​The new tax rates and brackets for 2024 were released by the Internal Revenue Service (IRS) on November 9, 2023. The new brackets reflect an inflation adjustment of 5.4%, which is lower than the 7.1% increase for 2023.

​Here are the new tax rates and brackets for 2024:

In addition to the changes to the tax brackets, the standard deduction is also increasing for 2024. For married couples filing jointly, the standard deduction will be $29,200, an increase of $1,500 from 2023. For single taxpayers and married individuals filing separately, the standard deduction will be $14,600 for 2024, an increase of $750 from 2023.

The changes to the tax brackets and standard deduction are expected to save taxpayers an average of $1,200 in 2024.

From the Daily Herald Sunday, November 19, 2023:

Introduction:

In the hustle and bustle of the holiday season, nestled between the consumer-driven Black Friday and Cyber Monday, lies a day dedicated to generosity and philanthropy – Giving Tuesday. Celebrated on the Tuesday following Thanksgiving, this global movement encourages people and businesses alike to give back to their communities and support charitable causes. While the primary focus is on making a positive impact in the world, Giving Tuesday also presents significant benefits for businesses. In this blog, we will explore how participating in Giving Tuesday can be a win-win for businesses, fostering both social responsibility and corporate success.

1. Enhanced Corporate Social Responsibility (CSR):

Participating in Giving Tuesday provides businesses with a platform to showcase their commitment to corporate social responsibility. Consumers today are increasingly conscious of the values and ethics of the companies they support. By actively engaging in philanthropic activities on Giving Tuesday, businesses can strengthen their brand image, build trust with customers, and demonstrate a genuine dedication to making a positive impact beyond profit margins.

2. Community Engagement and Brand Loyalty:

Businesses that actively contribute to their communities are likely to foster stronger connections with customers. Giving Tuesday offers a unique opportunity for companies to engage with their local or global communities, supporting causes that resonate with their audience. This engagement can lead to increased brand loyalty as customers appreciate and support companies that prioritize social responsibility.

3. Positive Public Relations:

Participation in Giving Tuesday generates positive publicity for businesses. Media outlets often cover stories of companies making meaningful contributions to charitable causes, creating a ripple effect of positive public relations. This increased visibility not only attracts potential customers but also attracts talented individuals who may be interested in working for socially responsible companies.

4. Employee Morale and Team Building:

Engaging employees in Giving Tuesday activities can boost morale and foster a sense of purpose among staff. Many employees are motivated by the opportunity to work for a company that values and contributes to social causes. Participating in charitable initiatives as a team can strengthen the bond among employees, contributing to a positive workplace culture.

5. Tax Benefits:

Businesses may be eligible for tax benefits when they make charitable contributions. Donations made on Giving Tuesday can potentially provide businesses with tax deductions, offering a financial incentive for their philanthropic efforts.

Conclusion:

Giving Tuesday presents businesses with a golden opportunity to align their values with actions, contributing to a better world while reaping various benefits for their brand. By integrating philanthropy into their corporate culture, companies can not only make a positive impact on the causes they support but also build a more loyal customer base, enhance their brand image, and create a workplace culture that attracts and retains top talent. In the spirit of giving, businesses can truly find a path to success that goes beyond financial gains, creating a lasting legacy of positive change.

​​A 1031 Exchange, also known as a like-kind exchange, is a tax-deferred transaction under Section 1031 of the Internal Revenue Code in the United States. It allows an investor to defer capital gains taxes when they sell certain types of business or investment properties and reinvest the proceeds into other like-kind properties.

Here are the basics of a 1031 Exchange:

1. Eligible Properties:
   - Only certain types of properties qualify for a 1031 Exchange, including real estate held for business or investment purposes, such as rental properties, commercial properties, and vacant land.

2. Like-Kind Requirement:
   - The properties involved in the exchange must be of "like-kind," meaning they are of the same nature or character, even if they differ in grade or quality. For example, you can exchange a residential rental property for a commercial property.

3. Qualified Intermediary (QI):
   - To facilitate the exchange, you must work with a qualified intermediary (QI), also known as an accommodator. The QI holds the proceeds from the sale of the relinquished property and uses them to acquire the replacement property.

4. Identification of Replacement Property:
   - Within 45 days of the sale of the relinquished property, you must identify potential replacement properties in writing to the QI. There are specific rules regarding the number and value of properties you can identify.

