Beat the Clock on Tax-saving Strategies

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This year’s tax deadline is almost here. But the good news is you still have time to make some strategic moves to potentially reduce your tax burden and maximize your financial benefits for 2024.

Here are some last-minute tax-savings opportunities you shouldn’t overlook:

Take advantage of a Health Savings Account (HSA). If you have a high-deductible health plan, contributing to an HSA offers triple tax advantages: tax-deductible contributions, tax-free growth and tax-free withdrawals for qualified medical expenses. For the 2024 tax year, the HSA contribution limits are:

  • Individual coverage: $4,150
  • Family coverage: $8,300
  • Additional catch-up contribution if you’re 55 or older: $1,000

Maximize retirement contributions. If you haven’t already maxed out your IRA contributions for the tax year, you can still contribute up to $7,000 until April 15 — plus another $1,000 in catch-up contributions if you’re 50 or older. These contributions may be tax-deductible depending on your income and whether you have a workplace retirement plan.

Consider a SEP IRA. If you’re self-employed or have freelance income, a SEP IRA is one of the simplest ways to shelter your income. You can contribute up to 25% of your net earnings from self-employment, with a maximum of $69,000 for 2024. Like traditional IRA contributions, you have until Tax Day to make SEP IRA contributions for the previous year.

Reconsider itemizing. Most tax filers choose to take the standard deduction rather than itemize. But this doesn’t mean that you shouldn’t itemize, depending on your circumstances. For example, if you pay a great deal of mortgage interest, itemizing may work in your favor. Take time to add up potential itemized deductions such as:

  • Mortgage interest
  • State and local taxes
  • Charitable contributions
  • Medical expenses over 7.5% of your adjusted gross income
  • Gains from a home sale
  • Losses from disaster or theft

Don’t overlook education costs. The American Opportunity Credit offers up to $2,500 per eligible student, while the Lifetime Learning Credit provides up to $2,000 per tax return. Eligible students may claim these credits for qualified education expenses paid during the tax year.

Review tax credits. In addition to education credits, check your eligibility for other potential tax-saving credits, such as:

  • Child and Dependent Care Credit
  • Earned Income Tax Credit
  • Residential Energy Credits for home improvements
  • Electric Vehicle Credit

Making these smart tax moves before the deadline can significantly impact your tax bill and potentially increase your refund. But tax situations can be complex, and it’s always wise to consult with a qualified tax professional.

At Magone & Company, our expert CPAs can help you achieve the most favorable tax situation based on your unique situation. See if our consultative, relationship-based approach to financial wellness is right for you.

 

 This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your tax situation.

 

IRS Dirty Dozen Watchlist: New Tax Scams for 2025

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Tax season offers taxpayers many opportunities for savings. But it also brings out the scammers and fraudsters hoping cash in on unsuspecting filers, outdated credits and more.

Every year, the IRS releases its list of the “dirty dozen” scams impacting taxpayers and business owners. To protect your bank account, identity and reputation, see what’s new to the watchlist for 2025:

Expired sick leave and family leave credits. One of the most prevalent scams of 2025 involves Form 7202, “Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals.” Many taxpayers are still attempting to claim this credit despite it only being available for self-employed individuals for tax years 2020 and 2021. Continuing to claim it on your tax returns will trigger IRS scrutiny and potentially lead to penalties.

The self-employment tax credit. A bogus self-employment tax credit is circulating and misleading taxpayers into filing false claims. This misinformation is often a twisted reference to the expired sick leave and family leave credits mentioned above, suggesting that self-employed individuals and gig workers can collect payments of up to $32,000 for the COVID-19 period. If you see social media posts or receive emails promoting this false credit, be aware that it’s a scam.

Fraudulent household employment tax claims. The IRS reports a disturbing rise in suspicious Schedule H filings. This scheme involves the creation of fictional household employees — nannies, housekeepers or caregivers — to claim refunds based on wages never actually paid. The IRS has sophisticated methods to verify employment records and will flag any Schedule H filings that don’t match other documentation.

The overstated withholding scam. There’s also an uptick in taxpayers (or preparers) submitting returns with grossly exaggerated income and withholding amounts to generate artificially large refunds. The IRS has enhanced its detection systems for this particular scam and warns that such claims will be closely scrutinized. If discrepancies are found, refunds will be withheld, and guilty parties may face penalties or even criminal charges.

Remember, if a tax credit or deduction sounds too good to be true, it probably is. When in doubt, consult a certified tax professional. The experts at Magone & Company are available to answer any questions.

To get up to speed with other dirty dozen scams to watch out for, check out The IRS’ “Dirty Dozen” — What Tops This Year’s List? part 1 and part 2.

This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your unique circumstances.

