As we get closer to the end of the year, employees only have a few paychecks left for 2024. If you're an employee who received a surprise tax bill – possibly with penalties – for the 2023 tax year, consider checking your withholding to ensure it's sufficient.
The IRS provides an online withholding estimator tool to help determine the correct amount (see link below). If you find you need to adjust your withholding, give your payroll administrator a new Form W-4 to have more withheld this year. What if you got a big refund last year? Instead of letting Uncle Sam keep your money for a year, you can lower your withholding and give yourself a raise in take-home pay. Click here for the tool.
Taxpayers born before 1951 need to take required minimum distributions (RMDs) by Dec. 31, to avoid penalties. RMDs are the mandatory withdrawals from many retirement plans and IRAs, including SIMPLE IRAs and SEPs. Roth IRAs aren't subject to RMDs during the owners' lifetimes. RMDs are taxable income and can incur penalties if not withdrawn on time.
Previous tax law required RMDs to begin at age 72 and imposed a penalty of 50% on missed withdrawals. The Secure 2.0 Act raised the age to 73 and lowered the penalty to 25% (or 10% if corrected within two years). Contact us soon for help calculating the correct amount for your RMDs. Click here for more from the IRS.
As the year winds down, you may want to combine smart estate tax planning with tax savings using the annual gift tax exclusion. You can give cash or property (up to a specified value) to an unlimited number of family members or friends each year without gift tax implications. That specified amount is subject to annual inflation adjustments. For 2024, the amount per recipient is $18,000.
Notably, in 2025, this amount will increase $1,000 to $19,000 per recipient. Why is this significant? The amount was stagnant at $15,000 for several years (2018 to 2021). Beginning in 2022, the amount increased by $1,000 annually due to inflation. Contact us with any questions.
What's the difference between an amended tax return and a superseding return? Amended returns can be filed to correct or change information on a timely filed return, after the original or extended due date has passed. However, a superseding return is a rare opportunity to change or correct a filed return before the original or extended due date. Why does this matter? Some tax elections you make are irrevocable (for example, the election to carry forward a tax overpayment to the next year). Such a change can be made only on an original return. A timely filed superseding return takes the place of the original return.
Contact us if you need to file a superseding return. Click here to learn more.
With the holiday season about to kick off, many are turning their thoughts to making charitable donations. Suppose you own or are a beneficiary of an IRA and you're at least 70½ years old. In that case, you can make qualified charitable distributions of up to $105,000 in tax-free charitable donations during 2024 That's up from $100,000 in past years.
If you're age 73 or older, QCDs can fulfill your annual required minimum distribution if applicable. You can't take a charitable deduction for a QCD. However, the donated amount is removed from your taxable income, which may preserve your eligibility for other tax breaks. Contact us for additional year-end tax planning strategies.
Get in touch today and find out how we can help you meet your objectives.
