Law Office of Nathaniel Landman

11/09/2023

IRS provides tax inflation adjustments for tax year 2024

WASHINGTON — The Internal Revenue Service today announced the annual inflation adjustments for more than 60 tax provisions for tax year 2024, including the tax rate schedules and other tax changes. Revenue Procedure 2023-34 provides detailed information about these annual adjustments.

New for 2024

Starting in calendar year 2023, the Inflation Reduction Act reinstates the Hazardous Substance Superfund financing rate for crude oil received at U.S. refineries, and petroleum products that entered into the United States for consumption, use or warehousing. The tax rate is the sum of the Hazardous Substance Superfund rate and the Oil Spill Liability Trust Fund financing rate. For calendar years beginning in 2024, the Hazardous Substance Superfund financing rate is adjusted for inflation. For calendar year 2024 crude oil or petroleum products entered after Dec. 31, 2016, will have a tax rate of $0.26 cents a barrel.

Highlights of changes in Revenue Procedure 2023-34

The tax year 2024 adjustments described below generally apply to income tax returns filed in 2025. The tax items for tax year 2024 of greatest interest to most taxpayers include the following dollar amounts:

The standard deduction for married couples filing jointly for tax year 2024 rises to $29,200, an increase of $1,500 from tax year 2023. For single taxpayers and married individuals filing separately, the standard deduction rises to $14,600 for 2024, an increase of $750 from 2023; and for heads of households, the standard deduction will be $21,900 for tax year 2024, an increase of $1,100 from the amount for tax year 2023.
Marginal rates: For tax year 2024, the top tax rate remains 37% for individual single taxpayers with incomes greater than $609,350 ($731,200 for married couples filing jointly). The other rates are:
35% for incomes over $243,725 ($487,450 for married couples filing jointly).
32% for incomes over $191,950 ($383,900 for married couples filing jointly).
24% for incomes over $100,525 ($201,050 for married couples filing jointly).
22% for incomes over $47,150 ($94,300 for married couples filing jointly).
12% for incomes over $11,600 ($23,200 for married couples filing jointly).
The lowest rate is 10% for incomes of single individuals with incomes of $11,600 or less ($23,200 for married couples filing jointly).
The Alternative Minimum Tax exemption amount for tax year 2024 is $85,700 and begins to phase out at $609,350 ($133,300 for married couples filing jointly for whom the exemption begins to phase out at $1,218,700). For comparison, the 2023 exemption amount was $81,300 and began to phase out at $578,150 ($126,500 for married couples filing jointly for whom the exemption began to phase out at $1,156,300).
The tax year 2024 maximum Earned Income Tax Credit amount is $7,830 for qualifying taxpayers who have three or more qualifying children, an increase of from $7,430 for tax year 2023. The revenue procedure contains a table providing maximum EITC amount for other categories, income thresholds and phase-outs.
For tax year 2024, the monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking increases to $315, an increase of $15 from the limit for 2023.
For the taxable years beginning in 2024, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements increases to $3,200. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $640, an increase of $30 from taxable years beginning in 2023.
For tax year 2024, participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,800, an increase of $150 from tax year 2023, but not more than $4,150, an increase of $200 from tax year 2023. For self-only coverage, the maximum out-of-pocket expense amount is $5,550, an increase of $250 from 2023. For tax year 2024, for family coverage, the annual deductible is not less than $5,550, an increase of $200 from tax year 2023; however, the deductible cannot be more than $8,350, an increase of $450 versus the limit for tax year 2023. For family coverage, the out-of-pocket expense limit is $10,200 for tax year 2024, an increase of $550 from tax year 2023.
For tax year 2024, the foreign earned income exclusion is $126,500, increased from $120,000 for tax year 2023.
Estates of decedents who die during 2024 have a basic exclusion amount of $13,610,000, increased from $12,920,000 for estates of decedents who died in 2023. The annual exclusion for gifts increases to $18,000 for calendar year 2024, increased from $17,000 for calendar year 2023.
The maximum credit allowed for adoptions for tax year 2024 is the amount of qualified adoption expenses up to $16,810, increased from $15,950 for 2023.
Items unaffected by indexing

By statute, certain items that were indexed for inflation in the past are currently not adjusted.

