Month: January 2024

Have you ever been perplexed when reading an IRS letter you received in the mail? You’re not alone. The IRS is attempting to simplify and clarify its letters by launching the Simple Notice Initiative. The new program will review and redesign hundreds of documents with an immediate focus on the most common notices that individual taxpayers receive. The redesign work will accelerate during the 2025 and 2026 filing seasons, expanding into notices going to businesses. During the last year, the IRS reviewed and redesigned 31 notices in time for this year’s tax season.

If you receive a letter from the IRS and don’t understand it, we’d be pleased to help. Contact ATA. 

Effective January 1, 2024, U.S. and foreign entities doing business in the U.S. may be required to disclose information regarding their beneficial owners to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). This requirement is being implemented under the beneficial ownership information (BOI) reporting provisions of the Corporate Transparency Act (CTA) passed by Congress in 2021.

 

Who is Impacted?

Companies are required to report BOI information only when they meet the definition of a “reporting company” and do not qualify for an exemption. A domestic reporting company would generally include a corporation, limited liability company (LLC), and companies created by filing documents with a secretary of state, such as a limited liability partnership, business trust, and other limited partnerships. The term “foreign reporting company” generally includes entities formed under the law of a foreign country that are registered to do business in any U.S. state.

Reporting companies created or registered to do business in the U.S. after January 1, 2024, must file an initial report disclosing the identities and information regarding their beneficial owners within 30 days of creation or registration (FinCEN has recently proposed extending this deadline to 90 days). A beneficial owner is broadly defined as any individual who, directly or indirectly, either exercises substantial control over a reporting company or owns or controls at least 25% of the ownership interests of a reporting company. Reporting companies are required to file a BOI report electronically through a secure filing system, FinCEN’s BOI E-Filing System, which began accepting reports on January 1, 2024.

Reporting companies created or registered to do business in the U.S. prior to January 1, 2024, are required to file an initial report by January 1, 2025. Once the initial report is filed, an updated BOI report must be filed within 30 days of a change. The failure to make required BOI filings may result in both civil (monetary) and criminal penalties.

 

Who is Exempt?

There are 23 specific types of entities that are exempt from the new BOI reporting requirement.  Most exemptions apply to entities that are already subject to substantial federal reporting requirements, such as some public companies, banks, securities brokers and dealers, insurance companies, registered investment companies and advisors, and pooled investment companies.

An exemption is also available for a “large operating company,” generally defined as a company with more than 20 full-time employees, a physical office within the U.S., and more than USD 5 million in gross receipts or sales from U.S. sources (as shown on a filed federal income tax or information return).

 

Practical Challenges

Every company doing business in the U.S. will need to determine whether it is subject to BOI reporting or whether an exemption applies. Because many of the exemptions depend on an entity’s legal status under various statutes (e.g., the Securities Exchange Act, the Investment Company Act), coordination and confirmation with counsel may be necessary. Further, companies that are eligible for exemption will need to implement processes to continuously assess eligibility for the exemption.

Companies that are subject to BOI reporting will need to implement processes to identify its beneficial owners and gather the information necessary to file the required BOI report. For some entities, operating agreements, subscription agreements, and similar documents may need to be reviewed to take into account the new BOI disclosure obligations. Further, because the definition of beneficial owners includes not only shareholders but senior officers and important decision-makers within the reporting company, processes to identify changes in leadership or key management will need to be considered to comply with BOI reporting obligations going forward.

 

Next Steps

The new BOI reporting requirements are mandated under Title 31 of the U.S. Code. The new rules include the legal requirements of who must file, exemptions from filing, and the information to be reported. Because the information to be reported on this form arises from determinations that are primarily legal in nature, companies should begin working with their counsel to proactively assess their filing obligations under the new BOI reporting rules.

Contact us if you have questions.

The IRS recently announced various 2024 inflation-adjusted federal tax amounts that affect individual taxpayers. Most of the federal income tax rate bracket thresholds are about 5.4% higher than for 2023. That means that you can generally have about 5.4% more income next year without owing more to the federal government.

Standard deduction

Here are the inflation-adjusted standard deduction numbers for 2024 for those who don’t itemize: $14,600 if you’re single or use married filing separate status (up from $13,850 in 2023). $29,200 if you’re married and file jointly (up from $27,700). $21,900 if you’re a head of household (up from $20,800). Older taxpayers and those who are blind are entitled to additional standard deduction allowances. In 2024 for those age 65 or older or blind, the amounts will be: $1,550 for a married taxpayer (up from $1,500 in 2023) and $1,950 for a single filer or head of household (up from $1,850 for 2023). For an individual who can be claimed as a dependent on another taxpayer’s return, the 2024 standard deduction will be the greater of: 1) $1,300 (up from $1,250 for 2023) or 2) $450 (up from $400 for 2023) plus the individual’s earned income, not to exceed $14,600 (up from $13,850 for 2023).

Ordinary income and short-term capital gains

Here are the 2024 inflation-adjusted bracket thresholds for ordinary income and net short-term capital gains: 10% tax bracket: $0 to $11,600 for singles, $0 to $23,200 for married joint filers, $0 to $16,550 for heads of household; Beginning of 12% bracket: $11,601 for singles, $23,201 for married joint filers, $16,551 for heads of household; Beginning of 22% bracket: $47,151 for singles, $94,301 for married joint filers, $63,101 for heads of household; Beginning of 24% bracket: $100,526 for singles, $201,051 for married joint filers, $100,501 for heads of household; Beginning of 32% bracket: $191,951 for singles, $383,901 for married joint filers, $191,951 for heads of household; Beginning of 35% bracket: $243,726 for singles, $487,451 for married joint filers and $243,701 for heads of household; and Beginning of 37% bracket: $609,351 for singles, $731,201 for married joint filers and $609,351 for heads of household.

Long-term capital gains and dividends

Here are the 2024 inflation-adjusted bracket thresholds for net long-term capital gains and qualified dividends: 0% tax bracket: $0 to $47,025 for singles, $0 to $94,050 for married joint filers, and $0 to $63,000 for heads of household; Beginning of 15% bracket: $47,026 for singles, $94,051 for married joint filers, and $63,001 for heads of household; and Beginning of 20% bracket: $518,901 for singles, $583,751 for married joint filers and $551,351 for heads of household.

Gift and estate tax

The annual exclusion for gifts made in 2024 will be $18,000 (up from $17,000 for 2023). That means you can give away up to $18,000 to as many individuals as you wish without incurring gift tax or using up any of your unified federal gift and estate tax exemption. In 2024, the unified federal gift and estate tax exemption will be $13,610,000 (up from $12,920,000 for 2023). For gifts made in 2024, the annual exclusion for gifts to a noncitizen spouse will be $185,000 (up from $175,000 in 2023).

Conclusion

This article only covers some of the inflation-adjusted tax amounts. There are others that may potentially apply, including: alternative minimum tax parameters, kiddie tax amounts, limits on the refundable amount of the Child Tax Credit, limits on the adoption credit, IRA contribution amounts, contributions to your company’s retirement plan and health savings account amounts. Various other inflation-adjusted amounts may affect your tax situation if you own an interest in a sole proprietorship or a pass-through business. Contact us with questions. © 2023