Is Your Income Tax Withholding Adequate?

When you filed your federal tax return this year, were you surprised to find you owed money? You might want to change your withholding so that this doesn’t happen again next year. You might even want to adjust your withholding if you got a big refund. Receiving a tax refund essentially means you’re giving the government an interest-free loan. Adjust if necessary Taxpayers should periodically review their tax situations and adjust withholding, if appropriate. The IRS has a withholding calculator to assist you in conducting a paycheck checkup. The calculator reflects tax law changes in areas such as available itemized deductions, the child credit, the dependent credit and the repeal of dependent exemptions. You can access the IRS calculator here: https://www.irs.gov/individuals/tax-withholding-estimator Life changes There are some situations when you should...

IRS Provides Simplified Method for Extending Portability Election

The IRS has released a procedure (Rev Proc 2022-32) that provides a new, simplified method for obtaining an extension of time to make a "portability" election. A portability election allows a surviving spouse to apply a deceased spouse's unused exclusion (DSUE) amount to their own transfers during life or at death. New simplified method The new procedure allows certain estates to use to obtain an extension of time to elect portability of a DSUE amount. The procedure applies to estates that are not normally required to file an estate tax return because the value of the gross estate and adjusted taxable gifts is under the filing threshold and the decedent has a surviving spouse.  Under the new procedure, an extension request must be made on or before the...

Do Your ESG Initiatives Open the Door to Fraud?

Within a relatively short period, corporate environmental, social and governance (ESG) initiatives evolved from a disjointed and confusing set of goals to a more unified business imperative. This is largely because investors, employees, customers and other stakeholders have demanded it. But as companies ramp up ESG spending and require executives to meet ESG objectives, the likelihood of fraud also increases. Although the SEC has created a Climate and ESG Task Force, there’s currently little regulatory guidance related to ESG and fraud. Therefore, your business needs to be proactive. Broad range of goals When designed and managed strategically, ESG initiatives target a broad range of goals — for example, they reduce environmental impact, increase workforce diversity and require transparent accounting methods. Yet, despite your organization’s best intentions, fraud can...

How to Avoid the Early Withdrawal Tax Penalty on IRA Distributions

When you take withdrawals from your traditional IRA, you probably know that they’re taxable. But there may be a penalty tax on early withdrawals depending on how old you are when you take them and what you do with the money. Important: Once you reach a certain age, you must start taking required minimum distributions from your traditional IRAs to avoid a different tax penalty. Previously, the required beginning date (RBD) was April 1 of the year after the year in which you turn 70½. However, a 2019 law changed the RBD to 72 for individuals who reach age 70½ after 2019. But what if you want to take an “early” withdrawal, defined as one taken before age 59½? You’ll be hit with a 10% penalty tax unless...

3 Tax Breaks for Small Businesses

Sometimes, bigger isn’t better: Your small- or medium-sized business may be eligible for some tax breaks that aren’t available to larger businesses. Here are some examples. QBI deduction For 2018 through 2025, the qualified business income (QBI) deduction is available to eligible individuals, trusts and estates. But it’s not available to C corporations or their shareholders. The QBI deduction can be up to 20% of: QBI earned from a sole proprietorship or single-member limited liability company (LLC) that’s treated as a sole proprietorship for federal income tax purposes, plus QBI passed through from a pass-through business entity, meaning a partnership, LLC classified as a partnership for federal income tax purposes or S corporation.   Pass-through business entities report tax items to their owners, who then take them into...

JB Straubel on Recycling EV Batteries to Create a Closed-Loop System

As posted to the Redwood Materials YouTube page on 8/11/22 Run Time 41 minute, 15 seconds In this clip, JB Straubel, Founder & CEO of Redwood Materials and Tesla co-founder & former CTO details how recycling lithium-ion batteries will cost effectively help EV demand & supply chain needs.  Of concern however is that legacy automotive manufacturers haven’t “done the math” on attaining the raw materials needed to produce batteries in their transition to electric vehicles, and skepticism among mining companies about the future demand of EVs and the truly massive transformation of industry necessary to transition the world to a sustainable energy economy. JB believes that it is going to be challenging for auto makers coming into EV production a bit late. Securing enough supply of batteries...

How to Treat Business Website Costs for Tax Purposes

These days, most businesses have websites. But surprisingly, the IRS hasn’t issued formal guidance on when website costs can be deducted. Fortunately, established rules that generally apply to the deductibility of business costs provide business taxpayers launching a website with some guidance as to the proper treatment of the costs. Plus, businesses can turn to IRS guidance that applies to software costs. Hardware versus software Let’s start with the hardware you may need to operate a website. The costs fall under the standard rules for depreciable equipment. Specifically, once these assets are operating, you can deduct 100% of the cost in the first year they’re placed in service (before 2023). This favorable treatment is allowed under the 100% first-year bonus depreciation break. Note: The bonus depreciation rate will begin...

IRS/Energy Dept Issue Guidance, List of Cars Eligible for Revised EV Credit

On its website, the IRS has issued guidance  on accessing the Inflation Reduction Act of 2022's tax credits for electric vehicles ("Plug-in Electric Drive Vehicle Credit at a Glance"), while the Energy Department listed credit-eligible cars, trucks, and SUVs ("List of Vehicles with Final Assembly in North America") on 8/16/22, just hours after President  Biden signed the law. Credit Amounts The Act introduces a $4,000 tax credit for the purchase of used electric vehicles (EVs), and updates the $7,500 credit for new EVs . . . Vehicle Price Caps A major change however is the introduction of caps on the price of new vehicles, based on the buyer's income, that qualify for that credit. The caps imposed are: $55,000 for electric cars, and $80,000 for SUVs and pickup trucks. Final Assembly...

Does the Kiddie Tax Affect Your Family?

Many people wonder how they can save taxes by transferring assets into their children’s names. This tax strategy is called income shifting. It seeks to take income out of your higher tax bracket and place it in the lower tax brackets of your children. While some tax savings are available through this approach, the “kiddie tax” rules impose substantial limitations if: The child hasn’t reached age 18 before the close of the tax year, or The child’s earned income doesn’t exceed half of his or her support and the child is age 18 or is a full-time student age 19 to 23.   The kiddie tax rules apply to your children who are under the cutoff age(s) described above, and who have more than a certain amount of...

The Auto Industry is Likely to Decline in Enterprise Value

Excerpt of an article posted to the ARK Invest website on 7/15/22 According to the research of ARK Invest, during the next five years the auto industry as measured in units will grow, but as measured by enterprise value, it will shrink. In 2021, the number of light vehicles sold globally was 78 million and the enterprise value of automakers, roughly $3.5 trillion. According to IHS Markit, during the next five years unit auto sales will increase at a 4.7% compound annual growth rate and hit a new high at 98 million units in 2026. ARK’s Non-Autonomous EV Base Case agrees with the consensus view that unit sales will increase by 20 million during the next five years but that the enterprise value of global automakers...