August 2024 Tax Update Insights

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Table of Contents

Staying updated on the latest tax changes is crucial for tax professionals, especially as we navigate the complex landscape of 2024. This August update dives into the significant changes and insights from experts Jason Dinesen and Nicholas Preusch. From recent developments in the Tax Cuts and Jobs Act to family management companies, this blog provides valuable information that can impact your practice. Read on to explore the key updates and understand what they mean for you.

Key Changes: Tax Cuts & Jobs Act

The Tax Cuts and Jobs Act (TCJA) remains a pivotal point of discussion in 2024. Key provisions that tax professionals should note include:

Reduced Individual Tax Rates: These reductions are temporary and set to expire after 2025, impacting tax planning for individuals.

Increased Standard Deduction: A substantial increase that simplifies filing for many taxpayers.

SALT Limit and Mortgage Interest Changes: The state and local tax (SALT) deduction cap and reduced mortgage interest deduction limits are vital considerations for homeowners.

QBI Deduction: An essential provision for pass-through entities, providing up to a 20% deduction on qualified business income.

Estate Tax Exemption: Currently increased, but future changes are possible depending on the political landscape.

Understanding: Reconciliation & Implications

Reconciliation is a budget tool that impacts tax legislation significantly. The use of reconciliation allowed TCJA provisions to pass with a simple majority. With upcoming elections, the future of these tax changes is uncertain, and professionals should stay vigilant about potential shifts.

Wealth Tax Proposals Under Biden-Harris

The Biden-Harris administration has proposed several changes, including a potential wealth tax targeting high-net-worth individuals. Key elements include:

Unrealized Capital Gains Taxation: Affecting those with net wealth above $100 million.

Expanded Child and Earned Income Tax Credits: Designed to provide additional support to families, making these credits fully refundable.

ERC Updates: What You Need to Know

The Employee Retention Credit (ERC) continues to evolve. Jason and Nicholas discuss recent issues, including what to do if your ERC is disallowed. Tax professionals must be aware of these updates to guide clients effectively, particularly with voluntary disclosure programs that could impact financial statements.

The Debate on S-Corp Distributions

One of the more nuanced discussions revolves around S-corporations and disproportionate distributions. Recent IRS guidance and court cases indicate that while such distributions alone do not affect S-corp status, the governing documents and proper execution of distributions remain critical.

Family Management Companies: A Scrutinized Strategy

Hiring family members through management companies to optimize payroll taxes has been trending. However, this strategy comes with significant legal and compliance risks, especially around economic substance and genuine business arrangements. Tax professionals should carefully evaluate this approach to avoid potential pitfalls.

Key Takeaways

Stay Informed on TCJA Provisions: These continue to affect planning strategies, especially as expiration dates loom.

Understand Wealth Tax Proposals: High-net-worth clients could face new liabilities under proposed changes.

ERC Compliance is Essential: Recent updates and enforcement actions make understanding ERC rules a priority.

Scrutinize Family Management Companies: Ensure compliance with all legal requirements to avoid unwanted IRS scrutiny.

Conclusion

The August 2024 Monthly Tax Update brings forth several critical changes and discussions that will shape the tax landscape for the rest of the year. By staying informed and proactive, you can provide your clients with the guidance they need to navigate these updates successfully. At MY-CPE, we are committed to equipping tax professionals with the knowledge and tools to excel in their careers.

FAQs

The TCJA continues to impact tax rates, deductions, and credits, with individual provisions set to expire after 2025.

Proposed taxes on unrealized capital gains could significantly increase tax liabilities for those with wealth exceeding $100 million.

Engaging with voluntary disclosure programs and understanding the latest IRS guidance can help mitigate risks.

While potentially beneficial, this strategy carries substantial risks and must be approached with caution to ensure compliance.

Jason Dinesen

President, Dinesen Tax & Accounting, P.C.

Jason Dinesen (LPA, EA) is an entrepreneur, tax expert, and CPE Presenter. Dinesen brings over 15 years of experience helping individuals and businesses with accounting, bookkeeping, tax preparation, and business advisory in various industries. Dinesen is a regular CPE Presenter at MYCPE ONE. He has coached more than 200k+ accounting, taxes, and HR professionals on various topics of accounting, individual taxation, corporate taxation, and professional ethics. Jason has developed a strong following within the professional community for tax-related subjects. Dinesen is known for sharp tax interpretations, and he quickly brings his analysis of the latest tax updates and IRS guidance to the professional community.