IRS Updates Contributions to 401(k) Plans and IRAs

By: Michael P. Sawicki. Esq.

On November 1, 2023, the Internal Revenue Service announced that that the amount individuals can contribute to their 401(k) plans has increased from $22,500 for 2023 to $23,000 for 2024.

The limit on annual contributions to an IRA increased to $7,000, up from $6,500. The IRA catch‑up contribution limit for individuals aged 50 and over was amended under the SECURE 2.0 Act of 2022 (SECURE 2.0) to include an annual cost‑of‑living adjustment of $1,000 for 2024.

The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), and most 457 plans, as well as the federal government’s Thrift Savings Plan remains $7,500 for 2024. Therefore, participants in such plans who are 50 and older can contribute up to $30,500, starting in 2024.

The income ranges for determining eligibility to make deductible contributions to traditional IRAs and Roth IRAs each increased for 2024. Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. If neither the taxpayer nor the spouse is covered by a workplace retirement plan, the phase-outs of the deduction do not apply. The phase‑out ranges for 2024 are as follows:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to $77,000 – $87,000, up from $73,000 – $83,000.
  • For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to $123,000 – $143,000, up from $116,000 – $136,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to $230,000 – $240,000, up from $218,000 – $228,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

The deductible limit on charitable distributions for 2024 increased from $100,000 to $105,000.

Details on these and other retirement-related cost-of-living adjustments for 2024 can be found in Notice 2023-75, available on IRS.gov.

If you have any questions regarding these updates from the IRS, please contact Batoff Associates. P.A. at 410-864-6211.

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Major Corporate Governance Changes are Coming. Are You Ready for Compliance with the Corporate Transparency Act?

By: Michael P. Sawicki, Esq.

Effective January 1, 2024, the Corporate Transparency Act (CTA) goes into effect which will require almost every legal entity incorporated, organized or registered in a state to disclose information related to its owners, officers and controlling persons with the Federal Crimes Enforcement Network (FinCEN). The intent of the CTA is to reduce terrorist financing, money laundering and any other illegal activities. The CTA provides criminal (a $10,000 fine or 2 years in jail) and civil penalties (up to $500 per day) for individuals who knowingly provide false or fraudulent information or who fail to comply with reporting requirements.

Companies who will be required to report under the CTA include domestic and foreign privately held entities. A domestic privately held entity is a corporation, limited liability company, or other entity formed by filing a document with the secretary of state or similar office under the laws of that state. A foreign entity includes any private entity formed under the laws of a foreign country that is registered to do business in any state in the US. There are certain exemptions for large operating companies, SEC reporting companies, insurance companies, tax exempt entities and subsidiaries of exempt companies. A large operating company is exempt if it employs more than 20 full time employees in the US with more than $5 million in gross receipts or sales and operates from a physical office in the US.

Reporting companies formed prior to January 1, 2024, will have one year to comply with the CTA by filing initial reports. Reporting companies created or registered on or after January 1, 2024, will have 30 days upon receipt of their creation or registration documents to file initial reports. FinCEN will be creating an online portal called the Beneficial Ownership Secure System to collect and store reports. Reports filed with FinCEN will not be available to the public or subject to the Freedom of Information Act.

Companies subject to the CTA will be required to provide identifying information for the beneficial owners of the reporting company which is an individual who directly or indirectly either exercises substantial control over a reporting company or owns or controls at least 25% of the ownership interests of a reporting company. The CTA provides factors for determining substantial control (subject to certain exemptions) including: (i) serving as a senior officer of the company, (ii) having authority over senior officers or a majority of the board of directors, (iii) having substantial influence over important decisions, or (iv) having any other type of substantial control over the company.

Companies will be required to report all identifiable information regarding the company as well as the name, DOB, home address, US passport or driver’s license number and an image of the document for each beneficial owner of the company.

Now is the time to review and update your company’s compliance plan and determine if you will be subject to the CTA.

