Author: Carrie Christensen

KT Insights
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Unlock the Benefits of an IRS Online Account

In today’s digital age, convenience and efficiency have become paramount in many aspects of our lives. This is particularly true when it comes to managing our finances and tax-related matters. If you have ever tried resolving tax issues by calling or writing the IRS, you will likely have experienced frustrations such as lengthy hold times and months of waiting for a written response.

In light of these challenges, creating an IRS online account can offer significant advantages. The IRS continues to enhance the features available to taxpayers within their online accounts.

Here are some of the benefits of using an IRS online account:

  • Streamlined Access to Tax Information – View past tax returns, payment history, and outstanding balances, and eliminate the need for paperwork.
  • Secure Communication with the IRS – Send and receive messages securely, protect your personal information and facilitate quicker responses.
  • Efficient Tax Payment and Refund Tracking – Make payments directly through the portal and track refund statuses in real-time, saving time and hassle.
  • Access to Key Documents and Forms – Easily download essential tax documents like 1099 forms, W-2s, and more for tax preparation and inquiries.
  • Easy Management of Payment Plans – View payment options, set up plans fitting your financial situation, and manage payments seamlessly.
  • Real-Time Alerts and Notifications – Receive alerts and notifications about your tax status, preventing missed deadlines and penalties.
  • Convenient Access Anytime, Anywhere – Access your account from anywhere with an internet connection, managing your tax information flexibly.
  • Enhanced Accuracy and Reduced Errors – Cross-reference documents to ensure accuracy and reduce errors, making the tax filing process smoother.

How to Create Your IRS Online Account

To create an online account with the IRS – https://www.irs.gov/your-account.

From here, you can create an individual account or an account for your business. You will need to provide identification information, such as your Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN), and other identifying details. You will also need to have your photo identification ready. The website will walk you through the process of verifying your identity and setting up your account.

Create your IRS online account today and unlock the myriad benefits that come with it.

April 29, 2025
| Carrie Christensen
KT Insights
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Reminder: April 15th Income Tax Filing Deadline Approaching

Ensure You’re Prepared to File or Request an Extension

The clock is ticking as we approach the April 15th deadline for filing your income tax return. With only one week left, it’s essential to ensure everything’s in order to avoid last-minute stress and/or potential penalties.

Requesting an Extension

If you’re feeling overwhelmed and worried you’ll be unable to file by the deadline, remember that the IRS offers the option to request a six-month extension to file returns. Meaning you can extend your filing deadline to October 15th and give yourself additional time to accurately prepare your documents.

However, it’s vital to note that this extension only applies to filing your return, not to paying any taxes due.

Payment Deadlines

Any tax balance owed to the IRS must still be paid by April 15th to avoid a late payment penalty.

If you find yourself unable to complete your return by the deadline, we recommend calculating an estimated amount due and sending that to the IRS. Doing so will help prevent penalties and interest from accruing on any unpaid balance.

Estimated Tax Payments

Another consideration for taxpayers who typically pay estimated taxes is the first quarter (Q1) estimated tax payment for 2025, also due on April 15th. One effective strategy to minimize potential underpayment penalties is to include your Q1 estimate as part of your extension payment.

Doing this provides a cushion in the event that you have underestimated your 2024 tax liability. When your 2024 return is finalized, any overpayment is applied to 2025 and the Q1 payment will be considered timely.

Steps to Request an Extension

Requesting an extension is a straightforward process. Taxpayers can file Form 4868, “Application for Automatic Extension of Time to File U.S. Individual Income Tax Return,” either electronically or by mail.

Another convenient option is to make an extension payment online at irs.gov/payments. When an extension payment is made online, the IRS automatically extends your return.

As always, reach out to your KT Tax Advisor if you have any questions about your specific tax situation.

April 8, 2025
| Carrie Christensen
KT Insights
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Tax Implications for Remote Workers

With the rise of remote workers, understanding tax obligations has become increasingly important for both employees and employers. As individuals choose to live in locations different from where the companies they work for are based, they may encounter complex questions about where taxes should be paid. Navigating these complexities requires an understanding of factors such as tax domicile and state sourcing rules.

Tax Domicile

Understanding tax domicile is critical for remote workers, as it determines the primary jurisdiction where an individual is taxed. This is often referred to as tax residency and is based on factors such as the location of your primary residence, duration of your stay, where you are registered to vote, and where your vehicle is registered.

State Sourcing for Remote Income

State sourcing rules for remote income are generally tied to where the work is performed versus the employer’s location. For example, income earned by a taxpayer who works for a California based company but is a South Dakota resident performing their job duties from their Rapid City home, would be considered South Dakota source income, not California.

