Both your individual tax return AND first quarter estimated tax payment are due. Here is what you need to know.

First quarter due date: Monday, April 15, 2024

The estimated tax payment rule

You are required to withhold or prepay throughout the 2024 tax year at least 90 percent of your 2024 total tax bill, or 100 percent of your 2023 federal tax bill.* A quick look at your 2023 tax return and a projection of your 2024 tax obligation can help determine if a quarterly payment might be necessary in addition to what is being withheld from any paychecks.

Things to consider

• Underpayment penalty. If you do not have proper tax withholdings throughout the year, you could be subject to an underpayment penalty. A quick payment at the end of the year may not be enough to avoid the penalty.
• W-2 withholdings have special treatment. A W-2 withholding payment can be made at any time during the year and be treated as if it was made throughout the year. If you do not have enough to pay the estimated quarterly payment now, you may be able to adjust your W-2 wage withholdings to make up the difference.
• Self-employed. In addition to paying income taxes, self-employed workers must also pay Social Security and Medicare taxes. Creating and funding a savings account for this purpose can help avoid the cash flow hit each quarter to pay your estimated taxes.
• Use your refund. An alternative option to pay your first quarter estimated tax is to apply some or all of your tax refund.
• Pay more in the first quarter. By paying a little more than necessary in the first quarter, you can be in a position to adjust future estimated tax payments downward later this year if your tax obligation trends lower than you originally thought.
• Not sure if you need to make a quarterly payment? Take a quick look at your tax return to see the amount of tax you paid last year. Divide this amount by the number of paychecks you receive each year and compare to your most recent paycheck. Is enough being withheld from each paycheck? Talk to your employer if you decide you need to adjust your withholdings to cover next year’s tax bill.

*If your income is more than $150,000 ($75,000 if married filing separate), you must pay 110 percent of your 2023 tax obligation to avoid an underpayment penalty on your 2024 tax return.

Beginning In April a number of IRS notices began hitting mailboxes. Unfortunately, the notices are coming in cold, as the IRS is turning on mailing their notices after a long time of being turned off. Their process is creating a lot of undue alarm.

Example: A small business, current in their tax payments, receives a right to levy asset notice. In other words, pay this tax, interest and penalties or we will have the immediate right to take your assets and keep you from leaving the country. Typically a number of notices are sent before the levy notice, but the levy notice is the first notice received. Even worse, the cause of the problem was the IRS incorrectly appling their tax payment to tax year 2024 instead of 2023.

Example: An individual receives a notice of the IRS assigning their account to a collection agency. In reality, the taxpayer paid their tax and was waiting for the IRS to clarify what, if any, interest was due on their late payment. No response was ever sent by the IRS.

What is happening

The IRS turned its notice system back on after a long hiatus during the pandemic. Unfortunately, it appears no review or adjustments were made before the notices were turned back on. So,

• There was no correspondence back from taxpayers to clear up errors over this time period. These are errors the taxpayer did not know about because notices were turned off.
• The letter cycle clock never stopped. This means instead of getting the next notice in the series, you might receive the fourth or fifth letter in a series.

To make matters worse

In the first example, the IRS representative could see the payment, see it was erroneously applied to next year’s, as yet unfiled, tax return, but the IRS representative was not authorized to correct the error. After calling the department with authorization, the accountant learned the ability to transfer payments was disabled for up to 30 days.

Even worse, just because the error is now known, that communication does not necessarily get passed to the collections (levy ) group. So the levy activity may still be going on, even though the error (theoretically) is now known.

And these notices were mailed in April, right in the middle of tax filing season.

What to do

If you receive a notice, don’t panic, but don’t ignore it.

Call for help in order to respond to the IRS in a timely manner. This almost always means 30 days, so it can generally be handled right after the upcoming tax filing deadline.

Since little review appears to be done on many of these open tax cases, that missing step will typically be your first step to help clarifying and fixing the problem.

One of the more popular provisions in the tax code is the $250,000 capital gain exclusion ($500,000 for a married couple) of any profit made when selling your home. As long as you follow the rules, most home sales transactions are not a taxable event.

Your best defense to a potentially expensive tax surprise in your future is proper record retention.

The problem

The gain exclusion is so high, that many of us are no longer keeping track of the true cost of our home. This mistake can be costly. Remember, this gain exclusion still requires documentation to support the tax benefit.

The calculation

To calculate your home sale gain, take the sales price received for your home and subtract your basis. Basis is an IRS tax term that equals the original cost of your home including closing costs, adjusted by the cost of any improvements you have made in your home. You might also have a reduction in home value due to prior damage or casualty losses. As long as the home sold is owned by you as your principal residence in at least two of the last five years, you can usually take advantage of the capital gain exclusion on your tax return.

To keep the tax surprise away

Always keep documents that support calculating the true cost of your home. These documents should include:

• Closing documents from the original home purchase
• All legal documents
• Canceled checks and invoices from any home improvements
• Closing documents supporting the value when the home is sold

There are some cases when you should pay special attention to tracking your home’s value:

The best way to protect this tax code benefit is to keep all home-related documents that support calculating the cost of your property. Please call if you wish to discuss your situation.

