Scott + Company https://www.scottandco.com Wed, 21 Feb 2024 03:31:11 +0000 en-US hourly 1 https://wordpress.org/?v=6.4.3 Two Great Midlands Accounting Firms Come Together: J.W. Hunt and Company Joins Scott and Company https://www.scottandco.com/blog/two-great-midlands-accounting-firms-come-together-j-w-hunt-and-company-joins-scott-and-company/?utm_source=rss&utm_medium=rss&utm_campaign=two-great-midlands-accounting-firms-come-together-j-w-hunt-and-company-joins-scott-and-company Thu, 02 Nov 2023 14:18:22 +0000 https://www.scottandco.com/?p=16399 Scott and Company LLC is pleased to announce that J.W. Hunt and Company joined Scott and Company, LLC effective October 1, 2023.  Two great Columbia, South Carolina full-service certified public accounting firms, with a rich history in the Midlands, come together to increase their depth of expertise and better serve their clients. The firm will...

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Scott and Company LLC is pleased to announce that J.W. Hunt and Company joined Scott and Company, LLC effective October 1, 2023. 

Two great Columbia, South Carolina full-service certified public accounting firms, with a rich history in the Midlands, come together to increase their depth of expertise and better serve their clients. The firm will continue to specialize in tax minimization, compliance, assurance, and advisory services for business owners, executives, and independent professionals. The firms will operate under Scott and Company, LLC.  

“J.W. Hunt and Company has a stellar reputation for providing tax, audit, and accounting services with responsiveness, professionalism, and quality. The J.W. Hunt team will bring additional depth to our firm—especially for our accounting and advisory services tailored to banks. Both firms have a long history in the community and together we are committed to helping our clients achieve their goals by being a trusted advisor and partner,” said John Price, Jr. CPA, Managing Member of Scott and Company LLC.

“We are thrilled to join Scott and Company—an extraordinary accounting firm with similar core values, wonderful people, and an excellent reputation. The additional resources and expertise will be a great value for our team members and clients. Scott & Company also has been an independent member of the BDO Alliance USA for many years (one of the industry’s largest associations of accounting and professional service firms). This will enable us to have the personalized touch of a local firm with national firm resources,” said Bill Pouncey CPA, Partner, J.W. Hunt and Company LLP. 

Learn more online at www.scottandco.com and join the conversation on LinkedIn:https://www.linkedin.com/company/scott-and-company-llc

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Major Tax Sunset on the Horizon https://www.scottandco.com/uncategorized/major-tax-sunset-on-the-horizon/?utm_source=rss&utm_medium=rss&utm_campaign=major-tax-sunset-on-the-horizon Wed, 21 Feb 2024 03:29:21 +0000 https://www.scottandco.com/?p=16450 Article Highlights: Back in late 2017, Congress passed the Tax Cuts & Jobs Act of 2017 (TCJA) which made enormous changes to income tax laws as outlined below. However, most of the provisions of TCJA were only temporary changes that will expire after 2025. During the Covid pandemic, Congress made other tax law changes that will also...

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Article Highlights:

  • Estate and Gift Tax  
  • Personal Exemptions
  • Standard Deductions
  • Home Mortgage Interest Deduction
  • Limitation on Tax Deductions (SALT)
  • Suspension of Tier 2 Miscellaneous Itemized Deductions
  • Suspension of the Limitation on Itemized Deductions
  • Individual Tax Rates
  • Child Tax Credit
  • Special Rule for Certain Discharges of Student Loans
  • Employer Payments of Student Loans
  • Moving Expenses
  • Bicycle Commuting
  • Discharge of Indebtedness on Principal Residence
  • Premium Assistance Credit
  • Casualty Losses
  • Achieving a Better Life Experience (ABLE) Accounts
  • Paid Family and Medical Leave Credit
  • New Markets Credit
  • Work Opportunity Credit
  • Bonus Depreciation
  • Employer De Minimis Meals and Related Eating Facilities

Back in late 2017, Congress passed the Tax Cuts & Jobs Act of 2017 (TCJA) which made enormous changes to income tax laws as outlined below. However, most of the provisions of TCJA were only temporary changes that will expire after 2025. During the Covid pandemic, Congress made other tax law changes that will also soon expire. So far Congress has not addressed these expiring tax provisions. Will they extend them, let them just expire and return to old law, or address them individually with new legislation? With the potential for significant tax changes on the horizon, taxpayers should begin thinking more urgently about their estate and income tax planning.

What Congress might do is up in the air, especially with 2024 being an election year. It is expected these expiring issues will not be addressed until after the elections. However, to give taxpayers a heads up to the TCJA and other legislation provisions expiring after 2025 the following list has been compiled of the more significant expiring provisions compared to pre-TCJA tax law. 

Estate and Gift Tax – Probably the most significant of expiring provisions is the exemption from estate and gift tax, which was about doubled under TCJA and is $13.61 million for 2024. Under pre-TCJA law, the exemption would have been approximately $5.49 million adjusted for inflation in 2024. How Congress deals with the exemption amount will mean significant estate planning issues for the more well-to-do. 

Personal Exemptions – Prior to TCJA, taxpayers were allowed an exemption deduction for everyone included in the family. The exemption amount adjusted for inflation is $5,050 for 2024. As an example, if a married couple filing jointly had 2 children dependents and the exemption deduction was allowed for 2024, they would have an income deduction of $20,200 (4 x $5,050)However, TCJA suspended the exemption deduction through 2025.        

Standard Deduction – Under TCJA the deduction for taxpayers not itemizing their deductions, termed the standard deduction, was approximately doubled from the pre-TCJA amounts. As an example, the 2024 standard deduction for a married couple filing jointly is $29,200. Under pre-TCJA law it would have been approximately $14,950 adjusted for inflation. The higher standard deduction under TCJA has allowed more taxpayers to skip having to itemize their deductions.

Home Mortgage Interest Deduction – TCJA limited the itemized deduction for home mortgage interest on a taxpayer’s principal and second homes to the interest on a combined acquisition debt of $750,000 ($375,000 for married individuals filing separately) and eliminated the deduction for interest on $100,000 of equity debt.  Since that time, homes have soared in value, and correspondingly the amount of mortgage loans, and interest rates have increased significantly. Pre-TCJA law allowed an interest deduction on up to $1 million of home acquisition debt and $100,000 of equity debt. The real estate market will feel the effects of how the deduction for home mortgage interest is treated after 2025.   

