Carol McAtee's Blog

As a new tax year begins, your tax professional can help identify year-end opportunities to help reduce your tax bill and confirm you are in compliance with tax law. Some tax issues to take into consideration include:

Required Minimum Distributions (RMDs)

Generally, anyone age 73 or older must take an RMD from their traditional retirement account in tax year 2025 to avoid a 25% penalty on required amounts not withdrawn. Some taxpayers under age 73 who have inherited IRAs (including certain inherited Roth accounts) must also take an RMD in 2025.

Flexible Spending Accounts (FSAs)

FSAs are “use it or lose it” accounts, meaning you generally lose any funds unused by year-end or unclaimed by your plan’s deadline, usually December 31. If you have funds remaining in an FSA, you should check your employer plan’s deadlines for incurring expenses and submitting claims.

Roth Conversions

If your marginal tax bracket is lower than usual or you expect to be in a higher bracket in retirement, consider converting funds from a pretax retirement account to a Roth account. Contributions to Roth accounts are taxable in advance, so you do not have a tax liability when withdrawals are made.

The Roth conversion itself is a taxable event, meaning you pay the tax on the amount converted. Your tax professional can advise if this is right for you, based on your goals and preferences, current savings mix, time horizon and current and possible future tax rates.

Tax Loss Harvesting

Recognizing capital losses could allow you to offset capital gains recognized throughout the year, including long-term capital gain distributions from mutual funds. Any excess capital losses are next used to reduce ordinary income by up to $3,000. Any remaining excess losses are carried into future years to offset capital gains recognized in 2026 or later.

Health Savings Account (HSA) Contributions

Unused balances in HSAs carry over from year to year, with an FSA. Eligible contributions provide an income tax deduction. Earnings will generally grow tax free, and distributions will ultimately be tax-free if used for qualified medical expenses.

529 College Savings Plan Contributions

529 distributions used for qualified education expenses are federally tax-free. Contributions may also provide a state tax benefit. If the beneficiary ends up with an account balance, there are multiple options for the use of these funds. Your financial advisor can review them with you.

Qualified Charitable Distributions (QCDs)

Taxpayers age 70½ or older may be able to exclude up to $108,000 from their adjusted gross income (AGI) by donating to a qualified charity directly from their IRAs. QCDs also satisfy all or part of the annual IRA RMD, if applicable. This generally results in lower taxable income regardless of whether or not deductions are itemized.

Annual Gifts

In tax year 2025, you can make a $19,000 gift per person without using your federal estate and gift tax exemption. If you and your spouse are eligible to gift-split, together you can gift up to $38,000 per person per year. You can also make payments for tuition and medical expenses directly to providers on someone’s behalf without using the annual exclusion or lifetime exemption.

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As part of its efforts to track income from the “gig” economy that may not be reported by some taxpayers, the IRS has expanded the use of a reporting form for online income: Form 1099-K.

Form 1099-K Reporting Threshhold

Taxpayers who sold items online or received money for services through payment apps may receive a Form 1099-K. For the 2025 tax year, the payment apps are required to issue both the taxpayer and the IRS a Form 1099-K if the threshhold of $2,500 is met. For 2024, the threshhold was $5,000 and it is anticipated that it will decrease to $600 starting in 2026.

Income reported on Form 1099-K could include anything from profits on sales of used clothing to resale of concert tickets. The rule does not apply to personal payments like gifts or transfers of money to friends and family. For example, if you charge a dinner with friends and they reimburse you for their share of the meal via an app like Venmo, those funds do not apply toward the reporting requirement. However, the payment in these cases should be marked as personal/non-business within the payment apps, such as Venmo and Paypal, to ensure proper reporting.

Response to Receiving Form 1099-K

It is important to respond to a Form 1099-K if you receive one. If the charges are incorrect, for example, if used clothing is sold at a loss rather than a profit, then the discrepancy can be explained to the IRS on Schedule 1 of Form 1040.

In addition, several states have different and sometimes even lower threshholds on reporting online income via Form 1099-K. Taxpayers should check with the states in which they do business for these limits.

