Merendino Accounting and Tax Services, PLLC

Merendino Accounting and Tax Services, PLLC Accounting, tax, and consulting services for individuals and small businesses.

08/01/2024

A new rule that begins soon will impose new nationwide limits on short-term limited duration insurance (STLDI) plans.

The rule, which applies to plans sold or issued on or after September 1, 2024, will limit STLDI plans to three-month terms, and to a total duration – including renewals – of no more than four months.

Under the new rules, there is no change to STLDI policies that are already in effect, or policies that are sold and issued before September 1, 2024. The current rules continue to apply to those policies.

This means policy durations of plans that are sold and issued prior to September 1, 2024, are up to the states and the insurers as long as the policies don’t have initial terms of more than 364 days or total duration of more than 36 months.

Short term insurance policies are already not available in fourteen states and Washington, DC.

I don’t normally include politics in business posts, but those two things cannot help but be intertwined in this year’s ...
06/06/2024

I don’t normally include politics in business posts, but those two things cannot help but be intertwined in this year’s Presidential election.

Back in 2017 under then President Trump the Tax Cuts and Jobs Act was passed by Congress. This bill lowered tax rates for most Americans regardless of income level and reduced certain itemized deductions. Right now, the bill is scheduled to expire at the end of 2025, and without further action by Congress the IRS will go back to the higher tax rates that existed under then President Obama.

This will impact most Americans in a negative way financially in addition to the rising costs that have existed for the past few years.
Something else to think about when deciding your vote this November.

05/14/2024

Former IRS contractor Charles Littlejohn was sentenced in January to five years in prison for organizing one of the largest data thefts in the history of the Federal government.

Littlejohn's crime involved the illicit acquisition and distribution of sensitive data from the Internal Revenue Service, targeting some of the wealthiest individuals and entities in the United States. This breach not only exposed the personal tax information of thousands but also highlighted vulnerabilities within the IRS systems.

The extent of how many taxpayers were affected by the breach was unknown until now. Littlejohn admitted taking tax information from thousands of wealthy Americans between 2018 and 2020. It's the largest documented data theft at the IRS in history. More than four years after the incident, notification letters are now being sent by the IRS to the affected taxpayers.

Due to government and corporate data breaches in recent years, there has been an increase in criminals using stolen Social Security numbers to file fraudulent tax returns and claim refunds. An Identity Protection Personal Identification Number (IP PIN) can help prevent this. The IP PIN is a six-digit number assigned by the IRS that must be used when filing a tax return.

Anyone who knows or is concerned that their personal data has been exposed is encouraged to obtain an IP PIN through the IRS website at irs.gov/ippin.

05/06/2024

By now most business owners should be aware of the new Beneficial Ownership Information (BOI) requirements of the U.S. Government beginning in 2024. The failure to comply with these requirements could result in substantial fines and penalties.

While many uncertainties remain surrounding BOI reporting, one thing is set in stone— BOI reporting is done solely through the Financial Crimes Enforcement Network (“FinCEN”) website, fincen.gov, utilizing their BOI E-Filing System by either the business owner or their authorized representative.

Reports are not submitted in any other manner and the government does not mail forms to complete the report. If you receive mail or any online solicitation to file beneficial ownership information and submit payment, discard it immediately.

04/22/2024

Post Tax Season Commentary

Now that another tax season has passed, here are some recommendations that I think will help in future years:

Taxpayers that have a life changing event during the year should consider how that may affect their income tax situation. While changing one’s filing status due to marriage or divorce will have obvious consequences, other events such as changing employment may as well. When starting a new job, it is highly recommended to review the first paycheck to see that enough is being withheld for income taxes. In recent years there has been a sharp increase in taxpayers owing more money on April 15th, as the IRS W-4 form is more complicated than it was in the past. Those that use a tax professional should ask them to review their income tax withholdings if they owed money to the IRS with their return this year.

Self-employed taxpayers fall into tax problems with the IRS by failing to keep up with quarterly estimated payments. In addition to falling behind with their tax obligations they also incur penalties for the late payment. The IRS expects estimated tax payments to be made based on the prior year’s income, with some exceptions. Taxpayers are recommended to set aside twenty-five to thirty percent of their earnings in a separate savings account and then use this to make tax payments each quarter. Budgeting for income taxes is just as important as it is the necessary expenses for one’s business.

It's ridiculous that many school age children must file tax returns, but for those that do it is suggested to have them do it themselves with the parent’s help. While I am happy to do them for my clients, the child may qualify for one of the free file programs that are available now. Also, the tax profession is experiencing a shortage of personnel, so learning more about income taxes may get the high school/college student interested in pursuing it as a worthwhile career.

Finally, if you want to file on time, please consider your tax professional if you use one. It should not be expected to have a tax return be finished by April 15th if the information is not provided to the preparer by the beginning of April. Even if it is expected to owe taxes with the filing of the return, early preparation is still recommended so if that ends up being the case the taxpayer then has more time to prepare. The failure to plan forces many to enter into installment payment agreements that benefit nobody except the IRS.

