December 2024 Individual Due Dates

December 2 – Time for Year-End Tax Planning

December is the month to take final actions that can affect your tax result for 2024. Taxpayers with substantial increases or decreases in income, changes in marital status or dependent status, and those who sold property during 2024 should call for a tax planning consultation appointment.

December 10 – Report Tips to Employer

If you are an employee who works for tips and received more than $20 in tips during November, you are required to report them to your employer on IRS Form 4070 no later than December 10. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 12 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed.

December 31 – Last Day to Make Mandatory IRA Withdrawals

Last day to withdraw funds from a Traditional IRA Account and avoid a penalty if you were born before January 1, 1951. If your birth date is during the period January 1, 1951 through December 31, 1951 (i.e., you reached age 73 in 2024), your first required distribution is for tax year 2024, but you can delay the distribution to April 1, 2025. If you are required to take a distribution in 2024, and the institution holding your IRA will not be open on December 31, you will need to arrange for withdrawal before that date.

December 31 – Last Day to Pay Deductible Expenses for 2024

Last day to pay deductible expenses for the 2024 return (doesn’t apply to IRA, SEP or Keogh contributions, all of which can be made after December 31, 2024).

December 31 –  Caution! Last Day of the Year

If the actions you wish to take cannot be completed on the 31st or in a single day, you should consider taking action earlier than December 31st, as some financial institutions may be closed that day.


Weekends & Holidays:

If a due date falls on a Saturday, Sunday or legal holiday, the due date is automatically extended until the next business day that is not itself a legal holiday. 

Disaster Area Extensions:

Please note that when a geographical area is designated as a disaster area, due dates will be extended. For more information whether an area has been designated a disaster area and the filing extension dates visit the following websites:

FEMA: https://www.fema.gov/disaster/declarations
IRS: https://www.irs.gov/newsroom/tax-relief-in-disaster-situations

December 2024 Business Due Dates

December 2 – Employers

During December, ask employees whose withholding allowances will be different in 2025 to fill out a new Form W4 or Form W4(SP). 

December 16 – Social Security, Medicare and Withheld Income Tax

If the monthly deposit rule applies, deposit the tax for payments in November.

December 16 – Nonpayroll Withholding

If the monthly deposit rule applies, deposit the tax for payments in November.

December 16 – Corporations

The fourth installment of estimated tax for 2024 calendar year corporations is due.

December 31 – Last Day to Pay Deductible Expenses for 2024  

Last day to pay deductible expenses for the 2024 return (doesn’t apply to IRA, SEP or Keogh contributions, all of which can be made after December 31, 2024). 

December 31 – Last Day to File Beneficial Ownership Report for pre-2024 Reporting Companies

Last day to timely file the Beneficial Ownership Report with FinCEN for companies created before January 1, 2024. The new Beneficial Ownership Information Reporting Rule requires certain entities (corporations, limited liability companies, partnerships) to electronically file “beneficial ownership” information reports to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) starting on January 1, 2024. Businesses created or registered to do business before Jan. 1, 2024 have until Jan. 1, 2025 to file their initial reports. Companies created or registered on or after Jan. 1, 2024 will have 30 days to file after their creation. Please contact this office if you need information about or assistance in complying with the reporting requirements. Substantial penalties apply for non-compliance.

December 31 – Caution! Last Day of the Year

If the actions you wish to take cannot be completed on the 31st or in a single day, you should consider taking action earlier than December 31st, as some financial institutions may be closed that day.

Weekends & Holidays:

If a due date falls on a Saturday, Sunday or legal holiday, the due date is automatically extended until the next business day that is not itself a legal holiday. 

Disaster Area Extensions:

Please note that when a geographical area is designated as a disaster area, due dates will be extended. For more information whether an area has been designated a disaster area and the filing extension dates visit the following websites:

FEMA: https://www.fema.gov/disaster/declarations
IRS: https://www.irs.gov/newsroom/tax-relief-in-disaster-situations  

Tax planning is a crucial aspect of financial management, yet it often remains underestimated by many taxpayers. One area that frequently causes confusion and potential financial strain is the management of estimated tax payments and the associated penalties for underpayment. Understanding the intricacies of estimated tax safe harbors, the requirement for payments to be made ratably, and the strategies to mitigate penalties can significantly impact a taxpayer’s financial health. This article delves into these topics, offering insights into how taxpayers can navigate these challenges effectively.