If you e-file your tax return, you can generally expect to receive your refund within three weeks of it being accepted by the IRS. Expect four or more weeks if you mail in your tax return. But delays can happen.

Refund Delays: The common culprits

These are the most common reasons that refunds are delayed, according to the IRS:

• Errors or incomplete information. It could be an error in a Social Security number or a mismatch with how a name is recorded with the Social Security administration.
• Needs further review. In this case the IRS may be highlighting known areas of error or fraud.
• Affected by identity theft or fraud. This delay is very common and can be as simple as a thief having already filed a tax return using your Social Security number.
• Bank or creditor refers your information to the IRS due to suspicious activity.
• Certain credits. If your tax return includes either the Earned Income Tax Credit or the Additional Child Tax Credit, the IRS may want to double-check your calculation because these credits often contain errors.
• Your return includes Form 8379 (injured Spouse Allocation). These returns can take up to fourteen weeks.

Check the status of your expected refund

If you expect a refund and it goes beyond the stated time frame AND it does not include one of the items listed above, visit Where’s my refund? at the IRS website.

To check on the status of your refund, you’ll need

• Your Social Security Number
• Your filing status
• The exact refund amount

The Where’s my refund? tool is getting better every year. Your refund status is typically available within one to two business days of the IRS accepting your tax return. If your tax return is not found, it means there may be a problem that requires a follow up on your part.

March 15th is the tax-filing due date for 2023 calendar year S corporations and partnerships. While this filing deadline does not require making a tax payment, missing the due date could cost you a hefty penalty.

The penalty

The penalty is calculated based on each month the tax return is late multiplied by each shareholder or partner. So a business tax return with no tax due, filed the day after the March 15th due date, could cost a married couple who jointly own an S corporation $490 in penalties!*

Take action

Here are some ideas to help you avoid penalties:

• File on time. If you are a partner or shareholder of an S corporation or partnership, remind your fellow owners to file on or before March 15th. In addition to the penalties, filing late shortens the time you have to file your individual tax return.
• Consider an extension. If your entity cannot file the tax return in time, file an extension on or before March 15th, which gives you an extra six months to file your business return. Remember, you pay the taxes for your flow-through business on your Form 1040 tax return at this year’s April 15th filing deadline.
• Your personal tax return may be delayed. Do not file your Form 1040 tax return until you receive all your K-1s from each of your S corporation and partnership business activities. But be prepared if your business files an extension, as it’s possible you may need to extend your personal tax return while you wait for the K-1. Remember that an extension to file doesn’t mean an extension to pay your taxes. You may need to estimate how much you’ll owe so you can make a payment by April 15th.
• Challenge the penalty. If your business does get hit with an IRS penalty for filing late, try to get the penalty abated. This is especially important if you file and pay your personal taxes on time.

If you haven’t filed your S corporation or partnership return for 2023, there’s still time to get it done or file an extension.

*The penalty calculation for 2023 S-corporations and partnerships is $245 for each month or part of a month (up to 12 months) the return is late, multiplied by the number of shareholders or partners.

Double-check this list of items that often cause delays with both filing your tax return and getting your much anticipated refund.

Missing W-2 or 1099. Using last year’s tax return, make a list of W-2s and 1099s. Then use the list to ensure they are received and applied to your tax return. Remember, missing items will be caught by the IRS’s matching program.

Missing or invalid Social Security number. E-filed tax returns will come to a screeching halt with a missing or invalid number.

Dependent already claimed. Your return cannot be filed if there is a conflict in this area.

Name mismatch. If recently married or divorced, make sure your last name on your tax return matches the one on file with the Social Security Administration.

No information for a common deduction. If you claim a deduction, you will need to provide support to document the claim.

Missing cost information for transactions. Brokers will send you a statement of sales transactions. If you do not also provide your cost and purchase information, the tax return cannot be filed.

Not reviewing your return and signing your e-file approval. The sooner you review and approve your tax return, the sooner it can be filed.

Forms with no explanation. If you receive a tax form, but have no explanation for the form, questions could arise. For instance, if you receive a retirement account distribution form it may be deemed income. If it is part of a qualified rollover, no tax is due. An explanation is required to file your information correctly.

Hopefully by knowing these commonly missed pieces of information, you can prepare to have your tax filing experience be a smooth one.

The tax code has plenty of ways to reduce your taxable income, and many take place on your paycheck. If you haven’t already done so, now is a great time to conduct a thorough review of your paystub. Here are some tips:

Review insurance withholdings. Many employers adjust the amount you contribute for your insurance at the start of each year. Check to ensure the proper amount is being withheld. This includes medical, dental, short-term disability and long-term disability. Every extra dollar hits your pocketbook!

Action: Compare the withholding amount with your employer documentation. Double check whether the dollars withheld are pre-tax or after tax. Most of these benefits should be pre-tax.

Check elective pre-tax benefits. These elective benefits typically include Health Savings Account (HSA) pre-tax contributions if you are in a qualified high deductible health plan or an FSA contribution if you are in this pre-tax health benefit. Remember that there are annual contribution limits, so double check you are taking full advantage of this tax benefit.

