January 2025 Tax Notes

Yes… it’s time to start thinking about taxes again. Here are some things to think about:

Filing Deadlines

• Individual returns – April 15 – October 15 with extension
• S Corporations, Partnerships and LLCs – March 17 – September 16 with extension
• C Corporations – April 15– October 15 with extension
• Los Angeles City Tax (see below) – February 29
• FBAR (see below) – April 15 – automatic extension to October 15
• 1099s and W-2s (see below) – January 31
• Corporation and LLC registration renewals – various (see below)
• California LLC and corporation minimum tax for 2024 (see below) – April 15
• California passthrough entity tax payments – March 17 for 2024 and June 15 for 2025
• Estimated payments for 2024 – January 15, 2025
• Estimated payments for 2025 (see below) – April 15, June 17, September 16 and Jan 15, 2026
• Beneficial Ownership reporting for LLCs, corporations and Partnerships (see below) – 30 days after any changes

Tax Checklist

Here is a link to my website, for a fairly comprehensive checklist of documents you may find helpful to complete your tax return:

Tax Checklist

Notable documents you may need to provide include:

• W-2s for employment income
• 1099s received for self-employment, rental, investment or other income
• Documentation of digital assets received, purchased, sold or otherwise disposed of
• 1099s for tuition payments
• Health insurance documents if you had coverage with Covered California or another marketplace provider
• Due diligence documents to support claims for dependent children or the Earned Income Tax Credit.

Extensions

Some people can’t file by the deadline. A common reason is that they don’t receive K-1s from their partnership investments in time. It is easy to file for a 6-month extension of time to file.

Be sure to file for an extension if you can’t file on time. It keeps a lot of options open, and it substantially reduces penalties if you owe tax. Let me know.

Los Angeles City Tax

This can be a big annoyance, and an avoidable expense, so please take care of it…

If you had a business in 2024, and you live in the City of Los Angeles, you need to file for a Los Angeles Business License. A business can be an LLC, a corporation, or even just a 1099 for independent contractor income. Also, if you have 4 or more rental properties in the city, you need a license. If you filed Schedule C for business income, and live in Los Angeles, you will need a business license.

It’s easy to file online, or to renew, and the tax is a relatively small amount – in fact there is no tax if your business revenue was under $100,000, or $300,000 if you are a creative artist. This is NOT part of your tax return.

To file, go to https://finance.lacity.org/  or phone (844)663-4411.

Beneficial Ownership Reporting

If you have an LLC, corporation or limited partnership, you may be required to file an online report and update it as necessary, with FinCEN regarding the beneficial ownership of the LLC, corporation or partnership. There are strict deadlines for filing these reports. This is NOT part of your tax return.

At this time, the reporting requirement is undergoing legal challenges. It is currently not required, but that could change with no notice. The best advice I’m seeing is to file the report, and any updates.

Personal Property Report for Rentals

If you own a short term rental such as an Airbnb, you will need to file a new annual report – Form BOE-571-STR Short Term Rental Property Statement to report business personal property. The report is not required if the total value of such items as furnishings, televisions, computers and appliances is under $100,000, but it is recommended to file anyway, to avoid assessments based on guesses by the county. The tax rate is approximately 1.2%. This is NOT part of your tax return.

1099s and W-2s – Deadlines and Filing Requirements

If your business paid any individual or partnership more than $600 during the year, you need to send them a 1099. Similarly, if you paid wages, you need to send the employees a W-2. There is no need to send a 1099 to a corporation.

It is important to issue 1099s. A question on the tax returns asks whether any 1099s should have been issued, and you must specifically state whether you actually sent them. 1099s and W-2s must be sent to the recipients and filed with the IRS by January 31. There are penalties for not issuing 1099s on time.

California law makes it especially difficult to treat workers as independent contractors. The IRS is also making this a priority. It is your responsibility to determine whether your workers should be treated as employees instead of independent contractors. If you have concerns, I am happy to discuss them with you, but ultimately, you should consult an attorney.

Keep State Filings Current – LLCs, Corporations and Partnerships

LLCs, corporations and limited partnerships are required to file periodic statements to maintain their registration with the state. It’s easy to forget, but it can be expensive and annoying if your business is suspended. California requires a Statement of Information every one or 2 years, depending on the type of entity. Here’s a link to the California website to check your status. https://businesssearch.sos.ca.gov/

Remember that California minimum tax payments for 2025 are due by April 15, and the additional fee for larger LLCs is due by June 17. Check the rules if your business is registered in another state.

Estimated Payments

If you have a business, or if you don’t have taxes withheld from your income, you should be making quarterly tax payments. There is a penalty (not a big penalty, but a penalty all the same) if you don’t pay the lower of 90% of current year’s tax or 100% of last year’s tax (it’s 110% for higher incomes).

It’s a good idea to check on your investment accounts and partnership interests to see if they expect large capital gains. Making an estimated payment for 2024 by January 15 could save unexpected penalties.

Financial Accounts Outside the U.S.

If you had financial accounts outside the U.S. in an amount greater than $10,000 during the year, you will need to file Form FinCEN 114, or FBAR. If the amounts are over $50,000, you may also need to provide information on your tax return. These amounts are not taxed, but they must be reported. There are nasty penalties for failure to file.

Financial accounts include bank accounts, pension funds, cash value insurance policies and retirement savings accounts (such as a Canadian RRSP or a UK ISA).

Note: If you have an interest in a foreign corporation or partnership, or own mutual funds outside the US, there are special reporting requirements. Gifts from foreign donors may need to be reported, too, depending on the amounts involved. Please let me know as soon as possible.

401(K) Plan Reporting

If your solo 401(K) has a balance of $250,000 or more, you need to file Form 5500(EZ) by July 15. It’s not a difficult form, but there are penalties for failure to file. This is not part of your tax return.