Gray & Harasym, LLP

03/02/2023

Dear Clients:

The deadline for S-corporations and partnerships is March 15th. If you have not contacted us yet regarding your business tax returns, please reach out as soon as possible. We will not be able to put your business returns on extension without your authorization.

If you have already filed your tax returns and are waiting for your refunds, you can check the status with the IRS at: https://www.irs.gov/refunds. For California filers, you can check your state refund status here: https://www.ftb.ca.gov/refund/index.asp. Please note that we do not have access to any special portal to check on your refunds. The links above are the only tools we have at our disposal, also.

For those taxpayers with brokerage accounts, please let us know as soon as possible if a corrected 1099 is received. Many larger brokerage houses issue corrections weeks after the original 1099 is issued. If we can incorporate those changes before filing your tax returns, it could potentially save us from having to file an amended tax return to report the changes.

Upcoming due dates:
- March 15th: Due date for S-Corporations and partnerships
- April 18th: Due date for individuals, calendar year C-Corporations, and trusts/estates
- May 15th: Due date for tax-exempt organizations

As always, if you have any questions, please do not hesitate to contact us. We are here to help.

Celeste & Mark

01/04/2023

Dear Clients:

Happy New Year!

Last week the IRS introduced some much needed guidance regarding the new Clean Vehicle tax credit. The legislation added several new requirements in order to fully qualify in 2023, including final assembly location, critical materials and battery component requirements, and MSRP limits. Although all the nuances still need to be defined by the IRS, they are requiring dealers to provide you with a report verifying the vehicle’s eligibility for the credit prior to purchase. So, as the new regulations are stated, you should know beforehand whether or not you may be eligible for the credit. Stay tuned as the IRS continues to issue more guidance.

Also last week, the President signed the Secure Act 2.0 into law. This bill contained several provisions which directly impact retirement accounts, including increasing many contribution limits and increasing the age to start taking Required Minimum Distributions from 72 to 73. Some of the larger changes concern Roth accounts, with SIMPLE and SEP Roth accounts now allowed. Look for more IRS guidance on these changes in the coming months.

With tax season right around the corner, you should start to see 1099s arriving in your mailbox. As a reminder, if you have a business you may need to issue 1099s. Any non-employee who you paid $600 or more for services should get a 1099, so let us know if you need any assistance. Our organizers and engagement letters will be going out in the next few weeks, also, so please let us know if you don’t get them by the end of the month.

As always, if you have any questions, please do not hesitate to contact us. We are here to help.

Celeste & Mark

12/05/2022

Dear Clients:

An IRS ruling in 2014 allowed individuals who received state payments in order to care for disabled individuals to exclude those payments from income. However, a recent interpretation by the Chief Counsel of the IRS says those payments may be subject to F**A tax, depending on the facts. If you are the spouse or parent of the disabled individual, your income is still exempt from all taxes, but other situations may fall under the new interpretation. Contact us if you have any specific questions about this recent change.

One of the extended tax credits in the recently passed Inflation Reduction Act allows a federal tax credit for the installation of an electric-vehicle charger in your main home. The credit is equal to the smaller of $1,000 or 30% of the cost of the equipment and installation. Businesses can get a better credit, the smaller of $100,000 or 30% of the cost.

Thinking of purchasing a vehicle for your business? If you are looking at a heavy SUV (>6,000 lb.), you may want to place it in service before year end. Under current law, 100% of the cost can be deducted for federal taxes, but that drops to 80% of the cost starting in 2023.

As always, if you have any questions, please do not hesitate to contact us. We are here to help.

Celeste & Mark

11/02/2022

Dear Clients:

The Inflation Reduction Act that was passed by Congress a few months ago contained some extensive changes to the plug-in/hybrid auto tax credit. The biggest changes consisted of scrapping the manufacturer’s sales cap and requiring that components and battery parts be manufactured in the US or countries with which the US has entered a free trade agreement. It also requires that final assembly of the auto takes place in North America. This final requirement means that not every vehicle of a particular make and model will qualify. The only way you (and we) will be certain is by checking the VIN of the new auto. The government has a list of eligible vehicles at https://afdc.energy.gov/laws/inflation-reduction-act that also contains a VIN look-up tool. This new tax change is still evolving and the government does continuously update this website as new information becomes available.

