 Well, good afternoon everyone. Thank you for joining us for the 2024 edition of Tax Update, Getting Ready for Tax Season. If you need closed captions, you can click on the Show Captions button that should be on the menu at the bottom of the Zoom window. There's a small CC icon. Click there and Live Captions should be displayed. The San Francisco Public Library acknowledges that we occupy the unceded ancestral homeland of the Ramayitishaloni peoples who are the original inhabitants of the San Francisco Peninsula. We recognize that we benefit from living and working on their traditional homeland. As uninvited guests, we affirm their sovereign rights as First Peoples and wish to pay our respects to the ancestors, elders, and relatives of the Ramayitish community. We recognize to respectfully honor Ramayitish peoples we must embrace and collaborate meaningfully to record indigenous knowledge and how we care for San Francisco and all its people. So please come visit us in person at the library at the main library. We're on the fourth floor. Come on up. We're happy to help you. If you cannot visit us in person, you're welcome to contact us through our chat reference service, which can be found on our webpage. It's sfpl.org. You can also email us at bizcytec at sfpl.org. That is b-u-s-s-c-i-t-e-c-h at sfpl.org. Or you can give us a call at 415-557-4488. You can find out more about all the business and finance resources that we offer on our webpage at sfpl.org. Click on the research and learn tab, and then click on the business and finance resources link. If you've missed any of our programs, you can view programs that we've received permission to record on SFPL's YouTube channel. Go to playlists and scroll down to the work it playlist. There you'll be able to watch all the past programs that we have recorded. Also, after today's program, you will all receive an email with a copy of the presentation slides and a link to the recording. I'd also like to mention, if you're looking for more valuable information about taxes, please join us for a pair of upcoming programs that will be a great complement to today's presentation. On February 13th, from 12 to 1 p.m., we'll be offering the presentation, Taxes How to Stay Out of Trouble. And then on Thursday, March 14th, from 6 to 7 p.m., we'll be hosting Tax Trouble What to Do If You've Got Problems with the IRS. Both of these programs will be presented by Heather Liston. I encourage everyone to register for both of these great programs. Links to more information about these programs and how to register will be provided in the chat. Now, without further ado, I'd like to welcome SFPL's Business Science and Technology Center's favorite, Larry Pahn. Larry, you want to take over the screen. All right, Jonathan. Well, thank you and hello, everybody, and good afternoon. So it's new tax season upon us. So give me a second here to set up my screen for you. So give me a minute here. Make sure I got this going. And if you have any questions or comments, you're welcome to enter them in the chat. Most likely, I will not be addressing those issues during the presentation because we got a lot to go over today, but I have reserved time at the end and I'll stick around as long as it takes to answer your questions. And if there's an urgent question or something, I might be addressing it during the presentation. So we're here until 3.30 in the afternoon. So let's get started. So it's the 24 tax season here. And let me just get the slides moving along. It's a little bit about me. I'm a CPA and an enrolled agent and a United States Tax Court practitioner. So those are my tax credentials. I'm also a personal financial specialist, a certified financial planner and a credit estate planner. And so those are my financial planning credentials. And I'm located in Redwood Shores, California. I was born in San Francisco. So that's where I started my life. But I've been a tax professional since 1986. And I'm a national tax speaker. And I also teach income tax here at the College of San Mateo. I'm actually broadcasting from Room Building 14 of the College of San Mateo. So that's where I am right now. There's a whiteboard right behind me. But if you want to learn more about taxes, you can take a look at the courses that I teach. And the other instructors teach on income taxes. I teach the individual tax course. In the summer, I'll be teaching the trust gift in the state course. And in the fall, I'll be teaching income tax and also the enrolled agent exam review course. So if you have friends or colleagues who need to take those courses, they're available. And I teach it on Zoom. So you don't have to come here to San Mateo, be taught over Zoom and anyone in California can take the courses. So let's get started here on what we're going to talk about. So what we're going to talk about today is let's talk about some late-breaking news to catch up the data on what's going on in the tax room. Then we'll go over the tax forms and update on the forms and what's going on in there. And we'll close with what can you still do to reduce your 2023 taxes, even though 2023 is already closed, we're in 2024. So those are the big three topics we're talking about here. So number one is that last Friday, President Biden signed legislation that averting a government shutdown. Because if we didn't pass a spending bill last week, we would have a government shutdown. And that's very, very frustrating. And as you know, government shutdowns do not save us any money. It actually costs us more money, but it causes a lot of headaches. And especially for us tax people, because at that kind of they lay off two thirds of the iris employees, and they're trying to gear up for tax season. So that's not a good time to have a government shutdown. So on Friday the 19th, government Biden signed the law, but it's only a stop-gap, stop-gap legislation. So John's got a comment here, no autocannot. Everybody hear me okay? Just let me know. Jonathan, can you let me know? You hear me okay? If you can hear me, that's fine. And technical issues, Jonathan? I can hear you. Okay. If there's technical issues, Jonathan will help you. All right. So the stop-gap legislation basically extends the 2022 spending plans levels. And our next drama is going to be March the 1st and March the 8th, if our Congress doesn't get anything done. So that means that's the deadline for 12 spending bills to fund the government. And the big ones are like the defense bill, the farm bill, aid to Israel, aid to Ukraine, the border problems, and all those kind of things. It's a big, big, big deal. 12 huge bills. It's billions of dollars here. So in the House it passed 314 to 108. So 106 Republicans said no and two Democrats said no. And the Senate was a little more bipartisan, 77 to 18. So stay tuned in the next coming weeks on what our wonderful Congress is going to do. Well, just giving an update on what's going on is in 2023, we did not have a tax bill. Because as you've been observing, Congress has been quite dysfunctional. They just can't get their act together. For a while there, we didn't even have a Speaker of the House. I mean, come on. How bad can that be? First time in history. So for 2024, we have a tax bill. It's called the Tax Relief for American Families and Workers Act 2024. The bill number is HR 7024. And it was passed 40 to 3 out of the House Ways and Means Committee. And you know, Congress is, you know, they're always like doing acronyms. So the acronym would this be TROFA, Tax Relief for American Families and Workers Act. So it was a bipartisan bill. On the House side, the House Ways and Means Committee is the committee that writes the tax laws. And it's run by Republican Mr. Smith. And he's the head of the Ways and Means Committee. It passed 40 to 3s. That's pretty, pretty, pretty, pretty darn unanimous. Pretty close to being unanimous. On the Senate, it's run by Senator Ron Wyden, who's a Democrat. So they came to an agreement. We have a bipartisan agreement here. Now, stay tuned in the news because the House vote could be next week. So stay tuned. Let's see what happens. Let's cross our fingers and hope Congress actually does any work. So let's talk about what this bill can do if it passes. Number one is increases the maximal refundable child tax credit. So currently it's $1,600, but it'll be increased to $1,800 for 2023, $1,924, $2,025, and also increased the child tax credit with inflation. It's been the same number for the last few years. It's been $2,000 as the child tax credit, also known as the CTC. So what does this mean? Well, since we know there could be a retroactive change to 2023, I frankly wouldn't rush into doing your tax return until we know what Congress is going to do about this, because you can get your tax return done now, but then you might have to change it again. The IRS has assured us they will automatically make this correction, but I frankly don't trust them. The other changes, those are on the individual side. There's a lot of changes. This is an 82-page bill, so I'm not going to go over every detail, but I'm putting out the big ones. Also increased section 179, Expensing. Those are for businesses to be able to write off the equipment that they purchased. Also, there's been some tax changes that have been made back in 2017 that took an effect in 2022 and 2023. One of them was what's called bonus depreciation. So in 2022, we had a 100% bonus depreciation if you bought equipment for your business. In 2023, it's down to 80%. And in 2024, it's 60%. It keeps going down to zero. The other thing is something called section 174. That's for research and experimental expenses. We're here in Silicon Valley. That's a big deduction for many, many businesses here. We've got the biotech companies. We have the tech companies. We have all kinds of innovative businesses we have here. And what the law changed starting in 2022 was you couldn't write off all those expenses. You had to amortize them, which means you deduct them over five years or 15 years. Five years of its domestic, 15 years that the research was done overseas. So the proposal here is to push these provisions to 2026. So if you notice 2022, that's a retroactive change. So if you already filed your tax return for 2022 and you qualify for this deduction, you can amend your 2022 return to get a refund. So you say, hey, that's great. How are we going to pay for it? Well, Congress has thought of a way to pay for it by, oops, wrong way, by stopping ERC, Employee Retention Credit. You've probably heard those commercials on the radio, seen the ads on TV. Some of you might have gotten phone calls, texts and all that. So unfortunately, many of those are probably fraudulent. Many of those are being applied by companies or businesses that don't even qualify. So one way to pay