Groce Law Firm, Ltd.

Payment Apps & Tax Form 1099-K

Payment Apps & Tax Form 1099-K Howdy, this is David Groce, your Texas Tax and Law Man. Let’s talk about the IRS wanting to tax money you receive on Zelle, PayPal, Venmo, and apps like that. Margaret Thatcher famously quipped, “Socialism is great until you run out of other people’s money.” It’s a hard realization that Uncle Sam has a spending problem. They keep spending more than they are making in taxes. Their solution is to simply tax you and me more. Bernie Sanders, the confessed socialist, wants to tax your credit card bonus points. The IRS has not come after that yet, but they sure would like to. However, the IRS has announced its intention to make everyone report the money they receive via payment apps. They started in 2022 and delayed amidst public pushback. The IRS delayed again in late 2023. However, for 2024 the IRS has announced its new $5,000 threshold for making payment apps send 1099Ks. Also, the 2024 Form 1040 will now have a place for us to report this 1099-K. Even with this increased threshold, the IRS expects payment apps to send 44 million Form 1099-Ks. As a compromise, the IRS indicates that taxpayers will not have to report these payment unless they meet two targets: • Receive more than $20,000 per year and •Have more than 200 transactions. If this is truly the new threshold, then most people who split payment for a meal or give their kids money should be fine. For business owners receiving payment this way, they are probably already reporting these payments on their P&Ls. But for those in the middle, welcome to the new rules. If your business is growing and you need help making the next steps of creating an LLC or expanding your business, give us a call. We would love to help you, your family, or your friends. Until next time, adios.

Gift & Estate Tax

Changes to the Unified Transfer Tax Howdy, this is David Groce, your Texas Tax and Law Man. Let’s talk about the Gift and Estate tax, technically called the Unified Transfer Tax. When I started practicing law in 1995, the IRS wanted 55% of your assets over $600,000. That was really oppressive. A family could work their whole life, building their business or maintaining their farm. Then when they pass, the IRS was standing there, hand-out, asking for more than half of the assets. Fortunately, we received the Bush Tax Cuts and the $600,000 exemption increased to $5,000,000, then in 2013 Obama made this exemption permanent at $5 million indexed to inflation. The Trump Tax Cuts and Jobs Act in 2018, then doubled that exemption from $6M to $12M per person. That means a married couple can pass $24M to their family and pay NO TAX. For 2024, the exemption is $13.61 million per person. However, like the other provisions of the Tax Cuts and Jobs Act, Congress made this law sunset on 12/31/2025. On January 1, 2026, the exemption rolls back to just under $7 million per person. For the majority of people, this is an effective repeal. And I think that is great for all Americans. But for some, especially those with growing businesses or highly appreciated real estate, we may need to keep the tax in mind. Also, don’t forget the annual exclusion gift, which allows you to gift $18,000 each year per donor per done. It’s a great way to help kids make a down payment on a house or deal with the unexpected. Keep us in mind when you think about estate planning. We regularly help clients draft wills, trusts, and complex estate plans as well as powers of attorney, medical powers of attorney, and physicians directives. Until next time, adios.

Bonus Depreciation & Section 179

Bonus Depreciation & Section 179 Howdy, this is David Groce, your Texas Tax and Law Man. Let’s talk about one of the juiciest deductions in the tax code - Bonus Depreciation. Bonus depreciation allows a business owner to deduct the purchase of new equipment in the year of purchase instead of spreading it over multiple years. The Tax Cuts and Jobs Act spoiled us. For the last 5 years, we have been used to deducting 100% of the purchase of new equipment. However, this deduction phases out. In 2023 it fell to 80%. 2024 its 60%. 2025 will be 40%, and in 2026 it will be 20%. Without new law, the bonus depreciation will be gone by 2027. Even if that is true, don’t panic yet. Section 179 is still on the books. Section 179 is not as simple or as sexy as bonus depreciation, but it is still a great tool for small business. Let’s look at how it works: • Section 179 allows a business to expense up to $1.2 million for 2024. • So long as the business buys under $3,050,000 in total equipment. The 179 deduction gets reduced for every dollar spent over that amount. • Section 179 applies to business assets with a depreciation schedule that is less than 20 years, that includes trucks and large SUVs. Bonus depreciation was nice, because a business owner reported it as “Depreciation” on page 1 of the business return - 1065 or 1120S. Section 179 gives you essentially same deduction, but it shows on each owner’s K-1 instead. That is not a bad thing. You just need to be able to identify where it goes for bankers and mortgage companies. If you need equipment to make your business grow, Section 179 is still a great tool to allow you to make that long-term purchase and receive an up-front expense. Thanks for tuning in. Until next time, Adios. #taxehelp #taxes #businessdepreciation #businesssupport #taxman #lawman

