Carol McAtee's Blog

Taxpayers who pay for tuition or expenses for higher education may be eligible for one of two education tax credits — the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit (LLC). If you claim your child as a dependent, you can claim the education tax credit for that child. To be eligible to claim the AOTC or the LLC, the taxpayer (or a dependent) should have received Form 1098-T, Tuition Statement, from an eligible educational institution.

Qualifying Expenses

Qualified tuition and related expenses for the education tax credits include tuition and required fees for the enrollment or attendance at eligible post-secondary educational institutions, including colleges, universities and trade schools. The expenses paid during the tax year must be for an academic period that begins in the same tax year or an academic period that begins in the first three months of the following tax year.
The following are not qualified expenses the AOTC or the LLC:
• Room and board
• Transportation
• Insurance
• Medical expenses
• Student fees, unless required as a condition of enrollment or attendance

American Opportunity Tax Credit

The American Opportunity Tax Credit (AOTC) is available to eligible students for the first four years of higher education, with several requirements for the student:
• Must be pursuing a degree or other recognized credential
• Must be enrolled at least half-time for at least one academic period or semester
• Must not have received the AOTC or the Hope credit for more than the past four years
• Must not have a felony drug conviction at the end of the tax year.

For the 2024 tax year, students may receive up to $2,500 of credit for the AOTC. The credit is refundable up to 40%. The credit is awarded for 100% of the first $2,000 of qualified educational expenses and 25% of the next $2,000. For example, if a student pays $4,000 in educational expenses, they will receive the full $2,500.

To prove eligibility, the student must receive a Form 1098-T from their educational institution or be able to substantiate payment to an institution that was not required to provide this form. To receive the full AOTC, the taxpayer’s Adjusted Gross Income (AGI) must be $80,000 or less, or $160,000 or less for a married couple filing jointly. If the AGI is above those limits, taxpayers may be eligible for a reduced credit.

Qualified tuition and related expenses for the AOTC include amounts paid for books, supplies and equipment needed for a course of study. The materials do not have to be bought from the eligible educational institution. Purchase of a computer can qualify for the credit if the computer is necessary for attendance at the educational institution.

Lifetime Learning Credit

The Lifetime Learning Credit (LLC) provides to $2,000 in tax credit. It is generally more flexible than the AOCT, since there is no limit on the number of years it can be claimed and the eligibility requirements are less stringent. The Lifetime Learning Credit is not limited to your first four years of undergraduate study. It can be applied for graduate school or courses taken to acquire or improve job skills without pursuing a degree.

Like the AOTC, the LLC is for qualified tuition and expenses paid to qualified institutions in the United States, including colleges, technical schools and universities offering education beyond high school. Unlike the AOTC, the LLC requires any qualified related expenses to be paid directly to the school.

Similar to the AOTC, the student should have received a 1098-T tuition statement from the higher education institution. The credit is worth up to 20% of the first $10,000 that a taxpayer spends at a higher education institution, for a maximum of $2,000.

For example, if a taxpayer started school at a university in the fall semester and tuition cost was $10,000 or more, that taxpayer could be eligible for a credit of $2,000. The LLC is not refundable and can only be applied against tax balances due.

To qualify for the full credit in 2023, a taxpayer’s income must have been no more than $80,000 for single filers or $160,000 for joint filers. Beyond those limits, the credit is gradually phased out.

Claiming Your Education Credits

IRS Form 8863 is used to calculate both the American Opportunity Tax Credit and the Lifetime Learning Tax Credit, including the refundable portion of the AOTC. You cannot claim both credits in the same year for the same student, but you can claim both credits in the same year for different students. The combined total of nonrefundable credits is reported on your Form 1040, US Individual Tax Return.
Scholarships

The Form 1098-T also reports any scholarship amounts received. Taxpayers must subtract the scholarship amount from the tuition paid amount and then claim a credit for the remaining tuition on their tax return. The IRS considers scholarship amounts that exceed tuition and related expenses as income.

Your CPA or tax advisor will be helpful in maximizing the credit by determining if the AOC or the LLC is the more beneficial credit, and by optimizing the scholarship and grant allocation between qualified and nonqualified expenses.

