Deanna Bloodworth, Certified Public Accountant, PLLC

Federal Tax Filing Season Opens on January 27, 2025

The IRS has announced that the filing season for 2024 tax returns will officially begin on Monday, January 27. On that date, the IRS will begin accepting tax returns for processing, and begin preparing and issuing refunds. Note that you may file your return before January 27, but the IRS will not take any action with the return until that date. Except in regions where the IRS has issued deadline extensions due to federal disaster declarations, 2024 individual tax returns must be filed by April 15, 2025.

After January 27, people who have filed their 2024 returns will be able to use the IRS Where's My Refund portal (link below) to check the status of their tax refunds. For most returns filed electronically, status updates will become available within 24 hours after filing. For paper returns, it can take up to four weeks for the portal to provide refund status information. The IRS issues most tax refunds within 21 days after processing the return. However, refunds related to the Earned Income Tax Credit cannot be issued before mid-February.

A tax professional can help you e-file your return with direct deposit of your refund, for the fastest possible processing.

IRS Refund Status Portal: https://www.irs.gov/wheres-my-refund

Quarterly Estimated Tax Payments - Reminder

If you are making quarterly estimated tax payments to the IRS, the due date for the September 1 – December 31 quarter of last year is January 15, 2025.

For payments made using IRS Direct Pay, you can make payments until 11:45PM EST, and for payments using a credit or debit card, payments can be made up to midnight on the due date.

Standard Business Mileage Rate to Increase for 2025 – Did You Know?

The IRS has announced that the standard mileage rate for business use of a vehicle will be 70 cents per mile in 2025, an increase of 3 cents over the 2024 rate. Note that this rate applies only to business miles driven on or after January 1, 2025. Self-employed people and small business owners who use the standard mileage rate must use the previous rate of 67 cents per mile to figure their 2024 vehicle expense deductions.

In most cases, using the standard business mileage rate is optional. You may instead figure your deduction by tracking actual expenses like repairs, depreciation, auto loan interest, and fuel or charging expenses. Make sure to prorate each expense based on the percentage of your mileage traveled solely for business reasons. Also note that if you report actual expenses for the first year when you put a vehicle into service for business, then you generally must track actual expenses for all subsequent years as well.

A tax professional can help you determine whether you qualify to deduct business vehicle expenses, and if so, help you find the most advantageous strategy to figure your deduction.

Tax-related Gift Card Scams During the Holidays – Did You Know?

The holiday season can bring a lot of joy, but unfortunately, it also brings a new wave of scammers trying to cheat Americans out of their hard-earned money. Many scammers impersonate the IRS or other government agencies and demand payment in gift cards.

In one common version of the scam, a caller posing as an IRS agent threatens a person with tax and/or criminal penalties if the person does not immediately pay off a fictitious tax debt. The scammer may also send threatening text, email or voice messages with a callback number. Ultimately, the scammer demands that the person make payment by purchasing gift cards and sharing the card numbers and PINs.

If you get a call or message from anyone demanding payment in gift cards, hang up or do not reply. The IRS will never call a taxpayer to demand payment in gift cards, prepaid debit cards or wire transfers. If you have legitimate concerns about your tax situation, including back taxes you may owe, a tax professional can help you handle the problem in a safe, secure way.

'Tis the Season to Prepare for Tax Time – Start Assembling Important Documents Now

With a New Year fast approaching, tax filing season cannot be far behind. Taking a few simple steps to prepare over the next several weeks can significantly reduce stress when you complete your return. First, make sure you have important records readily at hand, like last year's return and receipts for deductible expenses or donations. Second, keep your eyes out for year-end income statements in January and early February. These documents may include:

- W-2 forms from employers
- Forms 1099-NEC and/or 1099-MISC showing your income from sources like rents, self-employment activities (such as gig work) and royalties
- Forms 1099-INT and 1099-DIV showing interest, dividends and other investment income

If you accept payments for goods or services through a payment app or online payment platform, you might also receive Form 1099-K showing that income. The filing threshold for these forms was lowered for 2024, so you may receive one even if you never have in the past.

Other important forms you might receive include Forms 1095-A (Health Insurance Marketplace Statement) and 1098-T (Tuition Statement). Also remember that you must answer questions about your involvement with digital assets like crypto on your tax return, and report any resulting income. Make sure you have complete records of all your 2024 digital asset transactions, so you can meet these reporting requirements. A tax professional can help you organize your records, and help you file your return electronically to get your refund as quickly as possible.

Retirement Plan Distributions Deadline - Did You Know?

The IRS recently issued a reminder that many seniors must take mandatory withdrawals, known as required minimum distributions (RMDs), from their retirement accounts by December 31. In general, people of age 73 or older must take annual RMDs from their traditional IRAs or IRA-based workplace plans, such as SIMPLE IRAs, even if they are still working. Similar RMD rules apply for many other workplace retirement plans like 401(k) and 403(b) accounts. However, people who have not yet retired can defer RMDs for some of these accounts, as long as they do not own more than 5% of the company. Designated Roth accounts within workplace retirement plans are generally not subject to RMD rules.

