Putting off distributions and holding assets in your retirement accounts as long as possible may seem like a good idea, but waiting too long can cause a major tax problem. When you reach age 73, the trigger requiring minimum distributions (RMDs) from qualified retirement accounts is initiated, potentially causing unwanted tax obligations.​

RMDs explained
Required minimum distributions is a formula applied to traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k), 403(b) and other defined contribution plans that calculates how much you must withdraw from your retirement accounts each year. If you fail to take out the minimum distributions, amounts not distributed on a timely basis can be subject to a 25% penalty (or 10% if the problem is corrected within two years).

ALERT: Prior to 2023, the RMD penalty was a whopping 50%!
Thankfully, there are other beneficial rule changes that impact required minimum distributions:

No distributions required while you are still working. You may now delay withdrawing funds from employer plans like a 401(k), past age 73 as long as you are still working and are not a 5%-or-greater owner of the company.

RMD rules are different for Roth accounts. Roth IRAs are not subject to the RMD rules while you are still living. And beginning in 2024, Roth 401(k) and Roth 403(b) minimum withdrawals are not required.
The RMD rules ensure the deferred tax benefit for certain retirement accounts does not extend indefinitely into the future. In other words, the IRS wants their cut by applying income taxes to your tax-deferred savings account balances. The amount you must take out each year is based upon your age, your spouse’s age, and your filing status.

The tax planning opportunity
If you wait to start taking money out of your retirement accounts, the balance in your accounts may be very high when you reach age 73. These higher balances mean a higher annual taxable withdrawal amount. If your required retirement plan distribution is large enough, it may apply a higher marginal tax rate on your withdrawals, and trigger taxes on your Social Security benefits. Depending on your income and filing status, up to 85 percent of your Social Security benefit can be subject to income tax.
The key is to be tax efficient in your withdrawals every year, and long before the required minimum distribution rules take away your planning flexibility.
Some tips

• Plan withdrawals. Once you hit age 59½, you may withdraw money from qualified, tax-deferred retirement accounts without experiencing an early withdrawal penalty. To reduce future tax risk on your Social Security benefits, manage annual disbursements from your retirement account(s) to be more tax efficient when you reach age 73.
• Start receiving Social Security. You may begin full Social Security benefits after reaching the minimum retirement age. But remember, your benefit amount can increase if your start date for receiving Social Security benefits is delayed until age 70. Consider this as part of your plan to be tax efficient.
• See an advisor. There are many moving parts in planning for retirement. These include Social Security benefits, pension plans, savings, and retirement accounts. Ask for help to create the proper plan for you and your family. One element of the plan should include being tax efficient to avoid the tax torpedo.

"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.  
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA;  Janice Papais, CPA

WASHINGTON – As part of a larger effort to protect small businesses and organizations from scams, the Internal Revenue Service today announced the details of a special withdrawal process to help those who filed an Employee Retention Credit (ERC) claim and are concerned about its accuracy.

This new withdrawal option allows certain employers that filed an ERC claim but have not yet received a refund to withdraw their submission and avoid future repayment, interest and penalties. Employers that submitted an ERC claim that’s still being processed can withdraw their claim and avoid the possibility of getting a refund for which they’re ineligible.
The IRS created the withdrawal option to help small business owners and others who were pressured or misled by ERC marketers or promoters into filing ineligible claims. Claims that are withdrawn will be treated as if they were never filed. The IRS will not impose penalties or interest.

Those who willfully filed a fraudulent claim, or those who assisted or conspired in such conduct, should be aware that withdrawing a fraudulent claim will not exempt them from potential criminal investigation and prosecution.

“The IRS is committed to helping small businesses and others caught up in this onslaught of Employee Retention Credit marketing,” said IRS Commissioner Danny Werfel. “The aggressive marketing of these schemes has harmed well-meaning businesses and organizations, and some are having second thoughts about their claims. We want to give these taxpayers a way out. The withdrawal option allows employers with pending claims to avoid future problems, and we encourage them to closely review the withdrawal option and the requirements. We continue to urge taxpayers to consult with a trusted tax professional rather than a marketing company about this complex tax credit.”

When properly claimed, the ERC – also referred to as the Employee Retention Tax Credit or ERTC – is a refundable tax credit designed for businesses that continued paying employees during the COVID-19 pandemic while their business operations were fully or partially suspended due to a government order, or they had a significant decline in gross receipts during the eligibility periods. The credit is not available to individuals.

The ERC is a complex credit with precise requirements to help businesses during the pandemic, and since mid-September, the IRS has received approximately 3.6 million claims for the credit over the course of the program.