However, if that same taxpayer traveled to California and performed services for the company while in California, income earned during that time would be considered California source income. The taxpayer may then be required to file a California non-resident tax return to report those specific wages.

Employer Obligations

Hiring remote workers can also create challenges for employers. Employers must ensure proper withholding and reporting of payroll taxes for remote employees. Employers may need to register in multiple states and comply with varying state and local tax laws as their remote workforce grows.

Additionally, having employees in a state may create nexus and make it necessary for the employer to file an income tax return in that state. However, utilizing remote workers can also provide benefits to employers such as reduced overhead and access to a broader talent pool.

Home Office Deduction

A common question from remote workers is if home office expenses are deductible. Unfortunately, the Tax Cuts and Jobs Act of 2017 eliminated the ability for employees to deduct unreimbursed business expenses such as home office costs, supplies, mileage, and business meals. Home office expenses are still deductible for self-employed individuals.

This is just a brief overview of some of the tax implications surrounding remote workers. If you have questions about your specific individual or business tax situation, reach out to your KT Tax Advisor for more information.

April 1, 2025
| Carrie Christensen
KT Insights
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Accelerated Depreciation Options

Bonus Depreciation & Section 179

Accelerated depreciation methods, such as bonus depreciation and the Section 179 deduction, provide business owners the opportunity to write off the cost of certain assets placed in service during the year quicker than traditional depreciation schedules allow. These methods offer significant tax benefits while enhancing cash flow for businesses. However, these options have their own nuances that should be considered.

Bonus Depreciation

Bonus depreciation for 2024 is limited to 60% of the cost of eligible property placed in service in 2024. For 2025, the limitation is 40% and is currently scheduled to be reduced by 20% each year until it is fully phased out in 2027.

To qualify for bonus depreciation, the property placed into service must have a useful life of 20 years or less. Some examples of qualifying property include qualified leasehold improvements, computer software, vehicles, and equipment.

Advantages

  • No dollar cap on the amount of bonus depreciation that can be taken in a year.
  • Bonus depreciation can reduce taxable income below zero. This means it can create losses to offset other income and even create a net operating loss.

Disadvantages

  • The decision to take bonus depreciation is made for each group of assets with the same class life.
    • Example: a taxpayer purchases two 5-year assets and does not want to use bonus depreciation on one. But, they must elect out of using bonus depreciation on both since each are 5-year properties.

Section 179 Deduction

The Section 179 deduction for 2024 is limited to $1,220,000. The 2025 limitation is $1,250,000. The limitation is calculated at the taxpayer level.

Some examples of business assets eligible for Section 179 are machinery, equipment, furniture, vehicles, and certain non-residential building improvements.

Advantages

  • Section 179 has greater flexibility than bonus depreciation. The taxpayer can decide how much Section 179 deduction to take on a per asset basis.

Disadvantages

  • In addition to the annual dollar cap as previously mentioned, Section 179 begins to phase out once the cost of assets placed in service in a year reaches a certain threshold. For 2024, the maximum deductible amount begins to decrease dollar for dollar once total purchases exceed $3,050,000. For 2025, the threshold is $3,130,000.
  • Section 179 is subject to a business income limitation. Meaning it can’t reduce taxable income below $0.
  • Passive investors with a Section 179 deduction flowing through to them on a Schedule K-1 may not be able to use the deduction unless they have taxable income from other businesses in which they are actively involved.

Ask your KT Tax Advisor what depreciation options are available to use on your 2024 tax return and what planning opportunities are available for 2025 and beyond.

March 4, 2025
| Carrie Christensen
KT Insights
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Charitable Donations 101

Charitable donations are a powerful tool to give back to your community and support causes dear to your heart while saving on income taxes. It’s crucial to navigate the process wisely to ensure your contributions are maximized and compliant with tax regulations.

Choosing the Right Organizations

When considering charitable donations, it’s essential to ensure that your contributions go to IRS-approved 501(c)(3) organizations. Only donations to these organizations are tax-deductible. The IRS provides an online search tool that allows taxpayers to verify the tax-exempt status of any organization.

You can find the search tool here:  https://apps.irs.gov/app/eos/

Beware of Scams

Scammers are becoming more sophisticated and tend to proliferate after natural disasters such as the recent California wildfires. Fraudsters prey on the goodwill of donors during these times. You should always verify the legitimacy of the charity before donating. Remember, if it sounds too good to be true, it most likely is. Scams not only divert funds from legitimate causes but can also affect your tax deductions.

