We are already two weeks into 2024 and we hope it is off to a good start for you! As you look back on 2023 in preparation for filing your income tax returns, consider the major tax law changes that have occurred, which include:
1. The Inflation Reduction Act increased tax credits and lifetime limits for energy efficiency home improvements and residential energy property, as well as for new and used clean-energy vehicles.
2. Beginning in 2023, deductibility of federal income tax on your Iowa tax return has been eliminated, married taxpayers can no longer file separately on a combined return, and Iowa will no longer tax retirement income, which includes 401(k)s, pensions and IRAs, and certain farm rental income. More information about changes to Iowa's tax law can be found here:
https://tax.iowa.gov/2023-changes-iowa-individual-income-tax
3. The age at which you must begin taking required minimum distributions from your retirement accounts has increased to 72.
4. Business meals are no longer 100% deductible; the old deduction rules now apply.
Please continue to be alert to tax scams. Do not respond to any phone calls or e-mails purporting to be from the IRS, Social Security, or the Iowa Dept. of Revenue – those agencies will make initial contact by mail. You are welcome to bring any such letter to our office for verification. Never include social security or bank account numbers in an unencrypted e-mail or in a phone call you did not initiate to a trusted number.
If you choose to have our office prepare and file your federal and state tax returns, you will need to sign and return our engagement agreement. Our contact information is at the bottom of this post. All professionally prepared tax returns must be filed electronically (“e-file”). If you want to file your own tax return for free, go to this webpage to learn how to electronically file your federal tax return for free:
https://www.irs.gov/newsroom/irs-free-file-is-now-available-for-the-2023-filing-season
Go to this webpage to electronically file your Iowa tax return for free:
https://tax.iowa.gov/individual-income-tax-electronic-filing-options
If you need worksheets or forms, please let us know. The IRS requires mileage logs for vehicles with business use. This is absolutely necessary for vehicles that are also available for personal use.
If you have a trade or business, you are required to send a Form 1099 to any individual, partnership or LLC that you paid $600.00 or more for services, rent or interest in the course of said business. Be sure to collect Form W-9 from each of your contractors or you may be required to make backup withholding deductions from your payments. Payments to cooperatives, banks and corporate entities are excluded. Wages in excess of $150 in any quarter require the filing of Forms W-2 and W-3. If you would like us to prepare these forms, you will need to provide us with the information before January 27, 2024.
If you have questions on any of the above or other tax matters feel free to call, e-mail, or stop in. When you have your records ready, you may let us know and we will set up an appointment that is convenient for you. Evening or Saturday appointments can be arranged. If you want to e-mail us information securely, send us an e-mail and we will open a Trustifi® portal for encrypted transmissions.
If you are involved in a business entity, there are a number of other new things of which you should also be aware, which include:
1. In an effort to reduce money laundering and tax evasion, the U.S. Treasury is requiring most small business entities to register with the FinCEN (Financial Crimes Enforcement Network). The initial report, which is called “Beneficial Ownership Information” (BOI), must be filed by December 31, 2024, for already existing businesses. (The time frame is much shorter for new business entities.) However, you are advised not to wait until the last minute as there will be considerable strains on the system at the close of the year and the penalties for non-compliance are substantial (including prison). The entities required to register include almost all limited partnerships, limited liability companies (LLCs), and corporations, except for publicly traded entities. Even single-member LLCs that are treated as “disregarded entities” for income-tax purposes must register. Living trusts that are treated as disregarded entities because the grantor is still the trustee do not have to register, but other types of trusts do need to register. Nonprofit entities with a tax-exempt determination do not need to register. If you want our office to file your BOI report, we will need to keep an image of each owner's driver's license, passport, or other approved identification.
2. Beginning in 2022, to combat out-of-state members or beneficiaries of Iowa entities who were not paying Iowa income tax on their Iowa earnings, Iowa now requires pass-through entities, such as LLCs, partnerships, S-corporations and trusts, to file a consolidated Iowa return called IA-PTE-C. The entitiy must also pay tax on behalf of its out-of-state distributees, unless they sign a Nonresident Member Agreement (NMA) each tax year.
3. Beginning in 2023, for members or beneficiaries of Iowa entities who were not able to deduct all their itemized state and local tax payments because of the $10,000 cap included in the Trump tax cut; Iowa now allows pass-through entities, such as LLCs, partnerships S-corporations and trusts, to elect to pay tax for all of their members or beneficiaries on a consolidated Iowa return called IA-PTE-T.
4. In an effort to close the “tax gap” (the gap between income tax owed and income tax reported [$688 billion in 2021]), IRS is stepping up enforcement of 1099 reporting rules. Of particular note is the requirement that you must have a signed, completed form W-9 from each person or entity to whom you are required to send a Form 1099 report. If you do not, you are required to withhold federal income tax from any payment you make to that business and deposit it with the U.S. Treasury.
Privacy Policy
Your privacy is important to us. Please read the following privacy policy.
We collect nonpublic personal information about you from various sources, including:
* Interviews regarding your tax situation
* Applications, worksheets, or other documents that supply such information as your name, address, date of birth, phone number, Social Security Number, income, dependents' information, and other tax-related data
* Tax-related documents you provide that are required for processing tax returns, such as Forms W-2, 1099B, 1099R, 1099INT, 1099DIV, 1099MISC, 1099NEC, 1099S, 1098, 1098E, 1098T, 1099SSA, 1099RBR, 5498,...
We do not disclose any nonpublic personal information about our clients or former clients to anyone, except as requested by our clients or as required by law.
We restrict access to personal information concerning you, except to our employees who need such information in order to provide products or services to you. We maintain physical, electronic, and procedural safeguards that comply with federal regulations to guard your personal information.
We charge a service fee for accepting payment of our tax preparation fees by credit card. If you choose to pay with a credit card, you may receive an email from the service Square, which processes the payment.
Pursuant to U.S. Treasury Regulations, you are advised that any federal tax advice included in this communication is not intended or written to be used, and cannot be used, to avoid any U.S. federal tax penalties, or to promote, market, or recommend to another party any transaction or matter.
Varley Law Office, PLC
Warren A. Varley • Attorneys-at-Law• Karen K. Varley
201 NE Second Street, P. O. Box 235, Stuart, Iowa 50250-0235
Phone: (515) 523-2456 [FAX 866-297-7985] E-mail: varleylaw@iabar.org
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