Are You Taking Advantage of These 3 COVID-Related Business Tax Credits?

Are You Taking Advantage of These 3 COVID-Related Business Tax Credits?

Put into place to help small business owners during the COVID-19 crisis, these tax credits may help you reduce your business’s financial burden:

Employee Retention Credit

This credit encourages businesses to keep employees on their payroll. The refundable tax credit is 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19. The credit is available to all employers and tax-exempt organizations regardless of size, except for state and local governments, and small businesses who take small business loans. To qualify, your business must be fully or partially suspended by government order due to COVID-19 during the calendar quarter, OR your gross receipts are below 50% of the comparable quarter in 2019. Once your gross receipts go above 80% of a comparable quarter in 2019, you no longer qualify after the end of that quarter.

Paid Sick Leave Credit

This credit allows businesses to receive a credit for an employee who is unable to work due to coronavirus quarantine, self-quarantine or has coronavirus symptoms and is seeking a medical diagnosis. Those employees are entitled to paid sick leave for up to 10 days (up to 80 hours) at the employee’s regular rate of pay — up to $511 per day, $5,110 in total.

Employers can also receive the credit for employees who are unable to work due to caring for someone with coronavirus or caring for a child because the child’s school or place of care is closed, or the paid childcare provider is unavailable due to the coronavirus. Those employees are entitled to paid sick leave for up to two weeks (up to 80 hours) at two-thirds the employee’s regular rate of pay — up to $200 per day, $2,000 in total.

Family Leave Credit

Employees are entitled to paid family and medical leave equal to two-thirds of the employee’s regular pay — up to $200 per day, $10,000 in total. Up to 10 weeks of qualifying leave can be counted towards the Family Leave Credit.

How Will You Receive the Credit?

As an employer, you can be immediately reimbursed for the credit by reducing your required deposits of payroll taxes that have been withheld from your employees’ wages by the amount of the credit. If you are eligible, you are entitled to immediately receive a credit in the full amount of the required sick leave and family leave, plus related health plan expenses and your share of Medicare tax on the leave, through December 31, 2020. The refundable credit is applied against certain employment taxes on wages paid to all employees.

You must report your total qualified wages and the related health insurance costs for each quarter on your quarterly employment tax returns or Form 941. If your employment tax deposits are not sufficient to cover the credit, you may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19. You may also request an advance of the Employee Retention Credit this way.

The rules regarding these COVID-19 related tax credits can be confusing. Whether we handle your payroll or you do, please contact us to discuss how you can take advantage of these money-saving tax credits for your small business.

PPP Loans of $50k or Less Get Simplified Forgiveness Application

If you received a Paycheck Protection Program (PPP) loan of $50,000 or less, you can now apply for loan forgiveness using a simple application: SBA Form 3508S. The forgiveness process for smaller loans is streamlined because you are not required to undergo complicated full-time equivalent (FTE) or salary reduction calculations. You will still have to make some certifications and provide documentation to your lender for payroll and nonpayroll costs, however. If you’re ready to get started with the process, contact your lender to be sure they want you to use the new form (they may have their own version). And give us a call if you need help completing the forgiveness application.

Approximately 3.57 million of the 5.2 million total PPP loans approved by the SBA were for $50,000 or less. And about 1.71 million of those loans were made to businesses with zero-to-one employee.

Make Your Appointment

It’s time to make your year-end tax planning appointment. Choose an in-person meeting (limited availability), or a Zoom or phone meeting. Please call Amber at  706-632-7850 or email her to set up a date.

MONEY BRIEF #1

If you do not plan to talk with us before the end of the year, then you should still review your tax withholding and payments now. An adjustment or two can boost your take-home pay OR allow you to increase your tax payments to avoid a surprise tax bill when filing next year. Things that can affect your year-end taxes include:

  • Coronavirus tax relief
  • Unemployment compensation
  • Job change or loss
  • Work-from-home changes
  • Life changes, such as marriage or childbirth

 You can visit IRS.gov/account to view your tax payment history, taxes owed and certain tax return information. And you can use the IRS’s Tax Withholding Estimator tool to determine how much you should be paying throughout the year.

