February 2024 - OS CPA

February 28, 2024 by oscpatax_wpadmin in Blog

Important Tax Deadlines in 2024

Whether you are an individual salaried person, an entrepreneur, or a business owner, one question unites us all: “When are taxes due this year?”

This blog will serve as your cheat sheet to remember all the tax deadlines 2024. You will also learn about the possible extensions and other factors that may affect your tax filing 2024. Therefore, make sure to mark these dates on your calendar so you stay on top of your tax prep and submission in 2024.

When Are My Taxes Due in 2024?

April 15, 2024, is the general tax deadlinefor filing your federal income tax return. However, the residents of Massachusetts and Maine will have until April 17, 2024, due to state holidays. You can also request a six-month tax extension using Form 4868 by April 15, 2024. This will move your tax filing deadline to Oct. 15, 2024.

For last-minute tax filers, the IRS will consider your paper return on time on two conditions:

1. If your paperwork was addressed correctly

2. It had enough postage; you postmarked it and put it in the mail by the due date. For those who file electronically, the IRS specifies that the date and time of transmission in your time zone will determine the timeliness of your return.

Important Tax Deadlines for Individual Filers in 2024

Deadline	Applicable	Description
January 12, 2024	For taxpayers who make below a certain income.	The Free File program opens and begins accepting returns on Jan. 12
January 16, 2024	For Self-Employed Workers and Taxpayers (If your withholding does not cover enough of your tax liability.	This is the last day to pay your estimated taxes for income you earned between September 1, 2023, and December 31, 2023.
January 29, 2024	For All Categories	The IRS starts accepting and processing federal tax returns for all. Remember, if you applied for credits, like the additional child tax credit or earned income tax credit - the IRS will not issue your tax refund until at least mid-February. Even if you file early.
January 31, 2024	For Form W-2 Form 1099	Form W-2 Due Date Employers must send or provide W-2 forms to employees who worked for them in 2023 by the specified tax deadline. 1099 Deadlines The IRS mandates that specific information returns, such as 1099-NEC, 1099-K, and 1099-INT, must be issued or mailed by January 31. This means that if you earned particular income from interest in 2023 or worked as a freelancer with non-employee earnings totaling $600 or more, you should anticipate receiving a document in your inbox or through mail detailing those earnings around this time. It will be crucial to refer to this information when filing your taxes.
February 15, 2024	For Form W-4 Deadline for Tax-Exempt Status • 1099 – Deadline Continues	Form W-4 Deadline for Tax-Exempt Status If you were exempt from tax withholding in 2023, this marks the deadline for submitting a new Form W-4 to your employer if you wish to retain the exemption for 2024. 1099 Deadlines (Continued) Additional deadlines pertain to informational returns such as 1099-Bs (for income derived from the sale of specific securities) and specific 1099-MISC forms. These must be dispatched to recipients by the specified date. Further details on information returns can be found on the IRS website.
Tax Day April 15, 2024	For Federal Tax Filing • IRA & HSA Contributions Deadline • Estimated Taxes Due For 1st Quarter	Federal Tax Filing Deadline This marks the date you must submit your taxes to the IRS. It is also the deadline for filing a tax extension. It's essential to note that a tax extension grants additional time for filing your return, not for paying your taxes. Even with an extension request, any taxes owed must be paid by April 15. HSA and IRA Contribution Deadline The final day to contribute to your health savings account or a Roth/traditional individual retirement account for the tax year 2023. The HSA contribution limit 2023 is $3,850 for individuals and $7,750 for family coverage. In 2023, the contribution limit for IRAs is $6,500 ($7,500 for individuals aged 50 or older). Estimated Taxes Due for 1st Quarter Payments for estimated taxes on income earned in the first quarter of the year (January 1, 2024, through March 31, 2024) are due today.
June 17, 2024	For • Estimated Taxes Due for 2nd Quarter • Tax Deadline for American Citizens living abroad (Expats)	Estimated Taxes Due for 2nd Quarter This is the deadline for making estimated tax payments on income earned during the second quarter of the year (April 1, 2024, through May 31, 2024). Tax Deadline for Expatriates People who reside or work outside the U.S. receive an automatic two-month extension from April to file their taxes on time. Taxes for this group are due by June 17, 2024
Mid-July, 2024	For Claiming 2020 Tax Refund	Usually, this deadline marks the last month within a three-year period to file your tax return and request a refund for a prior-year return.
Sept 16, 2024	For Estimated Taxes Due for 3rd Quarter	This is the deadline for making estimated tax payments on income earned during the third quarter of the year (June 1, 2024, through August 31, 2024).
October 15, 2024	For • Tax Extension Deadline • Solo 401(K), SEP & Simple IRA Contribution Deadline	Tax Extension Deadline Requesting an extension by April 15 provides an extension until October 15 to complete and submit your tax returns. If this deadline is not met, the IRS will deem your return late, and penalties will accrue. SEP and Simple IRA, Solo 401(k) Contribution Deadline Individuals who have set up any of the self-employment retirement plans mentioned above and successfully filed for an extension in April now have until October 15 to make their final contribution to these plans for the 2023 tax year.
December 31, 2024	For • 401(K) Contribution Deadline • RMD Deadline • Charitable Donation Deadline	401(k) Contributions Deadline The final day for making qualified contributions to an employer-sponsored retirement plan, such as a traditional or Roth 401(k), is generally December 31. For the 2024 tax year, the maximum contribution allowed is $23,000 ($30,500 for individuals aged 50 or older). RMD Deadline If you are obligated to take Required Minimum Distributions (RMDs), they must be completed by December 31. Charitable Donations Deadline For those who itemize deductions and wish to contribute to charity to reduce taxable income, December 31 is the last day to do so for the 2024 tax year.
January 15, 2025	For Estimated Taxes Due for the 4th Quarter in 2024	This marks the ultimate quarterly estimated tax payment obligation for the year 2024. Opting to pay 100% of your previous year's tax liability means that any outstanding taxes will be payable when you submit your 2024 individual tax return by the April 2025 deadline.

Important Tax Deadlines for Individual Filers in 2024

January 12, 2024

For taxpayers who make below a certain income.

The Free File program opens and begins accepting returns on Jan. 12

January 16, 2024

For Self-Employed Workers and Taxpayers

(If your withholding does not cover enough of your tax liability. This is the last day to pay your estimated taxes for income you earned between September 1, 2023, and December 31, 2023.

January 29, 2024

For All Categories

The IRS starts accepting and processing federal tax returns for all. Remember, if you applied for credits, like the additional child tax credit or earned income tax credit – the IRS will not issue your tax refund until at least mid-February. Even if you file early.

January 31, 2024

For Form W-2, Form 1099

Form W-2 Due Date

Employers must send or provide W-2 forms to employees who worked for them in 2023 by the specified tax deadline.

