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Tennessee Tax Legislative Update

As previously shared through an earlier update, in January Governor Bill Lee announced plans to amend the Tennessee franchise tax to simplify the calculation. Under existing law, the franchise tax base is the greater of 1) the taxpayer’s net worth or 2) the net book value of the property owned, and the rental value (using a defined multiple) of property used in Tennessee. Once calculated, the franchise tax base is subjected to a tax rate which is $0.25 per $100 of the tax base. Under Governor Lee’s simplification, the franchise tax would be determined based solely on net worth, with the alternative method using net book value of assets being repealed.

Since its announcement, this planned overhaul to the state’s franchise tax law has been subject to significant debate and negotiation among lawmakers; however, in the final hours of Tennessee’s legislative session last week, both chambers approved a compromise plan. The plan is projected to send approximately $1.5 billion back to taxpayers and reduce the state’s franchise tax revenue by approximately $400 million annually. Additionally, the compromise plan provides for three years of tax refunds desired by the Senate while also providing transparency provisions desired by the House. Tax refunds will be available for returns filed after January 1, 2021, covering a tax period that ended on or after March 31, 2020. Generally speaking, for calendar year taxpayers the applicable periods are tax years 2020 through 2023.  The refund claims will be required to be filed between May 15th and November 30th of this year and taxpayers claiming refunds will be required to waive all rights to sue the state over franchise tax obligations during the affected period. Specific to transparency, the compromise plan will require refunds paid to taxpayers to be disclosed in ranges – $750 or less; $751 to $10,000; greater than $10,000; or “pending” if a final payment has not been determined. 

Governor Lee is expected to sign the legislation.

Within the next few weeks, RBG tax advisors will be contacting our impacted Tennessee taxpayers to discuss the details of anticipated refund claims and expected timing of filings. Should you have any immediate questions, feel free to contact your RBG advisor.

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Tax Benefits Available to Disabled Taxpayers

Disabled individuals, as well as parents of disabled children, may qualify for several tax credits and other tax benefits. If you or someone listed on your federal tax return is disabled, you may be eligible for one or more of the following tax benefits:

Increased Standard Deduction – Since a change in the law more than 35 years ago, taxpayers (or spouses when filing a joint return) who are legally blind have been eligible for a standard deduction add-on. Thus, for 2024, if you are filing jointly with your blind spouse, you can add an additional $1,550 to your standard deduction of $29,200; if both you and your spouse are blind, the add-on doubles to $3,100. For other filing statuses, the additional amount is $1,950. While being age 65 or older isn’t a disability, it should be noted that there is also an “elderly” add-on to the standard deduction of $1,550 or $1,950, depending on filing status. These add-ons apply only to the taxpayer and spouse, not to dependents.

Exclusions from Gross Income – Certain disability-related payments, Veterans Administration disability benefits, and Supplemental Security Income are excluded from gross income (i.e., they are not taxable). Amounts received for Social Security disability are treated the same as regular Social Security benefits, which means that up to 85% of the benefits could be taxable, depending on the amount of the recipient’s (and spouse’s, if filing jointly) other income.

Impairment-Related Work Expenses – Individuals with a physical or mental disability may deduct impairment-related expenses paid to allow them to work.

  • Employees – Although the 2017 tax reform eliminated most miscellaneous itemized deductions through 2025, it retained a deduction for employees who have a physical or mental disability that limits their employment. As a result, they can still deduct the expenses necessary for them to work even when not itemizing deductions.
  • Self–employed – For those who are self-employed, impairment-related expenses are deductible on Schedule C or F.

Impairment-related work expenses are ordinary, necessary business expenses for attendant care services at the individual’s place of work as well as other expenses in the workplace that are necessary for the individual to be able to work. An example is when a blind taxpayer pays someone to read to them work-related documents.

Financially Disabled – Under normal circumstances, one must file a claim for a tax refund within 3 years of the unextended due date of the tax return. For example, for a 2021 tax return, the due date was April 18, 2022, which is when the 3-year clock started running. Thus, the IRS will not issue refunds for an amended 2021 or a late-filed original 2021 return submitted to the IRS after April 15, 2025. However, if a taxpayer is “financially disabled,” the period for claiming a refund is suspended for the period during which the individual is financially disabled.  

What does financially disabled mean? An individual is financially disabled if they are unable to manage their financial affairs because of a medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than 12 months.

For a joint income tax return, only one spouse must be financially disabled for the time period to be suspended. However, financial disability does not apply during any period when the individual’s spouse or any other person is authorized to act on the individual’s behalf in financial matters.

Earned Income Tax Credit (EITC) – The EITC is available to taxpayers who are disabled and to the parents of a child with a disability, even when the child’s age would normally prevent the child from being a qualifying child. To be eligible for the credit, the taxpayer must receive earned income, which generally means wages or self-employment income. However, if an individual has retired on disability, taxable benefits received under their employer’s disability retirement plan are considered earned income until the individual reaches a minimum retirement age. If the disability benefits received are nontaxable, as would be the case if the disabled individual paid the premiums for the disability insurance policy from which the benefits come, then the benefits are not considered earned income. The EITC is a tax credit that not only reduces a taxpayer’s tax liability but may also result in a refund. Many working individuals with a disability who have no qualifying children may qualify for the EITC.