In July, the IRS said it was shifting its focus to review ERC claims for compliance concerns, including intensifying audit work and criminal investigations on promoters and businesses filing dubious claims. The IRS has hundreds of criminal cases being worked, and thousands of ERC claims have been referred for audit.

The new withdrawal process follows the Sept. 14 announcement of an immediate moratorium on processing new ERC claims. The moratorium, which will last until at least the end of this year, follows a flood of ineligible ERC claims. Payouts for claims submitted before Sept. 14 will continue during the moratorium period but at a slower pace due to more detailed compliance reviews. With stricter compliance reviews in place, existing ERC claims will go from a standard processing goal of 90 days to 180 days – and much longer if the claim faces further review or audit. The IRS may also seek additional documentation from the taxpayer to ensure the claim is legitimate.

Enhanced compliance reviews of existing claims submitted before the moratorium is critical to protect against fraud but also to protect businesses and organizations from facing penalties or interest payments stemming from bad claims pushed by promoters.

The IRS continues to warn taxpayers to use extreme caution before applying for the ERC as aggressive maneuvers continue by marketers and scammers.

The IRS is also working on guidance to help employers that were misled into claiming the ERC and have already received the payment. More details will be available this fall.

Who can ask to withdraw an ERC claim

Employers can use the ERC claim withdrawal process if all of the following apply:

They made the claim on an adjusted employment return (Forms 941-X, 943-X, 944-X, CT-1X).
They filed the adjusted return only to claim the ERC, and they made no other adjustments.
They want to withdraw the entire amount of their ERC claim.
The IRS has not paid their claim, or the IRS has paid the claim, but they haven’t cashed or deposited the refund check.
Taxpayers who are not eligible to use the withdrawal process can reduce or eliminate their ERC claim by filing an amended return. For details, see the Correcting an ERC claim – Amending a return section of the frequently asked questions about the ERC.

How to withdraw an ERC claim

To take advantage of the claim withdrawal procedure, taxpayers should carefully follow the special instructions at IRS.gov/withdrawmyERC, summarized below.

Taxpayers whose professional payroll company filed their ERC claim should consult with the payroll company. The payroll company may need to submit the withdrawal request for the taxpayer, depending on whether the taxpayer’s ERC claim was filed individually or batched with others.
Taxpayers who filed their ERC claims themselves, haven’t received, cashed or deposited a refund check and have not been notified their claim is under audit should fax withdrawal requests to the IRS using a computer or mobile device. The IRS has set up a special fax line to receive withdrawal requests. This enables the agency to stop processing before the refund is approved. Taxpayers who are unable to fax their withdrawal using a computer or mobile device can mail their request, but this will take longer for the IRS to receive.
Employers who have been notified they are under audit can send the withdrawal request to the assigned examiner or respond to the audit notice if no examiner has been assigned.
Those who received a refund check, but haven’t cashed or deposited it, can still withdraw their claim. They should mail the voided check with their withdrawal request using the instructions at IRS.gov/withdrawmyERC.

Upcoming webinar and other resources for help

Tax professionals and others can register for a Nov. 2 IRS webinar, Employee Retention Credit: Latest information on the moratorium and options for withdrawing or correcting previously filed claims. Those who can’t attend can view a recording later.

The IRS unveiled a new question and answer checklist last month to help taxpayers understand if they’re eligible for the credit. Since then, the IRS evolved the checklist into an interactive IRS.gov feature to help employers – and the tax professionals working with them – check potential ERC eligibility.

The IRS also continues to encourage employers to seek out a trusted tax professional who understands the complex ERC rules, not a promoter or marketer trying to get a hefty contingency fee while taking advantage of honest taxpayers.

New approach from scammers

Marketers and scammers have already revised their ERC pitches following the Sept. 14 moratorium announcement. Some are pushing employers who submit an ERC claim into agreeing to costly up-front loans in anticipation of a refund. The IRS urges taxpayers to avoid these loans and also learn the warning signs of ERC scams.