Expenses related to use of a car, van, pickup or panel truck for business can be deducted as transportation expenses, but only for taxpayers who are self-employed or small business owners, or when using their vehicles for activities such as medical visits or charitable work. Taxpayers who are employees and paid via Form W-2 are not eligible for any deductions for vehicle expenses.

Note: Use of larger vehicles, such as tractor-trailers, is treated differently and is not part of the discussion below.

Claiming Deduction

Eligible taxpayers can claim their deduction in two different ways:
1. Deducting the actual business-related costs of gas, oil, lubrication, repairs, tires, supplies, parking, tolls, drivers’ salaries, and depreciation, OR
2. Using the standard mileage rate provided each year by the IRS. For tax year 2024, that is 67 cents per mile, up from 65.5 cents in 2023. For your deduction, you simply multiply 67 cents by the number of business miles traveled during tax year 2024.
Note that if you are using the standard mileage rate, your parking fees and tolls must be deducted separately.
The standard rate may understate your vehicle costs, especially if you use the car 100 percent or close to it for business. The standard mileage method may provide greater benefits for taxpayers who have less expensive cars. Your tax professional can determine which approach is best for you.

Business Driving Versus Commuting

Business miles are considered only those driven from a person’s principal place of business, whether that is a home office or a separate office location. In contrast, driving from home to a principal place of business is considered a commute, even for those who are self-employed or small business owners.
Business miles are deductible for activities like meeting with clients, traveling to secondary work sites or running errands to pick up supplies. If a person drives for both business and personal purposes, only the miles related to the business use are deductible.
The vehicle deduction can be important for anyone with their own business, but especially for those working in the gig economy as ride-share or independent delivery drivers. The companies that provide these applications often provide year-end statements with summaries of miles driven.
You can also deduct the interest you pay to finance a business-use car if you are self-employed.
Self-employed taxpayers can claim their business mileage deduction on their Form Schedule C, not subject to any threshold requirements or limits. Small business owners claim business mileage deductions on their corporate tax returns, including Form 1120 and 1120S or Form 1065.

Documentation

All mileage should be carefully documented. If you are audited, the IRS will want to see “substantiation,” such as a daily log that includes dates, mileage amounts, destinations and the reasons for travel. Logs can be handwritten, in an Excel spreadsheet, or through an app.
In addition, the IRS requires that you show both business and personal use of vehicles on your tax return. If you use the actual cost method for your auto deductions, you must keep receipts for all vehicle expenses. Some taxpayers use a separate credit card for their business expenses to simplify recordkeeping.

Non-Business Deductible Mileage

You can also deduct mileage driven for charitable purposes while volunteering for a nonprofit organization or for receiving medical care. Medical mileage deductions, however, are subject to medical expense limitations and are only deductible when total medical related expenses exceed 7.5% of your adjusted gross income.
The 2024 medical or moving rate is 21 cents per mile, down from 22 cents per mile last year. The charitable rate is not indexed and remains 14 cents per mile
Mileage for moving is deductible only by active-duty military members who are relocating because of new orders.

Section 179 Tax Deductions for Small Business Owners

A special tax benefit called the IRS Section 179 Deduction allows you to deduct the cost of certain larger vehicles from your tax returns. Under this benefit, you can immediately deduct a portion of the full purchase price of qualifying vehicles instead of depreciating the value over several years — provided they are used for business purposes more than 50% of the time.

Vehicles that may qualify under the Section 179 tax deduction include:
• Heavy SUVs, pickups, and vans over 6000 lbs.
• Typical work vehicles without personal use
• Cargo vans and box trucks with no passenger seating
• Specialty vehicles like ambulances and hearses

For tax year 2024, taxpayers can deduct up to $30,500 for qualifying vehicles weighing between 6,000 and 14,000 pounds. Larger commercial cars, vans and buses are exempt from this limitation and these types of business vehicles may be eligible for a full deduction of their cost.