5. Acquisition of Replacement Property:
   - The acquisition of the replacement property must be completed within 180 days from the sale of the relinquished property or by the due date of the tax return, including extensions, for the tax year in which the relinquished property was sold, whichever is earlier.

6. Tax Deferral:
   - By following the rules of a 1031 Exchange, you can defer capital gains taxes, depreciation recapture tax, and other applicable taxes that would typically be due upon the sale of an investment property. The gain is essentially rolled into the new property.

7. Potential Partial Tax Deferral:
   - If the value of the replacement property is less than the relinquished property, there may be some taxable gain (the "boot") that's not deferred. This can be in the form of cash, debt reduction, or other non-like-kind property.

It's essential to work with tax and legal professionals experienced in 1031 Exchanges to ensure compliance with all IRS rules and regulations. The rules for 1031 Exchanges can be complex, and failure to follow them precisely can result in unintended tax consequences.

Tax planning for business owners in 2023 should be a year-round effort, but here are some key tax moves to consider early in the year to help reduce your tax liability and optimize your financial situation:

1. Review Your Business Structure: Assess whether your current business structure (e.g., sole proprietorship, partnership, LLC, S corporation, C corporation) is still the most tax-efficient option for your business. Changing your structure can have significant tax implications, so consult with a tax professional before making any changes.

2. Maximize Deductions: Identify all available deductions and credits that can help reduce your taxable income. Common deductions include business expenses, home office deductions, and retirement plan contributions.

3. Consider Qualified Business Income Deduction (QBI): If you're eligible for the QBI deduction (also known as Section 199A deduction), ensure that you're optimizing it. This deduction can be significant for pass-through entities like S corporations, partnerships, and sole proprietorships.

4. Evaluate Employee Benefits: Review your employee benefits packages, such as health insurance plans, retirement plans (e.g., 401(k)s), and other fringe benefits. Ensure they are tax-efficient and meet your employees' needs.

5. Plan for Capital Expenditures: Take advantage of the Section 179 deduction and bonus depreciation rules to write off the cost of qualified capital assets in the year of purchase, rather than spreading the deduction over several years.

6. Charitable Contributions: If your business makes charitable contributions, ensure that you're documenting them correctly and taking advantage of any available deductions. Consider contributing appreciated assets for potential tax benefits.

7. Inventory Management: Review your inventory management practices to minimize carrying costs. Methods like LIFO (Last-In-First-Out) or FIFO (First-In-First-Out) can impact your tax liability.

8. Review Your Debt Structure: Evaluate your business debt and consider refinancing or restructuring if it makes financial sense. The interest on business loans is often deductible.

9. Tax Withholding and Estimated Payments: Ensure that your business is withholding the correct amount of taxes for employees and making estimated tax payments on time. Underpayment can result in penalties and interest charges.

10. Estate Planning: If you have a succession plan or intend to pass your business to heirs, consider the tax implications and develop a strategy that minimizes estate taxes.

11. State and Local Taxes: Be aware of your state and local tax obligations, including income, sales, and property taxes. State tax laws can vary significantly and impact your overall tax liability.

12. Hire a Tax Professional: Tax laws are complex and subject to change. Consider working with a tax professional or accountant who specializes in small business taxation to ensure you're taking full advantage of available deductions and credits while staying compliant with tax regulations.

Remember that tax planning should be tailored to your specific business situation and goals. It's essential to consult with a tax professional who can provide personalized advice based on your circumstances. Additionally, staying informed about tax law changes and deadlines throughout the year is crucial for effective tax planning.

This was inspired from an article in the Daily Herald Business section on Sunday September 3, 2023
Never too early: Tax moves every business owner should consider right now (dailyherald.com)

Special Thank you to Schaumburg Business Association for informing us about this (www.schaumburgbusiness.com):

The Cook County Small Business Source proudly introduces The 2023 Source Grant, which will provide $40 Million in grants to small businesses to help stabilize operations, foster recovery and resiliency, and advance equity in a post-pandemic economy.

$40M TOTAL FUNDING

$40 million in grants to small businesses coupled with no-cost advising and coaching services, to help stabilize operations, foster recovery and resiliency, and advance equity in a post-pandemic economy.

APPLICATION DATES: July 20 – August 18

Application review will begin in August 2023 and not before – so there is no rush to apply. Early submission of an application does not lead to an earlier or faster review. Applicants will be notified of their application status by November 2023 and grant awards will be distributed in January 2024.

