What is the difference between Roth and Traditional IRAs?

What is the Difference Between Roth and Traditional IRAs?

A Roth IRA and a Traditional IRA are both tax-advantaged retirement accounts, but they differ significantly in how and when you receive tax benefits. With a Traditional IRA, contributions may be tax-deductible, reducing your taxable income in the year you contribute. However, withdrawals in retirement are taxed as ordinary income. In contrast, Roth IRA contributions are made with after-tax dollars, so they are not tax-deductible, but qualified withdrawals in retirement, including both contributions and earnings, are tax-free.

Are Contributions Deductible?

Traditional IRA contributions are often deductible, but eligibility depends on your income and whether you or your spouse are covered by a workplace retirement plan. If covered, the deduction phases out at certain income levels. Roth IRA contributions, on the other hand, are never deductible, but they offer the benefit of tax-free withdrawals in retirement if certain conditions are met.

401(k) plans, whether Traditional or Roth, operate similarly regarding tax treatment. Traditional 401(k) contributions are pre-tax, reducing current taxable income, while Roth 401(k) contributions are made after-tax, allowing for tax-free withdrawals in retirement if requirements are satisfied.

Eligibility to Contribute and Tax Deduction Rules (2024)

As of the 2024 tax year, eligibility to contribute to a Roth IRA phases out for individuals with a modified adjusted gross income (MAGI) above $146,000 (single filers) or $230,000 (married filing jointly). For Traditional IRAs, there is no income limit if neither you or your spouse is covered by a workplace retirement plan, but if you (or your spouse) are covered by a workplace plan, deductions phase out based on MAGI starting at $77,000 for single filers and $123,000 for married filing jointly. You can still contribute to a traditional IRA if your income exceeds these limits, but the deduction allowed will be reduced or eliminated, depending on your MAGI.

Which Should I Choose?

The choice between a Roth and Traditional IRA often depends on your current and expected future tax situation. If you expect your income and tax rate to be higher in retirement, a Roth IRA can be advantageous, allowing you to pay taxes now at a lower rate. Conversely, if you anticipate a lower tax rate in retirement, a Traditional IRA could be better, providing upfront tax deductions. Consulting with a financial advisor can help determine the best strategy based on your unique financial circumstances.

How do I find my Columbus Account ID?

How do I find my Columbus Account ID?

If you live or work in Columbus, Ohio, and are required to file a Columbus return, we will need your Columbus Account ID to be able to e-file your return. You can find your Account ID by logging into your Columbus Revenue Information Service Portal (CRISP) account, but if you don’t already have a CRISP account, here are the steps you can take to request your Columbus Account ID and create a CRISP account.

STEP 1

Go to https://crisp.columbus.gov/. Once there, you will want to select one of the options under “Registration”.

• If you have filed a Columbus tax return before, click on “Create a Logon for an Existing Customer”. (This will be the correct option for most clients.)

• If you have NOT filed a Columbus tax return before, click on “Register a New Customer”. (If you are selecting this option, you will then be directed to indicate whether you are registering a new business or individual. For the purposes we are referencing here, you would want to register as an individual.)

STEP 2

If you selected “Create a Logon for an Existing Customer, you will then see this screen.

Input your information, and then select “No” for both the letter ID question, and the question asking whether you will be using the logon to file/make payments for someone other than yourself. Click “Next”, and follow any remaining prompts to complete the process, and a letter will be mailed to you from the City of Columbus, providing you with your account ID. Save this letter and feel free to upload a copy of it to your ShareFile folder so we can use the Account ID to e-file your Columbus return.

How do I make a payment WITHOUT an IRS.gov account?

How do I make a payment WITHOUT an IRS.gov account?

If you don’t have an IRS.gov account, you can still make a payment online via IRS Direct Pay. The following screenshots illustrate how to use the IRS Direct Pay website and provide some tips as you are going through the process.

STEP 1 of 5

The IRS asks for a reason for the payment. Common options:

• If you are making an estimated tax payment, choose “Estimated Tax.” 

• If your taxes are completed and you have a balance due, choose “Balance Due.” 

• If you are filing an extension and want to make an estimated payment of your amount due with the extension, choose “Extension.” (Note that making a payment doesn’t file the extension itself.)

WARNING - See the little box that says “business taxes?” Our clients will almost NEVER click that. If you have business income from a single member LLC, sole proprietorship, partnership, or scorp, you are making a PERSONAL tax payment on this website. You are not making a business tax payment. For most people, your business doesn’t owe IRS income taxes because the income flows through to the owner.