If you have questions about this featured topic or other accounting and tax related topics, please do not hesitate to contact us at 727-327-1999 OR [email protected].
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

An important aspect of your retirement planning and financial decisions is knowing how Social Security and taxes work. Being aware of the tax implications of Social Security benefits can help you avoid surprises.

Taxability

Not all of your Social Security benefits are subject to tax, but a portion of your benefits may be taxable depending on your income. While the age at which you retire or begin taking benefits affects how much you receive, it is largely your income and filing status that determine how much income tax is paid on your benefits.

To determine how much of your Social Security benefits are taxable, the IRS uses a tiered system based on your “combined income.” Your combined income for a given year is comprised of your adjusted gross income plus nontaxable interest and half of your Social Security benefits. Your benefits may be taxable if the total of your combined income is greater than the base amount for your filing status. 2024 limits are as follows:
• If your combined income is under $25,000 (single) or $32,000 (joint filing), there is no tax on your Social Security benefits.
• If your combined income is between $25,000 and $34,000 (single) or $32,000 and $44,000 (joint filing), up to 50% of the benefits can be taxed.
• If your combined income is above $34,000 (single) or above $44,000 (joint filing), up to 85% of the benefits can be taxed.

If you are married and file a joint return, you and your spouse must combine your income and Social Security benefits when figuring out the taxable portion of your benefits, even if your spouse did not receive any benefits.

Keep in mind that Social Security will not pay you two different benefits at the same time. For example, if you are married and take your spousal benefit, you will lose your retirement benefit if your spousal benefit is larger.

In addition to retirement benefits, other benefits from Social Security, including survivor and disability benefits, are subject to tax rules, with one exception: Supplemental Security Income payments (made to people with disabilities and older adults with little or no income) are not taxable. The IRS provides an online tool to help you determine how much, if any, of your Social Security income is taxable.

Tax Withholding

If you anticipate owing taxes on your Social Security benefits, you can choose to have federal taxes withheld. The withholding options can be 7%, 10%, 12%, or 22% of your benefits.

By having taxes withheld, you prepay a portion of your tax bill. You can set up this option when you first apply for Social Security or by completing and submitting IRS Form W-4V. You can also make quarterly estimated tax payments through Form 1040-ES to cover your anticipated tax liability.

Cost-of-Living Adjustment

Social Security benefits are increased by a small amount each your as adjustments for increases in the cost of living. The higher benefits can cause some recipients to move into a higher federal income tax bracket, particularly when inflation is high: The 2023 cost-of-living adjustment (COLA) was the largest in 40 years at 8.7%. Adjustments are typically smaller and recent projections suggest that the COLA for 2025 will approximate 2.6%.

State Tax on Social Security Benefits

Social Security benefits are not taxed in most states, but nine states tax benefits for 2024 (two less states than 2023):
Colorado
Connecticut
Kansas
Minnesota
Montana
New Mexico
Rhode Island
Utah
Vermont

Some state criteria for determining income tax are more advantageous for taxpayers than the federal government’s criteria, including higher income thresholds or higher deductions and exemptions that can lower the tax burden. New Mexico technically taxes Social Security benefits, but legislation passed last year provides higher income thresholds for exempting Social Security benefits.


Your trusted tax professional can help if you are anticipating retirement or seeking to confirm your tax-efficient strategy for your retirement years.

With the April 15 federal tax filing deadline well behind us, many who have filed their 2023 tax returns have breathed a sigh of relief. But since the tax code changes frequently – and never gets any less complicated – it’s worthwhile to be aware of a few changes coming down the road in tax year 2024 and future years.

IRS Free Filing

For tax year 2023, the IRS rolled out a limited pilot of its new, free Direct File program. For 2023, it was accessible only in 12 participating states and limited to taxpayers with relatively simple tax returns:
• Income limited to Form W-2, Social Security or unemployment
• Interest income of $1,500 or less
• Standard deduction rather than itemized deductions

The IRS will expand the rollout of the program in subsequent tax years.

Electric Vehicle Credit

Taxpayers who purchased an electric car may get up to $7,000 in a credit in tax year 2023 (and continuing through 2032), but the eligibility rules have become tighter. Limitations include income limits and requirements that the vehicle meet other criteria such as having final assembly in North America.