TWO TYPES OF GRANTS:

Businesses with 2019 gross revenue between $20k-$50k are eligible to receive $10K grants.

Businesses with 2019 gross revenue of more than $50k are eligible to receive $20K grants.

The Daily Herald had some great facts to support last week's Blog about Illinois. 

Frank Manzo IV
Illinois Economic Policy Institute

"Beware the naysayers who allege that Illinois' economy is "upside down" and "struggling."

Midway through 2023, there is no evidence that the state is in recession..."

​Read the rest at the Daily Herald Website:

https://www.dailyherald.com/business/20230716/attention-naysayers-the-data-show-illinois-economy-still-growing

During my travels this week, I heard about ESOPs a couple times. The first was at the Schaumburg Business Association Leadership Lunch where John Costello shared his journey as a business owner of Cherry's Industrial. He went from sleepless nights and the weight of the world on his shoulders to a thriving company with financial transparency, employees that share and live out core values, a common destiny and a shake in the outcome of the company.

I then read the Sunday Daily Herald Business section. This got a little more in the mud on the good and bad of Employee Ownership. ESOP plans are growing in popularity as a great way for a business owner to exit (dailyherald.com)

An ESOP can take various forms, but generally setting one up involves creating a separate entity that's owned by a company's employees, with the ownership determined based on a variety of factors from compensation to tenure to job position. They can be complicated, but below outlines some steps.

​To form an Employee Stock Ownership Plan (ESOP) for a company, follow these steps:

1. Design: Determine the objectives and structure of the ESOP. Decide what percentage of the company's shares will be allocated to the plan and how those shares will be distributed among employees.
2. Consult Professionals: Seek guidance from professionals such as lawyers, accountants, and financial advisors experienced in ESOP formation. They can assist with legal and regulatory compliance, valuation, and plan design.
3. Valuation: Conduct a valuation of the company to determine the fair market value of its shares. This valuation is crucial for setting the price at which the ESOP will purchase the shares.
4. Trust Formation: Establish an ESOP trust, typically in the form of a trust agreement, which acts as the legal entity to hold and administer the shares on behalf of the employees.
5. Financing: Determine how the ESOP will finance the purchase of shares. This can be through cash contributions from the company or borrowing funds externally.
6. Plan Documentation: Develop a comprehensive plan document that outlines the rules and provisions of the ESOP, including eligibility criteria, vesting schedules, and distribution rules. Ensure compliance with relevant laws and regulations.
7. Employee Communication: Communicate the ESOP's purpose, benefits, and mechanics to employees, emphasizing how it aligns their interests with the company's success.
8. Purchase of Shares: The ESOP trust purchases the company's shares using the funds allocated for this purpose. This can be done directly from existing shareholders or by issuing new shares.
9. Ongoing Administration: Establish procedures to manage the ESOP, including record-keeping, annual valuations, and compliance with reporting and disclosure requirements. Consider appointing a trustee or forming a committee to oversee the plan.
10. Employee Participation: Allocate the shares among eligible employees according to the plan's distribution rules. Monitor and update employee accounts as per the vesting schedule and any additional contributions made to the ESOP.
11. Repurchase Obligations: If employees leave the company or retire, establish a mechanism for the ESOP to repurchase their shares at fair market value, providing liquidity to exiting participants.

It is important to note that forming an ESOP involves legal, financial, and regulatory complexities. Engaging professionals with expertise in ESOPs is crucial to ensure compliance and a smooth implementation process.

Social responsibility refers to a company's commitment to operating in an ethical and sustainable manner, taking into account the impact of its activities on society and the environment. Some of the benefits of social responsibility include:

1. Improved brand reputation: Companies that are socially responsible are viewed more favorably by consumers, employees, and other stakeholders, which can lead to increased loyalty and trust.
   
2. Increased employee engagement: When companies prioritize social responsibility, employees are more likely to feel that their work is meaningful and that they are contributing to a greater good. This can lead to higher levels of job satisfaction and engagement.
   
3. Enhanced risk management: Companies that take social responsibility seriously are better able to manage risks associated with environmental, social, and governance issues. This can include avoiding negative publicity, legal sanctions, and financial penalties.
   
4. Access to new markets: Companies that are socially responsible are often able to access new markets, particularly those that prioritize sustainability and ethical practices.
   
