IFA Taxes FAQs

File Form 1040 or 1040 SR by April 15, 2024.

Please be advised there is no Advanced Child Tax Credits for year 2023 as it was for providing immediate relief during the pandemic.

We recommend that each of our clients set up their own IRS online account. With an online IRS account, you can view your account status, make payments (including balances due and estimate, among others), view past payments, confirm economic impact payments received, pull IRS transcripts, and view new IRS notices and letters you received, among other activities.

Accounts can be set up in as little as 10 minutes at www.irs.gov. If you have any trouble setting up an account, please contact our office and we can help walk you through the process. We can also help you set up your account in person during your tax appointment. If you are married, then each spouse should set up their own separate account.

All taxpayers now eligible for Identity Protection PIN began in 2021. The IRS Identity Protection PIN (IP PIN) Opt-In Program has been expanded to all taxpayers who can properly verify their identity. An IP PIN helps prevent your social security number from being used to file a fraudulent federal income tax return. You can use the Get An IP PIN tool on www.IRS.gov/getanippin to request an IP PIN.

For tax year 2023, if you don't have an IP PIN, and your adjusted gross income on your last filed return is below $79,000 for Individuals, or $158,000 for Married filling Joint or less, the IRS also provides Form 15227 to apply for IP PIN. Otherwise make an appointment to visit a Taxpayer Assistance Center (TAC). You can locate the closest TAC by visiting Taxpayer Assistance Center Office Locator at the IRS website.

The deduction for unreimbursed non-entertainment-related business meals is generally subject to a 50% limitation.

• Medical expenses will be deductible if they exceed 7.5% adjusted gross income.
• State and local taxes are now capped at $10,000.
• Interest on mortgages are fully deductible up to $750,000 on primary and secondary residences if purchased or refinanced after December 14, 2017.
• Miscellaneous deductions that exceed 2% adjusted gross income are no longer deductible they include:
  • Unreimbursed job expenses
  • Investment expenses
  • Tax preparation fees
  • Fees to fight the IRS
  • Hobby expenses
• Casualty or theft losses will only be deductible if they occur as a result of a federally declared disaster. Only losses in excess of 10% of AGI are deductible after minus $100 from the loss amount.
• The Lifetime Learning Credit is phased out for taxpayers with modified adjusted gross income in excess of $80,000 ($160,000 for joint returns).

For tax year 2023 and 2022, the Child Tax Credit (CTC) is the same $2,000 if eligible.

For tax year 2023, the Earned Income Tax Credit (EITC), ranges from $600 to $7,430 if eligible. For tax year 2022, ranges from $560 to $6,935 if eligible

For tax year 2023, the Child and Dependent Care Credit is up to $3,000 for a single qualifying child, or up to $6,000 for two qualifying children or more.

For tax year 2023, you can deduct as much as your business's net income or $1,160,000 whichever is smaller for qualifying equipment. For tax year 2022, that cap is $1,080,000.

While businesses can get a larger tax return now with this deduction, they forfeit the chance to claim depreciation in the future. In other words, they can't spread that asset's cost over many years. That can result in fewer tax benefits in the future.

For tax year 2023 is December 31, 2023.

For tax year 2022 is December 31, 2022.

For tax year 2023 is April 15, 2024.

For tax year 2022 is April 18, 2023.

1. Verify there are no other pre-tax (deductible) IRAs
2. If there are, roll over existing pre-tax IRAs to a 401(k) (if available) to avoid the IRA aggregation rule
3. Contribute to non-deductible IRA (if eligible)
4. Invest funds in the non-deductible IRA
5. Convert to Roth IRA
6. You can repeat steps 2-4 annually

Capital losses can be used to offset capital gains.

Short-term losses must first offset short-term gains (if any). Long-term losses must first offset long-term gains (if any). Once that is done and there are still leftover losses, then it can be applied to either short-term or long-term gains.

Example: A client has $20,000 in short-term carryover loss and a $10,000 in long-term carryover. During the year a position was sold for a $5,000 gain and had long-term capital gains dividends of $15,000. The results would the long-term loss carryover of $10,000 would be fully offset and the remaining short-term carryover would be reduced from $20,000 to $10,000.

Capital losses exceed capital gains in the current year.

Excess capital losses can offset up to $3,000 in ordinary income per year on your tax return ($1,500 if Married Filing Separately). Excess short-term losses (if any) will get offset before any excess long-term capital losses. These losses are tracked on Schedule D of the Individual (Form 1040) tax return.

Example (Continued): From our previous example $3,000 of $10,000 in short-term capital carryover will then be utilized to offset ordinary income. $7,000 will now be carried forward to future tax years.

If your dividends meet the definition of qualified dividends, they will be taxed at a rate of 0%, 15%, or 20%, depending on your adjusted gross income, or AGI.

If your dividends do not qualify, they will be taxed at your marginal tax rate, according to the 2022 tax brackets. As part of the tax overhaul, the seven brackets have been adjusted to 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

On top of the tax rates discussed in the previous section and any applicable state taxes you might owe, high-income investors are also required to pay a 3.8% net investment income tax.

Investors will owe net investment income tax if they have any net investment income (interest, dividends, capital gains, etc.) and have modified AGI in excess of these thresholds:

Finally, it's important to note that unlike the tax brackets, these thresholds are not indexed for inflation. So, they'll remain the same unless the law governing them changes.

A 529 plan is an education savings plan for college qualified expenses and K-12 tuition only that allows contributions to grow tax free similar to a Roth IRA. See chart below to see if your state has any additional tax benefits.

529 Plan Tax Benefit Chart

Tuition and fees, books and supplies, computer and internet access, room and board, special needs equipment. If the student lives off campus please refer to the colleges cost of attendance figures to determine the room and board amount.

Generally, you will pay federal and state income tax and a penalty of the earnings portion of a non-qualified withdrawal. The penalty exceptions are: the beneficiary receives a scholarship, attends a U.S. military academy, dies or becomes disabled.

To avoid paying tax and penalties on your earnings your options are: change of beneficiary to a qualifying family member, keep the funds in the account in case the beneficiary wants to attend grad school, make yourself the beneficiary and use the funds for furthering your own education, and roll funds into a 529 ABLE account.

Example: Your combined income which = Adjusted Gross Income + Nontaxable Interest + ½ of Annual Social Security Benefit.

If you receive $30,000 in social security benefits and withdraw $40,000 from your Pre Tax 401k/Traditional IRA and a married couple filing jointly:

According to the chart, 85% of your $30,000 in social security benefits will be taxed.