Starting in tax year 2024, electric vehicle purchasers can transfer the credit to the car dealerships for an upfront discount, rather than waiting until they file their 2024 tax returns. This will appear as a reduction in the purchase price of the vehicle.

Energy Efficiency Home Improvement

Starting in tax year 2023, taxpayers can claim up to $1,200 per year in certain home improvements such as exterior doors, windows and insulation. In addition, a credit of up to $2,000 is available for new water heaters, heat pumps and boilers.

The Residential Clean Energy Credit is available for items like solar panels, solar water heaters or wind turbines, up to 30% of qualified costs.

Child Credit

The US Congress is debating an increase in the child tax credit, currently $2,000 for each qualifying dependent. If an increase is enacted in the middle of the tax year, the additional credit would be available as a retroactive payment. Taxpayers who have already filed would not have to file an amended tax return to realize the increased credit.

Non-W2 Income

Freelancers, independent contractors and small businesses have long been required to report any income to the IRS over $400. Online payment processors such as Venmo, Paypal, eBay or Airbnb are required to report the income of people selling goods and services, but at the current time only when their activity exceeds 200 transactions and $20,000 in payment annually.

That will likely change for the 2024 tax year: The IRS plans to lower the threshold to $5,000 annually, with no transaction minimum. The threshold could be lowered in subsequent years and eventually drop to a minimum of $600.

State and Local Tax (SALT) Deduction

The maximum deduction for state and local taxes paid is currently $10,000, through tax year 2025. However, some states provide a work-around, allowing taxpayers to pay the taxes from a pass-through entity such as an S-corporation or partnership. Then the entity owners can deduct the entity’s taxes on their personal tax returns. This work-around is complicated and not available in all states, requiring the skill of a well-experienced tax professional.

Cryptocurrency

Taxpayers are required to report any profits (capital gains) or losses from the sale of investments such as stocks or bonds. Brokerage firms must prepare tax forms (1099-B and 1099-DIV) to report these.

Up to now, brokerage firms have not been required to report transactions involving cryptocurrency or other digital assets. The IRS has proposed a new requirement to report these transactions with a new tax form – Form 1099-DA.

Regardless of the how brokerage firms report, taxpayers are still required to report any capital gain or loss when they sell digital currency.


If you have questions about this featured topic or other accounting and tax related topics, please do not hesitate to contact us at 727-327-1999 OR [email protected].
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The Corporate Transparency Act passed in 2021, creating a new requirement to report Beneficial Ownership Information (BOI) about the individuals who ultimately own or control a company, is part of the U.S. government’s efforts to address financial crimes. Starting January of 2024, this report will be required for many domestic and foreign business entities.

Anonymous Companies

Before this reporting requirement, companies were not required to list owners by name. These anonymous companies (also called shell companies) were sometimes used to disguise the identity of their true owner—the person (or people) who ultimately control or profit from the company. These people are also known as the “beneficial owners.”

Often these companies have few or no employees at all, and do not conduct any real business. The owners could include those involved in illegal activities – including embezzlers, arms traffickers, and drug dealers. By leaving their names off the forms they fill out, they created anonymous companies that are perfect for hiding illicit cash.

By creating a centralized database of beneficial ownership information, the government intends to address critical vulnerabilities in our financial system and address illicit finances.

Reporting Requirements

Beneficial ownership information reporting is not an annual requirement. A report only needs to be submitted once, unless the filer needs to update or correct information.

Filing is simple, secure and free of charge. Companies that are required to comply (“reporting companies”) must file their initial reports by the following deadlines:

• Existing companies, created or registered to do business in the US before January 1, 2024 must file by January 1, 2025.
• New companies created or registered to do business in the United States in 2024 have 90 calendar days to file after receiving actual or public notice that their company’s creation or registration is effective.
• New companies created or registered on or after January 1, 2025, will only have 30 calendar days to file.

Generally, reporting companies must provide four pieces of information about each beneficial owner:
• Name
• Date of birth
• Address
• Identifying number, issuer and image of either a non-expired U.S. driver’s license, a non-expired U.S. passport, or a non-expired identification document issued by a State, local government, or Indian tribe. If none of those documents exist, a non-expired foreign passport can be used.