for these tax breaks is to stop new employee retention credit claims. They're going to close it off on January 31st. That's next week. Also, all those people you hear doing those commercials, you've seen those commercials. Well, they want to impose substantial penalties on them, $200,000 or 75% of their income. So because, I mean, there's billions of dollars of these claims and the IRS is really busy auditing right now. So anyway, the other thing is to give the IRS more time to audit them. Instead of the five years that they got, they're going to get six years to audit these type of claims. All right, so that's what's going on with this tax bill. Stay tuned. We'll see what happens. Okay. Oh, the other change is, if you get a foreign 1099 NEC or 1099 Miscellaneous, the threshold has been $600 for decades. So they're going to increase that to $1,000. So you have the, you know, if you're a gig worker, you're an independent contractor and you'll get a 1099 if you earn more than $1,000 from them instead of $600. And also starting in 24, it'll be indexed for inflation. Here's the URL. If you want to read this bill, it's 82 pages. And, you know, so the next step is that it's past the committee. Now it goes to the full House of Representatives. There's 434 of them. Not 435 because they kicked out George Santos. So it's seen as empty. So it's 434 Congress members. And I think we have 100 senators. No, or is it, we have, no, we don't have 100 senators. We have 99 because we lost our dear, no, we have a, we have an interim senator for Dying Feinstein. So I think we might have 100 senators to vote. So in the next few weeks, we'll see what happens with the debates and the votes and see if they get anything done. So stay tuned. News from Washington about this tax break. Okay. What else is like breaking? Well, right before Christmas, the IRS gave us a Christmas present. So on December 19th, the IRS announced that they're giving penalty relief for 2020 and 2021. So if you owe taxes on your 2020 and 2021 tax returns, the IRS will waive the failure to pay penalties. It's going to be automatic. And what happened was because of the pandemic, because the IRS is just overwhelmed right now, they're way behind in processing paperwork that they're going to kind of lighten their load by giving this relief. However, to qualify for it, your liability has to be less than $100,000. And the balance due notices were between February 5th of 2022 and December 7th of 2023. They've also warned to us that starting April 1st of this year, the failure to pay penalty will resume. It'll start being due starting April 1st of 2024. So just give you a reminder here about this penalty relief. It's automatic. You don't really have to do anything with it. But I'd recommend checking carefully. If you're working with a tax professional, they can help you by reviewing your transcripts and double checking the calculations. Just give you a reminder, if you owe back taxes to the IRS, the interest rate is now 8%. Yeah, just a couple of years ago, it was only 3%. But because of the high interest rates we've been having, it's now 8%. That's what you owe on your back taxes. Or if you don't pay your taxes on time, for example, for this year, for 2023, taxes are due on April 15th. If you don't pay by April 15th, the interest is at 8% after April 15th of this year for your 2023 taxes. So the penalty is half a percent per month up to a maximum of 25%. If you negotiate a payment plan with the IRS, it gets reduced to a quarter of a percent, 0.25%. Now if you owe more than $59,000, the IRS could file a lien. And what that means is it could show up on your credit report. If you owe more than $59,000. Also, you can have your passport revoked. And I've heard of people who showed up at the airport. They scan their passport and you can't leave the country. So if you owe more than $59,000, that could be the case. However, to get your passport reinstated, you can negotiate an installment plan with the IRS, a payment plan, and then they'll reinstate your passport. So this is how they're controlling it. They're not letting people leave the country if you owe back taxes. Last summer, the IRS announced that they're no longer visiting your work or your house. The revenue officers were not going to visit you anymore. And it was because they were concerned about safety. People, they were being shot at or being abused or being assaulted. So the IRS decided that for the safety of employees, we're not going to make visits. However, if you owe more than $250,000, you will be assigned your very own revenue officer. Those are the collections people with the IRS and they will visit you. They'll visit you at your house. They'll visit you at your work. They'll visit you to your friends, your girlfriends, your mistress, and everybody that they can find. They will come looking for you. So take this very seriously. So just a quick review of the letters that the IRS sends. So open your letters when you get here from the IRS. The IRS will only send letters. They're not going to text you. They're not going to email you. They're not going to Facebook messenger you. And if you owe money, you pay either by check, mail to the address on the letter, or you can pay on the IRS website. But they're not going to ask for gift cards, Venmo, Apple, what do you call those? Apple pay cards or whatever. So here's the notices you'll get. The CP-14 is the first letter you get from the IRS saying, hey, you owe us money. It's a soft letter. This usually happens after you file your tax return. It's just a reminder that, oh, you forgot to pay your tax bill with the tax return. The second one's a CP-500. It gets a little more aggressive. They say it's going to say, you owe us money. If you want to stop the interest in penalties, pay us by this date. It's usually 20 days after the letter. The next letter is LT-11. That's a bit more aggressive. It's going to have on the top there saying, this is your last warning before we're going to levy you. It's just a warning. That's the letter you get before CP-504. That's the serious letter. It's in large, bold type, in a big font. It's going to say, final balance to a reminder, notice the intent to seize or levy your property or rights to property and also direct it to pay immediately. If you can't pay, there's a number on the upper-hand corner of the letter and the IRS is really easy to work with in terms of figuring out the payment plan, depending on what you owe. If it's a small amount, they're not going to ask them any questions. They'll say, oh, can you pay $100 a month? Can you pay $200 a month or whatever it is? If you owe a large amount, then they're going to ask for more financial information. Take this very seriously because it can escalate and get very expensive. All right. Let me just check the chat here because I think I saw a question here. Julie asked a question about the child tax credit. The child tax credit only applies for children of 17 or under, not 18, 17, and it doesn't cover dependence over 26 years old. That's what's called the other dependent credit. That's $500. The child tax credit is $2,000. We'll talk a little more about that later. So here's the tax season dates for you to be aware of, tax season dates. January 16th was like a week ago or so, and that's the due date for your fourth quarter 2023 estimated payment. You pay that on time, then they wouldn't charge you a late penalty or an underpayment of estimated tax penalty. The IRS announced that January 29th is when they'll start accepting tax returns, but should you jump on that? Probably not because a lot of forms are still not released yet. A lot of forms are not available yet. Also, California, we're in California here. California hasn't released all their forms either, so I'd be cautious about that. Also, there could be some tax law changes, so I would be cautious about that. Now, if you have to file early because you're marifying separately or you have a contingent situation with the parents of your children, that's a different story. So for the first time in many, many years, our due date is April 15th. Last year, April 15th was on a Saturday, and then Monday, the 17th was a holiday in Washington, D.C., it was Emancipation Day. So last year, the due date was April 18th. So for the last few years, we haven't had April 15th, and I think I checked the calendar. So this year and the next few years is April 15th. However, if you're in Maine or Massachusetts, it's April 17th because we've got Patriots Day. Now, you can file an extension to October 15th. The extension only gives you time to file the return, not to pay. You still got to pay your taxes by April 15th. If you don't pay by April 15th, there will be interest in penalties. But we probably need time sometimes because you might have complicated investments or it might take some time to gather your information. So pay what you think you owe by April 15th and file an extension. All right. Here's a picture of the 2023-1040. The next few slides are kind of blown up the parts of it. So it looks very similar to 2022. The biggest difference I noticed is that the filing status has moved from the top of the page to right below your name and address. So that's the most significant change, but I didn't notice any changes in the form this year. So starting at the top, we'll work our way down the forms. Excuse me. Of course, get your name and address and your social security number. Now, it's really important that you enter your name correctly. That causes a lot of problems, especially if you change your name. If you do change your name, make sure it matches your social security card. Some people change their names. They change your DMV, but they didn't change it to social security. That can cause problems with matching identity and all that. So make sure you get your name correctly. Filing status. And we're going to talk a little more detail about the filing status, but your choice is single, merit filing, joining, merit filing separately, head of household or qualifying surviving spouse. It's based upon your marital status as of December 31st. So I was watching TV at New Year's Eve and a lot of idiots were getting married in Las Vegas. Why? Because it's going to be 12, 31, 23. I guess people want that magic number, 12, 31, 2023. So a record number of people got married on Christmas, on New Year's Eve. Well, guess what? They're trios as if they're married for the full year. That could be a problem, right? What if the person you married owes back taxes? Well, if you guys have a refund, the IRS is going to keep it. That could be a problem, right? Or child support or whatever, those kinds of issues. So before you marry somebody, you might want to do a credit check. You want to check in their tax situation because you could have some