If you have questions about IRS notices, help is just a phone call away.
HSA Limits Increase for 2024
Pre-tax or deductible contributions to a Health Savings Account (HSA) can be withdrawn tax-free to pay qualified current or future medical expenses of the account owner, his or her spouse, and any qualified dependent. Contribution limits are adjusted annually for inflation, and the 2024 limits were recently announced. They increase to $4,150 for individuals with self-only coverage (up $300 from 2023) and $8,300 for family coverage (up $550 from 2023). The additional catch-up contribution for individuals aged 55 or older before the end of the tax year remains at $1,000.
To take advantage of an HSA, individuals must be covered by a High Deductible Health Plan (HDHP) and not be covered by other health insurance, with the exception of insurance for accidents, disability, dental care, vision care, or long-term care. Medical expenses paid with HSA funds do not qualify for the medical expense deduction on a federal income tax return.
For the calendar year 2024, a qualifying HDHP must have a deductible of at least $1,600 for self-only coverage or $3,200 for family coverage (up $100 and $200, respectively, from 2023) and must limit annual out-of-pocket expenses of the beneficiary to $8,050 for self-only coverage and $16,100 for family coverage, an increase of $550 and $1,100, respectively, from 2023. As with contribution limits, maximum deductibles and out-of-pocket expense limits are adjusted for inflation annually.
Don’t hesitate to contact the office if you have questions about Health Savings Accounts.
July 17 Deadline for Unclaimed 2019 Tax Refunds
Nearly $1.5 billion in refunds remain unclaimed because some people haven’t filed their 2019 tax returns yet. Under the law, taxpayers usually have three years to file and claim their tax refunds. If they don’t file within three years, the money becomes the property of the U.S. Treasury.
However, for 2019 tax returns, people have more time than usual to file to claim their refunds. Normally, the filing deadline to claim old refunds falls around the April tax deadline, which is April 18 this year for 2022 tax returns. But the three-year window for 2019 unfiled returns was postponed to July 17, 2023, due to the COVID-19 pandemic emergency. Taxpayers who don’t file could be missing out on an average median refund of $893 for 2019, according to the IRS.
These unclaimed refunds could include more than just a refund of taxes withheld or paid during 2019. Many low- and moderate-income workers may be eligible for the Earned Income Tax Credit (EITC). For 2019, the credit was worth as much as $6,557. The EITC helps individuals and families whose incomes are below certain thresholds. Those who are potentially eligible for EITC in 2019 had incomes below:
- $50,162 ($55,952 if married filing jointly) for those with three or more qualifying children,
- $46,703 ($52,493 if married filing jointly) for people with two qualifying children,
- $41,094 ($46,884 if married filing jointly) for those with one qualifying child, and
- $15,570 ($21,370 if married filing jointly) for people without qualifying children.
Taxpayers should note that for those seeking a 2019 tax refund, their checks may be held if they have not filed tax returns for 2020 and 2021. In addition, the refund will be applied to any amounts still owed to the IRS or a state tax agency and may be used to offset unpaid child support or past-due federal debts, such as student loans.
Still need to file a 2019 tax return? Help is just a phone call away.
Tax Credits for Energy-Efficient Home Improvements
Taxpayers making certain energy-efficient updates to their homes are reminded that they could qualify for home energy tax credits. The credit amounts and types of qualifying expenses were expanded by the Inflation Reduction Act of 2022. Taxpayers who make energy improvements to a residence may be eligible for expanded home energy tax credits.
What Taxpayers Need To Know
Taxpayers can claim two tax credits for the year the qualifying expenditures are made: the Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit. Before purchasing energy-efficient equipment, taxpayers are encouraged to review all requirements and qualifications at IRS.gov/homeenergy. Additional information is also available on energy.gov, which compares the credit amounts for tax year 2022 and tax year 2023.
Homeowners making improvements to their primary residence will benefit the most from these tax credits; however, renters may also be able to claim credits, as well as owners of second homes used as residences. Landlords cannot claim these credits.
Efficient Home Improvement Credit
Under the Inflation Reduction Act, taxpayers that make qualified energy-efficient improvements to their home after January 1, 2023, may qualify for a tax credit of up to $3,200 for the tax year the improvements are made. Beginning January 1, 2023, the credit equals 30% of certain qualified expenses:
1. Qualified energy efficiency improvements installed during the year, which can include things such as:
- Exterior doors, windows and skylights, and.
- Insulation and air sealing materials or systems.
2. Residential energy property expenses such as:
- Central air conditioners,
- Natural gas, pro, or oil water heaters, and
- Naturapanel gas, propane or oil furnaces, and hot water boilers.
3. Heat pumps, water heaters, biomass stoves, and boilers.
4. Home energy audits of a main home.
The maximum credit that can be claimed each year is:
- $1,200 for energy property costs and certain energy-efficient home improvements, with limits on doors ($250 per door and $500 total), windows ($600), and home energy audits ($150), and
- $2,000 annually for qualified heat pumps, biomass stoves, or biomass boilers.
