To speed refunds and help with tax filing, the IRS suggests the following:

• First, gather your necessary documents, such as W-2s, 1099s, and other income documentation.
• Ensure your deductions and credits, such as charitable donations and medical expenses, are documented.
• Check the tax law changes for the current year. Make sure you’re aware of any deductions or credits you might be eligible for by going to irs.gov. Gather the documentation for these new deductions or credits you might not have previously been tracking.
• Set aside time in your schedule to complete your taxes. It might be wise to engage a tax professional who can help with the process and maximize your savings. In addition, these professionals can help you navigate an ever-expanding tax law landscape that changes yearly.
• Ensure you have received Form W-2 and other earnings information, such as Form 1099, from employers and payers. The dates for furnishing such information to recipients vary by form, but they are generally not required before February 1, 2023. You may need to allow additional time for mail delivery. Check for errors on these documents.
• Try to file electronically and use direct deposit. Electronic filing allows you to check whether your return was accepted within hours of filing and your refund status after 24 hours. Filing by mail can take 6 to 8 weeks to process your return.[i]

[i] https://www.irs.gov/filing/individuals/how-to-file

Late January: IRS begins processing 2023 tax returns.

January 31, 2024: Employers must mail W-2 forms for 2023.

April 15:  The first estimated tax payment for tax year 2024 is due. Final day to contribute to IRAs and Solo 401(k) accounts.

Filing deadline for 2023 taxes:[1],[2]

June 17: The second estimated tax payment for 2024 is due.

September 16: The third estimated tax payment for 2024 due.

October 15: Extended deadline to file 2023 tax return.

January 15, 2025: Fourth estimated tax payment for 2024 due.[3]

[1] https://www.taxfyle.com/blog/2024-tax-deadline

[2] https://www.irs.gov/individuals/international-taxpayers/us-citizens-and-resident-aliens-abroad

[3] https://www.aarp.org/money/taxes/info-2024/irs-tax-deadlines.html

It is always a good idea to ensure you pay your taxes throughout the year with the correct withholding on your paycheck.

Especially if you have

• had an increase in your salary.
• Started a second job.
• Are you earning income from a sideline like driving Uber or selling goods online
• started a business.
• Had a lifestyle change like marriage, divorce, birth or adoption of a child, home purchase, retirement, or filed chapter 11 bankruptcy.
• Are you not claiming a dependent that you have in previous years? [i]

To check your withholding, use this estimator calculator.

[i] https://www.irs.gov/newsroom/how-to-get-tax-withholding-right

The IRS encourages taxpayers seeking a tax refund to file their tax returns as soon as possible. The IRS anticipates most tax refunds being issued within 21 days of the IRS receiving a tax return if the return is filed electronically, any tax refund is delivered through direct deposit, and there are no issues with the tax return. To avoid delays in processing, the IRS encourages people to avoid paper tax returns whenever possible. You can check your refund status here.[1]

[1] https://sa.www4.irs.gov/irfof/lang/en/irfofgetstatus.jsp

1. Underreporting income: All income is taxable unless it’s specifically excluded, as is the case with certain gifts and inheritances. In most instances, the income you earn will be reported to both you and the government on an information return, such as a Form 1099 or W-2. If the income you report doesn’t match the IRS’s records, you could face problems down the road. Be sure to include the income from all of the following forms that are applicable to your situation: 1099-B, 1099-DIV, 1099-MISC, 1099-NEC, 1099-R, Form 1099-INT, Form SSA-1099, and Form W-2.
2. Misreporting investment gains: When you sell an investment, you’ll need to know both the cost basis (what you paid for the investment) and the sale price to determine your net gain or loss. The cost basis of your investment may need to be adjusted to account for commissions, fees, stock splits, or other events, which could help reduce your taxable gain or increase your net loss. Financial institutions are required to adjust your investments’ cost basis and provide that information on a Form 1099. However, brokerages aren’t required to report the cost basis for investments purchased prior to a certain date, which means you’ll be responsible for supplying that information.
3. Choosing the wrong filing status: Your filing status determines your tax rate, standard deduction, and eligibility for certain credits and deductions. Be sure to choose the correct filing status based on your marital status and family situation.
4. Math errors: Math errors can delay the processing of your return and potentially result in penalties. To avoid math errors, double-check all numbers on your return for accuracy and make sure that there are no unexplained differences or items that were left off.

To avoid these mistakes, it’s important to take your time and be as accurate as possible when preparing your tax return. You can also compare this year’s tax return with last year’s to ensure that there are no unexplained differences or items that were left off.

Sources:  schwab.com,  irs.gov ,  investopedia.com, creditkarma.com , moneylion.com

If you have been compensated with stock options or company shares, you will need to pay taxes on them. The taxation of stock options depends on the type of option you receive and when you exercise it.