1099 Deadlines

The IRS mandates that specific information returns, such as 1099-NEC, 1099-K, and 1099-INT, must be issued or mailed by January 31. This means that if you earned particular income from interest in 2023 or worked as a freelancer with non-employee earnings totaling $600 or more, you should anticipate receiving a document in your inbox or through mail detailing those earnings around this time. It will be crucial to refer to this information when filing your taxes.

February 15, 2024

For Form W-4 Deadline for Tax-Exempt Status

If you were exempt from tax withholding in 2023, this marks the deadline for submitting a new Form W-4 to your employer if you wish to retain the exemption for 2024.

1099 Deadlines (Continued)

Additional deadlines pertain to informational returns such as 1099-Bs (for income derived from the sale of specific securities) and specific 1099-MISC forms. These must be dispatched to recipients by the specified date. Further details on information returns can be found on the IRS website.

April 15, 2024

Tax Day for Federal Tax Filing IRA & HSA Contributions Deadline, Estimated Taxes Due For 1st Quarter & Federal Tax Filing Deadline

This marks the date you must submit your taxes to the IRS. It is also the deadline for filing a tax extension. It’s essential to note that a tax extension grants additional time for filing your return, not for paying your taxes. Even with an extension request, any taxes owed must be paid by April 15.

HSA and IRA Contribution Deadline

The final day to contribute to your health savings account or a Roth/traditional individual retirement account for the tax year 2023. The HSA contribution limit 2023 is $3,850 for individuals and $7,750 for family coverage. In 2023, the contribution limit for IRAs is $6,500 ($7,500 for individuals aged 50 or older).

Estimated Taxes Due for 1st Quarter

Payments for estimated taxes on income earned in the first quarter of the year (January 1, 2024, through March 31, 2024) are due today.

June 17, 2024

For Estimated Taxes Due for 2nd Quarter, Tax Deadline for American Citizens living abroad (Expats) & Estimated Taxes Due for 2nd Quarter

This is the deadline for making estimated tax payments on income earned during the second quarter of the year (April 1, 2024, through May 31, 2024).

Tax Deadline for Expatriates

People who reside or work outside the U.S. receive an automatic two-month extension from April to file their taxes on time. Taxes for this group are due by June 17, 2024

Mid-July, 2024

For Claiming 2020 Tax Refund

Usually, this deadline marks the last month within a three-year period to file your tax return and request a refund for a prior-year return.

September 16, 2024

For Estimated Taxes Due for 3rd Quarter

This is the deadline for making estimated tax payments on income earned during the third quarter of the year (June 1, 2024, through August 31, 2024).

October 15, 2024

For Tax Extension Deadline, Solo 401(K), SEP & Simple IRA Contribution Deadline

Tax Extension Deadline

Requesting an extension by April 15 provides an extension until October 15 to complete and submit your tax returns. If this deadline is not met, the IRS will deem your return late, and penalties will accrue.

SEP and Simple IRA, Solo 401(k) Contribution Deadline

Individuals who have set up any of the self-employment retirement plans mentioned above and successfully filed for an extension in April now have until October 15 to make their final contribution to these plans for the 2023 tax year.

December 15, 2024

For 401(K) Contribution Deadline, RMD Deadline, Charitable Donation Deadline & 401(k) Contributions Deadline

The final day for making qualified contributions to an employer-sponsored retirement plan, such as a traditional or Roth 401(k), is generally December 31. For the 2024 tax year, the maximum contribution allowed is $23,000 ($30,500 for individuals aged 50 or older).

RMD Deadline

If you are obligated to take Required Minimum Distributions (RMDs), they must be completed by December 31.

Charitable Donations Deadline

For those who itemize deductions and wish to contribute to charity to reduce taxable income, December 31 is the last day to do so for the 2024 tax year.

January 15, 2025

For Estimated Taxes Due for the 4th Quarter in 2024

This marks the ultimate quarterly estimated tax payment obligation for the year 2024. Opting to pay 100% of your previous year’s tax liability means that any outstanding taxes will be payable when you submit your 2024 individual tax return by the April 2025 deadline.

Important Tax Deadlines for Businesses, Partnerships (including LLCs), C Corps (Form 1120), and S Corps (Form 1120S)

Deadline	Description
January 15, 2024	Estimated Taxes Due for the 4th Quarter in 2023
Early 2024-2023	Tax season begins for all businesses
January 31, 2024	Employers must send employees’ W-2 forms by this deadline
January 31, 2024	Send in certain 1099 forms
March 15, 2024	Partnerships, including multi-member LLCs and S-Corporations, must submit Form 1065 or 1120S by March 15, 2024, if they operate on a calendar year basis. For businesses utilizing a fiscal year, the tax return for business must be filed by the 15th day of the third month following the conclusion of the fiscal year.
April 15, 2024	Taxes deadline for C-Corporations C-Corporations are required to submit Form 1120 by April 15, 2024, if they operate on a calendar year basis. For businesses following a fiscal year, the tax return for C-corps must be filed by the 15th day of the third month after the conclusion of the fiscal year.
September 16, 2024	Deadline for extended partnerships and S-corporations returns
October 15, 2024	Deadline for extended C-corporations returns
January 15, 2025	Estimated tax payment due for the Fourth quarter of 2024

Important Tax Deadlines for Businesses, Partnerships (including LLCs), C Corps (Form 1120), and S Corps (Form 1120S)

Deadline
January 15, 2024
Early 2024-2023
January 31, 2024
January 31, 2024
March 15, 2024
April 15, 2024
September 16, 2024
October 15, 2024
January 15, 2025

Description
Estimated Taxes Due for the 4th Quarter in 2023
Tax season begins for all businesses
Employers must send employees’ W-2 forms by this deadline
Send in certain 1099 forms
Partnerships, including multi-member LLCs and S-Corporations, must submit Form 1065 or 1120S by March 15, 2024, if they operate on a calendar year basis. For businesses utilizing a fiscal year, the tax return for business must be filed by the 15th day of the third month following the conclusion of the fiscal year.
Taxes deadline for C-Corporations C-Corporations are required to submit Form 1120 by April 15, 2024, if they operate on a calendar year basis. For businesses following a fiscal year, the tax return for C-corps must be filed by the 15th day of the third month after the conclusion of the fiscal year.
Deadline for extended partnerships and S-corporations returns
Deadline for extended C-corporations returns
Estimated tax payment due for the Fourth quarter of 2024

3 Tips to Remember Before Tax Deadlines in 2024

Here are three tips you must remember before the tax day in 2024.

Open or Contribute to IRA

You can contribute to a traditional or Roth IRA and deduct it from your taxable income. The deadline to contribute to the IRA is April 15, 2024. For 2024, if you are younger than 50, the contribution limit is 7,000. In case you are 50 years of age or older, your IRA contribution limit is up to $8,000.

