IRS Regulation

2024 Corporate Transparency Act Reporting Requirements

Hey Business Owners!

Your friendly Insogna CPA team here with an important update on the financial front that you need to know about. The Financial Crimes Enforcement Network (FinCEN) has recently issued a rule under the Corporate Transparency Act that’s going to change how you report beneficial ownership information.

Let’s dive into what this means for you as a business owner.

Understanding the New Rule 🚩

This rule is designed to enhance transparency in the U.S. financial system. It targets illicit activities by making it harder for individuals to use corporate structures, like shell companies, to conceal their identities and launder money.

Key Aspects of the Rule 🗝️

✅ Who Needs to Report

If you have a domestic or foreign company, particularly corporations, and LLCs, you might need to report under this rule. There are exemptions, so not all entities will be affected.

✅ Reporting Beneficial Owners: A beneficial owner is anyone who directly or indirectly exercises substantial control over a company or owns at least 25% of it. The rule requires you to disclose their identities.

✅ Company Applicants: This refers to individuals who filed the documents to create your company or directed the filing.

What to Report: You’ll need to provide the names, birthdates, addresses, and identification details of the owners and applicants.

✅ Cost and Compliance

FinCEN has initially said their cost for submitting an initial report is around $85.

✅ Timeline

The rule takes effect from January 1, 2024. Existing companies have until January 1, 2025, to comply, while new companies must report within 30 days of their formation.

✅ Next Steps

FinCEN is working on more resources and guidelines to help companies comply with this new rule. They’re also developing a secure system to store this beneficial ownership information, ensuring confidentiality and security.

What You Need to Know Now

We’ll keep an eye out for you on further updates as FinCEN issues more guidance related to the reporting and filing requirements for all registered entities.

If you have questions about how this might impact your reporting requirements, please reach out to us. We’re here to help you navigate the Corporate Transparency Act reporting requirements with ease.

Ready to simplify your reporting process? Contact our team at Insogna CPA today, and let’s ensure you’re fully compliant with the new FinCEN regulations. We’re just a call or click away!

EV Tax Credits: Things Electric Vehicle Owner Should Know in 2024

The Inflation Reduction Act (IRA) contains funding for energy programs, including a $7,500 tax credit for electric vehicles (EVs). The law also provides tax credits for commercial trucks and home charging installations in rural areas. Plus, some used electric vehicles are also eligible for an incentive.

💵 How Much is the Electric Vehicle Tax Credit?

Until recently, only a small number of consumers were benefiting from EV tax credits. With Tesla and General Motors nearing their 200,000-vehicle sales cap and their long-standing tax credits set to expire, this new federal tax credit came just in time.

According to the Alternative Fuels Data Center, approximately 30 models are eligible for up to \$7,500 in tax credits, but only if their final assembly takes place in North America and 40 percent of their metals are mined in North America. Of the 30, ten have already reached their manufacturer cap. Additionally, there is an incentive of up to $4,000 on used electric cars.

“If you’re interested in an EV or a plug-in hybrid and it qualifies for a tax credit today, don’t wait, because it might not qualify next year,” says Jake Fisher, senior director of Consumer Reports’ Auto Test Center. “But if you’re considering a used EV, it is worth waiting.”

Other EV Provisions

In addition to federal tax incentives, the following IRA provisions apply:

✅ No More Caps: Removes the 200,000-vehicle cap on tax credits that made EVs and plug-in hybrids from Tesla, GM, and Toyota ineligible for tax credits.
✅ Price Restrictions: Ends tax credits for pricey EVs like the GMC Hummer EV, Lucid Air, and Tesla Model S and Model X.
✅ Assembly Requirements: Vehicles not assembled in North America, including the BMW i4, Hyundai Ioniq 5, Kia EV6, Subaru Solterra, and Toyota bZ4X, no longer qualify.
✅ Income Caps: Adds an annual adjusted gross income cap for buyers of \$150,000 for single tax filers, \$225,000 for heads of households, and \$300,000 for married couples filing jointly.
✅ Mineral Sourcing Restrictions: Starting in 2024, if any minerals or components are sourced from “foreign entities of concern,” including China or Russia, the vehicle will not qualify for any tax credit.