The credit is available only for qualifying expenditures to an existing home or for an addition or renovation of an existing home and not for a newly constructed home. The credit is nonrefundable, which means taxpayers cannot get back more from the credit than what is owed in taxes. Any excess credit cannot be carried to future tax years.
Residential Clean Energy Credit
Taxpayers who invest in energy improvements for their main home, including solar, wind, geothermal, fuel cells, or battery storage, may qualify for an annual residential clean energy tax credit. Taxpayers may be able to claim a credit for certain improvements other than fuel cell property expenditures made to a second home that they live in part-time and don’t rent to others.
The Residential Clean Energy Credit equals 30% of the costs of new, qualified clean energy property installed in a home in the United States anytime from 2022 through 2033.
Qualified expenses include the costs of new, clean energy equipment such as:
- Solar electric panels,
- Solar water heaters,
- Wind turbines,
- Geothermal heat pumps,
- Fuel cells, and
- Battery storage technology (beginning in 2023).
Clean energy equipment must meet the following standards to qualify for the Residential Clean Energy Credit:
- Solar water heaters must be certified by the Solar Rating Certification Corporation or a comparable entity endorsed by the applicable state.
- Geothermal heat pumps must meet Energy Star requirements in effect at the time of purchase.
- Battery storage technology must have a capacity of at least 3-kilowatt hours.
The credit is available for qualifying expenditures incurred for installing new clean energy property in an existing or newly constructed home. This credit has no annual or lifetime dollar limit except fuel cell property. Taxpayers can claim this credit each tax year they install eligible property until the credit begins to phase out in 2033.
This is a nonrefundable credit, which means the credit amount received cannot exceed the amount owed in tax. Taxpayers can carry forward any excess unused credit and apply it to any tax owed in future years.
Taxpayers should use Form 5695, Residential Energy Credits, to claim the credit. This credit must be claimed for the tax year when the property is installed, not just purchased.
Keeping Good Records Is Essential
Taxpayers are reminded that it is important to keep all receipts and records of purchases and expenses when the improvements are made to assist them in claiming the applicable credit during tax filing season. If you have any questions about home energy tax credits, please call.
What Teen Entrepreneurs Should Know About Taxes
Teens and young adults often go into business for themselves over the summer or after school. This work can include babysitting, lawn mowing, dog walking, or other part-time or temporary work. When teens or young adults are employees of a business, their employer withholds taxes from their paycheck. However, when classified as independent contractors or self-employed, they’re responsible for paying taxes themselves.
Here are six things to keep in mind:
- Everyone, including minors, must file a tax return if they had net earnings from self-employment of at least $400.
- If they owe taxes, teens and young adults should file their own tax returns, even if their parent or guardian claims them as a dependent.
- Teens and young adults can prepare and sign their own tax returns. There is no minimum age to sign a tax return.
- Parents can’t claim a dependent’s earned income on their own tax return.
- In addition to paying income tax, self-employed people are generally responsible for self-employment tax as well. This is the Social Security and Medicare taxes withheld from the pay of most wage earners plus the portion of these taxes the employer pays.
- Teens and young adults can lower the amount of tax they owe by deducting certain expenses.
What young entrepreneurs should do to keep on top of their tax responsibilities:
Keep records. It’s good to make and keep financial records and receipts during the year. Recordkeeping can help track income and deductible expenses and provide the information needed for a tax return.
Pay estimated tax, if required. If teens or young adults are being claimed as dependents and expect to owe at least $1,000 in tax for 2023, they must make estimated quarterly payments. They should pay enough tax on time to avoid a penalty. They can use one of these forms to calculate their estimated taxes:
- Form 1040-ES, Estimated Taxes for Individuals
- Form 1040-ES NR, U.S. Estimated Tax for Nonresident Alien Individuals
If taxpayers also have a job where their employer withholds tax, they can request that their withholding be increased to cover their estimated taxes from their self-employed income. That way, they don’t have to pay estimated tax separately. The Tax Withholding Estimator on the IRS website is a great tool to help wage earners figure out how much they should withhold.
File a tax return. When tax season rolls around, young taxpayers can review the information and forms, gather their records, and e-file their tax returns. When preparing to file a tax return, they should review all their records, including any estimated tax they’ve already paid.
Anyone who owes taxes can pay electronically through Online Account and IRS Direct Pay. If you need assistance with these and other tax issues, please call.
Why You Should Back Up Your Quickbooks File
It shouldn’t take the thought of a natural disaster to make you think about always having a current backup of your QuickBooks information. Files get corrupted. Computers fail and become inaccessible. Hackers can get in and compromise your valuable company information.
Once you lose your customer and vendor data and all your historical transactions, your business is gone. You might be able to reconstruct parts of it if you were storing some information on paper, but how long would that take? Meanwhile, your customers and vendors might give up and turn elsewhere.
