To rescind certain balances made available to the Internal Revenue Service (HR 23) – Introduced by Rep. Adrian Smith (R-NE) on Jan. 9, this bill would rescind funds allocated to the Internal Revenue Service by the Inflation Reduction Act of 2022. The bill is designed to “defund” specific enforcement activities, operational support, enhancement to the e-file tax return system, and allocations to the U.S. Tax Court and other Department of the Treasury tax agencies. The bill passed in the House on Jan. 9 and has moved to the Senate,
Protecting America’s Strategic Petroleum Reserve from China Act (HR 22) – This bill would prohibit the Department of Energy (DOE) from selling crude oil to any entity under the ownership, control, or influence of the Chinese Communist Party. The bill was introduced on Jan. 9 by Rep. Cathy Anne McMorris Rogers (R-WA). It passed in the House on Jan. 12 and is currently under consideration in the Senate.
Born-Alive Abortion Survivors Protection Act (HR 26) – An example of one of many abortion-related bills introduced by the House in the new 118th Congressional Session, this Act would require healthcare practitioners to exercise the proper degree of care in cases where a fetus survives an attempted abortion – including ensuring the neonate is immediately admitted to a hospital. Failure to provide such care or failure of others to report the crime would be subject to a fine and/or up to five years in prison. Furthermore, anyone who intentionally kills the neonate would be subject to prosecution for murder. However, this bill would bar criminal prosecution of the birth mother in these circumstances and permit her to bring civil action for these violations if perpetrated by others. The bill was introduced by Rep. Ann Wagner (R-MO) on Jan. 9 and is under assignment in a House committee.
Fair Tax Act of 2023 (HR 25) – This legislation was introduced in the House by Rep. Buddy Carter (R-GA) on Jan. 9. It is currently assigned to committee for consideration. The purpose of the bill is to replace the current income tax system (including payroll, estate, and gift taxes) with a national consumption sales tax on goods and services. Instead of paying the current 10 percent to 37 percent tax rates based on income bracket, as well as eliminating all deductions and credits, U.S. residents would pay a minimum 23 percent federal tax (in addition to state and local taxes) on all purchases, regardless of income bracket. Exemptions would include property or services purchased for business, export, investment, or state government functions. The flat rate would essentially tax a higher percentage of income from low earners while high-income earners would have more assets available for savings and investment that would not be taxable. Each state would bear the responsibility for collecting and remitting this federal sales tax to the Treasury.
Overhauling the National Tax System, Eliminating Oil Sales to China, and Criminalizing Late Abortion Attempts
February 1, 2023 · Blog, Congress at Work, Uncategorized
⏱ 3 min read
To rescind certain balances made available to the Internal Revenue Service (HR 23) – Introduced by Rep. Adrian Smith (R-NE) on Jan. 9, this bill would rescind funds allocated to the Internal Revenue Service by the Inflation Reduction Act of 2022. The bill is designed to “defund” specific enforcement activities, operational support, enhancement to the e-file tax return system, and allocations to the U.S. Tax Court and other Department of the Treasury tax agencies. The bill passed in the House on Jan. 9 and has moved to the Senate,
Protecting America’s Strategic Petroleum Reserve from China Act (HR 22) – This bill would prohibit the Department of Energy (DOE) from selling crude oil to any entity under the ownership, control, or influence of the Chinese Communist Party. The bill was introduced on Jan. 9 by Rep. Cathy Anne McMorris Rogers (R-WA). It passed in the House on Jan. 12 and is currently under consideration in the Senate.
Born-Alive Abortion Survivors Protection Act (HR 26) – An example of one of many abortion-related bills introduced by the House in the new 118th Congressional Session, this Act would require healthcare practitioners to exercise the proper degree of care in cases where a fetus survives an attempted abortion – including ensuring the neonate is immediately admitted to a hospital. Failure to provide such care or failure of others to report the crime would be subject to a fine and/or up to five years in prison. Furthermore, anyone who intentionally kills the neonate would be subject to prosecution for murder. However, this bill would bar criminal prosecution of the birth mother in these circumstances and permit her to bring civil action for these violations if perpetrated by others. The bill was introduced by Rep. Ann Wagner (R-MO) on Jan. 9 and is under assignment in a House committee.
