Excent Financial

It's all fun & games until Uncle Sam wants his change$$$

Some common ways to ensure you are paying yourself first is by utilizing pre-tax accounts, also known as "tax-deferred" accounts.

Not only will you be putting away money for your retirement, but you will also lower your taxable income by the amount deposited. Ultimately you lower the amount of taxes you pay currently.

The idea is that you will be in a lower income tax bracket in retirement, so you will enjoy more favorable tax rates at the time than you would during your peak earning years. By deferring taxes, you hope to reduce your overall tax bill on the funds in the account.

Some pre-tax accounts are listed below:

Traditional IRAs
SEP IRAs
401(k) plans
Pensions
Profit-sharing accounts
457 plans
403(b) plans

The above content is and is for informational and advertising purposes only. You should not construe any such information or other material as legal, tax, investment, financial, business or any other advice. Please do your own due diligence and research before making financial commitments.

Series I savings bonds are a safe alternative to hedge against inflation. Not to mention the recession (my bad, "looming" recession).


The above content is and is for informational and advertising purposes only. You should not construe any such information or other material as legal, tax, investment, financial, business or any other advice. Please do your own due diligence and research before making financial commitments.

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Year-End Transactions Can Change Your 2022 Tax Refund – Did You Know?

Now is the time to prepare to file your 2022 tax return, and the IRS is reminding taxpayers that certain end-of-year financial transactions might have significant tax impacts. Tax withholding from paychecks does not ordinarily take into account income sources like yearly or holiday bonuses, stock dividends, or selling real estate or other property at a profit. If you receive such income, you might end up getting a smaller tax refund than you have been anticipating, or even owing tax and penalties for underpayment.

In addition, the IRS reminds taxpayers that if they have outstanding debts like unpaid taxes from previous years, past-due child or spousal support, or overdue student loan payments, their 2022 tax refunds might be reduced by these amounts under the Treasury Offset Program (TOP).

A tax professional can help you determine the tax implications of income you received late in 2022.

Opening Date for 2023 Tax Filing Season

The IRS will begin accepting 2022 tax returns for processing on January 23, 2023. Taxpayers may file their returns before that date, but may need to wait until January 23 or later to get confirmation that the return was accepted. The filing deadline for 2022 returns is April 18, 2023.

If you have a federal tax refund coming, you can track it by using the Where's My Refund tool (link below) once the IRS has accepted your return.

To avoid processing delays, make sure that your return is complete and free from errors. A tax professional can help you file an accurate return electronically and set up direct deposit, so that your refund comes as quickly as possible.

IRS Where's My Refund? Tool: https://www.irs.gov/refunds

Quarterly Estimated Tax Payments - Reminder

If you are making quarterly estimated tax payments to the IRS, the due date for the September 1st - December 31st, 2022 quarter of year is January 17th, 2023.

For payments made using IRS Direct Pay, you can make payments until 11:45PM EST, and for payments using a credit or debit card, payments can be made up to midnight on the due date.

IRS Delays Implementation of New Form 1099-K Rules – Did You Know?

The American Rescue Plan Act (ARPA) of 2021 changed the IRS reporting rules for payments sent through third-party payment processors like PayPal and CashApp. The new rules require payment processors to send a Form 1099-K to all recipients of $600 or more in payments for goods or services during a year. These rules were to take effect beginning with tax year 2022.

However, the IRS has now announced that 2022 will be treated as a “transition year” for the ARPA provisions regarding 1099-K forms. As a result, payment processors may choose to follow the previous rules, which stated that a Form 1099-K must only be sent if a business or individual received over $20,000 in payments through more than 200 transactions. The new $600 threshold will take full effect in tax year 2023.

Therefore, if you received between $600 and $20,000 for goods or services through a payment processor in 2022, with 200 or fewer transactions, you may or may not receive a Form 1099-K. Note that this transition policy applies only to the sending of 1099-K forms. You must still report all taxable income you receive through a third-party processing platform to the IRS, regardless of whether you receive a tax form showing the income. A tax professional can help you determine which payments you received may be taxable.