Action: Correct any errors as soon as possible with your employer and maximize your contributions to get your full tax benefit, but be careful with FSA contributions as part of the balance in this account does not carry over into the next year like HSA contributions.

Retirement Plans. Review to ensure contributions for employer-provided retirement plans are properly noted. If there is an employer contribution to your plan, make sure this is noted and properly calculated as well.

Action: If your employer is making a contribution to your plan, ensure you are maximizing this tax-deferred benefit.

Update your withholdings. Determine if enough is being withheld for Federal and State tax purposes. File a new W-4 with your employer if you need to adjust how much is being withheld for these taxes.

Action: Cost of living adjustments made by the IRS are impacting the tax rate being applied to your income. This is because the tax brackets are expanding while tax rates are remaining unchanged. Either use the new IRS withholding estimator (not for the faint of heart) or look at last year’s tax return and make adjustments accordingly.

Your paycheck is often one of the best sources of information to figure out how you can reduce your tax obligation. So keep it on your radar and come back to it for a quick review a few times during the year.

Beginning in 2024, many small businesses will have to report information about their owners to the Financial Crimes Enforcement Network (commonly referred to as FinCEN), a bureau of the U.S. Department of the Treasury that collects and analyzes information to help fight financial crimes. Here is what you need to know.

Determine if your business must comply with the new reporting rules. Any company created in the United States that has registered with a secretary of state or any similar office under the laws of a state or Indian tribe, or foreign companies registered to do business in the U.S., must comply with these new reporting requirements.

Many small businesses that are C corporations, S corporations, partnerships, or LLCs (including single-member LLCs) must comply. There are, however, nearly two dozen types of businesses that are exempt from these new reporting requirements, including sole proprietors, accounting firms, insurance companies, banks, certain large businesses, and tax-exempt entities.

Know when you MUST report. The reporting deadline varies depending on when your business was created or registered:

Created before January 1, 2024. For existing companies that were created before January 1, 2024, you must file your FinCEN report, commonly referred to as a Beneficial Ownership Information (BOI) report, sometime this year (before January 1, 2025).

Created during 2024. Companies formed this year have 90 days to file their FinCEN BOI report after they are created or registered.

Created in 2025 and beyond. The BOI report must be filed within 30 days of being registered or legally created.

Immediately report any changes. After your initial BOI report is filed, an updated BOI report must be filed within 30 days following any change in information previously filed with FinCEN. Any inaccuracies discovered on previously-filed reports must also be reported within 30 days.

Why they want to know. The Federal government wants to know who owns or is a beneficial owner of businesses in the U.S. This information is meant to protect national security by making it easier to find corruption, money laundering operations, tax evasion, and drug trafficking organizations. They will be sharing this information with approved agencies including Federal and State law enforcement and Federal tax authorities.

There are penalties for noncompliance. You may be liable for up to $5,000 or more in fines for each defined violation for non-compliance or false information provided on the form. There are also daily fines for potential errors and omissions.

Where to register and learn more. When filing, be prepared to not only identify owners and beneficial owners of your business, but also be prepared to submit visual proof of each owner’s identity (i.e. Driver’s license, passport, etc.) Click here to learn more: www.fincen.gov/boi

Remember, existing companies have until the end of 2024 to complete their BOI report, and FinCEN just put the reporting system live in early January 2024. So don’t delay, but you may wish to wait a bit to ensure the reporting tool is working properly.

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The old year is ending and the new one is about to start. Here are some tax tips to get you going into the new year with a brighter tax future on your horizon.

1. Review beneficiaries. Now is the time to review beneficiaries in all your retirement accounts and insurance policies. While it might not impact your tax situation, it could impact others if not structured correctly.

2. Fully fund FSA or MSA. Flexible Savings Accounts and Medical Savings Accounts are a great way to pay for qualified, medical, dental and vision care. But it only works if you fund your account. So check with your employer and plan to take full advantage of this great tax benefit.

3. Planfully fund retirement accounts. Plan now to take advantage of the many retirement planning options. Whether it be a 401(k) or on of many versions of IRAs, they are a great way to manage your tax obligation, while planning for your future.

4. Consider any anticipated tax events. Life events are the biggest cause of tax surprises. So if you are planning to move, retire, get married or divorced, have kids or change jobs you should know of the tax impact BEFORE it happens. You could save thousands.

5. Review withholdings. Coupled with number 4, any changes could impact your tax obligation and should impact how much you have withheld during the year. So consider an annual review of your situation and adjust your withholdings accordingly.

6. Consider the child factor. This one is important because of the numerous tax benefits associated with children. It can mean funding a 529 program, or opening a Roth IRA if your older children have earned income. It can mean understanding when benefits expire as your children age or planning for college age children. The bottom line, conduct a tax review specific to your children.

7. Consider your property. Selling a home, stocks, bonds or digital currency all have potential tax implications. So if any of these are on the horizon consider taking a planned approach. It could save you a bundle.