Understanding Tax Deductibility

It is important to remember that donations to individuals are not tax-deductible. This rule applies to contributions made through personal fundraising websites like GoFundMe, particularly when donations are earmarked for one person or a small group, such as a family who lost their home. While these donations are undoubtedly generous and helpful, they do not qualify for tax deductions.

Limits on Deductible Donations

There are specific limitations on the deductibility of charitable donations:

  • Cash (or check/credit card) donations are limited to 60% of your adjusted gross income (AGI) for the year.
  • Noncash donations are capped at 50% of your AGI.

If your donations exceed these limits, the excess amount can be carried forward for up to five years.

Considerations if You Don’t Have Enough to Itemize

Bunching

Bunching is a strategy to consider if you typically don’t have enough itemized deductions to exceed the standard deduction amount in a year. The standard deduction for married filing joint filers for 2025 is $30,000 ($15,000 for singles).

Consider giving two years’ worth of donations in one year and none in the next. By bunching your donations in one year, this will bump you over the standard deduction threshold. You can itemize in the year you double up and take the standard deduction the following year.

Qualified Charitable Distributions

For taxpayers aged 70 ½ or older who own traditional IRAs, Qualified Charitable Distributions (QCDs) offer a beneficial way to make donations. This provision allows you to transfer up to $108,000 in 2025 from your IRA directly to a qualified charity. The QCD can count as all or part of your required minimum distribution, but unlike other IRA distributions, it is not taxable and is not included in your AGI. This option can be highly advantageous for those looking to support charities while managing their taxable income.

Record Keeping for Your Donations

Keeping accurate records of your donations is crucial for tax purposes. For donations less than $250, a bank record (such as a canceled check or bank statement) or a receipt from the organization is sufficient. For donations of $250 or more, you need a contemporaneous written acknowledgment from the charitable organization. This acknowledgment must include:

  • The organization’s name.
  • The amount and date of the contribution.
  • A statement indicating no goods or services were provided by the organization in return for the donation.
  • If goods or services were provided, a statement with a description and estimate of their value.

Maintaining these records ensures that you have the necessary documentation to support your deductions if questioned by the IRS.

Maximizing the Impact of Your Donations

Charitable donations provide a meaningful way to contribute to society. By understanding the rules and regulations surrounding these contributions, you can ensure that your generosity is both impactful and beneficial for your tax situation.

Remember – Always donate to verified organizations, keep good records, and understand the limits and advantages of your contributions.

With thoughtful planning, your charitable donations can make a significant difference. Please reach out to your KT Tax Advisor to discuss planning opportunities around charitable giving.

February 11, 2025
| Carrie Christensen
KT Insights
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Extending Your Taxes

Monday April 15, 2024, is the federal deadline for filing your 2023 individual income tax return. This is also the last day to request a six-month filing extension.

An important thing to note is that this is only an extension to file, not an extension to pay. Any tax due for 2023 is due by April 15th. If you expect to owe tax for 2023, you should send a payment to the IRS for the estimated amount due with your extension form.

Payments made after April 15th are subject to penalties and interest. Additionally, if you fail to file an extension, late filing penalties will apply if you owe tax.

April 9, 2024
| Carrie Christensen
KT Insights
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Understanding IRS Rules for Deductible Business Meals & Entertainment

The IRS allows self-employed taxpayers to deduct certain business meals and entertainment expenses. However, knowing what meals and entertainment expenses are deductible can be pretty confusing. Recent tax laws have changed what businesses are allowed to deduct. The Tax Cuts and Jobs Act of 2017 eliminated the deduction for most entertainment expenses and the Consolidated Appropriations Act of 2021 temporarily allowed business meals provided by a restaurant to be 100% deductible.

Even with these changes, business owners still have opportunities to benefit from deductible business meals and entertainment. The key to maximizing tax benefits is understanding what is deductible versus what is not and using that as a guide for business expenditures. Here are some examples of common business meal and entertainment expenses, and how they are taxed:

100% Deductible

  • Company holiday party or summer picnic
  • Business-promoting meals provided to the public such as an open house
  • Meals provided as taxable compensation to employees (included on W-2)
  • Business meals that are a critical part of your business function (food critic or food blogger)
  • Meals provided to an employee at work in order to work late
  • Entertainment for paying customers, such as hiring a band to play at your restaurant

50% Deductible

  • Business meals and/or drinks with clients or colleagues
  • Meals while traveling on business
  • Treating a few employees to a meal
  • Food for an in-office meeting
  • Meals at conferences
  • Office snacks

0% Deductible

  • Entertainment with a client or customer, whether or not business is discussed
  • Tickets to sporting events
  • Lavish or extravagant expenses
  • Country club dues

It is important to note that even though the entertainment portion of a business outing is nondeductible, meals consumed during the event would still be 50% deductible. For example, if you take a client to a hockey game and also purchase food and drinks, the game tickets are nondeductible, but the food and drinks are 50% deductible. Just be sure to get a breakout of the expenses on the receipt.

