https://activerain.com/blogs/chaleh45 en-us https://activerain.com/blogsview/5900898/one-big-beautiful-bill-series--part-2-deductions-and-exemptions Hi all, it's Tuesday August 12th, a week after the first OBBBA article and now it's time for the second article in the series, deductions, something everyone loves because it reduces the amount of income subject to tax. For todays' article, I will stick to deductions that everyone can take, and save itemized deductions, taken on Schedule A, for later. Rest assured, I will cover them because there are some important changes, especially an increase in the controversial State and Local Tax (famously known as the SALT tax) limitations. The standard deduction, established by the Tax Cuts and Jobs Act (TCJA) of 2017, passed during President Trump's first term in office, was extended and expanded. That's a good thing because if the TCJA was allowed to expire at the end of 2025, the standard deduction would have reverted back to the 2017 levels for the 2026 tax year, those amounts were less than half of the standard deductions that folks were allowed to take on the returns they filed this past April (and some on extension still have yet to file)! That would have been painful for most people, regardless of one's politics. Let's dig into the standard deduction. As it stands now, those that will be filing Married Filing Joint (MFJ) will go from a standard deduction of $29,200 (in tax year 2024) to $31,750 ($31,500 plus a cost of Living Adjustment (COLA) amount of $250.) Those filing as Single/Married Filing Separately, the standard deduction will go from $14,600 (in 2024) to $15,750 ($15,500 plus $250 COLA). Finally, those filing as Head of Household (HOH) will go from $21,900 to $23,625 ($23,375 plus $250 COLA). Bear in mind also, an additional amount will apply to those over age 65, which, with more and more of the Baby Boom Generation hitting their senior years, will benefit more and more people......But wait, there's more! (special shout out to the late great Billy Mays)Many seniors will also be able to take advantage of a special and temporary ADDITIONAL deduction of $6000 PER PERSON over age 65! That means potentially $12,000 additional for a married couple  from tax filing years 2025-2028 (meaning the 2026-2029 filing seasons for us geeky tax types). Bear in mind though, this additional $6000 starts phasing out at the $75,000/$150,000 income limits, so those making too much will not benefit from this little senior bonus deduction. Two other very important limitations on this temporary senior deduction is that if you are married you MUST file Married Filing Jointly (MFJ) in order to claim the extra $6000 deduction for one or both applicable spouses if  you otherwise qualify based on income. If you are MFS (Married Filing Separately) than you are SOL! Also, the claimant(s) must have a valid Social Security Number in order to be eligible for the extra $6000 deduction. The final topic I will cover today are personal exemptions. The personal exemption used to be an additional per person amount of income that could be subtracted from one's income, in addition to the standard or itemized deductions, before calculation of one's taxable income. It was a great deal, especially if was married had  several children, and I have several clients that lost deduction money when the ability to subtract exemptions from taxes disappeared after it was suspended with the passage of the TCJA (Tax Cuts and Jobs Act) in December 2017. While the exemption is not deductible it still lurks behind the scenes because it is used as a metric for determining other tax return items such as the qualifying relative (QR) dependent credit. The exemption suspension itself is now permanent with passage of the OBBBA.To refresh your memory, on how the exemption will be used to determine the dependent exemptions,  there are two dependent credit categories, the Qualifying Child and Qualifying Relative. The second credit, the Qualifying Relative dependent, has an income test involved, the Qualifying Child dependent has no income test. The now unused exemption amount, adjusted for inflation to $5200 in 2025, will determine if a potential Qualifying Relative will meet the income test. If the potential Qualifying Relative makes more than $5200, they fail the income test. Even if they pass the other tests (which are  beyond the scope of this article), they are unable to be claimed as a Qualifying Relative.  Whoa, a lot was covered here. I think I have a brain ache. See you next time.  Halas Consulting is a financial services firm specializing in tax prep, tax resolution and tax advisory services. Halas Consulting is located in Pittsburgh's northern suburbs of Ross Township/West View. The firm is owned by Christian Halas Christian Halas, Tax, Insurance, Investment Specialist (Halas Consulting) Tue, 12 Aug 2025 18:02:55 -0700 https://activerain.com/blogsview/5900898/one-big-beautiful-bill-series--part-2-deductions-and-exemptions https://activerain.com/blogsview/5899857/one-big-beautiful-bill-series--kickoff-article-for-individuals Hi all! Long time no write! Anyway I'm back from my "writing slumber" to construct a series of articles on the new tax bill recently passed by Congress and signed by President Donald Trump on July 4, 2025 known as the One Big Beautiful Bill Act, or the OBBA. This bill both continues the cuts of the Tax Cuts and Jobs Act of 2017 (TCJA) and expands them in many cases. Regardless of politics, the one thing this bill IS NOT is a handout to the very rich. While there are a few items the wealthy will love, such as the increase in the deductibility of the State and Local Tax (aka The SALT tax), and the extension and increase in the Uniform Gift and Estate limits, there are other things the very wealthy will NOT like, such as the phaseouts for many features starting at $75,000 for singles and $150,000 for Married Filing Joint filers, and reinstatement of limits on itemized deductions known as "The Pease Limitation."We'll start off by looking at what benefits everyone. The marginal tax rates  will remain at 10, 12, 22, 24, 32, 35, and 37%. This will benefit everyone, because if the Tax Cuts and Jobs Act was allowed to expire after 2025, the marginal rates would have reverted back to 10, 15, 25, 28, 33, 35, 39.6%. This would have increased EVERYONE'S tax bill starting in 2026. Please keep in mind that these brackets are "marginal" brackets, meaning they what you pay on the last dollar you recognize. This is opposed to your "effective" tax rate, which is the percentage of tax you pay on your entire recognized earnings.Most working people or couples fall in to the 22-24% marginal bracket. Halas Consulting is a financial services firm specializing in tax prep, tax resolution and tax advisory services. Halas Consulting is located in Pittsburgh's northern suburbs of Ross Township/West View. The firm is owned by Christian Halas Christian Halas, Tax, Insurance, Investment Specialist (Halas Consulting) Tue, 05 Aug 2025 07:10:11 -0700 https://activerain.com/blogsview/5899857/one-big-beautiful-bill-series--kickoff-article-for-individuals https://activerain.com/blogsview/5830201/pittsburgh--pa--irs-changes-rules-on-some-inheritances I do tax accounting and tax resolution primarily in Pittsburgh and Western PAWhile you were going on with life, the IRS made a change to the tax treatment of some inheritances with Revenue Ruling 2023-2.This ruling pertains to assets held in an Irrevocable Grantor Trust. These trusts are typically set up by one's lawyer in order to protect assets from being included in a decedent's gross estate, as well as not be subject to Medicaid spend down rules or being subject to the claims of a beneficiary's creditors. A common example would be a home where one spouse has died, and the surviving spouse needs to be placed into a nursing facility due to worsening physical or mental disability. Under Section 1014 of the code, which governs assets that are subject to the rules of a deceased grantor's (such as the surviving parent) gross estate, an asset, such as a home, receives a "step-up" in basis upon the death of the surviving parent. This means that instead of the house receiving the parent's basis (the price the parents paid for it way back in the day), the inheriting son or daughter automatically receives it at the market price of the home on the date of their parent's death. It is also treated as a long-term capital gain, even though the inheriting son or daughter may not have lived in it for many years and sells it within a year of the passing of their last surviving parent.  