In this example, we are making a Balance Due payment. Choose the following options:

STEP 2 of 5

This step will ask you to verify your identity. If we are filing your 2023 taxes, you cannot use 2023 tax information to verify your identity because the IRS has not yet processed this return. You will need to recall your filing status and address used on your 2022 taxes to complete this step (or whatever year you select to use for verification).

This step will also ask for an SSN. To verify your account, you must use the SSN of the first person listed on the tax return, if you filed a joint tax return. You won’t be able to verify with the secondary SSN. 

TIP: a balance due payments MUST be paid under the SSN of the first person listed on the joint return or the IRS will not credit it properly, in our experience. This is not true if you are making an estimated tax payment - you can make this under your respective SSNs for joint filers.

STEP 3 of 5

This section just asks how much you want to pay and for your bank info. You cannot use a credit card on this website (though there are third party websites to do that, like this one we trust). 

We recommend that you enter your email address and check the box to get an email confirmation of the transaction. This is good record-keeping and proof for you, if there’s ever a discrepancy with the IRS.

STEP 4 of 5

You are simply confirming your previous entries.

STEP 5 of 5

No additional work - success!

How do I change the tax withholdings for my W-2 job?

How do I change the tax withholdings for my W-2 job?

If you have owed money to the IRS when your taxes have been filed, and you have a W-2 job (aka, you work as an employee of someone else), you may want to adjust how much of your wages are withheld for taxes, but how do you do this?

The way you control how much is withheld for taxes is with a Form W-4, which just tells the payroll department at your job how much or how little to withhold. You may have filled one out when you first started your job and then never really thought about it again, but if you want to adjust your withholdings, you will simply need to fill out a new Form W-4 and submit it to your payroll/HR department.

Here are a couple general principals when it comes to filling out the W-4:

• Having “Married filing jointly” checked will result in less being withheld than if “Single” is checked.

• The more children/dependents you claim in Step 3, the less will be withheld for taxes.

If you tend to owe come tax time, here are some things you may want to adjust:

• Checking “Single” rather than “Married filing jointly” as your filing status

• Reducing the amount that you include in Step 3 (which will increase your withholdings)

• If you already have “Single” checked and 0 in Step 3, and you still owe taxes every year, checking the box in Step 2(c) will further increase your withholdings

Keep in mind that what you put on the W-4 has no bearing on how you are able to file your taxes, it is simply a way to communicate to the payroll department how much you would like to have withheld for taxes. (So even if you are planning on filing as Married Filing Jointly, you can still select “Single” on the W-4 as a way to increase your withholdings.)

The IRS also has a Tax Withholding Estimator that you can use to help you determine the best way to fill out your Form W-4. You can find that HERE.

How do I close my Ohio CAT account?

What is the Ohio CAT and how do I close my account, if the new rules apply to my business?

In 2023, Ohio announced major changes to the Ohio Commercial Activity Tax (CAT) filing requirement. Historically, any business with $150,000 or more in gross income was required to register and pay this additional tax. The Ohio tax department has made major changes only requiring larger businesses to file and pay. Here is the public announcement email from the Ohio Department of Taxation with more information:

Beginning Jan. 1, 2024, please be aware of the following changes to the Commercial Activity Tax (CAT).

• The CAT annual minimum tax is eliminated

• The exclusion amount is increased from $1 million to $3 million.

• Annual filing is eliminated after the 2023 annual return, which is due May 10, 2024.

• Taxpayers with taxable gross receipts of $3 million or less per calendar year will no longer be subject to the CAT in 2024.

If you anticipate continuing to have less than $3 million in taxable gross receipts in tax year 2024, we recommend that you cancel your CAT account immediately with an effective date of Dec. 31, 2023. 
*Please note, you must still file your last annual return for tax year 2023 which is due May 10, 2024.

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Here are steps to close your account if your gross income is expected to be less than $3 million in 2024. Closing the account NOW and making it effective 12/31/2023 will save you time and hassle later!

Go to your Ohio Business Gateway (OBG) account and follow the following screenshots. If you don’t complete this before 12/31/2023, you may not be able to do it online. If you do not see the “CAT CANCEL ACCOUNT” option, refer to this FAQ to add that to your OBG home page.

If you have additional questions or issues closing the CAT account, please contact the Ohio CAT department.

How do I set up an Ohio Business Gateway account or add an accountant user?