Limitation on Tax Deductions (SALT) – SALT is the acronym for state and local taxes. Pre-TCJA taxpayers who itemized their deductions were allowed an unlimited deduction on their federal return for property taxes and state and local income tax. TCJA imposed a $10,000 limit on that deduction, which generally impacted higher-income taxpayers and those who reside in states with high state income taxes such as CA, NJ, and NY. Many states developed workarounds. 

Suspension of Tier 2 Miscellaneous Itemized Deductions – Tier 2 miscellaneous itemized deductions are those that are deductible to the extent they exceed 2% of a taxpayer’s income (AGI). TCJA prohibited these expenses from being deducted. They include legal expenses, which, when not deductible, can be a substantial hardship for someone who wins a taxable lawsuit and then must pay taxes on the entire award or settlement without being able to deduct the amount paid for legal services, which in many cases are 40% of the award or settlement. Tier 2 miscellaneous deductions also include employee business expenses, and not being able to deduct these costs can also be a hardship for employees who must supply their tools, uniforms, and supplies or have unreimbursed work-required vehicle or other transportation expenses.  Also included are investment fees, job-search expenses, home office for employees, and other work-related expenses.

Suspension of the Limitation on Itemized Deductions – Pre-TCJA itemized deductions were subject to a phaseout that generally affected higher-income taxpayers. That provision limited itemized deductions to the lesser of 3% of income (AGI) or 80% of those otherwise allowable deductions for the year.  

Individual Tax Rates – TCJA not only reduced the top tax bracket for individuals from 39.6% to 37% (this generally only impacts higher-income taxpayers), but also reduced the tax rates at almost every level, and adjusted the bracket thresholds. 

Child Tax Credit – The child tax credit was $1,000 pre-TCJA. TCJA temporarily increased it to $2,000 through 2025. What Congress decides to do about the credit can have a substantial impact on families with children under the age of 17, especially lower-income families. 

Special Rule for Certain Discharges of Student Loans – Although not a part of the TCJA changes, current tax law enacted in 2021 excludes cancellation of debt income to any loan provided expressly for post-secondary educational expenses, regardless of whether provided through the educational institution or directly to the borrower, if such loan was made, insured, or guaranteed by the U.S., DC, state, eligible education institution, etc. This provision is available only through 2025.

Employer Payments of Student Loans – A temporary provision included in the 2020 Covid pandemic relief legislation permits employers to make tax-excludable payments up to $5,250 towards an employee’s student loan debt via their employer-provided educational assistance programs. This, too, expires after 2025.

Moving Expenses – TCJA suspended (except for military) both the deduction for a job-related move and the income exclusion for reimbursements.   

Bicycle Commuting – Although not a big tax issue, TCJA did suspend the exclusion of the per month $20 inflation-adjusted employee fringe benefit for bicycle commuting to work.   

Discharge of Indebtedness on Principal Residence – When TCJA was passed the housing market was in decline and homes were being foreclosed upon or voluntarily being surrendered to the lender. In many cases the lender was forced to sell the home for less than the mortgage and generally did not pursue the homeowner for the difference. This resulted in debt relief income for the homeowner, which for tax purposes is taxable income. TCJA included a provision that excluded up to $750,000 ($375,000 for married individuals filing separately) of debt relief income from the discharge of indebtedness on a principal residence. Because of the current strong housing market, losing this provision after 2025 should affect very few taxpayers. 

Premium Assistance Credit – Premium assistance credit is a credit for individuals who obtain their medical insurance from a government marketplace. Legislation during the COVID-19 epidemic provided certain premium assistance enhancements that have benefitted nearly all those who purchase their health insurance through the marketplace.  These enhancements extend through 2025. If Congress doesn’t extend the enhancements, it will mean higher out-of-pocket costs for insurance coverage for a significant number of people.

Casualty Losses – Although TCJA retained the itemized deduction for casualty and theft losses incurred in a federally declared disaster, it did suspend other casualty losses incurred during 2018 through 2025. 

Achieving a Better Life Experience (ABLE) Accounts – Federal law enacted in 2014 authorized states to establish qualified ABLE programs that provide the means for individuals and families to contribute and save for the purpose of supporting individuals, blind or severely disabled before turning age 26 (46 beginning for years after 2025), in maintaining their health, independence, and quality of life. However, several enhancements to the program will expire after 2025. They include the qualifying contributions for the saver’s credit, accepting rollovers from qualified tuition (Sec 529) plans, and an increase in contribution limits. 

Paid Family and Medical Leave Credit – Provides a credit to an employer for wages paid to employees while they are on paid family or medical leave. Originated by TCJA for 2018 and 2019, the credit was subsequently extended by Congress through 2025.

New Markets Credit – Not part of TCJA but nevertheless sunsetting after 2025, this provision provides a tax credit for making certain investments in qualified entities resulting in the creation of jobs and material improvement in the lives of residents of low-income communities. Subject to credit carryovers through 2030. This credit generally benefits big business. 

 Work Opportunity Credit – Not part of TCJA but nevertheless sunsetting after 2025, employers may qualify for a credit for hiring workers from one of several targeted groups. The credit is generally 40% of first-year wages, up to $6,000, which provides a maximum credit of $2,400 per employee.  

Bonus Depreciation – Bonus Depreciation allows businesses to expense in the year of purchase the cost of business assets (e.g., equipment) rather than spreading the cost over their useful life (depreciating the cost). Bonus depreciation was originally allowed on 100% of the cost of a qualified business asset but has entered a phase where a smaller percentage applies to purchases in succeeding years until bonus depreciation is totally phased out.  

Year20232024-2025202620272028
Percentage80%60%40%20%-0-

Employer De Minimis Meals and Related Eating Facilities – TCJA ended the employer deduction for employer de minimis meals and related eating facility, and meals for the convenience of the employer.  

Although it is unknown at this time how Congress will deal with these expiring tax issues, if you have any questions, please give this office a call.

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Let’s Talk Business South Carolina featuring John Price Jr., CPA – Managing Member Tax & Advisory. https://www.scottandco.com/news-events/lets-talk-business-south-carolina-featuring-john-price-jr-managing-member/?utm_source=rss&utm_medium=rss&utm_campaign=lets-talk-business-south-carolina-featuring-john-price-jr-managing-member Tue, 06 Feb 2024 22:22:26 +0000 https://www.scottandco.com/?p=16447 It’s tax season, so for business owners and other executives with financial responsibilities at their respective companies, that means ensuring you’re aware of the latest tax reform news. John Price, Scott and Company CPAs’ managing member and a leading member in the company’s tax and advisory services practice joins the show to ensure you’ve got all the...