Top-up-Your HSA

For 2023, the limits are $3,850 for an individual HSA owner and $7,750 for a family. In 2024, these limits increase to $4,150 for individuals and $8,300 for families. Individuals aged 55 or older have the option to contribute an additional $1,000 to their HSA.

Top-up Your HSA

This health savings account (HSA), accessible to people with a high-deductible health plan, offers a tax-efficient method for covering out-of-pocket expenses. You can make contributions to your HSA for the 2023 until April 15, 2024.

For 2023, the limits are $3,850 for an individual HSA owner and $7,750 for a family. In 2024, these limits increase to $4,150 for individuals and $8,300 for families. Individuals aged 55 or older have the option to contribute an additional $1,000 to their HSA.

Plan 401(k) Contributions

Contributions made to a traditional 401(k) result in a reduction of your overall taxable income for the year. For instance, if your annual income is $65,000 and you contribute $10,000 to your 401(k), you will only be taxed on $55,000 of your earnings, effectively shielding $10,000 from taxes.

Additionally, many employers offer matching contributions, providing an opportunity to receive extra funds if you contribute sufficiently to your account.

While it is no longer possible to contribute for 2023, there is ample time to develop a strategy for the current year. In 2024, you can contribute up to $23,000 (or up to $30,500 if you’re 50 or older) by December 31. Explore more details on 401(k) contribution limits for comprehensive information.

Frequently Asked Questions

What if I miss a tax deadline?

If you anticipate that you will not be able to complete your tax return by April 15, 2024, you have the option to request an extension, providing you with additional time. However, you must remember that while an extension allows more time to file, it does not extend the deadline for tax payments.

If you anticipate a tax liability, the IRS recommends filing and paying your estimated taxes to minimize penalties and interest. If you are unable to pay the full tax amount, you can avail yourself of and arrange an installment plan with the IRS.

In case you expect a tax refund from the IRS, there is no penalty for filing late. However, it is advisable to file your taxes promptly to expedite the refund process. It is important to remember that even if you are not subject to penalties for filing late, there is a high likelihood that you still need to file a tax return. The IRS maintains strict criteria for determining who must file, taking into account factors such as annual income.

What if you miss the tax filing deadline and are owed a refund?

If you have overpaid for the 2023 tax year, there is usually no penalty for submitting your tax return after the deadline. Nevertheless, it is advisable to file your taxes as soon as possible.

What happens if I miss the tax filing deadline and owe taxes?

If you fail to meet a tax filing deadline in 2024 and have a tax obligation to the IRS, it is essential to submit your tax return promptly. Each day your tax return remains overdue, the IRS typically imposes interest, failure-to-file penalties, and failure-to-pay penalties until you file your return and settle the outstanding balance.

What if I owe more than I can pay?

Accordion ContentIf you fail to meet a tax filing deadline in 2024 and have a tax obligation to the IRS, it is essential to submit your tax return promptly. Each day your tax return remains overdue, the IRS typically imposes interest, failure-to-file penalties, and failure-to-pay penalties until you file your return and settle the outstanding balance.

What's the fastest way to file my tax return?

The fastest method for submitting your tax return in 2024 is through electronic filing (e-filing). E-filing with the IRS offers enhanced security compared to paper filing. As the tax return is transmitted electronically, concerns about it being lost in the mail or arriving tardily are eliminated. Furthermore, immediate confirmation is provided that the IRS has received and initiated the processing of your tax returFor those anticipating a tax refund, the expedited way to receive the funds is by opting for an electronic deposit into your bank account. By combining direct deposit with electronic filing, the IRS typically issues 90% of refunds in less than 21 days.

Conclusion

If you have not filed your tax returns yet, do not leave it any longer and gather essential tax documents from your employers, mortgage companies, investment firms, and other relevant sources now. Whether you are a salaried individual, a self-employed entrepreneur, or a business owner looking for tax planning advice or filing tax returns, contact our tax expert in Dallas.

February 27, 2024 by oscpatax_wpadmin in Blog

Top 25 Financial Terms You Must Know in 2024

A startup or an established organization, all business owners must be familiar with the financial terminologies commonly used in the market. Employing a financial advisor or utilizing accounting software benefits your company. However, it remains crucial for you to possess a fundamental comprehension of your business’s financial dynamics.

Avoid confusion when encountering unfamiliar terms in an investor meeting. Knowing essential financial terms empowers you to manage your business finances with confidence. This guide equips you with knowledge of 25 essential financial terms essential for entrepreneurs and small business owners.

25 Common Financial Terms to Know in 2024

Here are 25 commonly used financial terms with the simplest definitions for your understanding.

Accounts Payable

Accounts payable refers to the funds that your business owes to external entities for goods or services received. This situation arises when your business has obtained a product or service, typically through credit, but has not yet settled the payment. On balance sheets, your business represents Accounts payable as short-term debts or liabilities.

Accounts Receivable

Accounts receivable refers to the funds owed to your business by clients or customers for products or services rendered but not yet compensated. This indicates that a sale has been conducted, yet payment is pending. Your business commonly issues invoices to customers detailing the amount owed. On balance sheets, Accounts receivable is recorded as an asset.

Accounts Receivable

Accounts receivable refers to the funds owed to your business by clients or customers for products or services rendered but not yet compensated. This indicates that a sale has been conducted, yet payment is pending.

Your business commonly issues invoices to customers detailing the amount owed. On balance sheets, Accounts receivable is recorded as an asset.

Adjusted Gross Income

Adjusted Gross Income (AGI) is the overall income derived from wages or investments, subtracting income adjustments approved by the IRS. These adjustments encompass items such as interest on student loans, contributions to retirement accounts, or work-related expenses. The IRS utilizes your AGI to ascertain your taxable income and assess eligibility for specific Tax Deductions or credits.

Amortization

Amortization is the systematic repayment of debt through regular installments over a designated period. Lenders or other entities compute amortization by considering the total loan amount and the mutually agreed-upon interest rate. Usually remitted on a monthly basis, these payments encompass both the incurred interest costs and the reduction of the loan balance.

Amortization

Amortization is the systematic repayment of debt through regular installments over a designated period. Lenders or other entities compute amortization by considering the total loan amount and the mutually agreed-upon interest rate.

Usually remitted on a monthly basis, these payments encompass both the incurred interest costs and the reduction of the loan balance.

Asset

An asset is an economically valuable item owned by you or your business and is reflected on the balance sheets of your business. Current assets, also known as liquid assets, are assets that can be readily and swiftly converted into cash, typically within a year. Examples encompass balances in checking or savings accounts, inventory, and short-term investments.

In contrast, non-current assets are fixed assets. These take a longer time to be liquidated and include items such as property, machinery, and equipment.

Assets can be tangible, representing material items like cash or equipment, or intangible, signifying non-physical entities that still hold value. These include trademarks, patents, copyrights, and franchise agreements.

