December 2023

Dear Client,

Happy Holidays!

We hope you had a wonderful year, and your loved ones are safe and healthy.

As the year end approaches, there are some key deadlines you need to be aware of and steps that you can take to help minimize your 2023 income tax liability.

Here are the filing due dates for each type of filing for tax year 2023:

• S-Corporation and Partnership tax returns are due on March 15, 2024
• Calendar year end C-Corporation tax returns are due on April 15, 2024

Corporate Transparency Act (new in 2024)

The Corporate Transparency Act (CTA), enacted in 2021, was passed to enhance transparency in entity structures and ownership to combat money laundering, tax fraud, and other illicit activities.

What this means to you is that for existing LLCs and corporations, you must file a form with details about your firm’s ownership within twelve months of January 1, 2024. For companies formed during 2024, you have 90 days from formation to fill out the form. 

There are large penalties for reporting false or fraudulent information, or neglecting to report this information by the deadline, the penalties can be up to $ 500.00 per day, up to $10,000.00 plus up to 2 years in prison.

Here is a link to the website for filing: https://www.fincen.gov/boi

New York Minimum wage for year 2024



The state minimum wage is scheduled to increase on January 1, 2024 to $16.00 per hour for New York City and the counties of Nassau, Suffolk and Westchester. It will be $15.00 for the rest of the state.

Pass-through Entity Tax (PTET)

To recap what PTET is, an entity is allowed to pay a pass-through entity tax that can count as a business deduction. This tax can then be claimed as a dollar for dollar credit on the taxpayer’s personal tax return for NY. NYC also allows entities to opt in to PTET. The requirement is that the entity must already be opted into the NYS PTET election for the same year. For tax year 2023, it is too late to make the PTET election. For tax year 2024, an entity has until March 15, 2024 to opt into both NYS and NYC PTET. The election has to be made online. Estimated taxes for PTET would be required. If you need help with estimated tax calculation, we would need your books with completed year-to-date information. For tax year 2023, it is too late to make the PTET election. 

Over 30 states have this PTET regime. There are changes in the coming year to the Connecticut (CT) PTET. CT PTET has been mandatory, and they only give you a credit of 87.5% of the PTET paid on your personal tax return. In 2024, the CT PTET will go back to being optional, but if you don’t opt in, you will be required to prepare composite returns for CT. In most cases, it will be better to elect the PTET.

Each state has different rules. If you have specific questions about your state, please reach out.

1099s & W-2 Preparation

• If you are self-employed or in business and have paid $600 or more by cash or check to an individual or unincorporated business, including LLCs, who have performed services for you this year, you are required to issue that contractor a 1099-NEC form. The deadline for filing 1099 forms with the IRS is January 31, 2024, which is the same day that you must send them to your payees.

Do not include in the 1099 total any amounts that you paid utilizing a payment settlement entity (PSE, such as amounts paid by credit card or using PayPal, Venmo, Square or Stripe since they issue their own 1099-K forms. Payments made by Zelle do need to be included in the 1099s that you issue. That is because Zelle does not hold funds. They are a peer-to-peer network. For calendar years after 2021, the PSE is required to send you a Form 1099-K if it has processed gross payments for goods or services that exceed $600. Many PSE’s do still issue 1099-K forms to all their vendors, even if their transactions are below the threshold.

Please do not forget to file your 1099 forms. The IRS can disallow your deductions for payments to subcontractors if you do not send them 1099 forms. There are also penalties for not filing 1099s. The later they are, the greater the penalty. The maximum penalty is $310 per missing 1099 form, unless it is found to be intentional, and then it is $630. Please file your 1099s.

• 1099 Alert - The IRS still has the question on the tax return that specifically asks if you made any payments in 2022 that would require you to file a form 1099, and if yes, did you file all the required 1099 forms. This question makes it even more imperative that you file all required 1099 forms.

• If you have any employees, you must provide W-2’s to them by January 31, 2024. The deadline for filing these forms with the IRS is also January 31, 2024.

If you need our help in preparing either of these forms, please contact us in January.

Foreign Account Reporting Requirement

If your company has any foreign financial accounts, anyone who has signature authority over these accounts must file an FBAR form (Foreign Bank Account Reporting) if the aggregate value of the foreign financial accounts where they have signature authority exceeds $10,000 USD at any time during the calendar year. Both the company, and the signatory partners, owners and employees must file the forms. This is only for informational reporting. There is no tax impact for this reporting. IRS can impose a large penalty for failure to file.   

C- Corporations and S-Corporations

1) When you work for your own corporation, you are required to pay yourself reasonable compensation in the form of a salary through payroll. 

Please contact your tax accountant for year-end tax planning so we can evaluate your salary versus your business profit and determine whether anything needs to be adjusted. If necessary, your corporation could pay you a year-end bonus.  