Even if a Form 1099-K is not issued, taxpayers should be aware that the IRS requires online income or any other kind of income to be reported if it is taxable. The absence of a form does not eliminate the reporting obligation.

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 info@accpas.com.
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.

Several clean energy tax incentives will expire in the next few months under the recently passed OBBBA Act.

Clean Vehicle Credit

Under the Inflation Reduction Act (IRA) of 2022, eligible taxpayers could claim up to $7,500 for new electric vehicles and fuel cell vehicles based on the sourcing of battery components and critical minerals, originally scheduled to expire after 2032. Under the recently passed OBBBA Act, that credit will terminate for purchases made after September 30, 2025 instead.

For vehicle purchases made until September 30, the credit applies to qualifying “clean vehicles,” including electric vehicles, hydrogen fuel cell cars and plug-in hybrids. The maximum credit for new vehicles is $7,500, based on meeting certain income limits, MSRP caps, and sourcing requirements for critical minerals and battery components. Qualified vehicles also must undergo final assembly in North America.

Similar but lower credits may apply to used qualifying clean vehicles

Clean Vehicle Business Credit

The OBBBA also eliminates a similar tax incentive available for use of clean vehicles by businesses. The Qualified Commercial Clean Vehicle Credit (Sec. 45W) had been scheduled to expire after 2032. As a result of the OBBBA, it will apply only to vehicles acquired on or before September 30, 2025. Depending on vehicle weight, the maximum credit is up to $7,500 or $40,000, with additional rules and limits.

If you plan to take advantage of one of these vehicle credits before expiration, check whether the vehicle you want to buy is qualified and that you would indeed be eligible to claim the credit.

Home Energy Tax Credits

Under the Energy Efficient Home Improvement Credit, eligible taxpayers currently can receive a 30% tax credit for certain expenses, including energy-efficient windows, doors, skylights, insulation materials, heat pumps and home energy audits.

The maximum credit you can claim each year is $1,200 for energy-efficient property costs and certain energy-efficient home improvements. Separate additional annual limits up to $2,000 apply to heat pumps, heat-pump water heaters, and biomass stoves/boilers.

The credit was to expire at the end of 2032. Under the OBBBA, the credit will expire for property placed in service after December 31, 2025.

The Residential Clean Energy Credit for residential rooftop solar was also terminated after 2025 by OBBBA. The credit remains for qualifying installations through 2025.

If you have questions regarding any of these clean energy credits or other accounting and tax related topics, please don’t hesitate to contact our office at 727-327-1999 OR info@accpas.com.

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.

1040 Individual Tax Returns

For individual taxpayers who requested an extension to file their 1040 tax returns after the April 15, 2025, due date, the extended deadline is Wednesday, Oct. 15. For parts of the State of Florida affected by the 2024 hurricanes and tax preparers in those areas, the original due date was May 1, 2025.

Individual taxpayers who filed IRS Form 4868 to request an automatic six-month extension on their tax return were granted an extension that gave them extra time to file; however, they were still required to pay the estimated tax due by April 15 to prevent interest and penalties from accruing.

Completing the tax return filing by the October 15 deadline can help reduce additional late filing penalties.

Business Tax Returns

The deadline for filing tax returns for business who received deadline extensions varies depending on the business structure. For S-corporations and partnerships, that deadline is September 15, 2025. For C-corporations, the deadline is October 15.

Businesses that filed for additional time to file their returns, used Form 7004 to request the six-month extensions. As in the case of the individual 1040 tax returns, businesses were required to pay estimated taxes due to prevent interest and penalties from accruing.


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 info@accpas.com.
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Home-based businesses are more popular than ever before. The business structure you choose affects many issues, including exposure to liability and how your business income is taxed. It can also affect your financing and your ability to grow the business.

Common business entities include Sole Proprietorships, Limited Liability Companies (LLCs), S Corporations and C Corporations.

Sole Proprietor

Your home business income and expenses for a business you operate alone can be reported on your personal tax return on Schedule C (Profit or Loss from Business). To qualify as a business, your primary purpose must be for income or profit, rather than a hobby activity, being involved in the business with continuity and regularity.