Fair Tax Act of 2023 (HR 25) – This legislation was introduced in the House by Rep. Buddy Carter (R-GA) on Jan. 9. It is currently assigned to committee for consideration. The purpose of the bill is to replace the current income tax system (including payroll, estate, and gift taxes) with a national consumption sales tax on goods and services. Instead of paying the current 10 percent to 37 percent tax rates based on income bracket, as well as eliminating all deductions and credits, U.S. residents would pay a minimum 23 percent federal tax (in addition to state and local taxes) on all purchases, regardless of income bracket. Exemptions would include property or services purchased for business, export, investment, or state government functions. The flat rate would essentially tax a higher percentage of income from low earners while high-income earners would have more assets available for savings and investment that would not be taxable. Each state would bear the responsibility for collecting and remitting this federal sales tax to the Treasury.
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
Natural language processing (NLP) is a technology that allows computers to understand and process human language. Processing of natural language is necessary when you want an intelligent device to follow your instructions. NPL is an artificial intelligence (AI) component with many real-life applications.
As technology advances, business leaders have to figure out how to tap into the new trends to remain relevant, stay ahead of competition, and meet consumer expectations and needs.
How NLP Works in Brief
NLP involves making computers perform tasks with the natural language humans use. The input and output can be spoken or written text. NLP combines computational linguistics – rule-based modeling of human language – with statistical, machine learning, and deep learning models.
NLP aims to build machines that understand and react to text or voice data and then respond with text or speech in a similar manner as humans do. Examples of NLP in real life include voice-operated GPS systems, personal assistant apps, speech-to-text dictation software, and customer service chatbots.
As businesses seek better ways to improve efficiency, NLP is one technology promising huge rewards for enterprises dealing with vast quantities of unstructured text. In accounting, unstructured data include transaction descriptions, invoices, written communication, etc.
The use of NLP is growing significantly in enterprise solutions designed to help streamline business operations. Large companies such as Deloitte, Ernst & Young (EY), and PricewaterhouseCoopers (PwC) have implemented various NLP solutions. A good example is Deloitte, which incorporated NLP into its Audit Command Language to improve contract compliance.
How NLP Can Improve the Efficiency of Accounting Processes
Areas in which NLP helps improve efficiency include:
Forensic Investigations When CPAs want to perform forensic investigations, they have to deal with significant amounts of data from documents such as bank statements, transaction data tables, and data found in emails or deposition transcripts. Analyzing all the data as they try to look for specific patterns or gain insights is challenging. However, the application of NLP can be helpful in the investigative analysis process. NLP using algorithms can identify patterns automatically and reduce the time it would have taken to analyze the documents.
Accounting and Auditing Auditing is challenging due to the process of reviewing financial statements and ensuring they match regulations and legal standards. Auditors must have excellent analytical and decision-making skills to spot inaccuracies in financial statements. However, NLP helps to optimize the auditing process.
Financial Analysis and Automated Generation of Financial Reports NLP can automatically extract financial data from balance sheets, income statements, and cash flow statements. This can cut down on time and error-prone work. At the same time, it can obtain insights from massive financial data sets and financial reports. This enables accountants to make data-driven decisions and quickly identify trends and patterns in the data, hence, making it easy to provide guidance to clients on investments and household finances.
Automated Data Entry NLP can be used to extract data automatically from unstructured text documents, including bills and receipts. It also can be used to automate the entry of data from tax documents and input it into accounting systems. This can cut down on time and error-prone work.
Improve Centralized Data Management Solutions Incorporating NLP in accounting and procurement helps improve the ability of a centralized data management system to collect and integrate data from different sources. This enables standardization and collaboration. Additionally, the data provided has higher-quality insights. As a result, there is better financial planning and improved risk assessment and management.
Customer Interaction NLP can be used to enhance the effectiveness of customer interaction. This is done by automating the procedure for responding to client inquiries, such as concerning invoices, payments, and account balances.
Conclusion
Natural language processing is proving to be a powerful technology that can help improve the efficiency and effectiveness of accounting processes. As it continues to evolve, it will likely become an increasingly important tool for accountants and other financial professionals. Most importantly, these advanced technologies take care of manually reviewing unstructured data. This helps businesses scale and – at the same time – reduce costs.
How To Use Natural Language Processing To Improve The Efficiency Of Accounting Processes
February 1, 2023 · Blog, Uncategorized, What's New in Technology
⏱ 4 min read
Natural language processing (NLP) is a technology that allows computers to understand and process human language. Processing of natural language is necessary when you want an intelligent device to follow your instructions. NPL is an artificial intelligence (AI) component with many real-life applications.