MONEY BRIEF #2

Social Security recipients can expect a modest 1.3% cost-of living adjustment, or COLA, in 2021. The estimated average Social Security payment will increase about $20 to $1,543 a month next year; a typical couple’s benefits would increase $33 to $2,596 per month. (The 2020 increase was 1.6%.) The COLA affects about 1 in 5 Americans, including Social Security recipients, disabled veterans and federal retirees — some 70 million people.

PPP Loan Forgiveness: Is It Time to File?

PPP Loan Forgiveness: Is It Time to File?

I f you were among the first to receive a Paycheck Protection Program (PPP) loan, you may have recently received a notice from your lender that payment was due. This is because those early loans generally provided for a six-month deferral period.

However, the SBA just updated its guidance to clarify the deferral period for ALL PPP loans — including those that were approved before the Paycheck Protection Flexibility Act became law on June 5. According to the new rules, lenders must extend the deferral period for PPP loan payments to either:

  1. The date the SBA remits the borrower’s loan forgiveness amount to the lender, OR
  2. 10 months after the end of the borrower’s loan forgiveness covered period (if the borrower does not apply for loan forgiveness).

What Does This Mean?

Basically, this means you have several more months. Which is good, because you probably don’t want to file for loan forgiveness until the questions surrounding tax deductibility and automatic forgiveness are resolved. Here’s why:

Deductibility of expenses: Forgiven PPP loans are not taxable income, but IRS Notice 2020-32 declared that no tax deduction is allowed for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a PPP-covered loan. The position is that allowing the deductibility of expenses paid with PPP funds would result in a double-dipping scenario. The AICPA and other organizations have urged Congress to allow full deductions for PPP-related business expenses, but congressional action has not yet been taken on this.

Blanket forgiveness: Some members of Congress have proposed legislation that would allow for a simpler forgiveness process for loans under a certain amount (possibly $150,000 and below). Again, no congressional action has been taken yet.

 

By the time the PPP loan program stopped accepting applications on August 8, the SBA had approved roughly 5.2 million loans totaling $525 billion — leaving almost $134 billion of congressionally approved funds unspent. 

What We Do Know About PPP Loan Forgiveness

If you’re eager to file for PPP loan forgiveness, keep in mind:

Forgiveness application due date: There is no defined deadline for submitting the forgiveness application, but loan payments will be required to begin 10 months after the end of the covered period (as noted above). Once you submit a forgiveness application, it triggers deadlines for lenders and the SBA. Lenders have until 60 days after the forgiveness application is received to issue a decision to the SBA. The SBA then has 90 days after receiving the decision from the lender to review the application and remit the forgiveness amount to the lender with any interest accrued through the date of the payment.

Early applications for loan forgiveness: These are permitted, but an eight- or 24-week covered period will still apply. If your loan was funded before June 5, 2020, you can choose to keep the eight-week covered period or move to the 24-week period. If your loan was funded after June 5, 2020, you must use a 24-week covered period. Whether you choose eight weeks or 24 weeks, you may apply for forgiveness before the end of the covered period — but doing so lowers the maximum eligible compensation (amounts would be prorated).

Definition of an owner-employee: The PPP loan forgiveness application established a PPP owner-employee compensation rule for determining the amount of compensation eligible for loan forgiveness. The IRS later defined an owner-employee as someone who is both an owner and an employee of a C corporation, and that the PPP owner-employee compensation rule does not apply to individuals with less than a 5% stake in a C or S corporation.

So … What Should You Do?

With so much uncertainty still hovering around the PPP loan forgiveness process, we suggest that you wait a bit longer before applying for loan forgiveness. In the meantime, document everything. Keep track of all paperwork involving your PPP loan, payroll expenses and other expenses that were paid with your loan. You’ll need to have your paperwork in order when the time finally does come to file.

If you have any other questions or concerns relating to the PPP loan program, please don’t hesitate to contact us. We’ll be happy to answer your questions.

Make Your Appointment

It’s time to make your year-end tax planning appointment. Choose an in-person meeting (limited availability), or a Zoom or phone meeting. Please call Amber at  706-632-7850 or email her to set up a date.

