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What Is an EIN and Does Your Business Need One?

Entrepreneurs often shrug off the idea of getting an Employer Identification Number (EIN), thinking their small business doesn’t really need one. Sure, if you’re flying solo, you might get away with using your Social Security Number (SSN) for a while—but trust me, it’s not the best long-term strategy, even if hiring employees isn’t on your radar yet. In most cases, having an EIN is not just a good idea; it’s a must. It provides key benefits beyond just payroll setup.

💡 Protect Your Personal Information with an EIN

One of the top perks of an EIN is safeguarding your personal identity. While you still need to protect your EIN and only share it when absolutely necessary, using it for your business means your personal details stay more secure.

Government forms and official documents require an identifier, and the EIN (issued by the IRS) can be used in place of your Social Security Number. Sure, identity theft is still a concern if your EIN gets stolen, but the information tied to it is far less sensitive than what’s connected to your SSN. Bottom line: fewer risks, more peace of mind.

❓ Incorporating Your Business? An EIN is Non-Negotiable

If you’re incorporating your business (or planning to), your business becomes its own entity. That means it needs its own form of identification, especially if you plan to hire employees—even if you’re the only employee for now.

You’ll still need to pay yourself a salary, which means dealing with payroll taxes and following IRS guidelines. This applies whether you’re forming a corporation, LLC, or partnership—you can’t just use your SSN for official filings.

💡 The EIN Does More Than Payroll

An EIN comes with long-term benefits that go way beyond just payroll. You’ll need it to open business bank accounts, apply for business credit, and even set up retirement plans like pensions or profit-sharing. Whether you’re running a general partnership, LLC, S-corp, or sole proprietorship, the EIN will play a role in critical business operations. And let’s face it, using an EIN instead of your SSN for your business is just smart, plain and simple.

Every business is unique, and while we strongly recommend securing an EIN, we understand it might not be necessary for everyone. Have questions about how an EIN applies to your specific situation? Let’s chat and make sure you’re making the right decision for your business today.

Not sure if an EIN is right for your business?

Give us a call, and we’ll help you navigate the process. In 2024, having the right tools in place can make all the difference—so why not get started on the right foot? Reach out today!

What Is The Difference Between A Lien And A Levy?

If you’re reading this, there’s a good chance you’ve received one of those dreaded notices from the IRS. Interaction with the Internal Revenue Service is pretty common—especially during tax season. But if you’ve been notified of an IRS tax lien or levy, things just got a whole lot more serious.

The most important thing to do right now? Stay calm. Yes, these notices mean your financial life just took a turn for the complicated, but you have rights—important ones—that are worth protecting.

❓ What Is an IRS Tax Lien?

An IRS tax lien is a very specific type of claim that the government (in this case, the Internal Revenue Service) makes on your property. That property can include but is not limited to real estate and other types of assets. Typically, this is something that occurs when you’re past due on your income taxes and you’ve failed to make proper arrangements to get yourself back up to date again.

A tax lien can affect you in a number of different ways, all of which are less than ideal. Even though tax liens no longer appear on your credit report, your credit rating will still suffer ‒ thus harming your ability to get a loan or secure new credit for your business. Tax liens also usually appear during title searches, which can impact your ability to sell your house or refinance the mortgage you already have.

❓ What Is an IRS Tax Levy?

A tax lien is essentially the first part of a two-step process. That second step takes the form of a tax levy, which involves the actual seizure of the property in question in an effort to pay the tax money you owe. Via a tax levy, the IRS can do everything from garnish your wages, seize assets like real estate or even take control of your bank accounts to get their money.

At the very least, you’re likely to go through wage garnishment ‒ meaning that you’ll be taking home far less money at the end of the week in your paycheck. A 21-day hold might be placed on your bank account in an effort to encourage you to “work things out,” and if you don’t, they may even try to seize your home as a last resort.

Luckily, there are a few things that the IRS CAN’T seize even by way of a tax levy. These include things like unemployment benefits, certain pension benefits, disability payments, workers’ compensation, and others.

❓ What Can I Do About It?

If you can pay your tax bill, do it. If you can’t, set up an IRS payment plan to keep things manageable. Yes, interest and penalties will keep adding up, but it’s better than losing your house.

You also have rights. If you feel the IRS is treating you unfairly, you can file an appeal with the IRS Office of Appeals or request a meeting with a higher-level agent. You can also apply for a Withdrawal of the Notice of Federal Tax Lien or a Certificate of Discharge if your property is on the line.

In situations like these, it’s easy to feel overwhelmed. But you don’t have to go it alone. Working with a seasoned tax professional can help you navigate the IRS and protect your assets.

Need Help?

Dealing with IRS notices is never fun, but you’re not alone. If you need help understanding your options or negotiating with the IRS, our team of tax experts is just a call away. Let’s get your financial peace of mind back on track—starting today!

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!