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The deadline for filing individual, 2023, tax returns is right around the corner – April 18. Master Your Money prepares returns and provides strategies for reducing clients’ tax obligations. The tax code, however, is filled with numerous key, though often obscure terms, essential to understanding these strategies. What are some of the terms?
Take away: Master Your Money provides tax preparation services along with strategic advice to individuals and businesses. Call us today for an appointment. Sources: IRS Publication: Topic No. 409 Capital Gains and Losses (January 26, 2023). IRS Publication: IRS provides tax inflation adjustments for tax year 2023 (December 8, 2022). “20 Tax Terms You Need to Know,” Forbes (Nov. 15, 2022).
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At Master Your Money, we provide comprehensive tax services to help businesses and individuals reduce taxes by maximizing deductions. One common deduction covers the business use of vehicles. The 2023 tax year marks an increase in the standard mileage rate for this deduction. What are the parameters of the standard mileage rate deduction? What are the parameters of deducting the actual cost of driving the vehicle? What option is best for you?
Beginning on January 1, 2023, the standard mileage rate for the business use of a vehicle, including, automobiles, vans, pickups and panel trucks, is 65.5 cents per mile. This rate applies to electric as well as hybrid-electric vehicles (along with the traditional gasoline and diesel-powered vehicles). In claiming the standard mileage rate or the actual expense method, you must keep records of the mileage for each business trip, the date, the destination, along with the business purpose in contemporaneously written logs. You also must keep track of total miles (business + personal) driven per vehicle per year. You can always claim the business portion of any auto loan interest paid and license tabs. As an alternative to the standard mileage rate, businesses may generally deduct the actual costs of using a vehicle for business purposes. These costs include, for example, gas, oil, tires, insurance, repairs, along with a depreciation allowance. Be aware, though, that in many cases, certain limits apply to depreciation write-offs on vehicles which are inapplicable to other types of business assets, potentially making this option less favorable. Master Your Money can help you determine what method – standard mileage rate or actual expenses – is available in your case, and which one will maximize your tax savings. For instance, taxpayers can use the standard mileage rate but generally must opt to use it in the first year the vehicle is available for business use. Then, in later years, either the standard mileage method or actual expense method may be used. Leased vehicles, however, must use the standard method for the entire lease period (including renewals) if that method is initially chosen. Lastly, as a practical matter, the standard mileage method is beneficial to avoid tracking actual expenses. Take-away: Like many tax issues, including the standard rate method versus the actual cost method, there are many factors to consider as to which specific approach makes the most sense in a particular case. Master Your Money can help guide you in these decisions. Call us today for an appointment. Sources: IRS Publication – “Travel, Gift, and Car Expenses,” (last reviewed or updated: 07-Feb-2023). IRS Publication - “Topic No. 305 Recordkeeping,” (last reviewed or updated: 26-Jan-2023). IRS Publication - “IRS issues standard mileage rates for 2023; business use increases 3 cents per mile,” (last reviewed or updated: 29-Dec-2022). IRS Publication - “Topic No. 510 Business Use of Car,” (last reviewed or updated: 06-Oct-2022). At Master Your Money, we prepare tax returns for individuals and businesses. The deadline for filing returns for tax year 2022 is April 18, 2023. Timely and complete delivery of your key tax documents and related information to Master Your Money will help ensure an accurate return, maximizing deductions while reducing the potential need for filing amended returns. What are some of the key information and documents?
Take-away: Accurate and timely delivery of tax records to your tax preparer reduces unnecessary fees as well as the need to amend returns. Make an appointment with Master Your Money today concerning the preparation of your 2022 tax return. Sources: IRS Publication – “Topic No. 305 Recordkeeping” (last reviewed December 12, 2022). “Tax Prep Checklist: Everything You Need to File Your 2022 Taxes,” Forbes (October 27, 2022). At Master Your Money, we provide tax services to help clients, including small business owners, reduce taxes. The 2023 tax year is just days away and the new year ushers in some important developments concerning the tax laws. What are some of the key ones?