Starting this year, there are also changes to research and development (R&D) expenses. Prior to 2022, companies could expense R&D costs in the year incurred. However, starting in 2022, all R&D costs must be capitalized and amortized over 5 years. The expenses are still eligible for the R&D tax credit, but any remaining expenses cannot be written off in the year incurred. There was some minor hope that Congress would delay this until 2023, but since it is an election year, the chances of that happening before the end of the year are slim.

In a prior newsletter we mentioned the attractive interest rates currently being paid on the government’s Series I bonds. In addition to this, Series I bonds also provide an education exclusion that permits qualified taxpayers to exclude from their gross income all or a part of the interest paid on redemption of the bonds when the bond owner pays qualified higher education expenses at an eligible institution. A nice perk of this exclusion is that moving the funds into a 529 plan counts as a qualified higher education expense. So, even if your child is still years away from attending college, you can sell the bond, contribute the funds into a 529 plan for the child, and avoid taxation on the interest income you received upon redemption.

Only one more upcoming due date for the 2021 tax season:
- November 15th: Extended deadline for tax-exempt organizations.

As always, if you have any questions, please do not hesitate to contact us. We are here to help.

Celeste & Mark

The Inflation Reduction Act of 2022 (Public Law 117-169) amended the Qualified Plug-in Electric Drive Motor Vehicle Credit (IRC 30D), now known as the Clean Vehicle Credit, and added a new requirement for final assembly in North America that took effect on August 17, 2022. For more details on the cr...

10/03/2022

Dear Clients:

President Biden has recently announced the forgiveness of some student loan debt. Cancellation of debt is normally taxable, but the U.S. has waived this for forgiven student loans through 2025. States will potentially have different rules, however, so the amount forgiven may be taxable income for state purposes. Please let us know if you have had some student loans forgiven so we can determine if there are any state tax impacts.

Looking for somewhere to invest your money during these turbulent stock market times? Series I bonds issued by the U.S. government are currently earning 9.62%. There is a $10,000 per year maximum for e-bonds plus another $5,000 for paper bonds. More information can be found here: https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm.

As a reminder, settlement awards that are due to physical injury or illness are generally not taxable. Any punitive awards are taxable. Your settlement agreement should delineate how much each award is for so we can determine the taxability, if any. Otherwise, the IRS will potentially take the position that it is all taxable.

Upcoming due dates:
- October 17th: Extended deadline for individuals and calendar year C-corporations.
- November 15th: Extended deadline for tax-exempt organizations.

As always, if you have any questions, please do not hesitate to contact us. We are here to help.

Celeste & Mark

09/05/2022

Dear Clients:

Many California businesses paid a 2022 estimated pass through entity tax (PTE) in June of this year. Unfortunately, the Franchise Tax Board has been erroneously processing some of these payments and immediately refunding them back to the taxpayer. If your business gets a refund from the FTB, please give us a call. Do not deposit it. The FTB is aware of the issue and has outlined a process to properly return the payment.

Last week the IRS announced broad penalty forgiveness for many taxpayers who filed late returns for the 2020 and 2021 tax years. The penalty abatement will be automatic, so there is nothing for taxpayers to do. If you have already paid a penalty, the IRS will automatically issue you a refund for those penalties. Per the IRS, most relief should be processed by the end of September. The IRS decided to do this in order to free up staff to work on the 8.7 million unprocessed tax returns they currently have.

There have been some rumblings the past few weeks that the budget increase recently announced for the IRS will lead to more audits. From what we have heard, this is not the case for the vast majority of taxpayers. While there is a chance audit rates could increase for those making more than $400,000, a large portion of the funds are going to go towards updating the IRS’ antiquated software systems and improving their customer service. For those of us who have had to wait hours (and even days) on hold to talk to someone at the IRS, this is welcome news.

