2025, the monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking rises to $325, increasing from $315 in tax year 2024.
• Health flexible spending cafeteria plans: For taxable years starting in 2025, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements rises to $3,300, growing from $3,200 in tax year 2024. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount rises to $660, increasing from $640 in tax year 2024.
• Medical savings accounts: For tax year 2025 participants who have self-only coverage, the plan needs to have an annual deductible no less than $2,850 (a $50 increase from the previous tax year), but no more than $4,300 (an increase of $150 from the prior tax year).
The maximum out-of-pocket expense amount rises to $5,700, up from $5,550 in tax year 2024. For family coverage in tax year 2025, the annual deductible is no less than $5,700, increasing from $5,550 in tax year 2024; however, the deductible can't be more than $8,550, an increase of $200 versus the limit for tax year 2024. For family coverage, the out-of-pocket expense limit is $10,500 for tax year 2025, rising from $10,200 in tax year 2024.
• Foreign earned income exclusion: For tax year 2025, the foreign earned income exclusion increases to $130,000, from $126,500 in tax year 2024.
• Estate tax credits: Estates of decedents who die during 2025 have a basic exclusion amount of $13,990,000, increased from $13,610,000 for estates of decedents who died in 2024.
• Annual exclusion for gifts: The exclusion grows to $19,000 for calendar year 2025, rising from $18,000 for calendar year 2024.
• Adoption credits: For tax year 2025, the maximum credit permitted for an adoption of a child with special needs is the amount of qualified adoption expenses up to $17,280, increased from $16,810 for tax year 2024.
Unchanged for tax year 2025
By law, some items that used to be indexed for inflation in the past are currently not adjusted.
• Personal exemptions: For tax year 2025, they remain at 0, as in tax year 2024. The elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act of 2017.
• Itemized deductions: There is no limitation on itemized deductions for tax year 2025, as in tax year 2024 and preceding, to tax year 2018. The limitation on itemized deductions was eliminated by the Tax Cuts and Jobs Act of 2017.
• Lifetime learning credits: The modified adjusted gross income amount used by taxpayers to determine the reduction in the Lifetime Learning Credit provided in Sec. 25A(d)(1) of the Internal Revenue Code is not adjusted for inflation for taxable years starting after Dec. 31, 2020. The Lifetime Learning Credit is phased out for taxpayers with modified adjusted gross income in excess of $80,000 ($160,000 for joint returns).

https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2025

https://www.irs.gov/pub/irs-drop/rp-24-40.pdf