This is how most assets pass after the death of a parent or parents. But let's say the parents, while aging but still lucid, upon counsel from their attorney, place their home in an Irrevocable Grantor Trust in order to protect it from the increasingly onerous Medicaid spend down laws. The home transfers in (or is "granted" to the trust) at Mom and Dad's basis, which is what they paid for it back in the day, plus any major expenses such as a remodeling or additions.When Mom finally passes (assuming Dad passes before Mom) per Revenue Ruling 2023-2, instead of receiving the "stepped up" basis as in the prior paragraph, the home retains the basis of its grantor, and the rest is tax taxed as gain. For a trust, this is quite high, and there are no long-term gain rates for a trust either. All trust income and gains are at the same rates which are as follows for 2023-2024:$0-$2,900- 10%$2,901-$10,550-24%$10,551-$14,450-35%$14,151+-37%So, to put some numbers to the prior percentages, let's say the house in the example is worth $100,000 including the original basis, several remodeling jobs and a small addition (all of which there are records for to prove!), and the house sells for $450,000 in today's market. A gain of $350,000. Not as big as many, but not too shabby either.The first $2,900 would result in $290 in taxes.The next $7,649 ($10,550 minus $2901) would result in $1,835.76 in taxes.The next $3,899 ($14,450 minus $10,551) would result in $3,899 in taxes.The remainder ($350,000 minus $14,451 or $335,549) would result in $124,153.13 in taxes.Add them up you get a haircut of $290+$1835.76+$3899+$124,153.13=$130,177.89 in taxes by placing the assets in an irrevocable trust vs. well, nothing for passing them along outside of a trust, especially if sold immediately. Of course, a case can certainly be made for the fact that if left outside of the trust and the home has to be liquidated once Mom is placed in long term care never to return that $219,822.11 ($350,000 minus $130,177.89) is better than nothing, and that is certainly true as well. The bottom line is that both options, put the assets in a trust or leave them outside, is an important decision worthy of much consideration before making such a move, along with a sobering acceptance that the wind could blow in an unfavorable direction for either option down the road. Christian Halas, Tax, Insurance, Investment Specialist (Halas Consulting) Thu, 15 Feb 2024 12:47:17 -0800 https://activerain.com/blogsview/5830201/pittsburgh--pa--irs-changes-rules-on-some-inheritances https://activerain.com/blogsview/5806964/a-brief-primer-on-401k-target-date-funds I advise in Tax, Insurance and Investments primarily in Western PA, but can and do travel where I need to in order to serve my clients and prospects at the level they deserve. I recently read an article that over 60% of 401k investments are made into "Target Date Funds", but also, in that same article, 46% investors are clueless about their investments. That's almost half!Let's break this down, shall we. Many 401k plans these days have implemented both Auto Enrollment and QDIAs (Qualified Deferred Investment Alternatives) into the company retirement plan. This can be simply explained as whether you chose to invest in your company's 401k or not, you are automatically enrolled, that choice has been made for you, and if you don't choose your investments, you will be placed into a QDIA investment based on your projected retirement date. As a financial services professional, I understand why this was done. Forcing people to invest in their retirement so they aren't left destitute and relying on government assistance in old age because they lacked the foresight to take such actions on their own is not an overall bad thing. However, I'm also a bit of a libertarian, and don't particularly like outside forces making life decisions for me. Being that 60% of 401k investments are made into Target Date Funds, per this article, and that Target Date Funds are the premier recipient of Qualified Deferred Investment Alternatives (where your money goes, whether you chose it or not), it's important to understand how these Target Date Funds work. Target Date Funds work on a principle known as a "glide path." This glide path assumes that you will be aggressive in your investment choices when you are younger and have time to recover from a significant market downturn, while taking advantage of the potentially higher returns being aggressive will yield, and they will "glide" to more conservative investments as you get older. That is, invest in lower yielding, more income and less growth, but also, hopefully, less volatile investments. This is not a bad strategy, the only "bug" in the proverbial soup is if you don't adhere to the "traditional" marriage and family forming structure put into place over time, your investments could head into "income mode" too early.In a traditional "glide path," couples would get married and start their families in their late 20s or early 30s and by their late 40s/early 50s their kids would be done with college/trade school/ other post-secondary education, the couple would be in their peak earning years, pack more into their retirement (instead of education funding vehicles such as 529 plans) and soon after that point the investments would start on the "glide path" to more conservative investments as the couple hits their 60s and then decide to hang it up on their primary career. At one point in time, that path probably worked well and applied to the vast majority of folks, but does it still? With late in life family formations and childbearing, second and third marriages and additional family formations, unforeseen layoffs, economic upheaval, COVID pandemics, rampant inflation, other economic maladies affecting families, and people working well into their 70s and beyond, the "traditional" way of doing things may not be occurring as it once did. Your retirement plan's Target Date "glide path" might start leaving equities and heading toward more conservative income producing investments when you don't have an income problem because you are still working for another 10 or 15 years! You still need growth! Unfortunately, the Target Date Fund that you were placed in does not know this, and heads on its designed path. If you are part of the 46% that claim to not understand investments, you are unable to change course based on real life conditions. This could pose a problem in later years because you could fall short and outlive your money. Not good. Consider consulting with an independent financial advisor and/or financial planner before you get down the road too far. He or she should be able to design an investment mix that will better adapt to your individual situation as opposed to a pre-determined path. Christian Halas, Tax, Insurance, Investment Specialist (Halas Consulting) Fri, 08 Sep 2023 09:16:21 -0700 https://activerain.com/blogsview/5806964/a-brief-primer-on-401k-target-date-funds https://activerain.com/blogsview/5802422/getting-your-meal-tax-deductions-to-stick-like-glue-in-an-audit I do tax, insurance and investment advice primarily in Western PA but will travel if necessary. I enjoy using my knowledge of the complex tax code to help everyday people. Of all the tax deductions self-employed business professionals like to take, none are more successfully challenged by the IRS and denied quite like meals, travel, and vehicle deductions. This is primarily because of lack of understanding of what constitutes an allowable deduction, and what substantiation (i.e. relevant documents) are required. While business meals, business travel, and business use of a vehicle are all important and worthy of their own discussion, today we are only going to focus on the common business meal deduction a typical salesperson like a real estate pro would claim. No per diems or specialty meal deductions. While the discussion would also, in many cases, carry over to business travel, and business use of a vehicle deductions, those deductions have many other "tentacles" which are beyond the scope