Here are my year-end tax planning tips for individuals and business owners:
To Our Valued Clients,
Here are my year-end tax planning tips for individuals and business owners:
BOI Filing Deadline Halted
Due to a recent Federal Court ruling (Texas Top Cop Shop, Inc., et al. v. Garland, et al.), the FINCEN Business Owner Information reporting requirement (BOI) has been temporarily halted. The DOJ (Department of Justice) has filed to appeal, but with the anti-regulatory focus of the incoming President, it’s possible that the BOI ruling will be repealed entirely. Although you can voluntarily file your business ownership data with FINCEN, my recommendation is to wait until we hear the outcome of the DOJ’s appeal, or further action from the new Administration in DC. *Warning: Scammers are texting, posting on social media and emailing business owners to extract money from their pockets to file their BOI (even though it would have been free to file). Like most US government departments, FINCEN will NOT use email or text to contact you.
2024 Schedule K’s coming for 3rd Party Pay Transactions of $5,000 or more
Anyone receiving more than $5,000 via a 3rd party payment app or marketplace such as Venmo, Cash, PayPal, eBay, Amazon, Etsy, Airbnb, Uber, DoorDash and others will be receiving a 2024 1099-K early next year, with a copy going to the IRS. Even if you’ve shared expenses with a friend or family member, and they reimbursed you using a method other than direct bank transfer such as Zelle, you will receive a 1099-K if the total in 2024 is more than $5,000. That amount will be reduced to $2,500 in 2025 and $600 in 2026 and forward.
What does this mean to you? If you’re selling items on eBay, Amazon, Etsy or another 3rd party marketplace, if you’re an owner collecting rent through Airbnb or VRBO, or even if you’re a driver for DoorDash, Uber, Lyft or another delivery service, and you haven’t been claiming that income on your tax returns because the amount was below the old $20,000 1099-K threshold, the IRS will now be receiving documentation of that income . Hint: If you need help on how to properly set up a side gig, let me know – I can help!
For personal transfers, many (or all) of those transactions are likely not taxable in nature, but you as the taxpayer, are still required to keep accurate records documenting the nature of those transactions. To avoid this, I strongly recommend that people pay directly for things using their own account, and if you are going to transfer funds for a shared personal (non-taxable) expense, use Zelle or another bank-to-bank transfer.
S-Corp Shareholder Distributions / C-Corp Owner Salary/Bonus
Now may be a good time for S-Corp Shareholders who haven’t taken Shareholder Distributions this year to have their Tax Pro evaluate their Form 7203 Shareholder Basis to determine whether it makes sense to take a Distribution before the end of the year. For small business C-Corp owners, it may be a good time to pay yourself a year-end Bonus, depending on the year’s business profit and your personal income / tax goals.
Solo 401k and other Business Retirement Contributions
All contributions to Qualified Retirement Plans such as Solo 401k or other plans are due by December 31st, or you’ll miss out on this year’s tax deduction.
Bonus Depreciation and Section 179 Deductions
If you haven’t already, now is the time to talk to your Tax Pro about whether it makes sense to take Bonus Depreciation or Section 179 deductions before the end of the year. These deductions might make sense for assets you’ve purchased for use in your business, and how they’re expensed or depreciated can make a difference in both your current and future net income.
If you know someone with tax issues who isn’t getting the help they need, feel free to forward this email and have them call or email me. They can also schedule a time to chat on my calendar link below.
Have a great weekend!
Crystal McMahon, CFP®, Managing Director
Enrolled Agent, Admitted to Practice before the IRS
950 Broadway Suite M100, Tacoma, WA 98402
Office: 253-858-2427 Ext 1
Arrowroot Family Office is not a tax firm, all opinions are my own and they are not individual tax advice. If you have a tax pro, please consult them to discuss your unique situation.
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