Asset allocation

Asset allocation is the strategic determination by your organization regarding the assets in which you intend to invest. The primary asset classes are cash, stocks, and bonds. In making these investment decisions, your company commonly assesses the potential risks and returns associated with each class. Periodically, your business may engage in asset rebalancing, adjusting its asset allocation to align with business needs or enhance profitability.

Balance sheet

A balance sheet is one of the fundamental financial documents produced by your business. It illustrates your organization’s financial standing at a specific moment. Furthermore, it showcases the company’s assets, liabilities, and shareholders’ equity.

This financial statement presents assets on one side and liabilities along with shareholders’ equity on the other, ensuring that the sums on both sides are equivalent.

Balance sheet

Bonds

Bonds are financial instruments representing investments in debt and belong to the category of fixed-income securities. When you purchase a bond, you essentially lending money to an entity, frequently a corporation or government, for a specified duration. In return, the entity repays you at regular intervals, typically with interest.

Budget

A budget is a financial blueprint crafted by your business to outline the anticipated expenditures over a specific period. During the budgeting process, you (as an individual or a company) typically take into account factors like income, assets, and liabilities. The purpose of a budget is to enable you to assess the balance between earnings and expenditures, facilitating informed financial decisions and future planning.

Budget

A budget is a financial blueprint crafted by your business to outline the anticipated expenditures over a specific period. During the budgeting process, you (as an individual or a company) typically take into account factors like income, assets, and liabilities.

The purpose of a budget is to enable you to assess the balance between earnings and expenditures, facilitating informed financial decisions and future planning.

Capital gains

Capital gains refer to the appreciation in the value of an asset or investment beyond its original purchase price. It signifies the disparity between the current worth of something and its value at the time of acquisition. A realized capital gain happens when you sell the asset or investment at a profit. Conversely, a capital loss occurs if the asset or investment decreases in value compared to its purchase price.

Cashflow statement

A cash flow statement constitutes a fundamental financial document for your business. It portrays the inflow and outflow of money within a specific timeframe. This statement evaluates solvency, indicating your organization’s capacity to settle its bills and expenses. Your business is deemed cash-flow positive when the inflow of money surpasses its outflow.

Cashflow statement

A cash flow statement constitutes a fundamental financial document for your business. It portrays the inflow and outflow of money within a specific timeframe.

This statement evaluates solvency, indicating your organization’s capacity to settle its bills and expenses. Your business is deemed cash-flow positive when the inflow of money surpasses its outflow.

Compound interest

Compound interest denotes the interest accrued on a loan or deposit, computed on the initial amount plus the accumulated interest over time. Banks and lenders calculate simple interest as a percentage of the initial or principal amount. However, compound interest is calculated annually as a percentage of the new loan or deposit amount. This leads to a faster growth rate for a debt or deposit with compound interest compared to simple interest.

Credit

Credit is a formal agreement where a lender provides money to a borrower with the understanding that the borrower will repay it at a later date. Trustworthiness can be demonstrated by consistently repaying credit in full and on time. Credit cards serve as a prevalent example of purchasing on credit.

Credit

Expenses

Expenses constitute the expenditures associated with running your business. It is directly tied to revenue generation. Common examples of expenses include rent, utilities, employee wages, and marketing costs. Your business monitors expenses for profit and loss statements. Furthermore, certain expenses may be eligible for write-offs on income tax returns, provided they adhere to IRS regulations.

Fico Score

A FICO score, or credit score, is a numerical representation comprising three digits that assess your reliability in repaying loans or debts. Financial entities, including banks and lenders, determine your credit scores by evaluating factors like payment history, length of credit history, and outstanding debts. A higher score enhances the likelihood of you obtaining favorable terms on loans or credit cards.

Fico Score

A FICO score, or credit score, is a numerical representation comprising three digits that assess your reliability in repaying loans or debts.

Financial entities, including banks and lenders, determine your credit scores by evaluating factors like payment history, length of credit history, and outstanding debts. A higher score enhances the likelihood of you obtaining favorable terms on loans or credit cards.

Income

Income refers to the funds you earn from the sale of goods and services or through investments. For instance, as a salesperson, you generate income by selling products to customers. Revenue represents your overall income received from regular work activities. On the other hand, net income or net profit is the amount remaining after deducting expenses or costs from your total income.

Income Statement

An income statement is alternatively referred to as a profit and loss statement. It stands as another essential financial document for your business. This statement outlines your company’s revenues, losses, or expenses during a specific period, typically on a monthly basis. Serving as a crucial tool, the income statement aids in assessing your company’s revenue-generating capability and its potential for growth.

Income Statement

An income statement is alternatively referred to as a profit and loss statement. It stands as another essential financial document for your business. This statement outlines your company’s revenues, losses, or expenses during a specific period, typically on a monthly basis.

Serving as a crucial tool, the income statement aids in assessing your company’s revenue-generating capability and its potential for growth.

Interest

Interest represents the extra amount you are obligated to repay when you borrow money. Entities lending money typically impose interest, calculated as a percentage of the loan. For instance, if you obtain a $30,000 car loan, a lender might stipulate an additional 5% of the loan, resulting in $1,500 in interest. Interest rates are subject to variation, influenced by factors like your credit score and the repayment duration. Similarly, you have the opportunity to earn interest when investing or saving money.

Investment

An investment involves allocating money with the anticipation of obtaining a profit or tangible benefit in return. Unlike purchasing goods for personal use, you make investments to enhance value or generate additional funds. A common avenue for investment is the stock market, where people aim to increase their wealth. Additionally, you may invest in real estate properties or other assets that appreciate in value over time.

Investment

An investment involves allocating money with the anticipation of obtaining a profit or tangible benefit in return. Unlike purchasing goods for personal use, you make investments to enhance value or generate additional funds.

A common avenue for investment is the stock market, where people aim to increase their wealth. Additionally, you may invest in real estate properties or other assets that appreciate in value over time.

Liability

A liability refers to a debt or monetary obligation that one person or company owes to another. Instances of liabilities encompass bank loans, accounts payable, and credit card debts. Current liabilities are obligations due within a year, whereas non-current liabilities, such as mortgages and leases, are more prolonged. Similar to assets, liabilities are reflected on the balance sheets of your business.

Loan

A loan refers to a financial arrangement wherein one entity lends a specified amount of money or an item to another entity. The borrower is obligated to repay the borrowed sum to the lender within a predetermined timeframe and may be subject to interest charges. When seeking a loan, you have to furnish a lending institution with a rationale for the funds along with pertinent financial details, including your credit score and employment verification. In certain cases, lenders may demand collateral, establishing an agreement that allows the lender to seize property in the event of non-repayment, commonly referred to as default.

Loan

A loan refers to a financial arrangement wherein one entity lends a specified amount of money or an item to another entity. The borrower is obligated to repay the borrowed sum to the lender within a predetermined timeframe and may be subject to interest charges.

