David Moseman CPA, Author at CironeFriedberg, LLP

Understanding the Gift Tax

September 23, 2022 by David Moseman CPA

For tax purposes, gift givers, rather than gift recipients, have to account for and potentially pay the gift tax. But, you won’t owe the federal gift tax until you have given away millions in cash or other assets during your lifetime. It sounds simple enough, but you still may have to file gift tax returns even though you don’t owe any tax. Additionally, certain states have gift tax filing requirements and their exclusions and requirements may differ from federal requirements.

The annual federal gift tax exclusion changes almost every year to adjust for inflation and it allows you to give a certain amount to as many people as you wish without those gifts counting against your substantial lifetime exemption. Gifts made during your lifetime will reduce your taxable estate. So, making annual gifts up to the annual exclusion is a smart way to reduce your taxable estate without any negative side effects.

Sounds good so far, right? Well, it may not be so clear. Some gifts, for example, are exempt from federal tax, including the following:

Gifts to IRS-approved charities
Gifts to your spouse, with certain exceptions
Gifts covering another person’s medical expenses made directly to the service providers
Gifts covering another person’s tuition expenses made directly to the institution

So, when exactly do you need to file a gift tax return? Some gifts may require you to file Form 709: U.S. Gift (and Generation-Skipping Transfer) Tax Return. This is necessary even if you don’t owe taxes on the gifts you’re reporting.

If it sounds a bit confusing, it is. You don’t owe tax, so why do you need to file a gift tax form anyway? The federal gift tax exists for one reason: to prevent citizens from avoiding the federal estate tax by giving away their money before they die.

Some transactions that are not commonly thought of as gifts could be considered gifts for gift and estate tax purposes. For example, adding a joint tenant to real estate, canceling indebtedness, making a payment owed by someone else, making a gift as an individual to a corporation, giving real or tangible property all qualify as gifts that are subject to the gift tax.

Before you get bogged down in these many details, we suggest you talk to a professional about your gift habits, abilities, and financial picture. Contact us today to learn more.

If you need assistance or have any questions on the information in this article, please call your CironeFriedberg professional. You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Stamford) or email us at info@cironefriedberg.com.

2022 Tax Brackets and Standard Deductions

September 20, 2022 by David Moseman CPA

The end of the year brings tax planning into focus, since tax filing is right around the corner.

2022 Tax Brackets

Tax rates for 2022 are remaining the same as 2021 but the tax brackets are changing slightly. In 2022 a single filer with income up to $10,275 will see a 10% tax rate in comparison to up to $9,950 in 2021 for a 10% rate.

The taxable income for a married couple filing jointly, MFJ, will see a 10% tax rate up to $20,550 compared to $19,900 in 2021 and up to $14,650 for head of household (HOH) in 2022 compared to $14,200 in 2021.

These slightly wider brackets are due to inflation. Your CironeFriedberg tax CPA can review this with you. You can also find all updated 2022 tax brackets on the IRS website, 2022 IRS Tax Brackets.

Standard Deduction

The standard deduction is increasing in 2022 to account for inflation. Single filers under 65 will be able to claim a standard deduction of $12,950 in 2022 compared to $12,550 in 2021. Single filers 65 and over can claim a $14,700 standard deduction.

Married couples will be able to claim a standard deduction of $25,900 in 2022, an $800 increase over 2021’s standard deduction of $25,100. In addition each spouse 65 and older can claim an additional $1,400.

Head-of-Household taxpayers under 65 will be able to claim a standard deduction of $19,400 in 2022, up from $18,800 in 2021, while head-of-household filers 65 and older can claim a standard deduction of $21,150.

In addition, each blind person of any filing status will receive an additional $1,400 on their standard deduction in 2022, a $50 increase from the $1,350 allowed in 2021.

Important Tax Deadlines

September 9, 2022 by David Moseman CPA

Important Tax Deadlines

Estimated Quarterly Tax Payments

For income you earned June 1 – August 31, 2022, your tax payment deadline is September 15, 2022.

For income you earn September 1 – December 31, 2022, your tax payment deadline is January 17, 2023.

Individual Income Tax Returns on Extension

Those taxpayers who received an extension of time to file their 2021 individual income tax returns have until October 17, 2022, to file their returns and pay.

For guidance on how this may affect your situation, reach out to one of our tax advisors at CironeFriedberg. You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Stamford) or email us at info@cironefriedberg.com.

Is an S Corp the Right Structure for Your Business?

