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Filing a tax extension is not a setback. In fact, it can be a strategic move that allows you more time to establish a solid and optimal tax strategy. If you need extra time to ensure your entire situation is optimized or if you don’t have certain documents in time to file by the deadline, it's always better to extend than to hastily file.

When Filing an Extension Makes Sense

There are common situations where filing an extension is the best course of action:

1. Insufficient information

If you're unable to provide your accountant with all of the documentation necessary for filing an accurate return, filing an extension becomes necessary. 

This happens commonly when a corporate return gets extended, for example, and the business owner is unable to file a personal return without the corporate return being filed. There are many situations where certain documents may not be available in time for your CPA to do a thorough job assessing your overall tax situation.

2. Complex financial situations

Sometimes, your CPA may need additional time to thoroughly scrutinize your financial blueprint. Rushing such processes could lead to missed financial opportunities or errors. Filing an extension may give your CPA the time they need to deliver an optimized return.

3. Getting complete information to your CPA too close to the deadline

Most CPA firms have deadlines they set in order to give their team enough time to complete all of the tax returns by the federal deadline. In cases where a client is unable to provide all of the information prior to that specific deadline set by the CPA firm, your accountant may file an extension for you.

Tax Extension Filing Deadline

The deadline for filing an extension is the same deadline for filing a return. So, for individual returns, the deadline for filing an extension is April 15. Once filed, you now are allowed until October 15 to file your return.

Does filing an extension mean I get to delay payment of my tax liability?

Remember, even if you file an extension, you still need to remit an estimated tax payment before the due date. Your CPA can help you calculate how much to pay to stay in compliance. Once your final return is filed, this amount will be reconciled either with an additional payment or a refund.

It’s very important to understand that when you file for an extension, you are extending the deadline for filing your return- not for paying your tax liability.

Final Thoughts

Filing a tax extension may be strategic for your personal situation and give your CPA the time needed to ensure accuracy and optimization of your tax strategy. If you need to file one, don't be overly concerned, and work with your CPA to file your return as soon as possible before the October 15 deadline.

As a business owner, hiring capable staff is a primary responsibility. But there’s more to the process than finding qualified candidates.

Choosing between W-2 employees and 1099 independent contractors can have a real impact on operations and your bottom line. Here’s a simple guide that covers the high-level basics, to help you make the right choice for your unique business.

Identifying your goals

Outlining what you are hoping to achieve from the hire is the first step towards making an informed choice. Think about the following criteria below and how they relate to your needs:

Remember that it’s not one or the other. Many businesses hire both W-2 and 1099 staff, depending on the position or circumstances.

Advantages and disadvantages of 1099 independent contractors



Advantages and disadvantages of W-2 employees



Understanding IRS classifications

Note that how a worker is classified is not always up to the employer. Just because you choose to pay a worker using a 1099 and title their position as a contractor doesn’t mean that they automatically do not qualify for W-2 rights and protections.

Only the Economic Reality Test will be considered when making a final determination of worker classification. The Economic Reality Test determines if the worker is economically dependent on the employer for work or in business for themselves.

It is very important to make sure you only treat legitimate independent contractors as 1099s. Misclassifying employees can lead to heavy penalties and potentially be catastrophic for your business.

Need help making a decision?

Understanding the difference between 1099s and W-2s is a great first step, but if you’re still not sure which worker type is best for your business, an Iota Financial CPA is available to help.

We’ll talk through your specific goals and needs and come up with a staffing strategy that works for you.

You've taken the responsible step of investing in your child's or grandchild's future by contributing to a 529 plan, allowing your money to grow tax-free.

But life is full of surprises, and sometimes circumstances change. Perhaps your child received a scholarship, reducing the need for the full amount in the 529 plan. Or maybe their educational path has shifted, leaving you with excess funds.

Fortunately, recent legislative changes have opened up a new opportunity. You can now convert your 529 college savings plan into a Roth IRA, potentially benefiting your family's financial well-being for generations.