When seeking a loan, you have to furnish a lending institution with a rationale for the funds along with pertinent financial details, including your credit score and employment verification.

In certain cases, lenders may demand collateral, establishing an agreement that allows the lender to seize property in the event of non-repayment, commonly referred to as default.

Mortgage

A mortgage is a financial loan employed for the acquisition of property. As a mortgage borrower, you make regular payments, including interest, to banks or financial lenders over a designated period to repay your mortgages. The property itself serves as collateral, providing the lender with the right to seize it if you fail to meet your payment obligations.

Net worth

Net worth is the aggregate value of your personal or business possessions minus the total amount of debts owed. Consequently, it signifies the disparity between your assets and liabilities. You can ascertain your net worth by summing up the value of all your assets and deducting your debts from that total.

Net worth

Net worth is the aggregate value of your personal or business possessions minus the total amount of debts owed. Consequently, it signifies the disparity between your assets and liabilities.

You can ascertain your net worth by summing up the value of all your assets and deducting your debts from that total.

Stocks

Stocks, alternatively known as equities, represent ownership shares in a company. Companies issue stocks to generate funds for product development, debt payments, and business expansion. You as a person or a business can purchase a company’s stock are essentially investing in that particular business. As the value of stocks appreciates over time, you (as an investor) may sell them later to realize a profit. Additionally, you can benefit from stocks that pay dividends, which are portions of the company’s earnings distributed to shareholders.

Taxes

Taxes are levies imposed on you or your business by governments to finance public spending and various programs. The revenue generated from taxes is utilized for purposes such as national defense, funding police and firefighting forces, community development, and addressing the national debt. Taxes rates may fluctuate based on geographic location and the annual income of individuals or organizations.

Taxes

Taxes are levies imposed on you or your business by governments to finance public spending and various programs. The revenue generated from taxes is utilized for purposes such as national defense, funding police and firefighting forces, community development, and addressing the national debt.

Taxes rates may fluctuate based on geographic location and the annual income of individuals or organizations.

Frequently Asked Questions

What is finance?

Finance is the discipline that encompasses the administration of money and involves various activities, including investing, borrowing, lending, budgeting, saving, and forecasting.

What are the basic financial terms?

The fundamental financial terms comprise revenue, costs, profits and losses, the average rate of return, and break-even.

Why are financial terms important?

Familiarity with finance terms is crucial as it enables individuals to comprehend and oversee their personal financial well-being or the financial condition of a business. This understanding becomes particularly valuable when engaging with industry professionals like investors and accountants.

Why is it so important to understand your personal finances?

Grasping personal finance is essential for making prudent financial decisions and establishing a stable future. Essentially, personal finance revolves around the effective management of income, expenses, savings, and investments.

What is the power of financial literacy?

Financial literacy empowers individuals and businesses to make informed borrowing decisions, establish a favorable credit history, and steer clear of falling into debt traps.

Conclusion

Acquiring knowledge of these financial terms and maintaining a vigilant eye on your business operations enhance its likelihood of success. It enables you to fulfill your initial goal of growing your business and witnessing its prosperity.

As an entrepreneur or small business owner, your decision to run your own company probably driven by the more than the joy of creating and analyzing financial statements. Fortunately, our certified publish accountant provides assistance in the efficient management of your books.

Schedule a Free Consultation Today!

February 23, 2024 by oscpatax_wpadmin in Blog

Tax Implications for Freelancers & Gig Economy Workers in 2024

The transformation of the workforce has undergone a noteworthy change, leaning heavily towards the gig economy, where freelance, part-time, and on-demand positions take precedence. The freelancing and gig industry has experienced substantial expansion in the United States, encompassing various roles like delivery drivers, graphic designers, writers, and consultants.

According to US taxation laws, a crucial element of navigating the freelancing and gig economy landscape involves tax implications for freelancers. Discover how to optimize your income effectively and uphold financial stability in this dynamic work environment.

In this blog, you will learn who freelancers and gig workers are and what freelance tax implications are important.

10 Best Ways to Reduce Income Tax in 2024

What Does Self-Employed Mean?

Self-employment pertains to an individual who operates their own business or functions as an independent contractor. As a self-employed individual, you assume the responsibility of securing clients, overseeing the workload, and managing the financial aspects of your enterprise.

As a self-employed individual, you can operate in diverse fields, spanning professional services such as consulting or graphic design to trades like plumbing or carpentry. Your work may involve long-term client relationships, short-term projects, or a combination of both.

Who Is a Freelancer?

Freelancing also falls in the sub-domain of self-employed work. As a freelancer, you are an independent professional offering services to multiple clients on a project-to-project basis. Your expertise is usually applied in creative, knowledge-based, or specialized fields like writing, graphic design, web development, photography, and marketing.

With a specific skill set, you may concurrently work with various clients, providing expertise to meet their project requirements

Who is a Gig Economy Worker?

As a gig worker, you fall under a broader category that includes self-employed individuals and freelancers. As a gig worker, you engage in short-term, temporary, or on-demand work, commonly known as “gigs.”

These gigs can be projects, tasks, or services, often facilitated through online platforms or apps. As a gig worker, you may encompass freelancers, independent contractors, on-call workers, or those involved in the sharing economy, such as rideshare or food delivery drivers. Your work schedule may be less predictable, and income can come from various sources.

How to Do Taxes as A Freelancer?

In 2024, the self-employment tax rate is 15.3%, comprising 12.4% for Social Security (covering old-age, survivors, and disability insurance) and 2.9% for Medicare (supporting hospital insurance).

For the tax year 2023, the initial $160,200 of your combined wages, tips, and net earnings are subject to any combination of the Social Security part of self-employment tax, Social Security tax.

All your combined wages, tips, and net earnings for the current year are subject to any combination of the 2.9% Medicare part of the self-employment tax, Social Security tax.

Suppose your wages and tips are subject to either Social Security tax, totaling at least $160,200. In that case, you are exempt from paying the 12.4% Social Security part of the SE tax on any of your net earnings. However, you must still pay the 2.9% Medicare part of the SE tax tax on all your net earnings.

Note that you become liable for an additional 0.9% Medicare Tax if your wages, compensation, or self-employment income, combined with your spouse’s income (in case of a joint return), exceed the threshold amount for your tax filing status.

Filing Status	Threshold Amount
Married filing jointly	$250,000
Married filing separate	$250,000
Single	$125,000
Head of household (with qualifying person)	$200,000
Qualifying surviving spouse with dependent child	$200,000

Filing Status
Married filing jointly
Married filing separate
Single
Head of household (with qualifying person)
Qualifying surviving spouse with dependent child

Threshold Amount
$250,000
$250,000
$125,000
$200,000
$200,000

What If You Want to File Taxes as a Freelancer for Previous Years?

If you choose a tax year different from the calendar year, use the tax rate and maximum earnings limit effective at the start of your tax year. Even if there are changes in the tax rate or maximum earnings limit during your tax year, consistently using the same rate and limit throughout that period is essential.