Upcoming due dates:
- September 15th: Extended deadline for calendar year corporations and partnerships.
- September 30th: Extended deadline for calendar year fiduciary returns.
- October 17th: Extended deadline for individuals.
- November 15th: Extended deadline for tax-exempt organizations.

As always, if you have any questions, please do not hesitate to contact us. We are here to help.

Celeste & Mark

08/03/2022

Dear Clients:

California’s new budget included some refunds for eligible taxpayers. AB192 will issue refunds ranging from $400 to $1,050, depending on your adjusted gross income (AGI) in 2020. Single filers with AGI in excess of $75,000 ($150,000 for married taxpayers) will not receive any funds. The refunds are slated to be issued in October using direct deposit information California already has on file. If no bank information is available, then the refunds will be issued via a debit card. These payments will be nontaxable for California purposes and will be treated as state refunds for federal purposes.

News outlets last week revealed that Senate Democrats came to a tentative agreement on a pared down climate/inflation bill which does include some tax changes. While things may change before the Bill passes Congress and is signed into law, it currently includes a flat 15% minimum tax for C-corporations, an increase in IRS tax enforcement, closing the carried interest loophole for hedge fund managers, and an increase in federal clean energy tax credits. Apart from the potential expansion of the energy credits, we do not anticipate any impacts to most individual taxpayers. Stay tuned.

Upcoming due dates:
- September 15th: Extended deadline for calendar year corporations and partnerships.
- September 30th: Extended deadline for calendar year fiduciary returns.
- October 17th: Extended deadline for individuals.
- November 15th: Extended deadline for tax-exempt organizations.

As always, if you have any questions, please do not hesitate to contact us. We are here to help.

Celeste & Mark

06/07/2022

Dear Clients:

Summertime typical means that kids are home. For those who own businesses, you may want to consider hiring your kids for the summer to allocate some income to them. If you also set up a traditional IRA for them, you can make a contribution to the IRA on their behalf (to the extent of their wages or $6,000, whichever is lower). This deduction will offset the income to minimize (or eliminate) any taxes due on the earnings. Give us a call if you want more information on this strategy.

The IRS continues to experience backlogs and delayed response time due to staffing issues. It has been particularly difficult this year to contact them by phone. If we are in the process of assisting you with some IRS correspondences, please understand that it is taking longer than usual to get resolution. Your patience is appreciated. And if you are still waiting for your refund, the best status tool is on their website at https://www.irs.gov/refunds. We also urge you to sign up for an account with the IRS at https://www.irs.gov/payments/your-online-account. An account will allow you to check refund status, make and confirm estimated tax payments and access other tax records.

As always, if you have any questions, please do not hesitate to contact us. We are here to help.

Celeste & Mark

Get instructions on your online account. Review the amount you owe, balance for each tax year and payment history.

04/04/2022

Dear Clients:

We are in the final home stretch of the 2021 tax season! Individuals and calendar year corporations & fiduciaries are due April 18th this year due to Emancipation Day in Washington D.C. If we have not heard from you, we will be unable to extend your tax returns before the due date. Please contact us if you need an extension.

April 18th is also the deadline to make any IRA contributions for 2021. When making these contributions, please make sure to inform your brokerage that the contribution is for the 2021 tax year (and NOT 2022). 2022 IRA contributions can be made anytime during 2022, up to April 15, 2023.

If you have an HSA with a high deductible health plan and are going to be enrolling in Medicare in 2022, please remember that your contribution to your HSA for 2022 may be limited. Once covered by Medicare, you are no longer eligible to contribute to your HSA. The amount you can contribute is pro-rated for the months you are actually eligible. If you have any questions about this, let us know. Any over contribution will need to be removed from your HSA as soon as possible.

Upcoming due dates:
- April 18th: Due date for individuals, calendar year C-Corporations, and trusts/estates
- May 16th: Due date for tax-exempt organizations

As always, if you have any questions, please do not hesitate to contact us. We are here to help.