🚗 Qualifying Vehicles – For Now

According to the IRS, the models that may qualify for a tax credit include:

2024 Models:

Audi Q5 PHEV
BMW 3 Series PHEV, BMW X5 PHEV
Chrysler Pacifica PHEV
Ford Escape PHEV, F-150 Lightning, Mustang Mach-E, Transit Van
Jeep Grand Cherokee PHEV, Wrangler 4xe PHEV
Lincoln Aviator PHEV, Corsair PHEV
Lucid Air
Nissan Leaf
Rivian R1S, R1T
Volvo S60 Recharge PHEV

2023 Models:

BMW 3 Series PHEV
Mercedes-Benz EQS
Nissan Leaf

Potential 2024 Models:

Tesla Model 3, Model S, Model X, Model Y (subject to eligibility)
Cadillac Lyriq
GMC Hummer Pickup/SUV (subject to eligibility)
Chevrolet Bolt, Bolt EUV

💡 Vehicle Price Cap

According to Consumer Reports, “All the vehicles on both of these lists will still be subject to new caps on how much vehicles can cost. For SUVs, pickup trucks, and vans, the threshold is $80,000. For sedans, hatchbacks, wagons, and other vehicles, the credit cuts off at $55,000.”

❓ Did You Take Possession After August 16th?

What if you bought a qualifying car before August 16, but didn’t take possession of it until on or after August 16? Can you still claim the credit? The IRS says yes!

“Individuals who entered into a written binding contract to purchase a new qualifying electric vehicle before August 16, 2022, but do not take possession of the vehicle until on or after August 16, 2022 (for example, because the vehicle has not been delivered), can claim the EV credit based on the rules that were in effect before the Inflation Reduction Act’s enactment.”

Take Your Next Steps

Check Vehicle Eligibility:
Before signing any contract, ensure your vehicle qualifies by entering its VIN into the National Highway Traffic Safety Administration’s free VIN Decoder.

Do Your EV Tax Due Diligence:
If an EV is on your wish list, do your homework to avoid tax-time disappointment. If you have questions about which vehicles qualify for the tax deduction and how much you may be able to claim, give us a call.

Ready to Drive Green and Save Green?
Let’s connect! Our team is here to help you navigate the tax benefits of electric vehicles. Give us a call today, and we’ll help you make the most of your EV investment. Don’t wait—let’s make your green dreams a reality together!

Carried Interests Undergo Significant Tax Treatments in 2024

Carried interests, partnership interests held in connection with services performed, will experience significant changes in reporting and taxation treatment this year.

2021 Changes❓

In January 2021, regulators published the final regulations in the Federal Registry, resolving some of the concerns raised in earlier versions of the proposed regulations.

Starting in November 2021, the IRS issued frequently asked questions to clarify compliance issues.

According to the IRS, owner-taxpayers (partnership investors) and passthrough entities need to comply with these final regulations when addressing their tax compliance reporting. Here are the highlights of those compliance requirements:

1️⃣ A passthrough entity is now required to attach Worksheet A along with their Applicable Partnership Interest (API) holders Schedule K-1 after December 31, 2021. The worksheet discloses one-year and three-year holdings gains and losses. For regulated investment companies (RIC) and real estate investment trusts (REIT), reporting information will be disclosed on Form 1099-DIV.
2️⃣ For tax reporting after December 31, 2021, Owner-Taxpayers (aka investors in the partnership) will now use the information filed by the passthrough entity to complete IRS Worksheet B, as well as IRS Form Table 1 and Table 2, and attach those forms to their annual tax return.
3️⃣ If a taxpayer does not hold a qualifying investment for the three-year minimum, the investment will be treated under short-term capital gains rules. The IRS calls that calculation recharacterization. Refer to Worksheet B for that calculation.
4️⃣ For reporting, taxpayers should note the recharacterization on Schedule D, as well as on Form 8949: Sales and Other Dispositions of Capital Assets, when submitting a 1040 or 1041.
5️⃣ Taxpayers with unrecaptured Section 1250 gain, gains from the sale of real property such as a commercial building, warehouse, or rental property, should also utilize Worksheet B and report the amounts on Schedule D of their tax return.

