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Recent News & Publications

Corporate Transparency Act (February 2024)

   The Corporate Transparency Act (CTA) was enacted by Congress back in 2021 and became effective as of the 2024 tax year. Backed by Treasury Department's Financial Crimes Enforcement Network (FinCEN), the US intends to bring additional scrutiny and reporting requirements to all US entities.

   The new legislation will affect all Corporations, LLCs, LPs, LLPs, Business Trusts, and other entities formed or registered in the US, unless the entity is able to satisfy ALL of the following criteria:

  • More than 20 full-time employees in the US;

  • Operating within the US at a physical office owned or leased by the reporting entity and not shared with affiliates; and

  • More than $5 million in gross receipts or sales, excluding non US-sourced income.

   Unable to satisfy all criteria above classifies one as a "reporting company" and under current rules any entity formed on or after January 1, 2024 has 90 days to file. For entities in existence prior to January 1, 2024 the due date is not until January 1, 2025. It is paramount not to file late as the penalties for willfully violating reporting requirements are severe.

For more information and how the CTA might affect you, please reach out to your Bay Area Tax Group representative.

Key Changes for 2023 to 2024 Tax Years (January 2024)

   Any time we transition from one year to the next, tax laws change. As we enter the 2024 tax year, there are a few especially important changes worth highlighting:

  • Bonus depreciation has long been a business owner's best friend, accelerating traditional deduction timelines to benefit taxpayers sooner as opposed to later. For a number of years, Federal bonus depreciation allowed in the year of purchase was 100% and enabled a business to deduct the full cost of property in the year acquired and placed in service. However, for 2023 this rate has been reduced to 80% and in 2024 it drops once again to 60%. While Congress is currently working to draft legislature that might reinstate the 100%, taxpayers should focus on planning effectively with their tax professional to utilize accelerated deduction timelines from Section 179 - paying special attention to the annual limitations on these provisions.

  • Meals expense is once again deductible at 50% after a brief two-year stint at 100% during the Covid-19 pandemic. Beginning with 2023 and continuing with 2024, business meals purchased at restaurants for client meets are limited in their deductibility. However, there is a small silver lining as this limitation does not apply to special company events and holiday parties.

  • Entertainment remains a non-deductible expense for Federal purposes. Taxpayers should be diligent when bifurcating lumped expenditures so any portion attributable to meals is parsed out and deducted to the fullest extent. Fortunately, California still allows a deduction for entertainment expenses so these write offs should not be fully discarded.

  • The annual gift tax exclusion increased from $17,000 to $18,000 in 2024. The lifetime exemption for estate tax purposes was also increased, from $12.92 million to $13.61 million per taxpayer. While this large number may provide substantial peace of mind, it may be fleeting because the provision is scheduled to sunset at the end of 2025. When the Tax Cutes and Jobs Act expires on December 31, 2025, the lifetime gift exemption will drop back down to just under $6M. With political uncertainty heading into the election year, it would be prudent to review one's estate plan to determine if gifting strategies need to be implemented prior to the end of 2025.

Annual Update on Proposed 2024 Retirement Limits (October 2023)

   The Internal Revenue Service announced today that the amount individuals can contribute to their 401(k) plans in 2024 has increased to $23,000, up from $22,500 for 2023. The IRS also issued technical guidance regarding all cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for the tax year 2024 in Notice 2023-75. Highlights below:

  • The limit on annual contributions to an IRA increased to $7,000, up from $6,500. The IRA catch‑up contribution limit for individuals aged 50 and over was amended under the SECURE 2.0 Act of 2022 (SECURE 2.0) to include an annual cost‑of‑living adjustment but remains $1,000 for 2024.

  • The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs, and to claim the Saver's Credit all increased for 2024.

  • The maximum allowable SEP contribution for the 2024 tax year is $69,000. Based on a compensation limit of $345,000.

  • The income phase-out range for taxpayers making contributions to a Roth IRA is between $146,000 and $161,000 for singles and heads of household, up from between $138,000 and $153,000. For married couples filing jointly, the income phase-out range is increased to between $230,000 and $240,000, up from between $218,000 and $228,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.


   Additionally, Taxpayers can still deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer's spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply. Here are the phase‑out ranges for 2024:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to between $77,000 and $87,000, up from between $73,000 and $83,00.

  • For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $123,000 and $143,000, up from between $116,000 and $136,000.

  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to between $230,000 and $240,000, up from between $218,000 and $228,000.

  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

Filing Extension for Storm Victims (March 2023)

   The IRS and CA have just announced that it is granting extensions to California storm victims until May 15, 2023 (UPDATE – October 15th), for the following filing and payment deadlines that were normally scheduled for on or after January 8, 2023:

  • Individual income tax returns.

