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Tax Benefits for Members of the Military in 2024

Military members benefit from a variety of special tax benefits. These include certain non-taxable allowances, non-taxable combat pay, and a variety of other special tax provisions designed to support those who serve.

Prominent Military Tax Benefits

💡 Service Member Residence or Domicile
A frequent question by service members is, “What is my state of residence for tax purposes?” since one’s duty station may change multiple times while serving. Luckily, the government passed a law to solve this issue. A service member continues to retain his or her home state of residence for tax purposes, even when required to move to another state under military orders. This also applies to other tax jurisdictions within a state, such as city, county, and personal property taxes. Thus, a service member will continue to file tax returns for his or her home state and not the state where he or she is stationed.

💡 Service Member Spouse’s Residence or Domicile
To simplify the tax-filing requirements of military couples, the Military Spouses Residency Relief Act of 2009 allows military spouses to claim the same state of domicile as their service member for tax purposes, provided they had also established domicile there.

For example, if Chris resides in California with his spouse, who is in the military, and Chris has earned income in California but had established domicile with his military spouse in Virginia, Chris would be subject to Virginia income tax laws instead of California’s. The couple would only need to file one state return – in this case, Virginia. There would be no obligation to file a California return.

Unfortunately, spouses who hadn’t established domicile in the same state as their service member spouse and who had earned income in the state where their spouse was stationed were still forced to file with both states (assuming both states have income tax).

💡 New for Years Beginning in 2018
Thanks to the Veterans Benefits and Transaction Act of 2018, an individual married to a military member now has more choices. Under the act, a spouse can elect to have the same state of domicile as their service member spouse, even if they didn’t previously have the same domicile. If the non-military spouse doesn’t make that election, they can continue to choose to file in their own domicile state.

Making these choices can significantly impact the amount of state tax the spouse might have to pay. For instance, a spouse of a service member stationed in a high-income-tax state can elect to use the state of residency of the service member, especially if that state has no or low income tax, and avoid the taxes where the spouse is stationed.

⚠️ Be Cautious
It can be tempting for a service member or their military spouse to declare their state of domicile as a state without any state income tax, like Texas, Nevada, or Florida. However, doing so without any real connections to the state can cause complications down the line.

💵 Non-Taxable Allowances
While all pays are taxable, most allowances are tax-exempt. The primary allowances for most individuals are BAS (Basic Allowance for Subsistence) and BAH (Basic Allowance for Housing), which are tax-exempt. Conus COLA is one allowance that is taxable. A law change mandated that every allowance created after 1986 would be taxable. Conus COLA, authorized in 1995, became the first taxable allowance. Tax savings can be significant as BAS and BAH average over 30% of a member’s total regular cash payments. In addition to being tax-exempt from federal and state taxes, these allowances are also excluded from Social Security taxes.

Need Help?

Want to ensure you’re making the most of your military tax exemptions and other tax benefits? Let’s take the confusion out of your tax situation—reach out to us today for personalized guidance!

Tax Breaks for Parents in 2024: What You Need to Know

Summer just ended and if you’re a working parent, there’s a valuable tax break you should keep in mind for the next summer season.

Many working parents need to arrange childcare for their kids under 13 (or any age if disabled) during the school break. One popular option that comes with a tax perk? Day camps! The cost of day camps can be counted as an expense for the Child and Dependent Care Credit. However, keep in mind that overnight camps and summer school or tutoring programs don’t qualify.

💵 Expense Qualifications

For an expense to qualify for the credit, it must be an “employment-related” expense; i.e., it must enable you and your spouse, if married, to work, and it must be for the care of your child, stepchild, foster child, brother, sister or stepsibling (or a descendant of any of these) who is under 13, lives in your home for more than half the year and does not provide more than half of his or her own support for the year. Married couples must file jointly, and both spouses must work (or one spouse must be a full-time student or disabled) to claim the credit.

The qualifying expenses are limited to the income you or your spouse, if married, earn from work, using the figure for whoever earns less. However, under certain conditions, when one spouse has no actual earned income and that spouse is a full-time student or disabled, that spouse is considered to have a monthly income of $250 (if the couple has one qualifying child) or $500 (two or more qualifying children). This means the income limitation is essentially removed for a spouse who is a student or disabled.

For 2021 only, the total expenses that you may use to calculate the credit may not be more than $8,000 (for one qualifying individual) or $16,000 (for two or more qualifying individuals). This limit does not need to be divided equally.

The credit reduces a taxpayer’s tax bill dollar for dollar. However, the credit can only offset income tax and alternative minimum tax liability, and any excess is not refundable. The credit cannot be used to reduce self-employment tax or the taxes imposed by the Affordable Care Act.

If the qualifying child turned 13 during the year, the care expenses paid for the child for the part of the year he or she was under age 13 will qualify.

Need Help?

