2023 Year End - Williams & Schiller CPAs

2023 Year End Tax Letter

– Williams & Schiller, PC | CPAs & Consultants –

2023 Year End Letter

WS CPAs and Consultants is dedicated to providing tax planning and preparation, payroll, bookkeeping, and more with personalized attention to individuals and small businesses. We deliver high-quality, timely tax and accounting services customized to each client’s needs.

We want to know about your family, your background, your goals, and your dreams. Long-term relationships are our foundation – call WS CPAs to schedule your appointment today!

2023 Year End Letter

As we approach the end of the year, Williams & Schiller begins to shift our focus to tax planning including our annual tax letter. The year 2023 presents unique financial challenges, with concerns such as inflation, market volatility, and geopolitical risks at the forefront of our minds. Rest assured, our dedicated and client-focused team is ready to assist you in navigating these challenges and securing your financial future.

Williams and Schiller, CPAs has continued to grow and invest in our firm, expertise, and technology infrastructure to better serve our clients. In early 2023, we welcomed another member to our professional staff, Amanda Simpson. Amanda is a tax associate in our Sandpoint office and has been working closely with partners and staff on a variety of projects.

Thank you for entrusting us with your financial well-being. We value our relationship and are committed to providing you with the highest level of service. Please continue reading for valuable year-end tax planning tips and other financial insights and reference material.

Click here to meet our staff!

Important Tax Deadlines

First week of January, 2024	Tax organizers will be out in the mail to all clients, or emailed if requested.
January 16th, 2024	Fourth Quarterly 2023 estimated tax payment due
March 15th, 2024	Deadline for partnerships, multi-member LLCs, and S corporations without an extension
April 1st, 2024	Deadline to take first required minimum distributions (RMDs) from Traditional, SEP and SIMPLE IRAs, and former qualified employer sponsored retirement plans (QRP) if you reached age 73 in 2023
April 15th, 2024	Deadline for individuals, sole proprietorships, LLCs taxed as disregarded entities, and C Corporations Deadline to make 2023 contribution to traditional IRA, Roth IRA, Health Savings Account (HSA), or Education Savings Account (ESA
June 17th, 2024	Second Quarterly 2024 estimated tax payment due Deadline for expat filing without an extension
September 16th, 2024	Deadline for partnerships and S Corporations with extension Third Quarterly 2024 estimated tax payment due
October 15th, 2024	Deadline for individuals, expats, sole proprietorships, C-corporations, and LLCs taxed as disregarded entities with extension Deadline to make 2023 contribution to SEP plan
December 16th, 2024	Fourth Quarterly 2024 payment due – C corporations only
December 31st, 2024	Deadline for completion of gifts for the current calendar year (charitable or other) Deadline to take 2024 required minimum distributions (RMDs) from Traditional, SEP and SIMPLE IRAs, and former qualified employer sponsored retirement plans (QRP) if you reached age 72 before 2023 Deadline to complete a Roth IRA conversion Deadline to complete a 529 plan contribution

Individual Tax Planning

The tax landscape in 2023 remains relatively stable, with no significant legislative changes. However, it’s important to consider the implications of the Inflation Reduction Act of 2022, which may have an indirect impact on some individuals. One item that was set to impact many clients in 2023, but has been delayed to 2024, is a change to 1099-K reporting requirements that will impact folks with small businesses or receiving payments from popular companies/apps like AirBnB, Venmo, CashApp, Etsy, etc. Read our blog post here to learn more about this and how it may impact you in future years.

KEY REMINDER: The Federal student loan interest and payment suspension has ended (Fall 2023). Payment requirements have resumed and you should again receive a form 1098-E that outlines interest paid. Please include with your tax paperwork!

As we navigate the year, it’s important to consider your unique financial situation and take advantage of available tax planning strategies. We’re here to help you make informed decisions.