of today's discussion. You are currently able to deduct 50% of your eligible business meals. Right after the COVID pandemic, the IRS allowed a 100% deduction for business meals that took place in restaurants in order to get the restaurant industry back up and running after their yearlong (or more) shut down. The 100% deduction is now over, and the original 50% deduction is now back in effect. The following list summarizes what substantiation needs to be included in order to have a meal deduction stand up if questioned: the amount paid for each meal; the date of the meal; the name and address of the dining establishment; the business purpose of the meal, including the nature of any business discussions; and the business relationship of the person entertained by the taxpayer Now, the first three items are usually a no-brainer, because they are usually printed on the top of the receipt. The bottom two items are usually what is left out IF the receipt is kept (and it definitely should be). Well how about the bank or credit card statement if a debit or credit card was used? Isn't that enough? In and of itself, nope. It will likely get denied if subjected to an audit, which there will likely be more of now that we have a fully funded IRS again. The record must be "contemporaneous" meaning that all relevant facts are recorded at the time the business meal took place. Going back at the end of the year, or worse, when you are sitting with your tax preparer when he/she is gathering and/or preparing your return would likely result in a denial of the expense. Get the receipt, write on the receipt the business purpose of the meal, and who was present and either scan it to the folder where you keep your business statements if you electronically download them, or create a business receipt folder and scan them into your system (being that we are in the third decade of the 21st century, if you do not have a scanner, or a three-in-one scanner, copier, fax, how are you able to conduct business in the Information Age?) Some business credit cards, (I use an American Express Business Card) will allow you to upload your scan and keep receipt in your records on their system. What if I'm running late on the way home and grab a meal at the local tavern because I've been working all day? Hey, bon appetit, but it will not count as a business meal under audit if you are in the local metro area where you live and conduct the majority of your business. Qualified travel that takes you out of your metro area is able to be deducted at 50% and DOES NOT require another party with whom you are conducting business in order to be deductible.As alluded to in the first paragraph, the meal deductions, aside from qualified travel, is for business owners and self-employed professionals that are including a meal in the course of a substantial business discussion. If you are an employee, you CANNOT take a business meal deduction for federal tax purposes (though some states still allow it.) My recommendation if you are an employee is to encourage your employer to set up an ACCOUNTABLE PLAN, turn in your meal receipt to your manager or HR person, get reimbursed, and let the company take the meal deduction (they can, you can't). The Tax Cuts and Jobs Act, passed in December 2017 eliminated meals as an allowable employee deduction. This legislation will end on December 31, 2025, and it remains to be seen if employee business expenses will be allowed again on Forms 2106 and Schedule A of the Form 1040.Hopefully you found this brief article helpful.  Halas ConsultingPhone: 412-685-4285Email: chalas@vennwealth.comwww.halasconsulting.com Christian Halas, Tax, Insurance, Investment Specialist (Halas Consulting) Fri, 11 Aug 2023 14:32:41 -0700 https://activerain.com/blogsview/5802422/getting-your-meal-tax-deductions-to-stick-like-glue-in-an-audit https://activerain.com/blogsview/5795611/do-use-venmo--paypal--or-zelle--life-is-about-to-get-stressful I do tax planning, tax prep and tax representation primarily in Pittsburgh and Western PA. Do you or someone you know receive electronic payments? Venmo, Paypal, Apple Pay? How about sell pro sports tickets on an exchange like Stub Hub? Or maybe drive for Uber, Lyft, or DoorDash?Regardless of the venue, life is about to change in a big way.A little history first. Back in 2012, a new tax form called the 1099-K was introduced for payment transactions that took place via payment card or third-party network. At the time, third-party settlement organizations only had to report on Form 1099-K when the total number of transactions exceeded 200 AND the total sum of those transactions exceeded $20,000. These standards stayed the same through 2021. Then, Congress passed the American Rescue Plan of 2021 (Definitely didn't "rescue" any recipients of money via third party transaction). The verbiage in this legislation seemingly wiped out the 200-transaction standard and dropped the total sum measuring stick from $20,000 to $600! $19,400 disappeared with a few strokes of the pen. Now many people, including Congressmen, accounting professional organizations (AICPA), and even the IRS itself thought that was far too big of a bite at once. So, the original standard of $20,000 and 200 transactions was kept in place for 2021. 2022 would be a "transition year" and 2023 transactions reported in 2024 filing season would fall under the new standard. As little Carol Ann from the  Poltergeist movie series might say: "It's Here!"Estimates of the revenue to be generated by the new standard sit a cool billion dollars. Yes, that's billion with a capital B. Translation, that rule change will result in A LOT of money rolling in to the coffers. It will apply to all that ACCEPT funds through third party payment (as opposed to spend via third party payment.) So business income is in the mix, but also hobby income, gig income, sale of personal items, possibly even nontaxable transactions between friends and family IF they are not properly coded as such. In addition, if you are a recipient of third-party payments, and you typically file your tax return early, you might want to hold up a bit in 2024. Why? Well, Form 1099-K isn't due until the end of February for paper filers and the END OF MARCH for those that electronically file the 1099-K. That's even later than Form K-1, and two months after W-2s and other 1099s! If you file your return early and get a 1099-K in early April, you might have to file a superseding return if you filed before April 18th, or an amended return if after the 18th. The gross amount of the 1099-K you received will have to be reported on the 1040 (or 1041, 1120, 1065) and then adjustments made from there. "Netting out" outside of the return isn't permitted. Where the 1099-K is reported will also be a crap shoot because it varies. For example, on the 1040 it could be reported on Schedule 1, 1099-B, Schedule C, or E. I don't have the time, space or inclination to cover all of the scenarios.Lastly, the sad part is for personal transactions because the "heads they win, tails you lose scenario" is in effect. That is, if you sell personal items for a gain you may have to pay a capital gains tax, but you get no credit for a personal loss, it simply cancels out. Also, if you are selling items on Ebay, be sure to have a good idea of what was sold and the value. This will prove to be maddening for those that are cleaning house to move to smaller living quarters when they age, or those liquidating a parent's estate. Halas ConsultingPh: 412-685-4285Email: chalas@vennwealth.comwebsite: www. halasconsulting.com Christian Halas, Tax, Insurance, Investment Specialist (Halas Consulting) Thu, 29 Jun 2023 14:50:25 -0700 https://activerain.com/blogsview/5795611/do-use-venmo--paypal--or-zelle--life-is-about-to-get-stressful https://activerain.com/blogsview/5788113/the-social-security--unpleasant--tax-surprise I do tax preparation, tax planning and tax representation, as was as investment advisory for clients primarily in Western Pennsylvania as well as other areas of the state and country.If I had a dollar bill for every recent retiree that got socked with an unexpected tax bill in retirement, I'd be significantly wealthier. Why is this? Well, it's mainly because most fail to figure in their Social Security proceeds in with their tax planning, and even when they do figure it in, fail to realize how much of it is subject to taxes. Originally, Social Security income was not subject to income tax. This "party" ended in 1983, when amendments to the National Social Security Act subjected Social Security income to tax beginning in 1984. In that first incarnation of taxation, 50% of Social Security benefits were subject to tax for those with and Adjusted Gross Income (AGI) of $25,000 if single, or $32,000 if married. The tax proceeds were to be deposited into the OASDI (The formal name for Social Security, an acronym of Old Age Survivor and Disability Income) Trust Fund and not the general treasury. In 1993 the formula for taxation of Social Security was changed. Thresholds for different incomes were added or changed in order to tax higher income individuals to a greater degree. The new high-end thresholds were $34,000 for individuals and $44,000 for married filing jointly and $0 for Married Filing Separately (ALL of their income gets whacked at 85%. Talk about an incentive to get that late in life divorce done quickly!) The difference between the 50%, discussed previously, and the new 85% were to be put in a separate HI (High Income) Trust Fund.  (Note: This is an extremely condensed version of the Social Security "story" if you want to read about it more in depth, you can do so at Social Security History (ssa.gov))This whopping 85% is what throws people for a loop because those $34,000 and $44,000 thresholds for both singles and marrieds hasn't been changed since 1993, and with the stock market surges since that time, most people's 401k/403b/IRA balances are through the roof. Even worse, even if these folks and their financial and tax advisors do some advanced planning, they can only hold off the tax "beast" for a limited time because the RMD requirements kick in during one's early to mid 70s, as does the late Social Security election, and that almost assures those thresholds are quickly left in the dust. Let's look at a brief example, if a husband and wife filing jointly each take a modest $2000 per month from their retirement accounts, which totals $48,000 ($24,000 each) that already puts them over the $44,000 threshold of married filing joint couples. Now let's figure they both receive an equal amount in Social Security distributions. Of that $48,000 in Social Security distributions, a whopping $40,800 would be included in income! Many retired folks have a lot more than that in a given year. Now, also figure that unlike 401k and IRA distributions, most people DO NOT have withholding taken from their Social Security distributions, this is the default actually. One has to actively request withholding of taxes from Social Security, similar to IRA and 401k distributions. Unfortunately, many folks who DO have withholding taken from their IRA and 401k distributions, DON'T request withholding from their Social Security. I also didn't get into the STATES that tax Social Security to some extent (13 of them do, 13 States That Can Tax Your Social Security Benefits | The Motley Fool).I think it's plain to see how many retired people are not happy campers at tax time. Halas ConsultingPh: 412-685-4285email: chalas@vennwealth.comwww.halasconsulting.com Christian Halas, Tax, Insurance, Investment Specialist (Halas Consulting) Sat, 13 May 2023 10:19:10 -0700 https://activerain.com/blogsview/5788113/the-social-security--unpleasant--tax-surprise https://activerain.com/blogsview/5784448/an-impromptu-note-on-tax-withholding I do tax preparation, and tax representation for individuals and small businesses primarily in Western PA. Halas Consulting has been serving the community since 2006.Ah, the first part of another tax season is in the books, glad to be back writing in my Activerain blog after one of my typically more stressful 3 week periods out of the year. One of the biggest issues this season that caused clients to have to cut a check to the IRS was, hands down, inadequate withholding. While some under withholding is typical, usually with Schedule C independent contractors, seniors living off investment income, and large one-time events like a rental home sale or a large portion of a stock portfolio, this year had A TON of under withholding on W-2s and retirement account distributions. These things are usually on target. The IRS, the states, and the local taxing entities expect withholding to be performed at least quarterly, but it's typically done every paycheck for those that are employees. The official requirement is to withhold the lesser of 100% of last year's tax liability or 90% of this year's liability in order to not incur any penalties for under withholding. Now the amount that is withheld from one's paycheck is determined by Form W-4 that is typically part of a new hire packet whenever one begins a new job. Using information such as salary or wage, marital status, children, and job and income of a spouse as well as a second job or income source the W-4 will calculate the amount that needs to be withheld to both satisfy the Powers That Be as well as leave enough to pay the mortgage the electric bill, and a cold beer on Friday evening. The goal of the IRS is to get you as spot on as possible (i.e. nothing owed, nothing refunded, a zero balance. No, they don't want to be your savings account for your vacation next year because you don't have the fiscal discipline not to spend the money if you have access to it, nor should you want them to be, also their interest paid on the money is terrible, like nothing, but that's a story for another day.)Unfortunately for many, the last time many folks filled out a W-4 was when they got hired, and that was sometime during the first Obama Administration. They haven't filled one out since. Now at the end of 2017 Congress and President Trump passed the Tax Cuts and Jobs Act which automatically put more money in people's pockets but blew the existing withholding tables and calculations to kingdom come. I had people sitting across from me literally crying at the amount they owed. When the new withholding calculators came out, the withholding was a lot closer to that aforementioned "zero sum" objective which remains to this day. When I first pick up a W-2 to begin preparing a tax return I do a quick mental calculation of what ten percent of the taxable wages would be since ten percent is the lowest of the marginal tax brackets and then compare it to the amount of tax that actually was withheld, and it came up less a lot this season. And I mean A LOT! Most folks actual tax rate, known as their effective tax rate, as opposed to their marginal tax rate, is typically somewhere between 11 and 15%, so if they are currently withholding at 5% (many are) you can bet that return completion time this year was not one of joy for these people, usually quite the opposite. So, what can you do about it? If you haven't filled out a new W-4 recently, print one out online or get one at work, fill it out and hand it to your employer, or HR person. The new W-4 has five steps, with step 1 being the basics and step 5 being your John (or Jane) Hancock. If you want to do all the calculations for dependents, spouse's job or second job, have at it. I just normally recommend people fill out step 1 and then sign on step 5. If you can afford it, have them withhold at the higher single rate and that almost assures that you have enough withheld, especially if you are married and/or you didn't have any large income windfalls during the year. Now get 'er done! Halas ConsultingPh: 412-685-4285email: www.vennwealth.com Christian Halas, Tax, Insurance, Investment Specialist (Halas Consulting) Thu, 20 Apr 2023 09:54:41 -0700 https://activerain.com/blogsview/5784448/an-impromptu-note-on-tax-withholding https://activerain.com/blogsview/5781305/-what-is-this-letter-i-got-in-the-mail-from-the-irs----- I do tax preparation and tax representation before the IRS and State for individuals and businesses, primarily in Western PA and the tri-state area. April 18th marks the end of the non-extended tax filing season. There is a short break until May and then begins the CP-2000 Season.For those unfamiliar with the IRS Form CP-2000, it is the IRS letter that magically begins appearing in mailboxes, beginning sometime in May for those that filed their tax return in late March and early April. The reason why it was sent is quite simple. You see the IRS uses a system called the "Discriminant Function System" or "DiF System" for short. Whenever you receive taxable income from any company or individual, tax forms commonly known as "information returns" are generated.  