5. Improved financial performance: There is evidence to suggest that companies that are socially responsible perform better financially over the long term. This is because they are better able to attract and retain customers, employees, and investors who value sustainability and ethical practices.
   

Overall, social responsibility can have a range of benefits for companies, including improved brand reputation, increased employee engagement, enhanced risk management, access to new markets, and improved financial performance.

This law goes into effect 1/1/24 so clients have time to think about how they want to implement this.
 
What is required:  All employees in Illinois must accrue at least 1 hour of PAID SICK LEAVE for every 40 hours worked.  After 90 days of employment, employees must be permitted to take their accrued paid sick leave for their own or their family’s illness. 
 
What is not permitted: Requiring employees to find a replacement to be able to take the time off (you can request an employee help find their replacement, but not require it).  Requiring proof of the illness or need for time off (you can request the reason, but not require the employee to answer or provide proof).  Requiring employees to take time off in full day increments.
 
Employers can require “reasonable” notice.  For planned time off, like appointments or procedures, this is no more than 7 days’ notice.  For unplanned time off, the required notice can’t be sooner than the employee is aware of the need.
 
Employers can require time off be paid in 2 hour increments if the schedule time is at least 2 hours.  If the scheduled work time is less than the employer can pay out only what was scheduled.
 
Employers can either accrue time or frontload time.  If time is accrued, then employees must be permitted to rollover their unused time from year to year.  However currently the requirement for pay out and accrual caps at 40 annually.  So employees may be stuck rolling over unused hours indefinitely.  Clarification may come on this before the launch.
 
If an employee leaves employment, their sick leave accrued does not need to be paid out to them (If an employer uses their vacation pay to meet the requirements of this law, then they must still pay it out as vacation pay must be paid to employees at employment termination).  If an employee returns to the company within a 12 month period, their accrued sick leave picks up where it left off.  The 90 day clock does not restart so a returning employee can take their time off immediately (or picks up where they left off if they worked less than 90 days). 
 
Paid Leave for All Workers Act (illinois.gov)
​

Tax season can be a stressful time for many individuals, especially if they are filing their tax return at the last minute. As the deadline approaches, it is common for people to have questions about their taxes. Here are some common last-minute tax return questions and answers that may help alleviate some of the stress.

Can I still file my tax return if I missed the deadline?
If you missed the tax filing deadline, you may still be able to file your tax return. In the United States, the deadline for filing taxes is typically April 15th, but it can vary from year to year. If you missed the deadline, you can file for an extension using Form 4868. This will give you an additional six months to file your tax return. However, it is important to note that an extension to file does not mean an extension to pay any taxes owed. You still need to estimate your tax liability and pay any taxes owed by the original deadline to avoid penalties and interest.

Can I still claim deductions and credits if I file my tax return late?If you file your tax return late, you may still be able to claim deductions and credits. However, it is important to note that some deductions and credits have specific deadlines or limitations. For example, if you contribute to an IRA for the previous tax year, you must make the contribution by the tax filing deadline to claim it on your tax return. Additionally, some tax credits, such as the Earned Income Tax Credit, have income limits and other eligibility requirements. Therefore, it is important to review the specific requirements for any deductions or credits you plan to claim.

What if I made a mistake on my tax return?If you discover a mistake on your tax return after you have filed it, you can file an amended tax return using Form 1040X. This form allows you to correct any errors or omissions on your original tax return. It is important to note that you cannot use an amended tax return to claim a refund for a year that is more than three years old. Additionally, if you discover a mistake on your tax return that resulted in an underpayment of taxes, you may need to pay penalties and interest.

How do I pay any taxes owed?If you owe taxes, you can pay them online using the IRS's electronic payment options, including direct debit from your bank account, credit or debit card, or the IRS's online payment agreement tool. If you cannot pay your taxes in full, you can request a payment plan using the IRS's online payment agreement tool. It is important to note that interest and penalties may apply if you do not pay your taxes by the deadline.
In conclusion, filing taxes can be a complex process, and it is common to have questions or concerns, especially as the deadline approaches. By understanding the options available for late filing, deductions and credits, correcting mistakes, and paying taxes owed, you can take steps to minimize stress and ensure that you meet your tax obligations.

If you need help, you can contact GLM
​Tom Gosche, 630-675-8971, tomg@goglm.com