If a taxpayer’s child is disabled, the qualifying child’s age limitation for the EITC is waived.

The EITC has no effect on certain public benefits. Any refund received because of the EITC will not be considered income when determining whether a taxpayer is eligible for benefit programs such as Supplemental Security Income and Medicaid.

Child or Dependent Care Credit – Taxpayers who pay someone to come to their home and care for their dependent or disabled spouse may be entitled to claim this credit. For children, this credit is usually limited to the care expenses paid only until age 13, but there is no age limit or children unable to care for themselves.

Special Medical Deductions When Claiming Itemized Deductions – In addition to conventional medical deductions, the tax code provides special medical deductions related to disabled taxpayers and dependents. They include:

·        Equipment and Home Improvement Expenses – Amounts paid for special equipment or improvements installed in the home may be included as medical expenses deductible as part of itemized deductions, if their main purpose is medical care for the taxpayer, the spouse, or a dependent. Examples of the many eligible home improvement expenses include constructing entrance or exit ramps, widening doorways and hallways, and installing railings and support bars in a bathroom. The cost of permanent improvements that increase the value of the property may only be partly included as a medical expense.
  • Learning Disability – Tuition paid to a special school for a child with severe learning disabilities caused by mental or physical impairments, including nervous system disorders, can be included as medical expenses eligible for the medical deduction when itemizing deductions. A doctor must recommend that the child attend the school. Fees for the child’s tutoring recommended by a doctor and given by a teacher who is specially trained and qualified to work with children who have severe learning disabilities might also be included.
  • Drug Addiction – Amounts paid by a taxpayer to maintain a dependent, themself or their spouse in a therapeutic center for drug addicts, including the cost of meals and lodging, are included as medical expenses for itemized deduction purposes.
  • Other Medical Expenses – Here are some other medical expenses that apply to individuals with disabilities:  
    • Cost of Braille books and magazines that exceeds the price of regular printed editions.
    • Cost of a wheelchair used mainly for the relief of sickness or disability, not just to provide transportation to and from work, including the cost of operating and maintaining the wheelchair.
    • Cost and care of a guide dog or other animal aiding a person with a physical disability.
    • Cost of artificial limbs and hearing aids.

Exclusion of Qualified Medicaid Waiver Payments – Payments made to care providers caring for related individuals in the provider’s home are excluded from the care provider’s income if they meet certain requirements to be considered foster care payments. Even so, the nontaxable income may qualify as earned income for purposes of the care provider claiming the earned income tax credit. Qualified foster care payments are amounts paid under a state’s foster care program (or political subdivision of a state or a qualified foster care placement agency). For more information, please call.

ABLE Accounts – Achieving a Better Life Experience (ABLE) accounts provide a way for individuals and families to contribute and save for the purpose of supporting individuals with disabilities in maintaining their health, independence, and quality of life.

Federal law authorizes states to establish and operate ABLE programs. Under these programs, an ABLE account may be set up for any eligible state resident – someone who became severely disabled before turning 26 – who would generally be the only person who could take distributions from the account. Beginning for years after 2025, the eligibility age increases to 46. ABLE accounts are very similar in function to Sec. 529 plans that are designed for saving for education expenses. The main purpose of ABLE accounts is to shelter assets from the means testing required by government benefit programs.

Individuals can contribute to ABLE accounts, subject to per-account gift tax limitations (maximum $$18,000 for 2024, up from $17,000 in 2023). For years 2018 through 2025, working individuals who are beneficiaries of ABLE accounts are allowed to contribute limited additional amounts to their ABLE accounts, and these contributions can also be eligible for the nonrefundable saver’s credit.

Distributions to the disabled individual are tax-free if the funds are used for qualified expenses of the disabled individual.

For more information on these tax benefits available to disabled taxpayers or dependents, please give this your RBG advisor a call.

RBG - Intern Post - 5 People (2)

2024 Internship Spotlight

Internships offer a dynamic avenue for expanding your network and forging valuable connections. At RBG, interns collaborate directly with industry professionals, fostering relationships that can shape their future careers.

Beyond networking, internships serve as a direct pathway to permanent positions. RBG actively cultivates talent, often recruiting interns for full-time roles, with a clear trajectory for advancement up to Partner level. Dedication and effort during an internship with RBG can significantly increase your likelihood of receiving a job offer, setting the stage for a successful career journey.

This year, we’ve had the pleasure of hosting a fantastic cohort of interns. As we spotlight their experiences, we’ve asked each of them three key questions:

  1. What have you learned so far during your time at RBG?
  2. What has been your favorite part about interning at RBG?
  3. Based on your experience, what’s your biggest piece of advice you’d give to a future intern?
See their insightful responses below:

 

Q: What have you learned so far during your time at RBG?

A: “While interning at RBG, I have become more familiar with the audit process and how an audit team completes its work.”

Q: What has been your favorite part about interning at RBG?