  • Business return filings normally due between March 15 and April 18, 2023.

  • Fourth and first quarter estimated tax payments due on January 17, 2023, and April 18, 2023.

  • IRA and health savings account (HSA) contributions.

  • Quarterly payroll and excise tax returns, normally due on January 31, 2023, and April 30, 2023.


   In addition, penalties on payroll and excise tax deposits due on or after January 8, 2023, and before January 23, 2023, will be abated as long as the tax deposits are made by January 23, 2023.


   Current guidance indicates that the relief is automatically available to taxpayers who reside or have a business in the following California counties as listed on the IRS website.

Alameda, Colusa, Contra Costa, El Dorado, Fresno, Glenn, Humboldt, Kings, Lake, Los Angeles, Madera, Marin, Mariposa, Mendocino, Merced, Mono, Monterey, Napa, Orange, Placer, Riverside, Sacramento, San Benito, San Bernardino, San Diego, San Francisco, San Joaquin, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, Solano, Sonoma, Stanislaus, Sutter, Tehama, Tulare, Ventura, Yolo and Yuba counties.

SECURE 2.0 Act (December 2022)

   The SECURE Act 2.0, signed by President Biden on December 29, 2022, picks up where the original SECURE Act left off and further reforms the retirement planning landscape. We’ve prepared a list of a few of the key changes that may affect you going forward:

  • The age at which individuals must take required minimum distributions (RMDs) has increased from age 72 to age 73, 74, or 75 depending on the taxpayer’s year of birth.

  • Beginning in 2024, a surviving spouse is allowed to be treated as the deceased spouse for RMD requirements. This means the surviving spouse does not have to begin taking RMDs from the deceased spouse’s retirement account until the date on which the deceased spouse would have met the age requirement. California will conform to this provision. In most cases, financial advisors will determine the amount of RMD for the taxpayer but if needed, please contact our office to assist with these calculations.

  • Starting in 2025, individuals aged 60 – 63 will be able to make catch-up retirement contributions up to $10,000. This is only applicable to individuals who meet the age requirement after December 31, 2024. California is partially conforming to this provision as the tax deduction will be limited to the annual contribution amount for those 50 years and older instead of this special circumstance.

  • Beginning in 2024, individuals who have held a 529 plan for 15 years or more can now make a direct trustee-to-trustee rollover from the §529 plan to a Roth IRA. An individual can only rollover up to $6,500 annually (current limit) and $35,000 in their lifetime. Any personal contributions made directly into the Roth IRA account could affect the amount eligible for rollover from the §529 account in the same tax year.   California will not conform to this provision, which means earnings from the §529 account included in the rollover to Roth IRA will be taxable on the state tax return and subject to penalties on the California return.


   For more information about the SECURE Act 2.0 and how it impacts you, please reach out to your Bay Area Tax Group representative.

COVID-19 Relief Bill (January 2021)

    The Consolidated Appropriations Act of 2021 (referred to as the “COVID-19 Relief Bill”) signed into law by the president on December 27, 2020, is the latest round of stimulus legislation. With more than 5,000 pages, the Act may be the largest piece of legislation ever passed. As such, it will take considerable time to sort through the legislation’s provisions and relief measures.
    While there are many key provisions under this omnibus legislation that are designed to provide much-needed relief to small businesses, many of them are in fact legislative efforts to revamp the Paycheck Protection Program (“PPP”). The COVID-19 Relief Bill provides $284 billion to the U.S. Small Business Administration for both first and second-draw PPP forgivable small business loans. It also allocates $20 billion to provide Economic Injury Disaster Loan (“EIDL”) grants to businesses in low-income communities.

    A borrower is generally eligible for a Second Draw PPP Loan if the borrower:

  • Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses;

  • Has no more than 300 employees; and

  • Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.

    It’s worth noting, a significant provision is the clarification that business expenses paid with forgiven PPP loans are tax-deductible for federal tax purposes. This supersedes the November 2020 guidance in Revenue Ruling 2020-27, in which the IRS had concluded that expenses paid with PPP loan proceeds were not deductible if the loan was forgiven or if at the end of the tax year the taxpayer had a reasonable expectation that the loan would be forgiven. The COVID-19 Relief Bill brings the tax-deductibility issue in line with Congress’s intent when it created the original PPP as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act.
    While this is good news overall, taxpaye
rs need to tread carefully as state conformity issues remain. For example, California does not conform to this federal law and taxpayers will still need to reduce their deductions on their California returns.

