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Record-Breaking Revenues: Celebrating Success Previous and Looking Ahead

At Insogna CPA, we believe that success is more than just numbers—it’s about helping businesses thrive and reach new heights. In the past, we had the privilege of doing just that. Our clients collectively achieved record-breaking revenues of $215,464,385 in 2021, and we couldn’t be more thrilled to have been a part of their journey.

🤝 Helping Clients Grow

The entire team at Insogna CPA is proud to share that we helped our clients grow their revenues. A special thank you goes out to all our valued clients for trusting us as your financial partners. We’re excited to continue this momentum and look forward to achieving even greater success together in 2024!

Ready to break your own revenue records in 2024?

Let’s make it happen together. Reach out to us today, and let’s strategize for a profitable year ahead. Together, we can ensure that your business not only meets but exceeds its financial goals!

3 ways to defer capital gains tax in 2024

When you sell a business or investment property for a profit, that’s a capital gain. Normally, you’re hit with taxes on that gain the year it happens, even though the value may have built up over many years.

💡 3 Strategies to Defer Taxes on Capital Gains

The tax code offers some clever ways to push these payments further down the road:

✅ Spread the tax over several years
✅ Postpone the tax by reinvesting the gain
✅ Defer it for a specific period of time

These methods can be achieved through 1) a property exchange, 2) an installment sale, or 3) by investing in a qualified opportunity fund (QOF). Like all tax strategies, they come with their own set of rules and requirements.

1️⃣ Exchanging the Property for Another: The 1031 Exchange

What is a Tax-Deferred Exchange?

Many people refer to this arrangement as a “tax-free exchange,” but the gain is not actually tax-free; rather, it is deferred into another property. The gain will eventually be taxed when that property is sold (or will be deferred again in another exchange). These arrangements are also known as “1031 exchanges,” in reference to the tax code section that authorizes them: IRC Sec. 1031.

In the past, these exchanges applied to all properties, but since 2017, they have only applied to business- or investment-related exchanges of real estate. One of the requirements is that the exchanges must involve like-kind properties. However, the tax regulations for real estate exchanges are very liberal, and virtually any property can be exchanged for any other, regardless of whether they are improved or unimproved. One exception to this rule is that U.S. property cannot be exchanged for foreign property.

Is an Exchange Optional?

Exchange treatment is not optional; if an exchange meets the requirements of Sec. 1031, the gain must be deferred. Thus, taxpayers who do not wish to defer gains should avoid using an exchange.

Can Exchanges be Delayed?

It is almost impossible for an exchange to be simultaneous, so the tax code permits delayed exchanges. Although such exchanges have other requirements, they generally involve a replacement property (or properties) that is identified within 45 days and acquired within 180 days or the tax return due date (including extensions) for the year when the original property was transferred—whichever is sooner. An exchange accommodator typically holds the proceeds from such exchanges until they can be completed.

What are Reverse Exchanges?

The tax code also permits reverse exchanges, in which an exchange accommodator holds the replacement property’s title until the exchange can be completed. The other exchange property must be identified within 45 days, and the transaction must be completed within 180 days of the sale of the original property.

The amount of gain that is deferred using the exchange method depends on the properties’ fair-market values and mortgage amounts, as well as on whether an unlike property (boot) is involved in the exchange. The rule of thumb is that the exchange is more likely to be fully tax-deferred when the properties have greater value and equity.

2️⃣ Selling the Property in an Installment Sale

What is an Installment Sale?

In an installment sale, the property’s seller provides a loan to the buyer. The seller then only pays income taxes only on the portion of the taxable gains that occur during the year of the sale; this includes the down payment and any other principal payments received in that year. The seller then collects interest on the loan at rates approaching those that banks charge. Each year, the seller pays tax on the interest and the taxable portion of the principal payments received in that year.

What Qualifies as an Installment Sale?

For a sale to qualify as an installment sale, the seller must receive at least one payment after the year when the sale occurs. Installment sales are most frequently used for real estate; they cannot be used for the sale of publicly traded stock or securities. The installment sale provisions also do not apply when the sale results in a tax loss.

What are the Risks of an Installment Sale?