Celeste & Mark

03/07/2022

Dear Clients:

As tax season progresses, now is a time to remind you to watch out for scammers. The IRS will never call or email you and immediately ask for payment. If you have been contacted by someone claiming to be with the IRS, please do not give them any personal information. If uncertain, get a call back number and check with us before discussing anything with them.

The deadline for S-corporations and partnerships is March 15th. If you have not contacted us yet regarding your business, please reach out as soon as possible. We will not be able to put your business returns on extension without your authorization.

If you have already filed your tax returns and are waiting for your refunds, you can check the status with the IRS at: https://www.irs.gov/refunds. For California filers, you can check your state refund status here: https://www.ftb.ca.gov/refund/index.asp. As mentioned in a prior newsletter, the IRS is still processing 2020 tax returns, so some refunds are taking longer than usual to get. Please note that we do not have access to any special portal to check on your refunds. The links above are the only tools we have at our disposal, also.

For those taxpayers with brokerage accounts, please let us know as soon as possible if a corrected 1099 is received. Many larger brokerage houses issue corrections weeks after the original 1099 is issued. If we can incorporate those changes before filing your tax returns, it could potentially save us from having to file an amended tax return to report the changes.

Upcoming due dates:
- March 15th: Due date for S-Corporations and partnerships
- April 18th: Due date for individuals, calendar year C-Corporations, and trusts/estates
- May 16th: Due date for tax-exempt organizations

As always, if you have any questions, please do not hesitate to contact us. We are here to help.

Celeste & Mark

Check the status of your California state refund.

02/03/2022

Dear Clients:

Tax season is in full swing with the opening of the season on January 24th. Most 1099s/W-2s should have been received by now and our organizers were mailed out in the middle of last month. If you did not get your organizer, please let us know. Brokerage houses have more time to issue their 1099s, with most expected to be received by the end of this month.

The IRS has been backlogged since the start of the pandemic and still has millions of 2020 tax returns to process. Although we all hope for quick refunds, do not be surprised this year if it again takes longer for your tax returns to be processed.

Due to the stalling of the Build Back Better bill in Congress, no new provisions were implemented for 2022. The child tax credit has reverted back to its pre-2021 amounts, so there will not be any more monthly payments coming to taxpayers. In addition, there is no more $300 charitable deduction for non-itemizers. One positive from this is that the rumored increase in long term capital gains tax rates never materialized, so investors can still enjoy the lower tax rate afforded by this treatment. When (if?) these are taken up again by Congress is anyone’s guess at this point.

Upcoming due dates:
- March 15th: Due date for S-Corporations and partnerships
- April 18th: Due date for individuals, calendar year C-Corporations, and trusts/estates
- May 16th: Due date for tax-exempt organizations

As always, if you have any questions, please do not hesitate to contact us. We are here to help.

Celeste & Mark

01/03/2022

Dear Clients:

Happy New Year!

The IRS will be sending out 2 letters to taxpayers this month. Letter 6419 will show advanced child tax credits that have been paid to you and Letter 6475 will show economic impact payments you have received. If you get these letters, PLEASE include them in the tax documentation you provide us. It is important that we have the correct information when preparing your tax returns. Any errors will cause delays in tax return processing. We saw this situation happen this past year where it took over 4 months for the IRS to issue some refunds.

As a reminder, 1099s are due to recipients at the end of the month. As a general rule, if your business paid a non-employee $600 or more for services, they may need to receive a 1099 from you. Please let us know if you need assistance.

Congress failed to pass the infrastructure bill before the end of the year, so we are still a little bit in limbo regarding any potential tax changes for the 2021 tax year. We’ll have to see what happens in the next few weeks, but there is still the possibility of some retroactive changes to the tax code.

Our engagement letters and organizers will be going out in the mail the next couple of weeks. We understand the paperwork can be a little intimidating, but please try to complete the forms as much as possible. The more information we get from you, the better services we can provide.

As always, if you have any questions, please do not hesitate to contact us. We are here to help.

Celeste & Mark