Deadlines & Misc.
Third Quarter Estimated Tax Payments are due by Friday, Sept 15, 2023

September 15, 2023 is the deadline for timely filing extended corporate and partnership returns. Fiduciary (trust/estate) returns are due October 2.

2022 RETIREMENT PLANS
Employer contributions for taxyear 2022 are also due on September 15, 2023 for corporations and partnerships. Individual proprietors must make employer contributions by October 16, 2023.

PERSONAL PROPERTY TAX
Second half payments for 2023 (for the 2022 tax assessment) are due October 31, 2023.

UNCLAIMED PROPERTY
Unclaimed property reports are due October 31, 2023 for the reporting period July 1, 2019 through June 30, 2020. The most common unclaimed property items in a dental office are uncashed refund checks to patients.

STUDY CLUBS
If you would be interested in having us speak at one of your upcoming Study Club events, we would be happy to do so.  We can cover a variety of topics including long-term financial planning, transition planning and most popular the new Tax Act – and how it is impacting dentists.

Contact our office for more details. 425.216.1612 or mail@cpa4dds.com

IRS EMPHASIZES IDENTITY PROTECTION PIN PROGRAM 

The IRS has again issued a reminder of their identity protection program, where taxpayers can obtain a special PIN needed to file their tax return. Any attempt to file a return without the proper PIN will automatically be rejected. It helps to prevent fraudulently filed returns that attempt to claim a refund. Should such a return be filed using your Social Security Number, the steps needed to prove your identity can be rather time consuming and will delay your ability to claim your rightful refund. 

There are a few different ways to obtain a PIN. The fastest is using the online tool on the IRS website. It requires you to have an online account, which we have previously discussed here. 

https://sa.www4.irs.gov/icce-core/loac/ippin/pages/ippin.xhtml 

You can also apply using Form 15227, although this is only available to those with income

below $73,000 (single) or $146,000 (married filing joint).

https://www.irs.gov/pub/irs-pdf/f15227.pdf 

The final option is to contact your local IRS office and request an in-person appointment.

ROTH 401(K) CATCH-UP CHANGES DELAYED TO 2026
Employees aged 50 and up are allowed to make “catch-up” contributions to their 401(k) plans beyond the annual maximum. Recent Congressional legislation ruled that starting in 2024, employees with wages over $145,000 who want to make catch-up contributions can only do so under a Roth 401(k), meaning they would not get a deduction to their taxable wages.

The initial announcement created a number of questions. What about employers that don’t offer Roth options in their 401(k) plans? Are their highly compensated employees barred from making catch-up contributions? Employers who don’t currently offer a Roth 401(k) but want to do so would have to work quickly to change their plan in time. 

The IRS has listened to the feedback and delayed the implementation two years, now scheduled to begin in 2026. Employers should have enough time to either adopt a new retirement plan or make changes to their existing plan. Further guidance is expected, and additional comments have been requested, so there could still be changes over the next couple years. 

As a reminder, traditional 401(k) contributions reduce the employee’s taxable income in the year of the contribution. The money grows tax-free until distributions are taken (and fully taxed) in retirement. Many people will be in a lower tax bracket in retirement. Thus, they get a deduction during their high-bracket years and delay the taxation until a lower-bracket year. 

Roth contributions work in the opposite way. You do not get to deduct your contributions, but when you take the distributions in retirement, the entire amount is tax-free (assuming it has been in the Roth IRA for a specified time period and other conditions are met). 

Tax Cuts Expire After 2025 

Many of the tax cuts that went into place in 2017 are temporary and will expire after December 31, 2025. Since the cuts were enacted, we have always included the condition “pending further legislation.” Back in 2017, that seemed like a long time for things to happen. But as we get closer to 2025 with still no additional legislation, we should operate with the assumption that tax rates will increase in a couple years. 

Ordinarily, we advise taxpayers to delay recognition of income and accelerate deductions. However, when tax rates go up, you could be better off doing the opposite: have your income taxed now when rates are low, and hold off on deductions until rates are higher. So if you can time things like Roth IRA conversions or large equipment purchases over the next couple years, keep the changing tax landscape in mind. 

