Jun 24

April 2024

There are many concerns for this month. If you received a letter from the IRS, you are not alone. Many taxpayers and businesses received those letters in March. This has been one of the biggest concerns for many people receiving letters with only the total balance due in prior years, including they may levy your assets, if you don’t resolve the balance due as soon as possible. The first step is to consult with a tax professional. The tax professional will evaluate the letter and could reduce the tax liability by filing an amended return if any expenses on prior tax return were overlooked or missed, especially with small business filing Schedule C on their personal tax returns. That reminds me, for businesses claiming the standard mileage rate of 65.5 cents per mile, the IRS requires that you must substantiate business mileage in a contemporaneous log, with each trip’s starting and ending points, date, and business purpose. The standard mileage rate allows for separate deductions for parking and tolls. Other expenses that require substantiation by the IRS are Business meals; these meals need to record the date, individuals participating, and business purpose. Next, the bank statements and related records are insufficient to prove the business payments were ordinary and necessary business expenses. The debit card purchases generally identify to whom payments were made, but not exactly what was purchased or the business purpose of the purchase, and records of checks with only the check number and amount paid, but no annotations for any goods or services purchased, will be not enough to define between personal and business expenses. Last, this is a reminder to pay your taxes by April 15th, or pay as much as you can and file an extension by April 15th. This gives you six months to file the return until October 15th, 2024. Any unpaid taxes after April 15th, will incur an approximate 1% per month, or part of the month the tax liability, assessed penalty and interest. There is maybe another way to help lower your tax liability and save money for your retirement. Ask your tax preparer if a contribution to a traditional IRA (Individual Retirement Accounts) will be beneficial to reduce your taxes. Contributions made to the traditional IRA are with pre-tax dollars. Remember and you will pay taxes on all growth from this account when you withdraw the money from the IRA. These contributions will lower your income for the tax year of contribution and will result in less tax liability. The IRA contributions are limited by the lesser of your earned income, or $6,500 if you are under 50 and $7,500 if you are 50 and older for 2023. In the case of a married couple, you may duplicate your contributions. Perhaps there is a threshold limit if you are already on a retirement plan at work. If you are single, the full deduction is on $73,000 or less of your MAGI (Modified Adjust Gross Income) and $116,000 or less of your MAGI if you are married and filing jointly. You have until April 15th to make your contributions for the tax year 2023. That means by April 15th, 2024, you can contribute for your 2023 tax year, up to $6,500 or $7,500, if you are 50 and older. Also, from January 1st, 2024, through April 15th, 2025, you can contribute $7,000 or $8,000, if you are 50 and older. Remember, this is a very brief overview. It is your responsibility to discuss any tax and financial changes with your professional advisor for assistance in evaluating your situation. For details and specific assistance in applying the general information in this article, you may contact our office at your earliest convenience or contact your advisor. Provided by Pedro L. Baldeon, E.A., (321) 632-5726, a member of the National Society of Accountants.