Tax Implications for Gig Economy Workers

Before getting into the details of the taxes a gig economy worker must pay, you must understand the gig economy.

What is Gig Work?

Gig work refers to specific activities undertaken to earn income, typically facilitated through digital platforms such as apps or websites. Examples include:

Driving a car for booked rides or deliveries
Renting out property or a portion of it
Running errands or completing tasks
Selling goods online
Renting out equipment
Offering creative or professional services
Engaging in other temporary, on-demand, or freelance work

How Does the Gig Economy Work?

A gig economy is a market system characterized by the prevalence of temporary positions where companies enlist independent workers for short-term commitments. The term “gig” is informal slang referring to a job that has a defined and limited duration.

One significant advantage of the gig economy is that, as a freelancer, you have opportunities to earn income through jobs that offer flexibility and remote work options. This often allows you to prioritize your work’s quality over traditional credentials.

Gig Economy Worker Benefits

If your earnings from a side gig are less than $600, the payer is not obligated to send you a 1099 form. However, it remains essential to report these earnings on your tax return. Failure to do so can lead to penalties and fines. This requirement applies to cash payments received for services performed as well.

How Much Tax Should a Gig Worker Pay?

Per the Internal Revenue Service (IRS) guidelines, it is necessary to file a tax return if your net earnings from gig work amount to $400 or more, regardless of whether it is a side job, part-time endeavor, or temporary engagement.

Tax obligations apply to the income derived from gig work. If you engage in gig work as an employee, your employer is responsible for withholding taxes from your paycheck. However, if you operate as an independent contractor, you may be required to make estimated tax payments.

If you are uncertain about your classification as an employee or independent contractor, seek clarification from your employer or verify your worker status with a Certified Tax Planner or freelance specialist tax accountant in Dallas.

Tax for Gig Workers with Multiple Gigs

You must immediately report your income to the IRS if you are a gig worker with multiple gigs or jobs.

For example, you are a gig worker working as an Uber driver and part-time online content marketer. If you have received payment of $600 or more from working on any of these gigs during 2023, you will be liable to pay income tax on this amount in the 2024 tax season.

In such cases, the entity or individual who made the payment is typically obligated to furnish you with Form 1099-NEC, specifically for nonemployee compensation. Additionally, if you receive payments through online payment services like PayPal, there’s a possibility of receiving Form 1099-K.

It is important to note that payers also submit these forms to the IRS to report the income they have received. Payers must dispatch 1099 forms by January 31, indicating the dollar amount they earned and any withholdings from their payments, although withholding on 1099 forms is not prevalent.

If you do not receive this form, it remains your responsibility to report your earnings.

For Gig Workers Earning Less than $600 from Multiple Gigs

Failing to Pay Your Taxes on Freelance and Gig Income

Failure to include nonemployee compensation reported on a 1099 form in your tax returnmay lead to penalties. First, if the IRS deems your tax liability substantially underreported, they may impose an accuracy-related penalty amounting to 20% of the tax underpayment.

The IRS considers the understatement substantial if the underreported tax liability exceeds the larger of 10% of the correct tax or $5,000 for individuals.

For instance, neglecting to include $10,000 of your nonemployee compensation on your tax return would mean understating your taxable income by $10,000.

For example, if you are a single filer in the 22% income tax bracket, the penalty would be $440.

The Calculation: $10,000 x 22% tax bracket x 20% accuracy-related penalty $440.

How to Reduce Your Tax Bill as a Gig Worker?

Deducting business expenses can effectively reduce your taxable income. This will help lower your overall income tax as a gig worker. As a gig economy worker, you gain the advantage of deducting specific expenses from your self-employment income, a benefit not available to W-2 employees.

For instance, if you work as a rideshare driver, meticulous tracking of your car mileage during ridesharing is important. This allows you to deduct a portion of it at the per-mile rate during tax time. This deduction encompasses maintenance, gas, and insurance costs associated with your vehicle.

Ordinary expenses – common and widely accepted within your business.
Necessary expenses – deemed helpful and essential for your business operations.

Let us suppose you are a ski teacher. In this case, you might consider your ski boots an “ordinary expense.”

However, if you are a landscaper, you can deduct the rent for a storage space utilized to house landscaping tools and equipment. Even though a storage space may not be obligatory for landscaping, it qualifies as a “necessary expense” because it contributes to your business’s functionality.

Some common deductible expenses related to your side gig include:

Business mileage on your car
Dues and subscriptions paid to business-related organizations
Necessary tools and equipment
Tuition for work-related education and training costs

Tax Implications for Gig Workers Earning on Foreign Soil

If you are an expat working as a gig economy worker aboard, tracking the earnings generated from your gigs is crucial. This applies to all, regardless of your work setting or duration, especially if the work is part-time or paid in cash.

According to the law, as an American expatriate engaged in gig work, you must report your earnings on your federal tax return. This reporting obligation is particularly relevant if your income falls into the following categories:

Received in various forms, including cash, goods, virtual currency, property, etc.
Generated from temporary, side gig, or part-time work
Not documented on 1099-MISC, Form 1099-K, or any other income tax forms

Tips for American Gig Workers Residing Abroad

Here are two tips that will help you as an American expat gig worker anywhere in the world

Maintain Your Income Record

For a smooth tax filing process as a gig worker abroad, maintain your income records, invoices, and receipts throughout the year. Whether you collect them physically in a folder or track them digitally using online Excel sheets, record-keeping is crucial for filing your tax return.

Even if you don’t receive or are unaware of Form 1099 (which reports the total payments received from a person/entity or business during the year of service), keeping records of all income earned from gig work and sales is essential.

If you earned income as an independent contractor for gig work, you may need to pay taxes. It is advisable to check with a tax planner for expats to determine your tax obligations. To avoid penalties, pay the tax before the April 15 deadline.

Know Your Income Tax Forms

Some businesses, whether based in the US or abroad, might submit forms to the IRS detailing the payments made to you. If they indeed follow this practice, it’s crucial that you receive copies of these forms by January 31 each year. Common forms include Form-W2, Form 1099-MISC, and Form 1099-K.

In cases where you don’t receive these forms, you can use sales receipts or invoices to report payments not documented on Forms 1099 or W-2 to the IRS.

If the prospect of managing physical tax forms feels overwhelming, consider consulting with a tax preparation and submission expert and opt for online tax filing to simplify the process.

What Deductions Can Freelancers Take?

Consider these standard deductions to optimize your tax savings as a freelancer:

Home Office

Deduct a portion of mortgage/rent, property taxes, utilities, and maintenance for your home office.

Health Insurance

Deduct medical and dental premiums for your spouse, dependents, or children under 27.

Continuing Education

Deduct any qualifying work-related education expenses.

Car Expenses

Deduct your car’s mileage or actual car expenses for business purposes.