A: “My favorite part of interning at RBG has been the fact that I don’t feel as though I am just an intern. RBG has made me feel like I am part of the staff, even if I am a very inexperienced part of the team.”

Q: Based on your experience, what’s the biggest piece of advice you’d give to a future intern?

A: “My advice to future interns is to be bold and ask questions because there will always be something you need help understanding, or there may be a more efficient way to perform the work you’re doing.”

— Eric Daniels
    Senior, University of Memphis

Q: What have you learned so far during your time at RBG?

A: “I have learned about the audit process for both banks and private companies. I did not realize how much teamwork was involved with accounting until I worked with the audit team. I have also learned how to fill out 1040’s and 1041’s. There is something new in almost every tax return I prepare, so it is interesting to see it and take in all that knowledge.”

Q: What has been your favorite part about interning at RBG?

A: “I have enjoyed everyone I have worked with. Everyone here wants others to learn and they want to help out anyway they can. Working here pushes me to want to learn and improve.”

Q: Based on your experience, what’s the biggest piece of advice you’d give to a future intern?

A: “I would definitely recommend coming into your internship wanting to learn. I had heard before about how everyone in accounting is always learning, but I really see it now. Don’t let that thought overwhelm you, but be excited for it.”

— James Strickland
     Senior, University of Memphis

Q: What have you learned so far during your time at RBG?

A: “During my time at RBG I have learned how to prepare tax returns for individuals and trusts. I have also learned how to improve my professional communication and time management skills throughout this internship.”

Q: What has been your favorite part about interning at RBG?

A: “My favorite part of interning at RBG has been the people, everyone is so willing to help and answer any questions I may have. It feels like everyone tries their best to make others feel comfortable asking questions and receiving help.”

Q: Based on your experience, what’s the biggest piece of advice you’d give to a future intern?

A: “My biggest piece of advice for a future intern would be to not be too hard on yourself at first. Taxes are complicated, and I often felt down about myself or my work especially in the beginning. The point of an internship is to learn and grow, so as long as you are willing to ask questions and learn from mistakes, then you will do great!”

— Christian Russell
    Senior, Arkansas State University

Q: What have you learned so far during your time at RBG?

A: “I have learned more about Partnership Tax and the many differences between it and an individual return.”

Q: What has been your favorite part about interning at RBG?

A: “I have enjoyed that there isn’t an overarching sense of seniority and that new hires can fit right in professionally and socially.”

Q: Based on your experience, what’s the biggest piece of advice you’d give to a future intern?

A: “Come into your internship willing to ask a lot of questions and get involved in the RBG culture!”

— Ian Sharp
    Master’s Student, University of Memphis

Q: What have you learned so far during your time at RBG?

A: “Auditing is very different from the classroom. In the classroom, you’re only rewarded when you get something right. However, in the real world, much of what you do is learned by asking questions and through trial & error.”

Q: What has been your favorite part about interning at RBG?

A: “The collaborative aspect! Because I’m introverted, reaching out to clients, meeting new people, and getting to try new things is easily what I value the most out of my internship.”

Q: Based on your experience, what’s the biggest piece of advice you’d give to a future intern?

A: “RBG is filled with nice people, so if you do run into something you don’t understand, just ask! As long as you are willing to learn, they will teach you.”

— Lucas Hayden
    Master’s Student, Christian Brothers University

Q: What have you learned so far during your time at RBG?

A: “I’ve gained valuable experience in setting up operations for the CAAS department through collaboration with IT. This allowed me the autonomy to implement robust data security measures like KeePass, safeguarding our clients’ sensitive information. My skills now include payroll management, e-filing of 1099s, business tax e-filing, and annual report creation. Additionally, I’ve honed my ability to conduct loan reviews and prepare tax workpapers, along with filing 1040s and 1041s. I’ve also acquired proficiency in various software applications such as Engagement, Return Manager, Client Write-Up, Document, and Yearli.”

Q: What has been your favorite part about interning at RBG?

A: “The opportunity to experience all 3 departments (CAAS, Audit, Tax). My internship with RBG gave me the opportunity to improve my cognitive ability in the profession before deciding where my career would start as a full-time employee. Each department has diversified my intellectual portfolio. In addition to this, I appreciated the level of understanding everyone had when it came to me balancing grad school and working hours.”

Q: Based on your experience, what’s the biggest piece of advice you’d give to a future intern?

A: “Make connections your first day on the job. Interacting with all colleagues (not just in your department) could open a door of opportunities for learning and mentorship. I also recommend that you not be afraid to ask questions and keep a notebook at all times to write down the responses. This notebook will be extremely helpful down the line when you need refreshers.”

— Martina Jones
    Master’s Student , Rhodes College

Q: What have you learned so far during your time at RBG?

A: “I have learned how to use tax forms before even having any of the classes. I’ve also learned how to work in an environment like RBG.”

Q: What has been your favorite part about interning at RBG?

A: “The exciting events, the kindness of the community, and the understanding of those working around you.”

Q: Based on your experience, what’s the biggest piece of advice you’d give to a future intern?

A: “When you come work at RBG, make sure you go to the events and just talk to everybody, they are all very kind.”