Beneficial owners include any individuals who exercise substantial control over a reporting company or owns at least 25% of an ownership interest in the company.

The reporting entity must also submit certain information about the company , such as its legal name, trade name, address, jurisdiction of formation, and tax ID number.

Reporting companies include corporations, limited liability companies (LLCs), or other entities created or registered by filing documents with the secretary of state or similar state office. Note that sole proprietorships, trusts, and other entities that do not typically require the filing of a formal document with the secretary of state, are generally not considered a reporting company and will not have a filing requirement.

Certain entities, including publicly traded companies and certain large companies may be exempt from reporting.

In addition, reporting companies created on or after January 1, 2024, are required to submit information about the individuals who formed the company (“company applicants”). Company applicants are the individuals who filed the document that created or first registered the reporting company and the individual who was responsible for the direction or control over the filing.

Filing must be done electronically and only through FinCEN’s secure website. Additional Information can be found at fincen.gov/boi-faqs

Failure to file the Beneficial Ownership Information Report, when required, could result in civil penalties (of up to $500 for each day that the violation continues), criminal penalties (of up to two years imprisonment) and a large fine (of up to $10,000).


Please contact us for more information about Beneficial Ownership Information Reporting at 727-327-1999 OR [email protected].

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

Gambling income is any money or prizes that you earn from games of chance or wagers on events, including racetracks, raffles, the casino, or the lottery. Gambling income is fully taxable and must be reported on your federal tax return, specifically as other income.

Cash and Non-Cash Winnings

You are required to report any gambling winnings as income, either cash or prizes. For example, if you win a car in a charity raffle, you are required to report the fair market value of that car as income.

Tax on Winnings

Unlike many other forms of income, gambling winnings may be subject to federal income tax withholding at a flat rate of 24%. Gambling income is taxed whether tax is withheld or not.

Reporting of Winnings

Gambling establishments report winnings on a W-2G form (similar to a W-2 for wages) that is given to the winner and sent to the IRS. In general, the Form W-2G is issued if winnings exceed certain thresholds, including $1,200 or more from slot machines or bingo, $1,500 or more from Keno games or $5,000 or more from poker tournaments.

Gambling Losses

Gambling losses can be tax-deductible, but only up to the amount of winnings you report as income. Gambling losses can be reported under “Other Itemized Deductions” on Schedule A (Itemized Deductions) of Form 1040. If you take the Standard Deduction rather than itemizing, you cannot deduct any gambling losses.

You should keep copies of your losing tickets or win/loss statements, since you should be able to prove every gambling loss that you deduct.

Gambling losses can only be reported specifically as losses, and not as reductions in your winnings. For example, if you buy a $20 raffle ticket and win a $500 prize, you must report $500 on Form 1040, not $480.

Professional Gamblers

The information above applies only to gambling winnings and losses for casual gamblers. If you consider yourself a professional gambler, you must file a Schedule C (Form 1040) for your gambling business.

The IRS has strict rules in place for who can qualify as a professional gambler. And unlike casual gamblers, professionals must pay self-employment tax on winnings.


Please contact us for more information about the rules for reporting gambling income and losses, and for assistance in preparing your return at 727-327-1999 OR [email protected].

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

In the U.S., income taxes are collected on an ongoing basis. For many of us, this means that an employer pays federal and state taxes on our behalf by withholding a certain amount from each paycheck.

But if you earn income as a freelancer or receive certain types of non-wage income, you may need to pay what the IRS calls “estimated quarterly taxes.” This includes income from self-employment, interest, dividends, alimony and rent, as well as gains from the sale of assets, prizes and awards.

You also may have to pay estimated tax if the amount of income tax being withheld from your salary, pension, or other income is not enough.

In all cases, penalties due to underpayment of tax payments due may be incurred.

Determining If Estimated Payments Are Required

In general, most taxpayers can avoid penalties if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90 percent of the tax for the current year, or 100 (110 for higher income individuals) percent of the tax shown on the return for the prior year, whichever is smaller.