adverse consequences. So got to watch out for that. Same thing with getting divorced, right? Your divorce has to be final by December 31st. So I think in California, you got to get your paperwork in by at least June 30th to be able to even get divorced by the end of the year. So that could get a bit complicated. All right. So marital status is of December 31st. The head of household filing status seems to be the most confusing and the most abused and also the most misunderstood. And that can cause all kinds of problems with the IRS. So anyway, let's talk about the head of household filing status. It's for people who are unmarried, not married, right? Or considered to be unmarried. And you can still be married and might be able to qualify for a head of household. So to do that is the next five points here. File a separate return, no joint return. You have to pay over half the cost of keeping up the home for the year. And the next one's really important. The spouse did not live in the home for the last six months of the year. I noticed that people tend to leave the household like in August. Well, guess what? That's not six months, right? So last six months of the year. And the home is the main home of the child, step child, or foster child for over half the year. And you must be able to claim that child's independent. So if you're still married and you meet these five tests here, you can file the head of household. Also, that means paying for over half the cost of keeping up the home. And the qualifying person is your dependent that lives with you for at least half of the year. If that person is your parent, there's an exception for parents. They don't have to live with you. Parents do not have to live with you to qualify for head of household. Why would you want that status? Well, it's more favorable than filing single, not as good as filing jointly, but better than filing singles. That's why it's an important consideration to think about. All right, here's a worksheet on how to calculate the cost of keeping up the home. If you guys get into an argument about this, keep good records, but look what's on this list here. Property taxes, mortgage, rent, utilities, repairs, maintenance, property insurance, food, and other household expenses. So what's not on this list? Clothing for the kids. That's not part of the cost of keeping up a home. Vacations and medical bills and those kind of things. Those don't for the cost of keeping up the home. I see that mistake made a lot too, where people are making all these arguments, but it's like, well, what goes into that calculation? Key track of it, and whoever has the higher amount would qualify. Here's a chart on who is a qualifying person to help you qualify as head of household. I'm not going to go over this right now, but you can look at this later. What's a common question we get? A real common question we get. I've got a boyfriend and he doesn't work. Well, my first question is, what do you have a boyfriend who doesn't work? Well, so can I claim as a dependent? Can I be head of household? Well, let's go through these tests here, right? And well, the main question is that person a qualifying person? No, he's not related to you. No, don't adopt him. Okay, don't do that. So we get that a lot. Can I claim my boyfriend answers? No. So you got to think a little deeper about that. Okay. Now, the IRS has something called Interactive Tax Assistant on the website. It's a pretty handy dandy guide. There's one of them that's called What Is My Filing Status? So you can go to the IRS Interactive Tax Assistant and click on the menu that says What Is My Filing Status? It goes through a whole bunch of questions that basically are these tests to see if to figure out what your Filing Status is. Okay. The next line on the 1040 is the question about digital assets. And a couple of years ago, it was called cryptocurrency. Well, last year in 2022, the IRS changed it to digital assets because that's a more expansive description because it includes cryptocurrency, NFTs, non-fungible tokens, stable coins, and any digital representation of value. So they've expanded that. So the question is yes or no. At any time during 2023, did you receive as a reward, award, or payment for property or services or sell, exchange, or otherwise dispose of a digital asset? And don't lie because the IRS already knows the answers to this. But if you're holding cryptocurrency, let's say, but you didn't sell it, you didn't exchange it, you didn't do anything with it, you can say no. You can say no to that. It's only when you have a transaction of some sort. You know, you most someone's won. And in payment, you didn't get cash, they gave you a Bitcoin. Well, you have to say yes to that and that's going to be income at the value of the Bitcoin you receive. Cryptocurrency is property. Digital assets are property. I know it's called cryptocurrency. It's not cash. It's not a security. So for tax purposes, we treat it as property and any transaction you have is reportable on your Schedule D, which originates on Form 8949. Now, if you do have cryptocurrency, I hope you have a crypto, haven't added cryptocurrency exchange, gives a cryptocurrency exchange at the end of the year, will give you some nice statements to use for your tax return. You might have to pay an extra fee, but I would highly recommend paying the extra fee to get them to generate to Form 8949 for you. Because if you want us tax professionals to do it, it'll take us hours and hours to do it and we'll charge you a lot of money for it. So be a lot better to have either the exchange through the calculation or a third party that does those tax calculations for you. I highly recommend that. Well worth the fee. The next part of the 1040 is about the standard deduction. Most of us are claiming the standard deduction because it's pretty high and we'll go over that in a second here with the amounts. But the calculation is changed if you are dependent. That's when there's a box here. Or you get a bonus to your standard deduction if you're over age 65. You're over age 65, if you're born before January 2nd in 1959, or if you're blind and blind is defined as vision 200 over 20. And that's an extra bonus. If you're ready to finally join us, it's an extra $1,500. If you're single, it's an extra $1,850. So that's why these are important questions to make sure you answer if it applies to you. So don't ignore that. So the standard deduction for merit-funding journeys is $27,700. What does that mean? If you're merit-funding jointly, the first $27,700 of income is tax-free. It's exempt from taxes. That's why this is so important. Look how high it is. It's $27,700. It was doubled back in 2018 before that amount was half of this amount. If you're single, it's $13,850. So far, a lot of our younger people are kids. My son's in college now. But if he's working, he's working, he can make up to $13,850 and not pay any taxes. And if he's a dependent, there's this calculation you do. The standard deduction is not the full amount. It's the greater of $1250 or their earned income plus $400 up to the amount of the standard deduction. So most of us are not itemizing because these are pretty high. These are pretty high. Here's the bonus to your standard deduction we talked about. So for example, if you're merit-funding jointly and you're over age 65, both of you are over age 65, it's going to be $27,700 plus $3,000. That's $30,700. So the first almost $31,000 of income is tax-free if you're over 65. So that's a pretty good tax-free. That's why currently our taxes are relatively low. We're at record low taxes right now. However, one word of warning, our taxes will be going up in 2026 because that's when the tax cut in jobs that expires and these standard deduction amounts will be cut in half. So that's something we've got to be aware of of 2026. Okay. So Julie's got a question of how do you report the kid's income? They're independent. That's a good question. And it depends. There's something called the kiddie tax. So if they have unearned income interest and dividends, then you can report on your tax return using Form 8814 if that's the case. However, if they're working or if they have their own capital gains, then that kid's going to file their own separate tax return. Okay. The next part of the tax return are your dependents. So if you notice the question about the digital assets, cryptocurrency, do you notice it comes before dependents? So do you know what that means? The IRS thinks cryptocurrency is more important than your children. That's why it's above the dependent questions. So that's why it's so important. And like I said, don't lie because the IRS already knows a lot of this information already because they have issued what's called John Doe summons to the various crypto exchanges and they have the information. They know if you made money on cryptocurrency. All right. So dependents here, yeah, we've got to make sure we get their name, their social security number, input their relationship, son, daughter, brother, sister, parent, whatever. And then box four is do they qualify for the child tax credit or the credit for other dependents? The child tax credit is $2,000. The other dependent credit is $500. So if your child is over age 17, then they're not going to qualify for the child tax credit, but they'll get the credit for other dependent, the $500 credit instead. So I don't know if you recall, this happened about though, about almost 40 years ago. The Congress was suspecting people were lying on their tax returns. And so we have something called Tins for Tots, which means that you're required to put your kid's social security number on the tax return. Well, in 1987, we lost 7 million children. Yeah, we lost 7 million children because you're required to input the kid's social security numbers. So I guess people were putting down their dogs, their cats, and fictitious children. So hopefully that saves some money for the government. So here's a chart on rules for claiming a dependent. Again, I'm not going to go through the detail here because we don't have enough time, but this chart is for you to look at, to see if your child qualify as dependent. Now the IRS has these interactive tax assistance. So there is a main page here. It was last updated on January 16th. So it's pretty up to date. Just type in ITA on the IRS website, irs.gov and the search box type in ITA, it'll take you to this page of Interactor Tax Assistance. There's one for who may I claim as a dependent. They'll go over all kinds of questions, all kinds of nosy questions about the person to see that person qualifies. At the end of the calculation, they'll say, yes, this person qualifies, or no, it does not. Another one that's kind of helpful is, are my social security benefits taxable? Because