Avoiding Underpayment Penalties

Avoiding Underpayment Penalties Howdy, this is David Groce, your Texas Tax and Law Man. Let’s discuss Underpayment Penalties. You know, those naggy letters you receive AFTER you pay your tax. First, interest rates increased five percent last year. In January 2023, the underpayment rate was 3%. Now, it is 8%. This rate is tied to the federal interest rate and moves as rates change. Second, who owes an underpayment penalty? • For most filers, there is no underpayment penalty if the balance due the IRS is less than $1000. • If you paid in 90% of the taxes owed for 2023 or 100% of the amount paid in 2022, then there is no penalty. • The threshold increases 110% of last year's taxes for couples making more than $150,000 in adjusted gross income, or individuals above making over $75,000. Third, we can reduce this underpayment penalty for paying your taxes by April 15th. Even if you choose to extend your tax filing until later, you need to send in a tax payment by April 15th. Finally, check out my other video on paying estimated tax payments throughout the year. For large income earners that is the best way to escape the underpayment penalties. If you are enjoying these videos, forward to a friend and have them click subscribe. Until next time, adios.

Subcontractors vs. Employees Howdy, this is David Groce, your Texas Tax and Law Man. Let’s talk about sub-contractors vs. employees. The Biden Administration and the Bureaucrats running the DOJ, IRS, and DOL do not like small business owners. The truth is the government wants everyone who earns income in the U.S. to receive a W-2 because taxes are deposited monthly, if not weekly, you get to take no deductions, and all W-2 wages are subject to the payroll tax which is another 15.3% flat tax on your first $160,000 of income. Recently, the Department of Labor issued its new regulations which formally adopted the “total facts and circumstances” analysis to define who is an employee versus a subcontractor. This test focuses on six primary, but non-exhaustive factors: • Worker’s opportunity for profit or loss. • Investments made by the worker and the employer. • Degree of permanence of the work relationship. • Nature and degree of control over performance of the work. • Extent to which the work performed is an integral part of the employer’s business. • Use of the worker’s skill and initiative. This list simply rehashes the same thing every unemployment agency, the IRS, and the TWC has been saying for years. If you utilize sub-contractors in your business, keep in mind that a sub-contractor is hired to do a job, has flexibility to work for others, and is NOT your employee. Here are three great ways to protect yourself in case the DOL comes knocking: • Maintain an independent contractor agreement. • Clearly define and classify independent contractors. • Employees show up at your office, use your computers and equipment, work on your timeframe, and follow your specific instructions. • You hire subcontractors for a particular job at a time, to do a set scope of work, on an agreed time and schedule. • Hire independent contractors who use their own LLC or business entities. These simple steps enable you to clearly illustrate t

Beneficial Ownership Information

Howdy this is David Groce, your Texas Tax and Law Man. Let’s talk about the Corporate Transparency Act and a new requirement for small businesses to file a Beneficial Ownership Information form with the federal government. A colleague presented this to me over a year ago and I found it hard to believe it was even true, but it is. The Federal Government wants the name, birthdate, address, and a copy of the ID of every corporate officer, executive, or beneficial owner of more than 25% of every LLC in the U.S. This is a massive information grab by the Federal Government. This law will require over 32 million businesses to register this year and then require 5 million plus businesses to file each year. Please understand, this piece of legislation was the ONLY law vetoed by President Trump. However, both houses of Congress overrode his presidential veto on January 1, 2021, and the CTA goes into effect January 1, 2024. This may seem like a shocking statement to some, but this law is specifically designed to target small business owners, LLCs, and limited partnerships. Every entity that files a certificate of formation or articles of organization with a Secretary of State will have to file this report or face penalties up to $10,000 and imprisonment up to 2 years. The stated purpose of the CTA is to end the position of the U.S. as a haven for “shell companies” used to launder money, finance terrorists, commit financial and tax fraud, and conduct domestic and international “illicit activities and corrupt practices.” That purpose statement makes it sound like you having private information is almost criminal. And to the federal government, it’s about to be. The truth is the Federal Government REALLY wants to know all about your small business, who owns it, and who controls it. MUST be filed with the Financial Criminal Enforcement (FINCEN) division of the U.S. treasury. Exempt groups include banks, broker dealers, insurance companies and their agents, CP