Information returns come in many forms, a lot of them beyond the scope of this article, but the most common ones areForm W-2 (From your employer)1099-MISC (From an individual or company where you received various forms of income that is taxable but is not considered self-employment income)1099-NEC (Non-Employee Compensation. Given for work done as a non-employee. Much of NEC income is subject to both self-employment tax AND income tax)1099-DIV (issued for dividends on stock holdings),1099-INT (isssued for interest income, usually from a bank or brokerage),1099-B (issued by brokerage firm where you or your financial advisor engaged in stock, bond, or mutual fund selling activity during the year)K-1 (issued to those who received income from a partnership, LLC, S-Corporation, estate, or trust during the year) Now, when one of these forms is issued one goes to you, and the other one goes to the IRS. They enter it into the DiF System (mentioned above), and when your tax return is filed, the DiF System is checking off the information they received from a third party versus what is listed on your tax return. If a form is received from a third party but DOES NOT show up on your tax return, it triggers a Form CP-2000 to be generated and sent to you via US Mail.What should you do if you receive such a letter in the mail? Well, first off, open the darn thing up and review it (you'll be surprised the number of people absolutely petrified to the point of inaction when they see a piece of correspondence from the IRS) Is it a CP-2000? The Form or letter number is written in the upper right corner of the page, and is usually at the very bottom, or near the bottom of that group of information in that upper right section of the page. If it isn't a CP-2000, you can see what it is, and what it means by going to www.irs.gov and enter your letter number in the "search box" in the upper right corner of the webpage. That will take you to a page of options that will explain the letter.If IT IS a CP-2000, then look to see what information the IRS received from a third party that didn't show up on your return. Do you recognize it? If you do recognize it, agree with it and the figure is relatively small (possibly under $1000, and definitely under $500), send in a check with the voucher at the bottom of one of the pages, consider it a lesson learned and be done with it if you prepared your own tax return. If you paid a preparer to do your return, it begins to get a bit more involved. You still owe the tax and would have owed it if it had been properly included on the tax return. If it was something that was overlooked by your paid preparer, then he or she SHOULD cover any of the inevitable penalties and interest that is included with the CP-2000. However, if you did not supply your tax preparer with the documents missing, it is hardly their fault. Some preparers (like me) scan all preparation the documents that we are provided with into our computer, so we know exactly what we were given to work with. If you do not recognize the missing information and/or the figure owed is quite large, it is probably best to hire a professional knowledgeable in IRS Representation, such as a CPA, Enrolled Agent (EA), or attorney (that is knowledgeable in taxes) to deal with the IRS on your behalf, just like you would hire a criminal or civil lawyer to represent you if you were sued.  Halas ConsultingChristian E HalasPh: 412-685-4285email: chalas@vennwealth.com Christian Halas, Tax, Insurance, Investment Specialist (Halas Consulting) Fri, 31 Mar 2023 16:28:11 -0700 https://activerain.com/blogsview/5781305/-what-is-this-letter-i-got-in-the-mail-from-the-irs----- https://activerain.com/blogsview/5777811/do-you-really-need-to-form-a-corporation-or-llc- I do tax planning, tax preparation and Audit and Collections Representation, primarily in Western Pennsylvania. I am an Enrolled Agent, Certified Tax Representation Consultant, hold a Series 66 Investment Advisory License with Venn Wealth & Benefit Services (Venn and Halas Consulting are not affiliated entities) and a Life, Health and Property Casualty Insurance License in the Commonwealth of PA. I have been in business for 17 years.You and your buddy have it all figured out. You've been working construction projects for a few years as an employee, and doing some side jobs under the table or, for beer and pizza. You've learned a lot and figured you two are all ready to strike out on your own. You saw an advertisement online praising the virtues of forming an LLC. So, you filled out the forms paid the fee and got an acknowledgement letter of your new gig from the IRS, you two are official now, baby!Before you go too far into it, but still kinda after the fact, you decide to make an appointment with a local tax professional to find out the things you need to do, and after that meeting your heart sinks. You find out that you now have to file a brand-new tax form, a Form 1065, IN ADDITION to the Form 1040 you've been filing for years, as well as a state version of that form. You also find out from your IRS acknowledgment letter that they are expecting that form be filed in March of the following year. (Even if you made nothing)This new 1065 form also has some additional forms that require information be taken directly from your books. Uh-oh, what books? Financial record books, and you better have them. This will necessitate a bookkeeper, as you are a skilled laborer not an accountant. There's another few hundred a month to have someone keep your books. (Yes, I know the commercials for a certain popular bookkeeping software of the day make it seem easy, but it ain't always so, trust me.) You also have a new tax to pay, self-employment tax, on all the earnings you take out of the business. You learn it's a wise idea to open up a separate bank account and that all deposits and expenditures of the business be made to and from this account.  Uh-oh haven't been doing that.  There are a few other things he also mentioned but your brain shut down about 15 minutes ago. At this point you might be thinking that I'm anti-corporation and LLC, and you would be wrong. What I AM is anti-jumping into anything before you are fully informed of what you are getting yourself into. LLCs and corporations are great business concepts that provide protection for owners/shareholders/stakeholders, as well as the ability to more easily sell or transfer that business to others upon the death or retirement of its original owners among other benefits. In many cases, one is better off operating as a sole proprietor the first year, especially if one is new to that industry, or being self-employed or both. Buy a bigger liability insurance policy the first year. This applies primarily to "desk jockey" ventures like the one yours truly is in (accounting). It doesn't apply very well to starting your own dynamite manufacturing facility. If things go great the first year, and you pick up on the flow of running your own show and understand what you've gotten yourself into and embrace it, LLC or corporation away! But if you decide it isn't your cup of tea, you can simply walk away from a sole proprietorship in most cases ( i.e. if you don't have any payroll.) You can't simply walk away from the LLC or corporation; it requires some additional steps. So, in conclusion, look BEFORE you leap. Halas ConsultingPh: 412-685-4285email: chalas@vennwealth.comwebsite: www. halasconsulting.com Christian Halas, Tax, Insurance, Investment Specialist (Halas Consulting) Sat, 11 Mar 2023 19:40:20 -0800 https://activerain.com/blogsview/5777811/do-you-really-need-to-form-a-corporation-or-llc- https://activerain.com/blogsview/5776651/pittsburgh--pa-what-do-you-really-know-about-retirement-plans-part-2 I specialize in tax preparation and planning and representing taxpayers before the IRS and state tax entities. I'm also a licensed Investment Advisory Representative with Venn Wealth & Benefit Services LLC, A PA Registered Investment Advisor. Venn Wealth & Benefit Services LLC and Halas Consulting are not affiliated entities. OK, so now that we know how money gets into the