your tax, social security being taxable up to 85% of the social security, not 100%, but up to 85%. It could be 50%. It could be zero, 50% or 85%. Depending on your level of income is based upon what's called your modified, adjusted gross income. Okay. Another helpful one is a lot of our kids get scholarships, right? Do I include my scholarship, fellowship, or education grant as income on my tax return? So you can go through this calculator to help you figure that out, because that's another mistake people make is they don't report taxable scholarships. Scholarships can be taxable. Scholarships are tax-free. Scholarships and fellowships are tax-free. They've used to pay for tuition in a degree program. If you're no longer in a degree program and you still got a scholarship, then they'll be taxable. If it's being used to pay for room and board, that's taxable. You're going to watch out for that. Okay. So moving down the 410-40, lines one through 15 are the income and adjustments to the income. So line one is your W2 and other income there. Line two is your interest income, the interest from the bank, B of A or Wells Fargo, S box two B, line two B. Two A is your tax system to interest. A lot of people think, well, it's tax system. Why should I put out a tax return? Well, it's part of the modified adjusted gross income calculation. So you don't want to leave that out. Also, on the California return, if it's coming from California bonds, the state of California, County of San Francisco, San Francisco School District, that's tax-free. However, if it's outside of California, it's taxable in the California return. Line three is dividends. You can have it from stocks or mutual funds or exchange-traded funds. You have qualified dividends and ordinary dividends. Ordinary dividends are part of your income, but qualified dividends get a preferential tax rate. It can be either 0, 15% or 20%. Okay, line four A are your IRA distributions. More importantly is four B, that's the taxable amount. Always important to keep track of your basis of your non-deductible IRAs so you don't double pay or overpay taxes in your IRAs. Five A and five B is your pension. Same thing, a portion of your pension might not be taxable. So we have to study the 1099R for your pension very carefully. There could be some tax-free part of it. So you don't want to put the whole amount. You can't just blindly expect line two, the 1099R is correct. Line six is your social security benefits. Six A is the gross amount. Six B is the tax amount. Could be 50% or 85% or somewhere in between. Six C is new from last year. That's using the lump sum election method. So if you get a lump sum of social security benefits, because sometimes it takes a long time for them to process it or to figure out this could be SSDI, those kind of things. So using a lump sum method means figuring out the taxes are for the years they were attributable to. It could be a lot lower that way. So being very diligent for your calculations are important. Line seven is capital gains and losses. Selling stocks, selling mutual funds, selling your house, those kind of things, selling cryptocurrency. We're going to go over schedule one. That's line eight. That's the other income. And then line nine is the total of your total income. And then line 10 are adjustments to your income. That's on page two of schedule one. This is what gives us what's called above the line deductions. And that gives us line 11, the famous adjusted gross income. Very important number. The image to track from that, the higher of your standard deduction or IYC deduction. To the left of line 12 is the standard deduction amounts. 13,850 for singles, 27,700 for merit funding jointly. But if you have the bonus amounts, that gets included also. If you have a business, line 13 is qualified business income deduction. Then line 15 is your taxable income. That's the number you figure out your taxes at. That's depending what your tax bracket is. All right, schedule one. That's the additional income. I'm not going to go through every line. I'm going to go through the ones that you need to be aware of. Most of us are not going to have a taxable refund on line one because of the higher standard deduction. However, line two, you've got to be aware of. Line two is alimony. Alimony. If you're receiving alimony, it's taxable if it's from a marital settlement before 2019, 2018 and earlier. It's taxable if you receive it. If you got divorced this year or after 2019 or later, it's not taxable. That's because of the change in tax law. It's very important. That's why you see line two be there, enter the date of the marital settlement. That's very important to know. Let's see. Line three is business income. Let's see. Any other lines? Oh, line eight, B, gambling income, gambling income. What's important there is don't make the mistake what a lot of people have done and they've gotten trouble for it is that we have gambling income. Line eight, B, report the gross amount. I won $10,000, but I spent, I lost $8,000. Well, the mistake people were making where they entered $2,000, the net amount, no. You entered the gross amount in line eight, B, you deduct your gambling losses to the extent of your gambling winnings on schedule A. We'll look at that a little bit later, but that's for gambling losses. I think that's mostly in gray here in terms of income. We talked about alimony. I think the most relevant would be alimony. If you have a business or rental properties, the net income flows through here. Line seven's unemployment is taxable for federal, but not taxable for state. What I've noticed I've run into this year or last two years is people were getting 1099Gs for unemployment that they didn't get or never applied for. Watch out for that. Make sure you get the EDA involved with that fraud. Otherwise, you'll get a letter from the IRS saying, hey, you didn't pay taxes on this. And you tell them, I never got it. I never applied for unemployment. So it's a real mess. I just went through this with someone and the way we got a lot of help was through her state senator's officers or assembly member's office. They have staff members who work with the EDD on these issues. So if you got a fraudulent 1099G for EDD, make sure you get on top of that. Otherwise, IRS will say it's taxable and it becomes a big fight. So you got to watch out for that. Let's see. Line eight, nine, prizes and awards. I like to watch Jeopardy. Guess what? Those people in Jeopardy or Price is Right, that's all taxable. You'll get a 1099 from the TV show and you got to report that income on your tax return. Let's see. Other ones I need to point out here, I think we're pretty good here. I think we pretty much got things covered. Line M is kind of interesting. That's for the Olympics. So any of our athletes, they might be taxable. So just because you went to gold medals, not tax free, it might be taxable. On the backside of the Schedule 1 are adjustments like these are the above the line deductions. So I think the first one I want to point out is line 11, educator expenses. If you're a K-12 educator, that means being a teacher, a counselor, a librarian, paraeducator or whatever, a K-12, as long as you work more than 900 hours of the year, that's a $300 deduction that includes out-of-pocket, supplies, computers, courses, and PPE. I mean, if you got to buy face masks, gloves, or sanitizer, that's line 11 here. Let's see what else is here. Line 13, health savings account deduction. You got to April 15th to top off your 2023 health savings account deduction if you are in a health savings account. Line 20, IRA deduction, same thing. You got to April 15th to fund an IRA to get a deduction on your 23 taxes. That can help reduce your taxes. Line 19a is alimony paid. If it's alimony for a divorce before 2019, it's deductible for divorces 2019 and later, not deductible. So what you got to watch out for is if you're negotiating your alimony, depends on which side you're on. If you're on the recipient side, you want to put in the modification that this shall be taxed under the new tax law, which means tax-free. However, if you're the payer, you might want to say, well, since the original agreement was before 2019, we should apply the old law, which makes it deductible. So this is why it's important to get the tax professional involved with your lawsuits and divorces and all those kind of things. That way, we get the right and best tax treatment. All right. Abundant line deduction, educator expenses. We just talked about that. That's the $300 deduction. Let's see what else we got here. Line H and I. So in general, you see those commercials on TV right from the lawyers saying, hi Russ, we're the best law firm to get you the biggest settlement. Well, if you win a lawsuit, it's generally going to be taxable. Back wages, punitive damages, injuries, those are going to be taxable. However, if it's for a physical injury, a physical injury, then it's tax-free. Now, if there's emotional distress or mental issues or whatever, if you can tie the mental distress and the mental issues with the physical injury, then we can argue that would be tax-free. However, I would get an expert to write that letter from a psychiatrist and psychologist giving that expert opinion. What about the legal fees? Well, they're deductibles of miscellaneous deduction, which we currently don't have on your federal return right now. So we've got to be careful about that when you're negotiating a settlement. I just ran into a case for a young lady. She won $100,000 for back pay from her previous employer. They owed her $100,000. Well, the lawyers kept 60,000 of that for their fee and for out-of-pocket expenses. So she got a net of $40,000 that she was asking, how do I pay taxes on it? You pay tax on the $100,000. Can't deduct the 60,000. So I think she was probably left with very little money after all that. So got to negotiate those legal settlements very carefully. There's two exceptions where we can deduct the legal fees above the line. Line H is for unlawful discrimination claims. If it's an unlawful discrimination claim, of course we want a lawyer to give us a legal opinion about that. You and I can't make that determination. Or legal fees for a whistleblower case against for the IRS. You're turning in a former employer or you know someone's cheating on their taxes. You turn them in. You can get a whistleblower award, but it's complicated. So you might have to hire a specialized lawyer for that. Okay. So those are only two exceptions where we can deduct it above the line. Okay. I see a question from Allison here. Will you explain for IRA deduction? Is that different from my employer for okay? Yes, it is. And it can be claimed above and beyond your 401k, depending on what your income limit is, depending on