Tax Season: Must Know Tax Updates

Feb 20

As tax season is in full swing, accounting professionals are navigating a maze of tax law changes. This post offers a summary of the noteworthy updates, intending to equip accountants with a reference of updates to ensure efficient practice and client guidance. Ranging from retirement planning modifications under the SECURE 2.0 Act to changes in tax credits, deductions, and FinCEN BOI reporting requirements, these updates have significant implications that all members of the firm should be informed on.

The SECURE 2.0 Act: Transforming Retirement Planning

The SECURE 2.0 Act of 2022 marks a significant shift in retirement savings strategies, introducing over 90 provisions that reshape the landscape. For accountants, understanding these changes is crucial for advising clients on retirement planning. Highlights include:

Penalty-Free Early Withdrawals: Key for liquidity management advice.
529 Account Rollovers to Roth IRAs: A new tool for educational savings and retirement planning, with specific limitations and conditions.
Roth 401(k) RMD Elimination: Aligning Roth 401(k)s with Roth IRAs, impacting retirement income strategies.
Employer-Sponsored Emergency Savings: A novel component for employee benefits advisement.

Adjustments in Retirement Plan Contribution Limits

The increase in 401(k)s, IRAs, and other retirement accounts' contribution limits necessitates strategic planning advice from accountants, considering the financial goals and tax implications for clients.

Tax Credits and Deductions: Leveraging Client Benefits

Federal EV Tax Credit Modifications: Updates necessitate a fresh look at eligibility and claim processes.
Adoption Tax Credit Adjustments: Important for advising on family planning.
Standard Deduction Increase: Affects itemized deduction strategies, requiring a thorough analysis of whether clients should itemize or opt for the standard deduction.

Strategic Tax Planning: Brackets, Gains, and AMT

Adjustments in tax brackets, capital gains, and AMT exemptions call for strategic tax planning to optimize liabilities for individuals and businesses.

Fringe Benefits and HSA Contributions: Insights for Employers

Updates in HSA limits and fringe benefits like FSAs and commuter benefits are crucial for advising employers on benefits structuring and compensation strategies.

Additional Key Updates:

Form 1099-K Reporting Changes: Significant for clients using third-party payment platforms, with lowered thresholds impacting reporting.
Tax Credit Adjustments: CTC, EITC, and Child and Dependent Care Credit have seen adjustments, influencing tax planning for families.
No Above-the-Line Charitable Deductions: Affects charitable giving strategies.
Premium Tax Credit and Clean Vehicle Credit Updates: Temporarily expanded eligibility and new criteria for credits.
OECD Pillar Two: Affects multinational enterprises, requiring attention to international tax compliance.

FinCEN BOI Reporting Requirements

The Financial Crimes Enforcement Network (FinCEN) has established Beneficial Ownership Information (BOI) reporting requirements under the Corporate Transparency Act, targeting enhanced transparency to combat financial crimes. Starting January 1, 2024, FinCEN began accepting BOI reports, mandating entities created or registered before this date to file by January 1, 2025. Entities registered in 2024 have a 90-day period post-registration to comply, while those established or registered from January 1, 2025, onwards face a 30-day filing deadline. These reports aim to detail the individuals who own or control companies directly or indirectly, a move intended to deter illicit use of anonymous entities. To facilitate compliance, especially for small businesses, FinCEN released a Small Entity Compliance Guide, offering a straightforward explanation of the reporting rules, key questions, and various compliance tools. Access to BOI is strictly controlled, available to certain U.S. and foreign officials for national security, law enforcement, and intelligence activities, as well as financial institutions for customer due diligence, with the reporting entity's consent.

This tax season brings a wealth of updates, by staying informed and proactive, we can use these changes to enhance our practice and support our clients through strategic planning and compliance.