Here is a summary of the tax implications of different types of stock options:

1. Incentive stock options (ISOs): You generally aren’t taxed until you sell the stock after exercising your options, giving them a potentially more favorable tax treatment than NQSOs. However, you must meet certain requirements to take full advantage. If you hold the stock for more than two years after the date the options were granted and at least one year after exercising them, the spread is taxed at the long-term capital gains rate, which is generally lower than your income tax rate. This is called a qualifying disposition. If you sell before these criteria are met, the spread at the exercise date is taxed as ordinary income, and any gains after the exercise date will be taxed as either a short- or long-term capital gain, depending on the holding period. This is called a disqualifying disposition.
2. Non-qualified stock options (NSOs): You are taxed when you exercise your options. The tax is based on the spread between the stock’s fair market value and the exercise price of the option. The value of the spread is treated as compensation and subject to ordinary income and payroll taxes.
3. Restricted stock: The value of the stock grant (less the cost basis) is treated as compensation and is subject to ordinary income and payroll taxes. You’re allowed to make a so-called section 83(b) election within 30 days of the grant. This notifies the IRS that income tax on the stock should be assessed based on the valuation at the grant date (rather than later, when it vests). Once you pay taxes based on the stock’s value at the time of the grant, any future gains in the stock’s price will be treated as long- or short-term capital gains, depending on the holding period.

Scarlet Oak Financial Services can’t give tax advice and will always recommend that you speak with an accountant, CPA, or tax advisor for specific questions concerning your tax situation. But, if you need assistance finding tax help, we have a referral list of trusted tax professionals that our clients and we have worked with through the years. Please contact Faye at fsykes@scarletoakfs.com; she will be happy to send you a list of contacts.

Sources: turbotax.intuit.com, nerdwallet.com, investopedia.com, cookwealth.com

Here are some helpful tax tips for your charitable contributions, including stock donations:

• Request a receipt if you donate $250 or more to a single charity. If the donation is in cash, regardless of the amount, you’ll need a receipt or supporting bank records.
• Get an independent, written appraisal for gifts of property in excess of $5,000 ($10,000 for closely held stock). You won’t need an appraisal for exchange-traded funds, bonds, or mutual funds.
• Subtract the value of any benefits you received for your charitable donation (for example, books, tapes, meals, entertainment, and so on) before you deduct it .
• Itemize your deductions on your tax return if you think your total donations will exceed your standard deduction 1 and you want to receive a tax benefit for your charitable donations. If your standard deduction is higher, your donations won’t reduce your tax bill, but you’ll still be supporting your favorite charity—which is a good reason on its own to give.
• For donations of non-cash assets held for more than one year, the limit is 30% of your adjusted gross income (AGI). Your deduction limit will be 60% of your AGI for cash gifts.
• Stock donations made to specific types of qualifying organizations may be deducted up to 50% of the AGI limit. Examples of these types of organizations include but are not limited to Churches or associations of churches Educational organizations, Hospitals or certain medical research organizations, and Private operating foundations.

Sources: schwab.com, givedirectly.org, investopedia.com, kiplinger.com

Scarlet Oak Financial Services can’t give tax advice and will always recommend that you speak with an accountant, CPA, or tax advisor for specific questions concerning your tax situation. 

If you have performed a retirement account rollover, you may need to report it on your tax return. According to the Internal Revenue Service (IRS), most pre-retirement payments you receive from a retirement plan or IRA can be “rolled over” by depositing the payment in another retirement plan or IRA within 60 days. You can also have your financial institution or plan directly transfer the payment to another plan or IRA ¹.

When you roll over a retirement plan distribution, you generally don’t pay tax on it until you withdraw it from the new plan. By rolling over, you’re saving for your future and your money continues to grow tax-deferred. If you don’t roll over your payment, it will be taxable (other than qualified Roth distributions and any amounts already taxed) and you may also be subject to additional tax unless you’re eligible for one of the exceptions to the 10% additional tax on early distributions ¹.

The IRS provides detailed information on rollovers of retirement plan and IRA distributions on their website ¹.  Scarlet Oak Financial Services can’t give tax advice and will always recommend that you speak with an accountant, CPA, or tax advisor for specific questions concerning your tax situation. 

Sources:[1] irs.gov, irs.gov, nerdwallet.com

Corrected Forms
Even with our weekly mailing schedule, further delayed reporting and reclassification can
sometimes occur, resulting in clients receiving corrected 1099 forms. Some examples
include:

• Mutual funds revise their financials to include the amount of gross-ups for foreign
  withholding, tax-exempt payments subject to alternative minimum tax, and the portion of
  the distributions derived from U.S. Treasury obligations
• After year-end auditing, real estate investment trusts determine depreciation and other
  deductions reduce earnings so that distributions are changed from income
  to return of capital
• Any corrections to cost basis

Because brokers are required by the IRS to amend any 1099 tax form that has an
adjustment greater than $100, you may receive an amended 1099 tax form after March 15.
An income reclassification announcement could prompt an amended 1099 at any point
during the year. However, income reclassification events typically occur less frequently
after March.
If you need to file an amended tax return, it’s recommended you discuss the situation with
your tax advisor prior to refiling so they can determine the best course of action based on
your individual circumstances.
If you need to request a corrected tax form, please contact your financial professional.

