Especially in the early days of a business, it can be natural to want to handle as many day-to-day tasks yourself – bookkeeping included. Sometimes, it’s in an effort to save money. Often, entrepreneurs just feel like they’re in a better position to handle everything themselves. Regardless, this situation does seem to play out regularly.
Although the credit for purchasing a new electric vehicle can still be as much as $7,500, Congress has added some new stringent qualifications as to which vehicles qualify, and for the first time Congress has limited who qualifies for the credit by barring the credit to higher income taxpayers.
But first a little background. Prior to this change, a vehicle qualifying for the credit needed only to be a 4-wheel vehicle, with a minimum battery capacity of 5 kilowatt hours and a gross weight of less than 14,000 pounds. There was also a manufacturer limit of 200,000 units, after which the credit phased out over the subsequent four quarters. There were no qualification requirements for the purchaser of the vehicle.
New Qualifications – Under the new law, starting in 2023 the vehicle and the buyer must meet far more stringent requirements for a taxpayer to qualify for the clean vehicle tax credit.
Purchaser’s Income Limit – No credit is allowed for any tax year if the lesser of the modified adjusted gross income (MAGI) of the buyer for the:
MAGI is the buyer’s adjusted gross income increased by any foreign earned income and housing exclusions and excluded income from Guam, American Samoa, the Northern Mariana Islands, and Puerto Rico.
Vehicle Qualifications – To qualify, the vehicle must:
The VIN is permanently attached to a vehicle in several locations, appearing on the dashboard for most passenger vehicles and on the label located on the driver’s door frame. The VIN is also located on the window sticker of new vehicles and often appears on the vehicle listing on dealers’ websites.
The MSRP will be on the vehicle information label attached to each vehicle on a dealer’s premises. The MSRP for this purpose is the base retail price suggested by the manufacturer, plus the retail price suggested by the manufacturer for each accessory or item of optional equipment physically attached to the vehicle at the time of delivery to the dealer. It does not include destination charges or optional items added by the dealer, or taxes and fees.
Even when a vehicle is purchased for less than the MSRP, the credit limitation on the price of the vehicle is based on the manufacturer’s suggested retail price (MSRP), not the actual price paid for the vehicle.
Luckily for a buyer the dealer must provide a report that certifies the vehicle meets these requirements by specifying the amount of credit the vehicle qualifies for.
Seller Provided Report – The seller of the vehicle is required to furnish a report to the buyer and the IRS that includes:
List of Qualifying Vehicles – The IRS provides a list of eligible vehicles on its website.
Transfer of Credit to the Dealer – After 2023, the taxpayer purchasing the vehicle, on or before the purchase date, can elect to transfer the clean vehicle credit to the dealer from whom the vehicle is being purchased in return for a reduction in purchase price equal to the credit amount.
A buyer who has elected to transfer the credit for a new clean vehicle to the dealer and has received a payment from the dealer in return, but whose MAGI exceeds the applicable limit, is required to recapture the amount of the payment on their tax return for the year the vehicle was placed in service.
If you have questions about these new rules on the clean vehicle credit, please give this office a call.
Individuals and small businesses should consider various ways of starting off on the right foot for the 2023 tax year.
When you are attempting to defer the taxability of a capital gain, save money for your children’s future education or plan your retirement finances, you may do so in several ways, including investing in the stock market, buying real estate for income and appreciation, or simply putting money away in education savings accounts or retirement plans. Knowing how these various tax savings vehicles and income deferral opportunities function is important for choosing the ones best suited to your circumstances. Let’s begin by examining the tax nuances of IRA accounts.
FTX Group, also officially referred to as FTX Trading Ltd., is a cryptocurrency company that is currently in the process of bankruptcy proceedings. In addition to previously operating as a cryptocurrency exchange, it was also a crypto hedge fund.
It was originally founded in 2019 and hit its stride just a few years later in 2021. At one point, it had over a million users and was considered to be the third-largest exchange of its type in existence.
There is an important issue related to filing the 2022 S-corporation (Form 1120-S) and partnership (Form 1065) tax returns that requires the cooperation of the shareholders and partners.
Over the last decade, in particular, the definition of the term “career” has changed.
Rather than being employed by a single entity for which you receive a W2 at the end of the year, many are now participating in the “gig economy” in a variety of ways. They’re not just working a day job. They’re also driving for a ride-sharing service like Uber. They’re delivering food for companies like DoorDash. They’re leaning into the versatility that the fast-paced digital world has brought with it, enjoying the type of freedom that people didn’t previously have.
Have you seen those ads on television or received email solicitations promoting a large tax credit? The large tax credit they are referring to is the employee retention tax credit (ERTC). The ERTC is a government-sponsored program to keep workers employed during 2020 and 2021 because of the COVID pandemic by providing refundable tax credits to employers that kept their workers on payroll during the COVID crisis. Unlike most tax credits, this is a credit against the employer payroll taxes.
Even though this credit only applies for 2020 and part of 2021 for most businesses, if your business qualifies, and you haven’t already claimed the credit, it can still be claimed by amending the payroll tax returns for those years. So that you can determine if you might qualify for the credit and avoid being misguided by the credit promoters, the following is a summary of the qualifications to claim the ERTC.
The credit is available to all employers regardless of size, including tax-exempt organizations, tribal businesses, and businesses in U.S. Territories. There are only two exceptions: State and local governments and their instrumentalities. For eligible employers, the credit is available for wages paid:
December 1 – Time for Year-End Tax Planning
December is the month to take final actions that can affect your tax result for 2022. Taxpayers with substantial increases or decreases in income, changes in marital status or dependent status, and those who sold property during 2022 should call for a tax planning consultation appointment.
December 12 – Report Tips to Employer
If you are an employee who works for tips and received more than $20 in tips during November, you are required to report them to your employer on IRS Form 4070 no later than December 12. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 12 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed.
December 31 – Last Day to Make Mandatory IRA Withdrawals
Last day to withdraw funds from a Traditional IRA Account and avoid a penalty if you were born before January 1, 1951. You may delay your first distribution to April 1, 2023 if your birth date is during the period January 1, 1950 through December 31, 1950. If you are required to take a distribution in 2022 and the institution holding your IRA will not be open on December 31, you will need to arrange for withdrawal before that date.
December 31 – Last Day to Pay Deductible Expenses for 2022
Last day to pay deductible expenses for the 2022 return (doesn’t apply to IRA, SEP or Keogh contributions, all of which can be made after December 31, 2022).
December 31 – Caution! Last Day of the Year
If the actions you wish to take cannot be completed on the 31st or a single day, you should consider taking action earlier than December 31st.
December 1 – Employers
During December, ask employees whose withholding allowances will be different in 2023 to fill out a new Form W4 or Form W4(SP).
December 15 – Social Security, Medicare and Withheld Income Tax
If the monthly deposit rule applies, deposit the tax for payments in November.
December 15 – Nonpayroll Withholding
If the monthly deposit rule applies, deposit the tax for payments in November.
December 15 – Corporations
The fourth installment of estimated tax for 2022 calendar year corporations is due.
December 31 – Caution! Last Day of the Year
If the actions you wish to take cannot be completed on the 31st or a single day, you should consider taking action earlier than December 31st.
