Personal Income Tax
This newsletter is designed to give you some guidance on the information needed to prepare your 2024 individual income tax return and provide items to consider for your tax preparation and planning.
We will once again ask you to sign the annual tax return engagement letter that we will send you in early January, along with your tax organizer. In order to be able to serve all of our clients, we plan to limit in person appointments during the 2024 tax season. Clients can use their web portal accounts to upload information to us and we can send completed returns to your web portal. In addition, we have a secure drop box available 24/7 and offer other methods of contactless information exchange including e-mails, curbside drop-offs and pick-ups, mail, other delivery services, and virtual appointments.
We will once again ask you to sign the annual tax return engagement letter that we will send you in early January, along with your tax organizer. In order to be able to serve all of our clients, we plan to limit in person appointments during the 2024 tax season. Clients can use their web portal accounts to upload information to us and we can send completed returns to your web portal. In addition, we have a secure drop box available 24/7 and offer other methods of contactless information exchange including e-mails, curbside drop-offs and pick-ups, mail, other delivery services, and virtual appointments.
Deductions
We still need to accumulate the information on your 1) medical, 2) state income and property tax, 3) mortgage interest, 4) charity and other deductions in order to apply the latest rules, and to complete your state tax returns.
Employee work related business expenses are no longer deductible on the Federal return, but if you incur a lot of these types of expenses including business mileage and even potentially a home office, you may want to discuss the use of an accountable reimbursement plan with your employer to reimburse you, tax-free, for your out of pocket business expenses.
Employee work related business expenses are no longer deductible on the Federal return, but if you incur a lot of these types of expenses including business mileage and even potentially a home office, you may want to discuss the use of an accountable reimbursement plan with your employer to reimburse you, tax-free, for your out of pocket business expenses.
Compliance
The IRS has a question on the very first line of the 2024 Form 1040 asking whether you have bought, sold, spent, or traded any digital assets and we must ask you to verify this for us to avoid IRS penalties. Please answer the related questions on these items in the questionnaire section of your tax organizer that we will send to you in January and return the questionnaire along with your other tax information.
Finally, in order to prepare your return this year we are required to obtain all of your Form W-2’s, Form 1099’s from retirement, interest, dividends and brokers, Forms 1095 for health insurance, mortgage interest Forms 1098, college tuition Forms 1098-T, and any other official IRS documents. In addition, for new clients, we must receive a copy of your driver’s license(s).
Finally, in order to prepare your return this year we are required to obtain all of your Form W-2’s, Form 1099’s from retirement, interest, dividends and brokers, Forms 1095 for health insurance, mortgage interest Forms 1098, college tuition Forms 1098-T, and any other official IRS documents. In addition, for new clients, we must receive a copy of your driver’s license(s).
Planning
- In the current tax era of a greatly increased standard deduction and thus the larger amount of required to itemize deductions, a tax “bunching” strategy may be a planning idea to be used by some taxpayers. The “bunching strategy” recognizes that the best tax deductions are obtained by putting deductions in one year rather than spreading them amongst several years. For example, in years where your charitable contributions are very low, hold off until the next year to catch up, then also pay the full amount of the next year’s contributions in the “catch up” year in order to double your chances of itemizing. Similarly, few Americans receive a benefit from medical deductions anymore, but if you incur a large expense for say, the deductible on surgery, then try to do all of your other medical items in the same year, such as dental and vision exams, check-ups, etc.
- If you have a Health Savings Account (HSA) eligible medical insurance policy, you should strongly consider depositing some amounts into an HSA - the tax savings benefits are very good.
- One of the biggest tax savings areas that many people fail to fully utilize to its limit is to defer maximum amounts in the retirement plan or IRA options available to them. If your employer has a 401-K or other retirement plan or you are eligible to contribute to an IRA and you are not putting the maximum deferral amount in, you need to strongly consider increasing your contributions and also be sure to take advantage of any matching contributions from your employer.
- Check with your employer’s Human Resources department or look in your employer’s handbook to see what employer provided fringe benefits are available and options you have. Taxpayer’s are often surprised at the available benefits, or at our explanation of what some benefits really mean.
- If you have someone you want to save funds for future college expenses or who is currently attending college, you need to utilize the 529 Education Savings Plans. Contributions for 2024 to 529 plans must be made by December 31, 2024 in order obtain a state tax deduction for 2024.
- Estate planning is an issue for almost everyone, no matter your age or level of wealth. You should make sure you have a plan in place and that plan is reviewed regularly. Items to consider include wills, trusts, life insurance, titling of assets, beneficiaries, long-term care options, advance directives, etc. Your financial advising team including your attorney, financial advisor, insurance agent, tax preparer and others all will play roles in developing and implementing a plan.
We are happy to visit with you throughout the year for tax planning, retirement and similar income tax related issues, and sincerely appreciate your continued business each year.