Topics

• Topics  
• Newsletter  
• Tips for Accumulating Tax Data  
• Standard Deduction  
• Gift Tax Exclusion  
• Social Security Limits   
• Financial Planning Process  
• Record Retention Schedule
• Current Mileage Rates  
• Minimum Wage Rate  
• Retirement Plans  
• Health Savings Accounts 

Newsletter

January 2025

We appreciate the opportunity to work with you and advise you regarding your income tax obligations for the tax year 2024. We have mailed your 2024 Tax Organizer to assist in gathering information for your income tax return, please let us know if you didn't get yours or would like to be on the list to receive one.  

Please understand that due to an unprecedented tax workload and continued difficulty obtaining additional staff, it is more important now than ever that your tax documents be provided timely and in good order.

You may receive a 1099-K this year if you received a payment or had a transaction on an online platform for over $600, even if you did not have a business.  To avoid filing errors, please forward those to our office with your tax data. 

The following are a few reminders and highlights that we hope are helpful in assisting with the accumulation of your tax data. We also have a page on tips for accumulating tax data.

1. Itemized deductions continue to be much more limited in favor of higher standard deductions. As usual, we pursue whichever yields the biggest deduction.  You may want to consider bunching your itemized deduction into certain years to help you exceed the standard deduction when possible.

2. For businesses, the standard mileage rate for 2024 was 67 cents per business mile.

3. For individual retirement accounts, the deductible limit is $7,000 for 2024 ($8.000 if age 50 or older).  Please let us know if you have questions as to your qualifications and/or benefits for making regular IRA contributions, Roth IRA contributions, or nondeductible IRA contributions.  If you have reached age 73 or are subject to RMD (required minimum distribution) rules, please note failure to take the required distribution can result in penalties. We can help you calculate your RMD and help you plan for any tax exposure.

4. As a reminder for charitable contributions, you must have substantiation for any contribution, and written acknowledgement from the charity for any donations of $250 or more. Also, non-cash contributions exceeding $500 in value require additional information for the completion of Form 8283, including an appraisal if the amount exceeds $5,000. 

5. The Inflation Reduction Act of 2022 included new and newly expanded tax credits for solar panels, electric vehicles and energy-efficient home improvements. Please notify us if you have made or plan to make energy efficient purchases.

We hope this information is helpful and that the Organizer will assist you with accumulating your tax data. We also want to take this opportunity to wish you and your family a healthy and prosperous New Year in 2025. We look forward to seeing you this “tax season.”

**NOTE: Due to the increased security from the IRS, many of our clients created an IP Pin number (identity protection pin) during the identity verification process with their 2023 filing. If you created an IP Pin this past year, please obtain your 2024 IP Pin and provide us with the number with your 2024 data.

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Tips for Accumulating Tax Data

The following, although not an all-inclusive list, are suggestions to help you gather your tax return data and help ensure a more efficient and timely preparation of your tax return.

Electronic Filing & Direct Deposit

Federal and state agencies have made it mandatory for us to file your tax return electronically. This is our procedure for everyone, unless you advise us in writing that you want your return filed in paper format. In addition, if you would like to have your refund deposited directly into your account or pay a balance due by using electronic withdrawal, please make sure your banking information on Form 4A of the Organizer is included and correct. If not, include a voided check from your financial institution.

IRS regulations require us to obtain your signature on Form 8879, IRS e-file Authorization, prior to remitting the return to the e-file center. If necessary, we will email or fax the form to you for your signature. No returns will be electronically filed until Form 8879 is signed and your tax returns are approved by you. 

Prior Year Data

New clients should provide copies of their prior year’s federal and state returns. If you received any notice or correspondence from tax agencies on prior years during 2024, please provide copies for our reference.

Forms to Send

We are often asked, “What forms do I need to send to you?”  In most cases, it is simply adequate to recap data in either the organizer or in another format you prefer. However, we suggest that for the following forms, you can simply provide an original or copy of the form. You do not need to write the same information within your organizer. If you prefer, you may want to affix the statements to the proper location in the organizer using paper clips. Providing the form provides us with additional information required to be reported to the IRS and helps to ensure accuracy of data reported.