MONEY BRIEF #1

Good recordkeeping is an important part of tax planning and preparing for next year’s return. And it’s never too early to take stock of your record-keeping systems. Here are a few tips:

  • Develop a system that keeps all your pertinent information together. Set up dedicated folders on your computer as well as paper folders in your desk or file drawer.
  • Add tax records and statement to your files as you receive them. This includes your Economic Impact Payment Notice 1444 and any unemployment compensation documentation.
  • Notify the IRS if your address changes by filing Form 8822, Change of Address. Also be sure to notify the Social Security Administration of a legal name change to avoid delays in processing your tax return.
  • Keep any receipts, canceled checks and other documents that support your income and expenses. These include records relating to real estate property transactions, and stock purchases and sales.

For more record-keeping information, see Publication 5349, Year-Round Tax Planning Is for Everyone.

MONEY BRIEF #2

If you are undergoing an audit with the IRS, you have rights under the Taxpayer Bill of Rights, such as:

  • The IRS generally has three years from the date you file your return to assess any additional tax for that tax year. Note that the IRS has an unlimited amount of time to assess tax if you fail to file a return or file a false or fraudulent return.
  • The IRS generally has 10 years from the assessment date to collect unpaid taxes. This 10-year period can be extended if you enter into an installment agreement or if the IRS obtains a court judgment. Also, the 10-year collection period may be suspended if the IRS cannot collect money due to a bankruptcy or an ongoing collection process.
  • If the IRS concludes you owe taxes, it will issue a statutory notice of deficiency. This notice must include the deadline for filing a challenge with the tax court, typically within 90 days of the notice.
  • Generally, the IRS can only audit your tax return once for any given tax year. However, the IRS may reopen an audit for a previous tax year if the IRS finds a fraudulent return or other issues.

Is Your “Side Hustle” a Hobby or a Business?

Is Your “Side Hustle” a Hobby or a Business?

With a little extra time at home on your hands this year, you may have taken up a new hobby — maybe selling photographs, creating skin-care products or trading antiques — whether for fun or to make a few extra bucks. But is it just a hobby? Maybe you’re thinking it could turn into a new business venture. What’s the difference? And how does it affect your taxes?

The general thinking is that a business is operated to make a profit. A hobby, on the other hand, is engaged in for sport or recreation — it’s not intended to make a profit.

Whatever you consider your “side hustle” to be, keep in mind that you must report income earned on your annual federal tax return. How it’s reported depends on whether it’s a business or a hobby.

Differentiating Between a Hobby and a Business

The IRS usually considers your activity a business if you’ve made a profit for three of the past five years. Otherwise, you have to establish a profit motive. Consider how you would answer the following questions to help determine whether your hobby is really a business:

  • Is the activity carried out in a businesslike manner, where you maintain complete and accurate books and records?
  • Does the time and effort you put into the activity show that you intend to make it profitable?
  • Do you depend on income from the activity?
  • Are any losses due to circumstances beyond your control — or are they normal for the startup phase of your business?
  • Have you change your methods of operation to improve profitability?
  • Do you have the knowledge needed to carry out the activity as a successful business?
  • Were you successful in making a profit from similar activities in the past?
  • Do you expect to make a future profit from the appreciation of any assets used in the activity?

Tax Consequences of Hobbies vs. Businesses

If you make money from a hobby, you must report that income on your tax return (Schedule 1, Form 1040). The income will not be subject to self-employment tax. However, because of tax law changes made via the Tax Cuts and Jobs Act, you cannot deduct expenses for that hobby. Previously, you may have been able to add them to your miscellaneous itemized deductions, but these can no longer be deducted.

If your activity is considered a business, however, you will report your income on Schedule C. And you’ll pay self-employment tax on your earnings. However, you will also be able to deduct your expenses, including any qualifying home office expenses. These deductions can help reduce the amount of tax due on any income you made.

The rules regarding income and expenses for hobbies and businesses can be confusing. If you’re not sure the best way to handle your new “side hustle,” contact us. We’ll be happy to help you sort out the specifics of your situation.

Lodging Tax Increase Coming

If you’re a cabin rental owner, please note that BOTH Fannin County AND City of Blue Ridge Lodging Tax Rates are going up!

The county’s tax rate will rise from 5% to 6% beginning January 1, 2021. For rentals within the city limits, the City of Blue Ridge’s Hotel/Motel Excise Tax will increase from 5% to 8%, effective November 1, 2020.