what your income is. So there's some income limits to consider. And Ellen's got a question to explain F. What's F here? Let's see. F under adjustments. Contribution section 51C18D plans. That's a very specific type of pension plan. So it's pretty obscure. And most of us don't really have that. So that's why I'm not going to talk about it. It's very, very obscure. Okay. Schedule two are additional taxes we might need to pay. Line one, alternative movement tax that used to be a real hot topic here in Silicon Valley. But because of the 2017 tax law change, the exemptions have been substantially increased. So we're not, most of us are not going to be paying A&T. So we're not going to see that. The exception would be people with incentive stock options. Okay. Line two, we do see that more often. If you get your health insurance through covered California and you got a subsidy, however, your income might be too high to get the complete subsidy, you need to pay it back via line two here, excess, advanced premium tax credit repayment. So that's what we got to be careful about working with covered California, reporting the appropriate amount of income because some people like to get a big subsidy, but it can get very expensive. You have to pay it all back. So you got to be real careful about that. Line four, self-employment tax, that's if you have your own business and you pay your social security tax through your self-employment tax, I think those are the most relevant ones we're going to talk about today. On the other side are other taxes. And mostly those are mostly the penalty taxes. If you made a contribution to an IRA and HSA that you weren't eligible for, it's a 6% penalty. Or if you took money out of your health savings account and didn't use it for medical expenses, that's a 20% penalty. So that's pretty expensive, which if you do have a health savings account, use it for medical, we're always at plenty of medical expenses. So you'll never run out of medical expenses because a 20% penalty is pretty expensive. Schedule three, schedule three are credits. And what's a credit? A credit is a dollar for a dollar reduction in tax, way better than a deduction, right? So I put in yellow here the new credits to be aware of. And we'll talk about them a little bit more. Line five A is the residential clean energy credit. That's putting on solar panels in your house, a windmill, a fuel cell and a battery. And five B is energy efficient home improvement credit. And we'll talk about that in a lot more detail in terms of adding windows, doors, insulation, new furnaces to your house and those sorts of things. And then line M is a new credit for previously owned clean vehicles, used electric car. That's a new credit. That's a new credit that we didn't have last year. So we'll talk about these in just a second here. And then on the other side is a new refundable credit. That's if you have a business and you have business credits, that's for 3800. You can take what's called an elective payment election, which is just pure money to you there. So that's kind of new. So let's spend a few minutes on these energy efficient home improvement credits. So this came as a result of the inflation reduction act that was passed in August of 2022. It's in 2023. So it's a substantial enhancement over the previous credit. Previously, it was a $500 lifetime credit. That's all you got. Once you get to $500, you couldn't take more. Now it's $1,200 annually and also has been expanded to include your second home, your vacation home, not rental properties. Energy.gov gives us a detailed list of what are the qualified improvements and which appliances qualifying, those kind of details there. But the improvements could be your doors, windows, insulation, central air conditioners, heat pumps, heat pump, water heaters, biomass, dolls, butters and home energy audits. So it's a $1,200 credit. The limits are $250 per door or $500 in total, $600 for windows. So sometimes you might want to, you know, plan your windows. Maybe we'll do windows on this side of the house this year and maybe we'll do the other side next year or something like that because the limit is $600 per year. $150 for a home energy audit. I know PG&E does this for free, but these home energy audits are these experts who look at your house and they'll take an infrared picture of your house and you can see where all your leaking, your heat or whatever. You might be missing some caulking in certain areas. So that's why you might want to buy one, but the credit is $150. There's an extra $2,000 credit. If you get a qualified heat pump, heat pump, water heater, biomass stove or biomass boiler, yeah, no lifetime limit. However, this is not a refundable credit. So if your liability is less than $1,200, that's it. You know, if your liability is only 500 bucks, that's all you get. There's no refund created by these credits. So residential clean energy credit, that's for solar, wind, geothermal, solar water heaters, fuel cells and a battery. That's changed in 22 and before the battery had to be connected to the solar system. Now it could be a standalone battery system. I'm still not sure about that because they're kind of expensive and they kind of catch fire and they tend to explode. So I'm waiting for technology to get better. I'm waiting for the cost to go down. So I'm not rushing the battery thing. But it's a 30% credit of what these costs are up to 2032. And this is reporting a 456.95. So it's only for the solar, we get this question a lot where there's a lot of unfortunately bad contractors out there and they'll say, Hey, I'll give you a free roof. I'll put it, I'll put, I'll put the whole invoice on the solar panels, but you can't do that. You can't count the roof. If you're getting a new roof, rafters and shingles and all that, that's not going to count. So watch out for those bad contractors. I'm just going to say it out loud. I don't recommend any of the ones who advertise because they check out the consumer reviews. They're pretty bad. So watch out for that. And I would fact check them before you sign up with it. Also, you want to make sure you're paying the best price. I got solar panels. Well, guess what? My tax credit is half of my neighbors. Why? My neighbor got the same number of solar panels I got, but he paid twice as much because he is not a CPA like me. I shop around. I make sure I get the right vendors and the right contractors. My vendor did a great job. I paid a really good price. I'm really happy with that. My neighbor across the street paid twice as much. Don't know why. Or I see a lot of neighbors where I drive around. I see houses with a lot of solar panels. It's like, do they really need that many? You should match the panels with the amount of power you need. And also, I see houses are covered by trees and tall buildings and they're in the shadow all day. So, you know, some of these solar people are not there to help you. They're just there to sell you a solar panel. So, don't overpay. All right? Okay. So, roofs don't count. If you buy a brand new house, I know in Monterey County, all those new houses you see being built in Monterey County, they're required to have solar panels. So, you're buying a brand new house or you're buying it from a flipper or someone like that. They put solar panels in. Ask him how much you paid for that and then it'll give you a statement and that's what you can use for the credit. So, new houses count. New construction counts. Yeah. For some reason, we can't use solar water heating for pools or hot tubs. So, I would recommend calling our congress member to say, can you make that correction? Come on. I mean, it makes a lot of sense to use solar energy to heat your water, your swimming pools, right? No solar air heaters. There's fuel swells and batteries, but I'm not pushing the batteries because they're expensive and they're chemicals in there. They're volatile. Here's a couple of examples. Go over some examples of how this works. You got two doors. They're $1,000 a piece. So, 30% of $1,300. The maximum credit for doors are $250 each. So, two times $250 is $500. You got $500 for the doors. Skylights and windows, $2,200. 30% of that is $660 to limit $600. You switched out your air conditioner. It's something more efficient. It's $5,000. 30% of $5,000 is $1,500. That's $600. So, five plus six plus six is $1,700. The maximum is $1,200. So, that's how much we can claim is $1,200 in this example. So, you might want to plan your windows or whatever to spread it out over a couple of years, maybe. Same facts as number one, except instead of getting an HVAC, we got an electric heat pump instead and it cost $5,000. So, 30% of $1,500 is only 30% of $5,500. The limit is $2,000 and it's above and beyond the $1,200 limit. So, in this case here, we get $5 for the doors, $6 for the windows, $1,500 for the heat pump, that's $2,600. But I've asked around, heat pumps are expensive. So, in this example, same facts, except the heat pump costs $8,000. So, 30% of $8,000 is $2,400. That's the limit is $2,000. We also got an energy audit. That's $150 there. So, we get the $1,200 energy efficiency credits plus the $2,000. So, you get the maximum $3,200 credit. I had to go through this decision myself personally. My water heater blew up and so, I thought about it. Should I get a heat pump water heater and all that? Have you seen how much they cost? They're about $1,500 more than your traditional water heater. Also, it's electric. I would have to hire an electrician to fix my electrical system at home and that would take in a while. I kind of want my hot water. So, I got a efficient water heater. The original water heater that the previous owner put in was 75 gallons. I got a 50-gallon water heater. It's been working fine. I'm using less gas. I got hot water the next day because it would have cost a few thousand dollars more if I got the heat pump. Yeah, I would have got the $2,000 tax credit, but would have been worth it. Not if I had to wait two weeks for hot water and also spend a few thousand dollars more or so. I didn't do that. So, don't let tax credits drive your decision. See what makes sense. Don't overpay. I'm waiting for the technology and the cost to get better. Heat pump water heaters are still very expensive. Maybe when they make more of them, the price will probably go down. Maybe technology would get better. So, you know, they've always been expensive because they don't sell that many. Okay. Clean vehicles, substantial changes to the rules from 2022. The big change is that, starting in 2024, you can get the tax credit upfront, which is what I'd recommend because if it turns out that you can't use the whole $7,500 credit because your tax liabilities below that amount, you don't have to pay it back. So, it makes sense to get the credit upfront. What's the risk though? If you don't qualify for the credit because your income is too high, you have to pay it back on your tax return. So, the maximum is $7,500. You get it through a licensed dealership. There's MSRP, limits on the vehicles, $80,000 for vans, SUVs and pickup trucks, $55,000 for sedans. And income limits, it's this year or previous year. So, $300,000 if you're married, $150,000 if you're single. So, if you're above those amounts, you're not going to get the credit. So, if you're below that amount, yeah, you will. And the credit's a maximum of $7,500. It could be $3,750. It depends on the battery. It's got to be manufactured in North America. But I'll show you some websites that has all this information because I don't need to, you know, I don't know where the cars are made. I don't want anything about the batteries, but that's okay. The Department of Energy figured that out for us. Here's the information for used electric cars. The credit's up to $3,000, but the car can't cost more than $25,000. So, I'm not sure if you can get a car for $25,000. The HL limits are less, $150 for married, $75,000 for singles. I personally don't think we're going to see much of this. One, can you buy an electric car, a used car for $25,000 or less? It's got to be two years older than the current year. So, we're in 2024. So, it's got to be a 22 model or older. What happens when you buy a used electric car? You might have to buy a new battery. How much those batteries cost? 20 grand, right? 