CPA Company Lakeshore LLC

01/20/2025

The maximum contribution to a 401(k) in 2025 is $23,500 per employee. This is an increase from $23,000 in 2024.

The combined contribution limit for employees and employers in 2025 is $70,000, up from $69,000 in 2024.

Participants who are 50–59 and 64+ can contribute an additional $7,500 in catch-up contributions.
Participants who are 60–63 can contribute an additional $11,250 in catch-up contributions. This brings their total deferral limit to $34,750.

The limit for annual contributions to an IRA remains $7,000.

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01/16/2025

Taxpayers could receive a Form 1099-K

Taxpayers who received more than $5,000 in payments for goods and services through an online marketplace or payment app in 2024 should expect to receive a Form 1099-K in January 2025. IRS will also receive a copy of your Form 1099-K.

There have been no changes to the taxability of income. All income, including proceeds from part-time work, side jobs or the sale of goods and services is taxable. Taxpayers must report all income on their tax return unless it’s excluded by law, whether they receive a Form 1099-K, a Form 1099-NEC, Form 1099-MISC, or any other information return.

It is important for taxpayers to understand why they received a Form 1099-K and how to use it along with their other records to figure and report the correct amount of income on their tax return. It is also important for taxpayers to know what to do if they received a Form 1099-K but shouldn’t have. In either situation, good recordkeeping is key and will help make tax filing easier.

See What to do with Form 1099-K for more information.

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01/16/2025

IRS announces Jan. 27 start to 2025 tax filing season

The Internal Revenue Service today announced that the nation’s 2025 tax season will start on Monday, Jan. 27, 2025, and will feature expanded and enhanced tools to help taxpayers as a result of the agency’s historic modernization efforts.

The IRS expects more than 140 million individual tax returns for tax year 2024 to be filed ahead of the Tuesday, April 15 federal deadline. More than half of all tax returns are expected to be filed this year with the help of a tax professional.
Taxpayers should check Where’s My Refund? on IRS.gov

Most refunds are issued in less than 21 calendar days. Taxpayers can use Where’s My Refund? to check the status of their 2024 income tax refund within 24 hours of e-filing. Refund information is normally available after four weeks for taxpayers who filed a paper return. Information on Where’s My Refund? will update overnight so there is no need to check the tool more than once a day.

The easiest, safest and fastest way to receive a refund is to file electronically (e-file) and select direct deposit. According to Treasury’s Bureau of the Fiscal Service, paper refund checks are 16 times more likely to have an issue, like the check being lost, misdirected, stolen or uncashed. People should check FDIC and National Credit Union Administration websites if they don’t have a bank account. Veterans can use the Veterans Benefits Banking Program to find participating financial institutions.

The IRS also notes that starting Jan. 1, 2025, people will no longer be able to buy paper Series I savings bonds with their tax refund. Instead, Series I bonds are available in electronic format in TreasuryDirect.

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10/23/2024

IRS releases tax inflation adjustments for tax year 2025

WASHINGTON — The Internal Revenue Service announced today the annual inflation adjustments for tax year 2025.

Revenue Procedure 2024-40 provides detailed information on adjustments and changes to more than 60 tax provisions that will impact taxpayers when they file their returns in 2026.

Notable changes for tax year 2025

The tax year 2025 adjustments described below generally apply to income tax returns to be filed starting tax season 2026. The tax items for tax year 2025 of greatest interest to many taxpayers include the following dollar amounts:

Standard Deductions. For single taxpayers and married individuals filing separately for tax year 2025, the standard deduction rises to $15,000 for 2025, an increase of $400 from 2024. For married couples filing jointly, the standard deduction rises to $30,000, an increase of $800 from tax year 2024. For heads of households, the standard deduction will be $22,500 for tax year 2024, an increase of $600 from the amount for tax year 2024.
Marginal Rates. For tax year 2025, the top tax rate remains 37% for individual single taxpayers with incomes greater than $626,350 ($751,600 for married couples filing jointly). The other rates are:

35% for incomes over $250,525 ($501,050 for married couples filing jointly).
32% for incomes over $197,300 ($394,600 for married couples filing jointly).
24% for incomes over $103,350 ($206,700 for married couples filing jointly).
22% for incomes over $48,475 ($96,950 for married couples filing jointly).
12% for incomes over $11,925 ($23,850 for married couples filing jointly).
10% for incomes $11,925 or less ($23,850 or less for married couples filing jointly).