— Carson Young
    Sophomore , University of Memphis

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Unique Charitable Giving Options

There are some unique ways to make charitable contributions that can provide tax advantages to the donor. Before deciding about your charitable giving for the year, you may benefit from this article on ways to contribute that will help you tax-wise.

Normally, deductible charitable contributions are limited by a percentage of your income, more specifically your adjusted gross income (AGI), which is the number on your tax return before your deductions are subtracted. For most charitable contributions the tax deduction limit is 50% of your AGI (increased to 60% for cash contributions made to public charities in 2018 through 2025), but it can drop to 30% or even 20% in certain situations. Additionally, charitable contributions are only allowed if you itemize your deductions, which most people will do only when their standard deduction is less than the total of their overall itemized deductions.

Here are some of the unique ways of charitable giving that provide tax benefits to the donor:

Donate Unused Employee Time Off – As they have done before in the wake of disasters, including Hurricane Katrina, Superstorm Sandy, COVID-19, and Ukrainian relief, the Internal Revenue Service is allowing special contributions for Maui wildfire relief. It permits employees to donate their unused paid vacation, sick leave, and personal leave time to charities that are providing relief to victims of the Maui wildfire that began on August 8, 2023.

It is referred to as leave-based donations and here is how it works: if your employer is participating, you can relinquish any unused and paid vacation time, sick leave, and personal leave for cash payments which your employer will donate to relief charitable organizations. The cash payment will not be treated as wages to you and your employer can deduct the amount donated as a charitable contribution or a business expense.

However, since the income isn’t taxable to you, you will not be allowed to claim the donation as a charitable deduction on your tax return. Even so, excluding income is often worth more as tax savings than a potential tax deduction, especially if you generally claim the standard deduction or you are subject to AGI-based limitations.

This special relief applies to all donations made before January 1, 2025, giving individuals time yet in 2024 to forgo their unused paid vacation, sick, and leave time and have the cash value donated to help those who lost everything, including their homes, livelihood and even family in this devastating disaster.

This is a great opportunity to provide sorely needed help in the aftermath of the wildfire without costing you anything but time. Contact your employer to see if they are participating, and if not, make them aware of the unique opportunity. They benefit by not having to pay payroll taxes on the cash equivalent of the donated time, so it is worth their time to participate. If your employer is unaware of his program refer them to IRS Notice 2023-69 for further details.    

Contributions of Appreciated Assets – Although this is not a new strategy, it may be one you aren’t aware of. Taxpayers can donate appreciated long-term capital gain assets to a charity and deduct the fair market value (FMV) of the assets as a charitable deduction. For example, suppose you donate to your church’s building fund a stock that is worth $10,000 but that only costs you $2,000. Your charitable contribution would be $10,000, and you do not have to pay tax on the $8,000 appreciation in the stock. This strategy can also apply to land, homes, rentals, equipment, etc. Determining the FMV for listed stock is easy since the value of the stock can be determined from quoted stock prices on the day of the contribution. For other capital assets, a certified appraisal is generally required. It would be good practice to contact this office before making a gift of appreciated property to make sure that it is appropriate for your tax bracket and that the appraisal is properly performed and documented.

IRA to Charity Contributions – This charitable contribution, termed a qualified charitable distribution (QCD), is limited to taxpayers aged 70½ and older. They can directly transfer up to $100,000 a year from their IRA to a qualified charity. So if you are 70½ or older and make an IRA-to-charity transfer you won’t get a charity deduction, but instead, and even better, you will not have to pay taxes on the distribution, and because your AGI will be lower, you can benefit from other tax provisions that are pegged to AGI, such as the amount of Social Security income that’s taxable and the cost of Medicare B insurance premiums for higher-income taxpayers. As an additional bonus, if you are required to take an annual required minimum distribution from your IRA, the transfer also counts toward your RMD.

Caveat: Beginning in 2020 Congress repealed the age limit for making IRA contributions. This means a taxpayer can make traditional IRA contributions (if they have earned income) and QCDs after reaching age 70½. As a result, Congress included a provision in the tax law requiring a taxpayer who qualifies to make a QCD to reduce the QCD non-taxable portion by any traditional IRA contribution made after reaching 70½ that was deducted, even if they are not in the same year.

Charity Volunteer Deductions – If you do volunteer work for a charity, you cannot claim a charitable contribution deduction for the time you spend performing qualified charitable services. However, you can deduct out-of-pocket expenses you incur in performing those services. Here are some examples:

  • Entertaining For Charity – You may deduct the cost of entertaining others on behalf of a charity (e.g., wining and dining potential large contributors), but the cost of your own entertainment (or meal) is not deductible. The meals or entertainment on behalf of a charity may be provided in your home.
  • Uniforms – The cost of uniforms required to be worn when providing services to a charity is deductible as long as the uniforms have no general utility. The cost of cleaning the uniform also may be deducted. Treat these out-of-pocket expenses as “cash” donations rather than “property” donations.
  • Charitable Away-From-Home Travel – Volunteers often pay their own way when they travel away from home overnight in connection with charitable work. If you travel away from home overnight, including to foreign locations, to do charitable work for a qualified organization, you may generally deduct the same types of expenses that may be claimed by a taxpayer who makes a similar trip for business purposes. These out-of-pocket costs are deductible if they are properly substantiated non-lobbying expenses, they are reasonable in amount, and there is no significant element of personal pleasure, recreation, or vacation in the travel. Deductible expenses include your out-of-pocket roundtrip travel cost, taxi fares, and other costs of transportation between the airport or station and the hotel, lodging, and meals.