This is in addition to the 7% that goes to the State of Georgia.

Let us know if you need help updating your systems for the new tax rates. We’ll be glad to help you with the process.

MONEY BRIEF #1

If you filed your 2019 return by this year’s extended July 15 deadline and either received a refund in the past three months or will receive a refund, you may also receive an interest payment from the IRS. The IRS is sending interest payments — averaging about $18 each — to about 13.9 million individual taxpayers who are receiving refunds. If you received your refund by direct deposit, you will also receive your interest payment by direct deposit. Otherwise, you will receive a check. Note that any interest payment you receive from the IRS of $10 or more is taxable — you will receive a Form 1099-INT and must report it on your 2020 federal income tax return you file in 2021.

MONEY BRIEF #2

Did you know unemployment compensation is taxable? Any UI benefits you receive this year will be considered taxable on your 2020 tax return next spring. This is especially important to keep in mind if you chose not to have tax withheld from your benefits when you applied. Taxable benefits include regular UI plus any additional unemployment compensation authorized under the Coronavirus Aid, Relief and Economic Security (CARES) Act. If you did not choose withholding, or if the amount withheld is not enough, you can make quarterly estimated tax payments instead. Payment for the first two quarters of 2020 was due on July 15. Third and fourth quarter payments are due on September 15, 2020, and January 15, 2021, respectively. If you’re unsure of your situation, contact us today and we’ll help you work it out.

Working from Home? Here’s What You Need to Know About Taxes

Working from Home? Here’s What You Need to Know About Taxes

Thanks to COVID-19, you may find yourself working from home — whether for the first time or more often than before. So can you claim a home office deduction when you file your 2020 tax return next year?

First of all, if you are an employee, you are NOT eligible to claim the home office deduction. You may be able to deduct a few expenses, but these are very limited.

What Is Deductible?

  • You must meet specific requirements to deduct home business expenses. Even then, the deductible amount may be limited.
  • The home office deduction is available to both homeowners and renters, whether you live in a house, apartment, condo, mobile home, boat or similar property. It also includes other structures on the property — unattached garage, studio, barn or greenhouse — if they are related to the business.
  • It does NOT include any part of your property used exclusively as a hotel, motel, inn or similar business.
  • Deductible expenses include mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent.
  • There are two basic requirements for your home to qualify as a deduction:
    1. You must use a portion of your home exclusively for conducting business on a regular basis, and
    2. Your home must be your principal place of business.

Figuring Your Deduction

If you qualify for a home office deduction, you may choose one of two methods to calculate the deduction:

  1. The Simplified Option provides a rate of $5 per square foot, up to a maximum of 300 square feet, for a maximum deduction of $1,500 per year.
  2. For the Regular Method, you must determine the percentage of your home devoted to business use to determine the deduction for indirect expenses (utilities, mortgage, etc.). Direct expenses (office supplies, etc.) are deducted in full.

Please contact us for more details or for help determining if you qualify for the home office deduction.

Wallet of money

What You Need to Know About Payroll Tax Deferral

On August 8, President Trump signed a Presidential Memorandum allowing for a Payroll Tax Deferral. The IRS recently issued guidance on the memorandum. Here’s what you need to know:

  • It applies only to employees whose biweekly paychecks are less than $4,000 (about $104,000/year).
  • Employers can stop withholding employees’ payroll taxes from September 1-December 31, 2020.
  • Employees will then have to re-pay those taxes between January 1-April 30, 2021. (President Trump left open the possibility of forgiving the deferred taxes, but that can only be approved by Congress.)
  • This is a voluntary program. It is up to the employer whether to opt in to the payroll tax deferral. Many are not because employees would be forced to pay a big tax bill next year.

If you have questions about this new program, we can help you determine the best option for you — whether you have a company with employees or you are an employee affected by the tax deferral.

MONEY BRIEF #1

If you mailed a check to the IRS to pay your taxes recently, it may still be unopened in the backlog of mail due to COVID-19. Do not cancel your check thinking it may be lost! Any payments sent will be posted as of the date the IRS received them — rather than the date the agency processes them. The IRS is providing relief from bad check penalties for dishonored checks the agency received between March 1 and July 15 due to delays in processing. Note that interest and penalties may still apply if they were received late.