The Business Owner’s Accounting Glossary

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Understanding accounting terminology isn’t just for accountants — it’s a critical skill for every entrepreneur. By becoming more familiar with key financial terms, you can more clearly communicate with financial professionals (think lenders and bankers as well as your CPA) as you strategically manage your financials.

Here’s a list of 12 accounting terms you should know:

Assets. One of the most basic accounting terms, assets are any resources owned by your business that carry economic value. This can include cash, equipment, inventory or intellectual property. Your assets are part of your business’s overall valuation, so you want to clearly identify what they are and how much they’re worth.

Liabilities. These are the financial obligations or debts owed by your business, such as mortgage loans, lease agreements or pension obligations. They represent financial commitments that can influence your credit ratings and borrowing capacity.

Working capital. Working capital is the difference between current assets and current liabilities. It’s indicative of your company’s short-term financial health and operational efficiency. Knowing your working capital can help you asses your business’s ability to meet short-term obligations and fund operations.

Accounts receivable. This refers to the money that is owed and paid to your business by clients and customers for services or products received. It’s a key metric for understanding your cash flow and customer payment patterns.

Accounts payable. On the other hand, accounts payable is money that your business owes to suppliers or vendors, including outstanding bills and short-term debts. It’s important for managing business relationships and credit.

Balance sheet. This comprehensive financial statement is s snapshot your company’s financial position at a specific point in time. It includes your assets, labilities and any shareholders’ equity.

General ledger. A general ledger is your business’s accounting record containing all financial transactions and company financial activities. It’s typically organized into different account categories, including assets, liabilities, equity, revenue and expenses.

Trial balance. A trial balance is an internal accounting report that lists all general ledger accounts and their balances to ensure accounting records are mathematically correct. This report verifies that total debts equal total credits before financial statements are prepared.

Gross margin. This measures the percentage of revenue retained after direct production costs. A critical indicator of production efficiency and pricing strategy, a higher gross margin generally correlates with better profitability and operational efficiency.

Diversification. Diversification is a strategic approach to spreading investments across different assets or business areas. It reduces financial risk and helps protect against a volatile market by not concentrating resources in a single investment.

Depreciation. Depreciation is a strategic approach to allocate the cost of your tangible assets over their lifespan. It reflects the reduction in value of business assets, including gradual wear and tear.

Break-even point. This financial calculation determines when total revenue equals total expenses. In other words, it indicates the point where your business becomes profitable, helping to understand the minimum sales required to cover costs.

Turning financial language into business strategy

By speaking the language of finance, you can transform financial complexity into actionable insights. Apply these terms to your business, and use these concepts to guide your strategic and tax planning.

The CPAs at Magone & Company can support you in making the most informed financial decisions for your business. Give us a call today at (973) 301-2300 to learn more.

This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your unique circumstances.

Tax Audit 101: Your No-panic Guide to Dealing with the IRS

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Getting notified of an IRS audit is undoubtably a stressful experience for taxpayers. Why was your return selected? What documents will they request? How can you prepare for the scrutiny of your financial records?

By understanding the ins and outs of audits, you can ease your mind and ensure the process is as painless as possible.

How are taxpayers selected for an audit?

The IRS uses a variety of methods to select tax returns for audits, including:

  • Random selection. The IRS randomly selects a small percentage of tax returns each year to audit, just to ensure overall compliance.
  • Computer screening. The IRS uses computer programs to score tax returns based on a variety of factors. Returns with high scores are more likely to be audited.
  • Related examinations. If the IRS is auditing a business or individual, they may also audit related returns, such as those of the business owner or the business itself.

What won’t trigger an audit?

While there’s no way to guarantee you won’t be audited, there are some factors that usually won’t prompt the IRS to take a closer look:

  • Math errors (the IRS will usually just correct these)
  • Claiming the standard deduction
  • Having low to moderate income
  • Filing an amended return

How are you notified of an audit?

The IRS will never notify you by telephone. If selected for an audit, you’ll be notified by the IRS via postal mail, outlining the type of audit you’ll be undergoing: a mail audit or an in-person audit. A mail audit can be conducted through postal correspondence, while an in-person audit takes place in an IRS office or at your home or place of business.

How should you respond to an audit?

The audit notice will provide contact information and instructions, including a list of records they to review and a response deadline. If you receive an audit notice from the IRS, be sure to:

  • Collect all relevant tax documents, receipts and other records you’ll need to substantiate the items on your return
  • Consider hiring a tax professional to help you navigate the audit process and represent you before the IRS
  • Respond in a timely manner, meeting all deadlines set by the IRS to avoid additional penalties and interest

How long does an audit take?

Once you’ve provided the requested information, the IRS will review it and make a determination.