    Meals – If you are a volunteer traveling away from home overnight for a charity-related purpose, you may deduct 100% of your meal costs, since charity meals are not subject to the 50% reduction that applies to business meals.

Non-cash Contributions – This is a type of contribution with which you can easily run afoul of the IRS because the contribution deduction is based on the fair market value of the item being contributed, not the item’s original cost, and most used items such as clothing and household goods depreciate substantially.

Do not include items of de minimis value, such as undergarments and socks, in the deductible amount of your contribution, as they are specifically not allowed. It is not uncommon to see taxpayers over-valuate their contributions. That is why the IRS has four levels of verification and documentation requirements for non-cash contributions, with each becoming more stringent as the valuation increases:

Caution: The value of similar items of property that are donated in the same year must be combined when determining what level of documentation is needed. Similar items of property are items of the same generic category or type, such as clothing, household goods, coin collections, paintings, books, jewelry, privately traded stock, land, and buildings.

Deductions of Less Than $250 – You must obtain and keep a receipt from the charitable organization that shows: 

1. The name of the charitable organization,

2. The date and location of the charitable contribution, and

3. A reasonably detailed description of the property. 

Note: You are not required to have a receipt if it is impractical to get one (for example, if the property was left at a charity’s unattended drop site). This exception only applies if all the non-cash contributions for the year are less than $250.

Deductions of At Least $250 But Not More Than $500 – You must provide the same information as in the previous category and add:

4. Whether or not the qualified organization gave you any goods or services as a result of the contribution (other than certain token items and membership benefits).

If the deduction includes more than one contribution of $250 or more, you must have either a separate acknowledgment for each donation or a single acknowledgment that shows the total contribution.

Deductions Over $500 But Not Over $5,000 – You must provide the same acknowledgment and written records that are required for the two previous categories plus: 

5. Attach a completed IRS Form 8283 to the income tax return that reports:

a. How the property was obtained (for example, purchase, gift, bequest, inheritance, or exchange),

b. The approximate date the property was obtained or—if created, produced, or manufactured by the taxpayer—the approximate date when the property was substantially completed, and

c. The cost or other basis, and any adjustments to this basis, for property held for less than 12 months and (if available) the cost or other basis for property held for 12 months or more. 

Deductions Over $5,000 – These donations require time-sensitive appraisals by a “qualified appraiser” in addition to other documentation (this requirement, however, does not apply to publicly traded securities). When contemplating such a donation, please call this office for further guidance about the documentation and forms that will be needed.

Unfortunately, legitimate charities face competition from fraudsters, so if you are thinking about giving to a charity with which you are not familiar, do your research so that you can avoid swindlers who are trying to take advantage of your generosity. They show up in droves after disasters like hurricanes and firestorms. Here are tips to help make sure that your charitable contributions go to the cause that you support:

  • Donate to charities that you know and trust. Be alert for charities that seem to have sprung up overnight in connection with current events.
  • Ask if a caller is a paid fundraiser, who he/she works for, and what percentages of your donation go to the charity and to the fundraiser. If you don’t get clear answers—or if you don’t like the answers you get—consider donating to a different organization.
  • Don’t give out personal or financial information—such as your credit card or bank account number—unless you know for sure that the charity is reputable.
  • Never send cash. You can’t be sure that the organization will receive your donation, and you won’t have a record for tax purposes.
  • Never wire money to someone who claims to be from a charity. Scammers often request donations to be wired because wiring money is like sending cash: Once you send it, you can’t get it back.
  • If a donation request comes from a charity that claims to help a local community group (for example, police or firefighters), ask members of that group if they have heard of the charity and if it is actually providing financial support.
  • Don’t make a contribution if it is solicited in an email claiming to be from the IRS. The IRS does not send emails to individuals and does not ask for donations to organizations related to natural disasters. Scammers use this ploy to extract money from taxpayers who think their contributions will go for hurricane relief or to wildfire victims.
  • Check out the charity’s reputation using the Better Business Bureau’s Give.org or Charity Watch.

Remember that if you want to deduct a charitable contribution on your tax return, the donation must be to a legitimate charity. Contributions may only be deducted if they are to religious, charitable, scientific, educational, literary, or other institutions that are incorporated or recognized as organizations by the IRS. Sometimes, these organizations are referred to as 501(c)(3) organizations (after the code section that allows them to be tax-exempt). Gifts to federal, state, or local government, qualifying veterans’ or fraternal organizations, and certain nonprofit cemetery companies also may be deductible. Gifts to other kinds of nonprofits, such as business leagues, social clubs, and homeowner’s associations, as well as gifts to individuals, cannot be deducted.

