It is tax planning season at SBS CPA Group!

In 2023, Indiana introduced the Attainable Homeownership Tax Credit, which is designed to encourage contributions to affordable housing initiatives in Indiana. If you are looking to contribute to a meaningful cause, while benefiting from a significant tax incentive, this credit could be a fantastic opportunity. Currently, the only organization approved by the Indiana Economic Development Corporation (IEDC) to receive credit-eligible contributions is Habitat for Humanity of Indiana (including its local affiliates). The tax credit equals 50% of your contributions to Habitat Indiana, with a maximum credit of $10,000 per taxpayer per year. For married couples filing jointly, the maximum credit is also $10,000 per couple. Contributions can include cash, checks, stocks, and bonds. These contributions are valued at their fair market value at the time of the donation. The value of services, labor, or reduced-cost equipment is not eligible for the credit. To claim the credit, Habitat Indiana will provide a certifying number (PIN) that must be listed on Schedule IN-OCC. The program has an annual statewide credit cap of $4 million per fiscal year (July 1 – June 30). Credits are allocated on a first-come, first-served basis, based on when returns are received. If the annual cap is reached, any credits claimed afterward will be permanently disallowed, though carryovers will remain valid. Credits are limited to your Indiana state tax liability after applying other nonrefundable credits. For example, if you qualify for a $10,000 credit but your state tax liability is only $8,000, the unused $2,000 can be carried forward to future years. This tax credit is a win-win: it supports Habitat Indiana’s mission to provide affordable housing while offering a substantial incentive for taxpayers. Whether you are an individual, a couple, or a business, contributing to this program can make a meaningful impact on Indiana communities. If you are considering contributing to Habitat for Humanity of Indiana, ensure your donation meets the eligibility criteria and plan to claim the credit promptly to avoid missing out due to the annual cap. For further questions about the Attainable Homeownership Tax Credit, feel free to reach out to the partner in charge of your account. Thank you for reading!  Nathan Skinner

SBS CPA Group will be closed Dec. 24th thru Dec. 26th, allowing our staff time to spend with family. We will also be closed New Year Day, Jan. 1st.

Social Security: A Vital Program for Americans Social Security is a cornerstone of the United States' social safety net. Many Americans depend on this program to fund their retirement. The most recent data available from the Social Security Administration highlights the program's critical role in retirement planning. Social Security benefits account for approximately 30% of the income for individuals ages 65 and older. This aligns with the program’s original intent in 1935. Retirement income was envisioned as a three-legged stool consisting of pensions, personal savings, and Social Security, each contributing one-third. It was never intended to serve as the primary source of retirement income. Unfortunately, reliance on Social Security has increased significantly: 51.8% of individuals ages 65 and older depend on Social Security for half or more of their income. 24.7% of people in this age group rely on it for 90% or more of their income. Income Quintile Reliance on Social Security The extent of reliance varies significantly by income quintile: 1st Quintile (lowest 20% of taxable income): 86.6% depend on Social Security for at least half their income. 64.1% rely on it for 90% or more. 2nd Quintile: 82.3% depend on it for at least half. 47.8% rely on it for 90% or more. 3rd Quintile: 62.7% depend on it for at least half. 13.8% rely on it for 90% or more. 4th Quintile: 24.8% depend on it for at least half. Only 1% rely on it for 90% or more. 5th Quintile (highest 20% of taxable income): 2.2% depend on it for at least half. None rely on it for 90% or more. Challenges Ahead The program faces significant challenges. Without reform, Social Security will not be able to pay full benefits by 2035. This presents a critical issue for Congress, as reductions in benefits are politically and socially untenable. Understanding Social Security Benefits Despite its importance, many people are unaware of how their Social Security benefits are calculated. Since the SSA ceased mailing statements in 2011, individuals must proactively set up an online account to access this information. The benefit formula is intentionally progressive, favoring lower-income earners by replacing a higher percentage of their income. For higher-income earners, Social Security becomes less significant as a percentage of their total retirement income. Key Components of Benefit Calculations Credits: To qualify, individuals must earn 40 credits. In 2024, one credit is earned for every $1,730 in wages, with up to four credits given annually. Average Indexed Monthly Earnings (AIME): The AIME figure is based on a worker's 35 highest-earning years, adjusted for inflation. If fewer than 35 years of earnings exist, zeroes are averaged in. Primary Insurance Amount (PIA): This is the monthly benefit a person receives at full retirement age. PIA is calculated using a formula adjusted annually for inflation. An Example Calculation for 2024 For a retiree with an AIME of $6,000: 90% of the first $1,174 = $1,056.60 32% of the amount between $1,174 and $6,000 = $1,544.32 Total PIA = $2,601 (before Medicare premiums). Planning Considerations To optimize benefits: Aim for an AIME of at least $1,174, as the first tier yields a 90% replacement rate. Understand that amounts above $7,078 are replaced at only 15%. Reviewing your lifetime earnings is crucial to ensure accuracy. Errors are far easier to correct early on than later on, when reconstructing decades-old income records may be challenging. Social Security and Income Taxation Since 1983, up to 85% of Social Security income has been subject to federal taxes, depending on other income sources. This makes the program more progressive but also adds complexity to retirement planning. Strategic Decision-Making When to begin drawing Social Security benefits is a critical decision, particularly for married couples. Starting benefits early results in reduced monthly payments, while delaying up to age 70 increases them. Careful analysis and planning are essential to maximize long-term benefits. Conclusion Social Security remains a vital program for most Americans. Understanding its mechanics and planning effectively can significantly impact retirement security. Set up your Social Security account today to review your earnings and plan for the future.

