by Daniel Kittell | Accounting News, IRS, News, Tax, Tax Planning, Tax Planning - Individual, Tax Preparation - Individual
The IRS makes tax adjustments every year but because of high inflation, the adjustments for the 2023 tax year are more significant, including changes to standard deduction amounts and tax brackets. Read on for an understanding of the most significant changes in order to plan your finances through 2023.
Standard Deduction
The standard tax deduction, which is based on filing status, is a fixed amount that the IRS allows taxpayers to deduct from their taxable income, thus reducing their tax liability. It is adjusted each year for inflation. Most taxpayers already take the standard deduction rather than itemizing their deductions, and with the inflation adjustments for 2023, even more taxpayers may move into claiming the standard deduction.
For single taxpayers and married couples filing separately, the standard deduction increased from $12,950 in 2022 to $13,850 in 2023. For married taxpayers filing jointly, the standard deduction increased from $25,900 in 2022 to $27,700 in 2023. For those filing head of household, the standard deduction increased from $19,400 in 2022 to $20,800 in 2023.
Additionally, taxpayers who are blind or at least age 65 can claim a further standard deduction of $1,500 per person (an increase of $1,400 from tax year 2022) or $1,850 if they are unmarried and not a surviving spouse.
Tax Bracket Thresholds
Because of inflation, the federal income tax brackets for both ordinary income and capital gains increased by roughly 7% for tax year 2023. For example, the top tax rate of 37% applies to individual single taxpayers with incomes greater than $578,125 ($693,750 for married couples filing jointly, which is up from $647,850 in 2022), and the lowest tax rate of 10% applies to individual single payers with incomes of $11,000 or less ($22,000 for married couples filing jointly, which is up from 20,550 in 2022).
Retirement Plan Contribution Limits
The IRS has also increased contribution limits for several retirement plans in 2023. For 401(k), 403(b), and most 457 plans, the contribution limit will increase to $20,500 in 2023 (up from $19,500 in 2022). For catch-up contributions for taxpayers age 50 and older, the limit will increase from $6,500 in 2022 to $7,500 in 2023. Traditional and Roth IRA accounts will also see an increase in contribution limits from $6,000 in 2022 to $7,000 in 2023 (the catch-up contribution limits for taxpayers age 50 and older will not change).
Gift Tax Exclusion
In 2023, the annual exclusion for gifts increases by $1,000, from $16,000 in 2022 to $17,000 in 2023. This means that taxpayers can now give up to $17,000 to each recipient without having to pay gift tax.
Earned Income Tax Credit
The maximum EITC amount for qualifying taxpayers who have three or more qualifying children was $6,935 for tax year 2022. In 2023, this amount increases to $7,430 for qualifying taxpayers.
Alternative Minimum Tax
This tax for high-income earners is imposed on taxpayers who make a certain income. In addition to their income tax, the AMT ensures that they pay their fair share in taxes even when taking many deductions. The AMT exemption amount increases from $75,900 for tax year 2022 to $81,300 for tax year 2023. The AMT for joint filers is $126,500.
Health Flexible Savings Account
For tax year 2023, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements increases to $3,050. For cafeteria plans that approve of the carryover of unused amounts, the maximum carryover amount will be $610.
by Daniel Kittell | Accounting News, Industry - Retail & Distribution, News, Retail & Distribution, Uncategorized
The retail industry has experienced considerable changes in the past few years, and 2023 is on track for continued transformation. Retail companies can expect to see several key trends impacting businesses this year, including the growth of e-commerce, the focus on personalized experiences, and a shift to adopting sustainable practices. Below we discuss the key trends that are affecting retail businesses.
An Increase in E-Commerce
Online shopping escalated dramatically during the Covid-19 pandemic, and it doesn’t appear to be slowing down anytime soon. Online shopping provides consumers with convenience, access to wider ranges of products, and competitive prices. If they haven’t already, retailers need to embrace the new e-commerce era and optimize their online shopping experiences to level with customer expectations. Even strictly brick-and-mortar stores should think about offering best-selling products in an online storefront.