Here are some actions individuals can take to reduce their 2023 tax burden:

Maximize retirement plan contributions: Increasing your contributions to retirement plans like IRAs or 401(k)s can reduce your tax liability. The maximum contribution limits for 2023 are:
- Contribution limits for 401(k)s, 403(b)s, most 457 plans, thrift savings plans (TSPs), and other qualified retirement plans are $22,500.
- The annual contribution limit for traditional IRAs and Roth IRAs is $6,500, with an additional catch-up contribution of $1,000 for those over age 50.
Consider tax-loss harvesting: This strategy involves selling selected investments at a loss to offset gains and reduce capital gains taxes. See later in this letter to learn more about capital gains and tax-loss harvesting.
Review itemized deductions: If you can itemize deductions, consider accelerating expenses like charitable donations or medical expenses.
Charitable contribution planning: Donating appreciated assets that have been held for more than one year can be a tax-efficient way to give to charity. Donor-advised funds (DAFs) and qualified charitable distributions (QCDs) are other options to explore.

Additionally, it’s essential to review your retirement plans annually, as well as to stay informed about digital currency tax implications, especially if you or your children hold digital assets.

REQUIRED MINIMUM DISTRIBUTIONS (RMDS)

Below is a table to help you determine when you need to start taking your RMDs:

Birth Date	Applicable RMD Age
Before July 1, 1949	70 1/2
July 1, 1949-1950	72
1951-1959	73
1960 or later	75

Click here to read more about RMDs

2023 Federal Income Tax Brackets

Tax Rate	Single Filers	Married Filing Joint	Head of Household
37%	$578,126 or more	$693,751 or more	$578,101 or more
35%	$231,251 to 578,125	$462,501 to 693,750	$231,251 to 578,100
32%	$182,101 to 231,250	$364,201 to 462,500	$182,101 to 231,250
24%	$95,376 to 182,100	$190,751 to 364,200	$95,351 to 182,100
22%	$44,726 to 95,375	$89,451 to 190,750	$59,851 to 95,350
12%	$11,001 to 44,725	$22,001 to 89,450	$15,701 to 59,850
10%	$0 to 11,000	$0 to 22,000	$0 to 15,700

2023 Standard Deduction

Filing Status	2022	2023	Change
Single	$12,950	$13,850	$900
Married Filing Joint	$25,900	$27,700	$1,800
Head of Household	$19,400	$20,800	$1,400
Married Filing Separate	$12,950	$13,850	$900

Annual Exclusion for Gifts

The annual exclusion for gifts increases to $17,000 for calendar year 2023. In 2024 the exclusion jumps, up from $17,000 to $18,000 ($36,000 per recipient for married couples).

Child Tax Credit/Dependent Care deduction

Child Tax Credit

The 2023 child tax credit is worth up to $2,000 per qualifying dependent under the age of 17.
The credit is nonrefundable, but some taxpayers may be eligible for a partial refund of up to $1,600 through the additional child tax credit.
The credit amount decreases if your modified adjusted gross income exceeds $400,000 (married filing jointly) or $200,000 (all other filers).

Dependent Care

Dollar Limit
- The total expenses that you may use to calculate the credit may not be more than $3,000 (for one qualifying individual) or $6,000 (for two or more qualifying individuals). Expenses paid for the care of a qualifying individual are eligible expenses if the primary reason for paying the expense is to assure the individual’s well-being and protection. If you received dependent care benefits that you exclude or deduct from your income, you must subtract the amount of those benefits from the dollar limit that applies to you.

Qualifying Individual for the child and dependent care credit:
- Your dependent qualifying child who was under age 13 when the care was provided,
- Your spouse who was physically or mentally incapable of self-care and lived with you for more than half of the year, or
- An individual who was physically or mentally incapable of self-care, lived with you for more than half of the year, and either: (a) was your dependent; or (b) could have been your dependent except that he or she received gross income of $4,400 or more, or filed a joint return, or you (or your spouse, if filing jointly) could have been claimed as a dependent on another taxpayer’s 2023 return.

Capital Gains

Capital Gains Basics:

Capital gains come from selling assets. If you sell something within a year, it’s short-term; over a year is long-term. Short-term gains are taxed as regular income. Long-term gains have set tax rates.

Tax Rates for Long-Term Gains:

Long-term gains tax can be 0%, 15%, or 20%.
The rate depends on your income and filing status.
It also applies to qualified dividends but not to nonqualified dividends (taxed like income).