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It’s tax season, so for business owners and other executives with financial responsibilities at their respective companies, that means ensuring you’re aware of the latest tax reform news. John Price, Scott and Company CPAs’ managing member and a leading member in the company’s tax and advisory services practice joins the show to ensure you’ve got all the scoop. So, let’s start tax season planning now. John will help you assess your year-end tax strategies by reviewing updated IRS guidance.

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Safeguarding Your IRS Payments: Defending Against Check Washing Fraud https://www.scottandco.com/blog/safeguarding-your-irs-payments-defending-against-check-washing-fraud/?utm_source=rss&utm_medium=rss&utm_campaign=safeguarding-your-irs-payments-defending-against-check-washing-fraud Thu, 11 Jan 2024 22:59:49 +0000 https://www.scottandco.com/?p=16437 In an era where financial scams are becoming increasingly sophisticated, protecting your IRS payments demands more awareness than it once did. Check washing fraud, a technique where thieves steal checks from the mail, erase crucial information, and manipulate the payee and amount, has seen a resurgence. Understanding exactly how this crime is committed is essential...

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In an era where financial scams are becoming increasingly sophisticated, protecting your IRS payments demands more awareness than it once did. Check washing fraud, a technique where thieves steal checks from the mail, erase crucial information, and manipulate the payee and amount, has seen a resurgence. Understanding exactly how this crime is committed is essential if you want to protect yourself and your loved ones. In this guide, we will also look at implementing preventive measures to secure your financial transactions.

What is Check Washing Fraud

Check washing is a multi-step process criminals use to steal money from unsuspecting victims. The scheme unfolds as follows:

1. Mail Theft: Criminals target checks in the mail, either from mailboxes or USPS collection boxes. This can involve individuals acting alone or as part of organized crime rings.

2. Chemical Alteration: Stolen checks undergo a chemical washing process that erases the payee information and amount, leaving the signature and paper intact. Alternatively, criminals may attempt to scratch off existing details.

3. Forgery: Once the check has been prepared, criminals then inscribe new information on the blank check, changing the name and amount at will.

4. Deposit and Withdrawal: The manipulated check is deposited into a bank account, either through traditional means or using mobile deposit services. Subsequently, the criminals swiftly withdraw the funds.

This process may involve different “actors” from the crime ring specializing in distinct roles, such as stealing, washing, or cashing checks, contributing to the scheme’s complexity.

Mitigating Risks: Protective Measures

To shield yourself from becoming a victim of check washing fraud, consider implementing the following safeguards:

1. Embrace Electronic Transactions: Shift towards electronic bill pay, transfers, and peer-to-peer payment apps, minimizing reliance on physical checks.

2. Opt for Secure Writing Practices: Use black gel pens, known for ink that is challenging to wash off. Brands like Uni-Ball pens with Super Ink claim added protection against fraud.

3. Mail Safely: If mailing checks is unavoidable, drop them off at the post office to minimize theft risks. Avoid using USPS collection boxes, especially in less-traveled areas.

4. Mailbox Vigilance: Regularly retrieve mail from your mailbox, and sign up for Informed Delivery from USPS to monitor expected mail.

5. Travel Considerations: When traveling, request a USPS mail hold to safeguard your mail from potential theft during your absence.

6. Financial Oversight: Frequently review your checking account for unusual or unexpected withdrawals, promptly identifying any signs of unauthorized activity. If you see a suspicious transaction, contact your bank or credit union immediately for assistance.

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Tax Savings Tips https://www.scottandco.com/blog/tax-savings-tips/?utm_source=rss&utm_medium=rss&utm_campaign=tax-savings-tips Wed, 13 Dec 2023 02:58:42 +0000 https://www.scottandco.com/?p=16431 by: Bill West, CPA – Member, Tax and Advisory Services People often ask me what they should do to save on taxes. My response is it depends on what you are doing and how you make your income. Today, I am going to review a few tax saving opportunities that, if you are in the...

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by: Bill West, CPA – Member, Tax and Advisory Services

People often ask me what they should do to save on taxes. My response is it depends on what you are doing and how you make your income. Today, I am going to review a few tax saving opportunities that, if you are in the appropriate category, may prove beneficial.

For taxpayers who own an interest in a flow thru activity conducting a profitable active trade or business, avail yourself of the SC Active Tax or Business annual election of SC Code 12—6-545(G). This allows your flow thru entity (Partnership or S Corporation) to pay the SC income tax on the shareholder/partner’s behalf at the entity level thereby deducting state taxes for federal income tax purposes. If the entity does not make the election, then your SC income tax on this income is subject to the $10,000 individual deduction limit imposed by the federal SALT cap as an itemized deduction and will be reduced or eliminated. This is entirely different from federal section 199A and the Qualified Business Income Deduction (QBID) and is not subject to the specified trade or business rules (SSTB).

Retired and taking IRA distributions but still making a large amount of charitable donations – Rather than taking money from your IRA and writing a check to your church or charity, direct your IRA custodian (typically your broker) to make a Qualified Charitable Distribution (QCD) directly to your charity. The QCD amount can then be excluded from gross income on the face of your return, thereby lowering your adjusted gross and taxable income, potentially reducing the taxable portion of your social security, lowering your medical deduction threshold if you itemize, and generally reducing your taxes. You can no longer claim the QCD charitable deduction on schedule A, but you are not picking up the income. This works well for taxpayers at the threshold of being able to itemize on Schedule A.

Have a kid in college or Private School – You can utilize the SC529 plan as a conduit to pay the tuition (limited to $10,000 per year for secondary school tuition). Contributions to a SC529 plan generate a deduction on Page 2 of the individual SC income tax return automatically saving you 6.5% (or current SC tax rate). First, you will need to make the contribution to the SC529 plan which creates the SC tax deduction, then use the SC529 plan to pay the tuition, even in the same week.

Finally, if you purchased an ATV or UTV and paid more than $500 in SC sales tax, you may be due a refund. The court ruled that ATV and UTV are subject to the $500 tax cap, thanks to the Ecton Law Firm winning a SC Court of Appeals case (see Draft Ruling #23-xx on the SCDOR law and policy webpage for all the latest). You will need to pursue the refund with the selling retailer.

As with all things TAX, the devil is in the details, so consult with your tax advisor or CPA and have them run the numbers.

To learn more about tax savings strategies for you or your business, contact Bill West at bwest@scottandco.com or (803) 256-6021.

