Tax Tip: Save for Retirement, Save on Tax!
Admin • July 27, 2023
Deductibility of Travel Expenses
Tax payers can reduce or defer tax by contributing to a retirement account.
Certain taxpayers’ contributions could also qualify them for a tax credit
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Eligible workers still have time to make qualifying retirement contributions and get the Saver’s Credit on their 2022 tax return.
Who’s eligible for the credit?
You’re eligible for the credit if you’re:
- Age 18 or older,
- Not claimed as a dependent on another person’s return, and
- Not a student
Taxpayers have until April 18, 2023 – the due date for filing their 2022 return – to set up a new IRA or add money to an existing IRA for 2022. Both Roth and traditional IRAs qualify.
Amount of the credit
Depending on your adjusted gross income, the amount of the credit is 50%, 20% or 10% of:
- contributions you make to a traditional or Roth IRA,
- elective salary deferral contributions to a 401(k), 403(b), governmental 457(b), SARSEP, or SIMPLE plan,
- voluntary after-tax employee contributions made to a qualified retirement plan (including the federal Thrift Savings Plan) or 403(b) plan,
- contributions to a 501(c)(18)(D) plan, or
- contributions made to an ABLE account for which you are the designated beneficiary (beginning in 2018).
The IRA contribution limit for 2022 is $6,000 ($7,000 if you’re age 50 or over). They increase to $6,500 ($7,500 if you’re age 50 or over) for 2023.
Any employee sponsored retirement plan contributions have to be made before the last day of the year to qualify. Although it is too late to make contributions to impact your 2022 tax return, this is a great planning tool for 2023!
The SIMPLE IRA limit for 2023 is $15,500 ($19,000 if you’re age 50 or over)
The 2021 tax filing season is quickly coming to an end. The last day to timely file your Income Tax Return or Extension is Monday April 18th. This is an important date to avoid any late filing penalties and possible interest on payments due. April 18th is also the deadline to send in your 1st Quarter 2022 estimated tax payments. All payments must be postmarked by this date to avoid penalties. The IRS has processed roughly 89 million tax returns as of April 1st. If you have already filed and are waiting on your refund, click here to check the status.
The temporary provision that allowed meals to be 100 percent deductible in 2021 remains unchanged for 2022. The Provision allows for a full deduction of expenses paid or incurred after December 31, 2021 and before January 1,2023 for food or beverages provided by a restaurant. This means you may see a higher deduction for business meals on your tax return this year. In order to qualify, the business expense must have been incurred at a restaurant. The IRS defines a restaurant as “a business that prepares and sells food or beverages to retail customers for immediate consumption, regardless of whether the food or beverages are consumed on the business’s premise”. Meal expenses related to prepackaged food or beverages are excluded from the 100 percent deduction. The provision specifically excludes expenses from a grocery store; specialty food store; beer, wine, or liquor store; drug store; convenience store; newsstand; or a vending machine, or kiosk. Excluded meal expenses are still subject to the 50 percent limitation. The 100 percent deduction is also subject to the same rules as the 50 percent deduction.
In recognition of recent gasoline price increases, the IRS announced an increase in the standard mileage rates for the rest of the year. Taxpayers may use the optional standard mileage rates to calculate the deductible costs of operating an automobile for business and certain other purposes. Beginning July 1, 2022, the rates are 62.5 cents per mile for business use of an automobile (up 4 cents) and 22 cents per mile for costs of using an automobile as a medical or moving expense (also up 4 cents) . Rates from the beginning of the year remain 14¢ per mile for charitable organizations remains unchanged as it is set by statute. If this calculation is used in any form of a deduction on your 2022 tax return, it will be imperative for you to keep totals accurate to maximize your deduction.
Consider adjusting your tax withholding or estimated payments
Take Advantage of Lower Tax Rates on Investment Income.
Giving Back is Always in Season
The end of the year can be a stressful time for business owners. One way to alleviate that stress is by keeping your books updated throughout the year. Having updated books makes planning easier and takes some of the surprise out of tax time. Here are three tips for making bookkeeping easier Keep business and personal bank accounts separate – have one (or more) for each Enter receipts on a timely basis. Be consistent with expenses – categorize using set accounts that make sense to you Automated accounting software can also make bookkeeping easier. Bookkeeping does not have to be time consuming and strenuous. Modern bookkeeping can be done on-the-go. There are options to reconcile accounts on your phone and computer in short amounts of time.
Deductibility of Travel Expenses
Deductibility of Travel Expenses
“We have looked for years to be able to find a way to help our clients know which acres are profitable, which decisions were cost-effective, and which were not. Instead of knowing where clients are from an annual tax perspective, what did that crop truly do to change their bottom line?”