Year-Round Tax Planning Can Help You Avoid Costly Errors The federal tax code is extremely complicated and difficult to understand. Each state (and the District of Columbia) with an income tax has its own tax code. These tax codes change most years, and retroactive tax changes have become more frequent. The difficulty of the tax code makes year-round tax planning essential. I have been preparing U.S. income tax returns for 20 years. I have filed returns in at least 30 states and the District of Columbia. I have signed more than 7,000 federal income tax returns and a similar number of state income tax returns. I enjoy researching the income tax code and preparing income tax returns. What breaks my heart is performing what I call a "tax autopsy." This is when a client commits an unforced error and does something with major tax consequences that an accountant discovers only when preparing the person’s income taxes for the prior year. For many Americans, and a strong majority of my clients, income taxes are the single highest expense they have over their lifetime. Tax planning involves minimizing the income taxes you owe over your lifetime in a legal and controlled fashion. It’s a year-round activity that is separate from completing and filing your annual income taxes. Proper tax planning eliminates surprises as well as underpayment penalties and interest. Across the couple of tax autopsies I do every year, in each case, the taxpayers likely would have benefited from discussing the matter with a professional to ensure they understood the tax ramifications of the event or events in question. The Consequences of Tax Autopsies Tax autopsies often result in a large amount of income tax being owed, and the amount owed is often unexpected. This can cause stress and angst. It may also cause financial hardship. In some cases, it can lead to underpayment penalties and interest. In the worst cases, liens and levies can be put into place by taxing agencies. The key to avoiding tax autopsies is communication. The tax code is so complicated, and it changes so often, that few people have a strong understanding of how income taxes are calculated. Events That Require Tax Planning There are many different items taxpayers should discuss with professionals. Examples include: Retirement, which can create issues due to lack of withholding Retirement distributions Roth conversions Selling a property with a taxable gain Bonuses Equity compensation Gains realized from the stock market or cryptocurrency Legal settlements in certain circumstances Profits from one or more businesses One item that can create a serious tax autopsy for lower-income families is worth a longer discussion. The Centers for Medicare & Medicaid Services (CMS) is the federal agency that provides health coverage to more than 160 million people through Medicare, Medicaid, the Children's Health Insurance Program, and the Health Insurance Marketplace. Per CMS, in February 2024, 20.8 million people received health insurance through the Marketplace. In February 2024, 19.3 million Marketplace enrollees—or 93% of total Marketplace enrollees—received Advanced Premium Tax Credits (APTC). When enrollees sign up for Marketplace coverage, generally between November 1 and December 15 of the prior year, the enrollee must estimate income (known as Modified Adjusted Gross Income or MAGI) for the next calendar year. This is extremely challenging. For example, people signing up today are estimating their 2025 MAGI, and their actual 2025 MAGI will not be known until the 2025 income tax returns are filed in 2026. The federal government directly pays a portion of the monthly premium for the 93% of enrollees who choose to get the advanced subsidies based on the enrollee’s MAGI estimate. When the enrollee’s income tax returns are filed, their actual MAGI is calculated, and the subsidy is reconciled on the Form 1040. You can change your estimated income throughout the year through the Marketplace. If the enrollee’s MAGI is less than the estimated amount given to the Marketplace, life is good. The taxpayer was not paid enough APTC, and they will get credit for this underpayment on the Form 1040. The worst case is when a taxpayer’s MAGI is higher than the estimated amount they provided to the Marketplace. This means the enrollee received too much money in subsidies, and this amount is added to that person’s federal tax liability in most cases. In this situation, the tax autopsy happens when the enrollee has more taxable income than previously estimated. This can happen for a wide variety of reasons. Beyond what was mentioned earlier, the one I see most often in this circumstance is taxable retirement distributions. The amount of money that must be repaid depends on the exact circumstances; however, I have seen quite a few taxpayers have to repay several thousand dollars in subsidies they were not due. This is difficult because taxpayers who receive health care subsidies are low-income taxpayers. Year-round tax planning can help prevent tax autopsies and save taxpayers a significant amount of their hard-earned money!

