TAX TIME 2025
GEORGE WILSON ADAMS CPA MBA
February 5, 2025
Tax Time 2025 is upon us and officially began on January 27, 2025. For Maine residents personal returns for 2024 will be due on Tuesday, April 15, 2025. Business tax returns for multimember LLC's, S corporations and partnerships will be due on Monday, March 17, 2025. C corporation returns will be due by April 15. Your return is considered filed on time if the envelope is properly addressed, has enough postage, is postmarked by the due date, and is physically deposited in the mail by the due date. These timely filing rules are subject to IRS Regulations pertaining to IRC Section 7502. I strongly recommend electronic filing of returns or certified mail.
Note that accountants must receive a signed e-file authorization form in order to have legal permission to file a return on your behalf. If I do not receive a signed and dated e-file authorization form then I can't file your taxes.
While extension forms can always be filed, bear in mind that an extension of time to file is never an extension of time to pay taxes. You can extend your 2024 personal return until Wednesday, October 15, 2025. But your tax bill is legally due and payable on April 15 for Maine residents. The IRS and Maine will charge late payment penalties and interest on unpaid balances. This is the number one issue I deal with for clients who are on extension.
Why do extensions exist in the first place? The answer is that many people and companies honestly need additional time to prepare an accurate tax return that is signed under penalties of perjury. Another reason is that some clients provide tax information to their accountant close to a tax filing deadline, leaving the accountant with insufficient time to generate a tax return. Finally, and it does pain me to have to clarify this, accountants tend to go on vacation after tax season is over.
Here is a list of key changes for 2024 returns filed in 2025:
(1) The new IRS standard deduction for 2024 is as follows: $29,200 for married filing a joint return; $14,600 for single or married filing separately; and $21,900 for head of household.
Individuals age 65 and older receive an additional $1,950 for their standard deduction.
Few people itemize their deductions on Schedule A. The sum of all of your itemized deductions must exceed your standard deduction in order for you to benefit from itemizing.
(2) The 2024 IRS mileage rate is 67 cents per mile; the 2025 rate is 70 cents per mile. Many clients ask me if they should use the mileage method or the actual method when deducting vehicle costs. My rule of thumb for answering this question is as follows: if you buy a low cost vehicle and put a ton of miles on it, use the mileage method.
Alternatively, if you purchase a more expensive vehicle and have only a moderate amount of miles per year then think about using the actual method. Every time you acquire a business vehicle you must decide which method to use. If your business operates more than 4 vehicles then the IRS requires you to use the actual method.
The actual method allows you to deduct vehicle costs for gas, repairs, vehicle insurance, etc. Even though you use the actual method, you are still required to keep track of business mileage.
(3) Interest on underpayments of estimated tax is now 7%. This rate is adjusted quarterly by IRS based on market conditions. The rate has not been this high for many years. You can avoid this cost by accurately estimating the amount of tax to pay IRS quarterly. Estimated tax payments are remitted to IRS using Form 1040-ES and are due on April 15, June 15, September 15 and January 15. Use Form 2210 to calculate the penalty for underpayment of estimated tax.
(4) For business owners probably one of the most important tax issues to consider is your choice of entity. If you start a new business and do nothing it will be classified by the IRS as a sole proprietorship, leading to potentially adverse tax results. Work with an accountant or tax advisor for your business and find the best entity to use, such as an S corporation or LLC.
(5) IRA contribution limits are as follows:
Under age 50 $7,000 per person
Age 50 or older $8,000
Note that the deduction for funding an individual retirement account may be reduced or eliminated if you are covered by a retirement plan by your employer.
The ability to fund a ROTH retirement plan starts getting phased out if your modified adjusted gross income exceeds a threshold: $146,000 for single and head of household and $230,000 for married filing joint. Special rules apply to married filing separate returns. If you fund a ROTH even through your income exceeds these thresholds then you will owe a penalty.
(6) Maine's pension income deduction has increased to $45,864 from $30,000. Note that your actual deduction is reduced by the amount of social security benefits you received (see Box 5 of your social security benefit statement.)
(7) So-called bonus depreciation allowed for business owners depreciating newly acquired assets for their business has been reduced to 60% for 2024. Section 179 accelerated depreciation has remained mostly the same.
(8) Effective January 1, 2025, Maine enacted a new 1% payroll tax to fund up to 12 weeks of paid medical leave. For employers with 15 or more workers the tax is divided equally between the employer (0.5% tax) and the employee (0.5% tax withheld from paychecks.) For smaller employers the tax rate is 0.5% withheld from employee paychecks. See:
This new tax and related administrative burden will continue the pattern of making it even harder to operate a business in Maine with employees. The paid 12 weeks of leave may become, de facto, a new entitlement program that reduces the full time working hours available to employers from 2,000 per year (current full time work year including 2 weeks of vacation) to perhaps only 1,500 hours per year. Employers will either have to hire more employees to cover the shortfall of workers or make other painful adjustments to prices, size of the business, etc. Payroll costs and fees will increase substantially. The 1% initial tax rate is likely to increase over time as more and more workers cash in on this new entitlement program.
As long as Maine remains a one party state we will most likely continue our descent into socialism with bigger and bigger state government and more and more regulation of private business. Few people have access to the knowledge and insight that exposes the fundamental error of these socialistic schemes. Here are easily readable and brief reports from the Cato Institute that explain precisely why government mandated medical leave laws have profoundly adverse consequences:
https://www.cato.org/commentary/argument-against-paid-family-leave
and
https://www.cato.org/regulation/summer-2016/would-expanded-family-leave-hurt-workers
(9) Here are 2024 federal income tax brackets which apply to taxable income and are based on your filing status:
| Tax Rate | For Single Filers |
For Married Individuals Filing Joint Returns |
For Heads Of Households |
| 10% | $0 to $11,600 | $0 to $23,200 | $0 to $16,550 |
| 12% | $11,60 to $47,150 | $23,200 to $94,300 | $16,550 to $63,100 |
| 22% | $47,150 to $100,525 | $94,300 to $201,050 | $63,100 to $100,500 |
| 24% | $100,525 to $192,550 | $201,050 to 383,900 | $100,500 to $191,950 |
| 32% | $191,950 to $243,725 | $383,900 to $487,450 | $191,950 to $243,700 |
| 35% | $243,725 to $609,350 | $487,450 to $731,200 | $243,700 to $609,350 |
| 37% | $609,350 or more | $731,200 or more | $609,350 or more |
Bear in mind that Congress has the power to change tax laws retroactively. Thus, every word of this article written on February 5, 2025 could be erased or modified by future laws enacted by Congress.
Remember that the very best answer for you is to always pay the legal minimum tax: not one cent more.
National Headquarters of the Internal Revenue Service, Washington DC. The inscription at the top of this building says:
Taxes are what we pay for a civilized society
2024 is the 112th year of the income tax in the United States, following ratification on February 3, 1913 of the 16th Amendment to the Constitution.
George Adams
Certified Public Accountant Master of Business Administration
Tel: (207) 989-2700 E-Mail: GeorgeAdams@IntelligenceForRent.com
450 South Main Street: The HQ of IQ
Brewer, Maine 04412-2339
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