As technology advances, business leaders have to figure out how to tap into the new trends to remain relevant, stay ahead of competition, and meet consumer expectations and needs.
How NLP Works in Brief
NLP involves making computers perform tasks with the natural language humans use. The input and output can be spoken or written text. NLP combines computational linguistics – rule-based modeling of human language – with statistical, machine learning, and deep learning models.
NLP aims to build machines that understand and react to text or voice data and then respond with text or speech in a similar manner as humans do. Examples of NLP in real life include voice-operated GPS systems, personal assistant apps, speech-to-text dictation software, and customer service chatbots.
As businesses seek better ways to improve efficiency, NLP is one technology promising huge rewards for enterprises dealing with vast quantities of unstructured text. In accounting, unstructured data include transaction descriptions, invoices, written communication, etc.
The use of NLP is growing significantly in enterprise solutions designed to help streamline business operations. Large companies such as Deloitte, Ernst & Young (EY), and PricewaterhouseCoopers (PwC) have implemented various NLP solutions. A good example is Deloitte, which incorporated NLP into its Audit Command Language to improve contract compliance.
How NLP Can Improve the Efficiency of Accounting Processes
Areas in which NLP helps improve efficiency include:
Forensic Investigations When CPAs want to perform forensic investigations, they have to deal with significant amounts of data from documents such as bank statements, transaction data tables, and data found in emails or deposition transcripts. Analyzing all the data as they try to look for specific patterns or gain insights is challenging. However, the application of NLP can be helpful in the investigative analysis process. NLP using algorithms can identify patterns automatically and reduce the time it would have taken to analyze the documents.
Accounting and Auditing Auditing is challenging due to the process of reviewing financial statements and ensuring they match regulations and legal standards. Auditors must have excellent analytical and decision-making skills to spot inaccuracies in financial statements. However, NLP helps to optimize the auditing process.
Financial Analysis and Automated Generation of Financial Reports NLP can automatically extract financial data from balance sheets, income statements, and cash flow statements. This can cut down on time and error-prone work. At the same time, it can obtain insights from massive financial data sets and financial reports. This enables accountants to make data-driven decisions and quickly identify trends and patterns in the data, hence, making it easy to provide guidance to clients on investments and household finances.
Automated Data Entry NLP can be used to extract data automatically from unstructured text documents, including bills and receipts. It also can be used to automate the entry of data from tax documents and input it into accounting systems. This can cut down on time and error-prone work.
Improve Centralized Data Management Solutions Incorporating NLP in accounting and procurement helps improve the ability of a centralized data management system to collect and integrate data from different sources. This enables standardization and collaboration. Additionally, the data provided has higher-quality insights. As a result, there is better financial planning and improved risk assessment and management.
Customer Interaction NLP can be used to enhance the effectiveness of customer interaction. This is done by automating the procedure for responding to client inquiries, such as concerning invoices, payments, and account balances.
Conclusion
Natural language processing is proving to be a powerful technology that can help improve the efficiency and effectiveness of accounting processes. As it continues to evolve, it will likely become an increasingly important tool for accountants and other financial professionals. Most importantly, these advanced technologies take care of manually reviewing unstructured data. This helps businesses scale and – at the same time – reduce costs.
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
Apart from the spike in inflation, 2023 ended the year with a relatively strong economy, boasting an unemployment rate of 3.5 percent (below the market forecast of 3.7 percent) with increases in wages, corporate profits, and economic growth over the past two quarters. Despite the positive data, a slate of companies, including Microsoft, Google, Amazon, Goldman Sachs, and Bed Bath & Beyond, have all announced significant layoffs planned for this year.
Whether the result of a layoff, a new job, or retirement, the reality is that over the course of a career, most people will change jobs several times. The good news is that 401(k) plan assets are portable – meaning you can take them with you. However, it is important to be aware of all your options so that you choose the most advantageous one each time you change employers.
You Don’t Have to do Anything Right Away
The first thing to note is that the income deferrals you contributed to your employer’s retirement plan are yours to keep. However, an employer match may be subject to a vesting schedule. If you do not work at the company long enough to satisfy the vesting schedule, you might lose all or a portion of the unvested assets in your account.