Be aware that, to claim a charitable contribution, you must also itemize your deductions. If you only marginally itemize your deductions, it may be beneficial for you to group your deductions in a single year and then to skip deductions in the next year.

Please contact this office if you have questions related to the tax benefits associated with charitable giving for your particular tax situation.

Tax scam danger sign, A black and white danger sign with text Tax Scam and theft icon on a keyboard

Top 10 Ways to Spot a Tax Scam

Tax season can be stressful enough without having to worry about falling victim to tax scams. With cybercrime and identity theft becoming increasingly prevalent as more people file their taxes online, it’s wise to be vigilant and aware of potential scams targeting your personal information (and your financial well-being!) 

Here are the top 10 ways to spot a tax scam and protect yourself from becoming a victim:

File Early: Beat scammers to the punch by filing your taxes as early as possible. This reduces the window of opportunity for fraudsters to file a false return in your name. Plus, you’ll probably get your tax refund faster!

Sign Up for an IP PIN: The IRS offers an Identity Protection Personal Identification Number (IP PIN) program, providing an extra layer of security by requiring a unique code for tax filing. Consider enrolling to safeguard your tax return every year.

Beware of Unsolicited Contact: The IRS never initiates contact via email, text, or social media to request personal information. Be wary of any communication claiming to be from the IRS and asking for sensitive data. The agency only sends initial correspondence via the United States Postal Service (USPS).

Verify Caller Identity: If you receive a phone call purportedly from the IRS, verify the caller’s identity. The IRS does not ask for credit or debit card numbers over the phone and will never demand payment via gift cards or cryptocurrency. Furthermore, legitimate IRS agents will identify themselves with their employee ID number as a matter of course.

Watch for Spoofed Numbers: Scammers may use spoofing technology to make it appear as though they’re calling from an official IRS number. Don’t be fooled by the caller ID; always exercise caution when sharing personal information over the phone. 

Know the Payment Process: The IRS only accepts payments in U.S. dollars and will never insist on unconventional payment methods like gift cards or cryptocurrency. If a payment request seems suspicious, verify it directly with the IRS.

Stay Informed: Educate yourself about common tax scams and stay updated on the latest tactics used by fraudsters. Awareness is key to avoiding falling victim to fraudulent schemes. Popular scams can change from one tax season to the next, so do your research annually.

Trust Your Instincts: If something feels off or too good to be true, it probably is. Trust your instincts and err on the side of caution when dealing with unfamiliar or suspicious requests for personal information.

Seek Professional Advice: If you’re unsure about the legitimacy of a communication or suspect you may be targeted by a tax scam, seek advice from reputable sources such as the Identity Theft Resource Center or the Federal Trade Commission. 

Report Suspected Scams: If you believe you’ve been targeted by a tax scam or have fallen victim to identity theft, report it immediately to the appropriate authorities. Prompt reporting can help mitigate the impact of fraud and aid in recovery efforts.

Protecting Yourself Further

Speaking to NBC News, Colleen Tressler, a senior project manager at the FTC’s Division of Consumer and Business Education, shared the importance of taking swift action if you suspect you’ve been targeted by a tax scam. Tressler said, “It’s much easier to stop tax ID theft before it happens than to recover from it.” 

Utilize resources like identitytheft.gov to report incidents of identity theft and access guidance on protecting yourself from various types of fraud. Remember, staying informed and proactive is key to safeguarding your financial well-being during tax season and beyond.

Tax season doesn’t have to be synonymous with anxiety and uncertainty. By staying informed, vigilant, and proactive, you can spot potential tax scams and protect yourself from falling victim to identity theft and financial fraud. Remember, just like with your physical health, prevention is always better than cure when it comes to safeguarding your personal information and financial welfare.

Stay safe and secure this tax season – and every tax season!

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Securing Your Business’s Future: Mastering Succession Planning

For many business owners, the future is uncertain. Would you like to ensure the long-term success of your enterprise, reducing stress and providing peace of mind? That’s where succession planning comes in.

Every successful business gets to that point thanks to careful planning and strategic foresight. While most business owners focus on maximizing present success, it’s equally crucial to consider the future. Here, we look at the details of proper succession planning, exploring its significance, key benefits, and actionable strategies to ensure your business continues to thrive even after you’ve handed over the reins.

Understanding the Essence of Succession Planning

Succession planning is not about preparing for contingencies. It’s much more than that—it’s a proactive strategy that ensures a seamless transition within an organization’s leadership and critical positions. From identifying potential successors to nurturing their growth, this process is most effective when initiated years in advance. This allows for mentorship between outgoing and incoming leaders, allowing businesses to navigate transitions with grace and confidence.

The Benefits of Succession Planning

While many businesspeople believe succession planning is primarily about risk mitigation, this isn’t necessarily the case.  Retaining talent instills confidence in stockholders, and fostering a sense of continuity within the company are all important components of effective succession planning. By identifying and building up future leaders for years before they take control, businesses can inspire loyalty among both employees and investors.

Common Business Succession Planning Strategies

From buy/sell agreements to recapitalization, various strategies can be used during succession planning. By implementing tailored approaches that align with their goals and values, businesses can navigate succession with clarity and purpose.

