November 2024 - Private Tax Solutions

The IRS is rolling out significant changes for the 2025 tax year, aimed at addressing inflation and easing financial pressures for individuals and families. These adjustments are expected to influence tax planning, streamline tax preparation, and enhance tax compliance for millions of taxpayers. Here’s an overview of the changes and how they can impact your finances.

The Financial Crimes Enforcement Network (FinCEN) recently introduced new Beneficial Ownership Information (BOI) filing requirements as part of its mission to combat financial crimes like money laundering and terrorism financing. These rules are pivotal in creating greater transparency in business ownership while ensuring compliance with federal anti-money laundering laws.

For businesses, navigating these requirements can be complex, making professional tax solutions critical for compliance. Whether you are a small business owner, corporate executive, or tax professional, understanding these regulations is essential to avoid penalties and safeguard your organization’s reputation.

Form 990-T is a specialized tax form used by tax-exempt organizations, such as nonprofits, religious institutions, and charities, to report any unrelated business taxable income (UBTI). While these organizations are exempt from federal income tax, they are still required to pay tax on income derived from activities not directly related to their exempt purpose. As such, preparing Form 990-T requires a nuanced understanding of what constitutes unrelated business income, applicable deductions, and compliance requirements.

In 2021, the IRS processed over 1.5 million returns for tax-exempt organizations, highlighting the importance of compliance in this sector. To simplify the process and avoid potential penalties, it is crucial to understand the structure of Form 990-T, the types of income it covers, and the strategies for accurately preparing it.

With year-end approaching, it’s the perfect time to explore ways to reduce your 2024 business taxes. At Private Tax Solutions, we’re here to help you maximize your deductions with these six effective strategies tailored to your business’s needs. Implementing these tips before the year ends can make a significant impact on your tax savings.

1. Prepay Expenses Using the IRS Safe Harbor

Take advantage of the IRS safe-harbor rule, which lets cash-basis taxpayers prepay and deduct certain expenses up to 12 months in advance. These include costs like rent, equipment leases, and insurance premiums. For example, if you pay $2,000 in monthly rent, you can prepay for 2025 this December, securing a $24,000 deduction in 2024.

As the year draws to a close, don’t forget to maximize your Section 199A deduction. This valuable tax benefit, introduced by the Tax Cuts and Jobs Act (TCJA), provides a 20% deduction on qualified business income (QBI) for pass-through businesses. However, if your taxable income exceeds certain thresholds, careful planning is required to ensure you receive the maximum deduction. Here are three last-minute strategies to help you optimize your Section 199A deduction before December 31, 2024.