15 grand, 10 grand. So, I'm not sure if this is really that great of a credit. So, before you rush up to buy a used electric car, check the condition of the battery because that's going to be really expensive. The most lucrative credit for electric cars are commercial, clean vehicles. If you have a business, oh, the AGI limitation doesn't apply, the North America limitation is applying, the battery limitation doesn't have to apply. It's a $7,500 credit if the car weighs less than 14,000 pounds. If it weighs more than 14,000 pounds, it's a $40,000 credit. That's huge. What's a 14,000-pound car? It's those Amazon trucks out there. Do you see those electric Amazon trucks? Those are 14,001-pound. That's what that is. Okay. And here's the websites you can look at, fueleconomy.gov. I think that's the Department of Energy website. It's got a, what you can do to make it easy is, if you're not sure about your car, type in the VIN number into the website. Ding, they'll tell you what the credit is. So, the VIN number will be specific to your vehicle. They'll tell you what the battery situation is and what the manufacturer situation is because I don't know if that car, like a BMW, a lot of them are made in Spartanburg, North Carolina or South Carolina. So, even though it's a BMW. Okay. I'm kind of picking up my pace here because our time is going a bit quick. Okay. If you can itemize, here's Schedule A. We're going to walk through Schedule A here. So, first part of Schedule A, what are first itemized seductions? Medical and deductible dental expenses. It has to exceed 7.5% your adjusted gross income. That's why that line is so important on your 1040. So, I think we can think of your normal medical expenses like, and the magic words are expenses incurred for the cure prevention and mitigation disease. So, copays, out-of-pocket fees, lab fees. If you're on Medicare, they don't cover eyes. They'll cover your eyes, ears or teeth, right? So, those are out-of-pocket expenses. Hearing aids. Oh, God, they're expensive. A client got those new digital hearing aids. $4,500. How did I know that? Well, she got their brand new digital hearing aids. She looked into the San Francisco Bay. She just happened to be looking at the San Francisco Bay. She got hit by a gust of wind. Boom! Her hearing aids ended up in the bay. $4,500 in the bay. God, that's expensive. So, my recommendation, you are going to get those high-priced hearing aids by the insurance. I think it was only $150. Well worth it by the insurance. You never know if you're going to lose your hearing aids in the San Francisco Bay or not. The other medical expenses, I had a client in, he lives in San Francisco. San Francisco is a bit hilly. So, his house is three levels. You walk in the front door, that's the living room and kitchen, room upstairs, his bedrooms downstairs. Well, he lost a leg. He lost a leg. He was on Coumadin. He didn't die, but he lost a leg and because of that, he couldn't navigate his house. So, he had to put an elevator in his house. In the year we did it, it cost $17,000. So, we took that as a medical deduction. He also remodeled his bathroom. So, he can use the toilet. So, he can shower. He had to put a wheelchair ramp in front of his house. He can wheel into his house. Those are all deductible as a medical expense. You cannot double count as your basis in your home. So, don't add it to your cost basis if you're going to deduct them. This makes sense if you're atomizing and it helps reduce your taxes. So, okay. The next one are taxes you pay. Well, if you look at line E here, the limit is $10,000. Well, you know, we're in the Bay Area, you know, state taxes, property taxes, you easily get to $10,000 pretty darn quickly and that's all we can deduct. Okay. Mortgage, the deductible limit for a mortgage is currently $750,000 a principle. If you got your loan before December 15th to 17th, that's a million dollars. So, a common question I get here in the Bay Area is you have two people own a home together, but they're not married. Not married. So, that means each of them get the $750,000 limit. So, that gives you another excuse for not getting married. That can save you a lot of money. If you get married, you're down to $1,750,000 limitation. Smaller deduction, right? Giving money to charity. Great way of reducing your taxes. Just make sure you get a thank you letter and a receipt if it's $250 or more. If you give non-cash, like use clothing and all that, more than $500, make sure you include Form 8283. If you decide to give non-cash contributions of more than $5,000, you need a qualified written appraisal. And what is part of that? Cryptocurrency. If you're going to donate cryptocurrency, get an appraisal of the cryptocurrency. You can't rely on the exchange. The exchange says, hey, it's worth 10 grand. Well, that's great, but you need an appraisal for that. Okay. I'm going pretty quickly because we're running out of time. So, I can circle back in more detail. If you guys have questions, I see a lot of questions coming in the chat. I will get back to them. Okay. Casually and death losses, oh yeah. You get your catalytic converter stolen. Your bike gets stolen. Your car gets hit or whatever. Your insurance doesn't cover it. Not deductible because it's not part of a federally declared disaster. We've had a few of those, right? We had the winter storms last year. We had the wildfires. Those were federally declared disasters. So, if you have losses as result of those federally declared disasters, yes, we can claim those losses. Line 16, other itemized deductions, that's where you put your gambling losses. And then line 17 is your itemized deductions. If it's greater than your standard deduction, by all means, we claim this. And here's a summary of the standard deduction. Well, look at 22. Let's just focus on Marathon and Joining. 25,900 for 2022. Look, it jumped to 27,723 because we had high inflation in 22. And then we had high inflation in 24. Not as high as 22, but we still had high inflation in 23. So, it went up. It's now 29,200 for 24. Single people, 14,600. That's the amount of tax-free income you can have as long as you're working. Okay, the back side of 410.40. That's the taxes, payments, and refund amount. Let's go into detail here. So, taxes, line 16, that's where you figure out your tax liability. Now, if you have capital gains, you get the preferential rates there. But we have, let's see, line 19 is the child tax credit or credit for other dependents that we talked about earlier. That's $2,000 for a child, $500 for other dependents. So, that's very important there. Line 23 or other taxes, most notably, it'll be self-employment tax. And then here's a chart of the tax brackets. So, let's just go, let's help the 24 here. So, you know, most, I don't know, depending on where your income is for singles, you don't hit the tippy top tax bracket until you have $690,000 married, filing joint, $731,000. So, I have clients complaining, oh, I'm such a high tax bracket. No, you're not. You're in a 24% bracket. You're in a 22% bracket. You've got a ways to go before you hit the top tax bracket. So, but at these levels of taxable income is what brackets are in. So, that's something to consider when it comes to our tax planning. Okay. And then we get the payments. Yeah, your payments could be through your withholding. That's line 25A, your W2, 1099, that could be through your pension, right? Also, through your social security and withholding through there. I like to have as much taxes taken out that way. It's a lot easier than writing checks. Line 25 or estimate payments. You either pay by check or you pay online or whatever. I prefer to pay online, to pay on the IRS website, irs.gov slash direct pay. A lot safer nowadays is a bit dangerous to mail a check because they either lose it, it doesn't get cashed, and then they say you didn't pay, then they impose interest on penalties. So, pay online. Best way to go, you get a confirmation number and a receipt too. That's really helpful. Let's see here. Line 28, additional child tax credit. That's the number that could possibly change. We'll see what happens. Line 29, American opportunity credit. That's the tuition credit for your kids in college. All right. So, line 33 is a total of all your payments. If that number is bigger than your liability, then you have a refund. If it's less than you owe, if you have a refund, you know, don't take a check. Don't take a check for federal estate. Have a direct deposit. So, line 35, B and D, get enter your routing number and your account number. Make sure it's a good bank account. It gets confusing if you enter a wrong bank account there, like an account that's closed. The IRS knows your bank account already anyway, so get a direct deposit. Because one of my clients, she, her, it just so happened, her federal and state refund was in the same mail truck, and the mailman got mugged. He got mugged, and so her refund checks got stolen. To make it worse, the person who stole it signed her name, and we got a copy of the cancel checks. It's really creepy to see someone sign your name. It took almost a year to get the refund. It was a real pain. So, for now on, she's getting her refunds direct deposit. Okay. If you owe, same thing. Don't set a check. That just hasn't been working so well. However, if you look at line 35A, you can use form 38888 to allocate your refund up to three accounts. You can go to a check account, savings account, an IRA account, HSA account to fund your IRA or HSA. But look at part two. Part two is savings bonds. You can buy up to 5,000 nursing savings funds for yourself. Well, for other people, like for your kids or grandkids, $5,000. Way easier than doing it online with Treasury Direct. And I think my next slide's about I-Bonds. So, you get I-Bonds. They pay for 30 years. It's risk-free. You only pay federal tax, no state tax on that. I stands for inflation. So, it's just twice a year, May the 1st and November the 1st. So, the last adjustment was May the 1st of 23 and until April 30th of 24 is 5.27%. What do you think? Inflation is kind of cooling off, right? So, maybe in May it'll go down. So, maybe we want to buy those bonds before May 1st of 24. Look at May of 22, October of 22. Remember the sky-high inflation we had? Look at, look at what it's paying. 