	0%	15%	20%
Single	$0-44,625	$44,626-492,300	$492,301+
Married Filing Joint	$0-89,250	$89,251-553,850	$553,851+
Head of Household	$0-59,750	$59,751-523,050	$523,051+
Married Filing Separate	$0-44,625	$44,626-276,900	$276,901+
Trusts and estates	$0-3,000	$3,001-14,650	$14,651+

Tax Loss Harvesting: What It Means

Tax loss harvesting is a financial strategy to help reduce your tax burden. It’s a way to use investment losses to reduce the taxes you owe when you’ve made money on other investments. Your investment manager or broker can do this for you, but you may need to be proactive and ask them to do so.

How It Works:

Sell Investments at a Loss: You start by selling some investments (like stocks or funds) that are worth less than what you paid for them. This creates a “paper” loss, meaning you lost money on those investments. Then, you buy new similar stock.
Offset Gains: Now, here’s the trick. You can use those losses to offset any gains you made during the year.
Lower Taxes: By offsetting gains with your losses, you end up with less taxable income, and that means you pay less in taxes.
You may deduct up to $3,000 of excess capital losses against ordinary income per year
a. You may also carry over any remaining losses to future tax years

Digital assets and virtual currency

Digital assets are defined under the U.S. income tax rules as any digital representation of value that may function as a medium of exchange, a unit of account and/or a store of value. Digital assets may include virtual currencies such as Bitcoin and Ether, Stablecoins such as Tether and USD Coin (USDC) and non-fungible tokens (NFTs).

The sale or exchange of virtual currencies, the use of such currencies to pay for goods or services or holding such currencies as an investment, generally have tax impacts –– and the IRS continues to increase its scrutiny in this area. We can help you understand the tax and investment consequences.

Energy tax credits

From electric vehicles to solar panels, “going green” continues to provide tax incentives. The Inflation Reduction Act of 2022 included new and newly expanded tax credits for solar panels, electric vehicles (EV) and energy-efficient home improvements. The rules are complex but there is still time for these credits to be beneficial in the current year. The most notable change to the EV credits is the requirement that the vehicle has final assembly in North America. If you are planning an EV purchase, please reach out as the list of qualifying vehicles has changed significantly.

Early planning can help you minimize your tax bill and secure your financial future. Please contact our office for a year-end review tailored to your specific needs.

BUSINESS TAX PLANNING

For businesses, the Inflation Reduction Act of 2022 remains the most significant tax legislation impacting the tax landscape in 2023.

Key Reminder: The 100% deductibility of business meals expired at the end of 2022. Business meals are back down to 50% deductible for 2023.

Many businesses, yours included, have likely been inundated with ads for claiming Employee Retention Credit (ERC). To prevent abuse of the credit, the IRS is temporarily not accepting new applications for the credit until at least the end of the year. We will monitor updates with the IRS and help you appropriately navigate the ERC. If you have any questions about your business’ eligibility for the credit, please contact us.

Additionally, as mentioned in the individual side of this letter, a change to the 1099-K reporting requirement was set to take place this year. However, it was delayed until 2024 and the threshold amounts increase. When this does take place, it will result in far more 1099-K’s being issued. Be prepared for this, and bring those 1099-K’s in with your tax files. Read our blog post here to learn more about this and how it may impact you. This year, you will likely also be subject to new reporting called Beneficial Ownership Interest (BOI) through new legislation. More information on this is can be found below.

Business owners should consider strategies to reduce taxable income and maximize tax savings. Here are some key considerations for business tax planning:

Consider a SALT workaround, which allows pass-through entities to deduct state and local taxes for federal purposes. This is the single most important business tax deduction that has come out in recent years, and could mean big savings for you. Read more about the workaround here.
Write off asset additions and vehicles, especially for businesses with higher revenue in 2023.
Evaluate income deferral and expense acceleration based on your expected tax bracket.
Take advantage of the 100% deduction for business meal expenses.
Understand the qualified business income (QBI) deduction for pass-through entities and its impact on your taxable income.
Consider establishing a retirement plan for your business to benefit from deductible contributions.