If the sold property is mortgaged, the mortgage must be paid off as part of the sale. Even if the seller does not have the financial resources to pay off the existing loan, an installment sale may be possible if the seller takes a secondary lending position or includes the existing mortgage in the new loan.

An installment sale has hazards; for instance, the buyer may decide to either pay off the installment loan or sell the property early. If either occurs, the installment plan ends, and the balance of the gains is taxable in the year when the buyer either paid off the loan or sold the property (unless the new buyer assumes the loan).

3️⃣ Investing in a Qualified Opportunity Fund (QOF)

A Qualified Opportunity Fund allows you to invest capital gains into economically distressed areas, called Opportunity Zones. By doing this, you can defer taxes until 2026 or until you withdraw the investment—whichever comes first. Plus, if you keep your money in the fund long enough, a portion of the gain can become tax-free.

Even better? If you hold the investment for at least 10 years, any appreciation on the investment is not taxable. This is an attractive option if you’re looking for a longer-term deferral strategy with the potential for additional tax benefits.

❓Which Strategy Fits Your Situation?

Each of these tax deferral strategies has its pros and cons, and not all of them will be right for your situation. It’s essential to analyze your unique circumstances before moving forward.

Ready to keep more of your hard-earned money?

Let’s talk. Reach out today to see how these capital gains deferral strategies can work for you in 2024. Taxes may be inevitable, but that doesn’t mean you can’t plan smarter!

Gift Tax, Explained: What It Is and How It Works

In 2024, the annual gift tax exemption remains $17,000, allowing individuals to gift up to $17,000 to as many people as they wish—without owing taxes on those gifts. So, for instance, a generous grandfather can give $17,000 to each of his 10 grandchildren this year, without worrying about any tax surprises.

But what if he decides to go bigger? If Grandpa gifts each grandchild $21,000, he’s exceeded the exemption by $4,000 per gift. This would mean he’s potentially on the hook for gift taxes on that $40,000 excess.

How about married couples? Both spouses can give away \$17,000 each, allowing a couple like Cynthia and Joe to gift up to \$34,000 per person annually—perfect for spoiling their nieces and nephews tax-free.

❓ What Is the Gift Tax?

When a person gives money or property to someone other than their spouse or dependent, they may be required to pay gift tax. This federal excise starts at 18% and can reach up to 40% on certain gift amounts. The responsibility for paying the tax typically lies with the donor, not the individual receiving the gift. While recipients don’t face any immediate tax consequences, they may have to pay capital gains tax if they sell gifted property in the future.

Not all gifts get taxed.

Certain types of gifts are totally tax-free, like:

✅ Payments for school tuition or medical bills
✅ Donations to charity
✅ Political contributions
✅ Gifts to your spouse or dependents

💡 Lifetime Gift Tax Exemption

If a gift exceeds the 2024 annual $17,000 limit, that does not automatically trigger the gift tax. Also, the IRS allows a person to give away up to $12.92 million in assets or property over the course of their lifetime and/or as part of their estate.

If a gift exceeds the annual exclusion limit, the difference is simply subtracted from the person’s lifetime exemption limit and no taxes are owed.

Don’t Let Gift Giving Become a Tax Headache 🤯

Navigating the federal gift tax is essential for anyone with a generous spirit—or a large estate. If your gifts exceed the annual exclusion, you’ll need to report them on IRS Form 706. Better to play it safe than get an unwelcome letter from the IRS!

Need help navigating gift taxes or have other tax concerns? Contact us today and let us handle the numbers, while you handle the gift wrapping this December!

Texas Tax Help: Top Year-End Tax Tips

We get it. Taxes can feel like one big puzzle — especially if you’re running a growing business or navigating investments. And then there’s the nagging question:

“Did I miss anything major?”

“Are there hidden deductions I should know about?”

“How much could these little mistakes cost me in the long run?”

Our award-winning tax pros take the guesswork out of it. From maximizing your deductions to giving you tailored tax help that fits your unique situation, we’ve got you covered. We’ll dive into your financials, gather all the right paperwork, and uncover more ways to save than you thought possible.

Download our Tax Preparation Checklist for Individual Taxpayers to help you organize your files.

💡 Learn more about what you can and cannot claim

The Power 8: Smart Year-End Tax Moves!

Ready to tackle your taxes like a pro?