Understanding Underestimated Penalties – Underpayment penalties can catch taxpayers off guard, especially when they fail to meet the required estimated tax payments. The IRS imposes these penalties to encourage timely tax payments throughout the year, rather than a lump sum at the end. The penalty is essentially an interest charge on the amount of tax that should have been paid during the year but wasn’t. This penalty can be substantial, especially for those with fluctuating incomes or those who experience a significant increase in income without adjusting their estimated payments accordingly. While most wage-earning taxpayers have enough tax withheld from their paychecks to avoid the underpayment penalty problem, those who also have investment income or side gigs may find their withholding isn’t enough to meet the prepayment requirements to avoid a penalty.

Estimated Tax Penalty Amount – The IRS sets the interest rates for underpayment penalties each quarter.  It is equal to the federal short-term interest rate plus 3 percent. With the recent rapid rise in interest rates the underpayment interest rate for each quarter of 2024 is a whopping 8%, the highest it has been in almost two decades. Something you should be concerned about if you expect your withholding and estimated tax payments to be substantially underpaid.   

Estimated Tax Due Dates – For individuals, this involves using Form 1040-ES to make the payments, generally on a “quarterly” basis. 

The estimated tax payment schedule for individuals and certain other taxpayers is structured in a way that does not align with the even quarters of the calendar year. This is primarily due to the specific due dates set by the IRS for these payments. For 2024, the due dates for estimated tax payments are as follows:

  1. First Quarter: Payment is due on April 15, 2024. This payment covers income earned from January 1 to March 31.
  2. Second Quarter: Payment is due on June 17, 2024. This payment covers income earned from April 1 to May 31. Note that this period is only two months long, which contributes to the uneven nature of the quarters.
  3. Third Quarter: Payment is due on September 16, 2024. This payment covers income earned from June 1 to August 31.
  4. Fourth Quarter: Payment is due on January 15, 2025. This payment covers income earned in the four months of the period September 1 to December 31.

 Note, these payment due dates normally fall on the 15th of the month. However, whenever the 15th falls on a weekend or holiday, the due date is extended to the next business day.  

Estimated Tax Safe Harbors – To avoid underpayment penalties and having to make a projection of the expected tax for each payment period, taxpayers can rely on safe harbor rules. These rules provide a guideline for the minimum amount that must be paid to avoid penalties. Generally, taxpayers can avoid penalties if their total tax payments equal or exceed:

  • 90% of the current year’s tax liability or 
  • 100% of the prior year’s tax liability.

However, for higher-income taxpayers with an adjusted gross income (AGI) over $150,000, the safe harbor threshold of 100% increases to 110% of the prior year’s tax liability.

Ratable Payments Requirement – One critical aspect of estimated tax payments is the requirement for these payments to be made ratably throughout the year. This means that taxpayers should aim to make equal payments each “quarter” to avoid penalties. However, income is not always received evenly throughout the year, which can complicate this requirement. For instance, if a taxpayer receives a significant portion of their income in the latter part of the year, they may find themselves underpaid for earlier quarters, leading to penalties.

Uneven Quarters and Computing Penalties – The challenge of uneven income can be addressed by understanding how penalties are computed. The IRS calculates penalties on a quarterly basis, meaning that underpayments in one quarter cannot be offset by overpayments in a later quarter. This can be particularly problematic for those with seasonal or sporadic income. To mitigate this, taxpayers can use IRS Form 2210, which allows them to annualize their income and potentially reduce or eliminate penalties by showing that their income was not received evenly throughout the year.