Filing Schedule C allows you to deduct business-related expenses, such as the cost of a home office or mileage driven for business purposes. Any profit is generally treated as self-employment income and subject to self-employment tax.

While you can deduct business losses, the IRS applies the hobby loss rules, which typically limit loss deductions to three out of five years unless you can demonstrate a profit motive.

As a sole proprietor, there is no legal distinction between you and your business. You are personally liable for business debts or lawsuits, and your personal assets may be at risk.

Limited Liability Company (LLC)

Forming an LLC can offer limited liability protection, meaning your personal assets are generally protected from business debts and legal claims.

An LLC allows you to open a business bank account and may improve your chances of obtaining business financing or credit. If you are the sole owner, the IRS treats your LLC as a disregarded entity, allowing you to continue reporting business income on Schedule C.

In Florida, you must register your LLC with the Department of State, Division of Corporations. There is an initial filing fee and a recurring fee for filing annual reports, which are required to maintain your LLC’s active status.

S Corporation (“S Corp”)

To elect S Corporation status, your business must meet certain IRS requirements, and you must file Form 2553. An S Corp files a separate corporate return (Form 1120-S), in addition to your personal return.

Like an LLC, an S Corp provides limited liability protection. Income passes through to shareholders and is reported on their individual tax returns, helping to avoid double taxation. Reasonable salaries paid to shareholders are subject to payroll taxes, but distributions are not, offering potential tax savings.

S Corps may also qualify for the Qualified Business Income Deduction (QBID), which allows eligible owners to deduct up to 20% of qualified business income.

C Corporation (C Corp”)

C Corporations are taxed as separate legal entities. This means the business pays corporate income tax, and shareholders pay personal income tax on any dividends received—commonly referred to as double taxation.

There are no ownership restrictions for C Corps, and they can issue multiple classes of stock to an unlimited number of shareholders, making them suitable for businesses seeking outside investors or venture capital.

C Corps can deduct charitable contributions (up to 10% of taxable income) and may offer tax-deductible benefits to employees, such as health insurance and retirement plans.

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 info@accpas.com.
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.

While tax laws are complicated, the most common tax return errors are simple, including misspellings and missing information. Mistakes can delay refunds or prompt a letter of inquiry from the IRS.

Have Complete Paperwork

Taxpayers should be sure to collect all key documents, such as Forms W-2 or 1099 for income received, as well as any supporting paperwork for tax deductions or credits like education credits or mortgage interest payments. Consulting the previous year’s tax return will help identify documents that are likely to be needed in the current year as well.

Electronic Filing

Electronic filing minimizes mathematical errors. The tax software does the math, flags common errors and prompts taxpayers for missing information. It can also help taxpayers by identifying potential tax credits or deductions for which they qualify.

Direct Deposit

Direct deposit to a bank account is the fastest and safest way to receive a refund. Be sure your bank’s routing number and your account number are correct to avoid delays or misdirected refunds.

Filing Status

Your filing status can change after a major life event such as getting married or moving away from your parents’ home. Generally, filing status is based on your marital status on the last day of the year. The filing options are:
• Single – If you’re unmarried, divorced or legally separated.
• Married filing jointly – If you’re married or if your spouse passed away during the year.
• Married filing separately – If you’re married and don’t want to file jointly or find that filing separately lowers your tax liability. Most couples save money by filing jointly.
• Head of household – If you’re single and you paid more than half of your living expenses for yourself and a qualifying dependent.
• Qualifying surviving spouse – If your spouse died during the past 2 years and you have a dependent child.

Names, Birthdates and Social Security Numbers

Taxpayers should confirm that their names, dates of birth and Social Security numbers (SSN) are listed correctly, as well as those of any dependents. The SSN and individual’s name should be entered precisely as indicated on the Social Security card. In cases where a dependent or spouse lacks an SSN and is ineligible to obtain one, an individual tax identification number (ITIN) provided by the IRS should be listed instead of an SSN.

Digital Assets Question

Tax reporting Forms 1040, 1040-SR, 1040-NR, 1041, 1065, 1120 and 1120S all contain this question below about digital assets, requiring a “yes” or “no” answer:
“At any time during the tax year, did you: (a) receive (as a reward, award or payment for property or services); or (b) sell, exchange, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?”
The question must be answered by all taxpayers, not just by those who engaged in these transactions involving digital assets.