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Year-End Tax Planning Opportunities Are Here https://www.scottandco.com/blog/year-end-tax-planning-opportunities-are-here/?utm_source=rss&utm_medium=rss&utm_campaign=year-end-tax-planning-opportunities-are-here Wed, 13 Dec 2023 02:30:47 +0000 https://www.scottandco.com/?p=16428 Article Highlights: Blog: Year-end is rapidly approaching, as are the holidays. So, before you become distracted with the seasonal celebrations, it may be in your best interest to consider year-end tax moves that can benefit you for both 2022 2023 and 2023 2024. Here are last-minute tax issues you might consider: INDIVIDUAL PLANNING OPPORTUNITIES Not Needing...

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Article Highlights:

  • Not Needing to File a 2023 Return?
  • Are Your Children Attending College? 
  • Did You Sell Your Home This Year?
  • Do You Have an Employer Health Flexible Spending Account?
  • Did You Become Eligible to Make Health Savings Account (HSA) Contributions This Year?
  • Is Your Income Unusually Low This Year? 
  • Must You Take a Required Minimum Distribution (RMD)? 
  • Do You Have Stocks That Have Declined in Value? 
  • Do You Have Stocks That Have Appreciated in Value and Your Income Is Low This Year? 
  • Have You Considered Prepaying State Income and Property Taxes?
  • Are You Planning Your Charitable Deductions?
  • Do You Have Outstanding Medical or Dental Bills? 
  • Have You Forgotten the Annual Gift Tax Exclusion?
  • Do You Think You May Have Under-Withheld Taxes This Year?
  • Did You Suffer a Disaster Loss This Year?
  • Divorced or Separated This Year? 
  • Do You Qualify for Energy or Environmental Tax Credits?
    • Credit for Energy Efficient Home Modifications
    • Solar Credit 
    • Clean Vehicle Credit
    • Previously Owned Clean Vehicle Credit
  • Are You a Working Shareholder in an S Corporation?
  • Are You Planning Business Purchases Soon?
  • Are You Self-Employed?
  • Do You Plan to Pay Your Employees a Bonus?
  • Business Awareness Issues
    • 2024 E-File Mandate
    • Corporate Transparency Act    

Blog: Year-end is rapidly approaching, as are the holidays. So, before you become distracted with the seasonal celebrations, it may be in your best interest to consider year-end tax moves that can benefit you for both 2022 2023 and 2023 2024. Here are last-minute tax issues you might consider:

INDIVIDUAL PLANNING OPPORTUNITIES

Not Needing to File a 2023 Return? – If your income and tax situation is such that you do not need to file for 2023, don’t overlook the opportunity to bring in some additional income, to the extent it will be tax-free. For instance, if you have appreciated stock that you can sell without incurring any tax, consider selling it, or perhaps take a tax-free IRA distribution if you are 59½ or older or if younger and qualify for an exception to the “early withdrawal” penalty.

Also, just because you are not required to file a tax return does not mean you shouldn’t. By not filing you may miss out on some substantial refundable tax credits.

Are Your Children Attending College?  If you qualify for either the American Opportunity or Lifetime Learning education credits, check to see how much you will have paid in qualified tuition and related expenses in 2023. If it is not the maximum allowed for computing the credits, you can prepay 2024 tuition if it is for an academic period beginning in the first three months of 2024. That will allow you to increase the credit for 2023. This is especially effective for students just starting college who only have tuition expenses for part of the year. 

Did You Sell Your Home This Year? If so, and if you meet the ownership and occupancy tests, the gain from selling your main home will not be taxed, up to $250,000 ($500,000 if you file a joint return with your spouse who also meets the occupancy test). But if you don’t meet the requirements of both owning and using your home for 2 years in the 5 years counting back from the sale date, you may still qualify for a partial home sale gain exclusion. For example, you may qualify for a reduced exclusion if you sold your home to relocate this year because of a change in employment or due to health. We can determine the amounts of excluded income and taxable gain, and project how your taxes will be impacted. 

Do You Have an Employer Health Flexible Spending Account? If so, and if you contributed too little to cover expenses this year, you may wish to increase the amount you set aside for next year. The maximum contribution for 2023 is $3,050. The amount you haven’t used in 2023 that may be carried to 2024 is $610 and must be used in the first 2½ months of 2024.

Did You Become Eligible to Make Health Savings Account (HSA) Contributions This Year? If you become eligible to make health savings account (HSA) contributions late this year, you can make a full year’s worth of deductible HSA contributions even if you were not eligible to make HSA contributions for the entire year. This opportunity applies even if you first become eligible in December. In brief, if you qualify for an HSA, contributions to the account are deductible (within IRS-prescribed limits), earnings on the account are tax-deferred, and distributions are tax-free if made for qualifying medical expenses.

Is Your Income Unusually Low This Year? If your income is unusually low this year, you may wish to consider converting your traditional IRA into a Roth IRA. The lower income likely results in a lower tax rate, which provides you an opportunity to convert to a Roth IRA at a lower tax amount. Also, if you have stocks in your retirement account that have had a significant decline in value, it may be a good time to convert to a Roth.

Are You Required to Take a Required Minimum Distribution (RMD)? Once U.S. taxpayers reach the age of 73, they are required to take what is known as a “required minimum distribution” from their qualified retirement plan or IRA every year. If this is the first year that this rule applies to you and you haven’t withdrawn the required amount yet, there’s no need to panic – you don’t have to do so until sometime during the first quarter of next year. Of course, if you wait until 2024 to take your 2023 distribution, you’re going to end up having to take two distributions in one year – one for 2023 and one for 2024.

For those who have been required to take an RMD before 2023, you only have until December 31st to take the required distribution for 2023 if you want to avoid penalties.

Do You Have Stocks That Have Declined in Value? With the stock market’s ups and downs, you should review your stock portfolio and consider selling losers to offset capital gains that would otherwise be subject to the 15% or 20% long-term capital gains tax rate. Capital losses can also offset up to $3,000 ($1,500 in the case of a married taxpayer filing a separate return) of ordinary income if capital losses exceed capital gains by at least that amount. Recognizing capital losses to offset capital gains can also reduce the amount of income subject to the net investment income surtax. Be aware of the wash sale rules that don’t allow you to deduct a loss if you repurchase those loser stocks within 30 days before or after the sale date.

Do You Have Stocks That Have Appreciated in Value and Your Income Is Low This Year? There is a zero long-term capital gains rate for taxpayers whose taxable income is below the 15% capital gains tax threshold. This may allow you to sell some appreciated securities that aren’t in an IRA or retirement account that you have owned for more than a year and pay no or very little tax on the gain. The 2023 15% capital gains tax bracket starts at a taxable income of $89,251 for married joint filers, $59,751 for those filing as head of household, and $44,626 for all other filers.