It is not necessary to roll over your 401(k) assets right away; in many cases, you can leave them where they are indefinitely. However, you will no longer be able to make contributions to the plan, receive matching funds, or tap that money for a loan. If the plan has a wide range of investment options, low fees, and expenses and has performed well, then leaving assets where they are may be your best choice.
On the other hand, you should investigate to ensure your plan does not change once you no longer work for a former employer, as some plans charge higher fees for inactive employees. Also, some employers may require you to cash out of your account balance – usually if it is below $1,000. If your balance is above $1,000, that employer must offer you the option to roll those assets into a personal IRA.
Take the Money
If you opt to withdraw the cash value of your account, you will be subject to an immediate tax impact. Your company may cut you a check for the amount withdrawn, but it is required to withhold 20 percent of the amount to prepay the tax you’ll owe. If you have not yet reached age 59½, the IRA will classify the distribution as an early withdrawal. This means you might owe a 10 percent penalty in addition to the federal tax withholding. The balance also may be subject to state and local taxes. All told, you could lose up to 50 percent of the account value if you take an early distribution.
For young adults in particular, it can be tempting to withdraw their 401(k) balance when they leave an employer. They may not have acquired much in assets, not met vesting requirements for the employer match, and figure they have more need for the money now than in 50 years when they retire. However, bear in mind that investments made early as an adult often purchase good, dependable stocks at low prices, with decades for those stocks to appreciate. Holding onto those assets over the long term allows for maximum growth opportunity, whereas withdrawing them means you’ll have to start all over again.
Roll Over Assets to Your New Employer’s 401(k)
Some employer plans will accept transfers from a former retirement plan, but not all of them do. You will have to inquire. If this is an option, recognize that there is no need to roll over right away. You may want to work there for awhile to ensure you’re happy, the company is viable, and you plan to stay there a while. Furthermore, you may have to wait until the next enrollment period to request a rollover, and some employers may require that you work a specific period of time (e.g., one full year) before you can transfer old 401(k) assets to your new plan.
Open a Personal IRA
A third option is to transfer your old employer’s 401(k) assets to a personal individual retirement account (IRA) that you open through a brokerage of your choice. The new brokerage custodian will give you the forms needed to request the formal rollover, and your former 401(k) plan administrator might have forms to complete as well. It is best to have the two custodians conduct the transfer directly so that you never take possession of the funds yourself, which could result in tax penalties if not conducted correctly.
You’ll need to select new investment options (e.g., mutual funds, exchange-traded funds, individual stocks or bonds) for the IRA, and be sure to compare its fees with your old account. By rolling over to an IRA that you manage yourself, you will have a wider range of investment options and can shop for plans with lower fees.
Bear in mind that, moving forward, any additional contributions you make to this IRA will be subject to lower annual contribution limits (in 2023: $6,500 if under age 50; $7,500 for 50 and older) than 401(k) plans as well as the income limitations applicable to a Roth IRA (2023: less than $153,000 Modified Adjusted Gross Income (MAGI) if you are single; less than $228,000 if you’re married and file jointly).
There are three IRA rollover options for 401(k) plan assets:
Roll over to a new or existing traditional IRA – No taxes are due on the assets you transfer, and earnings continue to accumulate tax deferred until withdrawn. It’s best to directly roll-over the funds from one custodian to another.
Roll over to a new or existing Roth IRA – This option requires that you pay taxes on the rollover amount in the tax filing year they are transferred. You may use money from the 401(k) plan or pay the tax separately using other assets (the latter is preferable so that your equity continues to appreciate). Once the IRA has been open for at least five years, and you are at least age 59½, contributions and earnings can be withdrawn free of all taxes and penalties. Furthermore, unlike the traditional IRA, you are not required to take minimum distributions (RMDs) from a Roth.
Roll over a Roth 401(k) to a new or existing Roth IRA – No taxes are due when the money is transferred, and new earnings accumulate tax deferred. Contributions and earnings are eligible for tax-free withdrawals once the IRA has been open at least five years and you are at least age 59½.
Do Something
Leaving your 401(k) with a former employer is a perfectly acceptable option, but you should consider consolidating your 401(k) plans at some point. More and more people are working for multiple employers throughout their careers, and they may lose track of where they hold 401(k) assets. In fact, at the end of 2021, there was a nationwide total of $1.35 trillion sitting in forgotten 401(k) plans.
Don’t let that happen to you.