Workarounds: Increasing Withholding and Retirement Plan Distributions

  • Increase Withholding – One effective workaround for managing underpayment penalties is to increase withholding for the balance of the year. Unlike estimated payments, withholding is considered paid ratably throughout the year, regardless of when the tax is actually withheld. This means that increasing withholding later in the year can help cover any shortfalls from earlier quarters.
  • Retirement Plan Distribution – Another strategy involves taking a substantial distribution from a retirement plan such as a 401(k) or 403(b) plan, which is subject to a mandatory 20% withholding requirement. The taxpayer can then roll the distribution back into the plan within 60 days, using other funds to make up the portion of the distribution which went to withholding. Tax withholding can also be made from a traditional IRA distribution, but this approach requires careful planning to ensure compliance with the one IRA rollover per 12-month period rule.
  • Annualized Exception – For taxpayers with uneven income, the annualized exception using IRS Form 2210 can be a valuable tool. This form allows taxpayers to calculate their required estimated payments based on the actual income received during each quarter, rather than assuming equal income throughout the year. By doing so, taxpayers can potentially reduce or eliminate underpayment penalties by demonstrating that their income was not received evenly.

Managing estimated tax payments and avoiding underpayment penalties requires careful planning and a thorough understanding of IRS rules and regulations. By leveraging safe harbor provisions, understanding the requirement for ratable payments, and utilizing strategies such as increased withholding and retirement plan distributions, taxpayers can effectively navigate these challenges.

If you are expecting your pre-payment of tax to be substantially underpaid and wish to develop a strategy to avoid or mitigate underpayment penalties, please contact this office.  But if you wait too late in the year, it might not provide enough time before the end of the year to make any effective changes. 

There are special rules for qualifying farmers and fishermen, who may have different requirements and potential waivers for underpayment penalties; contact this office for details.

Tax-Savvy Retirement: Strategies Boomers Can Use to Lower Their Tax Bill and Maximize Savings

Retirement is your reward for a lifetime of hard work, but keeping more of your savings in retirement requires strategy. Many Baby Boomers unknowingly leave tax dollars on the table by missing out on tax-savvy moves. You’ve built up a lifetime of savings—now it’s time to make sure they work for you. Let’s break down a few ways to stay tax-efficient in retirement so you can keep more for yourself, your loved ones, and the causes you care about.

Manage Required Minimum Distributions (RMDs)

If you’ve hit the age where RMDs kick in, you know they can increase your tax bill. But there’s a smart way to handle them. RMDs from traditional IRAs or 401(k)s are taxable income, and if you don’t meet the requirement, you’re facing up to a 25% penalty. One way to minimize the tax impact? Consider strategic withdrawals. For example, withdrawing only what you need until RMDs are mandatory may allow your account to grow tax-deferred longer, giving you a larger cushion while controlling your taxable income.

Pro Tip: Schedule a call with us to look at how much you’re withdrawing and assess if we can create a withdrawal strategy that reduces your RMD impact over time. Don’t let penalties and excess taxes eat into your savings when there are steps you can take today.

Leverage Qualified Charitable Distributions (QCDs)

If you’re charitably inclined, here’s a tax-smart move that lets you donate directly from your IRA to a charity, avoiding extra income on your tax return. Qualified Charitable Distributions (QCDs) allow you to transfer up to $100,000 each year directly to a qualified charity bypassing federal income tax on that amount.

This is a powerful strategy, especially if you’re in a higher tax bracket or want to reduce your RMD income. Instead of taking a taxable RMD, channel that money directly to a cause you’re passionate about while reducing your taxable income.

Take Action: Not sure how QCDs work? Connect with our office for a quick QCD rundown, and we’ll help you structure donations in a way that makes sense for your taxes.

Time Your Social Security Benefits Wisely

Social Security is one of the most reliable sources of retirement income, but did you know that timing matters for taxes? Taking benefits too early or waiting too long can affect your taxable income significantly. For example, if you start Social Security benefits at 62, you may miss out on an increase that comes with delaying until full retirement age or even later.

Plan Smart: If Social Security timing feels complicated, that’s because it is! Let’s review your situation and determine the best time for you to start benefits to minimize the tax hit.

Practice Tax-Efficient Withdrawals

Not all retirement accounts are created equal when it comes to tax. In fact, the order you draw down from each account—whether it’s taxable, tax-deferred, or tax-free—can make a big difference. With tax-efficient withdrawals, you can manage your income tax bracket, avoid unwanted tax spikes, and make your savings last longer.