9.62%. Wow. So, it's based on inflation. It's to protect your front inflation. It's not for your everyday money, but I think it's a great way of saving, right? And you can't buy that much anyway. You're limited to $5,000 for the refund or if you buy from the US government, it's $10,000. So, I'm not telling you to put all your money in there. I'm showing the bottom of your tax return because look at sign here. What does it say there? Under penalties of perjury. I declared that I've examined this return and accompanied schedules and statements and to the best of my knowledge and belief they are true, correct and complete, right? You're signing under penalties of perjury. That's very serious. So, take it seriously. And it's amazing how people don't do that and they get into big, big trouble. So, don't lie. Don't cheat. I've been doing this for 38 years. People try to lie. Well, anybody who tried to cheat, they're not my clients. They're ex-clients because you don't save anything by cheating. So, what's the point of cheating? It doesn't save you any money. So, it doesn't help. Okay. In the final minutes here, let's go over really quickly here. What can you do to lower your taxes now? Well, take advantage of your pre-tax retirement plans. You're 401K, 403B, 457TSBs. If you qualify for a traditional IRA, contribute to it. You got to April 15th of 24. So, you figure out if that will help you or not. Take advantage of the health savings account. I'm a big fan of that. You have to use a high deductible health plan. But what's the advantage? Lower premiums. And you got to April 15th of 2024 to fund, to top off your 23 deduction. And that's reported on Form 8889. If you're over 7.5 and you have an IRA account, don't write checks to your charities. Take it out of your IRA account. Because you're not getting deduction anyway. You're most likely not itemizing. So, you can distribute up to $100,000 from your IRA to your favorite charities. It fulfills your required minimum distribution. So, the money has to go directly from the IRA to the charity. For $24,000, that goes up to $105,000. And if you want to know more about it, we can talk about it some more. How else can you lower your taxes? Adjust your withholding. Make sure it's enough or bump up your withholding if you're getting so security. Have withholding that you're so security. Make sure you have enough taken out of your IRA distributions or whatever. Because if you don't have enough taken out, you're going to owe. And if you can't pay it all now, it's going to cost you more because you got interest abilities and estimate payments too. So, paying your taxes will save you money. Okay. How can you lower your taxes in the future? And this can be a totally different seminar is taking advantage of Roth contributions. And like Jonathan's putting in the chat here, staying out of trouble and not getting into tax trouble. But Roth contributions, but back to a Roth, a mega back to a Roth. If you have a home, keep track of your home improvements. That's going to be pretty important when you sell your home. How do you figure out the basis? Don't throw that away. There's going to be tax considerations in any of our life changes. If your spouse dies or if you die, if you get married, you get divorced or you have a kid, these all change your tax planning and something to be considered here. If you're a business owner, if you're a business owner, you have a business. We've heard a lot about the employee retention credit. Well, what the IRS has now is the IRS withdrawal program. If you submitted an ERC claim, but you don't qualify, the IRS allows you to withdraw it without any penalties or anything like that. That's ongoing right now. No deadline on it. However, let's say you got the ERC, you cashed a check already. Uh-oh. Well, the IRS just implemented the volunteer disclosure program where you go, uh-oh, I don't deserve it. I know a person. He got a million dollars of ERC. He doesn't qualify. Why did he get it? His buddies all got it. They don't qualify. Well, with this volunteer disclosure program, until March 22nd of 2024, you can pay back only 80% without any interest or penalties. So we'll see what happens with that. Otherwise, there's going to be an audit and then there's no, you're going to pay the whole thing plus interest and penalties. So that's a big topic. The other topic, if you're a business owner, you have a business entity. This thing called the corporate transparency app is for beneficial ownership information reporting. The governor wants to know who owns your business because of money launders, human traffickers, oligarchs and all that stuff. So it's administered by FinCEN, the Financial Crimes Network. For existing businesses, you got to January 1st of 25 to report. If it's a brand new business, you got to do it within 90 days of creation. However, if there's any corrections updates or changes, you got to within 30 days. And there's some nasty penalties, $500 a day penalties or up to $10,000 imprisonment up to two years. So that's kind of a big deal. So some resources, I got you the link to the Form 1040 that we just went over and the instructions to the 1040. Publication 17 is a great comprehensive booklet. Your federal income tax, it's only 142 pages. I love reading it. I know in the San Francisco Maine Library, you guys have a VITA or tax aid. I'm here in San Mateo. I'm actually here at the college of San Mateo. We have the VITA program that's going on right now as we speak on Saturdays. If you're in the San Mateo community, you can sign up. You can check to see what VITA sites are close by. There's income limitations and complexity limitations too. If you have a complex return, you won't qualify. Speaking of the Corporate Transparency Act, I am giving a free presentation with the Benner Business Bureau on Wednesday, February 21st, 2024. It's a nine o'clock Pacific time and here's the link to register for that. So I'm going to go over all the details about the Corporate Transparency Act and what you need to do to comply. It's very complicated. But I thought it's very important to have this presentation and hopefully many people apply. So spread the work to your people who own business entities. So take a look at that. And I think that takes us to our last slide and I think we're doing okay with the time. Okay. So Jonathan, I'm going to turn off the share and I'm going to work on answering questions as long as we can. How much time do we have? About six minutes, but we can go over a few minutes if necessary. Let's say 10 minutes. Okay. Why don't you give your closing statements and I'll just work our way through the questions here. Okay. Well, I just I really want to thank you, Larry. This was a great presentation. I personally found it very helpful. And yeah, we're really lucky to have you here. I'm very generous with your time and your expertise. I just want to thank everyone else for joining us today. We'll get to your questions and please check out our other tax programming that we have coming up. I put some links in the chat for those. Those should be good compliments to Larry's program today. So let Larry get back to the questions. Okay. So let me let me let me get to the questions here. Okay. Let's say some of these we already answered. Okay. I'm starting chronologically. So the earlier ones first and Lily's got a question with a 1099 miscellaneous requirement. It's still $600 on the current year, the $1,000 of proposals in the proposed legislation. So that's not long yet. And that would take an effect in 24, not retro 23. But but you still got a file. You have include you have to include all your income doesn't matter if you got a 1099 or not. So for example, in my office around the corner for my office is the chiropractor. He drives a yellow Corvette. Okay, he drives a yellow Corvette. He came in for a tax consultation. And I looked at his tax returns. I want you to keep amending your return. Why do you keep correcting your returns? Oh, I keep amending because I keep getting these 1099s. I go, no, no, you should report all your income. You should have a system to keep track of all your income. It doesn't matter if you got 1099 or not. No, no, no, no, I only report what I get in 1099s. I go, no, because you get co-pays, you get cash payments and all that. You got to report all your income. Doesn't matter if you got 1099 or not. Well, since he cheats on his taxes, he's not working on my back. So he did not become my car proctor because I told him to go away. I don't work with tax cheaters. I can't afford it. I have a license to maintain. Okay, so no, you have report all your income doesn't matter if you get 1099 or not. Okay. Okay. Oh, Wendy's got a question. Should I report 1098T, 1098 tuition on parent and child tax return? That's a good question. So if it's your child who's dependent, then if, and you can qualify for the American opportunity credit, then of course that goes on your tax return. Now, if the child is not a dependent, then they file on their tax return. Okay. Jail's got a question. How does rounding work? Well, rounding is if it's a 0.5 or higher that goes up to the next dollar, 0.5 or less goes goes down. So for example, $100, $100 and 25 cents, that's around $100. $100 and 62 cents, that's around to $11. Okay. Allison's got a question. For the IRA deductions that differ from my employer for on K. Yes, it is because that's a contribution to an IRA account. However, deductibility is based upon your level of income. Okay. All right. Okay. So is a $10,000 maximum deduction of property tax includes mortgage insurance interest or, oh, the $10,000 state and local tax deduction, that's only for state and local taxes, property taxes, income taxes, DMV fees and those kinds of things. Interest is a separate line. The limitation of interest, if you get the loan after December 15th to 17th is $250,000 a principal. If it's before that, it's a billion dollars. And no deduction for home equity loans. There used to be $100,000 allowable amount to be deducted. Not anymore. Okay. Daniel, federal free file. Okay. I really can't talk about federal free file because I'm not really up on that. And I don't really have been paying any attention to it because I don't think that's a good idea. Taxes are incredibly complicated. So if you only do it once a year, that's a steep learning curve. I'm not comfortable with that to be honest with you. And also it's being oversold by the government and I don't really believe it. Okay. Gail's got a question. Do the EVs need to be manufactured in the U.S. from credit? It's North America, which includes Canada, U.S. and Mexico. So North America required for personal, for business, doesn't matter. Is line of credit interest deductible? No. How long do you have to own the car? Actually, you took the credit. Well, you have to own the car, right? You can't resell it. What does the door and window has to do to qualify? Okay. You're talking about home energy efficient credit? Yeah. If you get a new window, get a door, that'll qualify. 