Have You Considered Prepaying State Income and Property Taxes? You probably know that if you are not subject to the alternative minimum tax and you itemize your deductions, you are eligible to deduct both your property taxes and state income (or sales) tax up to a maximum of $10,000. But did you know that in some cases, and of course if you haven’t exceeded the cap, you can increase the amount that you deduct on your 2023 return by prepaying some of the taxes by December 31, 2023? You can ask your employer to boost the amount of your state withholding by a reasonable amount; or, if you are self-employed, pay your 4th-quarter state estimated tax installment in December (otherwise due in January) and increase your deduction. The same is true for your real estate taxes: if you pay your first 2024 installment in 2023, you can take it as part of your 2023 deduction. But be mindful of the so-called SALT limit – the maximum deductible amount of state and local taxes of all types is $10,000. So, don’t electively prepay state taxes if you are at or above the $10,000 cap. 

Are You Planning Your Charitable Deductions? Many people who itemize take advantage of the ability to take a deduction for their donations to their favorite charities or house of worship. Did you know that you can choose to pay all or part of your 2024 planned giving in 2023 in order to increase the amount you deduct in 2023? Though this may not be appealing to those who itemize every year, if you alternate between taking the standard deduction one year and itemizing the next, this can give you a big boost.

Charitable contributions are deductible in the year in which you make them. If you charge a donation to a credit card before the end of the year, it will count for 2023. This is true even if you don’t pay the credit card bill until 2024. In addition, a check will count for 2023 if you mail it in 2023. For last-minute mailings, it may be appropriate to obtain proof of mailing from the USPS. And don’t forget to get an acknowledgment letter or document from each qualified organization that clearly states the donated amount and whether the charity gave you goods or services (other than certain token items and membership benefits) as a result of the contribution.

Did You Know You Can Make Charitable Deductions from Your IRA Account? Those who are age 70½ or older are allowed to transfer funds (up to $100,000 annually) from their IRA to qualified charities without the transferred funds being taxable, provided the transfer is made directly by the IRA trustee to a qualified charitable organization. If you are required to make an IRA distribution (i.e., you are age 73 or older), you may have the distribution sent directly to a qualified charity, and this amount will count toward your RMD for the year.

Although you won’t get a tax deduction for the transferred amount, this qualified charitable distribution (QCD) will be excluded from your income, with the result that you may get the added benefit of cutting the amount of your Social Security benefits that are taxed. Also, since your adjusted gross income will be lower, tax credits and certain deductions that you claim with phase-outs or limitations based on AGI could also be favorably impacted. 

If you plan to make a QCD, be sure to let your IRA trustee or custodian know well in advance of December 31 so that they have time to complete the transfer to the charity. If you have contributed to your traditional IRA since turning 70½, the amount of the QCD that isn’t taxable may be limited, so it is a good idea to check with this office to see how your tax would be impacted.

Have Outstanding Medical or Dental Bills? Taxpayers who itemize their deductions are able to deduct qualified medical and dental expenses that exceed 7.5% of their adjusted gross income. If you have reached that threshold or are close, then it may make sense for you to pay off any of those types of bills that are still outstanding rather than paying them over time. If you are near or above the limit, it may also make sense to look at what your medical and dental expenses will likely be for the next year and move those that you can into 2023 to increase the deduction. These expenses could include dental work or eyeglasses. An additional important issue: if you are thinking of doing this by paying using a credit card and you’re not going to pay the card balance immediately, make sure that you’re not paying more in interest than you’re saving with the increased tax deduction.

Have You Forgotten the Annual Gift Tax Exclusion? Though gifts to individuals are not tax deductible, each year, you are allowed to make gifts to individuals up to an annual maximum amount without incurring any gift tax or gift tax return filing requirement. For the tax year 2023, you can give $17,000 (up from $16,000 in 2022) each to as many people as you want without having to pay a gift tax. If this is something that you want to do, make sure that you do so by the end of the year, as you are not able to carry the $17,000, or any unused part of it, over into 2024. Such gifts need not be in cash, and the recipient need not be a relative. If you are married, you and your spouse can each give the same person up to $17,000 (for a total of $34,000) and still avoid having to file a gift tax return or pay any gift tax.  Speaking of spouses, there’s no limit on the excluded amount a spouse can gift to their wife or husband.

Do You Think You May Have Under-Withheld Taxes This Year? If you think there’s a chance that the income taxes you’ve paid to date for 2023 are insufficient, it’s a good idea to increase your withholding in the time that’s left before year-end to make up for it. Underpaying taxes makes you vulnerable to an underpayment penalty that is assessed quarterly. The good news is that even if you have underpaid for any or all of the first three quarters of the year and will owe taxes when you file your 2023 return, you can catch up by boosting your year-end withholding, since federal withholding is deemed paid ratably throughout the year. Plus, increased withholding and possible payment of estimated taxes can also reduce the fourth quarter underpayment penalty.

Did You Suffer a Disaster Loss This Year? 2023 has had some significant disasters, including Hurricane Idalia and others, wildfires in the West and on Maui, and severe storms and flooding throughout the U.S. Any property losses incurred because of a federally declared disaster can be claimed on the current year’s tax return or, at the election of the taxpayer, on the prior year’s return (2022 for 2023 disasters), generally providing quicker access to a tax refund. However, care must be exercised to ensure a disaster loss is claimed on the return of the year that will provide the greater benefit. In addition, after insurance reimbursement is accounted for, the result may not be as expected and should be determined before making the decision of which year to claim a loss.

Divorced or Separated This Year? A divorce or separation can have a significant impact on a couple’s tax filings. Filing joint or separate returns, who claims the children, the tax rules related to whether to take the standard deduction or itemize, how income and tax prepayments are allocated, and more issues need to be considered. Best to figure that all out in advance.

Energy & Environmental Tax Credits There are currently several sizable tax credits available:

Credit For Energy Efficient Home Modifications – This tax credit for making energy saving improvements to taxpayers’ existing homes has been around since 2006The dollar limits and credit percentages have been modified several times over the years. In addition, the credit had a lifetime credit cap which was recently $500, and the credit rate had been reduced to 10%. Being available for 16 years with a $500 lifetime cap had almost rendered this credit impractical. However, the Inflation Reduction Act has breathed new life into the credit by increasing the credit rate to 30% and by replacing the lifetime credit cap with an annual cap of $1,200. That allows individuals to annually make up to $4,000 of creditable home energy improvements. There are annual limits for certain types of improvements; for example, there is a $600 annual credit limit for residential energy property expenditures, windows, and skylights, and $250 for exterior doors ($500 total for all exterior doors). A new feature is being able to claim a credit of up to $150 in addition to the $1,200 annual cap for an energy audit performed by a certified home energy auditor on your primary residence. 