It is often worthwhile to bring in a succession consultant to determine the best strategies for your business. These professionals will consider a variety of factors as they help you and your team prepare for the future.

Succession Planning and Family-Owned Businesses

In the case of family-owned businesses, Score statistics paint a sobering picture: only thirty percent (30%) survive into the second generation, twelve percent (12%) survive into the third, and forty-seven percent (47%) of family business owners expecting to retire in five years DO NOT have a successor.

This is problematic, not only for the family themselves, but for customers who may have come to rely on these family businesses for services like plumbing, appliance repair, or grocery shopping. If you own a family-run business, now is the time to beat the statistics and make sure your venture survives.

Types of Succession Plans

Succession planning for businesses can take various forms, tailored to meet the specific needs and circumstances of each organization. 

Here are some common types of succession plans – again, a succession planning expert can assist you with your strategy:

1. Internal Succession Plan:

   – Involves identifying and grooming potential successors from within the organization.

   – Current employees are trained, mentored, and prepared to take on key leadership roles.

   – Provides continuity and stability by retaining institutional knowledge and preserving company culture.

   – Typically involves promoting employees to higher positions or transitioning ownership to family members.

2. External Succession Plan:

   – Focuses on bringing in talent from outside the organization to fill key leadership positions.

   – Suitable for businesses that lack internal candidates with the necessary skills or experience.

   – May involve hiring executives from other companies or recruiting individuals with specific expertise in the industry.

3. Family Succession Plan:

   – Designed for family-owned businesses to transfer ownership and management to the next generation.

   – Involves identifying family members interested in leading the business and preparing them for leadership roles.

   – Addresses issues related to fairness, governance, and estate planning within the family.

4. Emergency Succession Plan:

   – Provides a contingency plan for unexpected events such as the sudden incapacitation or death of key executives.

   – Ensures that the business can continue operations smoothly during times of crisis.

   – Includes clear guidelines for interim leadership, decision-making processes, and communication protocols.

5. Hybrid Succession Plan:

   – Combines elements of internal and external succession planning strategies.

   – Allows businesses to capitalize on the strengths of both internal talent development and external recruitment.

   – Provides flexibility to adapt to changing circumstances and address talent gaps effectively.

6. Leadership Development Program:

   – Focuses on identifying and nurturing high-potential employees at all levels of the organization.

   – Offers training, mentoring, and career development opportunities to prepare future leaders.

   – Cultivates a pipeline of talent to fill key positions over time, ensuring a smooth transition of leadership.

7. Partnership or Co-Ownership Agreement:

   – Applicable to businesses with multiple owners or partners who need to plan for ownership transitions.

   – Defines the process for buying out or transferring ownership shares among partners.

   – Addresses issues such as valuation, buy-sell arrangements, and dispute resolution mechanisms.

Each type of succession plan has its advantages and considerations, and businesses may choose to adopt a combination of approaches based on their unique circumstances and objectives.

The Imperative of Succession Planning: What It Means for You

Succession planning isn’t a luxury—it’s a strategic imperative for every business owner. By investing in proactive planning and talent development, you can safeguard your business’s future, inspire confidence among stakeholders, and preserve your legacy for generations to come.

Succession Planning: A Key to Weathering Economic Downturns

As we shared earlier in this guide, succession planning isn’t just about preparing for leadership changes and risk mitigation—it’s about future-proofing your business against economic uncertainties. By integrating succession planning into your business strategy, you can navigate economic downturns with confidence, ensuring operational continuity and long-term success.

Ready to Secure Your Business’s Future?

Securing your business’s future begins with proactive planning and strategic foresight. Whether you are navigating leadership transitions or preparing for economic downturns, succession planning is the key to long-term success. Ready to take the next step? Consult with our experts today and embark on a journey towards enduring success and prosperity.

Invest in your business’s future—start your succession planning journey today.

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Navigating Economic Storms: 10 Strategies for Business Survival and Success

As the winds of economic uncertainty continue to blow, many businesses find themselves sailing through turbulent waters. With high-interest rates and mounting consumer debt, fears of an impending recession loom large. But amid these challenges lies an opportunity for businesses to not only survive but thrive. Here, we offer a compass to guide you through these uncertain times and help recession-proof your business.

1. Review and Reduce Expenses: In times of economic distress, tightening your purse strings should be your first move. Conduct a thorough review of your expenses and identify areas where costs can be cut without compromising essential operations. Renegotiating contracts, switching to more affordable suppliers, and optimizing staffing levels are all strategies to consider.

2. Strategic Pricing: Consider adjusting your pricing strategy to reflect changing economic conditions. A modest increase in prices can help offset rising costs and bolster your bottom line, especially for products or services deemed essential by consumers. Of course, it is important to balance price increases with sensitivity toward your customers’ economic challenges.

3. Prioritize Customer Retention: In a downturn, retaining existing customers becomes even more critical than acquiring new ones. Offer incentives, discounts, or additional services to incentivize loyalty and keep your customer base intact.

4. Diversify Revenue Streams: Relying on a single source of income can leave your business vulnerable to economic fluctuations. Explore opportunities to diversify your revenue streams through new product lines, targeted marketing initiatives, or expansion into untapped markets.

