I was interviewed by Jane Caffrey live on NBC Connecticut just days before the tax deadline and was asked to provide tips for last-minute filers. I talked about the payment plan the IRS has in place for those who are unable to pay their tax liability and how businesses can’t deduct R&D expenses this year. But first, here’s a sneak preview of my No. 1 tip for filing taxes in 2024: Start early!
Here’s the transcript from my appearance on the NBC Connecticut News at 7.
Jane: Time sure flies when you’re putting off your taxes, right? You now have just one week until the filing deadline. That is April 18. So joining us tonight is Angel Li, an accountant who specializes in tax and advisory services at FML CPAs in Glastonbury. Angel, thanks so much for being here with us tonight. We want to start out with a simple question. What happens when you wait until the very last minute to file or to get your tax info to your CPA?
Angel: Besides the fact that it stresses everybody out, it really takes the opportunity away from us, the preparer, also from the taxpayer, to work together as a team to get through the return. So 99 percent of the time when I get documents, I probably will have some sort of questions going back to the taxpayer. It could go from anywhere between, ‘Hey, you’re missing a 1099,’ to ‘I don’t think the Q1’s reporting your income correctly, you need to go back to your source documents.’ It could be your banker, it could be your payroll provider, it could be your business tax return preparer, right? So when we go down to the wire like that, it really gives us very little opportunity to make sure that we capture all your expenses, all your income, as accurate as possible. And most importantly, it strips away the tax planning aspect of it right? We want to maximize the deduction. So this gives us the chance to ask you all the appropriate questions.
Jane: Can you go over some of the new payment plan options from the IRS for taxpayers, those who still have balances from 2020 or 2021?
Angel: For this year, for whatever reason it is, there are definitely more taxpayers that are not able to pay the tax liability with their return. So there is a payment plan that the IRS has, but it’s very important — so you can apply for the payment plan two ways. Go online, or you could use the form 9465 to apply for the payment plan. Upon approval, what that does is the IRS will allow you a period of time to submit your payment. Sometimes there is a requirement to debit out of your checking account. And sometimes they will allow you to do some sort of credit card, or cut a check in. But the most important part is you need to apply through online or through, again, the form 9465. Now keep in mind, this is just a payment plan. They will still charge you an interest and a failure to file and pay on time. So just try to get on it as soon as possible.
Jane: And there are some changes this year. What do people need to know as they go into filing?
Angel: So one of the hot topics this year is that 174 capitalization rule. This applies to many businesses that are out there right now. Pretty much what this is, is part of the TCJA that was in place in 2017. It kicked in on Jan. 1 of 2022. What that really is, is for any company out there that has an R&D expense, or research expenditure expense out there, it requires you to capitalize that cost and amortize that over five years or 15 years. Let me put it into more simple terms. So if you incur research and development costs, expenses, what the IRS wants you to do right now is not deduct it in the current year, but instead over five years if it’s domestic costs, or 15 years if it’s foreign. What that does is really put a burden on our taxpayers. If you think about it, a company that could break even, now they are actually facing a tax liability because they can’t take that deduction in Year One. So this definitely has created a lot of noise in the market.
Jane: OK, alright, great. This is some really good information here as we wrap up tax season, so thank you for breaking it down for us on the News at 7. Angel Li with FML CPAs, thank you so much for being here tonight.
Angel: Thank you for having me.