Account View from LPL Financial  gives you online access to your accounts, statements, and secure documents. This online access is also where you can change your preference for paper notices to electronic, change beneficiary information on your accounts, can set up contributions or withdrawals to your individual or joint nonqualified accounts (retirement contributions and withdrawal setup require communication with Scarlet Oak directly), upload documents to us in a secure and encrypted manner, receive tax documents and much more.

1. Sign into your Account View online account. If you haven’t set up an Account View account, please contact Teresa at teresa@scarletoakfs.com or 871.1219 Ext  2.
2. From the Account View profile, select the Documents & Statements tab.
3. In Documents & Settings, select Tax Forms. Note: Ensure the correct tax year is selected.
4. Click the hyperlink “LPL 1099 Prelim” to access the tax statement.

It’s always a good idea for you to maintain an open line of communication with your financial professional and your tax advisor throughout the year to ensure the best tax strategy and outcomes for you. This dialogue will help you decide if filing an extension is the best course of action. There are many reasons why filing an extension might make sense for you. For example, the volume of data or complexity of certain transactions inside or outside your account may require additional time to address. Also, if you’re expecting to receive your 1099 in the third or fourth mailing wave in March, it may be reasonable to consider filing an extension to allow sufficient time for your tax advisor to accurately complete your tax return forms. LPL Financial does not have a method to verify in advance which mailing wave your account(s) will fall under.

Filing an extension grants additional time (six months) to submit a complete and accurate tax return. However, you’ll still need to estimate whether you’ll owe any taxes and pay that estimated balance by April 15. Extending the return allows you and your tax advisor more time to prepare and ensure filing of an accurate tax return. In many cases, you may still be waiting for additional information, such as your Schedule K-1 or corrected 1099s, to complete your tax return.

Filing an extension allows additional time to file returns without penalty when you’re waiting for missing information or tax documents (such as corrected 1099s).

Please remember: An extension provides additional time to file, but not additional time to pay. Penalties may be assessed if sufficient payment is not remitted with the extension. It’s often less expensive (and easier) to file an extension rather than rushing to meet the deadline and having to amend the tax return later.

Extending will not increase the likelihood of being audited by the IRS. It’s better to file an extension rather than to file a return that’s incomplete or doesn’t give you adequate time to review carefully before signing.

No, you should give your tax advisor whatever information you have as early as possible or as soon as it becomes available. You should expect to pay any anticipated taxes owed by April 15.

If you’re required to make quarterly estimated tax payments, your first quarter estimated tax payment is still due April 15. Your tax advisor may recommend that you pay the balance due for last year and your first quarter estimated tax payment for this year with the extension.

If you’re anticipating a large refund, your tax advisor will likely try to get the extended return done as soon as possible once all tax information is available. Your tax advisor may also want to discuss tax planning opportunities with you so that in future years, you don’t give the IRS an interest-free loan!
For more information on filing extensions, please visit www.irs.gov.

If an error with a contribution has occurred, please immediately contact Melinda at Melinda@scarletoakfs.com or 800.871.1219 Ext 1.

If you over-contribute or erroneously contribute to your retirement account, there are processes you can use to resolve these mistakes. The IRS deadline for processing prior year return of excess and recharacterizations is the tax return due date for the tax year of the contribution (including extensions).

If you have excess contributions for 2023, there are several options available. If the 2023 excess contribution occurred between January 1, 2024, and April 15th, 2024, we can accept a letter of instruction or form CM100 asking LPL to change the reporting to a 2024 contribution. By changing the tax year of the contribution to 2024, you can leave the funds in the account as a current-year contribution or remove it by October 16, 2024.

In general, if the excess contributions for a year are not withdrawn by the date your return for the year is due (including extensions), you are subject to a 6% tax. You must pay the 6% tax each year on excess amounts that remain in your account at the end of your tax year.

Unfortunately, we cannot recharacterize any prior-year 2022 contributions after the deadline. Please discuss this with your tax professional before making any decisions.

Resolving Over-Contributions for 2023: If you have over-contributed to your retirement account, you may need to process a return of excess. To withdraw an excess contribution from an IRA, you need to complete the Move Money, IRA Distribution, Excess Contribution (CM108) form.

Source- LPL End of Year Investor Guide 2023

Schwab sends its 1099s in two waves. The first wave is typically sent out at the end of January, and the second wave goes out by mid-February. If you have more than one brokerage account, you’ll receive a 1099 Composite for each account you hold.

You’ll receive an email notification either when your 1099 Composite is available to view online or download from Schwab’s 1099 Dashboard, or when we’ve mailed you a paper copy. (This will depend on the delivery preferences you’ve set on schwab.com.) After we’ve produced your 1099 Composite, you can access it any time, either on schwab.com or the Schwab Mobile app.[1]

[1] https://www.schwab.com/learn/story/overview-brokerage-1099-tax-form#:~:text=When%20can%20I%20expect%20to,for%20each%20account%20you%20hold.

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