We have several things to get to today, when it comes to tax planning for the 2024 Income Tax Season. Those items include…
1 – Research and Development Expense Amortization
Beginning in 2023, qualified R&D Expenses can no longer be deducted inside the year incurred. They must be amortized as 5 year property.
Please understand what this will mean. If you spent $100K on R&D inside 2024, you’ll only get a deduction for $20K. The only way to offset this problem is by also using the credit.
2 – Research and Development Tax Credit
This credit is still available in 2024 but with several changes. Qualifying research must be to acquire knowledge that is “technological in nature” and should focus on creating or improving a business component.
The R&D Tax Credit for payroll taxes on startups is also still in place.
3 – EIDL Loans
These are regular loans with a 30 year repayment schedule usually at 3.75% interest. This is not a forgivable loan and isn’t income. Any interest paid on the loan is deductible.
Once we reach the end of the year, we’ll need to get a statement from the government showing how much interest was paid over the period. These loans were “front-loaded”, so the majority of your payments will probably be deductible interest rather than principal.
4 – Student Loan Forgiveness
The current administration has initiated several processes to forgive student loans. Some of these have been nullified through legal processes. Others haven’t. The President then used several loopholes inside the existing laws to forgive as many of the loans as he could.
Please understand that loan forgiveness is subject to regular income tax rates at both the Federal and State levels. This isn’t free.
By not having to repay the loan, you’ve received an economic benefit. As such, you’ll receive paperwork on the forgiveness at the end of the year that must be included in your taxes.
5 – Business Meals Only 50% Deductible
All business meals, whether consumed inside a restaurant or not, are again subject to the 50% deductible rule. Proof for the deductibility of meals is what’s known as the “Newspaper Proof” which includes who was at the meal, what was the business purpose, when did it occur, where did it occur, and why was it initiated.
Just because you put a meal on a business credit card doesn’t mean that it can be automatically deducted. If you take your spouse or significant other to dinner on a Saturday Night and discuss business, that doesn’t make it deductible.
Your spouse or significant other will probably never become one of your clients. Since there is no potential income that would result from the meal, it probably isn’t deductible.
Let me leave you with this…
It’s obvious that the stories we’ve heard about the government prosecuting PPP Loan Fraud are true. I’ve spoken to not less than three entrepreneurs who are being indicted on fraud charges inside the past week for problems with their PPP Loans.
Whether it is a State AG, the FBI, or another governmental agency, these problems are turning legal. Please allow me to be clear.
I’m not an attorney. I’m an accountant. If the government wants to put you in jail, you need a lawyer. There’s nothing I can do to help you.
Here’s an idea. Rather than going to jail, if you’re having one of these problems, why not just pay them back? I’ve never even heard of a problem at a bank that can’t be solved with a check.
But either way, please call the attorney of your choice. Calling me and ranting about how unfair the system is, won’t do either of us any good.
This is the sixth in my series of trying to get my clients ready for our December Tax Planning Sessions. If you have questions, please don’t hesitate to contact us.
We’re all going to get through this. Let’s get through it together.
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Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
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