04/04/2024

Despite the Biden Administration saying that the additional IRS funding provided under the Inflation Reduction Act would be used to go after the highest income taxpayers and larger corporations, evidence so far is to the contrary.

The Wall Street Journal reported in an editorial on Tuesday that as of last summer, 63% of new audits targeted taxpayers whose income was less than $200,000 and that 80% of all audited taxpayers earned less than $1 million.

This should not be a surprise. With the national debt approaching 35 trillion dollars the Federal Government is going to need money from most American taxpayers to fund their lavish spending habits.

02/21/2024

Beginning in 2025, all domestic and foreign entities registered in Pennsylvania must file with the Pennsylvania Department of State (Department) an annual report with filing deadlines determined by entity type:

• July 1 for corporations (both profit and nonprofit).
• Oct. 1 for limited liability companies.
• Dec. 31 for all others.

Entities may file the report electronically or through a paper filing. Each entity will be charged a $7.00 fee, except for nonprofit entities for which there is no fee.

For each registered entity required to file an annual report, the Department must annually deliver notice of the filing requirement at least two months before the annual report is due. However, failure of the Department to deliver the notice or of any entity to receive the notice does not relieve an entity of the obligation to make the annual report filing.

An entity that fails to file its annual report within six months of the filing deadline is subject to administrative dissolution or cancellation by the Department pursuant to Section 381. An administratively dissolved or cancelled entity continues its existence as the same type of entity. However, it may only conduct activities necessary to wind up and liquidate, it is not currently subsisting, and its name will become available for another entity to claim. An entity may correct the dissolution or cancellation by applying for reinstatement and paying an accompanying fee. The Department will not take administrative action to cancel or dissolve for failure to file annual reports until 2027.

This requirement is separate from the Beneficial Ownership Information (BOI) report now required by the Federal Government under the Corporate Transparency Act. That requirement began January 1st of this year.

01/31/2024

On his nightly newscasts Bill O’Reilly does a Smart Life segment where he gives tips on how to make your life better. Last night his segment focused on income taxes.

As tomorrow is February 1st it was recommended to begin getting your tax information in order. Waiting can result in your tax return being filed later than necessary and could result in the delay of your refund or being unable to pay what may be owed by the April 15th deadline.

Also recommended was the use of a professional tax preparer if your income is $80,000 or more. How Mr. O’Reilly came up with that income figure is unclear, but it echoes what I have said multiple times that for many people there are better ways to save a few bucks than to do your own tax return. The use of artificial intelligence is not away as wise as human intelligence.

01/22/2024

Today I saw an advertisement from a tax preparation company saying that if you use them, you will get the maximum refund guaranteed. Taxpayers should be more concerned that their taxes are being done properly within IRS rules than with their refund.

A responsible tax preparer will not advertise their services based on the size refund they get for the client, as there could be several reasons for that. For example, the taxpayer could have overpaid taxes with their employer throughout the year and are just getting the money returned to them at tax time. So, they lost the opportunity to use that money sooner.

A business owner could have paid quarterly taxes based on the prior year, but then their income dropped in the current year. This again would result in an overpayment of taxes that could have been avoided with proper planning.

Working with a tax preparer year-round, not just at tax time, makes sense for many people and for all business owners. The little bit of money one might save by using a program like TurboTax could cost them in other ways.

12/21/2023

The IRS has granted about $1 billion in penalty relief to some 4.7 million individuals, businesses and tax-exempt organizations that were not sent automated collection reminder notices during the pandemic.

Most getting the relief make less than $400,000 a year.

During COVID-19, the IRS temporarily suspended mailing of automated reminders to pay overdue tax bills starting in February 2022. These reminders would have normally been issued as a follow-up after the initial notice.

The service will issue a special reminder letter starting next month that will alert the taxpayer of their liability, ways to pay and the amount of penalty relief, if applied. These reminder letters will read, "LT38, Reminder, Notice Resumption."

12/20/2023

The Internal Revenue Service has issued the 2024 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, or medical purposes.

Beginning on January 1, 2024, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

67 cents per mile driven for business use (an increase of 1.5 cents from 2023)

21 cents per mile driven for medical purposes

14 cents per mile driven in service of charitable organizations

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Taxpayers can use the standard mileage rate but generally must opt to use it in the first year the car is available for business use. Then, in later years, they can choose either the standard mileage rate or actual expenses. Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.

12/01/2023

The Internal Revenue Service is warning taxpayers to be on the lookout for charity fraud.

On Giving Tuesday and as part of Charity Fraud Awareness Week, the Internal Revenue Service highlighted its continued support of international efforts to fight fraud and charity scams.

The IRS issued an advisory on Giving Tuesday calling attention to Charity Fraud Awareness Week. It noted that charitable organizations lose 5% of their revenue each year to fraud, according to the Fraud Advisory Panel, a U.K.-based organization that leads the effort in organizing Charity Fraud Awareness Week, which runs from November 27th-December 1st.

Donors are urged to verify a charity's tax-exempt status at "Tax Exempt Organization Search" before donating goods, services or money to an organization.

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