30% that cost would be for the home energy improvement credit. Okay, Daniel, my niece started a job last year. I want to help her open an IRA for income earn. Oh, good job, Uncle Dan. I don't think she would have earned enough to file taxes. No problem. So for determined cruel second, do I just use the amount of W2 with the job as tip based? Not sure to employer factors in W2, blah, blah, blah. Oh, that's a good question. Well, first of all, if her tax is going to be zero, because if she made less than the standard deduction, then if her taxes are zero, I would just go with the box one amount, the W2 amount. If it's more than 6,500, the limit is 6,500 for 23. If it's less than 6,500, I'd just go with box one in a Roth IRA. So Roth IRA makes the most sense for her. And here's the beauty. To have a qualified Roth IRA, you have to have it for at least five years. So if she's young, five years from now, she'll have a qualified Roth IRA. Yay. Good job, Uncle Dan. Okay. Is there a tax rate for installing EV charger at home? Yes, there is. However, it's only restricted to rural areas and low income areas. There's a website to type in your zip code to see if you qualify, but I don't think we have any of those here in the Bay Area. Can you refer a solar panel you used? Not publicly. Okay. What about tax revenue for installing the home? Yes. That's part of the home energy efficient credit. That's part of that $600 limit. Okay. So when your income's above the limit, can you get the EV credit up front? Yeah. You can get the credit up front. If your income's too high, it's based on this year's income or last year's income. If the income's too high, you got to pay it back. It's on the tax return. You got to pay it back. If you got to 7,500, you got to pay it back to 7,500. Can you get the EV credit every year? What is this? Every three years, I think? Every three years? I think you can't get it every year. I don't have that memorized. But you get it. Your spouse can get it, something like that. If you sell or use things online, such as eBay or Poshmark, are we concerned in business? Have I followed business or as an individual? Very good question here. That's a good question, Monica. It depends, right? If I'm just getting rid of my used clothes and making some money on it, and you probably paid more for it, right? For example, let's say you sell something at eBay. You got 700 bucks. eBay sends you a 1099 for 700 bucks, but that item costs you 1,000. On schedule one, you report to seller ours of income because that's the 1099 you got for eBay. On page two of schedule one, you deduct $700. You can't claim a loss, $700 because 7 minus 7 is zero. If you sell items online for family members in different states, that gets a lot more complicated when you're dealing with state taxes. So got to be careful about that because you might have to follow another state tax return. What if I donate 10 times of 500, ends up to be 5,000, still need a clue for, oh yeah, oh yeah. There's a case that just happened last year. I think these people in San Francisco, they were so clever. They went to Salvation Army, Salvation Army and Goodwill, 173 times. They're so clever. They think they can get away with not having to get a receipt because they said every time I did it was less than $250, so I don't need a receipt. No, it's free as if it's one donation. It was over $5,000. No appraisal or they lost a whole deduction. So don't be clever, okay? If you think you're being clever, they've already thought about it. Okay, form 80 to 83 is for $500. Yeah, $500. If you donate more to 500 bucks, fill up form 80 to 83. How do you know a backdoor Roth is beneficial? How to best do a backdoor Roth? I'll tell you what, though Jonathan, have us do a seminar on that, okay? That's a big, big, big topic. If a college class includes a triple receipts, does a trip expenses concern college expense for tax purposes? No. Okay, let's see here. Thank you. Can I claim my son is dependent on a federal tax and file for his own estate taxes? No. You have to be consistent. You can't say, oh, he's dependent for federal purposes and not for state purposes. Can't do that. Does IHS get included in income? Oh, thanks for bringing that up, Anna. That's a good question. So if you do receive IHSS, it stands for what? In-Home Health Services and it's tax-free. So it's not included in income. It's tax-free. However, for purposes of iris, a street is earned income. So you can put a Roth IRA against, I would recommend a Roth IRA against this. So let's say I got $10,000 at IHSS. I could put up to 6,500 bucks in there. Pretty good deal there. Can I split interest with my brother if he's not in the same income? Okay, Joe. So can I split interest? Does that mean you guys have a bank account together? Well, probably not a good idea. So if you look at the 1099, whose social security number is on the 1099? Probably yours, right? Okay. How to report general contributions via QCD. Good question. So you'll report it on line 4A of the 1040. So let's say it's $10,000. And I gave the whole $10,000 to my favorite charity. So 4B will be zero. On the line next to 4B, I put the letters QCD for qualified charitable distribution. If you're using tax software, there's a box to check to report that. For people who have purposes for your files, make sure you get a thank you letter from the charity, and you get a receipt from the investment company or the financial institution that holds the IRA, showing it coming from the IRA account to the charity. And then you'll be good. Okay, Christina, let's see. Let me get to your question, Christina. Foreign account. Ah, we didn't talk about foreign accounts. Okay. Hong Kong banks even if I need to report any interest for that foreign account, I received a certain amount of money compensation for moving out of a rental property. That property belongs to a nonprofit making organization, which is going to redevelop the whole housing estate. Do I need to report the compensation? Oh, okay. All right. On schedule B, on the bottom of schedule B, if you have an overseas account, no matter how much money is in there, you got to check yes to that box. However, if you have more than $10,000 in overseas account, you need to fill out form F bar form 1114 a to report that foreign bank account and the highest balance in the account number and the address of the financial institution. So that's with FinCEN. So that is required. Now, it sounds like you got paid some money for moving out of a rental property. Yeah, what is that? Is that income? Most likely. So it just happens in San Francisco. I call them extortion fees to get rid of a tenant. You have to pay a bunch of money. Well, that's taxable. That's not tax-free. So I had a case, I know many cases in San Francisco, where we had to get rid of a tenant. We had to give him like $65,000. Boy, did they get angry. Well, hey, you think it's tax-free? Come on, you got $65,000. You got to pay taxes on it. Okay, Daniel's got a question. I have a few, I have a few hundred dollars each year of foreign tax credit for index fund investment. 2022 was the first year amount was just above the minimum that required complaint form 1116. Okay, form 1116 was a lot more complicated and convoluted than I anticipated. You bet you. And wasn't confident as I completed correctly, even though most confident final value I transferred back to schedule three was correct. I guess questions and audit risk in a form is not completely correct. Okay, all right. So form 1116 is how you report your foreign tax credit. Now, if you're foreign, and I unfortunately don't have this memorized off the top of my head, I think if you're single, if it's 300 or less, you don't have to file form 1116. If you're married is 600 or less. So if you're below those amounts, you elect out of filing form 1116. What's the downside of doing that? If you have a carryover, because you couldn't use the whole amount, you'll lose it. But by filing the form 1116, you get to take advantage of the carryover. Yeah, it's a complicated form because that's a whole semester in tax school. Okay, all right. All right. Okay. Okay, so I think, I think, Jonathan, I think we hit all the questions here. Yeah, I think we hit our questions here. So I think we're, we're great. Well, thank you for coming. I hope this was helpful. And the hard part was trying to pick which topics to cover. I mean, this was different than what we did last year. Last year, we had the winter storms. That was a big deal. Yeah, well, thank you so much again, Larry for joining us today. And thanks for everyone that joined us from home and also for the folks who joined us from the bridge learning studio on the fifth floor of the main library. Any questions from the bridge? I don't know if we had any questions from the bridge or not. Could you tell? I didn't see anything in the chat. So I, I'm guessing not. I just want to make sure I don't miss anybody. Oh, there they go. Excellent. Okay, well, yeah, thank you again, Larry. Really appreciate this. This was fantastic. Hope to have you back for more tax updates since, as you explained, this is constantly changing. So, yeah, hopefully we'll see you again soon. And we saw the, the Corporate Transparency Act. And, and, you know, Michael Finney of General Sound always does a tax calling show. So keep an eye on when he's going to do that again. I plan on volunteering for that again, too. That's always a lot of fun. Great. Thank you. All right. All right, everyone. Have a great afternoon and hopefully we'll see you at our next program.