Why is this significant?

Typically, taking a non-qualified distribution from a 529 plan comes with consequences. You would face a 10% penalty and be required to pay both federal and state income taxes on the withdrawn amount.

These penalties and taxes can be a burden when you have leftover funds in the plan. However, the ability to transfer those funds into a Roth IRA provides a new avenue for financial security.

Of course, there are some conditions to keep in mind.

Steps to Convert Your 529 to a Roth IRA

1. Verify Eligibility

Not all 529 plans are eligible for conversion to a Roth IRA. There are specific rules regarding the amount, frequency, and account ownership. Notably, the beneficiary of the 529 plan and the account holder for the Roth IRA must be the same individual.

2. Know the Limits

Planning is crucial, as there is an annual limit on the amount you can convert. Currently, the maximum contribution allowed for a Roth IRA is $7,000 per year.

The Secure Act 2.0 states that the total maximum amount that can be rolled over for qualified plans is $35,000. By contributing $7,000 annually, you would reach this maximum in 5 years.

3. Consider Timing

The 529 plan must have been established for at least 15 years before conversion. Additionally, any contributions made to the 529 plan within the past 5 years are not eligible for rollover.

Benefits for All

For young adults not burdened by student loans, this conversion can provide a head start on their retirement savings, setting them on a path towards financial stability. For parents, it offers flexibility to adapt to your family's changing needs.

Our Commitment to Your Financial Success

At Iota, we are dedicated to helping you become as tax efficient as possible, while optimizing your financial situation. Converting a 529 plan to a Roth IRA is just one of the many strategies we can assist you with. 
Let's have a conversation! Contact us today to schedule a complimentary consultation.

If you have a limited liability company (LLC), taking an S corp election could provide helpful tax benefits and unlock unique options for how part of your income is treated. Choosing whether to have your LLC taxed as an S corp depends on a variety of factors.

What is an S corp election?

Owners of eligible domestic LLCs can choose how the IRS treats the business for tax purposes.

Option One is to do nothing and have the IRS apply the default tax structure:

Option Two is to take an S corp election and the IRS will treat the LLC as an S corporation:

Benefits of S corp status

The key advantage of choosing to have your LLC taxed as an S corp is the ability to distribute part of the company’s profits as dividends and not earnings. Doing so can help owners save a significant amount of money on self-employment tax.

Here is how it works:

Say you are the sole member of an LLC that earns $150,000 in net income. As a pass-through entity, the full $150,000 would be subject to self-employment tax at a rate of 15.3% in 2023 (12.4% Social Security tax + 2.9% Medicare tax), for a total tax liability of $22,950.

If the same LLC had elected to be taxed as an S corp, you could choose to have $100,000 pass through as earnings and $50,000 distributed as dividends. As profits paid out as dividends are free of self-employment tax, the total tax liability in this case would be $15,300, for a savings of $7,650.

Note: Owners must pass through a reasonable percentage of net income as earnings or risk an IRS audit and potential recharacterization of distributions plus penalty and interest payments. A tax professional can help you determine reasonable compensation for your situation.

Disadvantages of S corp status

While the decision looks easy on the surface, there are consequences to taking the election that must be considered.

The bottom line

If saving on Social Security and Medicare taxes while avoiding double taxation is a high priority, an S corp is the only business tax status that makes this possible.

The 2024 S corp election deadline is March 15

If you own an LLC and wish to take an S corp election for 2023, time is of the essence. The deadline for filing Form 2553 (Election by a Small Business Corporation) is March 15, 2024. Remember that Form 2553 must be signed by all shareholders.

Is an LLC taxed as an S corp right for your business?

Choosing an LLC, but electing to have it taxed as an S corp is a complex matter and not a decision to be taken lightly. While the benefits often outweigh the costs, you should always schedule a meeting with an experienced tax advisor before moving forward.