The personal exemption for tax year 2024 remains at 0, as it was for 2023. This elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.
For 2024, as in 2023, 2022, 2021, 2020, 2019 and 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act.
The modified adjusted gross income amount used by taxpayers to determine the reduction in the Lifetime Learning Credit provided in § 25A(d)(2) is not adjusted for inflation for taxable years beginning after Dec. 31, 2020. The Lifetime Learning Credit is phased out for taxpayers with modified adjusted gross income in excess of $80,000 ($160,000 for joint returns).

09/11/2023

It's a hot topic as retirees everywhere struggle to keep up with the rising cost of living.

08/30/2023

Businesses must electronically file Form 8300, Report of Cash Payments Over $10,000, beginning January 1, 2024

WASHINGTON —The Internal Revenue Service today announced that starting Jan. 1, 2024, businesses are required to electronically file (e-file) Form 8300, Report of Cash Payments Over $10,000, instead of filing a paper return. This new requirement follows final regulations amending e-filing rules for information returns, including Forms 8300.

Businesses that receive more than $10,000 in cash must report transactions to the U.S. government. Although many cash transactions are legitimate, information reported on Forms 8300 can help combat those who evade taxes, profit from the drug trade, engage in terrorist financing or conduct other criminal activities. The government can often trace money from these illegal activities through payments reported on Forms 8300 that are timely filed, complete and accurate.

The new requirement for e-filing Forms 8300 applies to businesses mandated to e-file certain other information returns, such as Forms 1099 series and Forms W-2. Electronic filing and communication options will be simpler and will make it easier to interact with the IRS. Beginning with calendar year 2024, businesses must e-file all Forms 8300 (and other certain types of information returns required to be filed in a given calendar year) if they’re required to file at least 10 information returns other than Form 8300.

For example, if a business files five Forms W-2 and five Forms 1099-INT, then the business must e-file all their information returns during the year, including any Forms 8300. However, if the business files fewer than 10 information returns of any type, other than Forms 8300, then that business does not have to e-file the information returns and is not required to e-file any Forms 8300. However, businesses not required to e-file may still choose to do so.

Waivers

A business may file a request for a waiver from electronically filing information returns due to undue hardship. For more information businesses can refer to Form 8508, Application for a Waiver from Electronic Filing of Information Returns. If the IRS grants a waiver from e-filing any information return, that waiver automatically applies to all Forms 8300 for the duration of the calendar year. A business may not request a waiver from filing only Forms 8300 electronically.

The business must include the word “Waiver” on the center top of each Form 8300 (Page 1) when submitting a paper filed return.

If a business is required to file fewer than 10 information returns, other than Forms 8300, during the calendar year, the business may file Forms 8300 in paper form without requesting a waiver.

If a business files less than 10 information returns, it can still choose to e-file the Forms 8300 electronically if it chooses to do so.

Exemptions

If using the technology required to e-file conflicts with a filer’s religious beliefs, they are automatically exempt from filing Form 8300 electronically. The filer must include the words “RELIGIOUS EXEMPTION” on the center top of each Form 8300 (page 1) when submitting the paper filed return.

Late Returns

A business must self-identify late returns. A business must file a late Form 8300 in the same way as a timely filed Form 8300, either electronically or on paper. A business filing a late Form 8300 electronically must include the word “LATE” in the comments section of the return. A business filing a late Form 8300 on paper must write “LATE” on the center top of each Form 8300 (page 1).

Record keeping

A business must keep a copy of every Form 8300 it files, as well as any supporting documentation and the required statement it sends to customers, for five years from the date filed.

Filing electronically will provide a confirmation that the form was filed; however, e-file confirmation e-mails alone don’t meet the record keeping requirement. When e-filing, filers must also save a copy of the form prior to finalizing the form submission. They should associate the confirmation number with the saved copy. Prior to finalizing the form for submission, businesses should save a copy of the form electronically or print a copy of the form.

E-filing

Many businesses have already found the free and secure e-filing system to be a more convenient and cost-effective way to meet the reporting deadline of 15 days after a transaction. They get free email acknowledgment of receipt of the form when they e-file. Businesses can batch e-file their reports, which is especially helpful to those required to file many forms.

To file Forms 8300 electronically, a business must set up an account with the Financial Crimes Enforcement Network's BSA E-Filing System. The IRS will ensure the privacy and security of all taxpayer data.

