Tax & Accounting Update
Delay in Requirements for form 1099-K
Following feedback from taxpayers, tax professionals and payment processors and to reduce taxpayer confusion, the Internal Revenue Service announced a delay of the new $600 Form 1099-K reporting threshold for third party settlement organizations for calendar year 2023. As the IRS continues to work to implement the new law, the agency will treat 2023 as an additional transition year. This will reduce the potential confusion caused by the distribution of an estimated 44 million Forms 1099-K sent to many taxpayers who wouldn't expect one and may not have a tax obligation. As a result, reporting will not be required unless the taxpayer receives over $20,000 and has more than 200 transactions in 2023.
January 16th due date
Taxpayers who didn’t pay enough tax in 2023 should make a fourth quarter tax payment on or before Jan. 16 to avoid a possible penalty or tax bill when filing in 2024. Taxes are normally paid throughout the year by withholding tax from paychecks, by making quarterly estimated tax payments to the IRS or by a combination of both. This is done because taxpayers need to pay most of their tax during the year as income is earned or received.
Who needs to make a payment?
Taxpayers who earn income not subject to tax withholding such as self-employed people or independent contractors should pay their taxes quarterly to the IRS. In addition, people who owed tax when they filed their current year tax return often find themselves in the same situation again when they file the next year. Taxpayers in this situation normally include:
- Those who itemized in the past but are now taking the standard deduction,
- Two wage-earner households,
- Employees with non-wage sources of income such as dividends,
- Those with complex tax situations and/or
- Those who failed to increase their tax withholding.
Understanding 2023 RMDs
There has been some confusion with recent retirement savings legislation which has been passed with Secure 2.0 Act as to when people must begin taking required minimum distributions from tax deferred retirement savings accounts. After the Secure 2.0 Act became law, the RMD age moved to 73.
RMD age by birth
- If born in 1950 or earlier, you must take RMD this year (2023)
- If you were born on or after January 1, 1951, you are not obligated to take RMD in 2023.
For a full article click on the link below.
Mileage rates update for 2024
The Internal Revenue Service a few days ago issued the 2024 standard mileage rates used to calculate the deductible cost of operating an automobile for business, charitable, medical or moving purposes. Beginning on Jan. 1, 2024, the standard mileage rates for the use of a car (also vans and pickups trucks) will be:
- 67 cents per mile driven for business use, up 1.5 cents from 2023.
- 21 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, a decrease of 1 cent from 2023.
- 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2023.
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.
Best States for Middle-Class Families with low tax burden
I came across this interesting article that talks about states that have the lowest tax burden for middle class households. In the research it was considered each state’s median annual salary and average annual tax spent for three main tax categories: state income tax, property tax and sales tax on essential items. Wyoming was ranked number one as the best state for middle class families with only 2.15% of income spent on taxes. For a full article click on the link below.