Alternative Minimum Tax Exemption Amounts. For tax year 2025, the exemption amount for unmarried individuals increases to $88,100 ($68,650 for married individuals filing separately) and begins to phase out at $626,350. For married couples filing jointly, the exemption amount increases to $137,000 and begins to phase out at $1,252,700.
Earned Income Tax Credits. For qualifying taxpayers who have three or more qualifying children, the tax year 2025 maximum Earned Income Tax Credit amount is $8,046, an increase from $7,830 for tax year 2024. The revenue procedure contains a table providing maximum EITC amount for other categories, income thresholds and phase-outs.
Qualified Transportation Fringe Benefit. For tax year 2025, the monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking rises to $325, increasing from $315 in tax year 2024.
Health Flexible Spending Cafeteria Plans. For the taxable years beginning in 2025, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements rises to $3,300, increasing from $3,200 in tax year 2024. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount rises to $660, increasing from $640 in tax year 2024.
Medical Savings Accounts. For tax year 2025, participants who have self-only coverage the plan must have an annual deductible that is not less than $2,850 (a $50 increase from the previous tax year), but not more than $4,300 (an increase of $150 from the previous tax year).

The maximum out-of-pocket expense amount rises to $5,700, increasing from $5,550 in tax year 2024. For family coverage in tax year 2025, the annual deductible is not less than $5,700, increasing from $5,550 in tax year 2024; however, the deductible cannot be more than $8,550, an increase of $200 versus the limit for tax year 2024. For family coverage, the out-of-pocket expense limit is $10,500 for tax year 2025, rising from $10,200 in tax year 2024.

Foreign Earned Income Exclusion. For tax year 2025, the foreign earned income exclusion increases to $130,000, from $126,500 in tax year 2024.
Estate Tax Credits. Estates of decedents who die during 2025 have a basic exclusion amount of $13,990,000, increased from $13,610,000 for estates of decedents who died in 2024.
Annual Exclusion for Gifts increases to $19,000 for calendar year 2025, rising from $18,000 for calendar year 2024.
Adoption Credits. For tax year 2025, the maximum credit allowed for an adoption of a child with special needs is the amount of qualified adoption expenses up to $17,280, increased from $16,810 for tax year 2024.

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10/16/2024

Tax deductions vs. credits: What’s the difference?

Both deductions and credits can be powerful tax-saving tools, but they work differently. A tax deduction reduces the amount of income that’s taxed and thus becomes more valuable the higher the tax bracket. A tax credit reduces the actual tax you owe dollar-for-dollar, providing much more tax savings than a deduction of an equal amount. But many deductions and credits are subject to income-based limits that reduce or eliminate the tax savings for higher-income taxpayers.

10/15/2024

Tax treatments by type of Charitable gift

The tax advantages of a charitable contribution generally depend on three factors: the recipient (only donations to qualified charities are deductible), how you structure the gift, and the type of property you choose to give. Different types of property donations—whether its cash, business assets, or investments—offer different tax advantages and drawbacks:

Cash donations are simple, but as previously mentioned, make sure you keep a receipt from the charity or a bank record (such as a canceled check or statement) to substantiate your cash gift—no matter how small.

You can deduct transportation costs and other expenses related to volunteering. However, the value of volunteer time isn't deductible.

