February 2024 tax updates

2024 Estimated Tax Due Dates

As you know in the United States the tax systems use a “pay-as-you-go” form when you receive your income as you are required to pay a portion of income you earned as soon as you earn it. For the self-employed, or other instances where tax is not withheld from income (dividends, interest, alimony, etc.) you are required to pay this tax in the form of estimated tax payments. Estimated tax payments are normally paid in four equal amounts based on the IRS schedule. Listed below are the due dates for 2024 estimated tax payments:

• Payment 1: January 16, 2024 (for income earned from September 1-December 31, 2023)
• Payment 2: April 15, 2024 (for income earned January 1-March 31, 2024)
• Payment 3: June 17, 2024 (for income earned April 1-May 31, 2024)
• Payment 4: September 16, 2024 (for income earned June 1-August 31, 2024)

New Deal on Child Tax Credits Announced

Lawmakers are approaching a funding deadline to avoid government shutdown and have announced a bipartisan tax package. This credit would be available for 2023 tax returns filed in early 2024 and would include:

• Ensuring lower income families with multiple children will qualify for a larger portion of the credit.
• Child tax credit enhancements, including provisions to index the $2,000 child tax credit starting in 2024 and the refundable maximum starting in 2025, and increase the refundable maximum to $1,800 in 2023, $1,900 in 2024, and $2,000 in 2025 before indexing (all provisions sunset December 31, 2025). 
• Adjusting the child tax credit for inflation

Government Update: 174, ERC, and Cost Segregation

Senior lawmakers in Congress recently introduced “The Tax Relief for American Families and Workers Act of 2024” to increase innovation or business growth in the coming years. The Act focuses on three main changes:

• Significant changes to the tax treatment of R&E expenditures – Delaying the implementation of capitalizing and amortizing R&E expenditures over a 5-year period until taxable years beginning after December 31, 2025.
• Extending the benefits of 100% bonus depreciation through January 1, 2026 – This change is so to override the “phase-down” of bonus depreciation that is to begin in 2023. Assets acquired in 2023 would only be eligible for 80% depreciation instead of 100%. Returning to 100% would help businesses invest more in capital improvements and real estate projects.
• Addressing Employee Retention Credits – This bill will impose additional penalties for fraudulent claims from the use of the ERC and is setup to terminate the ERC program entirely after January 31, 2024. The IRS will also extend their statute for ERC assessments and the period for taxpayers with disallowed ERC claims to re-claim deductions for wages.

Overall, this act was proposed to increase economic activity and create a better environment for businesses to thrive.