Of course, financial decisions should never be made solely because of the tax ramifications. Buy that new piece of equipment when you need it, not just because there is a potential tax savings to be had.

THIRD QUARTER 2023 ESTIMATED PAYMENTS

***THIS IS ONLY FOR THOSE THAT PAY BY QUARTERLY INSTALLMENTS***

We highly encourage that estimated payments be made online at EFTPS.gov – this very convenient site allows you to enter multiple payments and dates in advance. Call us if you need help!

However, if you still prefer to mail in a paper check:

If we have prepared your 2022 return, you will find pre-printed estimated tax payment vouchers in your TaxCaddy account or in your folder if we mailed your tax return to you. Otherwise, detach or photocopy the voucher below.

1. Complete the name, address and social security number sections.
2. Fill in amount (call us at 425.216.1612 if you have questions regarding the amount).
3. Address your envelope to:

Internal Revenue Service
PO Box 802502
Cincinnati, OH 45280-2502

      4. Make your check payable to the United States Treasury.
      5. Note your social security number and “2023 1040-ES” on the memo line of your check.
      6. Enclose the voucher and check in your envelope addressed to the Internal Revenue Service (see above).
      7. Mail on or before Friday, September 15, 2023.

Deadlines & Misc.
First Quarter 2023 Estimated Tax Payments are due by Tuesday, April 18, 2023.  See Below.

INCOME TAX RETURNS
Tuesday, April 18 is the deadline for timely filing or extending individual income tax returns. In order to avoid penalties and/or interest, 2022 tax due must be paid with the filed return or extension by April 18.

Personal Property Tax
First half taxes are due on or before May 1, 2023. Personal property affidavits are also due May 1, 2023.

STUDY CLUBS
If you would be interested in having us speak at one of your upcoming Study Club events, we would be happy to do so.  We can cover a variety of topics including long-term financial planning, transition planning and most popular the new Tax Act – and how it is impacting dentists.

Contact our office for more details. 425.216.1612 or mail@cpa4dds.com

Washington State Capital Gains Tax
In a bit of a surprise, the State Supreme Court has upheld the capital gains tax, meaning the first payments under the new tax are due on April 18^th, 2023.  There are numerous exceptions to the tax, such as sales of real estate, depreciable assets used in a business, the gain from selling certain small businesses, and assets held in retirement accounts, and we continue to believe that the majority of our clients will not be impacted.

However, this is an unprecedented step in taxing the income of individuals and represents a new source of state revenue.  Many fear that it will lead the way to a full-blown state income tax.  Officially, the tax is labeled an excise tax, more like a sales tax than a tax on income.  Income taxes remain unconstitutional in Washington.

For now, the tax is 7% on net long-term capital gains above $250,000, although critics also point out that there is little to stop the state from increasing the tax percentage, reducing the income threshold, or both.

If your net long-term capital gains as shown on your federal income tax return are less than $250,000 in a given year, you do not owe the Washington capital gains tax, nor are you required to file anything with the state.  Even if your net long-term gains exceed $250,000, if some of those gains result from excluded types of property such that your gains subject to the state tax are less than $250,000, you are also exempt from any state tax or filing requirements.  However, in some scenarios it may be advisable to still file a state return showing your total net long-term capital gains, then backing out those gains not subject to the state tax.

If you file an extension on your federal income tax return, you are also granted an extension for filing the state return.  However, it only extends the time to file, not the time to pay.  If you owe under the state capital gains tax, that must still be paid on or before April 15^th each year (April 18^th this year, due to the 15^th falling on a weekend).  You would need to estimate your final liability, with any potential overpayment being refunded when you ultimately file.

The filing of the return and payments are made through the State Department of Revenue website.  Visit https://dor.wa.gov/taxes-rates/other-taxes/capital-gains-tax for more information.