401(k) Options After You Leave an Employer
February 1, 2023 · Blog, Financial Planning, Uncategorized
⏱ 6 min read
Apart from the spike in inflation, 2023 ended the year with a relatively strong economy, boasting an unemployment rate of 3.5 percent (below the market forecast of 3.7 percent) with increases in wages, corporate profits, and economic growth over the past two quarters. Despite the positive data, a slate of companies, including Microsoft, Google, Amazon, Goldman Sachs, and Bed Bath & Beyond, have all announced significant layoffs planned for this year.
Whether the result of a layoff, a new job, or retirement, the reality is that over the course of a career, most people will change jobs several times. The good news is that 401(k) plan assets are portable – meaning you can take them with you. However, it is important to be aware of all your options so that you choose the most advantageous one each time you change employers.
You Don’t Have to do Anything Right Away
The first thing to note is that the income deferrals you contributed to your employer’s retirement plan are yours to keep. However, an employer match may be subject to a vesting schedule. If you do not work at the company long enough to satisfy the vesting schedule, you might lose all or a portion of the unvested assets in your account.
It is not necessary to roll over your 401(k) assets right away; in many cases, you can leave them where they are indefinitely. However, you will no longer be able to make contributions to the plan, receive matching funds, or tap that money for a loan. If the plan has a wide range of investment options, low fees, and expenses and has performed well, then leaving assets where they are may be your best choice.
On the other hand, you should investigate to ensure your plan does not change once you no longer work for a former employer, as some plans charge higher fees for inactive employees. Also, some employers may require you to cash out of your account balance – usually if it is below $1,000. If your balance is above $1,000, that employer must offer you the option to roll those assets into a personal IRA.
Take the Money
If you opt to withdraw the cash value of your account, you will be subject to an immediate tax impact. Your company may cut you a check for the amount withdrawn, but it is required to withhold 20 percent of the amount to prepay the tax you’ll owe. If you have not yet reached age 59½, the IRA will classify the distribution as an early withdrawal. This means you might owe a 10 percent penalty in addition to the federal tax withholding. The balance also may be subject to state and local taxes. All told, you could lose up to 50 percent of the account value if you take an early distribution.
For young adults in particular, it can be tempting to withdraw their 401(k) balance when they leave an employer. They may not have acquired much in assets, not met vesting requirements for the employer match, and figure they have more need for the money now than in 50 years when they retire. However, bear in mind that investments made early as an adult often purchase good, dependable stocks at low prices, with decades for those stocks to appreciate. Holding onto those assets over the long term allows for maximum growth opportunity, whereas withdrawing them means you’ll have to start all over again.
Roll Over Assets to Your New Employer’s 401(k)
Some employer plans will accept transfers from a former retirement plan, but not all of them do. You will have to inquire. If this is an option, recognize that there is no need to roll over right away. You may want to work there for awhile to ensure you’re happy, the company is viable, and you plan to stay there a while. Furthermore, you may have to wait until the next enrollment period to request a rollover, and some employers may require that you work a specific period of time (e.g., one full year) before you can transfer old 401(k) assets to your new plan.
Open a Personal IRA
A third option is to transfer your old employer’s 401(k) assets to a personal individual retirement account (IRA) that you open through a brokerage of your choice. The new brokerage custodian will give you the forms needed to request the formal rollover, and your former 401(k) plan administrator might have forms to complete as well. It is best to have the two custodians conduct the transfer directly so that you never take possession of the funds yourself, which could result in tax penalties if not conducted correctly.
You’ll need to select new investment options (e.g., mutual funds, exchange-traded funds, individual stocks or bonds) for the IRA, and be sure to compare its fees with your old account. By rolling over to an IRA that you manage yourself, you will have a wider range of investment options and can shop for plans with lower fees.
Bear in mind that, moving forward, any additional contributions you make to this IRA will be subject to lower annual contribution limits (in 2023: $6,500 if under age 50; $7,500 for 50 and older) than 401(k) plans as well as the income limitations applicable to a Roth IRA (2023: less than $153,000 Modified Adjusted Gross Income (MAGI) if you are single; less than $228,000 if you’re married and file jointly).
There are three IRA rollover options for 401(k) plan assets:
Roll over to a new or existing traditional IRA – No taxes are due on the assets you transfer, and earnings continue to accumulate tax deferred until withdrawn. It’s best to directly roll-over the funds from one custodian to another.