Your retirement account administrator should inform you of your RMD amount, which is based on your account balance and current age. In general, RMDs count as taxable income. Failure to take an RMD by the deadline may trigger a tax penalty of up to 25% of the required withdrawal amount.

The standard deadline to take RMDs is December 31, but if you turned 73 in 2024, you will typically have until April 1, 2025 to take your first RMD. Just keep in mind that you will then need to take your second RMD by December 31, 2025. A tax professional can help you determine how the various RMD rules apply to your accounts, and plan for any tax impacts of the withdrawals.

Healthcare Open Enrollment Deadline on December 15

This week is the last week to register for the HealthCare.gov open enrollment period with the deadline being Sunday, December 15th, 2024. Once the Open Enrollment period is over, you will only be able to enroll if there's a qualifying life event for the Special Enrollment Period.

Enrollment can be done at https://healthcare.gov, and a simple checklist of documents you'll need can be found here: https://marketplace.cms.gov/outreach-and-education/marketplace-application-checklist.pdf.

Giving Tuesday and Charitable Donations - Did You Know?

Giving Tuesday is an annual event that highlights charitable giving after Thanksgiving.

If you are considering charitable donations, you may be able to donate to a Donor-Advised Fund (DAF) every two or three years instead of every year. This may qualify you to receive tax benefits now, allow the amount to grow tax-free, and the decision on which qualified charity to fund can be made later.

If you are 70.5 years or older, you may also be able to make a qualified charitable distribution (QCD) directly from your IRA this year. QCDs may allow the donation to be deducted from your income. A tax advisor can help you structure your charitable giving.

The IRS has released a tool to make it easier to get information about qualified charitable organizations. The Exempt Organizations Select Check tool can be found at: https://www.irs.gov/charities-non-profits/tax-exempt-organization-search.

Tax Credit for Businesses That Provide Childcare for Employees – Did You Know?

Businesses that offer childcare services to employees may qualify for the Employer-Provided Childcare Tax Credit for some of the expenses involved. Eligible costs may include acquisition or construction of a childcare facility, ongoing expenses to run an in-house daycare center, and/or referral costs like contracting with an outside childcare facility or service.

This nonrefundable credit may cover up to 25% of qualifying workplace childcare facility costs, or 10% of costs for an outside service, up to a maximum of $150,000. Eligible businesses may claim the credit as part of the General Business Credit, meaning that any excess credit amount may be carried back one year or forward up to 20 years. A business tax professional can help you determine whether your enterprise qualifies for the Employer-Provided Childcare Tax Credit, and if so, help you get the maximum benefit from the credit.

Use Savings Bonds to Pay for College and Get a Tax Advantage – Did You Know?

Ordinarily, interest earned on U.S. savings bonds is taxable income. However, if you pay higher education costs, then you may qualify to cash in federal series EE or I bonds tax-free. The IRS Education Savings Bond program allows eligible people to exclude some or all of their U.S. bond interest from their gross income, provided that they use the bonds to pay tuition and certain required fees at a qualifying higher education institution.

To be eligible for this program, you must pay the education expenses for yourself, your spouse or a dependent. The program is subject to income limits, which the IRS adjusts annually for inflation. Other eligibility restrictions may apply, such as limitations on the expenses you may pay using the bonds if the student also receives tax-free scholarship funds. A tax professional can help you determine whether you qualify for the Education Savings Bond program, and if so, how much of the interest on your bonds could be exempt from tax.

Helpful Resources to Replace Records Lost in a Disaster

Disasters like hurricanes, tornadoes, floods and wildfires may destroy people's tax and financial records, making it difficult for them to apply for the assistance they deserve. Fortunately, a number of resources exist to help reconstruct lost records and begin the rebuilding process.

Those affected by federally declared disasters can request free transcripts of their past tax returns by using the IRS Get Transcript webpage (link below), or calling 800-908-9946. Banks and credit card issuers can provide copies of account statements and other financial documents, either online or on paper forms. Meanwhile, records documenting the value of a home and surrounding property can typically be obtained from a title company, mortgage lender or county assessor's office.

People who completed home improvements that affected their home's value or qualified for tax credits can usually get needed records from the contractors who performed the work. In some cases, the IRS will also accept written statements from friends or relatives who saw the home before and after improvements were made. For lost or damaged vehicles, a variety of sources can provide information on their fair market value. You can find these sources online, or seek assistance at a public library.

Get a Tax Return Transcript: https://www.irs.gov/individuals/get-transcript

New Requirements for Energy Efficiency Credits Take Effect in 2025 – Did You Know?

The IRS offers a variety of tax credits to people who invest in home improvements that significantly reduce energy usage. These nonrefundable credits may total up to $3,200 for a particular year. A maximum credit of $2,000 is available for water heaters, heat pumps, boilers or biomass stoves that meet specific design and efficiency requirements. Meanwhile, qualifying homeowners may claim up to $1,200 in credits for other energy improvements like installing highly efficient exterior doors, windows or skylights.