If you have any questions or would like to get more information regarding the Corporate Transparency Act, please contact Batoff Associates, P.A. at 410-864-6211.

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Data Security: Do You Have Adequate Safeguards in Place?

By: Michael P. Sawicki, Esq.

For most companies that deal with confidential information like financial information, proprietary business plans, personal data, health information, or credit card processing, data security should be a top priority. The added complexity of cloud services and flexible work environments have altered how and where your employees connect to the office and where your company’s data resides. It is more important than ever that you protect your digital information from unauthorized access, corruption, or theft throughout its entire lifecycle.

A data security policy describes how a business handles confidential information and personal data. Its primary function is to protect the data and create transparency for the consumer and employees about how their data is processed, protected, and shared. A data security policy regulates the usage, management, and monitoring of data in an organization. Its primary goal is to protect all data used, managed, and stored by a company. Data security policies are typically not required by law, but can help organizations comply with data protection standards and regulations.

Types of data security include hardware security, software security, and legal security. Organizations are legally obliged to protect customer and user data from being lost or stolen or being compromised. Data security is also crucial to preventing the reputational risk to an organization that accompanies a data breach. Legal security can mitigate risk to the company in the event of a data breach.

The Maryland Personal Information Protection Act (MPIPA) was enacted to ensure that Maryland consumers’ personal identifying information is reasonably protected, and if it is compromised, they are notified so that they can take steps to protect themselves. Maryland data privacy laws specifically define what counts as personal information. This includes a Maryland resident’s first and last name or their initials. However, this information must be in combination with one or more of the following:

·  Official ID numbers (e.g., Social Security, passport, driver’s license, or tax identification numbers);

·  Financial numbers (e.g., account, credit card, or debit card numbers);

·  Personal health information, such as details of health insurance policies;

·  Biometric data; and

·  Genetic information.

If there is a security breach, businesses are required to conduct a prompt investigation into the breach and inform affected consumers within 45 days of the breach. Notices must be made to consumers in writing. Any notice must urge the consumer to change his/her passwords and security questions and must detail all compromised information, provide the business’s contact information, and include a statement that informs consumers how they can get advice on preventing identity theft via the Federal Trade Commission and Office of the Attorney General.

Compliance under MPIPA consists of organizations implementing a reasonable level of security to protect personal information. This requires creating, adopting, and maintaining a written security policy. It also requires businesses to take reasonable steps to prevent unauthorized access to personal information.

If you would like to get more information on the creation of a data security policy and speak to an attorney about your needs, please contact Batoff Associates, P.A. at 410-864-6211.

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Does Your Company Have a Record Retention Policy? 

By: Alina Pargamanik, J.D.

Does your company have a record retention policy? If not, you could be putting your company at risk of significant legal repercussions.

What Is a Record Retention Policy?

Record retention policies specify the business’s processes and procedures for managing documents. A well-drafted record retention policy provides guidelines and procedures for the storage, organization, retrieval, and destruction of documents in accordance with both legal requirements and inter-company policy. Any record retention policy must provide a provision for the suspension of the policy in the event of litigation or upon the company’s notice of an investigation.

Depending on your company’s industry and the matter involved, there are various regulatory and legal standards for record retention. For example, the Internal Revenue Service requires organizations to retain employment tax records for a minimum of four (4) years; the Occupational Health and Safety Administration requires businesses to retain records on workplace injuries for five (5) years; and the Equal Employment Opportunity Commission requires employers to retain all personnel or employment records for one (1) year. The following federal laws also set forth specific record retention requirements:

  • Sarbanes-Oxley (SOX) Act: SOX created financial record keeping and reporting requirements for corporations to protect investors from fraudulent activity, including a five (5) year retention period for customer invoices, a seven (7) year retention period for tax returns and receivable or payable ledgers and an indefinite retention period for payroll records and bank statements.
  • Gramm-Leach-Bliley Act (GLBA): GLBA requires financial institutions to be transparent with consumers about their information-sharing practices and to make an additional effort to secure consumer data. GLBA does not require a specific retention period, but the general rule is to retain all financial records for a period of seven (7) years, in line with SOX.
  • Health Information Portability and Accountability Act (HIPAA): HIPAA is a regulation designed to protect patients’ private data against fraud and theft, but it does not set specific retention periods of medical records. It does, however, specify how long healthcare organizations must retain HIPAA-related documents. Healthcare organizations (or “Covered Entities”) are required to retain HIPAA compliance documentation for a minimum of six (6) years from when it was created or, in the event of a policy, from when it was last in effect.

Why Is It Important to Have a Record Retention Policy?

Having and implementing an appropriate and well-drafted record retention policy could prevent your business or organization from experiencing legal troubles should a government investigation or threat of litigation arise.

In 2005, the Supreme Court overturned the conviction of Arthur Anderson, a former Big Five accounting firm, for destroying documents related to a case involving Enron, an energy, commodities, and services company. Several weeks before the SEC launched an investigation into Enron’s accounting practices, Arthur Anderson destroyed approximately two tons of Enron work papers. The Supreme Court ruled that companies may destroy documents in the “normal course of business” and in compliance with a valid document retention policy. The destruction of documents in accordance with a record retention policy is permissible as long as the action is taken in “good faith” without any knowledge that the company is on notice of pending or anticipated litigation or a government investigation.

Even if your company has an existing record retention policy, it is important to regularly review and, if needed, revise the policy. Record retention laws and regulations are ever-changing, so it is critical to have an attorney confirm that your policy is in compliance and that your company is adequately implementing and enforcing the policy.

If your company or organization needs assistance in drafting or reviewing a record retention policy, please contact Batoff Associates. P.A. at 410-864-6211.

Filed Under: Corporate Law, Employment Law, M & A
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Watching the Sunset: Planning for the 2026 Tax Law Sunset

By: Alina Pargamanik, J.D.

Several provisions of the Tax Cuts and Jobs Act (TCJA) of 2017 are set to sunset, or expire, at the end of 2025. Without the proper planning, you may face some shocking tax consequences.

The TCJA set forth sweeping tax changes for businesses and individuals, particularly high-net-worth individuals, through permanent tax cuts to corporate profits and lower individual tax rates with a restructured tax bracket. The TCJA reduced the top business tax rate from 35% to 21% permanently, so businesses will not experience much of an impact in 2026. Nevertheless, the top individual, estate and trust income tax bracket would increase back to 39.6% from the current 37% rate.

For itemized deductions, according to the Tax Policy Center, “Under [the TCJA,] itemizers could claim deductions for all state and local property taxes and the greater of income or sales taxes (subject to overall limits on itemized deductions).” This policy is set to change upon the sunset of the TCJA. Although the TCJA repealed personal exemptions, the standard deduction almost doubled under the TCJA from approximately $13,000 to $24,000, but this amount is set to revert back in 2026. The TCJA also restricted itemized deduction for total state and local taxes to $10,000 per year. This cap will be eliminated after 2025.

Additionally, the TCJA doubled the lifetime gift and estate tax exemption from $5.5 million to $11.2 million. In 2026, the estate and gift exemption will revert back to pre-TCJA levels and is expected to be about $6.5 million per individual or $14 million for a married couple. When planning for the TCJA sunset, you should discuss various estate planning options such as annual gifting and Spousal Lifetime Access Trusts (SLATs) with your estate planning attorney.

Unless a significant legislative change occurs between now and 2026, taxpayers should stay vigilant of the upcoming 2026 tax law sunset. Having a plan for your financial affairs is the key to financial success. It is important to speak with your estate attorney and financial advisor to ensure that your tax and estate planning needs are in order.

If you would like to get more information on the 2026 tax law sunset and speak to an attorney about your estate planning needs, please contact Batoff Associates, P.A. at 410-864-6211.

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