Contact us today to have an Iota Financial CPA work through your company’s financials and make an entity structure recommendation based on your unique business goals and situation.

Beginning on January 1, 2024, businesses across the US will need to comply with new reporting rules under the Corporate Transparency Act (CTA). This act, passed as part of the Anti-Money Laundering Act of 2020, requires certain corporations and similar entities to report their ownership and control information to the Financial Crimes Enforcement Network (FinCEN).

If your business is structured as a corporation, LLC, or limited partnership, chances are you will need to file a report. Here’s what you need to know:

What information needs to be reported? 

Under the CTA, businesses are required to report their “beneficial ownership information” (BOI). This includes:

In addition, businesses must report any changes to this information within 30 days of the change.

Which businesses need to comply?

While banks, securities brokers, insurance companies and a few other entity types are exempt, most corporations and similar US-based entities must comply, including those with foreign owners. The only exception would be if your entity already reports similar information under existing federal or state reporting laws.

How to file your BOI report 

Starting on January 1, 2024, qualifying businesses can file their reports online at

Important deadlines include:

Penalties are steep

Failure to comply can lead to penalties of $500 per day (up to $10,000) or even imprisonment up to 2 years.

Given the relatively short timeline and steep penalties, businesses should begin preparing now by gathering ownership information.

The frenzy of tax season often brings financial anxiety and unwanted surprises. But working with a proactive CPA, you can transform tax preparation from reactionary to purposeful through year-round planning.  

Too often, we assume our taxes will simply work themselves out when that fateful April deadline looms near. Then boom - a major life event or investment decision from last year leads to confusion, missed deductions, and potentially large unplanned tax bills. 

Life Is Unpredictable

Everyone has those seasons in life - the times where you have a plan but circumstances take over and now you are working on Plan B or C.  These changes are unpredictable, but still should be accounted for.  Over the course of a year, you may experience many personal and professional changes that impact your taxes such as…

Selling a rental property:  When Jane sold her rental property investment for $400K after deducting past depreciation, she faced $30K in depreciation recapture taxes that she wished she had set aside money for.  

Buying rental property:  Hank purchased a rental condo and didn’t realize rental activities are considered passive income by the IRS, with different rules about loss deductions he should have factored in.

Selling stock:  Laura sold $100K in tech stocks from her portfolio after holding for less than a year and faced higher short term capital gains not realizing brokerage 1099 forms were sent to the IRS.

Gifting:  Miguel gifted his daughter $20K to help with student loans but neglected to properly file a gift tax return, leading to penalties. 

Selling a home:  When selling their house for $650K after 21 months of living in it as their primary residence, the Davis’ missed $50K+ in capital gains exemptions by not tracking home improvements better. 

Starting a business:  Launching her freelance business mid-year, Jamie missed deductions by not separating business use deductions from the beginning.

Getting married:  After their dream wedding, Robert and Michelle realized they lost deductions by not clearly tracking her sizable student loan interest payments.

Having a baby:  Following twins, the Abrams missed out on $4K dependent care flexible savings account funds due to enrollment period restrictions.

Even events that bring joy can come with unexpected consequences at tax time.  Meeting regularly with your tax advisor ensures they stay up to date with all the changes in your life  making it possible to predict the tax implications of these big moves.

Be Proactive, Not Reactive

The key is being proactive, not reactive. Working closely with your CPA at least twice per year enables you to foresee how major life events may affect your tax liability or opportunities. 

Rather than guessing how to handle tax consequences, together you can develop an intentional strategy optimized for your situation. This prevents unpleasant surprises down the road.

Planning Pays Off

Beyond avoiding surprises, proactive planning with an advisor maximizes all your hard work to accumulate wealth and assets. 

With expert guidance, you can thoughtfully time transactions, leverage tools like gifting, and take advantage of deductions - putting thousands of dollars back in your pocket.