Tax season shouldn’t add more stress to your busy schedule as a parent. Let’s simplify it! Contact us today, and we’ll help you take full advantage of the tax breaks that benefit working parents like you in 2024.

File a Tax Extension in 2024: What You Really Need to Know

Sometimes life happens, and meeting that tax deadline isn’t feasible. A tax extension can give you up to six extra months to file your return, which is a relief when you need some breathing room. Filing for an extension is straightforward—you can submit it online or enlist a tax professional to help. Best of all? Extensions are almost always granted, and there are no hoops to jump through.

That said, an extension doesn’t push back your payment deadline. Taxes are still due by April 15^th, so while you get extra time to file, you don’t get extra time to pay.

❗When Life Gets in the Way

Most taxpayers are unable to pay taxes on time due to various reasons, including illness, death of a family member, natural calamity, and other such scenarios. That is when Insogna CPA’s team of professionals can step in to help you find your way out of the trouble with the IRS.

💵 The Cost of Delay: Penalties for Late Payments

No matter when taxpayers file their tax returns, if they do not pay the tax owed by the standard deadline, IRS penalties and interest might begin to accrue. Even if you are unable to pay taxes, filing a return is a must, as the penalties for failure to file are much more severe than failure to pay penalties.

We’ve Got You Covered—For Free!

For our clients who have engaged us to file their 2023 tax returns and need extra time, we automatically file extensions at no extra charge. It’s one less thing for you to worry about.

Looking for a proactive CPA team that does more than just crunch numbers? Let us help you navigate the tax landscape, uncover deductions, and reduce your tax bill. Contact us today to get started!

10 Ways to Avoid Accounting Horror This Halloween

To keep the financial ghouls and gremlins out of your books this fiscal year, here’s your 2024 guide to preventing accounting nightmares:

Horror Prevention Checklist:

1️⃣ Keep Software from Turning Zombie – Update your accounting software regularly to avoid it turning into a glitchy, rogue monster.
2️⃣ Ghoul-Proof Your Internal Controls – Solid checks and balances are like garlic for financial vampires, keeping any mischief out of your books.
3️⃣ Backup Before the Apocalypse – Always back up your financial data. You never know when tech troubles (or financial zombies) will strike.
4️⃣ Witch-Watch Your Cash Flow – Keep stirring that financial cauldron, and watch for any odd bubbles that might spell trouble.
5️⃣ Audits: The Ghostbusters of Accounting – Regular audits will help you exorcise unwanted financial surprises.
6️⃣ Don’t Let Taxes Haunt You – Stay up to date on tax laws so that IRS specter doesn’t pop up unexpectedly.
7️⃣ Employee Vetting: No Vampires Allowed – Make sure your employees are only sucking up knowledge, not company funds.
8️⃣ Double, Double, Two-Factor Trouble – Secure your financial accounts with two-factor authentication for extra protection.
9️⃣ Guard Your Financial Treasures – Store important documents in a password-protected vault, preferably guarded by a digital dragon.
1️⃣0️⃣ Summon Your Financial Wizards – Consult with accounting experts regularly to keep dark forces (and tax surprises) at bay.

With this handy checklist, your 2024 financial books will be free from any scary surprises—no ghouls, goblins, or gremlins in sight!

Ready to ward off accounting nightmares?

Our team of financial wizards is here to help you make 2024 your most profitable (and least spooky) year yet. Reach out today, and let’s ensure your business is as safe as a password-protected vault!

Paralympics 2024: Proactive Tax Strategies for College and Pro Athletes

Hey, athletes! As you shine on the Paralympic stage, don’t let taxes steal the spotlight. With Name, Image, and Likeness (NIL) earnings rolling in, and your Olympic Medal monies piling up, understanding tax savings is your new game plan. Here’s the deal—all your money is taxable. Yep, you owe the IRS. But don’t sweat it; we’re here to help you keep more of your hard-earned cash in your pockets!

🎾For College Athletes

Set Up an LLC for Tax Savings
Setting up an LLC isn’t just for businesses. It’s a smart move, we have our athlete clients setup too. This helps to separate your personal finances from your athletic business income streams. And allows our team the option to elect your LLC with the IRS to file as an S-Corp, potentially saving you thousands of dollars in unnecessary self-employment taxes. Think of your own LLC as your secret weapon for keeping more in your pocket.

Track Your Expenses Like a Pro
Training, travel, equipment—these are just a few expenses that can lower your taxable income.

There are many apps to help separate expenses if you run everything through one account. However, if you want months to categorize things, will you remember that one meal where you talked business?

Keeping detailed records is like nailing that perfect routine—essential for reducing your taxable income.

So, we always suggest keeping a separate business checking and credit card to help you identify what is personal and business when you have time in your business schedule to finally categorize things. Or, if you just want a CPA team to help with this our amazing accountants are always ready to help. With a CPA on your team, you’ll know exactly what counts as a deductible expense.