This credit is non-refundable (meaning it can only offset the current tax liability) and there is no carryover.  

Solar Credit – There is a 30% nonrefundable federal tax credit for installing solar on your first and second homes (need not own the home). Unused credit can be carried forward to the subsequent year.  The credit begins to phase out in 2033.  Expenses of battery storage technology with a capacity of not less than 3 kilowatt hours count toward the credit. Battery and systems upgrades will qualify for credit even after the initial installation.  

Clean Vehicle Credit – The 200,000-unit limit per manufacturer no longer applies after 2022. But the maximum $7,500 credit depends partly on the vehicle being manufactured in North America and partially whether the critical minerals included in the battery were extracted or processed in the U.S. or a country with a free trade agreement or recycled in North America. Another qualification is that the manufacturer’s suggested retail price cannot exceed $80,000 for vans, SUVs, and pickups, or $55,000 for other vehicles. No credit is allowed if the buyer’s modified adjusted gross income (MAGI) for the credit year, or if less for the preceding tax year, exceeds $300,000 for married individuals filing joint; $225,000 for those filing head of household; and $150,000 for others.

Previously Owned Clean Vehicle Credit – Beginning in 2024, a credit is allowed up to the lesser of $4,000 or 30% of a used clean vehicle’s sale price. This credit is for lower income taxpayers and no credit is allowed if the taxpayer’s MAGI for the credit year, or if less for the preceding tax year, exceeds $150,000 for married individuals filing joint; $112,500 for those filing head of household; and $75,000 for others. The vehicle must be acquired from a dealer for a price of $25,000 or less and be the first transfer of the vehicle since this credit was enacted. 

For both the new and used clean vehicle credit, the dealer must report the required information to the buyer and the IRS, including the maximum credit allowed, the buyer’s name and tax ID number, and vehicle identification number.

BUSINESS PLANNING OPPORTUNITIES

Are You a Working Shareholder in an S Corporation? If so, you may not be aware of the IRS’s “reasonable compensation” requirements, which can influence your Section 199A (qualified business income) deduction and your payroll taxes. Reviewing the requirements as they apply to your circumstances may avoid future problems with the IRS.

Are You Planning Business Purchases Soon? If so, you can reduce taxable income if you make last-minute business purchases such as for office equipment, tools, machinery, and vehicles, and write them off using the 80% bonus depreciation or Sec. 179 expensing, provided you place the item(s) into business service by the end of 2023. (The bonus depreciation rate drops from 80% to 60% for business purchases put into service in 2024.) However, you must consider the impact that expensing the items will have on your taxable income and the Sec.199A 20% pass-through deduction. It may be appropriate to contact this office in advance of any last-minute business acquisition. 

You might also make sure you are taking advantage of the de minimis safe harbor rule that allows small businesses to expense rather than capitalize the purchase of tangible property up to $2,500.

Are You Self-Employed? If you are self-employed, you can establish a self-employed retirement plan (SEP) and contribute 25% of your business net income, up to a maximum of $66,000 for 2023

Planning on Paying Your Employees a Bonus? Consider paying your employees bonuses before year-end, rather than after the start of the new year. That way you benefit from the tax deduction a year sooner.

Business Awareness Issues – The following are new requirements that every business needs to be aware of and prepared to deal with:  

2024 E-File Mandate –Beginning in 2024 an organization (generally a business) filing, in aggregate, 10 or more information returns or statements (previously more than 250) in a calendar year will be required to file electronically. The regulations also require e-filing of certain returns and other documents not previously required to be e-filed.   

Corporate Transparency Act – The Act requires corporations, limited liability companies (including single member LLCs), and similar entities to report certain information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury. This information includes the beneficial owners’ full legal names, dates of birth, current residential or business street addresses, and unique identification numbers from acceptable identification documents.

  • A reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial beneficial ownership information report. FinCEN plans to have their secure online reporting process in place as of January 1, 2024.
  • A reporting company created or registered on or after January 1, 2024, will have 30 days to file its initial beneficial ownership information report. This 30-day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.

Every taxpayer’s situation is unique, and the suggestions offered here may not apply to you. The best way to ensure that you are putting yourself in a tax-advantaged position is to seek advice from an experienced, qualified tax professional. Stop stressing and contact this office for assistance.

The post Year-End Tax Planning Opportunities Are Here first appeared on Scott + Company.]]>
Employee Spotlight – Allison Davis https://www.scottandco.com/blog/employee-spotlight-allison-davis/?utm_source=rss&utm_medium=rss&utm_campaign=employee-spotlight-allison-davis Wed, 06 Dec 2023 20:31:36 +0000 https://www.scottandco.com/?p=16421 2. What year did you join Scott and Company? 3. Why did you choose Scott and Company? 4. Give summary of background work experience and tell about your current responsibilities at the firm, especially if you have a unique responsibility(s). 5. What do you enjoy most about living in Columbia? 6. Where is your favorite place to go and why?...

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  • Where did you go to college?
    • Graduated Newberry College in 2013

    2. What year did you join Scott and Company?

    • Joined Scott and Company in 2022

    3. Why did you choose Scott and Company?

    • The firm was voted ‘South Carolina Best Places to Work’ which piqued my interest. However, the great attitudes and sincerity of the tax members I met with ultimately led me to choose Scott and Company as my employer. Now that I have been with the firm for over a year, it is clear to me why they are consistently voted ‘Best Places to Work.’ I plan to retire from Scott and Company.

    4. Give summary of background work experience and tell about your current responsibilities at the firm, especially if you have a unique responsibility(s).

    • My initial vision of what I wanted to do in life was to become an attorney. I attended Charleston School of Law, but quickly realized this path was not for me. While ‘figuring out’ what it was that I was meant to become, I worked in fine dining. I enjoyed the work, but this was not the answer. I knew that I loved math, loved meeting and connecting with people, and loved solving puzzles for those who could benefit from what I know.  This was the beginning.  I decided to apply for accounting internships to see if accounting was a good fit for me.  It was.  I learned that accounting was much more than just math. There were tax laws, business operations, and many software programs to learn about. As a senior tax accountant at the firm, I get to do math, and meet and work with many people, preparing individual and business tax returns, and all the things I love doing. This was it; I can not see myself pursuing anything else. I love the everyday ‘puzzles’ and I can truly say, I love my job.