August 22, 2022 by David Moseman CPA

S corporations are entities that can pass corporate income, losses, deductions and credits through to shareholders for federal tax purposes. Shareholders report the flow-through of income and losses on their personal tax returns and are assessed a tax at their individual income tax rates. The Tax Cuts and Jobs Act (TCJA) also gives S corporation owners the potential to qualify for a 20% deduction on income (qualified business deduction).

An S corporation offers investment opportunities from the sale of stock and the coveted protection of limited liability. This means that company directors, officers, shareholders and employees enjoy limited liability protection. Your business can continue to exist even if the owner leaves or dies. It sounds like a good deal, but not every company can be an S corporation.

You must meet the following requirements:

Be a domestic corporation.
Have only allowable shareholders: individuals and certain trusts and estates, but not partnerships, corporations and nonresident aliens.
Have no more than 100 shareholders.
Have only one class of stock.
Not be an ineligible corporation, such as certain financial institutions, insurance companies and domestic international sales companies.

If you meet these qualifications, you have to take a number of formal steps to become an S corporation. You have to choose a legal name and reserve it, apply for a business license and other certificates specific to your industry, and obtain an Employer Identification Number. Rules may vary depending on the jurisdiction. Also, despite the pass-through advantages, S corporations still have to meet certain responsibilities. They must prepare and file income tax and estimate tax forms. (Some of these are especially complicated.) They also are responsible for Social Security, Medicare taxes, and federal unemployment taxes on wages, and any relevant excise taxes. The individual S corporation shareholders are responsible for income and estimated taxes.

While there’s a lot to love about an S corporation, there are a few things to consider:

You cannot expand with international ownership — citizens and permanent residents only.
With the 100-shareholder limit, there may be practical limits on growth.
The IRS can be fussy: Any errors among the various filing requirements can inadvertently result in the termination of S corporation status. Indeed, the IRS typically looks very closely at S corporation filings, making sure there’s a clear line between salaries and dividends, as they are taxed differently. Be prepared for detailed IRS scrutiny in this area.

The S corporation is just one of a number of ways to organize your business. Is it right for you, or is there another way that would be more appropriate? The experienced advisors at CironeFriedberg can help walk you through the financial and practical details as they affect your personal situation.

IRS Increases Interest Rates for Quarterly Payments

August 16, 2022 by David Moseman CPA

Effective October 1, 2022, the Internal Revenue Service (IRS) will increase interest rates for the calendar quarter. For individuals, the rate for overpayments and underpayments will be 6% per year, compounded daily, up from 5% for the quarter that began on July 1. For corporations, rates vary.

Here are the new rates.

FOR INDIVIDUALS

6% for overpayments for individuals (payments made in excess of the amount owed)

FOR CORPORATIONS

5% for corporations (payments made in excess of the amount owed)
3.5% for the portion of a corporate overpayment exceeding $10,000
6% for underpayments (taxes owed but not fully paid)
8% for large corporate underpayments

Generally, for a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points, and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point. The interest rates announced today are computed from the federal short-term rate determined during July 2022.

IRS Announcement

Connecticut’s Sales Tax Holiday in August

August 10, 2022 by David Moseman CPA

Annually, Connecticut offers a sales and use tax exclusion during a one-week period in August for clothing and footwear costing less than $100 per item.

This “sales tax holiday” occurs during the third Sunday in August through the following Saturday. This year, it occurs Sunday, August 21 through Saturday, August 27.

Note: Tax does not apply to the sale of an article of clothing or footwear costing less than $100 sold during the exclusion week by mail, telephone, or over the Internet.

For more information, visit the CT Department of Revenue with this link.

Or, as posted on the Connecticut Department of Revenue Services (DRS) website, you can call DRS during business hours, Monday through Friday:

1-800-382-9463 (Connecticut calls outside the Greater Hartford calling area only); or
860-297-5962 (from anywhere)

TTY, TDD, and Text Telephone users only may transmit inquiries anytime by calling 860-297-4911.

If you need assistance or have any questions on sales and use tax, please call your CironeFriedberg professional. You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Stamford) or email us at info@cironefriedberg.com.

Understanding the Gift Tax

2022 Tax Brackets and Standard Deductions

Important Tax Deadlines

Important Tax Deadlines

Is an S Corp the Right Structure for Your Business?

IRS Increases Interest Rates for Quarterly Payments

Connecticut’s Sales Tax Holiday in August

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