Whether you need quick tax tips or deeper tax help, we’re here to make sure 2024 is your best tax year yet. Let’s chat and find those savings!

Reasons You Might Not Get a Tax Refund Next Year

With all the tax reform changes and reduced income tax withholding for most taxpayers, there’s growing concern that while more take-home pay is great now, it could mean an unpleasant surprise at tax time next year.

This is why you need to be extra cautious about your payroll withholding. One glance at the W-4 instructions can make anyone’s head spin, especially if you’re not trained in taxes. Spoiler: it’s not business as usual.

What adds to the problem is that many taxpayers count on a refund to pay property taxes, insurance, and other large expenses. The W-4 worksheets are designed to withhold the correct amount of tax with no substantial refund, and many tax practitioners are reporting that clients’ withholdings have been reduced to seriously low amounts.

In other years, most taxpayers can look at the tax from their prior year’s return and compare it to their projected payroll withholding to see if their current withholding amount is appropriate. But some taxpayers with multiple jobs, a working spouse, or complicated returns will find it difficult to adjust their withholding to achieve the desired results.

The same problem exists for retirees with pension income, the difference being that they use a W-4P instead of a W-4.

💡 Taxpayers with Multiple Jobs

The same problem exists for retirees with pension income, the difference being that they use a W-4P instead of a W-4.

Get Help Projecting Your Taxes

If you want a clearer picture of your potential tax refund or need help tweaking your payroll withholding, give us a call. We’ll help you avoid surprises—and make sure you’re still in control when tax season rolls around.

Remote Work and Taxes: Does Your Remote Workforce Create Income Tax Nexus in 2024?

Remote work has become the new normal, but it’s not without its tax implications. As companies navigate the post-pandemic landscape, one important question remains: does remote working create income tax nexus for your business? In other words, if your employees are working from different states, could this mean you owe taxes in those states too? Let’s break it down.

Nexus is the connection a business has with a state that subjects it to that state’s tax laws. Whether through sales, property, or employee activities, your business could be responsible for taxes in any state where it has nexus. With remote work now more prevalent than ever, this is a question all businesses need to ask themselves.

❓ How to Know If Remote Working Creates Nexus

The shift to remote work has resulted in employees working from different states—states they may not have worked from before. If your employees have been working remotely in other states, your company may have created nexus in those states. Nexus can mean having to comply with payroll withholding, income tax, and even sales tax regulations in each new location.

While some states have offered temporary relief for businesses due to the pandemic, those rules are often changing, so it’s essential to stay informed.

💡 Individual Income Tax Payment and Withholding

Any individual income tax and related payroll withholdings are usually sourced to the state where the employee performed their work. As many employees are now telecommuting due to COVID-19, certain states and cities have adopted the ‘Convenience of the Employer’ test.

This means that the wages of those remote workers are sourced to the employer’s location unless it was decided to have the employee in another state based on the employer’s necessity, rather than the employee’s convenience. For example, Philadelphia-based employers who are working outside the city are exempt from the city’s wage tax for the days spent working.

📆 Apportionment

There’s also the issue of apportionment; many states still use a three-factor method of property, payroll, and sales to help calculate the business tax apportionment factor. As employees are now working from home, states could insist that the compensation paid is creating a payroll factor numerator.

💡 State Taxes

Remote work can also affect your company’s state tax obligations. Normally, a business would have nexus for state tax purposes if it has a physical presence in the state. However, with employees working remotely, your company may have a tax presence in multiple states without ever setting foot there.

While some states have temporarily suspended nexus rules due to the pandemic, others have not provided guidance, leaving businesses in uncertain territory.

❓ What States Are Doing

As of now, states are handling nexus rules in different ways. Some, like Alabama, have stated that remote work won’t create nexus, while others, such as Utah and Nebraska, have taken a stricter approach. With the tax landscape constantly evolving, it’s important to stay up-to-date with the latest guidance.

Make Your Next Move

Remote work isn’t going anywhere, and neither are its tax implications. To ensure your business stays compliant with the latest nexus rules, it’s essential to have a proactive strategy in place.

Reach out to us today! Whether your team is working from Texas or telecommuting from across the country, we’ll help you navigate the complexities of remote work and individual income tax in 2024. Let’s make sure your business is covered, no matter where your employees are.