MAKING RETIREMENT CHANGES

Do not forget to notify us if you make retirement changes throughout the year and you are wondering what the tax effect may be. Examples that could have a tax impact:

*Withdrawal from a retirement account, specifically before age 59 ½ . Not only do you owe tax on the amount distributed (or the earnings if a ROTH distribution), but you are likely subject to a 10% penalty. There are some exclusions that apply.

*Converting an IRA to a ROTH IRA. You will owe tax on the distribution from the IRA.

*Contributions to a retirement account.

A lot of retirement accounts have income limitations on the amount you can contribute during a year. To name a few:

• For a traditional IRA contribution to be deductible income for a single person in 2024 must be under $77,000.
• Roth IRA contributions are allowed for a single person if their income for 2024 is under $146,000.
• SEP IRA contributions cannot exceed 25% of an employee’s compensation. For a Sch C business, this compensation not only includes general business deductions but also additional deductions like health insurance, self-employment taxes, etc. We can provide an estimate of what your contribution could be with a tax projection. However, we cannot know this exact limit until we finalize your taxes.

If you have changed jobs during the year and you were maxing out your 401(k) contributions, you could easily over contribute during that year of change. Make sure your new employer knows the amount you already contributed to your 401(k) at your previous job.

*Setting up a new retirement plan for your business and your employees. You may be eligible for a new small business retirement credit.

NOTE: some of these situations may require tax planning and an additional fee for our services would apply. 

REMINDERS:

1. If you brought documents into the office for us to do your tax return, please come and retrieve them before September 30. Anything left after the 30th will be added to our secure shred bucket.
2. 3rd Quarter Estimates are due September 15

Summer Day Camp Expenses May Qualify for a Tax Credit

Along with the lazy, hazy days of summer come some extra expenses, including summer day camp for working parents. But, there’s some good news. If you paid someone to care for a child or a dependent so you could work, you may be able to reduce your federal income tax by claiming the credit for child and dependent care expenses on your tax return. This credit is available to people who, in order to work or to look for work, have to pay for childcare services for dependents under age 13. The credit is also available if you paid for the care of a spouse or a dependent, of any age, who is physically or mentally incapable of self-care. The Child and Dependent Care Credit is available for childcare expenses incurred during the summer and throughout the rest of the year. Here are three facts to remember about this credit:

• The cost of day camp may count as an expense toward the Child and Dependent Care Credit.

• Expenses for overnight camps do not qualify.

• Whether your childcare provider is a sitter at your home or a daycare facility outside the home, you may get some tax benefit if you qualify for the credit. You will need the name of the childcare provider, the address, the identification number (i.e. Social Security number or employer identification number) and the total amount paid.

Save your receipts from those camps and remember to send them in with your tax documents.