    5. What do you enjoy most about living in Columbia?

    • Living in the small town of Prosperity, I am about 45 minutes outside of Columbia. While I enjoy the benefits of a small town, I love traveling to the ‘big city.’ Considering myself a small town country girl, it is kind of a big deal for me to work in a multi-story building right in Columbia.

    6. Where is your favorite place to go and why?

    • I enjoy going different places and often. Experiencing a variety of cultures and landscape with my new little family is a dream come true. I especially enjoy other South Carolina small towns and what all they have to offer. 

       What book or movie do you recommend to others and why? 

    • The Accountant – #1 it has a great story line, #2 Ben Aflac, and #3 it makes my job look super cool

    7. What interesting fact would you most like your readers to know about you?

    • One summer I worked for a ranch and was asked to carry a sponsor flag in one of the rodeos. This was a dream come true for me!  I absolutely love horses and thought, “My nine-year-old self would be so proud!”

    Allison carrying the flag in the Georgia rodeo

    Everyone near and dear to our hearts. Family and friends at my daughter’s first birthday party. 

    The post Employee Spotlight – Allison Davis first appeared on Scott + Company.]]>
    COFFEE WITH… John Price, Member, at Scott & Company https://www.scottandco.com/news-events/coffee-with-john-price-member-at-scott-company/?utm_source=rss&utm_medium=rss&utm_campaign=coffee-with-john-price-member-at-scott-company Wed, 25 Oct 2023 13:39:00 +0000 https://www.scottandco.com/?p=16389 Check out this informative video with our very own John Price, Jr., CPA – Managing Member Tax & Advisory. John discusses a variety of tax related topics that are important for any business leader, executive, or independent professional to know and understand. 

    The post COFFEE WITH… John Price, Member, at Scott & Company first appeared on Scott + Company.]]>

    Check out this informative video with our very own John Price, Jr., CPA – Managing Member Tax & Advisory. John discusses a variety of tax related topics that are important for any business leader, executive, or independent professional to know and understand. 

    The post COFFEE WITH… John Price, Member, at Scott & Company first appeared on Scott + Company.]]>
    Business Growth: How to Plan for (and Make the Most of) This Critical Stage   https://www.scottandco.com/blog/business-growth-how-to-plan-for-and-make-the-most-of-this-critical-stage/?utm_source=rss&utm_medium=rss&utm_campaign=business-growth-how-to-plan-for-and-make-the-most-of-this-critical-stage Tue, 01 Aug 2023 20:51:27 +0000 https://www.scottandco.com/?p=16383 While it’s true that every business is different from the next – and every entrepreneur will go on his or her own unique journey – there are still a few constants that we know to be true. The start-up phase, for example, is when you write a formal business plan. You secure financing, you select...

    The post Business Growth: How to Plan for (and Make the Most of) This Critical Stage   first appeared on Scott + Company.]]>
    While it’s true that every business is different from the next – and every entrepreneur will go on his or her own unique journey – there are still a few constants that we know to be true.

    The start-up phase, for example, is when you write a formal business plan. You secure financing, you select your business structure, and you do all the other work required to get your enterprise off the ground. On the other end of the spectrum, we have the maturity phase, which is when you do what it takes to remain both competitive and sustainable for as long as possible.

    In between that, however, we have what is known as the growth phase – one that often catches a lot of new entrepreneurs in particular off-guard. Still, this is an exceptional opportunity to grow from the business you’re running into the one you hoped you’d be in charge of when you started, provided that you’re able to keep a few key things in mind.

    Maximizing Business Growth: Breaking Things Down

    As stated, the growth phase of any business is all about two things: expansion and innovation. The first is natural because as your company begins to grow larger, you need to adapt what you’re doing to accommodate for that and embrace it. You can’t necessarily get to that point without innovation, however. This is when you determine which of your current efforts are working, which ones aren’t, and make adjustments accordingly.

    From the financial side of the spectrum, one of the major things that you’ll want to account for during the growth phase has to do with taxes. During growth, things like federal, state, and local taxes are subject to laws that can often change frequently without warning. Keep track of (or at least, hiring a professional to do so) these changes can help you better understand what choices you need to make in terms of structuring, what types of incentives you can offer to your employees to help empower innovation and more.

    Along the same lines, there will also be certain considerations that you make regarding your accounting in general. During this stage of your business’ life, you’ll want to work hard to A) generate a consistent income, so that you can B) attract as many new customers as possible.

    For the best results, use this as an opportunity to re-evaluate your current systems, with IT being chief among them. What do you need to be able to do to generate consistent income that you can’t do right now? What did you once need but don’t any longer? These are critical questions to answer to help make sure that your business’ value continues to grow with its size.

    Slow and Steady Wins the Race

    During the growth phase of your business, you’ll also at least need to acknowledge that you are more subject to certain economic considerations than ever – some of which will be beyond your control. Because of that, you’ll need to keep a close eye on factors like cash flow and make sure that you understand how much you have available to be used as leverage. You’ll need to start making decisions with all key stakeholders in mind. That includes but is not limited to not only customers but also any other owners and also regulatory bodies in mind.

    Finally, understand that it is very likely that your personal finances will grow as your business does the same. That’s why, during this phase of your company, it’s equally important to focus your attention inward whenever possible.

    If you haven’t already started to do so, now would be an excellent time to talk to a professional about factors like estate planning. You’ll also want to have frank discussions about the amount of taxes that you’ll be exposed to. Even though retiring may be years or even decades away in your mind, it’s never too early to start thinking about who your assets will eventually pass to moving forward.

    In the end, know that every stage of your business’ life will be one that you must remain actively involved in for the best results. It’s just that the things you’re concerned about in the start-up phase will naturally change as you move into growth, maturity, and beyond. Regardless, you’ll always want to make decisions with an eye toward both short-term gains and long-term opportunities. The better you get at doing that, the more success you’ll be able to create for yourself in the future.

    If you’d like to find out more information about how to effectively plan for and make the most of the business growth stage of your company, or if you’d just like to discuss your own needs with an expert in a bit more detail, please feel free to contact us today.

    The post Business Growth: How to Plan for (and Make the Most of) This Critical Stage   first appeared on Scott + Company.]]>
    Eldercare Can Be a Medical Deduction https://www.scottandco.com/blog/eldercare-can-be-a-medical-deduction/?utm_source=rss&utm_medium=rss&utm_campaign=eldercare-can-be-a-medical-deduction Tue, 01 Aug 2023 20:36:08 +0000 https://www.scottandco.com/?p=16379 Article Highlights: Because people are living longer now than ever before, many individuals are serving as care providers for elderly loved ones (such as parents or spouses) who cannot live independently. Such individuals often have questions regarding the tax ramifications associated with the cost of such care. For these individuals, the cost of such care...