Planning ahead by just a few months on a major business decision or investment sale can tremendously cut your tax burden and better position you for long term growth.

Transform Tax Prep into a Strategic Partnership

This tax season, change the way you think about your taxes. They don’t have to be a once-a-year source of frustration. By meeting with your CPA regularly and planning intentionally together, tax and personal finance management become an integral piece of your wealth-building strategy.

The outcome is clarity, confidence, and more money working for you and your priorities rather than disappearing avoidably through missed opportunities.

Tax season can be confusing with all the rules around deductions, credits, income, and filings. What do they all mean for your bottom line? While tax deductions and tax credits both impact your tax liability, they do so in very different ways.  Understanding the difference can help you take advantage of both.

What are Tax Deductions?

A deduction reduces your taxable income. In other words, it lowers the amount of your earnings that will actually get taxed. Donations to charity, mortgage interest, 401(k) contributions, and medical expenses above a certain level are common deductions. If you make $60,000 and have $5,000 in deductions, you only pay income tax on $55,000.

Making Sense of Tax Credits and Deductions

What are Tax Credits?

Credits directly chop dollars off your final tax bill, rather than just reducing taxable income. Two people with identical incomes could owe very different amounts depending on applicable credits. Some examples are child tax credits, education credits and green energy home improvement credits. If you owe $5,000 in taxes, a $500 credit would make your new bill $4,500.

Here’s how it might look in the real world…

Client #1 has taxable income of $45,000 and owes around $4,900 in federal tax pre-deductions/credits. She makes a $1,000 401(k) contribution and qualifies for a $1,500 child tax credit.

Client #2 earns $70,000 per year and owes about $9,100 in federal taxes before any deductions or credits. He paid $8,000 in mortgage interest and gave $500 to charity.  

Each client’s individual tax burden was impacted by the  amount of deduction or credit applied. 

Common Tax Credits

Common Tax Deductions

Netting It Down

Tax deductions and credits work differently, but both effectively lower your tax liability. Deductions reduce your taxable income. Meanwhile, tax credits provide dollar-for-dollar reductions to your actual final tax bill, bringing down overall taxes owed. 

Every deduction and credit claimed puts more money back in your pocket! Proper tax planning is crucial to cut your tax burden to the lowest amount legally possible.
Wondering whether you are taking advantage of every possible deduction and credit that you can? Reach out to us today, and schedule a meeting!

As the year comes to an end, and tax season looms closer, social media is full of tempting scenarios for tax savings. But, be careful, not everything you see is true! For instance, you can't buy an expensive car, like a Land Rover, for a day, sell it, and then write it off. But, it is true that you can buy cars through your business.

A lot of businesses buy cars for different reasons. For example, your local pizza shop needs a car for deliveries. Before you pull the trigger to purchase a car through your business, here are a few things you need to know.

What to know before buying a car

The Basic Rule

Generally, businesses can only get tax deductions for costs related to using the vehicle for work. If the car is also used for personal reasons, those costs can't be deducted. Also, to maximize your deductions, the car needs to be used for business 50% of the time or more. For example, if you worked as a house inspector and used the car for both work and personal use, you'd have to divide the costs correctly. But, if you were a builder and used a truck only for work, all costs could be deductible.

Also, it matters who owns the car. If the business owns it, all costs of running it, like gas, insurance, and repairs can be tax-deductible. But, if it's your personal car, only work-related costs can be deducted.

How about miles driven?

For a car owned by the business, the miles driven for work can be deducted. The IRS allows companies to either deduct the real costs or use a standard amount per mile. For 2023, the standard mileage rate for business is 65.5 cents per mile.

Be sure to keep a mileage log for tracking the number of miles driven for each trip, the date and time of each trip, and the final destination of each trip.

Can I deduct other car expenses?

Be careful here, you can't count miles driven and other car costs, like gas or insurance, at the same time. Double dipping is not allowed. It’s either mileage or car-related expenses, but not both.

