As we approach the end of the year, it is important to consider various tax planning strategies as well as deadlines and requirements you must meet. New this year: business owners are now required to file a Beneficial Ownership Information report.

Here are some of the December 31, 2024, deadlines and planning ideas to consider:

BOI Report

As we noted in our February 2024 Insight, the Financial Crimes Enforcement Network (FinCEN) requires most U.S. entities to submit a BOI – Beneficial Owner Information report. This mandate is part of the Corporate Transparency Act (CTA) designed to combat money laundering activities.

The deadline for filing this report is January 1, 2025 for businesses that were created before January 1, 2024. Businesses established after January 1, 2024 have 90 days from the date of formation to file the reports. In 2025, new entities will need to file the BOI report within 30 days of their inception. Filing deadlines can’t be extended for other than some entities in designated areas impacted by Hurricanes Milton, Helene, Debby and Francine.

The CTA definition of a beneficial owner includes anyone who owns at least 25% of the equity or is in substantial control of an entity (such as senior executive officers, members of executive or management committees, and general partners of limited partnerships). There are some exemptions to the reporting requirement; these include certain types of banks, credit unions, investment companies, insurance companies, accounting firms and regulated public utilities. Some tax-exempt entities and inactive entities are also exempt from filing a beneficial ownership report.

BOI reports must be filed electronically. The report is available with no filing fee on the FinCEN website: https://www.fincen.gov/boi. More information about the report is available at https://www.fincen.gov/boi-faqs

Roth IRA conversion

December 31 is the deadline for converting a traditional IRA or other existing retirement account to a Roth IRA. Many people choose to convert accounts to a Roth IRA because withdrawals and income growth from a Roth IRA are tax-free. While tax is paid on the converted funds in the year of the conversion, future qualified distributions from a Roth IRA will not be subject to taxation. Also, Roth IRA accounts are not subject to required minimum distributions.

Required Minimum Distribution (RMD)

Required minimum distributions (RMD) are the minimum amount that account holders must withdraw each year from retirement accounts, typically beginning at age 73. Generally, a RMD is calculated for each account by dividing the prior December 31 balance of that IRA or retirement plan account by a life expectancy factor that the IRS publishes in Tables in Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs).

If you don’t take the RMDs from your account, you will be subject to a penalty equal to 25% of the amount that should have been withdrawn.

The deadline for withdrawing RMDs in 2024 is December 31, 2024.

Qualified Charitable IRA distribution

One way to avoid the taxable income from an RMD is through a qualified charitable distribution (QCD), also known as IRA charitable distributions or IRA charitable rollovers. Before December 31, an RMD up to $105,000 can be made as a direct transfer to charitable organizations without the withdrawal being taxable income or resulting in higher tax rates. QCDs also reduce the balance of the IRA, which may lower future RMDs.

529 plan contributions

The deadline to contribute to a 529 college plan in most jurisdictions (including Maryland, Virginia and DC) is December 31.. For a full list of requirements in each state, check out this link.

529 plans offer a range of tax benefits, including:

• Tax-deferred growth: Contributions grow tax-free within the account.
• Tax-free withdrawals: Withdrawals used for qualified education expenses are tax-free.
• State tax deductions: Many states (including MD, VA and DC) offer a state income tax deduction or credit for 529 plan contributions.

Flexible Spending Account (FSA)

If you have a Flexible Spending Account (FSA), make sure you use the funds before the end of the year, as they usually don’t carry over from year-to-year. Spend your FSA on eligible medical expenses to avoid losing the money.

Health Savings Account (HSA)

Contributing to a Health Savings Account (HSA) can provide triple tax benefits: contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are tax-free. Maximize your HSA contributions before the end of the year to take full advantage of these benefits.

Charitable Donation

Making charitable donations before the end of the year can also provide tax benefits. Donations to qualified charities are tax-deductible, which can reduce your taxable income. Consider donating appreciated assets, such as stocks, to maximize your deduction.

There are many other items to consider for purposes of year-end planning in order to minimize your tax bill and to meet all applicable filing requirements. The professionals at Dembo Jones can help you. Give us a call.