retirement vehicles, how do we get the money out? After all, most of us don't set aside money for retirement just for the sheer joy of watching our money grow, we have plans, man, and eventually we want to draw that money to do fun things like travel, golf, spoil the grandkids as well as ourselves. Here is where the rubber meets the road, and stuff gets messed up. Remember how I talked about the Individual Retirement "Arrangement"? Well, here's the part of the "arrangement" people hate. Uncle Sam wants paid. Whenever you draw from a retirement account it is potentially a taxable event, some of this money has been set aside untaxed for years, and ALWAYS generates a tax form known as a Form 1099-R. The most important part of this form is Box 7. This box contains either a number or letter code, sometimes both, and this code is what determines if and how the retirement account is taxed. GENERALLY speaking, retirement funds coming out of Traditional IRAs and workplace related plans such as 401ks and 403bs are fully taxable at withdrawal, Roth IRAs come out tax free and annuities are a mix of the two. The exceptions to these rules are mile long and would take far too much time and space to get into. For example, a Traditional IRA could have a mix of deductible and non-deductible contributions. The non-deductible contributions would not be taxed at distribution. Roth IRAs need to be in place at least five years AND the owner must be over the age of 59 1/2 in order to get tax free treatment on everything. Before that time. one may withdraw BASIS (what was contributed out of pocket) tax free, BUT it must be reported on tax Form 8606 at that year's income tax filing. If annuities are withdrawn, instead of annuitized, they are considered to be LIFO (Last In First Out) therefore all of the earning come out first and are taxed and then basis (what the owner contributed) comes out last and isn't taxed. There are many more "yeah buts" as I mentioned. Also, whenever you hit a certain age, the government REQUIRES you take out a portion of your retirement funds every year. These are known as Required Minimum Distributions or RMDs. That amount increases every year as you get closer to meeting your demise. That age used to be age 70 1/2 and that age still applies for many, but in recent years that age increased to age 72 and will end up at age 75 (at least for now) for later generations. Another can of worms opens up when the owner of a retirement account dies. Was he/she already taking RMDs? Was he/she married and leaving the remainder of the funds to a surviving spouse? Or is it going to a "non-spouse beneficiary," such as a son or daughter? Again, a zillion different combos here that are beyond the scope of this article. The one huge change in this area, which is going to generate A LOT of money for the IRS is the elimination of what was known as "The Stretch IRA" for non-spouse beneficiaries. You see, before the recent SECURE Act, we were able to do what is known as "The Stretch IRA" for non-spouse beneficiaries, such as adult children, regardless of age. Once the retirement account owner died, they were likely already taking Required Minimum Distributions based on their age. At the time of their death, we would then create a Beneficiary IRA and while the future RMDs still had to come out they were taxed based at the younger beneficiary's age. Since most started their families between the ages of 20-40, so their son or daughter is 20-40 years younger, that is a drastic reduction of the amounts that are required to come out. Think about it, an 80-year-old is usually a lot closer to dying than his/her 50-year-old son/daughter. These Stretch IRAs, if managed properly, because all involved were educated, could last to benefit the original account owner's grandchildren! In conclusion, as you can see taking the money out of retirement accounts can be quite daunting, and the rules have been changing a lot lately. If you aren't well versed in such things, you are better off to hire a tax and or other financial services professional to help you. If you are a "do it yourselfer" investment wise, that's fine. There are many financial advisors that work by the hour, who can advise you, you pay the guy/girl and then everyone goes their separate ways. The unfortunate thing is, if you mess something up in distributing these retirement funds and a lot of money ends up leaving the retirement fund "wrapper" the wrong way, that's largely the end, it is now taxable. This isn't a Nintendo or XBox game. there are largely no do overs or resets except under VERY specific circumstances.  Halas ConsultingPh: 412-685-4285email: chalas@vennwealth.comwebsite: www. halasconsulting.com Christian Halas, Tax, Insurance, Investment Specialist (Halas Consulting) Sat, 04 Mar 2023 13:00:13 -0800 https://activerain.com/blogsview/5776651/pittsburgh--pa-what-do-you-really-know-about-retirement-plans-part-2 https://activerain.com/blogsview/5775431/pittsburgh--pa--what-do-you-really-know-about-retirement-plans- I specialize in tax preparation, planning, and representing taxpayers before the IRS and state tax entities.  I am also a licensed Investment Advisory Representative in the Commonwealth of PA with Venn Wealth and Benefit Services LLC, a PA Registered Investment Advisor. Venn Wealth and Benefit Services LLC are not affiliated entities.IRA, Roth IRA, 401k, 403b, old fashioned pension plan. These terms are bandied about regularly. When the stock market hits the skids, you hear the gray-haired crowd complain that "my 401k is now a 201k."But seriously, what exactly are these things? The one thing they all have in common is that they allow an individual to save for their retirement on a deferred basis meaning, while you are working and saving the money it will not be taxed as long as it stays in that particular savings vehicle. In fact, the term itself, IRA stands for Individual Retirement Arrangement in the Internal Revenue Code and NOT Individual Retirement Account as most people think. Wanna know what the arrangement is? I told you above, while you are working and saving AND the money remains in the account, we (The IRS and State taxing bodies) will not tax it. WHEN it comes out, either early or when one retires, the devil wants his due, and my does he ever take it! You don't really have a say in the "arrangement." Like an insurance policy, it is a unilateral contract. One side writes the thing and the other agrees to it and adheres to it or chooses not to participate and all of their money is taxed as they earn it. Now or later, one or the other, take it or leave it. The money gets in these accounts in various ways, if it's a 401k, 403b, or Simple IRA, the money gets in by a deferral of one's salary. In fact, 401(k) and 403(b) are actually sections of the Internal Revenue Code that allow the salary deferral to take place. These salary deferral plans (with the exclusion of the Simple IRA) are quite complex and have higher administrative costs than your typical standalone IRA. A significant portion of these costs are to keep the particular plan compliant with the provisions of sections 401(k) or 403(b) of the revenue code. While it may surprise you, it is easier than you might think for a plan to fall out of compliance and lose its tax favored status. To do so would likely subject the sponsoring company, one's employer, to a class action lawsuit. For standard IRAs, known as Traditional IRAs and Roth IRAs, the money gets in typically by owners, everyday folks like us, contributing to the plan from their bank accounts via money they earned by working. If they don't have any other retirement plan in place at work, they can contribute to a Traditional IRA and deduct that amount on their tax return up to a certain amount, in 2023, that amount is $6500 plus an additional "catch up" contribution of $1000 if you are over age 50. If you have a retirement plan at your place of employment, the deductibility of the plan is typically reduced by your income as well as your spouse's income and contributions to a retirement account at work if you are married.A Roth IRA allows for the same amounts to be contributed, but none of the Roth IRA contributions are deductible, they are all made with "after tax" money. The catch with the Roth IRA is that when you reach retirement age none of the money withdrawn will be taxed as long as the plan has been in existence for at least 5 years.  