W-2 – Wage and Tax Statement                                                    1095 – Health Insurance

1098 - Mortgage Statement                                                           1098-T – Tuition Statement    

1099-K – Payment Card and 3^rd Party Network Transactions      1099-INT – Interest Income   

1099-DIV – Dividends and Distributions                                      1099-MISC - Miscellaneous Information

1099-R – Distribution from Pensions, Annuities                           1099-SSA – Social Security Benefit Statement 

1099-S – Proceeds from Real Estate Transactions                         1099-NEC – Nonemployee Compensation

1099-B – Proceeds from Broker & Barter Exchange                     HUD1 – Settlement Statement

Schedule K-1 – Income from Partnerships, S-Corporations, Estates or Trusts

Digital Assets & Virtual Currency

The IRS requires you to indicate if you have made transactions involving virtual currency. This does not count if you only purchased virtual currency with the U.S. Dollar and held it throughout the year. The sale or exchange of virtual currencies, including the use of such currency to pay for goods or services or trading as an investment generally have tax implications.  The IRS continues to highly scrutinize this area.  You will need to provide details of virtual transactions that provide sufficient information to report on your tax return appropriately.

Extensions

If you owe the IRS or your resident state, you can also have your payment sent directly to the taxing authorities as an electronic funds withdrawal. If you’re unable to make the filing deadline of April 15, 2025, please inform us no less than one week prior to the filing deadline that you want us to extend your tax return on your behalf. An extension only allows you to extend the filing of the tax return until October 15, 2025, NOT THE TAX YOU OWE. If your tax debt isn’t settled by April 15^th, the taxing authorities will bill you interest and penalties. 

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Standard Deduction

The basic standard deductions are:

Personal Exemption Amounts

The phaseout of the personal exemption deduction is suspended for tax years 2018 through 2025. 

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Gift Tax Exclusion

The annual gift tax exemption is $19,000 in 2025 and $18,000 in 2024.

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Social Security Limits

The social security tax rate remains at 6.2% for both employee and employer.

The Medicare tax rate remains at 1.45% for both employee and employer.

The Maximum Amount of Earnings and Still Receive Full Benefits

Full retirement age (also called "normal retirement age") has been 65 for many years. However, beginning with people born in 1938 or later, that age will gradually increase until it reaches 67 for people born after 1959.

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Financial Planning Process

Often the first area that comes to mind with financial planning is investing. Although a sound investment strategy is one of the important aspects of financial planning, it should be considered as part of an overall plan. The Institute of Certified Financial Planners (ICFP) defines financial planning as follows:

Personal financial planning is the organization of an individual’s financial and personal data for the purpose of developing a strategic plan to constructively manage income, assets, and liabilities to meet near and long-term goals and objectives. Important to the success of the personal financial planning process is the monitoring and periodic review of the plan to assure that it continues to meet the individuals’ needs.

The financial planning process is generally divided into seven different functions:

1. Determine goals and objectives and identify resources and means to achieve them.
2. Gather relevant data.
3. Review and analyze data
4. Prepare preliminary analysis of current financial situation and reassess goals.
5. Present a report and make recommendations.
6. Implement or coordinate implementation of recommendations.
7. Monitor performance and update plan.

The focus of financial planning is on seven areas that include the following:

1. Retirement and financial independence planning - Much of the burden and risk of planning for retirement has shifted from employers to employees. Also the availability of funds under our social security system is subject to change. A review of your expected retirement needs, along with assets currently available, the amount of your savings, and the length of time to your desired date of retirement should be considered.
2. Integrating tax and financial planning - Careful consideration of income tax implications is necessary for decisions made during the financial planning process. Coordinating income tax planning concepts and issues with your financial planning goals and objectives should be implemented on an ongoing basis.
3. Estate planning - Estate planning is also an important part of one’s financial plan to assure care of loved ones as well as for the managing, administering and distribution of your assets. An up-to-date will is essential, along with the possible use of a living (revocable) trust, and a durable power of attorney. Part of this process should include a review of how your assets are titled, since the best estate and financial plans can be thwarted by improper titling of assets.
4. Risk management and insurance needs - Risk management and insurance planning calls for obtaining the appropriate amount of health, life, auto, homeowners, general liability, and long-term care insurance. The goal is to allocate premium dollars to reduce significant risk and exposures. This includes using the appropriate deductibles and, in some cases, deciding not to insure against a potential loss. However, one should never risk a large loss to save a small premium.
5. Cash management, budgeting, and debt management - Current expenditures can be reviewed and a budget prepared that would document modifications based on one’s goals. Included would be a review of the terms of all outstanding debt to investigate opportunities to refinance at more favorable terms. Providing an emergency fund for contingencies is important. This can be accomplished with additional savings and/or a home equity line of credit.
6. Education planning and income splitting - Education costs continue to increase at a higher rate than the rate of inflation. A review of the progress toward funding education should be completed along with investigating potential sources of financial aid.
7. Investment planning and asset allocation - An appropriate investment strategy can only be made after considering the other components to one’s financial plan. In this fast changing world of investing, there are many opportunities available today not previously available. A good example is the increased popularity of online investing. Keep in mind, however, that studies indicate that a proper and wise allocation of investments is the largest determinate of investment success. For most, this is more important than individual stock selection or being able to potentially time the ups and downs of the market. One must be sure to distinguish between investing and speculating.

