Monthly Bulletin
Date October 2022 | Issue 2022.8

The Importance of Tax Planning


Have you ever thought about tax planning? Why is tax planning so important?
 
Tax planning is the practice of using effective strategies to delay or avoid taxes and can be used to cover several situations and considerations. Developing a plan to defer or avoid taxes by taking advantages of tax law while making sure you approach taxes efficiently. Tax planning improves your vision to save money today and for future needs. There are several basic types of tax planning: federal income tax planning, retirement tax planning, estate tax planning and small business tax planning.
 
Here are several reasons why tax planning is necessary:
 
1.     Lower your taxes:
a.      If you are self-employed it is especially important
b.     If you have significant unrealized losses or gains in your investments
c.      If you have a major event in your life – get married, divorced, having a baby,
retiring
d.     If you have a significant change income

2.     Provides time to make changes or prepare for a tax situation – do you need to change
your W-4 for tax withholding?

3.     Allows you to be ready for and take advantage of changes in IRS and state tax law

4.     Helps you avoid the deadline dread – you will have your information ready early and
won’t have the stress of the deadline and unexpected tax due.

5.     Tax rates are subject to change in 2026 – take advantage of lower rates now

6.     Prepare for required minimum distributions (RMD) by looking ahead – utilize lower
brackets while you can before RMDs start

7.     ROTH conversions – Is it a good time to do a conversion given your income level?

8.     Increase your savings for retirement
 
If you think you could benefit from tax planning please contact our office and set up an appointment.

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Closings and New Hours
Closed November 24th & 25th. We will reopen on November 28th, 2022
Closed December 23rd thru January 2nd. We will reopen on January 3rd, 2023

Office Hours starting
January 3, 2023 - Monday thru Friday 8am-5pm
Lea Ann O'Brian
30 Year Anniversary
Lea Ann is currently a manager with Westbrook & Co., P.C. and has extensive experience in compilation, payroll and sales tax services and also trust and estate work. She is a Certified Public Accountant and is a member of the American Institute of Certified Public Accountants (AICPA) and the Missouri Society of Certified Public Accountants (MOCPA). Lea Ann resides in Lexington and enjoys gardening and spending time with her three children and grandchildren.
Missouri Announces 2022 Income Tax Year Changes


Adoption Tax Credit (ATC): The current qualification rules are expanded for the ATC beginning with adoptions on or after January 1, 2022. The ATC now applies to any person residing in the state who proceeds in good faith with the adoption of a child, regardless of whether the child is special needs. Priority will be given to ATC applications claiming a credit for special needs children who are residents or wards of residents of Missouri.

SALT Parity Act. Beginning with tax years ending on or after December 31, 2022, an S corporation or partnership (pass-through entity) can annually elect to become an affected business entity required to pay the pass-through entity tax.

SALT Parity Act Members Tax Credits: If a partnership or S corporation elects to file a tax return and pay tax at the entity level, a corporation member will be allowed a tax credit on their Missouri Corporation Income Tax Return for their share of the taxes paid. The credit is not refundable and may be carried forward to succeeding tax years until the full credit has been redeemed. To claim this credit, members will complete Form MO-TC and report the credits claimed on their Missouri Corporation Income Tax Return.

Why is this important? Presently, you may only deduct up to $10,000 in state and local tax on your individual income tax return. This important change allows you to pay the income tax at the partnership or S-corporation level, allowing for a full deduction of the tax paid. You then receive a tax credit on your individual tax for taxes paid on your share of the business income.
Upcoming Due Dates

October 31:
         
Employers: Reporting income tax withholding and FICA taxes for third quarter 2022 (Form 941) and paying any tax due.

During November: 
          
Employers – Income tax withholding. Encourage employees to fill out a new Form W-4 for 2023 if they experienced any personal or financial changes. The 2023 revision of Form W-4 will be available on the IRS website by mid-December.

November 10:    

Individuals: Reporting October tip income, $20 or more, to employers (Form 4070).

Employers: Reporting income tax withholding and FICA taxes for third quarter 2022 (Form 941), if you deposited on time and in full all of the associated taxes due.

November 15:    

Exempt Organizations: Filing a 2021 calendar-year information return (Form 990, Form 990-EZ or Form 990-PF) and paying any tax, interest and penalties due, if a six-month extension was previously filed.