Tax free at retirement, everything, contributions and earnings, as long as it's done by the rules. This concludes part one of "What Do you REALLY Know about Retirement Plans." Stay tuned for part two where we discuss getting the money out of the plan. This is the part that is frequently done wrong and results in far too much money going to the IRS rather than retirement plan owners and next of kin.  Halas ConsultingPh: 412-685-4285email: chalas@vennwealth.comwww. halasconsulting.com Christian Halas, Tax, Insurance, Investment Specialist (Halas Consulting) Sat, 25 Feb 2023 09:49:51 -0800 https://activerain.com/blogsview/5775431/pittsburgh--pa--what-do-you-really-know-about-retirement-plans- https://activerain.com/blogsview/5772594/pittsburgh--pa-not-taxable-and-reportable--confusion-could-be-costly I do tax planning, prep, and IRS Representation primarily in Western PA. I hold an Enrolled Agent license, a PA insurance License, a Series 66 Investment Advisors License as well as being a Certified Tax Resolution Consultant.  There are quite a few things out there in the personal finance realm that are reportable to the taxing authorities even though they are not taxable. This runs contrary to what many people think, because, hey, if it isn't taxable, I just do it, walk away and life goes on, right? Not so fast. Here are two examples that are often botched.  1. Sale of Personal Residence- Yes, you can sell your home and not pay capital gains taxes on up to $250,000 if single and $500,000 if married many states also extend this tax skipping privilege, but it does come with reporting requirements. You must have lived in the home as a personal residence for two of the past five years (if you get married and your spouse moves in within two to five years sale, that complicates things a bit), and once you get the exemption, you can't get it again for three years. You are limited to the aforementioned $250,000/$500,000 limitation so it helps if you have the closing documents for both the purchase and sale of the home, as well as substantiation of major improvements such as a major remodel. So....Taxable: No, not within specified limitationsReportable: Absolutely 2. Early Withdrawal of Roth IRA Basis- Since Roth IRAs are typically funded with after tax money, you can withdraw your basis at any time free of tax liability, but does that mean withdrawing basis isn't reportable, absolutely NOT! In fact, you'll have another form to fill out and submit with your tax return (Form 8606, which can be, and needs to be filed on its own, even if you don't need to file a 1040 tax return) explaining what you did (Form 8606). Be sure to keep a good record of your basis (amount contributed out of pocket) in case of an audit. Taxable: No, not as long as you are taking out basis and no growthReportable: Always Halas Consultingchalas@vennwealth.comPh: 412-685-4285www.halasconsulting.com Christian Halas, Tax, Insurance, Investment Specialist (Halas Consulting) Wed, 08 Feb 2023 15:34:50 -0800 https://activerain.com/blogsview/5772594/pittsburgh--pa-not-taxable-and-reportable--confusion-could-be-costly https://activerain.com/blogsview/5771308/pittsburgh--pa--how-to-get-audited--goodwill-donations I specialize in tax preparation, planning, and representing taxpayers before the IRS and state tax entities.  I am an Enrolled Agent and Certified Tax Representation Consultant. Does donating to Goodwill, or Salvation Army or other such charitable organizations guarantee an audit? No, BUT there is an increased chance because of the manner many attempt to take a deduction on their tax return. These types of deductions are broadly known as non-cash charitables . They range from clothing, household goods, and toys all the way up to vehicles, art, shares of stock and really just about anything of value. These items have decreased considerably since the passing of the Tax Cuts and Jobs Act of 2017, since it takes a considerable amount to surpass the standard deduction, and make itemizing deductions worthwhile. However, it could come back in a big way in 2026 when the TCJA expires, unless Congress intervenes. The issue boils down to the "two v's": vagueness and values. You donate three two-ply garbage bags full of clothing, games, and household goods. You get a slip from the Goodwill attendant that is blank other than the date and a signature of receipt, or maybe you took the time to write "three bags of clothes, toys, and miscellaneous." You attempt to take a $500 or more deduction because you only buy good stuff at Macy's or Nordstroms. What was in the bag, men's suits, women's blouses, kid's clothing, bedding, books?  All of these things have a thrift store value, and it doesn't matter if you bought them at the Budget Barn, Bon Ton, or Neiman Marcus. There are online valuators to guide people with valuing their donated goods. How many of various items were? One, two, ten, a hundred?For non-cash charitable goods of over $500 another form is required to be added to the Schedule A, that would be a Form 8283.As you can see, there is a lot more involved to deducting non-cash charitable goods besides simply having a giving heart.  Christian HalasHalas Consultingchalas@vennwealth.com412-685-4285 Christian Halas, Tax, Insurance, Investment Specialist (Halas Consulting) Thu, 02 Feb 2023 14:36:44 -0800 https://activerain.com/blogsview/5771308/pittsburgh--pa--how-to-get-audited--goodwill-donations https://activerain.com/blogsview/5768937/pittsburgh--pa--january-17th--an-important-date-for-tax-time I do tax prep and planning as well as represent taxpayers in resolving tax matters with the IRS and states. I am an Enrolled Agent and hold the Certified Tax Representation Consultant Certificate offered by the University of Connecticut School of Business.Alright, let's cut to the chase, why is January 17th important? Glad you asked. First, for those that are independent contractors (i.e. MANY real estate agents) January 17th is the final day to send in your last estimated payment. Don't worry if you missed, just do it ASAP, like tomorrow. Second, since we are a little bit past the halfway point of the month, you have about two weeks before 1099-NECs are due for those that you paid over $600 for services rendered that aren't incorporated. That plumber, electrician, or other handyman that you pay to come in and take care of minor repairs before you list the house. Yeah, him (or her, hey it's 2023). If those repairs ran you over $600 for 2022, you need to send out a 1099-NEC. Also get a W-9 on file to prove that contractor is legally allowed to work here in the US. In light of the proposed new beefed-up IRS, it's time to start focusing on details. The two I mentioned, estimated taxes and 1099-NECs, are simple yet important parts of staying in tax compliance, and avoiding needless penalties and fees. Halas ConsultingChristian Halaschalas@vennwealth.comPh: 412-685-4285 Christian Halas, Tax, Insurance, Investment Specialist (Halas Consulting) Tue, 17 Jan 2023 17:39:23 -0800 https://activerain.com/blogsview/5768937/pittsburgh--pa--january-17th--an-important-date-for-tax-time https://activerain.com/blogsview/5764622/pittsburgh--pa--properly-deducting-business-miles-on-your-tax-return I do IRS and State Tax Representation and Tax Prep and Planning for taxpayers and small businesses in Western PA and the rest of the Commonwealth of PA.Business mileage is an important tax deduction for many self-employed businesses, but especially real estate agents. Driving around showing homes to prospective buyers is how most successful agents spend the majority of their time. But all too often the data on this important deduction come to me wrong at prep time. Mostly because I get one written or quoted line, business miles traveled, often as a round number (which is how I know it's a guess) and nothing else. Also no, it wasn't "the same as last year," and I promise you I DO NOT have the figure written on the ceiling of my office, so don't look up there. The Schedule C, which most real estate agents are filing, is more complex as far as vehicles is concerned because most small businesses are using their car for personal and commuting purposes as well as their business and those miles, maintenance/repairs and gasoline ARE NOT deductible. So, for the