Please be aware that due to a NYS Mandate, NYS Payroll Tax Returns must be filed electronically. In order to be included for the 2023 tax year, in most cases, all final payroll numbers must be processed by your payroll company by December 15^th.    

If you are already set up for payroll through your corporation, please contact your tax accountant for year-end payroll tax planning. 

If you have not set up a payroll account, please contact your tax accountant immediately so appropriate steps can be taken.      

If we are going to assist you with calculating your salary or year-end bonus, please provide us with your income and expense records. To ensure timely processing, the information must be provided to us by December 15, 2023.

2) For S-Corporations Only: If you are a more than 2% owner and you or the Corporation pays health insurance premiums for you (and your family), this is tax deductible, but there are special rules that apply to how this is reported.   

If you are paying for health insurance through your corporation, you must add the amount of health insurance premium paid in 2023 to Box 1 and Box 14 of your Form W-2 form. It is imperative that you let your payroll tax preparer know prior to December 18^th the amount of health insurance premiums paid in the year 2023. Otherwise, you will not be able to deduct the premiums as an adjustment to income.

3) Payroll tax forms (4th Quarter 2023 and Annual 2023) are generally due to the government by January 31^st.  However, if your payroll tax returns are being processed by a payroll processing company, the information needs to be processed by the payroll company by December 15^th, in most cases. The payroll company then has until January 31^st to generate the reports and file them with the applicable government agency. Please provide your information before that date to allow time for proper processing.  If our office processes your payroll, we will need your salary information by December 15, 2023, to ensure proper processing. 

4) For corporations operating in New York City, if you need to pay NYC corporate estimates, the 4th quarter payment is due December 15^th. If you haven’t made your estimated payment by December 15th, it needs to be made by December 31^st for you to receive the deduction on your 2023 tax return.

5) If you have a company retirement plan which allows employee (i.e., you and any workers on payroll) salary deferrals, in addition to employer contributions (i.e., in the name of your corporation), please remember that generally, the employee contribution must be deposited by December 31^st for it to be deductible in the current 2023 tax year. The employer contribution can be made as late as the business tax return deadline including extensions (i.e., March 15, 2024 or September 15, 2024 with a valid extension).

6) If your contributions to your 401k plan are not at the maximum level yet, and you want to maximize your contributions, you must do this through your payroll service company in the next few weeks. The deadline for deposit is on December 31, 2023.

Partnership (PS), Limited Liability Company (LLC), and Limited Liability Partnership (LLP)   

1) As an owner/operator of your PS/LLC/LLP, you do not receive a salary. Thus, there is no payroll for you. Payroll would only be applicable if you have employee(s) working for your company. 

2) For PS/LLC/LLPs operating in New York City with NYC Unincorporated Business Tax (UBT) due, the 4th quarter payment is due January 15, 2024. However, for any cash method taxpayers, it is recommended that you prepay the tax by December 31^st, so that it counts as a 2023 tax deduction. If you pay it in January, it will instead count as a tax deduction for the 2024 tax year. 

3) Company retirement plan – (see item # 5 above for Corporations). Please make your employee contributions by December 31^st.  Employer contributions can be made as late as March 15, 2024 (or September 15, 2024 with a valid extension).

4) New York State filing fee (Form IT-204-LL) – This tax form and the payment are due March 15, 2024 and applies to all active LLCs and LLPs operating in NYS. The filing fee is applicable to a PS only if the partnership has New York source income of at least $1 million. If we prepare the form it must be e-filed and paid for by direct bank debit/auto withdrawal.  

Electronic Payment of Payroll Taxes 

1) Federal and State governments require payroll taxes to be paid electronically.    

2) Only in rare instances can you make your tax payment via check through the mail without incurring a penalty from the government. This would apply when the tax owed is below certain levels, which likely may not be applicable in your situation. Thus, you should have active electronic payment accounts with Federal, New York, and/or New Jersey. 

3) If you have not registered with the government’s electronic payment system and you need to issue payroll by December 31^st, you need to register ASAP. There is a lag time of approximately five (5) working days from initial registration to receiving approval of the online account.

4) Please contact your tax accountant immediately if you need assistance with registering your business for any of the following payroll tax programs: 

• Federal: EFTPS (Electronic Federal Tax Payment System)
• New York: NYS-1 Web File
• New Jersey: EFT (Electronic Funds Transfer)

Notes to All

• Meals:

As of January 1, 2023, the rules allowing 100% of business meals to be deductible has expired, and the rules have gone back to a 50% deduction for most business meals. Although the business meals rule has reverted back, entertainment is still not tax deductible. Meals with employees or food for company holiday parties continues to be 100% deductible.  