STANDARD DEDUCTION: The standard deduction for married couples filing jointly for tax year 2023 increases to $27,700, up from $25,900 for 2022. For single taxpayers and married individuals filing separately, the standard deduction increases to $13,850 for 2023, up from $12,950; and for heads of households, the standard deduction will be $20,800, up from $19,400. TAX BRACKETS: For 2023, the maximum marginal tax rates, defined as the amount of additional tax paid for every additional dollar earned as income, remains at 37% for individual single taxpayers with incomes exceeding $578,125 ($693,750 for married couples filing jointly). The other rates are:
The lowest rate is 10% for single individuals with incomes of $11,000 or less ($22,000 for married couples filing jointly). EARNED INCOME TAX CREDIT: The maximum earned income tax credit, defined as the refundable tax credit for low to moderate income working individuals and couples, is $7,430 for qualifying taxpayers who have three or more qualifying children, which is up from $6,935 for 2022. 401(K) AND IRA CONTRIBUTION LIMITS: For individuals, the maximum contribution to 401(k) plans in 2023 is $22,500, up from $20,500 in 2022. This increase will also affect 403(b) plans, most 457 plans, and the government’s Thrift Savings Plan. The annual ‘catch-up’ contribution limit for those age 50 or older increases to $7,500. Additionally, IRA contributions increase to $6,500 in 2023 with the annual ‘catch-up’ contribution limit for those age 50 or older remaining at $1,000. This allows an individual who turns 50 or older at any point in 2023, and who is eligible for an IRA, to contribute a total of $7,500 to their IRA. HEALTH SAVING ACCOUNTS: In 2023, the maximum annual contribution for individuals is $3,850 up from $3,650 in 2022 and for families the maximum contribution is $7,750, up from $7,300 in 2022. For those 55 or older, a $1,000 annual catch-up contribution is permitted. Take-away: The changes for the 2023 tax year may impact your strategies for the upcoming year. Make an appointment with Master Your Money today to see what strategies make the most sense in your particular case. Sources: IRS Publication – “IRS Increases Mileage Rate for Remainder of 2022.” (last reviewed December 8 2022). “IRS Sets Higher 2023 Tax Brackets, Standard Deductions and Other Inflation Adjustments,” Forbes (October 18, 2022). At Master Your Money, we provide a full range of tax services to individuals and businesses. The end of the 2022, tax year is fast upon us and now is the time to consider possible year-end tax moves including, for example:
Sources: IRS Publication: Tax Exempt Organization Search (March 25, 2022). IRS Publication: Tax Withholding Estimator (October 31, 2022). “2022 Year-End Tax Planning Moves To Make Now,” Forbes (Oct 19, 2022). “2022 Year-End Financial Checklist,” Forbes (September 29, 2022). 2022 Has Spawned Several Beneficial Tax Deductions for Small Businesses:Which Ones Apply to You?9/27/2022 At Master Your Money we help small business owners reduce taxes. There are dozens of tax deductions relevant to small business owners. What are some of the more pertinent ones in 2022?
Sources: IRS Publication – “Here’s what businesses need to know about the enhanced business meal deduction.” (June 14, 2022). IRS Publication – “IRS increases mileage rate for remainder of 2022.” (June 9, 2022). IRS Publication – “For National Small Business Week, plan now to take advantage of tax benefits for 2022 . . . ” (May 3, 2022). IRS Publication – “How small business owners can deduct their home office from their taxes.” (January 19, 2022). At Master Your Money, we provide tax preparation services to help businesses and individuals succeed. Intelligent tax strategies can reduce your tax bill. Below are several tips.
Sources: “8 Tips To Reduce Your Tax Bill For The Next Tax Season,” Forbes (July 25, 2022). “13 Ways to Save Money on Your Taxes in 2022,” US News and World Report (March 4, 2022). “What Are The New Capital Gains Rates For 2022?” Forbes (February 7, 2022). IRS Publication - Earned Income and Earned Income Tax Credit (EITC) Tables (July 28, 2022). Master Your Money provides tax services to individuals and businesses. The IRS expects taxpayers to timely pay their taxes. To ensure compliance, the IRS is empowered to impose interest/penalties on unpaid taxes along with seizing taxpayer’s wages, bank accounts, real estate and other assets. Yet, sometimes taxpayers cannot pay timely because of serious setbacks largely outside their control. Master Your Money serves clients concerning payment options. What are the options? Initially, though, what are some general observations and pointers?