Here’s how it works: Many retirees start with taxable accounts to reduce immediate tax, moving to tax-deferred accounts (like traditional IRAs) later, and using tax-free accounts (like Roth IRAs) strategically. This isn’t one-size-fits-all—it’s about optimizing based on your income needs and tax situation.

Your Next Move: Wondering how to make this work for you? Contact our office, and we’ll help you set up a tax-smart withdrawal sequence that leaves you in control.

Don’t Let Retirement Taxes Surprise You

Navigating taxes in retirement is about more than just saving money—it’s about securing your financial legacy. The tax strategies you choose today can significantly affect your long-term savings. Don’t go it alone; our team is here to help you make the most of your retirement.

Take Charge of Your Retirement Today 

Ready to talk specifics? Contact our office to schedule a consultation, and together, we’ll create a retirement tax strategy tailored to your goals. Your future self will thank you.

Unlocking Cash Flow from Tax Credits: A Hidden Advantage for Small Businesses

If you’re the driving force behind a small or medium-sized business, you know that cash flow is the lifeline of your operations. Yet, in the daily whirlwind, an incredible opportunity often gets overlooked—tax credits. These aren’t just numbers on a financial statement; they’re transformative tools that can give your cash flow the boost it needs. Let’s explore how you can unlock these hidden advantages and secure the cash flow to fuel sustainable growth.

The Cash Flow Crunch 

Picture this: payroll’s coming up, inventory needs to be restocked, and you’re investing in growth—all while keeping cash flow steady. Sound familiar? For many small businesses, managing cash flow is a constant balancing act. But here’s the good news: there’s a way to ease this pressure without cutting corners or stalling progress. Tax credits could be the answer you’re looking for.

The Opportunity: Tax Credits as Cash Flow Catalysts 

Tax credits are more than financial perks—they’re powerful tools in your financial playbook. Unlike deductions that merely lower taxable income, tax credits reduce your tax bill dollar-for-dollar. This means more cash stays within your business, strengthening your financial stability and providing a new avenue for growth. Here are some key credits to know about:

1. Research and Development (R&D) Tax Credit 

Why It’s a Win: If your business is innovating—whether it’s developing new products, enhancing processes, or advancing technology—this credit is likely within reach. The R&D tax credit rewards businesses for pushing boundaries, making it ideal for forward-thinking entrepreneurs. 

How It Works: This credit allows you to claim a percentage of your qualifying R&D expenses, directly reducing your tax liability. Think of it as a financial nod for all the progress you’re driving. 

Qualify by: Keeping detailed records of R&D activities, including project descriptions, associated expenses, and outcomes. This documentation will help substantiate your claim.

2. Work Opportunity Tax Credit (WOTC) 

Why It’s a Win: Hiring can be an opportunity for cash flow improvement. The WOTC rewards businesses that hire individuals from certain target groups—such as veterans, individuals from low-income areas, and long-term unemployment recipiets. 

How It Works: Depending on the employee’s background, you may be able to claim a tax credit for a percentage of their wages during their first year of employment. This can be particularly valuable if you’re looking to expand your team and reduce tax liability in the process. 

Qualify by: Seek new hires that meet WOTC eligibility, have them certified, and keep precise hiring and payroll records to support the credit.

3. Industry-Specific Incentives 

Why It’s a Win: Certain industries—like renewable energy, manufacturing, and tech—benefit from tailored tax credits designed to encourage growth, sustainability, or innovation within their fields. These credits reward activities like energy efficiency improvements, eco-friendly initiatives, and technological advancements. 

How They Work: Industry-specific credits focus on specific qualifying activities, such as upgrading to energy-efficient equipment or investing in new technologies. In turn, these credits reduce your tax bill and boost your cash flow. 

Qualify by: Researching and understanding the incentives available in your industry and ensuring compliance with all relevant requirements to make the most of these opportunities.