You can donate almost any item—including old clothing, household goods, or vehicles—as long as it's in "good" used condition or better under IRS tax rules. If the property doesn't relate to the charity's mission, you may deduct the amount you paid for the property or the property's current reasonable value—whichever is less. If the property is related to the charity's mission—old clothes donated to the Salvation Army, for example—it's usually fully deductible based on its current reasonable value. Some charities will provide guidance, but it's ultimately up to you to determine the property's worth for tax purposes.

Ordinary income property normally includes assets like inventory held for sale by a business, artwork created by you, or manufactured items you produced. In addition, any short-term capital assets, such as stock, are considered to be ordinary income property if held for less than a year.

Typically, if the donated assets would have generated ordinary income if sold on the day of contribution, then the IRS limits your deduction to the asset's cost basis (the fair market value reduced by the amount of ordinary income or short-term capital gain that would have been realized). However, you may be able to take the full deduction if you include the appreciated value of the asset in your gross income on your tax return. If the property has decreased in value, your deduction could be further limited.

You can usually deduct the full fair market value of appreciated long-term assets that you've held for more than one year and a day—such as stocks, bonds, mutual funds, or other personal assets like real estate that have appreciated in value. An additional benefit is you don't have to recognize any gains on the donation, which means you pay no capital gains tax on that property.

Donating long-term assets—especially highly appreciated securities—instead of cash can be a very effective and tax-efficient way to support a charity. If your assets have appreciated in value, you can generally increase the amount of your potential deduction as well as your gift by contributing the securities directly to the charity instead of the cash generated by selling them.

10/14/2024

Tax Aspects of Charitable Giving

1. Request a receipt if you donate $250 or more to a single charity. If the donation is in cash, regardless of amount, you'll need a receipt or supporting bank records.

2. Get an independent, written appraisal for gifts of property in excess of $5,000 ($10,000 for closely held stock). You won't need an appraisal for exchange-traded funds, bonds, or mutual funds.

3. Subtract the value of any benefits you received for your charitable donation (for example books, tapes, meals, entertainment, and so on) before you deduct it.

4. Itemize your deductions on your tax return if you think your total donations will exceed your standard deduction1 and you want to receive a tax benefit for your charitable donations. If your standard deduction is higher, your donations won't reduce your tax bill, but you'll still be supporting your favorite charity—which is a good reason on its own to give.

5. Be aware of the annual deduction limits for donations to public charities, including donor-advised funds. For contributions of non-cash assets held more than one year, the limit is 30% of your adjusted gross income (AGI). Your deduction limit will be 60% of your AGI for cash gifts. Note that if you're planning a large donation that's close to or exceeds your AGI limit, you may carry over the excess contribution amounts up to five subsequent tax years. Consider talking to a tax professional before making your donation.

10/14/2024

Maximize retirement contributions

You can reduce your taxable income dollar-for-dollar with yearly contributions to your 401(k), IRA, and other retirement accounts.

A workplace retirement plan can contribute up to the maximum of $23,000 for 2024 (up from $22,500 in 2023). People age 50 and older can make additional catch-up contributions of $7,500.

Contribution limits to IRA plans have also increased to $7,000 for 2024, compared to $6,500 for 2023. (Catch-up contributions remain at $1,000.)

10/11/2024

The Social Security Administration's cost of living adjustment for 2025 is the lowest increase recipients have received in years.

The Social Security Administration has announced the cost of living adjustments (COLA) for 2025 and it’s the lowest increase recipients have received in years.

Social Security benefits and Supplemental Security Income payments will increase for more than 72.5 million Americans by 2.5% in 2025, the SSA announced in a release.

Social Security retirement benefits will increase by about $50 per month starting in January.

While the 2.5% increase is less than the COLA increases awarded in 2021, 2022 and 2023, it is consistent with the average increase granted over the past 10 years.

“Over the last decade the cost-of-living adjustment (COLA) increase has averaged about 2.6%,” the SSA announced Thursday, Oct. 10. “The COLA was 3.2% in 2024.”