Paycheck Protection Program Flexibility Act (May 2020)

    The President officially signed the Paycheck Protection Program (PPP) Flexibility Act of 2020 on June 5, 2020. The new act eases rules and provides much needed flexibility to small businesses on how they can spend their PPP funds and still qualify for forgiveness of the loans. Some of the highlights of the Flexibility Act are as follows:

  • Current PPP borrowers can choose to extend the loan forgiveness covered period from 8 weeks (56 days) to 24 weeks (168 days) from the loan origination date, as long as the covered period does not extend beyond December 31, 2020, or they can keep the original 8-week window. New PPP borrowers will have a 24-week covered period, as long as the covered period does not extend beyond December 31, 2020.

  • Reduces the required amount for payroll expenditure from 75% to 60%.

  • Provides two "new" exceptions allowing PPP borrowers to achieve full loan forgiveness even if they are unable to restore their workforce.

  • New PPP borrowers now have a five-year rather than a two-year maturity date for all loans made on or after the bill’s date of enactment. For loans made prior to that date, both the lender and the borrower must mutually agree to modification of the maturity date term to five years. Regardless of the maturity term, the interest rate will remain at 1%. (PPP loan borrowers should obtain documentation from their lender if the maturity date is changed and the PPP loan is extended to a five-year term).

  • Allows businesses to qualify for the employer payroll tax deferral provided in the CARES Act even if they have received PPP loan forgiveness.

    Bay Area Tax Group recommends that companies visit the Small Business Administration ("SBA") website for the latest guidance, resources, and access to the PPP loan forgiveness applications and instructions at

    The full application (Form 3508) has also been revised. It is now a five-page application and includes changes for the new 24-week covered period and the safe harbors added for the FTE and wage reductions. Additionally, the SBA released a new EZ version of the forgiveness application (Form 3508EZ). The EZ application requires fewer calculations and less documentation and will ease the paperwork for small business owners. However, not all borrowers are eligible, applicants should first review the rules and obtain confirmation from their lenders in advance.

COVID-19 Taxpayer Relief (April 2020)

    The President of the United States issued an emergency declaration under the Robert T. Strafford Disaster Relief and Emergency Assistance Act in response to the ongoing Coronavirus Disease 2019 (COVID-19) pandemic. The declaration is "to provide relief from tax deadlines to Americans who have been adversely affected by the COVID-19 emergency, as appropriate, pursuant to 26 U.S.C. 7508A(a)."


    On March 20th, the Treasury Department and the Internal Revenue Service announced that the individual federal income tax filing due date is automatically extended 90 days, from April 15th to July 15th 2020. No additional penalties or interest will accrue during these 3 months. Most states conform to Federal, including California, but not all. The following deadlines have also been extended:

  • Businesses with an April 15th filing deadline for the 2019 tax year will be given an additional 90 days to file returns and pay taxes without penalties and interest.

  • 2020 1st and 2nd quarter estimated income tax payments are due on July 15th, instead of April 15th or June 15th.

  • 2019 employer contributions to retirement plans that were due April 15th.

  • 2019 individual IRA deposits.

   This is an ever-evolving situation that will remain fluid for a number of months. We will be providing updates as the IRS and FTB make further announcements. If you have any questions regarding this information or how it applies to you, please reach out directly.

The SECURE Act (March 2020)

    The Setting Every Community Up for Retirement Enhancement Act, better know as the Secure Act, was signed into law on December 20th. One of the most dynamic changes to retirement legislation since the Pension Protection Act of 2006, addressing a wide variety of retirement planning topics. Some of the most impactful changes are summarized below:

  • Retirement Minimum Distributions (RMDs) will start at age 72, not age 70 1/2.

  • Age limitation on IRA contributions lifted.

  • Larger tax credits offered to small employers that establish retirement plans.

  • Penalty-free withdrawals from IRAs allowed for up to $5,000 of qualified birth or adoption expenses.

  • Non-spouses inheriting IRAs in 2020 or later must take distributions that end up emptying the account within 10 years. There are not RMDs during that period; a taxpayer could take no action for 9 years and then distribute everything in year 10. In addition to spouses, others that may be exempt to this rule include minor children, disabled individuals, and beneficiaries that are less than 10 years younger than the owner of the IRA.

  • Tax-free withdrawals from 529 Plans allowed for repayment of student loans up to $10,000.

Limited Liability Company or Insurance? (January 2020)

    Many people feel they need to form an LLC to protect themselves and their assets. But often, these concerns can be more easily addressed with insurance. You should be aware that the liability protection provided by an LLC is limited, and there are annual taxes and fees that must be considered. It's also worth noting that the state of California has been aggressively pursuing nonresident LLC members, which may deter out-of-state investors.