Additionally, a continuing e-commerce trend can be seen in the integration of social media commerce and marketing strategies. Social commerce lets customers buy products directly through social media platforms, sometimes with the assistance of influencers or brand ambassadors, and it’s an ideal way for retailers to interact with clients and drive sales.
Personalized Experiences
Retailers will need to create a special in-person shopping experience in order to compete with online shopping, increase customer loyalty, and drive sales. This can include online pre-order and curbside pickup as well as personal shoppers who guide customers through the store to offer personalized product recommendations. For example, if a customer is keen on a particular fragrance, the salesperson can point them toward different products with the same fragrance, making sure the customer is aware of any sales, promotions, or customer loyalty rewards programs. A personalized shopping experience elevates the shopping trip for the customer in a way that is difficult for e-commerce stores to do.
Automated Technology
Automation in pricing and inventory management systems is on the rise, which helps retailers lessen staff labor. As the industry continues to experience labor shortages, more retailers will be investing in these technologies. And more companies that specialize in automation solutions are popping up. Implementation of pricing automation can balance profitability and revenue growth, while inventory management systems can pinpoint an accurate amount of inventory to have in stock.
Sustainability
Consumers are becoming increasingly conscious of the environmental impact of the products they purchase and bring into their homes. Retailers and brands can reflect this by offering products that use recyclable or biodegradable packaging materials. They can also take steps to reduce their carbon footprint by embracing more sustainable transportation operations and working with suppliers that have environmentally-friendly practices. Finally, retailers are seeking ways to use more sustainable packaging materials, such as biodegradable packaging and plant-based plastics, and reduce packaging overall.
by Daniel Kittell | Accounting News, News, Retirement, Retirement Savings, Uncategorized
While the purpose of a retirement account is to fund your lifestyle in your golden years, certain situations in life might necessitate dipping into those funds early. Typically, withdrawing from an IRA before age 59 ½ will trigger a 10% early withdrawal penalty. However, there are some key milestones where that penalty is waived. Here’s when you can avoid the IRA early withdrawal penalty.
Medical Expenses
IRA funds can be used to cover unreimbursed medical expenses that exceed 7.5% of your adjusted gross incomes. For example, if your AGI is $80,000 in 2023, you can use a withdrawal to cover unreimbursed medical expenses this year over $6,000. You don’t need to itemize your taxes to take advantage of this exception to the early withdrawal penalty.
Health Insurance
If you are unemployed and have received unemployment compensation via a federal or state program for at least 12 consecutive weeks, you may be able to take IRA distributions without penalty in order to cover health insurance premiums for you, your spouse, and any dependents. The withdrawal must be made in the same year that you received unemployment, or the next year. You must also take the withdrawal within 60 days of being re-employed.
Costs for Higher Education
Penalty-free IRA distributions may be used to pay for some higher education costs for you, your spouse, your children, and grandchildren. Eligible costs include tuition, fees, books, supplies, equipment required for a student’s enrollment, and expenses for certain special-needs services. For students who attend school at least half-time, room and board may also qualify. Keep in mind that IRA withdrawals are considered taxable income and could lower the student’s qualification for financial aid.
Home Purchase
If you are funding a first home purchase with funds from an IRA, the withdrawal may be penalty-free. This doesn’t mean that you need to be a first-time home buyer. The IRS broadly defines a first-time buyer as someone who hasn’t owned a home in the last two years. If you fall into this category, you can withdrawal up to $10,000 ($20,000 for couples) without penalty. If the purchase or building of the home falls through, you have 120 days from the date of distribution to put the money back in your IRA in order to avoid the penalty.
Birth or Adoption of a Child
Parents are eligible to take a penalty-free IRA distribution of up to $5,000 following the birth or adoption of their child. The withdrawal must be made within one year of a child’s birth or legal adoption date.
Disability
Disabled retirement savers under age 59 ½ who are “totally and permanently disabled” aren’t obligated to pay the IRA tax penalty. In order to qualify, per the IRS, one must be unable to do “any substantial gainful activity” for a continued or indefinite duration due to a physical or mental condition, and a physician must certify the severity of the condition.
