Sharon's Tax Service

04/16/2025

Thank you to all of my awesome clients for helping to make this another special tax season together! You're the BEST!

Have a great rest of the year! 🏆

04/11/2025

Only a few more days (4-15-2025 is the last eligible day) left to be eligible to file and claim refunds for Tax Year 2021.

IR-2025-46: More than $1 billion in 2021 tax refunds still unclaimed – Taxpayers should act now to see if they are eligible Internal Revenue Service (IRS) sent this bulletin at 04/11/2025 03:05 PM EDT IRS Newswire April 11, 2025 News Essentials What's Hot News Releases IRS - The Basics IRS Guidanc...

04/07/2025

🤣😂 Love my clients, but this shirt is so true.

01/30/2025

WASHINGTON —The Internal Revenue Service today provided taxpayers with six tips to make filing their 2024 tax return easier.

Most of the information below is also available on the IRS.gov Let Us Help You page. Taxpayers should follow these handy suggestions as they prepare to file:

1. Gather all important and necessary tax paperwork and records needed for filing a complete and accurate tax return. Errors and omissions can lead to missing a deduction or credit and slow down tax return processing and refunds.

Before filing, taxpayers should have their:

Social Security numbers for everyone listed on the tax return.
Bank account and routing numbers.
Tax forms such as W-2s, 1099s, 1098s, records of digital asset transactions and other income documents.
Form 1095-A, Health Insurance Marketplace statement.
IRS letters they may have citing an amount received for a certain tax deduction or credit.
2. Report all types of income on the tax return to avoid receiving a notice or a bill from the IRS. Include income from:

Goods created and sold on online platforms.
Investment income.
Part-time or seasonal work.
Self-employment or other business activities.
Services provided and paid through mobile apps.
3. Avoid paper returns. Filing electronically with direct deposit is the fastest way to get a refund. Plus, tax software helps taxpayers avoid mistakes. It does the math and guides people through each section of their tax return.

4. Consider IRS free resources to help eligible taxpayers file.

IRS Free File provides a free online alternative to filing a paper tax return to any individual or family who earned $84,000 or less in 2024.
Direct File is available in 25 participating states for eligible taxpayers to file online directly with the IRS for free. This year, Direct File supports reporting more income types and claiming more credits and deductions. The free web-based service – available in English and Spanish – provides access to IRS customer service representatives through a live chat feature and works on mobile phones, laptops, tablets or desktop computers. Direct File guides taxpayers through a series of questions to prepare their federal tax return step-by-step and automatically guides taxpayers to state tools to complete their state taxes.
People who make over $84,000 can use the IRS' Free File Fillable Forms. These are the electronic version of IRS paper forms. This product is best for people who are comfortable preparing their own taxes.
People who generally make $67,000 or less, persons with disabilities, limited English-speaking taxpayers and those who are 60 years of age and older, can also find free one-on-one tax preparation help around the nation through the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs.
The Department of Defense provides MilTaxas a free tax resource for the military community. MilTax is a suite of tax services available for members of the military, as well as qualifying veterans and family members. There are no income limits. Eligible taxpayers can use MilTax to electronically file a federal tax return and up to three state returns for free.
5. Choose tax filing options based on personal situation and comfort level with tax preparation:

Personally file taxes.
Use online filing services.
Hire a tax professional and choose carefully. Most tax return preparers are professional, honest and provide excellent service to their clients. However, dishonest tax return preparers who file false income tax returns do exist. The IRS has a Directory of Federal Tax Return Preparers with Credentials and Select Qualifications and more on choosing a tax pro on IRS.gov.
6. Use online resources at IRS.gov to quickly get answers to tax questions, check a refund status or pay taxes. There’s no wait time or appointment needed. Online tools and resources are available 24 hours a day, including the IRS’ Interactive Tax Assistant tool and Let Us Help You resources, which are especially helpful.

01/14/2025

Sent to me by my longtime software company, Crosslink! Helpful tax guidance and changes for Tax Year 2024, filing season Jan-April, 2025.

Tax Updates for Tax Year 2024

Here is an overview of the federal tax provisions that go into effect in 2023 and other tax updates for tax year 2024:

Provisions Effective in 2024
Retirement Plan Provisions (Secure Act 2.0)
IRA Contribution Limits:

For individuals age 50 or older: $8,000.
For individuals under age 50: $7,000.
Retirement Plan Withdrawals for Domestic Abuse:

Individuals who have experienced domestic abuse may withdraw the lesser of $10,000 or 50% of their account balance without incurring the 10% early withdrawal penalty.
Withdrawn amounts can be repaid over three years. Any income tax paid on the repaid amount will be refunded.
Retirement Plan Withdrawals for Emergency Expenses:

Qualifying emergency expenses are exempt from the 10% early withdrawal penalty.
Qualifying expenses must be unforeseen or relate to immediate personal or family financial needs.
One distribution of up to $1,000 is allowed per year. Taxpayers can opt to repay the distribution within three years.
Bonus Depreciation