    Generally, members of an LLC are not personally liable for the debts of the LLC. A member’s acts may bind the LLC, but they generally do not subject individual members to personal liability. However, like the corporate shareholder, the LLC member is personally responsible for his or her tortious or malpractice acts. An LLC member's non-LLC assets may be attached if:

  • The member caused the event;

  • The member was negligent in hiring the person who caused the problem

  • The member was responsible for supervising the activity

    So what about insurance? For LLCs that hold property, most lenders will require the owner of the property to carry insurance on the property. Depending on your needs, you may be able to purchase an additional $1 million of insurance for in the neighborhood of $250 per year. Cost of insurance is based on a number of factors, including who the carrier is and what other coverage the carrier provides. $250 for $1M of additional coverage can look like a steal if you compare to the alternative - $800 LLC annual tax plus the cost to prepare an additional LLC tax return.

    Be aware that, at a minimum, the LLC is liable for an $800 annual tax, and that obligation is indefinite until the LLC formally dissolves. LLCs that have gross receipts attributable to California of $250,000 or more must also pay an LLC fee. The LLC fee starts at $900 and can be has high as $11,790 per year.

    The bottom line is that while LLCs are an excellent structure for many businesses, they aren't necessarily the right choice for everyone. If you are considering forming an LLC, be sure to reach out to our firm in advance so we can discuss the relevant financial and tax planning considerations.

AB 5 - Employees and Independent Contractors (September 2019)

    In 2019, the Governor signed AB 5. Under AB 5, most workers are presumed to be employees for purposes of the Labor Code, the Unemployment Insurance Code, and for most wage orders of the Industrial Welfare Commission unless a hiring entity satisfies a three-factor test, referred to as the ABC test. This means that many workers previously classified as independent contractors are now employees under California law and you must withhold California income and payroll taxes, and meet California’s minimum wage and overtime requirements.

    The ABC test - Under the ABC test, all three of these conditions must be met in order to treat the worker as an independent contractor:

  1. The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact, commonly known as the Borello “control test” (S.G. Borello & Sons, Inc. v. Dept. of Ind. Rel. (1989) 48 Cal.3rd 342);

  2. The worker performs work that is outside the usual course of the hiring entity’s business; and

  3. The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.


    The ABC test means, for example, that a hospital who hires nurses to work in specialized areas, such as an anesthesia nurse or neonatal nurse, may not treat the nurse as an independent contractor if those nurses are filling in for employee-nurses and don’t work for multiple hospitals. While physicians have their own specific exemption from AB 5, the same treatment would apply to other medical services, as well as consulting services, the entertainment industry, truck drivers and most notably, rideshare and delivery service workers.


    While applying the ABC test to workers will result in many more workers being classified as employees, the legislation provides for numerous exemptions to the application of the ABC test. The exemptions are complicated, and very specific. However, the exemptions do not mean workers are automatically independent contractors.

    Be aware that California law includes severe financial penalties for willfully treating an employee as an independent contractor. The penalties, which are in addition to other assessments, penalties, or fines, are:

  • $5,000 to $15,000 for each violation (a single misclassified individual); and

  • $10,000 to $25,000 for each violation if the Labor Commissioner, or a court, determines there is a “pattern and practice” of these violations.

  • (Labor Code §226.8)

Tax Reform - Employer Fringe Benefits (February 2019)

    The Tax Cuts and Jobs Act (TCJA) made significant changes to the tax deductibility of certain fringe benefits provided to employees that may affect the way employers deliver them. Because the tax impact of these changes will be felt immediately, it’s important for companies to consider if they’re going to make changes to their benefit programs, and, if they do, how to communicate those changes to their employees. This may include reviewing current reimbursement policies and accountable plan strategies as well as outstanding employment offer letters for any possible negative tax impacts to individual employees, the company, or both.


    Effective for amounts paid or incurred on or after January 1, 2018, the TCJA changes the tax treatment of the following fringe benefits:

    Transportation - Employers will no longer be able to deduct commuting benefits provided to employees, such as parking reimbursements or transit passes. However, the exclusion from income for these benefits received by an employee is retained.

    The TCJA also repeals the qualified bicycle commuting reimbursement, which allows employees to exclude from their income bicycle commuting reimbursements of up to $20 per qualifying bicycle each month. The qualified bicycle commuting reimbursement exclusion sunsets December 31, 2025.

    Some local laws require companies to offer certain transportation benefits to their employees. Careful consideration should be given to these local laws before any changes are made to the commuting benefits companies offer their employees.