Sign and Date the Return

Taxpayers are required to sign and date tax returns submitted on paper. When submitting a joint return, both spouses must sign and date.
If a CPA or other tax preparer is filing your return electronically, they will require you to sign a Form 8879 before filing. If taxpayers are preparing their own tax returns and filing electronically, they can sign and authenticate their electronic tax return by inputting their adjusted gross income (AGI) from the prior year.

Address

Be sure your mailing address is listed correctly, especially if you submit a paper tax return or ask for your tax refund to be mailed to you.

Keep Copies

Copies kept either on paper or digitally can be helpful in preparing future tax returns or filing an amended return. Typically, taxpayers should retain records supporting income, deductions or credits claimed on their tax returns until the period of limitations for that specific tax return expires.

Extensions

Taxpayers requiring more time to file their taxes can request a six-month extension until October 15, enabling them to avoiding late filing penalties. While the extension provides extra time for final filing, tax payments are still due on April 15 for most taxpayers. Taxpayers seeking an extension can avoid or reduce penalties by making full or partial payment of their estimated income tax by April 15.

Tax Preparers

Using a reputable tax preparer, including a certified public accountant, enrolled agent or other knowledgeable tax professional, can also help avoid errors as well as help taxpayers claim valuable credits and deductions.

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 info@accpas.com.
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A digital asset is a digital representation of value that is recorded on a cryptographically secured, distributed ledger or any similar technology. Common digital assets include virtual currency and cryptocurrency, stablecoins and non-fungible tokens (NFTs)
As digital assets grow in popularity, the IRS is taking significant steps to ensure that these types of transactions are properly tracked and reported for tax purposes. These new regulations are designed to align digital asset reporting with the existing standards applied to traditional financial services. By requiring detailed reporting of digital asset transactions, these regulations aim to close tax gaps and provide greater visibility into taxable activities, reducing the risk of non-compliance.

Broker Reporting

Starting in 2024, people engaged in “trade or business” in the United States will need to collect information about purchases over $10,000 using digital assets and to report these transactions to the U.S. Treasury, similarly to how they currently must report cash transactions over $10,000.
The regulations require brokers who deal with digital assets to file Form 1099-DA (Digital Asset Proceeds from Broker Transactions) and furnish payee statements reporting gross proceeds from sales of digital assets.
Brokers will be required to report gross proceeds from digital asset sales starting in 2026 for transactions occurring in 2025; and report tax basis information for certain digital asset sales made in 2026, beginning in 2027.

Taxpayer Reporting

For several years, taxpayers filing tax returns have been required check a box indicating whether they received digital assets as a reward, award or payment for property or services or disposed of any digital asset that was held as a capital asset through a sale, exchange or transfer. This is required regardless of the amount or whether the taxpayer receives a 1099-DA, payee statement or information return.
The Infrastructure Investment and Jobs Act of 2021 revised the rules that require taxpayers that are engaged in a trade or business to report receiving cash of more than $10,000 by considering digital assets to be cash.

Tax Returns

Capital gains or losses of digital assets are reported on Schedule D (Form 1040), Capital Gains and Losses.

If individuals received any digital assets as compensation for services or disposed of any digital assets they held for sale to customers in a trade or business, they must report the income as they would report other income of the same type, such as W-2 wages
Similarly, if they worked as an independent contractor and were paid with digital assets, they must report that income on Schedule C. Anyone who sold, exchanged or transferred digital assets to customers in connection with a trade or business must also report these transactions.

The rules for tracking and reporting digital assets and transactions are complicated. Your accountant or tax professional is your best source of guidance to assure you are in compliance with them.

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 info@accpas.com.
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.

While the deadline for filing your 2024 tax return is a couple of months away, getting your tax records organized now can help you avoid errors that could slow your refund or overlook possible deductions or credits.

Your tax return from the previous year is a great starting point. By looking at your previous return, you can quickly see what tax information you probably need now.

