April 2024 Tax Tips and More
April 2024
April 2024
Upcoming dates:
April 15
- Individual income tax returns for 2023 are due
- First quarter 2024 estimated tax payments are due
If it seems like our tax code complicated and confusing, well, it’s sort of true.
And Congress keeps adding to this complexity with what seems like an ever-growing list of what is and is not taxable. With the April filing deadline right around the corner, this month’s newsletter has a fun quiz to test your knowledge about what our tax code says is subject to income taxes.
As always, feel free to pass this information on to anyone that may find it useful and call if you have any questions or concerns.
Annual Tax Quiz - Is It Taxable?
The IRS seems to always have a surprise up its sleeve for the unsuspecting taxpayer. Here's a fun True or False quiz to test your knowledge of what's taxable. Enjoy!
If a thief steals someone’s property, he owes tax on the value of the stolen property.
True. But don't expect the person whose property was stolen to issue a Form 1099. Tax instructions tell you to list this as stolen property on your tax return. This part of the tax code is what famously put gangster Al Capone behind bars.
Scholarships are never taxable.
False. If you get scholarship money to cover tuition, fees and books, you pay no taxes. But if your scholarship also covers room and board, travel and other expenses, that portion of the award is taxable. Students who get financial aid in exchange for work must also pay tax on that money even if they use it to pay tuition.
Minor gambling winnings are not taxable.
False. When lady luck smiles on you, the tax collector typically doesn’t. While virtually all gambling winnings are deemed taxable income, not all winnings are reported to the IRS. The IRS requires reporting of winnings at various thresholds depending on the game: $1,200 or more from bingo or slot machines, or more than $5,000, minus the wager, from a poker tournament. If reported, the payer will issue you a Form W-2G and report what you won to the IRS. The practical nature of keeping track of and claiming this minor income is a different matter entirely.
If you lose your job and start collecting unemployment benefits, the IRS will cut you a tax break.
False. The IRS considers unemployment income to be a replacement for your regular income, and is therefore taxable. (During the pandemic, the IRS was legislated to make this unemployment tax-free, but this was only for a limited time.) The good news is that not all states do the same.
If someone forgives an amount of money that you owe them, you typically have to pay taxes on that amount.
True. Debt cancelled or otherwise discharged for less than what you owe – credit cards, mortgages, loans and so on – is generally taxable income per the IRS. Exceptions can include student loans, debts discharged in bankruptcy, or amounts in specific mortgage foreclosures as defined in a special tax law. The creditor may send you a federal Form 1099-C in the amount of the cancelled debt, which means the money also gets reported to IRS.
An agreement between two small businesses to get free hair cuts in exchange for mowing a lawn is not taxable.
False. When you exchange services in lieu of cash in a formal arrangement, the fair market value of the goods and services are fully taxable. You should get an IRS Form 1099-B or the like showing the value of cash, property, services, credits or other items that you received from the barter. On the positive side, any expenses you incurred to hold up your end of a deal are typically deductible as a business expense.
Password Madness: Tips to Keep Your Growing List Under Control
When it comes to keeping your online accounts safe, strong passwords that nobody can guess are an essential tool. Many struggle, though, with password fatigue because you need to have a password for…well, everything. And then you need to change these passwords every several months!
While most of us understand the need for strong passwords to protect our confidential information, it doesn't make password madness any easier to handle. Here are some tips to try and make your password process a little bit less stressful.
Treat all credentials equally. While the password for your kid's school lunch account may not seem that important, it could be tied to your credit card or bank account. Treat all log-in credentials you have with equal care and respect and remember that hackers frequently target seemingly unimportant passwords in order to guess other higher-value passwords.
Avoid oversharing on social media. Avoid sharing financial and personal information on social media since hackers scrape public profiles to find sensitive information. Even harmless information you share (like the fact you got a new bank account) could make it easier for them to access your credentials.
Don’t re-use passwords. It goes without saying that you shouldn’t use the easiest password that comes to mind like your birthday or the word password. On top of that, use a somewhat complicated password that’s unique to each of your accounts.
Set up multi-factor authentication on your accounts. Install multi-factor authentication on as many accounts as possible. This step means you'll get a text or an email in order to authenticate your identity, which makes it harder for thieves to gain access.
Install a password manager. Consider using a password manager such as LastPass or Dashlane (there are also many more companies that do a nice job in this area) to manage and oversee all your passwords. In addition to securing all your passwords with a single master password, password managers also help create complicated passwords for each of your accounts. The weakness using this tool is that thieves are now targeting password manager systems because they know they can get all of a person's passwords in one fell swoop.
Think of estate planning. Remember, password management also includes getting access to accounts by someone in your family or an executor of a will should you pass away or become incapacitated. So be sure to include transferring passwords them the need arises.
Use these steps to make your password madness easier to handle and your online accounts safer from online thieves.
Tax Day is Here!
Last-minute details, tips and freebies
With the individual tax-filing deadline on Monday, April 15th, now is the time to complete all filing arrangements and payments.
What follows is information typically provided in our filling instructions to you when the tax return is completed.
However, upon review, it makes sense to provide this information to everyone, whether you have filed or not. It is good information to know, so if you have not already done so, ask yourself these questions:
Did you sign your e-file authorization form? IRS Form 8879 needs to be signed by you before your taxes can be e-filed. If filing jointly, your spouse needs to sign as well. If you haven’t already, please return the signed form ASAP to ensure that your taxes can be e-filed on time. But don't sign it before reviewing the tax return. Remember, this signature means you agree with the accuracy of the tax return.
Do you need more time to file? If you are not ready to file your taxes before the initial April 15th deadline, you can file for a six-month extension. Be aware that it is only an extension of time to file — not an extension of time to pay taxes you owe. You still need to pay all taxes by April 15th!
Do you owe money? If yes, make your tax payment now! The IRS has several payment options on their website. If mailing a payment, include Form 1040-V and ensure the mail is postmarked on or before April 15th. Sending the payment by certified mail will ensure you have proof of a timely payment. Late payments, even by one day, are subject to IRS penalties and interest.
Do you need to deposit funds in your IRA or HSA? Did you claim an IRA or HSA contribution on your tax return? In order for the deduction to be valid for 2023, all deposits to those accounts need to be made by April 15th. Once completed, save proof of the contribution with your 2023 tax files.
Do you need to make an estimated tax payment? The first quarter estimated tax payment for 2024 is also due by April 15th. If you owe taxes for 2023, making 2024 estimated payments might make sense for you. A quick way to calculate a first quarter payment is to divide the taxes you paid in 2023 by four, then adjust this number for any paycheck withholdings. Send your payment along with Form 1040-ES to the IRS by April 15th. Then schedule a tax-planning meeting to determine the best approach for the remainder of the year.
If you do miss a deadline, file your return and pay the taxes as soon as you can to stop the accruing of interest and penalties.
As always, should you have any questions or concerns regarding your tax situation please feel free to call.
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