Determining the direction and priority of your financial goals can be a difficult task. For example, your retirement date and lifestyle expectations will determine how much you will need to save for retirement and how you will want to invest those savings. The following are some questions you can ask yourself that could assist with the financial planning process:

• Have I established attainable goals?
• Have I made a review of my current financial status?
• Do I have a personal budget?
• Do I have a contingency plan?
• Do I have an estate plan?
• Is my homeowner and auto insurance coverage adequate?
• Is my life insurance coverage adequate?
• Do I have an investment strategy and have I recently reviewed the components of my investment portfolio?

We hope the above provides a good overview of the financial planning process. Our assistance can range from informal consultations regarding the above areas to a more detailed analysis and financial plan preparation and implementation.

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Record Retention Schedule

Retain Indefinitely

Audit reports  
Capital stock and bond records, ledgers, transfer registers, stubs showing issues, record of interest coupons, options, etc.  
Cash books  
Charts of accounts
Checks (canceled for important payments, i.e. taxes, purchases of property, special contracts, etc.) (filed with transaction papers)
Contracts and leases in force
Copyrights, patents, trademark registrations
Corporation charter, minute books and bylaws
Correspondence (legal and important matters only)
Deeds, mortgages, easements and other property records
Depreciation schedules
Financial statements (end-of-year, other months optional)
General ledgers and journals
Insurance records, current accident reports, claims, policies, etc  
Property appraisals
Property records - including costs, depreciation reserves, end-of-year trial balances, blueprints and plans
Tax returns and work papers, including records to support carrybacks and carryovers

Retain 7-8 years

Accident reports and claims (settled cases)
Accounts payable ledgers and schedules
Accounts receivable ledgers and schedules
Bank statements  
Canceled checks (except checks kept permanently)
Contracts and leases (expired)
Expense analysis and expense distribution schedules
Inventories of products, materials and supplies
Invoices to customers  
Invoices from vendors
Maintenance and repair records (buildings and machinery)
Notes receivable ledgers and schedules
Option records (expired)  
Payroll records and summaries, including payments to pensioners and timesheets
Plant cost ledgers  
Purchase orders (purchasing department copy)  
Sales records  
Scrap and salvage records (inventories, sales, etc.)  
Subsidiary records  
Time books  
Voucher register and schedules  
Vouchers for payments to vendors, employees, etc. (includes allowances and reimbursement of employees, officers, etc. for travel and entertainment)

Retain 6 years

Commission reports  
Employee disability benefits records  
Employee withholding tax statements
Equipment leases (after expiration)  
Fire damage reports  
Monthly trial balances

Retain 2 years and less  

Purchase orders (except purchasing department copy)  
Receiving sheets  
Requisitions  
Stenographer's notebooks  
Stockroom withdrawal forms

* The above listing is only a guide and is not all inclusive. If you have any questions or need additional information, please contact us at (540) 662-7070.
 

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Current Mileage Rates

The standard mileage rate for business mileage (in lieu of using actual expenses), as well as the standard rates for use of your car for medical and moving or charitable purposes are as follows: 

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Current Minimum Wage Rate

The current FEDERAL minimum wage for covered nonexempt employees is $7.25 per hour effective July 24, 2009. 

As of January 1, 2024:

Virginia minimum wage remains at $12.41 per hour.

Maryland has mandated a minimum wage of $15.00 per hour.  

West Virginia minimum wage is $8.75 per hour. 

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Retirement Plans

Below are the annual contribution limits on elective deferrals for retirement plans.

Indexed Contribution & Benefit Limits for Qualified Plans

Roth IRAs 

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Health Savings Accounts

For 2025 and 2024, the minimum deductible for a high-deductible health plan (HDHP) is $1,650 in 2025 and $1,600 in 2024 for self-only coverage and $3,300 in 2025 and $3,200 in 2024 for family coverage.  The maximum out-of-pocket limit is $8,300 in 2025 and $8,050 in 2024 for self-only coverage and $16,600 in 2025 and $16,100 in 2024 for family plans.

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