Beneficial Ownership Reporting Requirements The Financial Crimes Network has put the Corporate Transparency Act (CTA) on hold following a ruling by a Federal judge in Texas. Despite this, filings are still being accepted. As of now, companies are not required to: File an initial report, which was originally due by January 1, 2025, for companies formed before January 1, 2024. Moving forward, file an updated report within 30 days if the beneficial owners change, move, or if the company relocates. Companies formed in 2025 were going to be required to file their initial report within 30 days of formation. Legal Uncertainty and Appeals The Financial Crimes Network is appealing the decision, and there are now court cases in multiple Federal jurisdictions. This issue may ultimately be decided by the Supreme Court. Further, in the last 24 hours, it looks like Congress might delay the reporting requirement for companies formed prior to January 1, 2024, by a year. In short, this is a mess. Client Requirements Despite the current uncertainty, all of our clients will be required to: Sign and date an engagement letter, choosing to opt into or opt out of us providing this service. Our Position We believe there is a strong possibility that the Corporate Transparency Act will be upheld, requiring companies to comply with the law. However, we will not know for certain until the pending court cases are resolved. If the law is reinstated, there is no clear guidance on how long firms will have to become compliant. All of our clients who require an updated report or an initial report will meet with Brent Bracht, CPA, and opt into or out of us providing this service. Clients will fill out the paperwork so we can file the forms depending on the outcome of the various court cases. Additionally, we are uncertain how the incoming Trump Administration and Congress will handle this matter. Penalties for Non-Compliance If compliance is ultimately required, the penalties for non-compliance include: Civil penalties of $591 per day, up to a maximum of $10,000. Criminal penalties of up to an additional $10,000 in fines and up to 2 years imprisonment. Client Options Clients have two options: Opt into us handling the service, and we will file the required forms now. Opt out of this service and handle the reporting requirements independently. We are here to provide support and ensure compliance should the law be upheld.