Documents Needed

Tax records that taxpayers often need to file their tax returns include:
• Forms W-2 from your employer(s)
• Forms 1099 from banks, issuing agencies and other payers including unemployment compensation, dividends, pension, annuity or retirement plan distributions
• Form 1099-MISC or other income statement if you worked as an independent contractor
• Form 1099-K for taxpayers who received more than $5,000 in payments for goods and services through an online marketplace or payment app
• Form 1099-INT if you were paid interest
• Records of digital asset transactions
• If you receive health insurance from the Health Insurance Marketplace, you will need to submit Form 1095-A to reconcile advance payments or Premium Tax Credits
• IRS or other agency letters
• An Identity Protection PIN, if the IRS has provided you with one.

Most income is taxable, so you will want to gather records from these other income sources below as well:
• Unemployment income
• Alimony
• Investment income
• Rental property income and expenses.
• Social Security benefits
• Individual Retirement Account distribution
• Miscellaneous income (jury duty, scholarships, gambling winnings)

Address/Name Change

If your address has changed, you should notify the IRS as soon as possible. Similarly, notify the Social Security Administration of a legal name change.

Adjustments and Expenses

You should also gather documents regarding any income adjustments that may reduce your taxable income and thus your tax payment:
• Student loan interest
• Moving expenses in certain circumstance
• Child and Dependent Care Tax Credit
• Mortgage points

Most taxpayers benefit more from taking the Standard Deduction than by itemizing expenses on Schedule A. For tax year 2024, the Standard Deduction is $14,600 for single filers and $29,200 for married taxpayers filing jointly.

You should review your records if you have substantial expenses on any of the following if you wish to consider itemizing:
• Mortgage interest paid
• State and local taxes paid
• Charitable donations
• Medical expenses paid for healthcare, insurance, and to doctors, dentists, and hospitals
• Amounts of miles driven for charitable or medical purposes

Life Changes

If you had significant changes in your life in 2024 such as marriage, divorce, starting your own business, purchasing or selling a home or becoming a parent, your taxes may be more complicated. A certified public accountant (CPA) or other tax professional will be essential in preparing and file your tax return. Again, that process should start sooner rather than later.

Direct Deposit of Tax Refund

The fastest way for you to get your tax refund is by choosing direct deposit. Be sure your tax return indicates this option and includes your bank routing and account number.

Required Minimum Distribution

If you have a 401(k) or IRA and turned 73 in 2024, you may need to make withdrawals and pay income tax on them. The amount of your required minimum distribution (RMD) is based on your age and the year-end values of your retirement accounts, and must be taken by April 1, 2025.

Tax Scams

As tax season is underway, taxpayers may be subject to scams via phone calls, emails and texts from entities claiming to be the IRS. Typically, the IRS will mail you a notice before using any other method of communication to notify you concerning issues with your tax return. The IRS does not reach out via social media or text messaging.

The IRS will send you a notice if you have a balance due, if changes were made to your tax return, or if the agency needs additional information. It’s important to respond quickly to the IRS especially if it found an error on your return or claims you owe back taxes. Your certified public accountant or other tax professional can respond to the IRS on your behalf.

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 info@accpas.com.
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Children who receive investment income or other unearned income are subject to special tax rules that affect how parents must report the child’s investment income. This is to prevent parents from putting investments in their children’s names, hoping that any investment profits would be taxed at the child’s lower tax rate based on their lower income. Instead, the federal government taxes children’s unearned income by taxing some of it at the parent’s tax rate – known as the “Kiddie Tax.”

Some parents can include their child’s investment income on their tax return, while other children may have to file their own tax return. If a child cannot file his or her own tax return for any reason, such as age, the child’s parent or guardian is responsible for filing a return on the child’s behalf.

Unearned Income

Unearned income includes all forms of investment income, including interest, dividends and most rent and royalty income. It also includes capital gains—the profit you make when you sell something for more than what you paid for it. If your child’s 2024 unearned income totals more than $2,600, either your child must file their own investment income taxes or you must report your child’s income on your own return.