How do I set up an Ohio Business Gateway account or add an accountant user?

Ohio Business Gateway (OBG) is a site designed to be a one-stop-shop for filing and paying various types of Ohio taxes for businesses. OBG can be a challenging site to use. In general, you have to give yourself access to each service area (sales tax, CAT, etc) and then give yourself access to each transaction type within that service area. And if you want Charitax to help, you can add us as an accountant user.  

To give Charitax access and set up Ohio Business Gateway for yourself:

Step 1 - Charitax will submit a request first (you will get an email notification and a notification through the app when this is done).

Step 2 - Login to your Ohio Business Gateway > If you have multiple companies, choose the appropriate one from the dropdown > Go to Lock Icon > “Requests for Account Access” > hit the check mark to approve us (where it says Eric Bisignano/Charitax LLC).

Step 3 - Go to Lock icon > Service Areas > select which ones you need (sales tax, CAT, etc).

Step 4 - Go to Lock icon > Transaction Types > select which ones you need.  

• For Commercial Activity Tax, choose CAT Annual, CAT Payment, CAT Quarterly (Includes Estimate), and CAT registration. (this should cover most CAT related filings you would ever need)

  Repeat this logic for other service areas you need access to.

Step 5 - Go to Person icon > Access Requests > scroll to bottom to Service Area Access Requests > click the + sign for all the Service Areas listed

Step 6 - Go to Lock icon > Service Area Access Management > Requested Service Area Access > click the check mark to give yourself access to each Service Area listed

Step 7 - Go to Lock Icon > User Authorization > Permission Template > click all 5 radio buttons (read, edit, create, delete, submit) to give them a blue checkmark > click Copy Permissions (all check marks below should activate and turn blue) > click SAVE

That should work!  Go to Home Icon > New Transaction tab.  You were successful if you can go to the Home icon and see the service area/transaction types you requested listed under New Transaction tab.

How do extensions work?

How do extensions work?

Why file an extension?
The IRS will grant you 6 additional months to file your taxes - so more time for you to file with no downside. If you don’t have your tax documents gathered or your bookkeeping ready before our deadline for on-time tax prep, we can file an extension for you. Extensions are common and free to file.

What is an extension?
An extension grants you 6 additional months to file your tax return. So for a personal tax return, that gives you until October rather than April. (For partnership and corporate business returns, you have until September rather than March.) It is more time to file but not more time to pay. So if you expect to owe, you should send in an extension payment. See below for more info on that.

What info do you need to file my extension?
We just need your basic info to file the extension (name, address, tax ID numbers). For most returning clients, we have all the info on file already. Let us know if you have an updated address. 

Does filing an extension cost me anything?
We can file the extension for you for free. A reminder that it is more time to file but not more time to pay so if you expect to owe, you should send in an extension payment. The extension payment is just for any taxes due - not a payment you’re making in order to file the extension. 

How do I make an extension payment?
You can make an extension payment on the IRS’s website (https://www.irs.gov/payments/pay-personal-taxes-from-your-bank-account). Click Make a Payment. Select Extension as the reason for payment.

How do I estimate what my extension payment should be?
If you generally receive a refund and your tax situation has not changed, an extension payment might not be necessary. If you generally owe and/or own a business and don’t think any estimated payments you made throughout the year will cover your tax due, we generally recommend 20-25% of your business profit (income after expenses) for the year minus any estimated payments you’ve made if applicable. There is no risk in overpaying because you’ll get the overpayment back as a refund when we file your taxes. The risk in underpayment is paying interest on the balance due when you file.

How do I make a payment from my IRS.gov account?

How do I make a payment from my IRS.gov account?

Note: If you want to make a payment WITHOUT logging into IRS.gov, you’ll want to use IRS Direct Pay.
You can find information on how to do that HERE!

Once you’re logged into your IRS.gov account, click Payments > Payment Options. From there, you can select your payment method and payment type (balance due, estimated payment, extension payment, etc).

If married and making a payment for a balance due, be sure to use the primary taxpayer’s SSN/account (whoever is listed first on your tax return). For anything other than a balance due payment, use the SSN of the person the payment applies to. 

Because IRS jargon can be tricky, here are some notes on a few of the payment types:

• Balance Due refers to the results of your tax preparation.  Did you owe money (versus getting a refund) after accounting for your income and tax withholdings, credits, and direct payments throughout the year?  This could be for last year or prior years, if you still owe the IRS on a prior year’s tax bill. 

