Massachusetts taxpayers are now able to claim a state income tax deduction for charitable donations made in taxable years beginning on or after January 1, 2023. This deduction is available against part B adjusted gross income (wages, pensions, business activities and rents), even for taxpayers who do not itemize their deductions on their federal income tax return.
As you may remember from our writing in November of 2022, Massachusetts now has the “Millionaire’s Tax”, which establishes an additional 4% state income tax on that portion of your income that exceeds $1 million. Utilizing the new Charitable Deduction law may help to reduce this additional tax.
As a reminder, this millionaire’s tax applies to not just high earners, but also to those with one-time income in excess of $1 million through, for example, the sale of a home or business.
The ability to deduct charitable contributions carries with it a twofold benefit; first, it may help to reduce your state income tax and second, it is likely to boost philanthropic giving by all Massachusetts taxpayers at all income levels, providing critical funding to charitable organizations that rely on donated funds.
Please reach out should you have questions on this or any other tax or accounting matter.
The Taxpayer First Act of 2019, enacted July 1, 2019, authorized the Department of the Treasury and the IRS to issue regulations that reduce the 250-return requirement for 2023 tax returns. However, the e-file threshold for returns required to be filed in 2023 remains at 250. The e-file threshold of 10 is effective for returns required to be filed on or after January 1, 2024.
Pass-through entities (PTE) that qualify are generally S corporations, partnerships and multi-member LLCs which are taxed as S corporations or partnerships. C corporations, single member LLCs, sole proprietorships, and trusts (in most states) are not eligible.
The IRS is offering a way for small businesses to potentially avoid any and all interest and penalties by withdrawing their claim. Specifically, small businesses that sent in an ERC claim that is still being processed can withdraw their claim and avoid the possibility of getting a refund for which they are ineligible. If you used an outside firm to obtain your Employee Retention Credit and have concerns about whether they adequately vetted your claim, now is a good time to contact our office to take a second look.
Massachusetts taxpayers are now able to claim a state income tax deduction for charitable donations made in taxable years beginning on or after January 1, 2023. This deduction is available against part B adjusted gross income, even for taxpayers who do not itemize their deductions on their federal income tax return.
Last week, amidst continued confusion of the RMD rules of the road, the IRS announced a delay in the final regulations for inherited IRA RMDs to 2024. In addition, the agency also extended the 60-day rollover of certain plans distributions to September 30, 2023, offering relief for those born in 1951 that received a distribution before July 31, 2023 to roll that taxable distribution over into an IRA, avoiding the taxation of that amount.
The IRS has an aggressive plan for the audit of the Employee Retention Credit claims in an effort to target unscrupulous credit companies encouraging businesses to take aggressive or fraudulent positions regarding the credit. We recommend that all of our clients who did not use our office to determine eligibility for the credit look at the backup under the above list to ensure that they are prepared for any future audit.
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