UNRECEIVED EMPLOYEE RETENTION CREDITS
By now, most have received refund checks for the employee retention credit.  However, the IRS has indicated that with the massive influx of amended payroll tax returns (which all had to be paper filed and manually processed), some may have been lost in the shuffle.

If you are still waiting for your refund, we may want to consider filing the returns again.  There is no real harm in doing so, other than the processing time and mailing costs.  In any event, the statute of limitations for amending payroll returns is three years after the return is filed.  For quarterly payroll returns, the “deemed” filing date is April 15^th of the following year, regardless of the quarter.  So, if you have an unpaid claim for quarter 2 of 2020, for example, and the IRS has no record of it on file, we would need to file again before April 15^th, 2024.

IRS ONLINE ACCOUNTS
The ability to establish an individual online account with the IRS has been around for several years.  It can be a useful tool for making estimated payments, verifying those payments already made, and ensuring that payments are being applied to the proper tax period.  If you have been subject to identify fraud, it can also be used to quickly retrieve the PIN number you need to file your return in case you lost the mailed version or never received it from the IRS (a new PIN is issued each year for victims of identity fraud).

In cases where we need to contact the IRS on your behalf, you can use your account to quickly grant us power of attorney rights instead of having to print, sign, and return physical versions of the forms.  With the increase in the number of clients needing IRS assistance, this can be a real time saver.

The benefits of an online account do not come without some cautions, though.  The sign-up process can be tricky to navigate at times.  It also uses the vendor ID.me for its verification process, which made headlines last year for its use of facial recognition technology.  You are not required to use this facial recognition feature, but opting out will increase the amount of time needed to create an account.  These are all factors to weigh when deciding whether to create an account.

***BELOW IS ONLY FOR THOSE THAT PAY BY QUARTERLY INSTALLMENTS***

We highly encourage that estimated payments be made online at EFTPS.gov – this very convenient site allows you to enter multiple payments and dates in advance. Call us if you need help!

However, if you still prefer to mail in a paper check:

If we have prepared your 2022 return, you will find pre-printed estimated tax payment vouchers in your TaxCaddy account or in your folder if we mailed your tax return to you. Otherwise, detach or photocopy the voucher below.

1. Complete the name, address and social security number sections.
2. Fill in amount (call us at 425.216.1612 if you have questions regarding the amount).
3. Address your envelope to:

Internal Revenue Service
PO Box 802502
Cincinnati, OH 45280-2502

4. Make your check payable to the United States Treasury.
5. Note your social security number and “2023 1040-ES” on the memo line of your check.
6. Enclose the voucher and check in your envelope addressed to the Internal Revenue Service (see above).
7. Mail on or before Tuesday, April 18, 2023.

UPCOMING DEADLINES

Fourth Quarter 2022 Estimated Tax Payments are due by Tuesday, January 17, 2023.  (see below)

INCOME TAX RETURNS

Partnership and S-Corporation tax returns are due Wednesday, March 15, 2023.  Individual and C-Corporation tax returns are due Tuesday, April 18, 2023.

PAYROLL REPORTING

Forms 1099-NEC, W-2, and W-3 are due Tuesday, January 31, 2023.  Forms 1099-MISC are due Tuesday, February 28, 2023 (paper-filed) or Friday, March 31, 2023 (e-filed).

Getting ready for tax filing season

“EXTENDED” FILING DEADLINE:  With the weekend and federal holiday, the filing deadline for individual income tax returns this year is pushed back to April 18^th.  As always, the earlier you get your documents to us the better, so please send us your W-2s, 1099s, K-1s, etc. no later than February 15^th.  Most should be delivered to you in late January or early February.

TAXCADDY:  We will continue to use TaxCaddy as our document delivery system.  For clients that are new to the Dental Accounting Group, you will receive a separate email with instructions on how to setup your account.  It is a secure portal that allows us to request specific documents, and you can even upload them by taking pictures with your phone.  Once your return is complete, it is also the place where you will receive your digital copy of the return.  If you have not received your invitation by early February, please let us know.