4. Payroll Tax Credit for R&D 

Why It’s a Win: Newer or smaller businesses, particularly startups, often find that they have little income to offset with the R&D credit. That’s where the payroll tax credit comes in—this option allows eligible startups to apply the R&D credit to their payroll taxes, providing cash flow relief from day one. 

How It Works: Eligible businesses can apply up to $250,000 of their R&D credit against payroll taxes each year, boosting cash flow without waiting for income to offset the credit. 

Qualify by: Meeting startup eligibility criteria (typically having less than $5 million in gross receipts) and engaging in qualifying R&D activities. Accurate documentation of expenses is key.

Cash Flow Strategy: Integrating Tax Credits into Your Financial Plan 

Securing these credits is just the first step. Once claimed, they can serve as a powerful fuel for your cash flow strategy. With added cash flow, you can invest in growth opportunities, pay down debt, or create a financial buffer. By factoring these credits into your cash flow projections, you’re strengthening your business’s financial resilience and opening doors to new growth possibilities. 

Ready to Tap into the Power of Tax Credits? 

Tax credits could be the cash flow solution your business needs. If you’re ready to uncover these opportunities, we are here to guide you. As advisors experienced in accounting, we specialize in helping businesses navigate the complexities of tax credits. Contact our office today to start exploring the credits that could transform your cash flow—and your business. 

Let’s turn those hidden tax credits into real, tangible gains. Reach out to schedule a consultation, and together, we’ll take your cash flow strategy to the next level!

Essential Year End Stock Strategies for Savvy Investors

Article Highlights:

  • Annual Loss Limit
  • Navigating Wash Sale Rules
  • Recognizing Year-End Gains and Losses
  • Donating Appreciated Securities
  • Managing Employee Stock Options
  • Dealing with Worthless Stock
  • Leveraging the Zero Capital Gain Rate
  • Netting Gains and Losses

As the year draws to a close, taxpayers with substantial stock holdings have a unique opportunity to engage in strategic planning to optimize their tax positions. This article explores various strategies, including understanding the annual loss limit, navigating wash sale rules, recognizing gains and losses, donating appreciated securities, managing employee stock options, dealing with worthless stock, leveraging the zero capital gain rate, and netting gains and losses.

Annual Loss Limit – The Internal Revenue Service (IRS) allows taxpayers to offset capital gains with capital losses. If losses exceed gains, up to $3,000 ($1,500 if married filing separately) can be deducted against other income. Any remaining losses can be carried forward to future years. This annual loss limit is crucial for taxpayers with significant stock holdings, as it provides a mechanism to reduce taxable income and potentially lower tax liability.

Navigating Wash Sale Rules – The wash sale rule is designed to prevent taxpayers from claiming a tax deduction for a security sold at a loss and then repurchased right away. A wash sale occurs when a taxpayer sells a security at a loss and repurchases the same or substantially identical security within 30 days before or after the sale. If a wash sale is triggered, the loss is disallowed for tax purposes and added to the cost basis of the repurchased security. To avoid this, taxpayers should plan sales carefully, ensuring that any repurchase occurs outside the 61-day window surrounding the sale date.

Recognizing Year-End Gains and Losses – Timing is critical when recognizing gains and losses. Taxpayers should evaluate their portfolios to determine which securities to sell before year-end. Selling securities at a loss can offset gains realized earlier in the year, reducing overall tax liability. Conversely, if a taxpayer expects to be in a higher tax bracket in the future, it might be advantageous to recognize gains in the current year when the tax rate is lower.

Donating Appreciated Securities – Donating appreciated securities to a tax-exempt organization can be more beneficial than selling the securities and donating the cash proceeds. By donating the securities directly, taxpayers can avoid capital gains tax on the appreciation and claim a charitable deduction for the fair market value of the securities. This strategy is particularly advantageous for taxpayers who have held the securities for more than one year, as it maximizes the tax benefits associated with charitable giving.

Managing Employee Stock Options – Taxpayers with unexercised employee stock options should consider year-end strategies to optimize their tax outcomes.