Standard Mileage Rates for 2023 – Did You Know?

The IRS has updated the 2023 standard mileage rates for vehicle uses that qualify for a tax deduction. These rates apply for most passenger vehicles, including cars, vans, SUVs and pickup trucks. Here are the main mileage rates for this year:

- 65.5 cents per mile for business use of a vehicle (up 3 cents from midyear 2022)
- 22 cents per mile for certain medical purposes or moving purposes for qualified active-duty Armed Forces members (same as midyear 2022)
- 14 cents per mile for vehicle use for qualifying charitable work (unchanged)

In most cases, taxpayers who qualify to claim a vehicle expense deduction may either use the standard mileage rate or actual expenses to figure their deduction. However, if you use your car or truck for business, you generally must use the standard rate for the first year you put the vehicle in service if you want to preserve this option for future years.

A tax professional can help you determine whether the standard mileage rate or actual expenses will result in a larger deduction in your circumstances. Keep in mind that if you choose to deduct actual expenses, you will need to keep detailed records of all vehicle-related costs.

'Tis the Season for Important Tax Paperwork

Keeping your records organized will help make sure you don't miss out on valuable deductions when it is time to file. Many taxpayers will receive year-end income statements from employers, banks, stock issuers and other sources in January and early February.

The most common documents include:

- W-2 forms from your employers, showing your wages and any taxes withheld
- Forms 1099-INT and 1099-DIV showing your interest and dividend income
- Forms 1099-MISC and 1099-NEC showing gig economy and other self-employment earnings, along with rents, royalties and other miscellaneous income
- Form 1099-K from payment processing services like PayPal and CashApp if you received $600 or more in payments through one of these platforms for goods or services
- Records of virtual currency (including crypto) transactions
- Charity donation receipts
- Health Insurance statements (like Form 1095)
- Proof of qualifying educational expenses (like Form 1098-T)
- Mortgage interest statements

December 31 IRA Deadline – Did You Know?

Many taxpayers with IRAs must take a withdrawal from their accounts each year, called a required minimum distribution (RMD). In general, taxpayers who will be 72 years of age or older by the end of this year must take a 2022 RMD from their traditional, SIMPLE or SEP IRA. Holders of Roth IRAs typically do not need to take RMDs.

The deadline for most 2022 RMDs is December 31. However, a different deadline applies if you turned 72 in 2022, and will be taking your first RMD. In this case, you may take your first RMD at any time until April 1, 2023, as long as you then take your second RMD by December 31, 2023. RMDs are generally taxable in the year when you receive the money.

Failure to take an RMD by the deadline, or withdrawing an insufficient amount, may result in a 50% tax penalty on the amount that was not withdrawn as required.

Many workplace retirement plans, such as 401(k) plans, have similar RMD rules. Taxpayers who inherited any type of IRA (including Roth) may also have to take RMDs. Your IRA trustee or administrator can help you determine whether you must take a 2022 RMD and if so, the correct amount. A tax professional can help you properly report the RMD and figure any tax due on it.

Giving Tuesday and Charitable Donations - Did You Know?

Millions of Americans will contribute to their favorite charities on Giving Tuesday (November 29), and throughout the holiday season. Charitable donations are often described as tax-deductible, but whether you can claim a deduction for your contribution depends on several factors.

First, you generally must itemize deductions on your tax return to claim a deduction for charitable donations. Therefore, your donation will not be deductible if you use the standard deduction. Note that the special rules that allowed taxpayers who did not itemize to deduct certain monetary donations in 2020 and 2021 have now expired. A tax professional can help you determine whether itemizing deductions would be advantageous for you.

If you do itemize deductions, you may generally deduct donations of money or property to any eligible tax-exempt charity. If you are unsure whether an organization qualifies to receive tax-deductible donations, the IRS Tax-Exempt Organization Search tool (link below) can help.

Tax-Exempt Organization Search: https://www.irs.gov/charities-non-profits/tax-exempt-organization-search