ID THEFT PIN: If you have been the victim of identity theft in recent years, the IRS will likely mail you a PIN number which must be included with your filed tax return.  Do not forget to include that letter with your tax documents.

2023 LIMITS AND UPDATES 

With recent inflation, several IRS amounts received significant increases for 2023.

Amount	2022	2023
401(k) deferral max	20,500	22,500
401(k) catch-up if 50+	6,500	7,500
SIMPLE deferral max	14,000	15,500
SIMPLE catch-up if 50+	3,000	3,500
FICA wage base	147,000	160,200
Business mileage rate	62.5 cents/mile	65.5 cents/mile
Standard deduction (single)	12,950	13,850
Standard deduction (married joint)	25,900	27,700

While the individual tax rates remain the same ranging from 10% to 37%, the brackets within which each rate begins have been adjusted upward as well.

FORM 1099-K REPORTING 

Form 1099-K has been around for several years and is used by payment processing companies (credit cards, PayPal, Venmo, etc.) to report certain transactions.  In prior years, they were only required if a recipient received more than $20,000 and 200 transactions in a year. That was set to change to $600 and no transaction minimum for tax year 2022. This would result in millions more 1099-Ks being issued to individuals who had never received one before.

After many complaints, the IRS acquiesced at the last minute to delaying the change for another year, so the lower threshold will go into effect this tax year, with the first such 1099-Ks issued in January 2024.

It is important to note that the actual taxation of such transactions has not changed. If you receive payment for services through Venmo or sell something on eBay, you are required to report the income (if the sale results in a gain; a loss is likely a non-deductible personal loss and is not reported). The only change surrounds who is issued a 1099-K.

The backlash related to scenarios such as splitting the bill at a restaurant and reimbursing a friend through PayPal. That remains a non-taxable event. But the payment processing company likely does not know what the payment was for and will issue a 1099-K if your annual total exceeds $600. While still a little unclear, the likely result in that scenario is to show the “income” on your individual income tax return, then back it out as non-taxable. Failing to report the income at all could result in a notice from the IRS that you underreported income.

NEW WASHINGTON CAPITAL GAINS TAX

As a reminder, Washington State enacted a 7% tax on capital gains for Washington residents with gains above $250,000 (with exceptions for assets such as real estate, property used in a trade or business, etc.).  It went into effect January 1, 2022, which, as things stand, means taxes on 2022 gains will be due by April 18, 2023.  According to the WA DOR, if the Court eventually finds the statute to be unconstitutional, any tax payments received will be promptly refunded with interest. 

We have explored this topic multiple times, but we still do not have a final decision on if it will stand.  A recent court case reversed a prior decision that barred the State from collecting the tax.  While it technically allows the State to collect the tax, it essentially just ensures that the State Supreme Court will have to ultimately decide on the tax’s legality.

Fourth Quarter 2022 Estimated Tax Payments

***THIS IS ONLY FOR THOSE THAT PAY BY QUARTERLY INSTALLMENTS***

We highly encourage that estimated payments be made online at EFTPS.gov – this very convenient site allows you to enter multiple payments and dates in advance. Call us if you need help!

However, if you still prefer to mail in a paper check:

If we have prepared your 2022 return, you will find pre-printed estimated tax payment vouchers in your TaxCaddy account or in your folder if we mailed your tax return to you. Otherwise, detach or photocopy the voucher below.

1. Complete the name, address and social security number sections.
2. Fill in amount (call us at 425.216.1612 if you have questions regarding the amount).
3. Address your envelope to:

Internal Revenue Service

PO Box 802502

Cincinnati, OH 45280-2502

*** NOTE THE NEW ADDRESS – DO NOT SEND TO SAN FRANCISCO ANYMORE ***

4. Make your check payable to the United States Treasury.
5. Note your social security number and “2022 1040-ES” on the memo line of your check.
6. Enclose the voucher and check in your envelope addressed to the Internal Revenue Service (see above).
7. Mail on or before Tuesday, January 17, 2023.