• Estimated Tax refers to payments you are making throughout the year.  Usually, this is for business owners or those who have income without tax withholdings. If you have W2 income only, you’re likely not going to use this payment type. Sometimes people refer to this payment type as “paying your quarterly taxes.”  Use the SSN of the person the payment applies to.

• Extension refers to a payment you make when requesting an extension of time to file your taxes. Tax filings are due on April 15th but you can request six months of additional time to file (but not to pay). Making an extension payment can help cover a potential tax bill and prevent any interest/fees for not paying by the April 15th deadline.

How do I view payments I’ve made to the IRS?

How do I view payments I’ve made to the IRS?

Log into your IRS.gov account. Click on Payments > Payment Activity and you should be able to view any scheduled, pending, and processed payments on your account. When it comes to letting us know about any payments you’ve made, be sure to only include payments attributed to the tax year we are currently working on. (So for example, in 2023 we would generally be working on your 2022 tax return.)

How do I get my tax documents to Charitax electronically?

How do I get my tax documents to Charitax electronically?

If you don’t already have a Sharefile folder, email jill@charitax.com and she will set one up for you. 

Once you have access to your Sharefile folder, upload documents to the tax year we’re currently working on under the folder Put Your Tax Docs HERE. (you will get an email notification when we add you - check spam folder, if you don’t see it)

Once you’re inside the folder Put Your Tax Docs HERE, you can upload by dragging and dropping or clicking the blue plus sign, then Upload.

Once you’ve uploaded your tax document, you can edit the file name by clicking on the pencil then changing the file name to match your tax document. See examples below. 

Once you’ve finished uploading all of your tax documents, email jill@charitax.com to let us know you are ready for our team to begin tax prep! We do not get notifications when people upload items to Sharefile.

MOBILE PHONE INSTRUCTIONS: The instructions above assume you are using a computer and accessing Sharefile through a browser.  If you prefer to use the Sharefile mobile app, download “Citrix Files” from the Apple App store or Google Play store.  The first screen will ask for the “account subdomain” - enter “charitax.” Then you can process is the same for uploading pics or files to Sharefile via the app.

How do I determine my Ohio local tax district?

How do I determine my Ohio local tax district?

This info only applies to Ohio residents. And if you work with Charitax for tax prep, we do this research for you.

You should not assume that the city in your address or your school district matches your income tax district. Your county auditor’s website is the best source to determine your local tax district by searching your address. This helps you know what city tax return you may be required to file each year. Each county has their own website to determine this and each one looks a little different. But if you live in Franklin County, for example, then you would enter your address on this site: https://property.franklincountyauditor.com/_web/search/commonsearch.aspx?mode=address.  Generally, apartment buildings or multi-unit homes are harder to search - consider the “map search” feature most county auditors’ sites have in these cases. 

Sometimes, the tax district listed on the website lists a township name or is blank. This usually indicates that you have no local taxes to pay and no local income tax return to file. Call the county auditor if you want to confirm.

Sometimes your school district and your local tax district are not the same. See the example below where this residence is in Columbus local income tax district but Hilliard City School district.

Another tool we use is the Ohio Tax Finder to search by address: https://thefinder.tax.ohio.gov/streamlinesalestaxweb/AddressLookup/LookupByAddress.aspx?taxType=taxsummary. In theory this website should match the county auditor’s site. The Tax Finder can be a helpful resource but the county auditor’s website is the authoritative source for determining your local tax district.

How can I create an IRS.gov account for myself?

How can I create an IRS.gov account for myself?

You might want to create an IRS.gov account to check your tax records and transcripts, view a balance due, make a payment, or set up a payment plan with the IRS. To create your account, go to https://www.irs.gov/payments/your-online-account and click on “Sign in to your Online Account”.

Then click on “Create an account”.

Create a login following the prompts. To verify your identity, you will need to have your photo ID available. Note that if you are using a smartphone to take a photo of your ID, it might be easier to use the option where they send a link to your phone due to the file types the website accepts when uploaded from your computer.

How can I give Charitax access to my Quickbooks Online account?

How can I give Charitax access to my Quickbooks Online account?

To add Charitax as an accountant user, use ebisignano@charitax.com as the email. 

When you're logged in to Quickbooks Online, go to the gear icon in the top right corner > click on Manage users.

Then click on the Accounting firms tab > invite ebisignano@charitax.com

That’s it!  Once you add this email address, our team can have access to your Quickbooks Online account.