10/10/2024

The IRS is providing disaster relief for individuals and businesses affected by Hurricane Helene, including all of Alabama, Georgia, North Carolina, and South Carolina. The relief also covers 41 counties in Florida, eight counties in Tennessee, and six counties and one city in Virginia.

Helene left many residents of the Southeast without water, power, or phone and internet service when it made landfall Sept. 26 on Florida’s Gulf Coast as a Category 4 hurricane.

Taxpayers in these areas have until May 1, 2025, to file various federal individual and business tax returns and make tax payments, the IRS said in the news release. This relief includes 2024 individual and business tax returns normally due in March and April 2025; 2023 individual and corporate returns with valid extensions; and quarterly estimated tax payments.

10/08/2024

IRS reminds taxpayers of Oct. 15 tax-filing extension deadline; combat zones, disaster areas, Israel have more time

WASHINGTON — The Internal Revenue Service today encouraged taxpayers to file their 2023 tax year federal income tax return on or before the upcoming Tuesday, Oct. 15, 2024, deadline to avoid possible late filing penalties.

Disaster-area taxpayers and military members and their families may have extra time to file. Those with an IRS address of record in areas covered by Federal Emergency Management Agency (FEMA) disaster declarations and those returning from a combat zone may qualify for additional time to file.

Deadlines vary depending upon the disaster and locality. Details on all recent disaster relief are on the Around the nation page on IRS.gov. Currently:

Taxpayers in parts of Arkansas, Florida, Iowa, Kentucky, Mississippi, New Mexico, Oklahoma, Texas and West Virginia have until Nov. 1, 2024, to file their 2023 tax year return.
Taxpayers in all or parts of Connecticut, Florida, Illinois, Kentucky, Louisiana, Minnesota, Missouri, New York, Pennsylvania, Puerto Rico, South Dakota, Texas, Vermont, Virgin Islands and Washington state have until Feb. 3, 2025, to file their 2023 tax year returns.
Taxpayers affected by Helene in all or parts of Alabama, Florida, Georgia, North Carolina, South Carolina, Tennessee and Virginia will have until May 1, 2025, to file their 2023 tax year returns.
Taxpayers affected by the terrorist attacks in Israel have until Sept. 30, 2025, to file their 2023 returns and pay any tax due.
Members of the military and others serving in a combat zone typically have 180 days after they leave the combat zone to file returns and pay any taxes due.

10/07/2024

Your income and Medicare go hand-in-hand

Medicare is a benefit for individuals aged 65 and older. It provides coverage for health care, but it’s not free. The amount you pay is on a sliding scale based on your income. Here’s how it works, and why it could potentially impact wealth planning and tax decisions.

Medicare is broken into several parts:

Part A is hospital insurance. There’s no premium* for most people, because if you’ve worked longer than 10 years, you’ve paid Medicare taxes long enough to receive this “free” benefit.
Part B is medical insurance. The minimum premium is $174.70 per month and can go up to $594.00 per month depending on your income.§ Find your premium here.
Part C is Medicare Advantage. This is insurance managed by a third-party provider. This premium is based on the plan you choose.
Part D is prescription insurance/drug coverage. The premium is based on the plan you choose and your income.

For Parts B and D, premiums are based on your income from two years prior—known as the Income-Related Monthly Adjusted Amount (IRMAA) thresholds. For instance, your 2021 income determines your 2023 premium amount. In addition, the Centers for Medicare and Medicaid Services (CMS) may change the premium.

Income considerations are important for your tax bracket and Medicare premiums. For instance, if you are pondering a Roth conversion, the amount you convert is considered taxable income in the year you convert. This income could push you into a higher income bracket, which could increase your tax rate AND your Medicare premium. For example, if you converted $100,000 two years ago, which increased your income to $350,000, your Medicare premium could be $1,258 more this year—from $4193 to $5,451.