MONEY BRIEF #2

The Work Opportunity Tax Credit is available to employers who hire long-term unemployment recipients and others certified by their state workforce agency if the individual begins work before January 1, 2021. You can find out more about this credit at IRS.gov/wotc or contact us for details on how this general business credit can save you money.

MONEY BRIEF #3

Reminder: The Coronavirus, Aid, Relief and Economic Security Act (CARES Act) enacted earlier this year allows employers to defer the deposit and payment of the employer’s share of Social Security taxes through December 31, 2020. This also allows self-employed individuals to defer certain self-employment taxes. These FAQs address the issue; or call us if you have questions.

MONEY BRIEF #4

Do you use an Individual Taxpayer Identification Number (ITIN) instead of a Social Security number? If so, it may expire at the end of 2020. ITINs are used by people who have tax filing or payment obligations under U.S. law, but are not eligible for a Social Security number. More than 1 million ITINs will expire at the end of 2020, including:

  • ITINs that have not been used on a federal tax return at least once in the last three consecutive years, and
  • ITINs issued before 2013.

If this applies to you, the IRS urges you to submit a renewal application now to avoid refund delays next year. Visit the irs.gov for more details.

COVID-Related Payroll Tax Deferral Raises Questions

COVID-Related Payroll Tax Deferral Raises Questions

In an effort to reduce the burden on workers, President Trump signed a memorandum on August 8 providing for the deferral of payroll taxes from September 1 through December 31, 2020. The new rule defers the employee portion of the old-age, survivors and disability insurance (OASDI) tax and Railroad Retirement Act Tier 1 tax for those whose pretax biweekly wages are generally less than $4,000. Note: Currently this is considered a tax DEFERRAL — not forgiveness — so tax will be due at a later date.

However, because the lack of detail in the memorandum left open a lot of questions, the American Institute of CPAs (AICPA) has requested guidance from the Treasury Department on handling the tax deferral. As soon as these issues are ironed out, we’ll be able to help you implement the tax deferral in your payroll systems. Details to come!

Source: Journal of Accountancy

PPP: Don’t Rush to Apply for Forgiveness

Are you one of the more than 5 million businesses that received a Paycheck Protection Program (PPP) loan? If so, you may be ready to apply for forgiveness.

However, experts are advising most small businesses to wait a little while to apply, even though the SBA opened the forgiveness portal last week. That’s because the SBA continues to make adjustments and issue new guidance (in the form of frequently asked questions).

The delay is mostly because Congress has been unable to agree on a new COVID-19 relief bill, which would hopefully address some outstanding issues. One such issue is whether expenses covered by PPP loans will be deductible on your 2020 tax return or not.

For example, SBA guidance recently issued clarifications for:

  • Payments for vision and dental benefits, which are included in group health care and insurance premiums and are thus eligible to be paid with PPP funds.
  • Payments of transportation utility fees assessed by state and local governments, which are eligible for loan forgiveness.
  • Calculating reductions in loan forgiveness arising from reductions in employee salary or hourly wage.
  • Sole proprietors, independent contractors and self-employed individuals, who qualify to use the simplified PPP Loan Forgiveness Application Form 3508EZ.

While you wait for Congress to act, take the time to gather up your paperwork so that you’re ready to apply when the time is right. If you don’t have a separate business account for the loan proceeds, be sure to keep good books and records that show how you spent the loan funds.

If you have any questions, please don’t hesitate to contact us. We’re here to help!

Source: CNBC

MONEY BRIEF #1

You can use the IRS Tax Withholding Estimator to determine the right amount of tax to be withheld and avoid surprises on your tax bill next year. Income tax withholding is generally based on your expected filing status and standard deduction. Adjusting withholding on your paycheck or revising the amount of your estimated tax payments can help prevent penalties. This is especially important if you work in the “gig” economy, have more than one job or experienced major life changes recently. This also applies if you received unemployment due to COVID-19 layoffs.