For more information, interested businesses can call the Bank Secrecy Act E-Filing Help Desk at 866-346-9478 or email them at [email protected]. For more information about the BSA E-Filing System, businesses can complete a technical support request at Self Service Help Ticket (treas.gov). The help desk is available Monday through Friday from 8 a.m. to 6 p.m. EST.

For more information about the reporting requirement, see FS-2023-19 on IRS.gov.

To help businesses prepare and file reports, the IRS created a video - How to Complete Form 8300 – Part I, Part II. The short video points out sections of Form 8300 for which the IRS commonly finds mistakes and explains how to accurately complete those sections.

01/10/2023

IR-2022-234, December 29, 2022 — The Internal Revenue Service today issued the 2023 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

01/09/2023

Tax Tip 2023-02, January 9, 2023 — The tax filing season is a popular time for scammers to call and try to dupe unsuspecting taxpayers. These thieves often make threatening or alarming calls posing as the IRS to try to steal taxpayer money or personal information.

12/23/2022

IRS announces delay for implementation of $600 reporting threshold for third-party payment platforms’ Forms 1099-K

WASHINGTON — The Internal Revenue Service today announced a delay in reporting thresholds for third-party settlement organizations set to take effect for the upcoming tax filing season.

As a result of this delay, third-party settlement organizations will not be required to report tax year 2022 transactions on a Form 1099-K to the IRS or the payee for the lower, $600 threshold amount enacted as part of the American Rescue Plan of 2021.

As part of this, the IRS released guidance today outlining that calendar year 2022 will be a transition period for implementation of the lowered threshold reporting for third-party settlement organizations (TPSOs) including Venmo, PayPal and CashApp that would have generated Form 1099-Ks for taxpayers.

“The IRS and Treasury heard a number of concerns regarding the timeline of implementation of these changes under the American Rescue Plan,” said Acting IRS Commissioner Doug O’Donnell. “To help smooth the transition and ensure clarity for taxpayers, tax professionals and industry, the IRS will delay implementation of the 1099-K changes. The additional time will help reduce confusion during the upcoming 2023 tax filing season and provide more time for taxpayers to prepare and understand the new reporting requirements.”

The American Rescue Plan of 2021 changed the reporting threshold for TPSOs. The new threshold for business transactions is $600 per year; changed from the previous threshold of more than 200 transactions per year, exceeding an aggregate amount of $20,000. The law is not intended to track personal transactions such as sharing the cost of a car ride or meal, birthday or holiday gifts, or paying a family member or another for a household bill.

Under the law, beginning Jan. 1, 2023, a TPSO is required to report third-party network transactions paid in 2022 with any participating payee that exceed a minimum threshold of $600 in aggregate payments, regardless of the number of transactions. TPSOs report these transactions by providing individual payee’s an IRS Form 1099K, Payment Card and Third-Party Network Transactions.

The transition period described in Notice 2022-10, delays the reporting of transactions in excess of $600 to transactions that occur after calendar year 2022. The transition period is intended to facilitate an orderly transition for TPSO tax compliance, as well as individual payee compliance with income tax reporting. A participating payee, in the case of a third-party network transaction, is any person who accepts payment from a third-party settlement organization for a business transaction.

The change under the law is hugely important because tax compliance is higher when amounts are subject to information reporting, like the Form 1099-K. However, the IRS noted it must be managed carefully to help ensure that 1099-Ks are only issued to taxpayers who should receive them. In addition, it’s important that taxpayers understand what to do as a result of this reporting, and tax preparers and software providers have the information they need to assist taxpayers.

Additional details on the delay will be available in the near future along with additional information to help taxpayers and the industry. For taxpayers who may have already received a 1099-K as a result of the statutory changes, the IRS is working rapidly to provide instructions and clarity so that taxpayers understand what to do.

The IRS also noted that the existing 1099-K reporting threshold of $20,000 in payments from over 200 transactions will remain in effect.

12/12/2022

The deadline to file your taxes is April 18, 2023, and the IRS is sharing updated information to help get you ready.

12/12/2022

Many tax benefits instituted during the pandemic have lapsed, which means some people could see smaller refunds.

09/12/2022

08/27/2022

Recent threats against the IRS are a reminder of the importance of civility—especially in the tax profession.