November 2024 Tax Updates

Social Security Taxable Wage Base for 2025

The annual cost-of-living adjustment to the maximum amount of earnings subject to Social Security for 2025 has been adjusted to $176,100 which is an increase from 2024’s $168,600 base. The taxable wage base impacts certain fringe benefits and is relevant when determining tax savings from a cafeteria plan. The Medicare tax rate for 2025 remains at 1.45% of all covered earnings for employers and employees while the Additional Medicare Tax of 0.9% applies to wages of more than $200,000. Employers are required to withhold the additional 0.9% on covered wages over $200,000 with no corresponding employer tax.

Corporate Transparency Act Reminder

The newly instated Corporate Transparency Act (CTA), which went into effect on January 1, 2024, may require your small business to report ownership information to the government.

What is it?

Beginning January 1 2024, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) will require most businesses to file a Beneficial Ownership Information (BOI) report for FinCEN records, as part of the new Corporate Transparency Act (CTA).

The CTA is mainly an anti-money laundering law, meant to prevent owners of corporations, LLCs or similar entities in the United States from facilitating money laundering, financing of terrorism, tax fraud and other illegal acts, through concealing their ownership. 

Who must file?

Domestic entities formed in the United States (domestic reporting companies) or certain entities created in foreign countries and registered to do business in the United States (foreign reporting companies) are required to file a BOI unless an exemption is met. There are 23 categories of exempt entities. An attorney can properly advise on the full list of exemptions and whether your business may meet an exemption.

What is filed?

A domestic reporting company created before January 1, 2024, must provide information about the company and its beneficial owners. A domestic reporting company created on or after January 1, 2024, must provide information about the company, its beneficial owners, and the company applicants (those directly involved with the actual formation of the entity). The initial BOI report and all updates and corrections will be filed electronically with FinCEN through a system that will be available via FinCEN’s website. There is no fee for filing the reports.

When must it be filed by?

A domestic reporting company created before January 1, 2024, must file its initial BOI report no later than January 1, 2025. A domestic reporting company created on or after January 1, 2024, must file a report within 30 calendar days of the date on which it receives actual or public notice that its creation has become effective.

How can Siegfried Advisory help?

As advisors, our role is to have broad awareness of legislation that impacts our clients and bring these changes to your attention.  However, this is a highly specialized area of law that requires detailed reporting and must be handled by attorneys or registered agents. We want to make you aware of this requirement and we recommend you speak to your attorney regarding this matter. If you need an attorney, we are happy to recommend one to assist in this area.

The Future of R&D Expensing

With tax priorities being settled for 2025 bringing back a provision that allowed businesses to immediately deduct certain research and development expenses has gained bipartisan support. Since 1954 the Tax Code allowed businesses to deduct certain R&D expenses from their income in the year the expenses occurred or amortizing them over a period of five or more years. Some of these expenses include researcher wages, research supply costs, and research facility operating expenses. The 2017 Tax Cuts and Jobs Act ended immediate expensing of research and experimental costs, effective at the start of 2022. The bipartisan tax bill that is now-stalled would have allowed businesses to immediately deduct the cost of their US-based research and experimental costs just through 2025. The bipartisan American Innovation and Jobs Act would repeal the TCJA’s change to Code Sec. 174 and expand the complementary R&D tax credit under Code Sec. 41(h) by increasing the cap for the refundable credit and expanding startup eligibility for the credit. The American Innovation and R&D Competitiveness Act aims to restore the pre-TCJA deduction and would eliminate the five-year amortization requirement for R&D expenses.