MONEY BRIEF #2

During the 2019 fiscal year, the IRS:

  • Collected more than $3.5 trillion in taxes.
  • Processed more than 253 million tax returns and other forms.
  • Issued more than $452 billion in tax refunds.
  • Was called or visited by nearly 61 million taxpayers.
  • Received nearly 651 million visits to its website (irs.gov), where taxpayers downloaded almost 363 million files.

The Rules Keep Changing: What You Need to Know About PPP Loans

The Rules Keep Changing: What You Need to Know About PPP Loans

With new legislation being debated and constantly updated, it seems, the rules regarding Paycheck Protection Program (PPP) loans and loan forgiveness keep changing. So the current advice from experts is: Don’t rush into anything!

Congress is currently trying to work out a new COVID-19 relief package before going on recess, which is scheduled for August 8. Part of the discussions may include changes that relax the forgiveness requirements for the smallest loans, possibly those up to $150,000.

The SBA notified lenders that it would not even begin accepting PPP forgiveness submissions until new software goes live. And the expected launch date of August 10 could be delayed if new legislation changes the forgiveness process. So lenders cannot finalize their “forgiveness portals” until the SBA has finalized theirs.

___________
More than 4.8 million businesses and organizations took out PPP loans through June 30, 2020. Recent legislation extended the chance to apply for a PPP loan through August 8. And new legislation may provide the opportunity to apply for a second PPP loan. Stay tuned for details!
___________

 

The Various Deadlines

Remember, you have up to 24 weeks to use your PPP money. And since payroll costs are a significant component of PPP forgiveness, you may need to wait until your payroll provider has time to develop reports that are customized to comply with PPP guidance. The other important deadline in the PPP forgiveness process comes 10 months after the end of your loan’s covered period. At that point, if forgiveness forms have not been submitted, the funds officially become a loan that needs to be repaid.

What’s more, the SBA has not yet answered questions with regard to some specific considerations, including which types of utility expenses are forgivable, how FTE employees are treated when fired for cause, determining 2020 vs. 2019 income for self-employed borrowers, and which documents are required for submission and which are required to be retained.

Keep Your Paperwork in Order

With plenty more details to come on this subject, we’ll be sure to keep you updated as the information changes. In the meantime, take steps to prepare for the forgiveness application process by documenting how the loan proceeds are used. Gather any materials you will need to support non-payroll expenses, such as mortgage interest, rent or lease payments, and utilities. And please contact us with any questions you may have about your current situation.

No Changes to Auto Depreciation Limits

According to the IRS, there will be NO CHANGES to the limitations on depreciation deductions for passenger automobiles first placed into service in 2020.

For cars, trucks and vans that are acquired after Sept. 27, 2017, and placed in service during calendar year 2020, the depreciation limit is:

  • $18,100 for the first tax year;
  • $16,100 for the second tax year;
  • $9,700 for the third tax year; and
  • $5,760 for each succeeding year.

When no Sec. 168(k) bonus first-year depreciation deduction applies, the depreciation limit is only $10,100 for the first tax year, with succeeding years the same as above.

 

MONEY BRIEF #1

Did you know that teachers and other educators can deduct certain unreimbursed expenses on their tax returns? To be eligible, you must be a K-12 teacher, instructor, counselor, principal or aide, and you must work at least 900 hours during a school year. You can deduct up to $250 of business expenses that were not reimbursed (be sure to keep your receipts) for:

  • Professional development course fees
  • Books
  • Supplies
  • Computer equipment, including related software and services
  • Other equipment and materials used in the classroom

MONEY BRIEF #2

.With new stimulus payment legislation currently being debated in Congress, what will you do with any new funds you receive? According to a U.S. Census survey, the majority of people who received the previous stimulus check used most of it on household expenses, while 16% paid off debt and 14% saved it. Households with incomes between $75,000 and $99,999 were more likely to use their stimulus payments to pay off debt or add to savings. In contrast, 88% of households with incomes of $25,000 or less used their checks to meet expenses. In households that spent their stimulus funds, approximately:

  • 80% used it on food.
  • 78% paid rent, mortgage and/or utilities.
  • 58% purchased household supplies and personal care products.
  • 20% bought clothing.
  • 8% spent it on household goods like TVs, electronics, furniture and appliances, or on recreational goods like fitness equipment, toys and games.

Tax Tips for Gig Workers

Tax Tips for Gig Workers

Are you a “gig” worker?