    Moving Expenses - The TCJA suspends through 2025 the exclusion from employees’ taxable income of a business’s reimbursements of employees’ qualified moving expenses. However, businesses generally will still be able to deduct such reimbursements. And to make matters worse, individuals can no longer take a federal deduction for moving expenses (barring rare exceptions).

    Employee Achievement Awards - The TCJA eliminates the business tax deduction and corresponding employee tax exclusion for employee achievement awards that are provided in the form of cash, gift coupons or certificates, vacations, meals, lodging, tickets to sporting or theater events, securities and “other similar items.” However, the tax breaks are still available for gift certificates that allow the recipient to select tangible property from a limited range of items preselected by the employer. The deduction/exclusion limits remain at up to $400 of the value of achievement awards for length of service or safety and $1,600 for awards under a written nondiscriminatory achievement plan.

    On-Premises Meals - The TCJA reduces to 50% a business’s deduction for providing certain meals to employees on the business premises, such as when employees work late or if served in a company cafeteria. (The deduction is scheduled for elimination in 2025.) For employees, the value of these benefits continues to be tax-free.

    Family & Medical Leave - For 2018 and 2019, the TCJA creates a tax credit for wages paid to qualifying employees on family and medical leave. To qualify, a business must offer at least two weeks of annual paid family and medical leave, as described by the Family and Medical Leave Act (FMLA), to qualified employees. The paid leave must provide at least 50% of the employee’s wages. Leave required by state or local law or that was already part of the business’s employee benefits program generally doesn’t qualify.

    The credit equals a minimum of 12.5% of the amount of wages paid during a leave period. The credit is increased gradually for payments above 50% of wages paid and tops out at 25%. No double-dipping: Employers can’t also deduct wages claimed for the credit.

Fighting Tax Reform - Pending Legislation in California (July 2018)

    California Senate Bill 227 has become an increasingly hot topic in the tax community over the last couple of months. The legislation would enact a “California Excellence Fund Tax Credit” allowing California taxpayers a credit against their personal income tax equal to 85% of a contribution to the California Excellence Fund. Furthermore, it is expected that contributions to the fund would also be allowed in full on the Federal tax return as a charitable contribution.


    This bill was intended to mitigate the effects of the recent tax form enacted late in 2017, which severely limits state tax deductions on Federal tax returns. Currently, the bill is “In Assembly” with the last reading on January 30th 2018. In order to pass the bill, the Assembly will need to pass the bill in Committee hearings before sending it to the Governor for final approval. We will continue to monitor the status as the bill moves through California legislature and keep you updated.

IRS Warning - Inflated & Fabricated Tax Deductions (April 2018)

    Proactive and innovate tax planning is a great way to reduce tax liabilities and minimize audit risk. However, fabricating or artificially enhancing deductions isn’t a comparable recipe for success. Indeed, the IRS this year has specifically cautioned taxpayers about padding deductions.


    Falsely claiming deductions, expenses, or credits on tax returns is serious, regardless of their type. The IRS notes that the majority of false claims tend to be associated with business expenses and charitable contributions. Consequently, they have put great resources into developing automated systems that are increasingly efficient in detecting abnormalities and generating audits. The IRS can normally audit returns within only the last three years, but additional years are not exempt from scrutiny if there are large errors or associated fraud. Significant penalties may apply for taxpayers who file incorrect returns including:


  • 20% of the disallowed amount for filing an erroneous claim for a refund or credit.

  • $5,000 if the IRS determines a taxpayer has filed a frivolous tax return, defined as one that does not include enough information to figure the correct tax, or that contains information clearly showing that the tax reported is substantially incorrect.

  • In addition to the full amount of tax owed, a taxpayer could be assessed a penalty of 75% of the amount owed if the underpayment on the return resulted from fraud.


    Generally, an understatement is defined as the difference between the correct amount of tax and the tax reported on the return, reduced by any rebate. “Substantial understatements” are considered to be those where the understated tax exceeds the greater of $5,000 or 10% of the tax required to have been shown on the return. These accuracy-related “substantial underpayments” are what leads to some of the most severe penalties (IRC 6662(b)(1) and (2)). And if the costs are not enough of a deterrent, the IRS reminds taxpayers that they could even be subject to criminal prosecution. The range of potential offenses include:


  • Tax evasion

  • Willful failure to file a return, supply information, or pay any outstanding tax due

  • Fraud and false statements

  • Preparing and filing a fraudulent return

  • Identity theft

    Criminal prosecution could lead to additional penalties and on rare occasions prison time. Innocent, even stupid mistakes can be forgiven. However ignorance of the law is no excuse and not something to be relied upon. The burden is placed on the taxpayer, and should be taken extremely seriously.

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