Schedule C filers I need the following:The first thing I need to know is what car are you using for business, hopefully it's just one car. 2015 Honda Accord, 2017 Plymouth Voyager, and similar are what I'm looking for here. Not just "car" or "SUV" or "Truck" or "Van."Then I have a series of 4 questions that need to be answered:1. Was the business vehicle available for personal use during off-duty hours? In most cases that's a yes2. Did the taxpayer (or spouse) have another vehicle available for personal use?3. Does the taxpayer have evidence to support this deduction?4. Is the evidence written?For those last two questions, they want a mileage log or something kept and recorded as you go in real time (contemporaneous record), not something thrown together on April 14th at midnight. That record is what will save you in an audit. Many use the mileage recorder in Quickbooks, as one of the many smartphone apps like Mile IQ, which is what I use in my business. Next, I would enter the mileage listing business miles, then commuting miles (if you have an office that you go to, your mileage between your home and the office is considered non-deductible commuting) and finally, other miles, which are basically pleasure miles. This section needs to be completed whether you take the simpler standard mileage deduction or your actual expenses.The final part of the form is completed if you want to take actual expenses, or if you want the tax software to compare the actual expenses to standard mileage to actual expenses and give you the higher deduction of the two. Actual expenses would include such costs and expenses such as gas, insurance, repairs and maintenance, registration, tires, oil, loan interest payments, and lease payment portion. While it's taking the better of the two make sense, I think it's important to note that in the first year a vehicle is in service you start with the standard mileage deduction, you can choose between standard mileage deduction and actual expenses the remainder of the 5 year depreciable life of that vehicle, but if you start with actual expenses, you must stick with actual expenses the entire time that vehicle is in service. Be smart, definitely take the mileage deduction you are entitled to, but provide it in the form the IRS (and often the states too) want it. As always, feel free to contact me with questions. Christian HalasHalas ConsultingPhone and Fax: 412-685-4285email: chalas@vennwealth.com Christian Halas, Tax, Insurance, Investment Specialist (Halas Consulting) Mon, 19 Dec 2022 12:28:36 -0800 https://activerain.com/blogsview/5764622/pittsburgh--pa--properly-deducting-business-miles-on-your-tax-return https://activerain.com/blogsview/5763314/pittsburgh--pa--6-year-end-tax-saving-ideas-for-cash-basis-businesses I perform tax prep, planning and IRS and State representation for Pittsburgh and vicinity, as well as the rest of the Commonwealth of PA. The time is now to make your last-minute tax moves for 2022. Not a whole lot can be done after December 31st. Part 2 of 24. Use Your Business Credit CardsMoney tight here at the end of the year with Christmas presents to purchase for clients and the family? No problem, put end of the year expenses on the business credit card. For cash businesses the expense is taken when it posts to the credit card, not when the credit card bill is paid.Now, if you are incorporated (a C or S corporation) and you use a personal credit card for the business expense. The corporation would have to reimburse you for the expense before midnight on December 31st so you would have to submit your expense report to your corporation in sufficient time.Best to always do business with a business card and business bank account to make life clearer and less subject to scrutiny.  5. Don't Assume You are Taking Too Many DeductionsSome business owners hold back with deductions thinking if they take a loss (Net Operating Loss) it will attract unwanted attention from the IRS and/or State. This only happens if you a don't show a profit in 3 of 5 years in most cases. The IRS understands and accepts that the first couple of years in business is likely to be lean. Also, the Tax Cuts and Jobs Act allows losses to only be carried forward and offset 80% of income. So don't be bashful if you have the proof, take those losses.  6. Don't Forget About The Qualified Improvement Property (QIP) DeductionThe CARES Act, in a fix to the Tax Cuts and Jobs Act (TCJA) allows those that own Non-Residential Real Property (Commercial Structures such as office buildings, retail stores, to make improvements to the interior of their stores and depreciate that improvement over 15 years instead of 39 years which still needs to be done for the building itself. This would include things such as fixtures and installation of slat wall to display goods for sale.Since the items that qualify as QIP are depreciated over 15 years, they would also   qualify for Bonus Depreciation or Section 179 Depreciation, as well.A building itself though would still have to be depreciated over 39 years. Well, concludes our list of six end of year tax deductions. Feel free to contact me with these or any other tax related issue via phone (412)685-4285 or email chalas@vennwealth.com Christian Halas, Tax, Insurance, Investment Specialist (Halas Consulting) Sun, 11 Dec 2022 19:33:24 -0800 https://activerain.com/blogsview/5763314/pittsburgh--pa--6-year-end-tax-saving-ideas-for-cash-basis-businesses https://activerain.com/blogsview/5762974/pittsburgh--pa--6-year-end-tax-saving-ideas-for-cash-basis-businesses I perform tax prep and planning, as well as IRS and state civil tax representation for Pittsburgh and vicinity, as well as the rest of the Commonwealth of PA. The time is now to make your last-minute tax moves for 2022. Not a whole lot can be done after December 31st. 1. Prepay rent using IRS Safe Harbor RulesThe tax rules allow you pay up to 12 months in expenses in advance without challenge, adjustment or change by the IRSExample: Your rent is $3000 per month and you would like a $36,000 (or less) deduction for 2022, so on Friday December 30th you mail a check your landlord for up to $36,000. He receives the money on Tuesday January 3rd. You deduct the up to $36,000 in rent in 2022, the year you paid it. He claims it in 2023 the year he receives it. You get a tax deduction in 2022, and the landlord gets his/her rent in advance a win-win.A couple of thoughts on this strategy, get your landlord in the loop so this goes down without a hitch and he/she isn't caught off guard thinking the payment was a mistake. Also have proof. send the payment certified mail, make this move difficult to challenge in the case of an audit.2. Don't bill your clients till next yearUsually, people don't send money until they receive an invoice.Example: Phil, a dentist, usually bills his customers and insurance companies at the end of each week. This year he stops billing his customers in December and mails them out in January 2023. He just postponed paying taxes on his December 2022 income until 2023. 3. Buy Office EquipmentSadly, 2022 is the end of the 100% Bonus Depreciation that was ushered in by the Tax Cuts and Jobs Act in December 2017. Next year, you will only be able to take 80% of bonus depreciation.  So, if you were looking for a new copier, mainframe, desk, chairs or other expensive equipment, buy it now.Planning note: A large equipment purchase, while be great for expensing a large item will negatively impact your QBI Deduction (Qualified Business Income)If you or someone you know needs tax planning and preparation services or IRS representation for IRS correspondence letter, feel free to contact me by phone at (412) 684-4285 or by email at chalas@vennwealth.com                                                   Christian Halas                                                   Halas Consulting                                        Phone and Fax: (412) 685-4285                                        Email: chalas@vennwealth.com                                       Website: www.halasconsulting.com Stay tuned for Part 2 of this two-part Series, coming soon. Christian Halas, Tax, Insurance, Investment Specialist (Halas Consulting) Thu, 08 Dec 2022 13:00:57 -0800 https://activerain.com/blogsview/5762974/pittsburgh--pa--6-year-end-tax-saving-ideas-for-cash-basis-businesses