Roll over to a new or existing Roth IRA – This option requires that you pay taxes on the rollover amount in the tax filing year they are transferred. You may use money from the 401(k) plan or pay the tax separately using other assets (the latter is preferable so that your equity continues to appreciate). Once the IRA has been open for at least five years, and you are at least age 59½, contributions and earnings can be withdrawn free of all taxes and penalties. Furthermore, unlike the traditional IRA, you are not required to take minimum distributions (RMDs) from a Roth.
Roll over a Roth 401(k) to a new or existing Roth IRA – No taxes are due when the money is transferred, and new earnings accumulate tax deferred. Contributions and earnings are eligible for tax-free withdrawals once the IRA has been open at least five years and you are at least age 59½.
Do Something
Leaving your 401(k) with a former employer is a perfectly acceptable option, but you should consider consolidating your 401(k) plans at some point. More and more people are working for multiple employers throughout their careers, and they may lose track of where they hold 401(k) assets. In fact, at the end of 2021, there was a nationwide total of $1.35 trillion sitting in forgotten 401(k) plans.
Don’t let that happen to you.
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
There has been updated guidance on how and when tax filers must file and report Form 1099-K, Payment Card, and Third-Party Network Transactions in 2022 and 2023. According to the December IRS release, new income and transaction reporting requirements for so-called third-party settlement organizations (TPSOs) have been delayed for one year.
A TPSO, according to the IRS, facilitates payments to “participating payees” of the platform. This type of organization can be an online marketplace, an app, or payment card processors that are used to facilitate commerce transactions. It could be a digital marketplace that holds auctions or items for sale that functions as a nexus between those selling items and those buying the items. The TPSO also is tasked with reporting the total amount of transactions to the IRS and the payee or individual who receive remittance(s) from the TPSO in conjunction with selling an item on an auction website or similar platform, based on the new $600 tax calendar year threshold.
The previous reporting threshold (which is in effect for filing taxes for the 2022 calendar year) for TPSOs to be mandated to report to the IRS was:
More than 200 transactions occurring annually
More than $20,000 in sales annually
Originally set to take effect for the 2022 tax calendar year and mandated in the American Rescue Plan (ARP) of 2021, the new reporting threshold is triggered when more than $600 is earned in aggregate for a single tax year, without regard to the number of transactions per calendar year. It will take effect starting Jan. 1, 2023.
When it comes to calculating tax obligations, it’s important to notice how differences exist between gains and losses. For example, the first step is to determine whether there’s been a sale or a loss. If there’s a gain, it must be reported on Schedule D and Form 8949.
Depending on the outcome of the sale (a gain or loss), the IRS gives guidance accordingly. If it’s a gain, when it comes to accounting for fees paid in conjunction with the item’s listing, the selling expenses should be reported as “a downward adjustment” on either Form 8949 or Schedule D. Another consideration on sales of personal items is determining whether it’s a short- or long-term gain. Items sold that are held for more than one year are recognized as long-term. If the item sold has been held one year or less, the capital gain is recognized as short-term. But when it comes to losses, the IRS doesn’t permit filers’ deductions.
There is one important distinction between online sellers and “personal transactions” with the 1099-K Form. When items are sold for a profit, the intent of the 1099-K Form is to ensure income earned is reported to the IRS (and state revenue agency). However, if family members or friends are using such “third-party payment platforms” to split a purchase (for a meal, entertainment, ride-share, reimbursing a bill payment, etc.), such transactions are excluded because they qualify as “personal transactions” under IRS guidance.
With the guidance for smaller transactions evolving, which will undoubtedly impact more and more filers, individuals and those professionals helping them will undoubtedly have to keep an eye on future changes to 2023’s Tax Code.
Understanding the Latest Modifications to Form 1099-K Reporting Requirements
February 1, 2023 · Accounting News, Blog, Uncategorized
⏱ 3 min read
There has been updated guidance on how and when tax filers must file and report Form 1099-K, Payment Card, and Third-Party Network Transactions in 2022 and 2023. According to the December IRS release, new income and transaction reporting requirements for so-called third-party settlement organizations (TPSOs) have been delayed for one year.
A TPSO, according to the IRS, facilitates payments to “participating payees” of the platform. This type of organization can be an online marketplace, an app, or payment card processors that are used to facilitate commerce transactions. It could be a digital marketplace that holds auctions or items for sale that functions as a nexus between those selling items and those buying the items. The TPSO also is tasked with reporting the total amount of transactions to the IRS and the payee or individual who receive remittance(s) from the TPSO in conjunction with selling an item on an auction website or similar platform, based on the new $600 tax calendar year threshold.