Retirement Savings

Deduct your contributions to a solo 401(k).

Self-Employment Taxes

Deduct half of your self-employment tax as a business expense.

Business Insurance

Deduct premiums you pay for business, employee accident, and health insurance.

Office Supplies

Deduct your expenses for daily business supplies.

Credit Card and Loan Interest

Deduct the interest you pay on business-related purchases.

Phone and Internet Costs

Deduct your entire internet and phone bill for a dedicated business line or a percentage for personal lines you use for business.

Business Travel and Meals

Deduct your travel expenses for legitimate business purposes.

Start-up Costs

Deduct up to $5,000 of your business start-up and organizational costs.

Advertising

Deduct expenses related to your business advertising.

Certain Memberships

Deduct membership fees for your professional organizations.

Qualified Business Income Deduction

Deduct a portion of business income on your taxes, depending on your total taxable incometaxable income and business type.

What are the Quarterly Tax Dates for 2024?

If you are going to owe at least $1,000 in taxes as a freelancer or gig economy worker, it becomes necessary to make anticipated tax payments periodically throughout the year. These payments should be made four times annually using Form 1040-ES. For the year 2024, the scheduled dates for quarterly estimated tax payments are as follows:

First Quarter (Q1): April 15, 2024
Second Quarter (Q2): June 17, 2024
Third Quarter (Q3): September 16, 2024
Fourth Quarter (Q4): January 15, 2025

It is crucial for self-employed individuals, freelancers, and others with income not subject to withholding to adhere to these quarterly estimated tax payments. This ensures compliance with tax obligations throughout the year.

Frequently Asked Questions

What is the tax rate for freelancers in the USA?

If you are a freelancer or gig economy worker in the USA, you are liable to pay a 15.3% income tax on your income.

What is the difference between self-employed and freelancers?

A self-employed worker initiates their own projects; a freelancer typically responds to client requests. Freelancers commonly work independently, choosing their hours and taking on various jobs for different clients. On the other hand, the term “self-employed” is frequently linked with business owners.

Can a gig be a job?

Gig work encompasses various roles, including freelance jobs. The defining factor that places a job within the gig economy is its structure – typically temporary or part-time. However, this doesn’t imply a restriction to just one gig; individuals often engage in multiple gigs simultaneously.

Conclusion

Whether a freelancer or gig worker anywhere in the USA or working abroad, each self-employed individual is legally under obligation to report their earning and file for taxes. If you are a gig economy worker curious about your gig economy tax implications, speak to a tax planning expert today!

February 16, 2024 by oscpatax_wpadmin in Blog

10 Tips that will Save you Income Tax in 2024

The tax season ends on April 5 every year and is a stressful time for most as the tax laws in the US are continuously changing. While some of the taxation strategies from last year may still be valid, others have undergone some changes that you must stay informed about.

Being proactive in tax planning and tax preparation and reviewing your finances and tax obligations helps you and your family stay on top of how to reduce taxable income and even keep more of your hard-earned money. In this blog, you will learn the ten best ways to reduce income tax in 2024.

10 Best Ways to Reduce Income Tax in 2024

Here are some of the most valuable tips on how to reduce income tax in 2024.

1. Contributing to Your HSA

You can reduce your income tax in 2024 by contributing to your high-deductive Health Savings Account (HSA). You have time until the tax deadline to make these contributions and apply them to last year’s tax spending.

2. Harvesting Your Investment Losses

Ensure you sell underperforming investments because you genuinely want to divest from them. Remember that violating wash sale rules, which disallow losses for tax purposes, occurs if you repurchase substantially similar stock or securities within 30 days.

Harvesting Your Investment Losses

Investment losses can offset capital gains, allowing you to lower your taxable income by up to $3,000 (or $1,500 for married individuals filing separately) with a net capital loss. If the net capital loss exceeds this amount, you can carry it forward to later tax years.

Ensure you sell underperforming investments because you genuinely want to divest from them. Remember that violating wash sale rules, which disallow losses for tax purposes, occurs if you repurchase substantially similar stock or securities within 30 days.

3. Opening a Flexible Spending Account (FSA)

You must utilize funds allocated to a Flexible Spending Account (FSA) must be utilized for eligible medical expenses within the same tax year; otherwise, the funds are forfeited. Contrary to a common misconception, a high-deductible health plan is not a prerequisite for contributing to an FSA. Similar to an HSA, contributions to an FSA can reduce your taxable medical income for the year.

4. Paycheck Withholdings

You can adjust your payroll tax withholdings at any time, and the IRS tax withholding calculator can assist with this; consult your tax planner for guidance.

Paycheck Withholdings

In 2023, individuals received an average tax refund of $2,753, reflecting a growth of over 7%, equivalent to approximately $229 per month. However, failing to withhold sufficient taxes from your paycheck may result in owing money and potentially incurring penalties. When itemizing your expenses on your tax return in 2024 in 2024, you can deduct charitable contributions as a tax deduction. This deduction applies to cash contributions and donated goods or services, for which it is essential to retain receipts if you intend to claim the charitable contributions.

Generally, the deduction for charitable contributions is capped at 60% of your adjusted gross income (AGI).

You can adjust your payroll tax withholdings at any time, and the IRS tax withholding calculator can assist with this; consult your tax planner for guidance.

5. Making Charitable Contributions

When itemizing your expenses on your tax return in 2024 in 2024, you can deduct charitable contributions as a tax deduction.

This deduction applies to cash contributions and donated goods or services, for which it is essential to retain receipts if you intend to claim the charitable contributions.

Generally, the deduction for charitable contributions is capped at 60% of your adjusted gross income (AGI).

6. Maximizing Your Tax Credits

If you want to know the ways to reduce taxable income in 2024, tax credit is an excellent place to start. For instance, if you qualify for a $2,000 tax credit, it will reduce your tax bill bill by the same amount. Some of the most common tax credits that may benefit you include the following:

American Opportunity Tax Credit

This tax credit is worth up to $2,500 for any qualified higher education expenses paid in the first four years of your higher education.

Child Tax Credit

This tax credit is worth up to $2,500 for any qualified higher education expenses paid in the first four years of your higher education.

Child and Dependent Care Credit

This tax credit helps cover expenses when you pay someone to look after your qualifying dependent or child so you and your spouse can continue to work. You can claim up to 35% of your caretaking expenses. This tax credit is up to $3,000 for one dependent or $6,000 for two or more qualifying dependents.

Earned Income Tax Credit

Are you on a low-to-moderate income? You can claim an earned income tax credit based on your income and the number of qualifying children.

Lifetime Learning Credit

You can get a credit of up to $2,000 for any qualified tuition and related costs.

7. Maximizing your business expenses

Suppose you operate a small business or engage in a side hustle where you report income or loss on Schedule C, Profit or Loss from Business, of Form 1040. In that case, U.S. Individual Income Tax Return makes sure that you maximize your business expenses.