Observations/Pointers: To qualify for a plan and other payment relief, taxpayers must file all tax returns for the past 6 years. Also, IRS approval of a plan or other relief, does not resolve state tax obligations which require separate arrangements with state tax authorities, such the Minnesota Department of Revenue. Payment options: 1. Short Term Payment Plan. Short term payment plans may be granted if the combined taxes, penalties and interest owed is less than $100,000 and the payment period is 180 days or less. Payment here is subject to interest along with penalties up to 5% of unpaid taxes each month. 2. Long Term Payment Plan – Taxpayers may qualify for a long-term payment plan if the combined tax, penalties and interest are less than $50,000 and the payment period exceeds 120 days. Long term payment plans, subject to interest and penalties, come in various versions relating to payment periods and amounts. 3. Offer in Compromise. Alternatively, taxpayers can seek an “Offer in Compromise” that, if approved, requires payment of only a portion of the taxes to satisfy the total tax debt. To have an application considered requires: (a) the filing of the past six years’ returns and making estimated payments for the current year’s taxes, (b) no open bankruptcy proceedings, and (c) a valid extension for the current return (if applying for the current year). In assessing applications, the IRS considers the taxpayer’s ability to pay, income, expenses, and asset equity. Offers are not approved if the IRS can collect all the taxes owed by the time the Collection Standard expires. 4. (Taxes) Currently Not Collectible. Another option is to seek an IRS determination that the tax cannot currently be paid given the taxpayer’s financial condition. Approval means a delay in collection until the taxpayer’s financial condition improves, but does not mean the tax debt is satisfied like in the case of Offers in Compromise. If your financial condition doesn’t improve before the Collection Standard Expiration Date, any remaining unpaid taxes may be forgiven. Take-away: The IRS expects timely payment of taxes and has broad enforcement powers ensuring the same. But taxpayers unable to make timely payment have options. Call Master Your Money for an appointment if you need help cleaning up your back tax problems. Sources: IRS Publication – “IRS Topic No. 202 Tax Payment Options,” (Reviewed/Updated: March 10, 2022). IRS Publication – “Additional Information on Payment Plans,” (Reviewed/Updated: March 10, 2022). IRS Publication – “Offer and Compromise,” (Reviewed/Updated: July 11, 2022). IRS Publication – “Temporarily Delay the Collection Process,” (Reviewed/Updated: June 22 2022). Master Your Money specializes in helping small businesses and their owners succeed. Reducing your tax bill by maximizing deductions is a primary objective at Master Your Money. Many of us have upcoming travel plans this summer and certain expenses resulting from business are clearly tax deductible. Deductions, however, get far more complicated when a couple days of hiking in the mountains mixes with the days on your trip meeting a customer, attending a conference, or attending a board of directors meeting. Consider these suggestions to avoid trouble with the IRS.
Take away: Business travel can result in substantial deductions, including when it mixes with personal frolic subject to the above rules. At Master Your Money, we provide effective tax advice and tax return preparation services minimizing tax bills for individuals and businesses. Contact a professional at Master Your Money today to discuss how we can help you use travel to grow your business and reduce your tax bill. Sources: Publication 463 - Travel, Gift, and Car Expenses (IRS Pub. March 28, 2022). Topic Number 511 - Business Travel Expenses (IRS Pub. February 17, 2022). It's important for everyone should know how the IRS contacts taxpayers. This will help people avoid becoming a victim of scammers who pretend to be from the IRS with a goal of money or stealing personal information.
Here are some facts about how the IRS communicates with taxpayers:
The IRS will never:
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Mark KrolakMark Krolak is a small business tax strategist and educator, teaching entrepreneurs and newly self-employed business owners strategies to grow their business and stop overpaying their taxes. |