The previous reporting threshold (which is in effect for filing taxes for the 2022 calendar year) for TPSOs to be mandated to report to the IRS was:
More than 200 transactions occurring annually
More than $20,000 in sales annually
Originally set to take effect for the 2022 tax calendar year and mandated in the American Rescue Plan (ARP) of 2021, the new reporting threshold is triggered when more than $600 is earned in aggregate for a single tax year, without regard to the number of transactions per calendar year. It will take effect starting Jan. 1, 2023.
When it comes to calculating tax obligations, it’s important to notice how differences exist between gains and losses. For example, the first step is to determine whether there’s been a sale or a loss. If there’s a gain, it must be reported on Schedule D and Form 8949.
Depending on the outcome of the sale (a gain or loss), the IRS gives guidance accordingly. If it’s a gain, when it comes to accounting for fees paid in conjunction with the item’s listing, the selling expenses should be reported as “a downward adjustment” on either Form 8949 or Schedule D. Another consideration on sales of personal items is determining whether it’s a short- or long-term gain. Items sold that are held for more than one year are recognized as long-term. If the item sold has been held one year or less, the capital gain is recognized as short-term. But when it comes to losses, the IRS doesn’t permit filers’ deductions.
There is one important distinction between online sellers and “personal transactions” with the 1099-K Form. When items are sold for a profit, the intent of the 1099-K Form is to ensure income earned is reported to the IRS (and state revenue agency). However, if family members or friends are using such “third-party payment platforms” to split a purchase (for a meal, entertainment, ride-share, reimbursing a bill payment, etc.), such transactions are excluded because they qualify as “personal transactions” under IRS guidance.
With the guidance for smaller transactions evolving, which will undoubtedly impact more and more filers, individuals and those professionals helping them will undoubtedly have to keep an eye on future changes to 2023’s Tax Code.
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
For the most part, New Year’s resolutions are hard to keep because many times you either list too many things or ones that aren’t manageable for the long haul – especially those that involve money. Here are a few simple tricks to help you make changes that are bite-sized, easy to implement, and more likely to stick.
Do a five-minute daily money check-in. Life is so busy that sometimes it’s easy to just spend money, then move on to the next task at hand. You might think, “I’ll check my bank balance later,” and then you never do. But if you’re serious about getting a handle on your finances, you might want to try this one thing: give yourself a “money minute.” Select a time of day, maybe after dinner, to log into your bank account. Take stock of what you spent money on. Did you really need that bottled water? That designer coffee? This way, you can nip those small (perhaps unnecessary) expenditures in the bud and make smarter choices in the coming days.
Get a money-saving app. One of the best ones to help you achieve financial goals is Ibotta. Let’s say you want to buy a new pair of running shoes, a good brand that’ll really last. With this app, you’ll save on everyday purchases, and when you’ve earned enough cash back, you can cash it in for a gift card from your selected store and get what you really want.
Consider micro savings goals. This technique is actually about rewarding yourself financially for changing your behavior. For instance, every time you go to yoga or Pilates, stash away $5. Or if you wake up early or finish a difficult task, stash away $10. When you’ve saved enough money to buy whatever it is you’ve decided on beforehand, you’ve not only avoided the trap of putting your goodie on credit (and paying interest), but also most likely started a new, healthy habit.
Set up an automatic savings plan. After you’ve paid taxes, insurance premiums, and perhaps even your retirement account, you might consider tucking away money for yourself that you’ll never miss. Every. Single. Paycheck. That’s right. When you automatically have a set amount deducted every time you get paid, over time, you’ll accumulate a bucket of money to use in whatever way you deem important – it could be saving for a vacation or a new car. It could also be a fund for emergencies. The point is it’s an easy, failsafe way to save and achieve your goals.
Do one frugal thing a day. This is all about a little bit of forethought and then just taking action. And when you adopt this mindset, you’ll be working daily toward your financial goals like paying off debt, saving money to quit a job you hate, or even having enough extra cash to invest in real estate or whatever strikes your fancy. Here are a few things to consider: drink more water than soda. Eat at home. Use public transportation instead of driving when you can. But this just scratches the surface. For more smart ways to start living frugally, check out this super helpful article. You’ll be surprised at all the ways you can cut back and save.