5. Invest in Strategic Marketing: While it may be tempting to scale back on marketing expenditures during tough times, maintaining a strong brand presence is essential. Invest in cost-effective marketing strategies to keep your business top-of-mind and position yourself for success when the economy rebounds.

6. Deliver Exceptional Quality: In challenging times, the temptation to cut corners may arise. However, maintaining the quality of your products and services is key to retaining customer trust and loyalty. Focus on delivering excellence in all aspects of your business, even when the economy is not on your side.

7. Build Cash Reserves: Establishing a robust cash reserve is crucial for weathering economic storms. Set aside a portion of profits each month and explore options such as business lines of credit to bolster your financial cushion.

8. Reduce Debt: With interest rates on the rise, reducing debt should be a priority for businesses and individuals alike. Implement a debt reduction plan to minimize interest payments and strengthen your financial position.

9. Explore Alternative Financing: When traditional financing options fall short, creativity can help secure the funding your business needs. Investigate alternative financing options such as SBA loans, lines of credit, or invoice factoring to bridge gaps in cash flow until the economy turns a corner.

10. Plan for Contingencies: Finally, prepare for the worst-case scenario by developing a comprehensive contingency plan. Anticipate potential challenges, outline strategies for revenue stabilization and cost containment, and maintain open lines of communication with employees and customers.

In times of economic uncertainty, proactive measures can make all the difference between sinking and sailing through the storm. By implementing these strategies and seeking expert guidance from your tax professional or financial planner, you can navigate the choppy waters of economic downturns and emerge stronger on the other side. 

Ready to recession-proof your business and thrive in challenging times? Follow these tips and you’ll be well on your way to success!

AI(Artificial intelligence) concept.

The IRS Is Tackling Tax Evasion With AI

As the current tax season continues, the Internal Revenue Service (IRS) has ushered in a new era of tax enforcement thanks to the power of artificial intelligence (AI). AI tools have taken nearly every industry by storm recently, and even federal tax authorities have realized that these resources can be invaluable in catching tax evaders.

Bolstered by funding from the Inflation Reduction Act of 2022, the IRS is improving its audit processes, particularly in areas where audit coverage has dwindled. Large partnerships, large corporations, and employment tax returns are all under the microscope as the IRS seeks to crack down on tax avoidance, particularly among wealthy companies and high-net-worth individuals.

AI Audit Concerns

While AI presents opportunities for more efficient tax audits, some industry experts have expressed concerns about privacy, bias, and transparency. In a Thomson Reuters report, James Creech, a senior manager for Baker Tilly’s tax advocacy and controversy team, voiced apprehensions about the potential ramifications of AI-driven audits. He cautioned against the possibility of taxpayers being flagged for returns that deviate slightly from the norm, noting that safeguards will be important in this new era of tax enforcement.

On the flip side, Creech did acknowledge the strides made in AI technology, particularly in targeted audits of partnerships. The AI tools employed by the IRS have already led to better issue selection, expediting the audit process and prompting inquiries regarding specific issues.

Future Outlook and Challenges

The IRS’s Strategic Operating Plan for FY 2023 through 2031 showcases a commitment to bolstering enforcement efforts, especially for large partnerships and corporations. However, the human element remains a critical factor in AI implementation. In the aforementioned Thomson Reuters deep dive, Creech pointed out that IRS “audits have been driven by algorithms for a long time,” noting that a “DIF” (discriminant function) score has been used to drive audit selection. Although Creech believes that new AI technology will make audit selection “better and better” in the long run, he still has concerns about  “what does the human being do with [algorithmic information.”

This is, of course, something that federal tax authorities will have to consider moving forward as AI becomes an increasingly important part of the auditing process.

AI and the ERC

As the IRS becomes increasingly reliant on AI, tax practitioners may find themselves navigating new terrain, including an increased number of Employee Retention Tax Credit (ERC) audits. In September 2023, the agency unexpectedly suspended all ERC applications. Then, in December, IRS officials announced a program that allowed taxpayers to voluntarily admit to “mistakenly claimed” pandemic-era tax credits.

The ERC, in particular, presents AI difficulties due to limited data availability. Creech made the point that AI’s effectiveness hinges on the availability of large data sets, making limited programs like the ERC less amenable to AI-driven scrutiny.

Addressing IRS Audit Red Flags

Wealthy taxpayers should be mindful of IRS audit triggers. According to Kiplinger, these red flags include claiming residence in Puerto Rico without substantiation, engaging in offshore asset movements, and significant cryptocurrency transactions. IRS AI algorithms are poised to detect patterns indicative of tax evasion, highlighting the importance of compliance.

While the IRS’s usage of AI technology promises improved tax enforcement and customer service, major change is never without challenges. Questions surrounding algorithmic bias, human interpretation, and data limitations persist – and likely will until far-reaching results of AI technology and taxes are available for assessment.

As the IRS meets the intersection of emerging technology and tax compliance, the onus remains on taxpayers and tax professionals to operate with diligence and integrity. Compliance with tax laws and regulations is important, as always, particularly with the rise of artificial intelligence.