Military Service
Members of the military reserves in the Army, Navy, Marine Corps, Air Force, Coast Guard, or Public Health Service may be exempt from the tax penalty if they were ordered or called to active duty after Sept. 11, 2001, and in duty for at least 180 days. The distribution must be taken during the active-duty period in order to avoid the 10% early withdrawal penalty.
An Inherited IRA
If you inherit a traditional IRA, you can take penalty-free withdrawals, even before age 59 ½. However, you will need to pay income tax on each distribution. If the original owner of the IRA account passed away after Jan. 1, 2020, you will be obligated to withdraw all assets from the inherited IRA within 10 years of the IRA owner’s death. The exception to this is if you are the surviving spouse or minor child of the original account owner, or if you are disabled, chronically ill, or up to 10 years younger than the original account owner.
For more information on individual tax planning, click here.
by Daniel Kittell | Business Growth, Industry - Veterinary Medicine, News, Uncategorized
Veterinary practices that provide award-winning services don’t hesitate on the small stuff – the over-and-beyond touches that make them stand out and keep clients coming back. The customer service tips below might not be groundbreaking, but when implemented on a regular basis, you’ll create positive experiences and gain repeat clients, who will likely spread the word to their friends and communities.
First Impressions and Communication
A common grievance reported to veterinary state medical boards is lack of communication. To avoid this fate, make a good impression when a client visits for the first time by:
- Introducing them to the team that will be caring for their pet
- Signing them up for any means you’ve established for clients to communicate with you, such as an online portal
- Offering them a welcome packet that includes details about your clinic, services offered, emergency contact information, where to find additional information about pet care, and a welcome letter
Create a Loyalty Rewards Program
Clients who follow your suggestions, properly care for their pets, and continue to bring their business to you are deserving of some perks, and a loyalty reward program is just the ticket. Whether they can be used for product or service discounts (or both) is up to you, but a loyalty program can be an effective vehicle in retaining clients.
Follow Up in a Meaningful Way
If you want a client to feel especially cared for, be sure to follow up on their pet after they’ve come in for an illness or procedure. At the minimum, follow up with a standard phone call one to three days after the visit, depending on the procedure. This also keeps you informed of the pet’s progress and client compliance of aftercare. If you want to add an extra personal touch, send the client a “get well soon” chew toy or catnip mouse for their pet.
Take Notes
Just as we appreciate when doctors remember something specific to us, clients appreciate when their vet remembers something specific to their pet, so take note of anything that stands out during routine check-ups. Do they like to be scratched behind the ears or on the belly? Is there a certain treat or toy they love? Jotting notes in a patients’ records about their likes and dislikes can help you create a personalized experience for your clients.
Create a Social Media Presence
Social media is a powerful tool that can help personalize your practice and communicate with your community. Share information like helpful tips for pet owners and any changes to hours or services. You can also post pictures of pets (provided the client has signed a photo release form), and encourage pet owners to post their own pictures and tag your practice.
Make a Memorial Donation
Establish a way to demonstrate your sympathy when a pet dies. While most practices send sympathy cards, you can go above and beyond by making a small donation to an animal charity fund in the pet’s name. You could also have a tree or flower planted in the pet’s name.
Implement a Referral Program
Referral programs can include simply sending a thank-you card to a client who sent a referral your way, or it can be as involved as sending a small gift of thanks for the business sent your way. You could provide new clients with a $10 discount and post a $10 credit to the referring client’s account. If you want to take it up a notch, you could give a different gift each time for repeat referrals to keep the program updated and worthwhile to the client.
by Daniel Kittell | Accounting News, Debt, Financial goals, News
With inflation at an all-time high since the 1980s, more Americans are living paycheck to paycheck and sinking further into debt. If you’re trying to get out of debt, you’re not alone. Creating a plan is possible, and you don’t need to start off with a bang. Here are some practical steps you can start today to help set you on the path to becoming debt free.
Decide on a Debt Payoff Strategy
Here are a few proven approaches to boosting the speed of your debt payoff:
- Debt snowball: This strategy focuses on paying off your smallest debt first while continuing to pay the minimum monthly amount on all others. Once your first debt is paid off, you roll the amount you had been paying on that debt into payments on the next largest debt. You continue this method until your last and largest debt is paid off. This approach can be effective if small wins motivate you to keep going.