Plan for Self-Employment Taxes
Having business taxable income likely mean you’re paying Social Security and Medicare taxes payroll taxes. Not fun! With some proactive tax planning – before December 31^st – you can potentially avoid parting ways with your cash to the IRS. Our team stays on top of this for our monthly clients so you’re not overpaying these pesky FICA self-employment taxes every year.

🏅For Professional Athletes – Mastering Your Tax Strategy

You’ve made it to the pro level—congrats! Now it’s time to play smart with your finances. A solid tax strategy isn’t just a nice-to-have; it’s crucial for your long-term success. Our team likes to do a formal Q4 tax planning engagement with our monthly clients so we have a game plan together before December 31^st avoiding taxes where we can.

Optimize Your Earnings with Strategic Investments
If you cash flow allows for, and you are a qualify for registered investor status, you can take advantage of things like oil & gas leases and wildlife funds that provide large tax deductions to help you offset your taxable income.

Understand State Tax Implications
Earning business income in multiple states with events? Each state wants there piece of your state income. A CPA can help you navigate the maze of state tax laws to ensure you’re not paying more than you owe.

Retirement Planning—Start Now
It’s never too early to think about retirement. Investing in a 401K or an IRA today can reduce your taxable income and set you up for a financially secure future. Plus, it’s a great way to ensure your earnings work for you long after you’ve left the field. And these monies are asset protected!

💡 Seeking Professional Advice?

Don’t leave your financial future to chance. A licensed CPA can provide the expert advice you need to manage your money wisely. From tax strategies to retirement planning, having a trusted advisor in your corner is a game-changer.

Whether you’re a rising college star or a seasoned pro, understanding your taxes is crucial to keeping your finances on track. At Insogna CPA, we’re here to help you navigate the complex world of athlete taxes. Don’t let taxes sideline your success—reach out to us today and let’s build a game plan for your financial future.

Contact our team today! We really do call you back and respond to your inquiries.

Last Minute Tax Filing Tips 2024

Haven’t filed your taxes yet? It’s okay, you’re not alone. Believe it or not, many people don’t file in early February when tax season starts. In fact, about one-third of taxpayers in the U.S. wait until the last two weeks before the April deadline to file!

But waiting too long can cause headaches. Rushing to meet the deadline increases the risk of errors, which could cost you more in the long run.

With the deadline looming, now is the perfect time to get organized—whether you file yourself or seek professional help. Ignoring your tax prep won’t make it disappear (unfortunately), and filing late will only add interest charges, which could end up costing you hundreds.

Start by Getting Your Tax Paperwork Organized

We get it—paperwork isn’t fun. Tax forms tend to mix with junk mail, old bills, and receipts from last year. But even if the thought makes you groan, organizing your tax documents is the first essential step for smooth tax filing. You’ll feel a weight lift once it’s done, trust us.

Here’s what you’ll likely need for tax filing:

📌 W-2 forms
📌 1099 forms
📌 Mortgage interest statements
📌 Receipts for deductions, like charitable donations or medical expenses
📌 Health Savings Account (HSA) statements

💡 Pro Tip Create a dedicated folder and collect your tax docs throughout the year. That way, when the next tax season rolls around, you’ll be ready—and you might even file early!

❓ Should You Take the Standard Deduction or Itemize?

Time is ticking, so it’s tempting to take the standard deduction just to get it over with. But before you rush, check if your expenses might exceed the standard deduction. Even though the Tax Cuts and Jobs Act doubled the standard deduction, itemizing could still save you money, especially for state taxes.

Need help figuring out if itemizing is the right move? We’re here to assist you, but don’t wait too long—accountants get busy fast as the deadline approaches.

❓What Happens If You Miss the April 18th Deadline?

If the April 18th filing deadline passes by and you still have not filed, there will definitely be repercussions from your decision, however, the severity depends on if you owe the government or not.

💡 Late-Payment Penalties

Even if you can’t pay your full tax bill, file on time to avoid the steeper “failure-to-file” penalty. It’s the smart, cheaper choice.

💡The Earlier You File, The Less You Pay

If you can’t pay the full amount, contact us ASAP to get your filing done. The sooner you file, the less you’ll end up paying in penalties. Remember, it’s not just about paying—it’s about filing first to minimize your financial hit.

💡Consider Filing for an Extension

If you’re still missing key documents, you can request a six-month extension by filing IRS Form 4868. But don’t forget: an extension only gives you more time to file, not more time to pay.

💡Pay What You Can Now

If covering the entire tax bill is out of reach, pay what you can when you file the extension. Then, work on settling the rest before the IRS comes knocking. If needed, you can set up a payment plan online.

Get Your Taxes Done Right

Feeling overwhelmed by tax filing? We’re here to help! Whether you need assistance with tax prep or an extension, contact us today. We’ll get your taxes squared away in no time, so you can stop stressing and avoid those costly penalties.

Ready to avoid those last-minute tax filing stress headaches? Get in touch with us today. Let’s get your taxes done right—and on time!