Backing up your QuickBooks company file is not just a good idea. It could save your company someday. You’ll also need to do it when moving it to a new computer. Here’s how it works.
Before You Start
You’ll need to decide two things before you begin the backup process. Do you want to:
- Back up to a local storage device, like a CD or USB drive, or to the cloud?
- Set your backups to occur automatically or launch them manually.
Both options are available within QuickBooks Desktop, though online storage will incur additional fees.
Instructions and screenshots were created using QuickBooks Premier 2021. If your version varies, please contact us.
Setting Up Local Backups
Let’s start by describing how you create a backup copy you can hold in your hand (it is recommended that you store this off-site). First, make sure your copy of QuickBooks is up to date. If you’re using automatic updates, this shouldn’t be a problem, though you might want to check to make sure a new update hasn’t been released. Open the Help menu and select Update QuickBooks Desktop, then follow the instructions. You should do this if you’re updating manually.
You must be in single-user mode to create backups. Open the File menu and click Switch to Single-user Mode if you’re not there already.
Open the File menu and click Back Up Company | Create Local Backup. In the window that opens, click the button in front of Local backup, then click Options. This window will open:
Figure 1: You’ll need to specify your options before creating your first backup in QuickBooks.
Browse to find the desired location for your backup (this should not be on the same drive where QuickBooks is stored, but rather a removable storage device), then complete the rest of the fields in this window. Be sure to choose Complete verification at the bottom of the window to ensure your QuickBooks company field is not corrupt. Click OK. The window will close and return you to the Create backup window. Then click Next.
The window that opens ask when you want to save your backup. You can:
- Save it now.
- Save it now and schedule future backups.
- Only schedule future backups.
Select the second option and click Next. You have two choices. You can have QuickBooks save a backup every X times you close your company file, or you can create a schedule. To do the latter, click New. Give your backup a Description and Browse to its desired location. Then tell QuickBooks when the backup should run. You can select a specific time as well as multiple days of the week.
Figure 2: Tell QuickBooks when you want it to save backups automatically.
Once your schedule is set, click Store Password. Enter your Windows username and password so your backups can be launched when you’re not at your computer. Click OK, then OK again, then Finish. QuickBooks will then verify the integrity of your data and create your first backup. You can always go back into the Create Backup screen to Edit or Remove a schedule.
When prompted in the Save Backup Copy window, modify the name of your backup slightly so it doesn’t overwrite your original file. Then, write it down and save it.
Restoring a QuickBooks Company File
Before you start, move your backup file from your external storage device or cloud service to your local hard drive. Your backup file will have a .qbb extension. QuickBooks will convert this to a .qbw file during the restoration process.
Open the File menu and click Open or Restore Company, then Restore a backup company in the window that opens. Click Next and select Local backup, then click Next again.
Click the down arrow next to Look in to locate your .qbb backup file. Click it to highlight it, then click Open. Click Next in the window that opens. The Save in field in the window that opens should be pointing at Company Files, which is where your file should go. Click Save. If you get a message warning you that your file is going to overwrite an existing file, back up and change the name of your company file or backup. QuickBooks will then do the restoration and open your backup company file.
You can create a smaller file that only contains the accounting data that you want to share or move. This is called a portable company file, and it lacks some of the information included in a full backup, like templates, logos, and images. Please call if you need additional assistance about how to do this.
Online Backup for QuickBooks
If you’d rather store your QuickBooks file in the cloud, you can subscribe to Intuit Data Protect. You have access to this from QuickBooks, but there’s a fee involved ($9.95 per month or $99.95 per year). You can store up to 100GB of data using this service. Backups and encrypted and automated. If you decide to go this route, please call.
You must be extremely careful when working with QuickBooks’ backup and restore functions. You need to be sure which type of backup you need, and you certainly must avoid overwriting the data that you’ll need. If you have any questions or need assistance, please contact the office to schedule some time to walk you through this process the first time until you understand it well.
Tax Due Dates for June 2023
Employees – who work for tips. If you received $20 or more in tips during May, report them to your employer. You can use Form 4070.
Individuals – If you are a U.S. citizen or resident alien living and working (or on military duty) outside the United States and Puerto Rico, file Form 1040 or Form 1040-SR and pay any tax, interest, and penalties due. If you want additional time to file your return, file Form 4868 to obtain 4 additional months to file. Then file Form 1040 or Form 1040-SR by October 16.
However, if you are a participant in a combat zone you may be able to further extend the filing deadline.
Individuals – Make a payment of your 2023 estimated tax if you are not paying your income tax for the year through withholding (or will not pay in enough tax that way). Use Form 1040-ES. This is the second installment date for estimated tax in 2023.
Corporations – Deposit the second installment of estimated income tax for 2023. A worksheet, Form 1120-W, is available to help you estimate your tax for the year.
Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments in May.
Employers – Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in May.
Copyright © 2023 All materials contained in this document are protected by U.S. and international copyright laws. All other trade names, trademarks, registered trademarks and service marks are the property of their respective owners.