If you choose to deduct actual expenses, you should keep a careful record of all costs. Then, you can claim a part of these expenses based on how much the car was used for work.

In general, keeping accurate records of car costs and when the car was used for business is a smart idea. 

Everyone's situation is different, so talking with an expert, like a CPA or business advisor, can help you make the best choices for your unique case. We get these questions a lot this time of year. Want to discuss your specific situation? We’re happy to help. Call us anytime at (404) 975-2945.

Do you want to gift money or assets to loved ones while staying tax compliant? As a business owner, understanding federal gift tax implications lets you give generously without financial pitfalls. 

Generosity is an admirable trait.  Coupled with the right information and strategy, you can continue without creating more of a tax burden on you and your business.  Here is what you need to know.

Defining Taxable Gifts

The IRS defines a gift as any asset transfer for below fair value compensation. Common examples include:

Bottom line, if you provide assets without receiving equivalent value in return, it classifies as a gift.

Who Bears Responsibility for Tax

As the gift donor, you pay applicable federal gift taxes. However, gift recipients can file a tax return electing to cover tax instead.

Current Gift Tax Rates

Gift tax rates range from 18-40% based on the gift’s fair market value. The IRS website details current brackets. For additional information on the tax rate limits, visit the IRS website

The Annual Gift Exclusion  

In 2023, you can provide up to $17,000 in gifts per individual annually tax and filing-free. You could give $17k each to multiple recipients without exceeding the annual exclusion.

Exceptions to the $17K Annual Threshold

While most gifts fall under the annual exclusion cap before requiring tax filings or payments, some common exceptions exist. These include:

When Gift Tax Filings Become Necessary  

You must file Form 709 for:

Failing to file mandatory gift tax returns leads to owing interest and penalties. Consult a tax professional to ensure compliance.

Ways to Minimize Gift Tax Liability

All is not lost.  Even if you plan to give a large gift, there are ways to reduce potential gift taxes. Some of them include:

Get Personalized Guidance

While this covers high-level federal gift tax rules, individual situations and state laws vary. Meet with an Iota Financial CPA to discuss your unique gifting circumstances and tax planning opportunities. Our goal is helping you give freely while minimizing owed taxes. Reach out to start the conversation!

As we close in on the end of the year, here is a tax strategy that can save you a lot of money.  Health Savings Accounts (HSAs), when used effectively, offer a triple tax advantage and are an excellent tool for managing healthcare costs. 

What is a Health Savings Account (HSA)?

An HSA is more than just a savings account. It's a powerful financial tool designed for individuals with high-deductible health plans. These accounts allow you to set aside pre-tax income for medical expenses, offering significant tax benefits. 

Contributing to Your HSA

Contributions to your HSA reduce your taxable income. For 2023, the maximum contribution limits are $3,850 for individuals and $7,750 for families. If you're 55 or older, there’s an additional catch-up contribution of $1,000. 

Tax Advantages of HSAs

Using Your HSA Funds:

With an HSA, you can pay for a wide range of medical expenses, including deductibles, co-payments, prescriptions, contact lenses, glasses, and other costs not covered by insurance. Consult with your tax advisor if you have questions about what qualifies as an expense so you can plan your healthcare spending wisely.

Record-Keeping and Reporting

Like all income and expenses when it comes to taxes, proper documentation is crucial for tax-free HSA withdrawals. Be sure to keep detailed records and receipts as you use the funds in your HSA.

Common Misconception 

Many individuals are unaware of the full potential of HSAs or are hesitant to use them for fear of losing unspent funds (HSAs are not “use-it-or-lose-it” accounts).  HSAs are a very effective way to help you pay for medical expenses not covered by insurance and optimize your tax situation.

Optimizing Your Tax Strategy

If you have questions about your HSA or would like a comprehensive review of your personal or business situation to minimize your tax liability, Iota Financial is here to help. Schedule a complimentary consultation today:

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