This will allow you to have access to specific and advantageous business expense deductions. Deductible expenses include:

Home office expenses
Vehicle expenses
Business loan interest
Qualified business income

8. Save Tax Money as You Save for Your Retirement

Do you have access to 401(K) through your employer? If yes, it is an excellent way to start saving for retirement. The best part is that your contributions and earnings will continue to grow tax-deferred till you retire you retire. However, you will pay taxes at the time of funds withdrawal.

401(K) Contributions

The 401(K) contributions are pre-tax and allow you to lower your income tax in 2024. Some employers may also match your 401(K) contributions by a certain percentage of your monthly income. If your employer offers this facility, maximizing your 401(K) contribution is best to achieve the full benefits of saving extra money in your retirement account.

Roth 401(K)

Getting a designated Roth 401(K) is another beneficial alternative to making post-tax contributions. This way, you will get no tax deductions on your contributions in 2024 or subsequent years. This way, you will grow your money tax-free, but you can also withdraw your savings tax-free when you retire.

Traditional IRA

Contributing to a traditional IRA allows you to save income tax on money you deposit in the current year. Therefore, your earnings and contributions continue to grow tax-free until you make a withdrawal.

Roth IRA

With a Roth account, taxes are incurred in the present year, offering a potential tax advantage in the future. Contributions can be withdrawn at any time without incurring taxes or penalties.

Moreover, after keeping the account active for five years, you can withdraw earnings without facing taxation. However, the penalty-free withdrawal of earnings is only applicable once you have reached the age of 59½.

Some employers offer a dependent care FSA, specifically designed to cover daycare, preschool, and elder care expenses, facilitating your ability to work. It’s crucial to adhere to the IRS’s precise regulations governing each account type, ensuring proper and compliant utilization of your FSA.

9. Setting Up a College Fund for Your Children

A 529 plan, commonly referred to as a qualified tuition program, enables the payment of eligible higher education expenses at an eligible educational institution. Moreover, you can allocate up to $10,000 annually for K-12 expenses at an elementary or secondary public, private, or religious school.

While contributions are not tax-free, earnings accumulate tax-free and can be withdrawn without taxation when utilized for qualified purposes.

10. Time your expenses to bundle deductions

Consider paying property taxes in advance or scheduling a costly surgery before December 31. This strategy may empower you to bundle adequate expenses, facilitating itemized deductions and potentially reducing your tax bill.

10. Time your expenses to bundle deductions

If you expect a tax-deductible expense in the near future, try consolidating as many of them as possible within the current year. Most expenses must be settled before December 31 to be eligible for claiming on the current year’s tax return.

Consider paying property taxes in advance or scheduling a costly surgery before December 31. This strategy may empower you to bundle adequate expenses, facilitating itemized deductions and potentially reducing your tax bill.

Frequently Asked Questions

What is a tax liability?

The IRS calculates your tax liability based on your income, tax filing status, adjustments, deductions, and credits. Locate your tax liability on line 24 of Form 1040.

What is the minimum salary to pay income tax in the USA?

Your tax filing status and age determine the minimum income amount. For instance, in 2023, individuals under the age of 65 with a single filing status have a minimum income threshold of $12,950. If your income falls below this threshold, there is generally no requirement for you to file a federal tax return.

What are US tax brackets?

For 2023 and 2024, there are seven federal income tax rates and brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Your taxable income and filing status dictate the federal tax rates applicable to you and the corresponding amount of taxes you will owe in that year.

What income is tax-free in the USA?

The IRS considers inheritances, gifts, cash rebates, alimony payments (for divorce decrees finalized after 2018), child support payments, most healthcare benefits, welfare payments, and money reimbursed from qualifying adoptions as nontaxable.

How does a deduction work?

A tax deduction decreases your taxable income, thereby lowering the amount of taxes you owe. In contrast to a tax credit that directly reduces the taxes owed dollar for dollar, a tax deduction diminishes your tax bill by your marginal income tax rate.

How can I reduce the annual tax bill for my business?

You can implement many of the same tips applicable to individuals and actively reduce the tax bills for your small to medium-sized business. You may qualify for special business deductions related to your home office, vehicle, and business loan interest.

Moreover, as a small business owner, you may qualify for the qualified business income deduction. This allows you to deduct up to 20% of your qualified business income, 20% of qualified real estate investment trust (REIT) dividends, and qualified publicly traded partnership (PTP) income. Engage with a tax professional to determine if your business qualifies for these advantageous deductions.

Conclusion

Proactive and careful attention to organization is necessary for year-round tax planning. For a successful tax season 2024, review your finances, maximize contributions to retirement accounts, monitor deductible expenses, assess your investment portfolio, and maintain proper organization.

The above-mentioned ten tips will help reduce your income tax in 2024. You must also consider taking professional advice from an experienced tax planner or a local CPA in Dallas to optimize your financial investments and maximize your tax benefits.

If you are a salaried person, self-employed, or small business owner, contact Owais Shamsi, a highly experienced CPA in Dallas with over two decades of experience in tax planning,tax preparation and submission.

Don’t leave your tax preparation and submission to the last minute. Find out how our proactive tax preparation and submission services can help your business- book an appointment here or call at 214-253-8515.

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Monthly Archives: February

Important Tax Deadlines in 2024

Table of Contents

When Are My Taxes Due in 2024?

Important Tax Deadlines for Individual Filers in 2024

Important Tax Deadlines for Businesses, Partnerships (including LLCs), C Corps (Form 1120), and S Corps (Form 1120S)

3 Tips to Remember Before Tax Deadlines in 2024

Frequently Asked Questions

Conclusion

Top 25 Financial Terms You Must Know in 2024

Table of Contents

25 Common Financial Terms to Know in 2024

Frequently Asked Questions

Conclusion

Tax Implications for Freelancers & Gig Economy Workers in 2024

Table of Contents

Tax Implications for Gig Economy Workers

How to Reduce Your Tax Bill as a Gig Worker?

Tax Implications for Gig Workers Earning on Foreign Soil

Tips for American Gig Workers Residing Abroad

What Deductions Can Freelancers Take?

What are the Quarterly Tax Dates for 2024?

Frequently Asked Questions

Conclusion

10 Tips that will Save you Income Tax in 2024

Table of Contents

10 Best Ways to Reduce Income Tax in 2024

1. Contributing to Your HSA

2. Harvesting Your Investment Losses

3. Opening a Flexible Spending Account (FSA)

4. Paycheck Withholdings

5. Making Charitable Contributions

6. Maximizing Your Tax Credits

7. Maximizing your business expenses

8. Save Tax Money as You Save for Your Retirement

401(K) Contributions

Roth 401(K)

Traditional IRA

Roth IRA

9. Setting Up a College Fund for Your Children

10. Time your expenses to bundle deductions

Frequently Asked Questions

Conclusion

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