2023 Mileage Rates

– Business mileage rate: 65.5 cents per mile for business purposes
– Medical and moving mileage rate: 22 cents per mile

Employee retention credit (ERC)

The Employee Retention Credit is a refundable tax credit for businesses that paid wages to employees during the pandemic. There was a significant number of third-party providers attempting to claim improper credit. To prevent abuse of the credit, the IRS is temporarily not accepting new applications for the credit until at least the end of the year. We will monitor updates with the IRS and help you appropriately navigate the ERC. It is important for employers to be cautious of third parties taking improper positions related to ERC eligibility, as claiming the credit inaccurately can result in severe consequences.

Many businesses, yours included, have likely been inundated with ads for claiming Employee retention credit (ERC). The Employee Retention Credit is a refundable tax credit for businesses that paid wages to employees during the pandemic. We have analyzed all of our business clients’ ability to take ERC and contacted those, where we think that they may have been eligible. However, if you have any questions about your business’s eligibility for the credit, please contact us. Certain factors that relate to eligibility are non-financial, and we may not have some of that information.

It is important for employers to be cautious of third parties taking improper positions related to ERC eligibility, as claiming the credit inaccurately can result in severe consequences. To prevent abuse of the credit, the IRS is temporarily not accepting new applications for the credit until at least the end of the year. We will monitor updates with the IRS and help you appropriately navigate the ERC.

Beneficial ownership interest (BOI) reporting

As you might have heard, Congress recently passed a new reporting requirement that impacts business entities, including Corporations, Limited Liability Companies and certain Partnerships. The Corporate Transparency Act (CTA) requires the disclosure of the beneficial ownership information of certain entities to the Financial Crimes Enforcement Network (FinCEN) starting in 2024. This is not a tax filing requirement, but an online report to be completed if applicable to FinCEN. There are severe penalties for businesses who willingly do not comply with the requirements.

The final form and instructions will not be released until January 1, 2024. We will provide an update on who this impacts, how to file the report with FinCEN and an option to have us file this report when we complete your 2023 income tax returns.

As with individual tax planning, early planning in business tax strategies can lead to fewer surprises and better financial outcomes. contact our office to schedule a year-end review tailored to your business’s specific needs.

ESTATE TAX PLANNING

What is estate tax? Estate tax is a tax levied on the value of a person’s estate after they pass away. It is typically assessed on the total value of assets and property left behind, with certain exemptions and deductions. Estates of decedents who die during 2023 have a basic exclusion amount of $12,920,000 (25,840,000 for married U.S. residents or citizens). In 2024, that exemption will increase to $13,610,000 ($27,220,000 for married U.S. residents or citizens). This means that estates with a total value below this threshold are not subject to federal estate tax. The estate tax rate is 40% for any amount exceeding the exclusion above.

While not all taxpayers may need to do formal estate planning, as they fall below the levels outlined above, we strongly encourage all taxpayers to have a will in order. Please click here to read an article from earlier this year discussing the benefit of a will.

Without further congressional action, these higher limits will be cut in approximately in half, reverting to about $7 million per person and double for a married couple. Please click here to read more about the sunsetting of the estate tax limits.

Estate tax planning is crucial to ensure the smooth transfer of your assets to your heirs. Estate planning considerations may include:

– Updating your will and trusts to reflect changes in your assets and beneficiaries.

– Evaluating the use of lifetime gifts to reduce the size of your taxable estate.

– Exploring the benefits of a revocable living trust for asset distribution.

– Considering charitable bequests and their potential tax advantages.

– Reviewing your life insurance policies to ensure they align with your estate planning goals.

We recommend working with an experienced estate planning attorney to tailor a strategy that aligns with your unique situation and goals, and we would be happy to assist you in ensuring that you maximize the tax efficiency of these plans.

Thank you for your continued trust and partnership with WS CPAs and Consultants. We look forward to helping you navigate the challenges and opportunities of 2023 and moving into the future. If you have any questions or need further assistance, please don’t hesitate to contact our team.