Be sure to keep proper records for deductible business meals. The IRS requires documentation of the amount (taxes and tips can be included), the date and location of the meal, who attended, and what was discussed.

February 27, 2024
| Carrie Christensen
News
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Tax Legislation Update

On Wednesday (January 31, 2024), the U.S. House of Representatives passed HR 7024 – The Tax Relief for American Families and Workers Act of 2024. This $78 billion tax package passed in the House with an 83% approval rate and now makes its way to the Senate.

Highlights of HR 7024

  • Child Tax Credit expansion – The bill will allow more lower-income families to receive the credit by increasing the refundable portion, revising the income limitations, and adjusting for inflation for tax years 2023-2025.
  • Reinstatement of 100% expensing of domestic research and development (R&D) expenses – Current law requires domestic R&D expenses be capitalized and expensed over 5 years. 100% expensing will be retroactive to tax year 2022 and extend through 2025. Foreign R&D expenses will still be capitalized and expensed over 15 years.
  • Extension of 100% bonus depreciation – Under current law, bonus depreciation for tax year 2022 is limited to 80% and is set to phase down by 20% in each subsequent year. The bill will reinstate 100% bonus depreciation effective January 1, 2023, through December 31, 2025.
  • Inflation adjustments to increase the Section 179 expensing limit – The bill will increase the expensing limits beginning in tax year 2024 and be adjusted for inflation thereafter.
  • Business interest expense limitation adjustment – The bill will revert the limitation back to 30% of EBITDA (earnings before interest, taxes, depreciation, and amortization) for tax years 2024 and 2025.
  • Employee Retention Tax Credit (ERTC) termination – The bill will not allow any ERTC claims to be accepted after January 31, 2024. Claims submitted prior to January 31, 2024, will still be processed. The bill also includes a clause to impose penalties up to $200K for promoters filing fraudulent claims.
February 1, 2024
| Carrie Christensen
KT Insights
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2024 Tax Season Officially Underway

  • The IRS began accepting and processing individual tax returns on January 29.
  • This year’s filing deadline for individual returns is April 15, 2024.
  • The IRS expects to receive more than 146 million individual tax returns for 2023 during the next two and a half months.

If you haven’t already, now is the time to get started gathering your tax documents!

Reports indicate that nearly a third of Americans wait until the last minute to file. In fact, traffic accidents increase significantly around April 15 as frantic drivers make a beeline for the post office. And, last minute filers are more likely to miss reporting items that should be included on their return which may lead to IRS notices and the need to file an amended return.

A good method to determine if you have all your tax documents is to compare forms received for 2023 versus 2022. And don’t forget to include any new items that you may have for 2023, like a W-2 from your new employer, a 1099-MISC for income earned from your new side hustle, or a 1099-R from a retirement distribution.

If you have a refund coming this year, you can check the status at https://www.irs.gov/wheres-my-refund. In an effort to provide improved service to taxpayers, the IRS has enhanced its “Where’s My Refund?” tool. Enhancements include more detailed status updates written in plain language and mobile device compatibility.

KT encourages our clients, and all taxpayers, to get their tax documents to their tax professional sooner than later!

January 30, 2024
| Carrie Christensen
KT Insights
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IRS Announces New Penalty Relief for Certain 2020 and 2021 Tax Returns

The IRS announced last month that it would be waiving late payment penalties for tax years 2020 and 2021 for certain taxpayers. The waivers apply to taxpayers with tax assessments of less than $100,000 for 2020 and/or 2021 and who were issued an initial balance due notice on or before December 7, 2023.

During COVID, the IRS suspended sending late payment reminders to taxpayers although penalties continued to accrue. As the IRS prepares to return to normal collection efforts, this relief will help ease the pain for many taxpayers. The agency estimates 4.7 million individuals, businesses, trusts, estates, and tax-exempt organizations are eligible for the penalty relief, representing $1 billion in savings to taxpayers.

The waivers are automatic – taxpayers do not need to take any action. The IRS plans to send out letters this month to alert taxpayers of their current balances due and the amount of penalty relief applied if applicable. Eligible taxpayers that have already paid the penalties and have no other tax liabilities will be receiving refunds.

January 23, 2024
| Carrie Christensen