• De minimis Safe Harbor Limitation:  

The IRS allows a de minimis safe harbor election that permits a taxpayer to not capitalize tangible property. Instead, it can be expensed as an ordinary and necessary business expense. The de minimis safe harbor limitation for a taxpayer without an applicable financial statement is $2,500 per invoice (or item).

• Business Mileage Guide Methods:  

Business transportation expenses can be calculated for tax purposes in one of two ways – standard mileage rate or actual expense method. In both cases a contemporaneous record must be kept of business miles, commuting miles, personal miles, and total miles.  

The standard mileage rate can be used if you do not hire out your car or operate a fleet. The 2023 rate is 65.5¢ per mile. 

The actual expense method can be used if you are unable to use the standard mileage rate. If your vehicle is costly to run or weighs more than 6,000 lbs. this method is usually preferable. You are required to maintain a record of all vehicle expenses as the deduction is calculated by applying a percentage of business miles over total mileage. Expenses include gas, oil, repairs, tires, batteries, insurance, supplies, monthly parking, washes, and waxes. The applied percentage will also include a percentage of lease payments or depreciation.

Any expenses for parking and tolls directly used for business can be deducted on top of either method.

• Business Loans: 

It is important that all loans between owners and the corporation be documented. 

Short term unwritten advances of less than $10,000 are acceptable if they are treated as debt and are expected to be repaid within a reasonable period of time. 

Debt of over $10,000 needs to be documented with a promissory note that includes a fixed maturity date and a reasonable interest rate that will create taxable income as it is repaid.

• Gifts to Employees:

If you are planning to give your employees a holiday gift, make sure it is de minimus and not in cash, otherwise it will need to be included in wages.

• Business gifts to Individuals: 

There is a limit on how much you can deduct on business gifts to individuals. The limitation is $25 per person per year.  If you purchase a gift for the same customer 3 times during the year totaling more than $25, you can only deduct $25 as business expense.

• Is your independent contractor really an employee? 

Please be aware that both the IRS and State taxing authorities are increasingly scrutinizing this issue. Improperly treating employees as independent contractors could result in stiff penalties (e.g., you may be subject to a civil penalty of $2,500 to $5,000 per employee) in addition to the related taxes you would normally be subjected to as the employer. If this is an area of concern for you/your company, please contact your tax accountant. Upon request, we will provide you with additional information regarding how to evaluate the “Independent Contractor vs. Employee.”

• Issuing Form 1099s

The law requires that a Form 1099-NEC be sent to each independent contractor and vendor (except when the recipient is a corporation) to whom you have paid $600 or more in a calendar year. This must be issued to the recipient by January 31, 2024. Additionally, the 1099s along with the Form 1096 summary must be filed with the IRS also by January 31, 2024.  If you need assistance with preparing these forms, please contact your tax accountant starting mid-December 2023.

• As a reminder, effective January 1, 2023 - IRS requires additional record keeping for your income. 

You need to keep a separate sub-total on income received as (1) cash/check payments and (2) credit card/electronic/online payments. Third party institutions such as AMEX, Visa, and PayPal will be reporting the sales collected on your behalf to the IRS and will issue tax Form 1099-K to you. Thus, the IRS is increasing its ability to independently verify your income with outside third parties and accordingly, we are required to separately report the income amounts on your 2023 tax return.

• Quickbooks Desktop software is being discontinued  

Different versions of Quickbooks desktop software are being phased out and support is being discontinued. After May 31, 2024, Quickbooks Desktop 2021 software will be discontinued. If you don’t upgrade your Quickbooks desktop to the online version by May 31, 2024, you will lose services like payroll, payments, and online bank feeds. For more information, please visit QB website link below:

https://quickbooks.intuit.com/learn-support/en-us/help-article/feature-preferences/quickbooks-desktop-service-discontinuation-policy/L17cXxlie_US_en_US

Final Notes to All  

• Please be aware that there is a fee associated with any year-end tax planning work.  

• If you need year-end tax planning for your personal taxes and/or company taxes, please contact your tax accountant ASAP. Please be aware that the earliest deadline mentioned above was the NYC Corporation tax, due December 15^th, so please plan accordingly.

• Please send over either your QuickBooks file or business records (i.e., summary of income and expenses) for the 2023 calendar year as soon as possible. If you can accurately project the income/expense for the remainder of this month, please do so, as this will be helpful in the tax planning process. If you use QuickBooks on-line and you have not already invited your accountant to have access to your file, please do so now.

• Please make sure you have your QuickBooks file fully reconciled for all bank and credit card accounts. Any current year outstanding items must be reviewed and deleted, if necessary. Do not delete any prior year’s outstanding items without checking with your accountant at our office.

We look forward to working with you over the next few weeks on any of the items referenced above, as well as your annual tax return during the normal tax filing season.

We wish you a happy and healthy holiday season.