The gig economy, or sharing or access economy, is any activity where you earn income providing on-demand work, services or goods. Often, it’s through a digital platform like an app or website. Two of the most popular types are ride-sharing (i.e., Uber and Lyft) and home rentals (i.e., VRBO and AirBnB), but there are others.

If you earn income through any type of gig work, be sure to keep these tips in mind:

  • Income from gig work is taxable. This is true whether the work is full-time, part-time or if you are paid in cash.
  • While providing gig services, you must be classified correctly. You or the business for which you are working must determine whether you are an employee or independent contractor.
  • If you are considered an employee, your employer typically withholds income taxes from your pay.
  • If you are an independent contractor, you may be required to make quarterly estimated income tax payments, plus pay your own Social Security, Medicare or Medicaid taxes.

If you have questions about paying taxes related to gig employment, please contact us. Or check out the Gig Economy Tax Center on the IRS website.

Retirement Plan Changes Due to COVID-19

If you have encountered financial hardship because of COVID-19, you may be able to withdraw up to $100,000 from your retirement plan or IRA before December 30, 2020. If you do so and are not yet age 59½, you will NOT have to pay the 10% penalty that generally applies to early distributions.

Do You Qualify?

To qualify, you must:

  • Have tested positive and been diagnosed with COVID-19, or
  • Have a dependent or spouse who has tested positive and been diagnosed with COVID-19.

You must also experience financial hardship due to you, your spouse or a member of your household:

  • Being quarantined, furloughed or laid off, or having reduced work hours.
  • Being unable to work due to lack of childcare.
  • Closing or reducing hours of a business that you own or operate.
  • Having your pay or self-employment income reduced.
  • Having a job offer rescinded or start date for a job delayed.

Consider All Your Options

While you may not pay a penalty, keep in mind that any distribution you take is still subject to regular income tax — but you can stretch the reporting on your tax returns over a three-year period. Note, however, that you must also repay the distribution to your retirement plan or IRA within three years. So it’s important to consider all your options before choosing to withdraw your retirement funds early.

Give us a call if you’d like some guidance on the best way to proceed for your situation.

MONEY BRIEF #1

Beginning this tax year, there is a new Form 1099-NEC: Nonemployee Compensation for business taxpayers who pay or receive nonemployee compensation. Payers must complete this form to report any payment of $600 or more in 2020 to one payee. The due date for filing the form is February 1, 2021. Note that nonemployee compensation may be subject to backup withholding if a payee has not provided a taxpayer identification number to the payer or the TIN provided was incorrect. Backup withholding can apply to most kinds of payments reported on Forms 1099 and W-2G, even though the payer doesn’t generally withhold taxes.

MONEY BRIEF #2

The SBA’s Economic Injury Disaster Loan (EIDL) Advance program, which provided grants to small businesses, closed after exhausting the $20 billion in emergency funding provided by Congress. The EIDL Advance program provided businesses with $1,000 per employee, up to a maximum of $10,000. Recipients did not have to be approved for a loan to receive Advance program funds. The funds went to nearly 6 million small businesses, including nonprofits, sole proprietors and independent contractors.

The SBA will continue to accept applications for EIDL program loans, which offer a 3.75% interest rate for small businesses and 2.75% rate for nonprofits. Businesses can apply for EIDL loans on the SBA disaster assistance page.

Note that if you receive a Paycheck Protection Program loan AND an EIDL loan, you must deduct the EIDL funding from the amount eligible for PPP loan forgiveness.

New & Easier PPP Loan Forgiveness Applications Now Available

New & Easier PPP Loan Forgiveness Applications Now Available

Last week, the SBA released a revised Paycheck Protection Program (PPP) loan forgiveness application and a new EZ application. These new applications reflect the changes that were made to the PPP by the Paycheck Protection Flexibility Act of 2020, which passed on June 5.

You can access the new applications here:

Revised Application Changes

The revised PPP Loan Forgiveness Application includes several changes:

  • If you own an S corporation, you cannot include health insurance costs when calculating payroll costs; however, retirement costs are eligible.
  • Safe harbors for excluding salary and hourly wage reductions, as well as reductions in the number of employees, can be applied as of the date the loan forgiveness application is submitted. You do not have to wait until December 31 to apply for forgiveness to use the safe harbors.
  • If you received your PPP loan before June 5, you can choose between using the original eight-week covered period or the new 24-week covered period.