If you are filing as a sole proprietor, partner, S corporation shareholder, and/or a self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return. If you are filing as a corporation, you generally have to make estimated tax payments for your corporation if you expect it to owe tax of $500 or more when you file its return.

If you receive salaries and wages and you had a tax liability for the prior year, you may have to pay estimated tax for the current year. There are special rules for certain taxpayers such as farmers or fishermen and certain taxpayers with higher incomes.

Adjusting Withholdings

You can avoid the possibility of paying estimated tax or penalties by asking your employer to withhold more tax from your earnings. To do this, you would file a new Form W-4 with your employer, entering the additional amount you want your employer to withhold.

Schedule for Estimated Tax Payments

For estimated tax purposes, the year is divided into four payment periods, each with a specific payment due date. For the 2024 tax year, these dates are:
April 15, 2024
June 17, 2024
September 16, 2024
January 15, 2025

If you do not pay enough by the due date of each payment period you may be charged a penalty even if you are due a refund when you file your tax return.

Calculating Estimated Tax

Calculating estimated tax requires consideration of expected adjusted gross income, taxable income, taxes, deductions and credits for the year. Your CPA or tax preparer can calculate what your estimated tax will be for each quarterly period, and how much you will need to pay for that period.

How to Pay

CPAs or tax preparers can provide you with paper voucher slips to send for each payment. In addition, individuals and businesses can pay their estimated federal taxes using the Electronic Federal Tax Payment System (EFTPS) or via online direct pay, offered at no charge by the IRS.


Please contact us for more information about estimated tax returns, and for assistance in preparing your return at 727-327-1999 OR [email protected].

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

The answer is yes, with two essential conditions that have to be met. Details of what expenses may be deductible are below, but these two basic conditions apply:

ONE: Deductions must be Itemized

First, you must itemize deductions using a Schedule A rather than taking the standard deduction. The standard deduction works best for the majority of taxpayers. For tax year 2024 it is $14,600 for single tax filers and $29,200 for married taxpayers filing jointly.

For many taxpayers, the standard deduction typically exceeds the total deductions you would get from mortgage interest, property taxes, charitable deductions, medical expenses and other deductions that could otherwise be itemized. However, if the taxpayer, spouse or dependent has significantly high medical expenses in a particular tax year, it might make sense to itemize.

TWO: Deductions must be for Qualified Medical Expenses

The IRS defines medical care expenses as “payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or payments for treatments affecting any structure or function of the body.”

The key words are “disease” and “treatment.” Thus, expenses that may contribute to your overall health, such as special health foods, supplements or a gym membership or trainer, are not deductible. However, if you are incurring these expenses as part of treatment plan for a disease, such as obesity, then they may be deductible.

Medical expenses that are usually deductible include the following:
• Payments for fees to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists and nontraditional medical practitioners
• Payments to participate in a weight-loss program for a specific disease or diseases diagnosed by a physician including obesity. (Note: this does not include ordinary payments for diet food items or payments for your gym or health club dues)
• Payments for insulin and for drugs that require a prescription for their use.

How Much Is Deductible?

It’s important to note that you can only deduct the amount of your total medical expenses that exceeds 7.5% of your adjusted gross income (AGI). For instance, if your AGI is $50,000, you can only deduct medical expenses over $3,750 ($50,000 x 7.5%).


If you have questions about this featured topic or other accounting and tax related topics, please do not hesitate to contact us at 727-327-1999 OR [email protected].
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

The IRS recently announced that nearly a million American taxpayers – approximately 940,000 – who have not yet filed tax returns for tax year 2020 may be due to get a refund. The IRS estimates typical refunds for these returns as over $900.

Filing Deadline

Taxpayers who have not yet filed a tax year 2020 return have until May 17, 2024 to file and potentially claim a refund. After that date, any refunds for unfiled 2020 returns revert to the Treasury Department.

In general, taxpayers have exactly three years to file a return and claim refunds. But due to the pandemic, the IRS extended the typical April 15 filing deadline to May 17 and thus the 3-year window runs to May 17.