Happy Holidays! At SBS CPA Group we are preparing for winter and tax season! New this tax season, we are rolling out a new platform for all things taxes – TaxDome! Be on the lookout for emails from TaxDome. You will be able to set up an online portal where you will be able to drop in documents for SBS and be able to print off your tax returns. We will also be able to accept electronic signatures for this upcoming tax season. We love to see our clients’ smiling faces, but if dropping by our office is not convenient for you, we can now do everything online. We think TaxDome will be a wonderful upgrade this tax season! If you have questions specific to TaxDome; please call Nikkie Reyes at 260-407-5000 or send her an email at Admin@sbscpagroup.com . She will answer your questions or direct you to an employee who can assist you. We are excited about TaxDome and another amazing tax season at SBS CPA Group. Please have an amazing Holiday Season!

The Corporate Transparency Act (CTA) and Beneficial Ownership Information (BOI) reporting rules are important, and you need to take them seriously. The rules are new this year and apply to those of you with an LLC or a corporation registered with The Secretary of State. The Financial Crimes Network (FinCEN) can charge you up to $591 a day in civil penalties, up to two years in prison, and another $10,000 in criminal penalties. Brent Bracht is the partner overseeing this, and Michelle Felger and Josie Ross have been working hard to file these forms for our clients who hired us to handle this. We have almost 300 of these filed and billed to our clients. We have another 50 in the process. We have another 75 clients from whom we are waiting for information. We have many clients to whom we mailed multiple packages via the USPS. We need to hear back from you very quickly. If you own a corporation or an LLC and have not worked with us to get your forms filed or provided us with a signed and dated engagement letter option out of us providing this service, we need to hear from you very quickly. Please reach out to the partner who handles your account today.  Mike Sylvester, CPA

Many of our Indiana clients take advantage of the Indiana CollegeChoice 529 plan. Note, the plan recently changed names and is now called the Indiana529. The Indiana529 plan is beneficial for those clients who: Have Indiana income tax liability. Want a tax-advantaged way to save for college. The maximum amount of Indiana tax credit allowed is 20% of the contribution, and for tax credit purposes, the maximum annual contribution is $7,500. From a tax perspective, the advantage of an Indiana529 plan is that you can qualify for an Indiana tax credit of up to $1,500 per year. Please note, you must have at least $1,500 of Indiana income tax liability each year in order to qualify for a tax credit of $1,500. Please remember, tax credits are superior to tax deductions. A tax credit lowers your tax liability dollar for dollar. You do NOT receive an Indiana tax credit if you contribute to a 529 plan run by a state other than Indiana. Please contact the partner handling your account if you want to learn more about the tax advantages of contributing to an Indiana529 plan. As always, there are a lot of rules, and the money needs to be used for specific purposes, generally through an accredited college.  Mike Sylvester, CPA

The largest expense Americans pay is taxes. We pay federal income taxes, Social Security taxes, Medicare taxes, sales taxes, and the list goes on and on. The income tax code grows larger every year. Indiana has really made its income tax code more complicated, and I remember when Indiana had a very simple tax code; that is no longer the case. Indiana adds 10-25 new tax provisions every year. We file your income taxes each year. The tax code becomes more complicated each year, and the amount of time we spend doing your taxes increases due to the complications and the fact that the rules are constantly changing. We are not focusing on tax planning when we complete your annual income tax returns; instead, we are filing the necessary forms to keep you compliant with the current tax code and to calculate the taxes you owe or the refunds you are due for the prior year. More of our clients should be trying to lower their income tax burden over the course of their lives. More of our clients should hire us to assist them with tax planning. Please reach out to the partner who handles your account if you want to hire us to work with you to minimize your income taxes. Of course, we charge separately for this! September 16th is the corporate deadline this year, and we will be busy between now and September 16th. Tax planning season is September 17th – December 15th, 2024. Please reach out to the partner who handles your account if you want to hire us to help you minimize your tax burden. Mike Sylvester, CPA