But the length of an audit varies depending on various factors, including the type of audit and whether both parties agree with the findings. If you disagree with the IRS, you have the right to file an appeal. The IRS also offers mediation services to help you come to a resolution.

What happens after an audit?

Once the IRS concludes an audit, a few things can happen:

  • If no changes are made to your return, the audit is closed
  • If the IRS made changes, you’ll receive a notice detailing the adjustments and any additional taxes owed
  • You may be subject to future audits, especially if issues were identified in the current audit

Ready to assist

If you or your business receive an audit notification, the CPAs at Magone & Company can offer our honest and objective audit services. Reach out today at (973) 301-2300.

Found Money: Common Tax Deductions You May Have Missed

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Every year, taxpayers inadvertently leave money on the table by overlooking deductions that are rightfully theirs for the taking. The tax code actually offers many legitimate deductions that are IRS-approved and yours for the taking — as long as you claim them. So when tax season rolls around, be sure you’re getting every penny you deserve.

Mortgage interest

If you own a home and have a mortgage, you can deduct the interest you pay on that loan. When you’re in the early years of your mortgage, your savings can be substantial as the majority of your payments go toward interest. And depending on where you live, you may be able to deduct state and local taxes, including property taxes, which can further reduce your tax liability.

Mortgage points

When you take out a mortgage, you may pay “points” — an upfront fee that lowers your interest rate. These points are usually tax-deductible in the year they are paid, even if you don’t itemize.

Home sale costs

Selling your home? The costs associated with the sale, such as real estate commissions, title insurance and legal fees, can be used to offset the capital gains tax on the sale. This helps reduce your overall tax burden.

Home office deduction

If you use a portion of your home regularly and exclusively for business purposes, you may be able to deduct your direct and direct expenses of running a business from your home office, including rent, utilities, insurance and other home-related expenses. Does your home fit the bill? Find out.

Continuing education and professional development costs

Are you or your dependents pursuing higher education? This deduction covers qualified education expenses for eligible students, allowing you to deduct up to $4,000 of qualified expenses, such as tuition and fees. Parents may also deduct interest payments on certain student loans from qualified lending institutions.

Ongoing training and education related to your current job may also be tax-deductible, even if your employer doesn’t reimburse you. As long as the training maintains or improves your job skills, it can qualify.

Medical and dental deductions

Medical and dental expenses that aren’t reimbursed by your insurance may be deducted to the extent your annual total exceeds 7.5% of your adjusted gross income. But to qualify for medical deductions, you must also itemize. When adding up your medical costs, be sure to include the cost of traveling to your doctor or medical facility for treatment, including your out-of-pocket expenses for gas, oil, repairs, parking and tolls.

Long-term care insurance is also a deductible medical expense. As long as your employer or spouse’s employer doesn’t subsidize the insurance, you may deduct an increasing portion of your premium as you age.

Legal and professional fees

Did you know that fees paid to lawyers, accountants, financial advisors and other professionals can sometimes be deducted? This can include the cost of tax preparation, estate planning and even consulting for starting a new business.

Don’t leave money on the table

The professionals at Magone & Company can help you navigate the deductions and tax credits your entitled to claim. Call us today at (973) 301-2300.

 

This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your tax situation.

Keeping Main Street Strong: Protecting Small Business Tax Relief

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Small businesses face a critical tax challenge as a significant tax deduction is set to expire at the end of 2025. But the Main Street Tax Certainty Act aims to provide a lasting solution.

Initially introduced in the 2017 Tax Cuts and Jobs Act, the Main Street Tax Certainty Act is proposed legislation to make the 20% pass-through business income tax deduction permanent. This benefit allows eligible small businesses — including sole proprietorships, partnerships and S corporations — to reduce their taxable income, provide tax stability and support continued economic growth.

What this means for Main Street USA

Small businesses, which create local and drive economic growth, are experiencing significant pressures — from economic uncertainty to rising prices to a labor shortage.

By offering a commonsense solution to strengthen these businesses, the Act seeks to enhance their resilience and arm them with a competitive edge, ultimately supporting the long-term success of small towns across the U.S.

The deduction supports 2.6 million jobs and contributes $325 billion to the U.S. economy. Permanent tax relief would enable:

  • Improved financial planning
  • Increased investment in workforce and technology
  • Enhanced competitiveness against larger corporations

The bill requires broader bipartisan support in order to be signed into law. Small business owners are encouraged to stay informed about the legislation, lobby their local Congressional representatives and consult tax professionals about impending impacts.

Navigating tax changes with confidence

If you have questions about how this potential change could affect your tax strategy, the tax experts at Magone & Company can help guide your business with a sound financial plan. Reach out today at (973) 301-2300.