Tax tips for year end

By Rhonda Howard, CPA

As the year winds down, there are tax issues you may need to consider: 

Check to be certain required minimum distributions from retirement funds have been taken for 2023. While many taxpayers have these set to automatically pay, errors still occur and required minimum distributions get missed. 

This error often occurs when a taxpayer has changed the custodian (bank or brokerage) handling the funds. Penalties for not taking required minimum distributions are significant although the IRS has been generous in removing those penalties.

Required minimum distribution age limits have increased. If you are uncertain if you are required to take one for 2023, please check the custodian of your funds and your trusted CPA. 

Current rules allow those age 70.5 and older to make a qualified charitable distribution from their IRA. If you have not yet taken your required minimum distribution from your IRA, consider making a qualified distribution. 

This process requires the distribution to be made directly to the charitable organization from the custodian of the IRA and can only be made from an IRA.

The qualified charitable distribution is not included in income but also not included on your return as a charitable donation. 

This procedure results in the reduction in taxable income without itemizing as well as may reduce taxability of Social Security benefits. 

For some taxpayers, a qualified charitable distribution may reduce your Medicare surcharge. You must still have a charitable donation slip from the organization noting the charitable donation. 

If you are eligible to itemize, be certain itemizable expenses are paid by December 31st. Among other things, itemizable expenses include medical expenses, interest on your residence, charitable donations and gambling losses to the extent of winnings. 

The Oklahoma Parental Choice Tax Credit website was to open on December 1 but was delayed until December 6. If you have children attending private schools and the school is participating in the program, you may be eligible to receive up to a $7,500 Oklahoma Tax Credit. Program dollars are limited; application is made at www.parentalchoice.ok.gov.

Apply as soon as possible because the Oklahoma Tax Commission must approve your application. Parents of home-schooled students are eligible for lesser credits although currently those credits will be initially taken on the 2024 individual tax return. The program is new and may see revisions in procedures.

Consider if you need to make estimated tax payments. Catching up on estimates now reduces interest paid. Interest rates for the Internal Revenue Service (IRS) and the Oklahoma Tax Commission are currently 8% and 15% respectively. 

If you own an entity that is organized as an LLC, partnership or corporation, there is a new requirement effective Jan. 1, 2024. Beneficial Ownership Information reporting is an anti-money laundering initiative that requires legally organized businesses to file a form electronically at www.fincen.gov/boi.

Entities currently in existence will have until Jan. 1, 2025 to file the initial report while newly formed entities will need to file sooner. Penalties apply for not complying. Various business organizations are pushing for deferral of the start dates for this program. 

The Employee Retention Credit (ERC) has received much publicity recently. The ERC is a pandemic program to assist businesses with specified percentage drops in revenue during certain time period as well as other qualifying characteristics. 

The IRS has stopped processing new employee retention credit applications because of fraud in the program. It appears the program will be reopened Jan. 1, 2024. IRS has issued voluntary procedures for you to withdraw your claim if you now believe you are ineligible. 

The information above is general in nature. Please contact your trusted CPA for specifics of tax law; procedures regarding your situation, and updates which may have occurred since this writing.

Rhonda Howard has been a certified public accountant since 1986 and has owned her own firm in Yukon since 2005. She and her husband have been Yukon residents since 1989.