    The post Eldercare Can Be a Medical Deduction first appeared on Scott + Company.]]>

    Article Highlights:

    • Incapable of Self-Care
    • Assisted-Living Facilities
    • Meals and Lodging
    • Home Care
    • Nursing Services
    • Caregiver Agencies
    • Household Employees
    • Employee Retirement Plan

    Because people are living longer now than ever before, many individuals are serving as care providers for elderly loved ones (such as parents or spouses) who cannot live independently. Such individuals often have questions regarding the tax ramifications associated with the cost of such care. For these individuals, the cost of such care may be deductible as a medical expense. Of course, any eligible deduction would be claimed by the person receiving the care if he or she is the one who pays the expenses. If someone else is paying the costs, that person may qualify to claim the deduction as explained below for “Medical Dependent.”

    Incapable of Self-Care – A person is considered incapable of self-care if, as a result of a physical or mental defect, that person is incapable of fulfilling his or her own hygiene or nutritional needs or if that person requires full-time care to ensure his or her own safety or the safety of others.

    Assisted-Living Facilities – Generally, the entire cost of care at a nursing home, home for the aged, or assisted-living facility is deductible as a medical expense, provided that the person who lives at the facility is primarily there for medical care or is incapable of self-care. This includes the entire cost of meals and lodging at the facility. On the other hand, if the person is living at the facility primarily for personal reasons, then only the expenses that are directly related to medical care are deductible, and the cost of meals and lodging is not a deductible medical expense. 

    Home Care – A common alternative to nursing homes is in-home care, in which day helpers or live-in caregivers provide care within the home. The services that these caregivers provide must be allocated into (nondeductible) household chores and (deductible) nursing services. These nursing services need not actually be provided by a nurse; they simply must be the same services that a nurse would normally provide (e.g., administering medication, bathing, feeding, and dressing). If the caregivers also provide general housekeeping services, then the portion of their pay that is attributable to household chores is not deductible.

    The emotional and financial aspects of caring for a loved one can be overwhelming, and as a result, caregivers often overlook their burdensome tax and labor-law obligations. Sadly, these laws provide for no special relief from these tasks. 

    Is the Caregiver an Employee? – Because of the way that labor laws are written, it is important to determine if an in-home caregiver is an employee. The answer to this question can be very subjective. Caregivers’ services can be obtained in a number of ways:

    • Agency-provided caregivers are employees of the agency, which handles all the responsibilities of an employer. Thus, loved ones do not have any employment-tax or payroll-reporting responsibilities; however, such caregivers generally come at a substantially higher cost than others. 
    • Household workers are typically classified as employees and are subject to Social Security and Medicare taxes. The employer is responsible for withholding the employee’s share of these taxes and paying the employer’s share of payroll taxes. Fortunately for these employers, the special rules for household employees greatly simplify the payroll-withholding and income-reporting requirements. Any resulting federal payroll taxes are paid annually in conjunction with the employer’s individual 1040 tax return. Federal income-tax withholding is not required unless both the employer and the employee agree to do so. However, the employer is still required to issue a W-2 to the employee and to file that form with the federal government. The employer also must obtain federal and state employer ID numbers for reporting purposes. 

    Some states have special provisions for the annual reporting and payment of state payroll taxes; these may be like the federal requirements. Other states have no special provisions and the household employee must be treated the same as an employee of a business.

    Household employers may find it easier to engage a payroll service that is knowledgeable in household employees, often referred to as Nanny Payroll Services,  to handle the hassles of payroll and associated reporting paperwork. 

    The employer’s portion of all employment taxes (Social Security, Medicare, and both federal and state unemployment taxes) related to deductible medical expenses are also deductible as a medical expense.

    You may be thinking, “Wait a minute – the household employers I know pay in cash and do not pay payroll taxes or issue W-2s to their household employees.” This observation may be accurate, but such behavior is illegal, and it is not right to ignore the law. Think about what could happen if one of your household employees is injured on your property or if you dismiss such an employee under less-than-amicable circumstances. In such circumstances, the household employee will often be eager to report you to the state labor board or to file for unemployment compensation. 

    Note, however, that gardeners, pool cleaners, and repair people generally work on their own schedules, invest in their own equipment, have special skills, manage their own businesses, and bear the responsibility for any profit or loss. Such workers are not considered household employees. 

    Here are some additional issues to consider:

    Overtime – Under the Fair Labor Standards Act, domestic employees are nonexempt workers and are entitled to overtime pay for any work beyond 40 hours in a given week. However, live-in employees are an exception to this rule in most states. 

    Hourly Pay or Salary – It is illegal to treat nonexempt employees as if they are salaried.

    Separate Payrolls – Business owners may be tempted to include their household employees on their companies’ payrolls. However, any payments to household employees are personal expenses and thus are not allowable as business deductions. Thus, business owners must maintain separate payrolls for household employees; in other words, personal funds (not business funds) must be used to pay household workers.

    Eligibility to Work in the U.S. – It is illegal to knowingly hire or continue to employ an alien who is not legally eligible to work in the U.S. When a household employee is hired to work on a regular basis, the employer and employee each must complete Form I-9 (Employment Eligibility Verification). The employer must carefully examine the employee’s documents to establish his or her identity and employment eligibility.

    Employee Retirement Benefits – Although not a requirement for hiring household help, a recent tax law change permits employers of domestic employees (e.g., nannies and caregivers of adults) to provide retirement benefits for such employees under a Simplified Employee Pension plan effective in 2023 and later years.  

    Medical Dependent – Generally, to claim a deduction for medical expenses, the taxpayer must have incurred the expense for him- or herself, a spouse or a dependent. An individual (other than a qualifying child) will qualify as a dependent of the taxpayer if the individual is related to the taxpayer or lives with the taxpayer all year, has gross income of less than $4,700 (for 2023), doesn’t file a joint return, and receives more than half their total support for the year from the taxpayer. However, there is an exception for a “medical dependent” that allows the taxpayer to include the medical expenses they paid for an individual who would have been their dependent except that the individual received gross income of $4,700 or more or the individual filed a joint return for the year. 

    If you have questions related to eldercare or about how your state deals with related employment issues – or if you would like assistance in setting up a household payroll system – please contact this office. 

    The post Eldercare Can Be a Medical Deduction first appeared on Scott + Company.]]>