- Debt avalanche: This strategy tackles the debt with the highest interest rate first while continuing to pay the minimum monthly amount on all others. Just like the snowball method, once your debt with the highest interest rate is paid off, you roll that amount into payments on the debt with the next highest interest rate, and so on. This approach can be effective if you’re worried about high interest rates as it may help save money over the course of your debt repayment plan.
- Debt consolidation: This strategy involves rolling all debt into a single new one, ideally at a lower interest rate. This helps to make payments more streamlined, and could possibly shorten your payoff timeline. You can consolidate debt with balance transfer cards and personal loans. This approach can be effective if you’re overwhelmed by the number of debts and payment dates to keep track of.
- Debt management plan: This strategy involves working with a nonprofit credit counseling agency. They can set up a debt management plan to help decrease your interest rate and get you started on a repayment plan. This approach can be effective if you have substantial credit card debt and haven’t made much progress in paying it off.
Tally Your Debt
Once you have an idea of the approach you want to take in paying off your debt, you need to take a deep dive into your accounts. Gather the most recent statements from all your loans and credit cards, and make an inventory of your debts. List each debt with the following information:
- Creditor name
- Current balance
- Due date
- Minimum monthly payment
- Interest rate
- Target date for a zero balance
Once you have all that cataloged, determine your monthly total in debt payments. Note that for credit card payments, if you’re not paying them in full each month, you’ll want to specify the minimum monthly amount due.
Build a Budget
First, get precise with your income, including side hustles, seasonal work, etc. Knowing how much you’re brining in each month from all sources of income helps to paint a clear picture of the available funds to spend. Next, add up your monthly expenses. This needs to include both essential expenses (mortgage, utilities, etc.) and discretionary expenses (typically optional purchases). Once you know your monthly income and expenses, you’ll know how much you can devote to paying down debt.
One way to boost your debt repayment journey is to scale back to a bare-bones budget, focusing on just housing, food, utilities, transportation, and bills while eliminating all discretionary expenses. If you go with this budget style, remember that it’s not forever, and the end goal will be worth it.
Cut Back on Spending
Many of us can’t do a hardcore bare-bones budget, but we can find ways to cut back on spending. Check your online subscriptions, streaming services, gym memberships, etc. How can you lower these costs, or cut them out altogether? Try preparing meals at home and bringing a sack lunch to the office. Keep an eye on water and electricity usage. Try to negotiate lower rates for insurance and cell service. The more you can scale back on spending, the more “found” money you’ll have to put toward debt.
Increase Income
If you find that you’re doing everything you can to tighten your financial belt and still barely making a dent in your debt, it might be time to consider increasing your income. While taking a second job is a viable option, you could also consider taking the initiative to ask for a raise from your employer, especially if it’s been a while since your last pay bump and your work performance has been consistently on point. However, if you’re new to the company or your position, it would be wise to hold off on this approach.
Additionally, side gigs such as dog walking, driving for companies like Uber or Door Dash, babysitting, and cleaning can all help to bring in extra income, and you can work around your full-time job. Also consider selling items you already own on reselling platforms like eBay, Poshmark, Mercari, and Facebook Marketplace.
Lower Your Interest Rates
Lowering your interest rates would allow you to put more funds toward paying down debt. Here are a few approaches:
- Balance transfer: A balance transfer allows you to shift debt from one account to another, ideally one with a lower interest rate. Many balance transfer cards offer a 0% APR for a limited amount of time. Moving high-interest debt to a credit card with 0% APR can help you knock down that debt at a much fast clip than sticking with a card with a high APR.
- Consolidate debt: Debt consolidation involves combining multiple debts into a single monthly payment. Many creditors offer debt consolidation loans, which are created specifically for paying off debt. Their terms typically specify a repayment period with a fixed interest rate.
- Negotiate a lower rate with creditors: Some creditors will work with you to come up with a repayment method that might better help you meet your goal. This could be a reduced interest rate or a smaller minimum monthly payment. Not every lender will offer to help, but it’s worth the inquiry.
Debt repayment is usually a journey, not a sprint, but the steps outlined above can help to pay off debt faster. The sooner you start, the sooner you’ll be debt free.
