2025 Newsletter

Welcome

Greetings, Holidays are here, so you know that means tax returns for 2024 are also.

December 2024 - NEWSLETTER

As we approach the 2024 tax year, it's important to stay informed about the latest tax changes and updates. Here are a few things to bring to your attention. Some of these may change with the new administration and new taxes or deductions. I stay up to date with my software and will inform you of any major changes.

Please use my new phone number for calls and texts: 541-279-8605. I am disconnecting the 310 number.
Please use the portal to upload documents to me. If you can't find the link, I will send you a new one. Please wait until you have all your W-2s, etc., before sending them to me. If you have an HSA at work, I will need the 1099 they send you, if any.
If you have marketplace health insurance, I will need a copy of the 1095-A you received from the IRS.
If you purchased or sold a home or any real estate, I will need the closing disclosure from both the sale and the original purchase.
Don’t forget to send me your brokerage statements if you have sold stock during the year. I will need the whole statement.
You will need to file if you made over $14,600 (cumulative) or if you had federal and/or state taxes withheld.
Standard deductions have increased:
- Singles: $14,600
- Married: $29,200
- Head of Household: $21,900 This means the IRS allows you to deduct this amount, depending on your filing status, from your income. In order to itemize, you would need more than these standard deductions.
It’s a good idea to open a taxpayer account with the IRS so you can see transcripts, W-2s, and other items reported to your account. Visit the IRS website and set up an “ID.me” account. This provides a transcript of what the IRS has in terms of W-2s and income, which will help me if I need to solve a mystery.
If you claim your 16–24-year-old as a dependent, ensure they do not file their own taxes and claim themselves. They can file, but they must check "dependent of another" in order for YOU to claim them and their educational expenses. They love to file early on TurboTax and get their refund, but they must NOT claim themselves. If you have questions, call me.
Remember to give me ALL 1099-Rs you receive. These are payments from IRAs, 401(k)s, and any retirement plans. Even if it shows tax withheld, I need the forms. The same goes for 1098-T, which is tuition paid to the educational institution for you or a dependent.
Try not to send me photos (JPGs) of your documents. They are usually unreadable for me, or the type is so small I can’t read it. Scanning is ideal. I do have a fax number, which is above. You can get a scan app for your phone, I use TurboScan. v
Those of you who are local don’t need to upload to the portal. Just bring your paperwork to the office.
Please inform me of address changes, new babies, name changes, filing status, etc.

Key Tax Updates

401(k) contributions: Individuals can contribute up to $23,000 to 401(k) plans in 2024 (up from $22,500 in 2023). If you are 50 or older, you can contribute up to $30,500.
IRA contributions: The annual contribution limit for IRAs in 2024 is $7,000 (up from $6,500 in 2023). If you are 50 or older, you can contribute up to $8,000. If you have a SIMPLE IRA, you can contribute up to $16,000 in 2024 (up from $15,500 in 2023).
Health flexible spending accounts: In 2024, you can contribute up to $3,200 in employee salary reductions to fund your health flexible spending arrangement.
Medical Savings Accounts (MSAs): Deductible ranges and out-of-pocket expenses for MSAs also increased. For individuals with self-only coverage, the plan must have an annual deductible of at least $2,800, at most $4,150, and an out-of-pocket expense limit of $5,550. For families, the annual deductible must be at least $5,550 but no more than $8,350, with an out-of-pocket expense limit of $10,200.
Social Security tax limit: For 2024, the maximum earnings subject to the Social Security payroll tax increased to $168,600 (up from $160,200 in 2023). This means the maximum Social Security tax you can have withheld from your paycheck in 2024 will be $10,453.20.
Alternative minimum tax (AMT): The Alternative Minimum Tax exemption amount for 2024 is $85,700 (up from $81,300) and begins to phase out at $609,350. The AMT exemption for married couples filing jointly is $133,300 (up from $126,500) and begins to phase out at $1,218,700.
Bonus depreciation: In 2024, businesses can deduct 60% in first-year bonus depreciation (down from 80% in 2023)
Gift tax exclusions: The annual gift tax exclusion increased to $18,000 for 2024 (up from $17,000 in 2023). You can gift someone up to this amount during the tax year without filing a gift tax return. The lifetime exclusion also increased to $13.61 million (up from $12.92 million).
Qualified adoption expenses: The maximum credit for adoption expenses increased to $16,810 (up from $15,950 in 2023).

EXTENSIONS

Remember, the 6-month extension is ONLY TO FILE your return. You still must pay any amount you owe on April 15. If you send in 100% of the tax you owed for the previous tax year, you will be OK. The IRS will charge you interest and penalties if you don’t. The rule of thumb is to pay 90% of the tax for the current year, or 100% of the tax you paid for the last year.

IRS Penalties

Below are the penalties that the IRS charges for late payment of tax due:

Late Filing 5% per month 25% of unpaid taxes $485 or 100% of unpaid tax, whichever is less

Late Payment 0.5% per month 25% of unpaid taxes

Calculation: The required annual payment is the smaller of:

90% of the tax shown on the current year’s return, or
100% of the tax shown on the prior year’s return (110% if the prior year’s adjusted gross income was more than $150,000)

If you have been paying your tax due in one lump sum at the end of the tax year, the IRS will send you a bill for interest and penalties if the amount is over $1,000. This is because they want you to PAY AS YOU GO. In the future, I will be sending you coupons to pay estimated taxes based on the tax you owed for the current year. You can use these or not. I will also be calculating the approximate penalty you will be charged. Remember, this is for tax owing of $1,000 or more. Those owing under $1,000 do not have to file quarterly coupon estimates.

Penalties for Not Using Estimated Payments Not making estimated tax payments can lead to penalties and interest charges. Here’s a summary of the penalties and limitations:

Underpayment Penalty: If you don't pay enough tax through withholding or estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. The penalty is calculated based on the amount of underpayment and the period it was due and unpaid.
Interest: Interest is charged on penalties, increasing the amount you owe until the balance is paid in full. The IRS charges its 8% interest rate until the balance is paid.

If you have any questions or need further assistance, please feel free to contact me. I am here to help you navigate these changes and ensure a smooth tax filing process. I am sure there will be more changes forthcoming.

I look forward to working with you next year. .

Regards, Bonnie Nixon and Julie Nind