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- IRS Launches Online Business Accounts
IRS Launches Online Business Accounts
Plus: Accountants being bad...again
Hi there,
We’re well into tax planning season, so here’s some tips to help get you started and avoid those spooky surprises. Happy Halloween!
1) Gift Exclusion up to $18k for 2024.
The gift exclusion is something that confuses a lot of taxpayers - and that’s because they don’t understand the interplay of the estate tax with it. The estate tax (at the federal level, state estate tax thresholds vary) is currently set at $12.92M for an individual and $25.84M for a couple. When you pass away, the value of your estate above those amounts is taxed federally anywhere from 18-40%.
Now, while you’re alive, any gifts you make above the gift exclusion threshold, get counted against your estate tax exemption as well. That means if I gave away $118k next year to someone (a single individual), I would have to report $100k of that to the federal government with my tax filing as a reduction of my estate tax threshold. Now instead of my estate tax threshold being at $12.92M, it’s $12.82M when I die.
But, if you give to a single person not more than the exclusion amount (so for 2024, $18k) in a year, you don’t have to report that amount as a reduction of your estate tax exemption.
And this amount isn’t limited a single person, you could give 100 people $18k and you’re under the reporting threshold. Additionally, this resets each year, so even if you gave $18k to someone next year, you could again give them up to the gift exclusion the following year without triggering a reduction in your exemption. Each year this amount is normally adjusted for inflation, so it’s not uncommon for this amount to rise yearly.
I can’t emphasize enough what a great announcement this is.
Previously, there was no centralized-location to view items related to business taxes like there are for individuals.
Items such as POA’s, tax transcripts, IRS notices, bank info, etc., will eventually all be available to the business owner with their login. Tax preparers will also have access to these items if granted, allowing them to service their clients far more efficiently than previously since there was no central-location these items could be accessed.
The first phase of this offering has been made available to sole proprietors who have an EIN number - and accounts are able to be created at the IRS’s website here. If you’re a sole proprietor with an EIN, I HIGHLY recommend getting an account set up.
An accountant for a church has been sentenced to prison after stealing $176k through a variety of means including charging personal expenses to the church’s Amazon account, stealing from the offering, as well as increasing his salary via payroll access without permission.
This is the perfect example of why internal accounting controls must be in place - especially for small businesses.
When one person has too much control and access to different functions, there are no checks and balances to keep fraud from happening.
There should always, when possible, be at minimum a second set of eyes on the finances and a second level of approval. In this instance - these are the controls that could have been put in place to help avoid the theft:
Have two people present when counting tithes, have a rotation of different counters so it’s not always the same two people
Have a system of approvals for CC purchases, with receipts required for each transaction and a review of the transactions outside of the person purchasing them occurring.
Strictly control access to personnel’s pay with review of each payroll being ran
Routine monthly review of operating budget with comparison to actuals (you could quickly tell if items are way outside of budget and investigate further)
Until next week!