Eligible property placed in service during 2024 qualifies for 60% bonus depreciation.
New Clean Vehicle Credit
Updates to the electric vehicle (EV) tax credit for 2024 include:

Full $7,500 Credit Requirements:

Battery Critical Minerals Requirement ($3,750):
At least 50% of critical minerals in the battery must be extracted or processed in a U.S. free trade partner country or recycled in North America.
Battery Components Requirement ($3,750):
At least 60% of the vehicle’s battery components must be manufactured or assembled in North America.
Exclusions:

Vehicles with battery components manufactured or assembled by a foreign entity of concern (e.g., China, Russia, North Korea) are ineligible.
Using the Credit as a Down Payment:

Beginning in 2024, taxpayers can transfer the $7,500 credit to the dealer to use as a down payment when purchasing the vehicle.
For additional details, refer to IRS Tax Tip 2023-123: Clean Vehicle Credits Can Help Car Buyers Pay Less at the Dealership.

Reminders for the New Clean Vehicle Credit
Other unchanged provisions include:

Income Limits:
Credit is available if the taxpayer’s modified adjusted gross income (AGI) does not exceed:
$300,000 for Married Filing Jointly.
$225,000 for Head of Household.
$150,000 for all other filing statuses.
Vehicle Price Limits:
Credit is available for vehicles with a manufacturer’s suggested retail price (MSRP) of:
$80,000 or less for vans, SUVs, or pickup trucks.
$55,000 or less for all other vehicles.
Other Requirements:
Credit can be claimed for one vehicle per year.
Qualifying vehicles must:
Be purchased new and used primarily in the U.S.
Not be purchased for resale.
Include the Vehicle Identification Number (VIN) on the taxpayer’s federal income tax return.
Fuel Cell Vehicles:
The full $7,500 credit is available for eligible fuel cell vehicles meeting the requirements under IRC 30B(b)(3). These vehicles must convert chemical energy into electricity using hydrogen fuel.
Eligibility Criteria:
Vehicles must weigh less than 14,000 pounds.
Final assembly must occur in North America.
Vehicles must be either:
Plug-in electric vehicles with a battery capacity of at least 7 kilowatt hours.
Fuel cell vehicles.
For more details, see the following IRS resources:

Credits for New Clean Vehicles Purchased in 2023 or After.
IRS Fact Sheet FS-2024-26 – Updates to FAQs on New, Previously Owned, and Qualified Commercial Clean Vehicle Credits.
Tax Year 2024 Annual Changes and Reminders
Mileage Rates for 2024
Business: 67 cents per mile
Medical: 21 cents per mile
Charitable purposes: 14 cents per mile
Standard Deduction for 2024
Single or Married Filing Separately: $14,600
Married Filing Jointly or Surviving Spouse: $29,200
Head of Household: $21,900
Additional Standard Deduction for 65 and older/Blind
$1,550 (per person, if 65 or older OR blind)
$1,950 (if unmarried, 65 or older AND blind)
Maximum Earned Income Tax Credit
Three or More Children: $7,830
Two Children: $6,960
One Child: $4,213
No Children: $632
Refundable Portion of Child Tax Credit
$1,700
Due Diligence Penalty

$600 for errors related to the following:
Earned Income Tax Credit (EITC)
Child Tax Credit
American Opportunity Credit
Head of Household filing status
2024 Federal Form Changes
Form 4136: Fuel Tax Credit Worksheet

New Requirement: Taxpayers claiming the fuel tax credit must complete and attach a new worksheet (Worksheet Fuel Tax Credit – 1).
Purpose: Ensures taxpayers meet credit requirements and provides detailed business use of the fuel.
Form 1040: Filing Status Update

A new line has been added for cases where a nonresident alien or dual-status spouse is treated as a U.S. resident for tax purposes.
Requirements:
Check the box on the form.
Enter the nonresident spouse’s name.
Attach a statement signed by both spouses if it’s the first year of this election.
For more details, see:
IRS Publication 519 (US Tax Guide for Aliens) – Starting on page 13.
Nonresident Spouse Page on the IRS website.
Form 5695: Residential Energy Credits

A checkbox has been added for taxpayers who jointly occupy a home (with someone other than a spouse) and jointly paid for qualifying property.
Special Rule: Both individuals can claim the credit proportionally.
For more information, refer to the Form 5695 instructions for line 7c.
Form 1040, Schedule 1: Reporting 1099-K Amounts

A new line has been added to report amounts from Form(s) 1099-K that:
Are from the sale of personal items sold at a loss.
Were reported to the taxpayer in error.
Reminders: 2024 Reporting Requirements
New Reporting Requirements for Third-Party Network Transactions
Beginning in 2024, individuals who receive $5,000 or more in income from goods and services through third-party payment networks (e.g., Venmo, Cash App, PayPal, Zelle) will receive a Form 1099-K (Payment Card and Third-Party Network Transactions) in January 2025.

Background:

This reporting change was originally slated to take effect in 2022 but was delayed by the IRS until 2024.