Beginning January 1, 2025, only officially certified products will be eligible for these tax credits. The products must come from an IRS-approved manufacturer, and the manufacturer must label each product with a unique product identification number (PIN). Save these labels, because in order to claim a home efficiency credit, you will need to include the PIN of each eligible product on your 2025 tax return. If a contractor or retailer cannot show you a clearly displayed PIN on a particular product, then the product likely will not qualify for tax credits for energy efficiency.

2025 Healthcare Open Enrollment - Did You Know?

The 2025 open enrollment period for Marketplace health insurance starts on November 1, 2024, and ends December 15, 2024. Plans will start January 1, 2025. During this period, you will be able to enroll in, renew, or change health plans for the coming year.

Once the Open Enrollment period is over, you will only be able to enroll if there's a qualifying life event for the Special Enrollment Period.

Enrollment can be done at https://healthcare.gov, and a simple checklist of documents you'll need can be found here: https://marketplace.cms.gov/outreach-and-education/marketplace-application-checklist.pdf.

Hurricane Relief Charity Scams

Natural disasters like Hurricanes Helene and Milton bring out the best in American generosity, as millions of people seek to help those affected by the storms. Unfortunately, these tragedies also attract scammers looking to steal the money and identities of people who wish to donate to relief efforts.

If you get a phone call, text message or email from someone claiming to represent a hurricane relief charity, verify the legitimacy of the organization before providing any personal information. Request the organization's official name, mailing address and website address, and keep in mind that scammers use fake organization names that sound similar to real charities. You can use the IRS Tax Exempt Organization Search tool (TEOS, link below) to verify that you are dealing with an authentic charity, authorized to receive tax-deductible donations. If you cannot find the organization in the database or the person who contacted you refuses to answer your questions, do not donate or share sensitive information like your Social Security number (SSN) or credit card number. Instead, hang up immediately or delete the message.

TEOS tool: https://www.irs.gov/charities-non-profits/search-for-tax-exempt-organizations

Clean Energy Tax Credit Scams – Did You Know?

The Inflation Reduction Act 2022 made it possible for people to sell certain clean energy tax credits. In these credit transfers, both the seller and purchaser must meet strict eligibility requirements and file required paperwork with the IRS. Unfortunately, dishonest tax return preparers are actively encouraging people to ignore the rules and improperly claim purchased clean energy credits. These scammers lure people in with false claims that the credits may be used to reduce tax on a wide variety of income types.

In reality, purchased credits may generally only be used to offset tax on passive activity income, which most people do not have. Regardless of what a scammer tells them, anyone who attempts to use purchased tax credits inappropriately, or claims credits they did not actually purchase, may face additional tax assessments and IRS penalties. Meanwhile, the scammer disappears with the fees they collected to file an inaccurate return on the person's behalf.

A tax professional can help you determine whether purchasing clean energy credits would actually reduce your tax, and if so, help you complete and file all the required forms.

IRS Online Account – Did You Know?

Setting up a free IRS online account (link below) makes it possible to handle many tax-related tasks conveniently and securely. With an online account, you can readily check your tax balance, whether your payments have been processed, and the status of your tax return or refund. You can also submit electronic tax payments for fast, safe processing.

In addition, you can use your online account to request transcripts of past returns, or official letters verifying that you were not required to file. These records may come in handy for a variety of purposes, such as securing college financial aid, completing rental applications or claiming the Clean Vehicle Credit when purchasing a car or truck. The IRS may charge a service fee for transcript requests made by phone, mail or email, but with an online account, you can obtain these documents for free.

Link to access or set up your online IRS account:
https://www.irs.gov/payments/online-account-for-individuals.

October 15 is the 6-month Extension Deadline

With the exception of those eligible for tax deadline relief due to a federally declared disaster, everyone who requested a 6-month extension to file a 2023 tax return must file by October 15.

If you owe tax, remember that the automatic 6-month extension applies only to filing your return, not to paying tax. Generally, after the standard April filing deadline, unpaid tax balances begin accumulating interest charges that increase daily. Filing and paying as soon as possible will keep those charges to a minimum.

People who cannot pay their full tax balance now should still file as soon as possible. By proactively setting up a payment plan with the IRS, they can minimize late payment penalties.

Disaster Relief Eligibility: https://www.irs.gov/newsroom/tax-relief-in-disaster-situations

Disaster Preparedness – Did You Know?

September is National Preparedness Month, the perfect time for all Americans to check their readiness for storms, floods, fires and other disasters. To help with that checkup, the IRS recently reminded taxpayers of important steps to include in their disaster preparation plans.

- Store key documents in a secure, waterproof and fireproof container. These documents include birth certificates and/or Certificates of Naturalization, Social Security cards, tax returns, home deeds and vehicle titles. If you do not have a suitable storage option in your home, you may wish to rent a safe deposit box. In either case, make copies of these documents and store the copies in a separate location from the originals, such as at a relative's home. You may also wish to scan documents if you have access to a secure digital storage option.

- To facilitate making insurance claims and/or claiming disaster loss tax deductions, individuals and businesses should maintain accurate inventories of their valuables. One simple way to document your possessions is to regularly take photos or videos around your home. Store the photos or videos securely, and include written notes like the year, make and model of key items.

Recovering from a disaster is always challenging. However, the right preparation can make the process a little simpler, and less stressful.