Reporting of Child’s Unearned Income

Reporting is done through Form 8615, Tax for Certain Children Who Have Unearned Income, and is used for calculating how much tax applies to the child’s income. Form 8615 is filed with the child’s federal tax return. For 2024, Form 8615 needs to be filed if the child has more than $2,600 in unearned income

Age Requirements

The child must meet one of the following age requirements:
• Under age 18 at the end of the tax year,
• Age 18 at the end of the tax year and didn’t have earned income that was more than half of the child’s support, or
• A full-time student at least age 19 and under age 24 at the end of the tax year and the child didn’t have earned income that was more than half of the child’s support.
In addition, at least one of the child’s parents must be alive at the end of the tax year.

Tax Rate

In general, in 2024 the first $1,300 worth of a child’s unearned income is tax-free. The next $1,300 is taxed at the child’s income tax rate for 2024. Any unearned income above $2,600, however, is taxed at the marginal tax rate of the parent(s), that is usually higher than the child’s rate.

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 info@accpas.com.
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The Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act is a bipartisan law that was signed into law at the end of 2022. It includes changes to many aspects of retirement plans to help Americans save more for retirement.

Required Minimum Distributions (RMDs)

SECURE 2.0 included a number of changes to the rules for required minimum distributions (RMDs) for IRAs and retirement plans. RMDs apply to IRAs (including SIMPLE IRAs and SEP IRAs) and to employer-sponsored retirement plans, including profit-sharing plans, 401(k) plans, 403(b) plans and 457(b) plans.

Changes in the rules for RMD under SECURE 2.0 include:
• The age at which account owners must start taking RMDs increased from age 72 to age 73 in 2023, and is scheduled to increase to 75 in 2033.
• The excise tax for failing to take the full RMD amount in a given year was reduced from 50% to 25% in 2023. The tax is reduced to 10% if the RMD is corrected within two years.
• The statute of limitations for assessing the penalty was delayed for certain people, including taxpayers with a terminal illness and survivors of domestic abuse.
• Roth IRA owners are no longer required to take withdrawals during their lifetime, but beneficiaries are subject to the RMD rules after the account owner’s death. Inherited IRA beneficiaries will be required to take RMD’s and must use the 10-year withdrawal schedule. However, the IRS has delayed the implementation of the RMD rules related to inherited IRA’s until 2025. Thus, no penalty will apply to a missed RMD for an inherited IRA in 2023 or 2024.

Other Retirement Plan Changes

The limits for catch-up contributions will increase in 2025. Starting in 2025, eligible participants between the ages of 60 and 63 can make “super-catch-up contributions” of up to 150% of the regular catch-up limit.

Employers can automatically enroll workers in 401(k) plans. Employers can match student loan payments with retirement contributions to 401(k), 403(b), governmental 457(b), and SIMPLE IRAs.

Employer Credit for Retirement Plans

Eligible employers may be able to claim a tax credit of up to $5,000, for three years, for the ordinary and necessary costs of starting a SEP, SIMPLE IRA or qualified plan like a 401(k) plan. Eligible startup costs consist of ordinary and necessary costs to set up and administer the plan, and to educate employees about the plan.

Employers qualify to claim this credit if the following conditions are met:
• 100 or fewer employees received at least $5,000 in compensation from the employer for the preceding year.
• At least one plan participant was a non-highly compensated employee (NHCE) with compensation of not more than $155,000 in tax year 2024. This requirement is to ensure that a company’s retirement plan does not unfairly benefit high income earners.
• In the three tax years before the first year the employment is eligible for the credit, the employees were not substantially the same employees who received contributions or accrued benefits in another plan sponsored by the employer.

The amount of the credit depends on how many people are employed by the business:
• With 50 or fewer employees who received at least $5,000, the credit is 100% of eligible startup costs, up $250 multiplied by the number of NHCEs who are eligible to participate in the plan, up to a total of $5,000.
• For 51-100 employees who received at least $5,000, the credit is 50% of eligible startup costs, up to $250 multiplied by the number of NHCEs who are eligible to participate in the plan, up to a total of $5,000.

Qualified businesses may claim the credit using Form 8881, Credit for Small Employer Pension Plan Startup Costs.

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 info@accpas.com.
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