01/10/2025

Automatic enrollment for employees in 401K as of 2025
Treasury, IRS issue proposed regulations on new automatic enrollment requirement for 401(k) and 403(b) plans

WASHINGTON — The Department of the Treasury and the Internal Revenue Service today issued proposed regulations addressing certain SECURE 2.0 Act provisions, including a provision generally requiring newly-established 401(k) and 403(b) plans to automatically enroll eligible employees beginning with the 2025 plan year.

In general, unless an employee opts out, a plan must automatically enroll the employee at an initial contribution rate of at least 3% of the employee’s pay and automatically increase the initial contribution rate by one percentage point each year until it reaches at least 10% of pay. This requirement generally applies to 401(k) and 403(b) plans established after Dec. 29, 2022, the date the SECURE 2.0 Act became law, with exceptions for new and small businesses, church plans, and governmental plans.

The proposed regulations provide guidance to plan administrators for properly implementing this requirement and are proposed to apply to plan years that begin more than 6 months after the date that final regulations are issued. Before the final regulations are applicable, plan administrators must apply a reasonable, good faith interpretation of the statute.

Treasury and IRS welcome comments on these proposed regulations. Comments may be submitted through the Federal Register. See the proposed regulations for details.

01/10/2025

$1,400 Stimulus Checks To Be Sent Out By End Of January

Amid the pandemic, $390 billion in direct payments went out to millions of Americans as part of the relief efforts. First, in April of 2020, eligible adults were sent $1,200 stimulus checks, then another $600 in December of 2020, and finally, $1,400 in March of 2021. It turns out though that $2.4 billion is leftover after all those payments, so the IRS is sending out more $1,400 checks - one million of them.

The special payments, which are going out in the next couple of weeks, will be sent to people who missed one of the original stimulus checks or didn't get the full amount and didn't claim a Recovery Rebate Credit on their 2021 tax returns. IRS Commissioner Canny Werfel explained in a statement, "Looking at our internal data, we realized that one million taxpayers overlooked claiming this complex credit when they were actually eligible."

The best part is that those who should be getting the check don't have to do anything to receive it. Instead, it will be directly deposited to the bank account they listed on their 2023 tax return, or it will just be sent as a check in the mail.

If you didn't file a 2021 tax return, you could still be eligible, but you'll need to file a tax return by April 15 and claim the Recovery Rebate Credit, even if your income was minimal or non-existent. Payments will be $1,400 or less, depending on what is owed. For those who are getting a check, they will also receive a letter from the IRS notifying them about the impending payment.

01/02/2025

If you have an investment gain, you might be able to postpone payment of tax on this ...
TAX TIP #9

Special rules for eligible gains
invested in Qualified Opportunity Funds. If you have an eligible
gain, you can invest that gain into a

Qualified Opportunity Fund (QOF)
and elect to defer part or all of the
gain that is otherwise includible in
income. The gain is deferred until
the date you sell or exchange the
investment or December 31, 2026,
whichever is earlier. You may also
be able to permanently exclude
gain from the sale or exchange of
an investment in a QOF if the investment is held for at least 10
years. For information about what
types of gains entitle you to elect
these special rules, see the Instructions for Schedule D (Form
1040). For information on how to
elect to use these special rules,
see the Instructions for Form 8949.

01/02/2025

You may be eligible to contribute more to your IRA for 2024 Tax Year!

Tax Tip #8

IRA contribution limit increased.

Beginning in 2024, the IRA contribution limit is increased to $7,000
($8,000 for individuals age 50 or
older) from $6,500 ($7,500 for individuals age 50 or older).

01/02/2025

Roth IRA income limitations and info:

Tax Tip #7

Modified AGI limit for Roth IRA
contributions. For 2024, your
Roth IRA contribution limit is reduced (phased out) in the following
situations.
• Your filing status is married filing jointly or qualifying surviving spouse and your modified
AGI is at least $230,000. You
can't make a Roth IRA contribution if your modified AGI is
$240,000 or more.
• Your filing status is single,
head of household, or married
filing separately and you didn't
live with your spouse at any
time in 2024 and your modified AGI is at least $146,000.
You can't make a Roth IRA
contribution if your modified
AGI is $161,000 or more.
• Your filing status is married filing separately, you lived with
your spouse at any time during the year, and your modified AGI is more than zero.
You can't make a Roth IRA
contribution if your modified
AGI is $10,000 or more. See
Can You Contribute to a Roth
IRA in chapter 9, later.
2025 modified AGI limits. You
can find information about the 2025
contribution and modified AGI limits in Pub. 590-A.

01/02/2025

f you receive a Form 1099-K ...

TAX INFO #6
Updated reporting requirements
for Form 1099-K. For 2024, payment card companies, payment
apps, and online marketplaces will
be required to send you a Form
1099-K when the amount of your
business transactions during the
year is more than $5,000. In calendar year 2025, the threshold will
lower to more than $2,500; and for
2026 and later years, the threshold
will be more than $600.
Changes to reporting amounts
from Form 1099-K. Beginning in
2024, if you received a Form(s)
1099-K that shows payments that
were included in error or for personal items sold at a loss, you will
now enter these amounts in the entry space at the top of Schedule 1
(Form 1040).