All of these tricks are easy and, in some cases, no-brainers. When you take a few minutes, set your mind on what you want, anything’s possible. Here’s to fulfilling your dreams in the New Year!
January 1, 2023 · Blog, Tip of the Month, Uncategorized
⏱ 4 min read
For the most part, New Year’s resolutions are hard to keep because many times you either list too many things or ones that aren’t manageable for the long haul – especially those that involve money. Here are a few simple tricks to help you make changes that are bite-sized, easy to implement, and more likely to stick.
Do a five-minute daily money check-in. Life is so busy that sometimes it’s easy to just spend money, then move on to the next task at hand. You might think, “I’ll check my bank balance later,” and then you never do. But if you’re serious about getting a handle on your finances, you might want to try this one thing: give yourself a “money minute.” Select a time of day, maybe after dinner, to log into your bank account. Take stock of what you spent money on. Did you really need that bottled water? That designer coffee? This way, you can nip those small (perhaps unnecessary) expenditures in the bud and make smarter choices in the coming days.
Get a money-saving app. One of the best ones to help you achieve financial goals is Ibotta. Let’s say you want to buy a new pair of running shoes, a good brand that’ll really last. With this app, you’ll save on everyday purchases, and when you’ve earned enough cash back, you can cash it in for a gift card from your selected store and get what you really want.
Consider micro savings goals. This technique is actually about rewarding yourself financially for changing your behavior. For instance, every time you go to yoga or Pilates, stash away $5. Or if you wake up early or finish a difficult task, stash away $10. When you’ve saved enough money to buy whatever it is you’ve decided on beforehand, you’ve not only avoided the trap of putting your goodie on credit (and paying interest), but also most likely started a new, healthy habit.
Set up an automatic savings plan. After you’ve paid taxes, insurance premiums, and perhaps even your retirement account, you might consider tucking away money for yourself that you’ll never miss. Every. Single. Paycheck. That’s right. When you automatically have a set amount deducted every time you get paid, over time, you’ll accumulate a bucket of money to use in whatever way you deem important – it could be saving for a vacation or a new car. It could also be a fund for emergencies. The point is it’s an easy, failsafe way to save and achieve your goals.
Do one frugal thing a day. This is all about a little bit of forethought and then just taking action. And when you adopt this mindset, you’ll be working daily toward your financial goals like paying off debt, saving money to quit a job you hate, or even having enough extra cash to invest in real estate or whatever strikes your fancy. Here are a few things to consider: drink more water than soda. Eat at home. Use public transportation instead of driving when you can. But this just scratches the surface. For more smart ways to start living frugally, check out this super helpful article. You’ll be surprised at all the ways you can cut back and save.
All of these tricks are easy and, in some cases, no-brainers. When you take a few minutes, set your mind on what you want, anything’s possible. Here’s to fulfilling your dreams in the New Year!
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
To rescind certain balances made available to the Internal Revenue Service (HR 23) – Introduced by Rep. Adrian Smith (R-NE) on Jan. 9, this bill would rescind funds allocated to the Internal Revenue Service by the Inflation Reduction Act of 2022. The bill is designed to “defund” specific enforcement activities, operational support, enhancement to the e-file tax return system, and allocations to the U.S. Tax Court and other Department of the Treasury tax agencies. The bill passed in the House on Jan. 9 and has moved to the Senate, 
Natural language processing (NLP) is a technology that allows computers to understand and process human language. Processing of natural language is necessary when you want an intelligent device to follow your instructions. NPL is an artificial intelligence (AI) component with many real-life applications.
Apart from the spike in inflation, 2023 ended the year with a relatively strong economy, boasting an unemployment rate of 3.5 percent (below the market forecast of 3.7 percent) with increases in wages, corporate profits, and economic growth over the past two quarters. Despite the positive data, a slate of companies, including Microsoft, Google, Amazon, Goldman Sachs, and Bed Bath & Beyond, have all announced significant layoffs planned for this year.
There has been updated guidance on how and when tax filers must file and report Form 1099-K, Payment Card, and Third-Party Network Transactions in 2022 and 2023. According to the December IRS release, new income and transaction reporting requirements for so-called third-party settlement organizations (TPSOs) have been delayed for one year.
For the most part, New Year’s resolutions are hard to keep because many times you either list too many things or ones that aren’t manageable for the long haul – especially those that involve money. Here are a few simple tricks to help you make changes that are bite-sized, easy to implement, and more likely to stick.