📜 Compliance requirements for partnership investments are more complex than ever

It seems clear that compliance requirements regarding partnership investments will be more complex this year. With so many moving parts in capital gains calculations, understanding the taxation treatment for carried interests can be challenging.

For expert advice on how to navigate the complex world of taxation for carried interests, including the latest changes in taxation treatment, reach out to Insogna CPAs for assistance when filing your 2024 return.

Need help navigating the latest taxation treatment changes for carried interests?

Do I need to update my ITIN number?

An Individual Taxpayer Identification Number (ITIN) is a nine-digit number issued by the IRS for individuals who need a U.S. taxpayer identification number but are not eligible for a Social Security number (SSN). If you don’t renew your ITIN on time this year (2024), it could delay your tax return

Depending on your income and filing status, you’ll generally either pay 0%, 15%, or 20% on your long-term gains. The 0% long-term capital gains tax rate applies if your taxable income is $0 to $44,625 (single filers) or $0 to $89,250 (married filing jointly).

There’s no avoiding this disclosure or payment of associated taxes—regardless of whether you receive a 1099-K, 1099-B, or 1099-MISC from a crypto exchange. Take the necessary steps to ensure you aren’t paying too little or too much. Start by reviewing how the IRS defines and taxes cryptocurrency.

Who Needs to Renew Their ITIN?

❗ Taxpayers with expiring ITINs or ITINs with the middle digits listed below need to file a Form W-7 renewal application. This applies even if you’ve used your ITIN in the last three years. The specific middle digits are 73, 74, 75, 76, 77, 81, or 82 (e.g., 9NN-73-NNNN).

❗ The IRS is sending the CP-48 Notice, “You Must Renew Your Individual Taxpayer Identification Number (ITIN) to File Your U.S. Tax Return,” to affected taxpayers. If you receive this notice but have already renewed your ITIN, no further action is needed unless another family member is affected.

❗ ITINs with middle digits 70, 71, 72, 78, 79, or 80 have expired. If you haven’t renewed these, you can do so anytime.

❗ Spouses or dependents in the U.S. should renew their ITINs. However, those outside the U.S. only need to renew if they plan to claim a tax benefit or file a tax return. Due to the suspension of personal exemptions from 2018 to 2025, there’s no need to renew ITINs solely for this purpose.

Family Renewal Option

Taxpayers can renew ITINs for their entire family at once, even if some family members’ ITINs are not expiring. This includes the tax filer, their spouse, and dependents.

Three Ways to Renew an ITIN

To renew an ITIN, complete a Form W-7 and submit the required documentation. You can:

1️⃣ Mail the Form W-7 with original or certified copies of identification documents to the IRS. These documents will be returned within 60 days.
2️⃣ Work with Certified Acceptance Agents (CAAs) who can verify identification documents and submit the ITIN application to the IRS.
3️⃣ Schedule an appointment at an IRS Taxpayer Assistance Center for in-person identity verification. Bring a completed Form W-7 and identification documents. Check the IRS website for more details.

⚠️ Avoid Common Errors and Delays

Federal tax returns with an expired ITIN will still be processed, but tax credits and exemptions will be disallowed. The IRS will notify you of any changes and the need to renew your ITIN. Once renewed, credits and exemptions will be restored, and refunds issued.

Common errors that cause delays include missing information or insufficient supporting documents, such as name changes. Ensure your form is complete before sending it to the IRS. Note that the IRS no longer accepts passports without a date of entry for dependents from countries other than Canada or Mexico, or for dependents of U.S. military personnel overseas. Acceptable documents to prove U.S. residency include:

👉 U.S. medical records for dependents under 6
👉 U.S. school records for dependents aged 6 to 17
👉 U.S. school records, rental statements, bank statements, or utility bills for dependents 18 and over

Act Now to Renew Your ITIN

Act now to renew your ITIN and avoid delays in your tax filing and refunds. Under the Protecting Americans from Tax Hikes (PATH) Act, ITINs not used on a federal tax return in the last three years, or those with specific middle digits, expired in 2018. Submit a renewal application as soon as possible.

If you have questions about ITIN renewal or need assistance, give us a call. We’re here to help ensure your tax season goes smoothly.