FAQ’s

When filing a tax extension, the taxpayer is requesting to extend the deadline for filing tax returns without accruing a penalty. Once an extension is received, the new deadline for submitting a tax return is October 18.

It is important to note however, the extension applies to the tax return itself, but not the payments if any are due. Any payments not received by the tax deadline of 04/18 will accrue penalties and interest.

Estimated tax payments are taxes paid to the IRS throughout the year on earnings that didn’t have tax withheld on them. This can include self-employment or freelancer earnings, or income earned such as dividends, realized capital gains, prizes, or other non-wage earnings.

Estimated tax payments are usually determined when you file your tax return for the previous year. In general, if you expect to owe tax of $1,000 or less when your tax return is filed you are not expected to make estimated tax payments.

April 15, 2024 for income earned January 1 – March 31, 2024

June 17, 2024 for income earned April 1 – May 31, 2024

September 16, 2024 for income earned June 1 – August 31, 2024

January 15, 2025 for income earned September 1 – December 31, 2024

A penalty will be assessed; 0.5% of the unpaid taxes for each month or part of the month the tax remains unpaid. The penalty will not exceed 25% of the unpaid taxes.

• Tax implications and planning
• Updates to residency status

Whether or not you will be paying for college out of pocket, it is recommended that you submit a FAFSA application to safeguard against any unforeseen changes in income status. A new/updated FAFSA application must be submitted each year of attendance.

529 plans must be listed in the asset total on the FAFSA application if the plan is under the parent or child’s name, however it is not listed as part of the asset total if the plan is under a grandparent’s name.

The federal gift tax applies to gifts of property or money to be paid by the living donor on behalf of each recipient. A gift tax return is not required to be filed unless the total gifts to a recipient exceed the annual gift tax exclusion. For 2022 the gift tax exclusion limit is $16,000 per donor, meaning each spouse can gift up to $16,000 to the same recipient. The exclusion amount is indexed annually to account for inflation.

An IRA is an account set up at a financial institution that allows individuals to save for retirement with tax free growth or on a tax deferred basis.

Traditional IRA: an individual retirement account to which you can contribute pre-tax or after-tax dollars that provides immediate tax benefits, if contributions are tax-deductible.

Roth IRA: a retirement account to which you contribute after tax dollars, in which contributions and earnings can grow tax free and can be withdrawn after age 59 ½, and once the account has been established for 5 years. A Roth IRA, however, has a current income limit of $144,000/year for individuals or those filing head of household, and an income limit of $214,000/year for married couples filing jointly. (Income limits may vary year to year)

Simplified Employee Pension Plan (SEP): employer funded retirement account in which an employer can contribute up to 25% of the employee’s total compensation pre-tax, with a max limit of $61,000 for 2022, or if self-employed a contribution limit of 20% of net income.

401K: Employer sponsored plan, funded by pre-tax employee and employer contributions, with an individual limit of $20,500 per year, and $26,500 per year for those over 50 years of age. A 401K can be transferred between employers if they both offer a 401K plan and can also be rolled over into an IRA account. Distributions including earnings will be included as taxable income at the time of withdrawal.

Please see table below for contribution limits and details. Contributions for each tax year can be made up to the tax filing deadline for that year, provided it is claimed on the tax return.

A required minimum distribution (RMD) is the amount of money that must be withdrawn from a retirement account each year once a person reaches the age of 72 (70 ½ if you reach 70 ½ before January 1, 2020) if no longer working and contributing to a retirement plan.

For more information, visit the IRS Retirement Plans Website (https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds)

Withdrawals of funds from a retirement plan before 59 ½ will incur a 10% federal penalty tax. In addition, the withdrawal amount will be included in gross income totals and taxed accordingly unless you qualify for an exception. For additional information on the exceptions and details on withdrawing funds from a retirement plan before 59 ½, please contact our office.

Rollover refers to the movement of funds from one retirement account to another that preserves the tax deferred status. Funds must be replaced into a retirement account within 60 days to avoid paying current taxes or early withdrawal penalties.