"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.  
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA;  Janice Papais, CPA

The Social Security Administration announced a 3.2% boost to monthly Social Security and Supplemental Security Income (SSI) benefits for 2024, a big drop from last year's increase of 8.7%. The increase is based on the rise in the Consumer Price Index over the past 12 months ending in September 2023.​

For those contributing to Social Security through wages, the potential maximum income subject to Social Security taxes is increasing to $168,600. This represents a 5% increase in your Social Security taxes! Here's a recap of the key dollar amounts:

2024 Social Security Benefits - Key Information​

What it means for you

• Up to $168,600 in wages will be subject to Social Security taxes, an increase of $8,400 from 2023. This amounts to $10,453.20 in maximum annual employee Social Security payments (an increase of $520!), so plan accordingly. Any excess Social Security taxes paid because of having multiple employers can be returned to you as a credit on your tax return.
• For all retired workers receiving Social Security retirement benefits, the estimated average monthly benefit will be $1,907 per month in 2024, an average increase of $80 per month.
• SSI is the standard payment for people in need. To qualify for this payment, you must have little income and few resources ($2,000 if single, $3,000 if married).
• A full-time student who is blind or disabled can still receive SSI benefits as long as earned income does not exceed the monthly and annual student exclusion amounts listed above.

Social Security & Medicare Rates
The Social Security and Medicare tax rates do not change from 2023 to 2024. The rates are 6.20 percent for Social Security and 1.45 percent for Medicare. There is also a 0.9 percent Medicare wages surtax for single taxpayers with wages above $200,000 ($250,000 for joint filers) that is not reflected in these figures. Please note that your employer also pays a 6.2 percent Social Security tax and a 1.45 percent Medicare tax on your behalf. These amounts are reflected in the self-employment tax rate of 15.3%, as self-employed individuals pay both halves of the tax rate.


"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.  
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA;  Janice Papais, CPA

You can begin receiving your Social Security retirement benefit as early as age 62. But by putting off your benefit start date you can receive a check that is approximately 8 percent higher for each year you delay receiving your benefit.​

The basics
Full retirement age. Those born between 1943 and 1954 reach their full Social Security benefit payment at age 66*. This is called your full retirement age.
Early benefit penalty. Those same retirees can begin receiving their benefit at age 62. But if you start your benefits before reaching your full retirement age, the amount paid to you is permanently reduced.
Bonus payment amounts. But there is also a bonus for each year you delay receiving benefits past your full retirement age. Your Social Security benefit is increased by 8 percent per year.
The maximum cap amount. After age 70, the Social Security benefit is maximized. Further delay in starting your benefits adds no additional payments.

Is a delay worth the wait?
Here are reasons to delay receiving your Social Security benefits until you reach age 70:
You expect to live longer. If your parents and grandparents lived long lives, you may wish to delay receipt of your initial Social Security benefits. The opposite is true if you have a shorter life expectancy.
You do not need the income. If you are still working or have alternative income sources, it may be better to delay receiving your benefits. An 8 percent increase in monthly payments is a good increase versus other investment alternatives.
Your spouse has died. You will need to review the possibility of receiving survivor benefits based on your spouse’s earnings. Later, you could then start collecting your own Social Security retirement benefits based on your earnings.
Your benefits are taxed. If you have other income, your Social Security retirement benefits could be subject to income tax if you are not yet at the full retirement age.
Should you delay receiving your Social Security benefits? There often is not one answer that fits all situations. Consider reviewing your situation prior to making a decision.
* Full retirement age increases by two months each year after 1954 until reaching full retirement age of 67 for those born in 1960 or later.


"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.  
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA;  Janice Papais, CPA

While most income received from your employer quickly ends up on a W-2 tax form at the end of the year, here are some common employee benefits that often avoid the impact of Federal taxes.​

Health benefits. While now reported on W-2's, employer provided health insurance premiums are currently not required to be reported as additional income by the employee. This includes premiums paid for the employee and qualified family members. In addition, the employee portion of premiums can be paid in pre-tax dollars.

Credit card airline miles. Credit card benefits like miles are not generally deemed as taxable income. So those miles earned on corporate credit cards that go to you as an individual are not likely to increase your tax bill.

Employee tuition reimbursement. Up to $5,250 of tuition reimbursed to you by your employer are not deemed to be additional taxable income.

Commuting expenses. You can generally exclude the value of transportation benefits you receive up to $300 per month for combined commuter highway vehicle transportation and transit passes. There is also up to $300 per month for tax-free qualified parking benefits.

Company Health Savings Account (HSA) contributions. Up to specified dollar limits, cash contributions to the HSA of a qualified individual are exempt from federal income tax withholding, social security tax, Medicare tax, and FUTA tax.

Group term life insurance. You can generally exclude the cost of up to $50,000 of group-term life insurance from your wages.

Small gifts. Small-valued gifts are not included in income and could include things like the use of the company copy machine, occasional meals, reasonably priced holiday gifts and tickets to a sporting event.

Knowing what benefits can avoid a tax bite, try to maximize their use to your greatest advantage and reach out with any questions you may have.

"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.  
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA;  Janice Papais, CPA