“In this world, nothing is certain except death and taxes.” - Benjamin Franklin
While that may be true, changes to our tax system are not certain and are ever changing. So here we are again - a new day with new rules. Here are 5 things you need to be aware of, in no particular order:
#1 Do you have an entity with less than 20 employees? This includes any LLC, S-Corporation, partnership, etc.? If so, you will need to report this entity to FinCEN beginning January 1, 2024. If you don’t, there is a $500 per day penalty. Why? The “Corporate Transparency Act,” which you can read more about here. But don’t worry, you can’t report or even sign up now as the website isn’t up and running yet...you will need to remember to do this in 2024. The good news is that if your entity is in place by the end of 2023, you have until January 1, 2025 to get ‘er done.
#2 Did you inherit an IRA in 2020, 2021 or 2022? You are not required to take a Required Minimum Distribution for 2023—at least according to the latest update from the IRS. However, this doesn’t mean that you shouldn’t still take it or take even more. Remember, the new rule is that any IRA you inherit will have to be completely dissolved within 10 years. A little gain now may create a lot more pain later since every distribution is taxable. I suggest that, at a minimum, you have a plan in place.
#3 Are you writing off travel or meals for business? A receipt is not enough. This would be a good time to invest in some quality time with your bookkeeper or CPA for education, especially regarding documentation. For example: For meals, 50% is the max deduction and there are rules around being able to get to 50% as well. If the meal is due to travel it is different than it is for business. No matter, you should at least have the following:
- Receipt that shows what you purchased
- Proof of payment like a credit card receipt
- The names of the people you had dinner with or the location if traveling
- A record for the reason of the business dinner
You need to know more and you should want to know more. Just email us at LifePlanning@kennedy-financial.com to get some introductory literature in this regard.
#4 Do you live in an area hit by a natural disaster? If the disaster was a federally declared “major” disaster, you can deduct up to 100% of unreimbursed or uninsured losses as an above the line deduction. This means you don’t have to itemize your deductions to get tax relief. Furthermore, there are often a lot of deadlines to file and pay taxes that are extended. In the world of high interest earning savings accounts, this could be a strategy you want to consider.
#5 Do you know you have an alternative to providing health insurance to your employees if you are small business owner? You don’t need to mess with the logistics of a group plan or worry about how much your premiums are going to go up from year to year. You just simply pick the amount you want to reimburse your employees with for health insurance and medical expenses and away you go. Okay, there are a couple of administrative aspects you have to follow, but an “Individual Coverage Health Reimbursement Arrangement” could be a game changer for you and your business.
We are Life Planners; we are not your tax advisors. This article is simply tax awareness to make sure you are communicating all of these items with your tax advisor. And, of course, we are here to help quarterback those conversations if you need us. We’re a simple phone call away.