Unclaimed Refunds

The unclaimed refunds include both full-time and part-time workers; some may have neglected to file a return because they did not meet the income threshold for being required to file. Tax year 2020 included the recovery rebate credits which are refundable even for taxpayers who had little or no income in that year.

The earned income credit based on family income and size is another refundable credit – worth as much as $6,600 in 2020.

Documents Needed

You may need to get past W-2 wage statements from employers and interest statements from banks. If you are unable to get these, you can order a “wage and income” transcript from the IRS which shows the income figures submitted to them from these sources.

Filing 2020 Tax Returns

The 2020 returns must be filed on paper and mailed to the IRS whether you use a self-submitting tax software or a professional tax preparer. A few exceptions to the May 17 deadline may apply, such as military service or physical/mental impairments that affect the taxpayer’s ability to manage their financial affairs.

Your CPA or professional tax preparer can help you determine if you would benefit from filing a 2020 tax return or are required to file one.


If you have questions about this featured topic or other accounting and tax related topics, please do not hesitate to contact us at 727-327-1999 OR [email protected].

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

You have until midnight on the April 15 Tax Day deadline to either electronically file a tax return or have a paper return postmarked by April 15. If you miss that deadline, your tax return will technically be late and possibly subject to penalties and interest.

However, you can electronically request an automatic, six-month tax extension by filing a Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. This moves your filing deadline to Oct. 15, 2024.

Unfortunately, the extension to file is not an extension to pay. The IRS requires you to pay an estimate of what you owe by the regular April deadline. As long as you pay an estimated amount that’s close to what you owe, you won’t be subject to fines or penalties if you file your return and pay any remaining tax liability by Oct. 15, 2024. For the IRS, that means your estimated payment needs to be at least 90% of your total tax liability.

Expecting a Refund

If you’re due a refund, there’s no IRS penalty for filing your return late, but filing more quickly means you will get your money back sooner. Remember, however, although you might not be hit with a penalty for filing late, you probably still need to file a return. The IRS has a strict definition of who has to file a tax return based on annual income, among other factors.

You have three years to file your 2023 tax return before the IRS turns your tax refund over to the Treasury and your money is gone forever. Your tax refund might be delayed by filing late, but you should still expect to receive your money in four to six weeks after filing.

Owing Money to the IRS

However, if you owe on your taxes, you don’t want to wait — penalties and interest can pile up quickly. There are two basic penalties that the IRS charges for filing taxes late when you owe money: a failure-to-file penalty and a failure-to-pay penalty. On top of that, you’ll also have to pay interest on the amount you owe.

• The failure-to-file penalty is generally 5% of the amount you owe for each month or part of a month that your return is late, with a maximum penalty of 25%. If your return is more than 60 days late, the minimum penalty is $435 or the balance of your taxes due, if less than that.

• The failure-to-pay penalty is usually calculated at 0.5% of any taxes owed that aren’t paid by the deadline. The IRS again charges the penalty for each month or part of a month that your payment is late, with a maximum 25% penalty total.

• Interest on late taxes fluctuates and is determined for individuals by adding 3% to the short-term federal interest rate. That rate is adjusted quarterly, and interest is compounded daily.

State Tax Return Deadlines

State income tax deadlines are typically the same as the federal tax deadline, but some exceptions exist. Check with your tax practitioner if you have questions about the deadlines for specific states.

Paying the IRS

If you can’t pay your tax bill in full, you can set up an installment payment plan with the IRS. If you can pay off your tax debt within 180 days, the IRS will let you apply for a short-term payment plan at no cost, although you’ll still accrue penalties and interest until your debt is paid off.

Check on Your Refund

Taxpayers expecting a refund can use the Where’s My Refund? tool on the IRS web site www.IR.GOV. (Remember that it is DOT GOV, not DOT COM.) To use the tool, taxpayers need to enter their Social Security number, filing status and exact refund amount expected.

Your CPA can help you with all of the above issues.

If you have questions about this featured topic or other accounting and tax related topics, please do not hesitate to contact us at 727-327-1999 OR [email protected].

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.