Living a Life That Matters Howdy, this is David Groce, your Texas Tax and Law Man. Last time we discussed the bad idea of a house divided. Today, let’s talk about a great idea: Living A Life that Matters. To live a life that matters we have to do the things that matter. That generally requires us to make the choice to put first things first. Jesus called us to lay up for ourselves treasures in heaven where rust and moss do not destroy, and thieves do not break-in and steal (Matt 6:19-21). The apostle Paul echoed this idea with his call to set our mind on things above (Col 3:1) To put first things first, we have to make the intentional choice to prioritize the things that really matter: Family, faith, and service. When put to the question as to what was most important, Jesus answered that we were to love the Lord our God with all our heart, our soul, our mind, and our strength and to love our neighbor as ourselves (Mark 12:30-31). This great command to love God and love others should start at home. My daddy is a man of action who lives a life of humble service loving and serving in his church and through his business. He is a man of few regrets. But one regret he shared with me for inspiration is that he waited too late in life to start taking family vacations. Based on that sage advice, my family and I have prioritized quality time living, laughing, loving, serving, and giving together. We started the summer with a time of refreshment on our first cruise since Corona. We enjoyed a Carnival Cruise to beautiful ports of call and exciting excursions in Mexico and Honduras. We made memories riding jet skis, snorkeling, and touring together. From there we visited with Jennifer’s parents in St. Augustine, Florida, where we played on the beach, steamed crabs, and relished making new memories and recalling old ones. After June refreshment, all of my family, including Jennifer, Teddy, Grace, and I went to Church Camp at Lake Lavon. We each led a group of studen

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Pay Your Kids

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IRS: Still Struggling Howdy this is David Groce, your Texas Tax and Law Man. How’s the IRS doing? After receiving government funding for 87,000 new employees, appointing a new IRS commissioner, and the official end to the Covid crisis, the IRS is supposed to be getting back on track. Unfortunately, the IRS is more like a big train sitting in the middle of the railroad switch yard trying to decide which track to get on. They tried to restart the IRS’s letter sending system to only send erroneous notice of taxes due when they weren’t really due. They still have a backlog of over 3 million unprocessed paper returns. And, they can’t hire qualified workers, much less train them to understand tax laws that increase in complexity each day. Not to mention the specious idea of making every American report Venmo and Zelle transactions over $600. That much information will certainly bog down the system even more and create more confusion than it will generate in revenue. Sadly, the government works on the law of large numbers and hypothetically believe it can collect another 15% on $600 or $90 in tax from 20 million Americans and collect a whopping $1.8 billion dollars in tax. Bernie Sanders certainly wants every American to pay tax on all of our income. He even wants to tax our bonus points on our credit cards. While this looks good on an excel spreadsheet, shaking down 20 million Americans for a $90 tax is a fool’s errand and patently unwise. Long-story short, the IRS is more like a giant train wreck than a monolithic titan coming to squeeze us all. Until next time, adios. #IRS #irsstruggle #taxes

Qualified Charitable Distribution (QCD) External Howdy, this is David Groce, your Texas Tax and Law Man. Let’s take about a Qualified Charitable Distribution, commonly referred to as a QCD. I am blessed to serve many generous people who love giving to the Lord’s work and other charitable organizations. A Qualified Charitable Distribution (QCD) is a great way to accomplish your charitable giving desires while also saving you tax money. And you know I love saving on taxes. To take a QCD, you have to meet the following requirements. You have to have money in an IRA or qualified plan. You have to be over 70 ½ years old. You have to take a distribution from your IRA. For clients that are over 73, they have to start taking Required Minimum Distributions from their IRA. These Required Minimum Distributions, RMDs, are the IRS’s way of making you pay tax on your IRA whether you need the money or not. A QCD is a great way to avoid paying tax on these distributions, if you are willing to donate a portion of that IRA distribution to charity. Each year, an individual taxpayer over 70 ½ can make a QCD up to $100,000. This would apply for a husband and a wife, giving a couple the ability to give up to $200,000 per year from their IRAs and pay NO TAX. Now, I do not have many clients who want to donate $100K to charity each year, but many want to give $5, $10, or $20K each year and a QCD is a great way to do it. To utilize this strategy and save on taxes, you have to do 4 things. • You have to qualify: be over 70 ½ and have an IRA. • You have to take a distribution from your IRA. • You have to donate to charity. • And most importantly, you have to alert your tax preparer. Because the IRA trustee does not know you are giving a charitable gift, the trustee does not send you a form to report the QCD. Your preparer has to report your QCD on Form 8606 with the filing of your personal Form 1040 tax return. When you file Form 8606,