Tax Projection Season

Indiana Department of Revenue Income Tax Bulletin #98 covers the Indiana 529 plan. This tax bulletin has been changed many times over the last few years. Indiana 529 plans can be a good idea for Hoosiers with tax liability who want to save for college. Be warned though, if you received Indiana tax credits for contributions to an Indiana College Choice 529 plan, and then decide to roll amounts from the Indiana 529 plan to another qualified 529 plan, Indiana claws back the Indiana tax credits! This can result in a significant amount of tax being paid to Indiana just for rolling funds over from the Indiana 529 plan to another states 529 plan!

The rules for who is paid overtime have just been changed by The Department of Labor. This matters to you if you or someone you know is an employee. This matters to you if you own a business and pay payroll. There are specific rules regarding which employees are exempt from overtime pay. Employees are often exempt from the rules forcing the employer to pay overtime and time and a half if they are employed in a bona fide executive, administrative, or professional (EAP) capacity. 1/1/20 – 6/30/2024 the EAP employee could only be exempt from overtime pay if their annual salary was $35,568 or more per year. On 7/1/2024 this annual salary increases to $43,888 per year. On 1/1/2025 this annual salary increases to $58,656 per year. This is a very significant increase. Further these thresholds will be increased once every three years. What this means is roughly four million more workers will be required to be paid overtime pay when they work more than 40 hours per week at time and a half, unless their annual salaries are increased above the thresholds listed above!  If we handle your payroll and you wish to discuss this with us, please reach out to the partner overseeing your account! Mike Sylvester, CPA

April 16th , SBS will go back to normal hours: Monday - Friday 8:30am to 5:00pm.

Our turnaround time for tax returns is four weeks or less from when you drop everything off. Please gather all your information; then drop everything off all at once. Please do not drop anything off until you have everything. In all cases you must completely fill out the first two pages of the tax planner. There are four ways you can drop off: 1. You can drop off a package to our office during business hours. We are open Monday – Friday 8:30 AM – 6 PM and Saturdays 9 AM – 4 PM through April 13th. 2. We have a 24-hour drop box. 3. You can mail them to us. 4. You can send the partner who handles your taxes an email and they can send you a link to our secure portal. All three partners in our firm file extensions for our own income tax returns every year. There is nothing wrong with filing extensions and per IRS statistics a record number of people will file extensions this year. Filing an extension does not increase your chances of being audited and is honestly not a big deal. As is normal, any returns for which we do not have everything dropped off by 6 PM on 3/15/2024 will be extended and done after the April 15th deadline. The time to drop off your income tax returns, only if you have everything, is now. If you know you will need an extension, please send the partner who handles your account an email. Mike Sylvester, CPA

Tax season is in full swing! Please gather all of your important tax documents! After you are certain that you have everything, please send us everything via our secure web portal or drop it off to our office (We do have a 24 hour drop box you can use). Please remember, all clients must completely fill out the first two pages of our tax planner. There is still time to beat the rush! Please make sure you drop off complete copies of all brokerage statements. Please do not drop anything off until you have all brokerage statements. Those of you that have accounts with TD Ameritrade and E*TRADE please read the next part carefully. TD Ameritrade was purchased by Charles Schwab, and you will get one 1099 from each company for each account. E*TRADE was bought by Morgan Stanley, and you will get one 1099 from each company for each account. Mike Sylvester, CPA

Tax Season | February 1st - April 15th Monday through Friday: 8:30am to 6:00pm Saturday: 9:00am - 4:00pm Sunday: Closed

The Augusta Rule is one of the most talked about “Tax Secrets of the Rich!” I see from non-tax influencers on social media. Most of what these "influencers say is flat out wrong! It’s the Augusta Rule - which allows you to not claim rental income on a property you own if you rent it out for 14 days or less during the year. Apparently, what the wealthy do, is they will have their business rent their property under this rule, thus getting a rental expense on the business side, and not have to claim income on the personal side. Let’s be clear - this is a legitimate tax strategy when implemented correctly. This involves renting the property at a reasonable FMV, transferring the expenses in question, issuing a 1099-Misc for the rental payments made to the business owner, and reporting the income and Augusta Rule deduction appropriately on your Schedule E, which is part of your personal 1040 tax filing. A recent tax court case that deals directly with the August Rule was Sinopoli v. Commissioner . In this case, the taxpayers used the Augusta Rule to expense $290,000 worth of rental expenses over three years through having monthly shareholder meetings in their homes. The courts ruled against the taxpayers and disallowed the majority of the deduction for the following reasons: 1. The defendants couldn’t produce record of what business was discussed during these meetings 2. The FMV of the meeting spaces were much lower than the taxpayers claimed The IRS adjusted the rent down to $500 for each meeting where they could produce evidence of what business was discussed - bringing the actual deduction to $10,500 for the three tax years in question, down from $290,000. For the IRS - this case was a slam dunk. The rent charged was so egregious and the evidence the taxpayers had was so minimal, it makes me wonder why they even tried contesting it in the first place. If you have tax planning questions, please reach out to the partner handling your account! Mike Sylvester, CPA

In a surprise to no-one who works in tax - the IRS has ruled that cryptocurrency received for staking is taxable when received. Staking is when users pledge (I call it loaning) crypto they own, to help others (usually computers) verify transactions that are happening on the blockchain. Crypto Bros do this in order to earn rewards (interest and dividends) on the crypto they are staking (loaning). The IRS has now issued clear guidance and staking is taxable income. Cryptocurrency is something the Internal Revenue Service and the Securities and Exchange Commission are taking a hard look at. If you have cryptocurrency please talk to us about it so we can ensure your tax returns are correct. Mike Sylvester, CPA

A 1031 Exchange is an exchange of property you can do when trading one investment property for another, and allows you to defer any gain you would have had upon the sale of the first investment, and roll it forward into the new investment. But - the key here is, it has to be an INVESTMENT property - a primary residence or a vacation home are not eligible for a 1031 Exchange. If you try and do this - that gain is taxable. Additionally, there are strict timelines associated with it - the property with which the exchange is occurring has to be identified within 45 days of the sale of the first property, AND you have to close within 180 days of the sale of the first property. If you don’t - yep, now that gain is taxable. Last - you need to use a QUALIFIED intermediary - meaning the funds from closing on the first property that are going toward the second property, are not allowed to touch the taxpayer's hands. If they do? You guessed it - that’s now a taxable gain. A 1031 exchange can be a powerful tool to defer taxable gain, if you are considering this please contact the CPA in charge of your account well in advance. Mike Sylvester, CPA