  • Non-qualified stock options (NSOs) – Exercising NSOs before year-end can accelerate income recognition, potentially taking advantage of lower tax rates. For example:
  • Zero Capital Gains Rate:
  1. If your taxable income is low enough to fall within the 0% long-term capital gains tax bracket, you can potentially sell appreciated assets, such as stocks acquired through exercising options, without incurring any capital gains tax. This is particularly advantageous if you have held the stock for more than a year, qualifying it for long-term capital gains treatment.
  2. This strategy requires careful planning to ensure your total taxable income remains below the threshold for the 0% rate. It’s important to consider all sources of income and deductions to accurately project your taxable income for the year.
  3. Lower Income Year:
  1. In a year where your income is unusually low, perhaps due to unemployment, reduced work hours, or other factors, you might find yourself in a lower tax bracket. This can be an opportune time to exercise stock options because the income from exercising options will be taxed at a lower rate.
  2. Additionally, if you have any capital losses, they can be used to offset capital gains, further reducing your tax liability.
  3. Exercising Options in Smaller Batches:
  1. Instead of exercising all your stock options at once, consider doing so in smaller batches over multiple years. This approach can help you stay within lower tax brackets each year, minimizing the overall tax impact.
  2. By spreading out the exercise of options, you can manage your taxable income more effectively, potentially keeping it within the limits for lower tax rates.
  3. Incentive Stock Options (ISOs) – Exercising ISOs and holding the shares for more than one year can qualify for long-term capital gains treatment. However, taxpayers should be mindful of the alternative minimum tax (AMT) implications associated with ISOs.

Dealing with Worthless Stock – If a stock becomes worthless, taxpayers can claim a capital loss for the entire cost basis of the stock. To qualify, the stock must be completely worthless, with no potential for recovery. Taxpayers should document the worthlessness of the stock and claim the loss in the year it becomes worthless. This strategy can provide a significant tax benefit by offsetting other capital gains or ordinary income.

Leveraging the Zero Capital Gain Rate – For most taxpayers in the 10% or 12% ordinary income tax brackets, the long-term capital gains tax rate is 0%. This presents an opportunity to realize gains on appreciated securities without incurring any tax liability. Taxpayers should assess their income levels and consider selling securities to take advantage of this favorable tax treatment, particularly if they anticipate moving into a higher tax bracket in the future.

Netting Gains and Losses – Netting gains and losses is a strategic approach to minimize tax liability. Taxpayers should review their portfolios to identify opportunities to offset gains with losses. If losses exceed gains, the excess can offset up to $3,000 ($1,500 for married filing separate taxpayers) of other income, with any remaining losses carried forward to future years. This strategy requires careful planning and record-keeping to ensure compliance with IRS regulations.

There are also tax advantages to matching long-term gains with short-term losses or vice versa. Here’s how it works:

  1. Offsetting Gains and Losses:
    • Short-term capital gains are taxed at ordinary income tax rates, which are typically higher than the rates for long-term capital gains.
    • Long-term capital gains benefit from lower tax rates, generally capped at 20%.
  2. Tax Strategy:
    • If you have short-term capital losses, you can use them to offset short-term capital gains first. This is beneficial because it reduces income that would otherwise be taxed at higher ordinary rates.
    • Similarly, long-term capital losses can offset long-term capital gains, which are taxed at lower rates.
  3. Optimal Matching:
    • Ideally, you want to use long-term capital losses to offset short-term capital gains. This strategy maximizes your tax benefit because it reduces income taxed at higher rates.
    • Conversely, using short-term losses to offset long-term gains is less beneficial because it reduces income taxed at lower rates.

By strategically matching your gains and losses, you can potentially lower your overall tax liability. However, it’s important to consider your entire financial situation. 

In conclusion, year-end strategic planning offers taxpayers with substantial stock holdings a range of opportunities to optimize their tax positions. By understanding the annual loss limit, navigating wash sale rules, timing the recognition of gains and losses, donating appreciated securities, managing employee stock options, dealing with worthless stock, leveraging the zero capital gain rate, and netting gains and losses, taxpayers can effectively manage their tax liabilities and enhance their financial outcomes.

Contact this office to tailor these strategies to individual circumstances and ensure compliance with tax laws.