New EZ Application Highlights

The new 3508EZ PPP Loan Forgiveness Application requires fewer calculations and less documentation than the full application. You can use the EZ application if you:

  • Are self-employed and have no employees;
  • Did not reduce the salaries or wages of your employees by more than 25% and did not reduce the number or hours of your employees; or
  • Experienced reductions in business activity as a result of health directives related to COVID-19 and did not reduce the salaries or wages of your employees by more than 25%.

New SBA Rules Issued

The SBA also issued updated rules last week for determining payroll costs and owner compensation in calculating PPP loan forgiveness under the new 24-week period.

Employees — The original PPP legislation allowed loan forgiveness for payroll costs of up to $15,385 per employee over the eight-week period ($100,000 annualized). The new rule for the 24-week period is three times the eight-week limit for full loan forgiveness, or $46,154 per employee.

Owners — If you file Schedule C, Profit or Loss From Business, or Schedule F, Profit or Loss From Farming, your PPP forgiveness calculations have also changed. For the eight-week period, the calculation is 8 ÷ 52 × 2019 net profit, up to a maximum of $15,385. For the 24-week period, the forgiveness calculation is limited to 2.5 months (2.5 ÷ 12) of 2019 net profit, up to $20,833.

Other PPP Modifications

The SBA made a few other changes to account for the Payroll Protection Flexibility Act:

  • The minimum term for PPP loans made on or after June 5 is now 5 years. For loans made before June 5, the minimum maturity remains at 2 years unless both the borrower and the lender agree to extend it to 5 years.
  • The proportion of PPP funding that must be used on payroll costs to qualify for full forgiveness drops to 60% from 75%.
  • The application deadline for PPP loans remains at June 30.

If you have any questions about the PPP loan changes, please don’t hesitate to contact us.

Source: Journal of Accountancy

Have You Been Counted?

Fannin County is lagging behind in responses to the U.S. Census. While nearly 61.4% of all U.S. residents have responded, only 57.4% in Georgia and 35.7% in Fannin have. If you haven’t been counted yet, simply go to 2020census.gov, and fill out the easy form. The count is important so that Fannin receives its fair share in federal and state funding allocations. You can check out the response rates on this interactive map.

MONEY BRIEF

An extension to file is not an extension to pay. July 15 is the deadline to both FILE and PAY your taxes for 2019. If you need additional time, you can request an extension to FILE your taxes by October 15. However, you must still PAY any taxes due by July 15. Let us know if you need us to file an extension for you.

MONEY BRIEF

Estimated tax payments for tax year 2020, which were due April 15 and June 15, are now both due by July 15. You can visit IRS.gov/payments to pay electronically. The IRS offers two free electronic payment options where you can schedule your estimated federal tax payments up to 30 days in advance with Direct Pay, or up to 365 days in advance with the Electronic Federal Tax Payment System (EFTPS).

MONEY BRIEF

Employers may have tax credits available due to the coronavirus pandemic. To help explain the credits, the IRS created a PDF that breaks down the details of the Employer Retention Credit and the credits for paid sick and family leave. The easy-to-follow charts will help you determine whether you are eligible for the credits, the amount of the credits and which wages apply to the credits.

Good News: Positive PPP Changes Are Coming!

Good News: Positive PPP Changes Are Coming!

There’s good news if you took out a Paycheck Protection Program loan. The Paycheck Protection Program Flexibility Act — recently passed by the House & Senate and expected to be signed by President Trump — gives business owners more flexibility to use loan money and still get it forgiven.

Congress passed the legislation this week because the clock on the initial 8-week window recently expired if you were among the first PPP loan recipients. A special note in the bill clarifies that June 30 remains the deadline for applying for a PPP loan. However, the deadline for spending PPP funds is pushed back to December 31.

Key Points to Know

The bill contains several important provisions that affect borrowers:

#1 — Timeframe Increased to 24 Weeks

If you have an outstanding PPP loan, you can choose to keep the original 8-week period OR switch to the new 24-week period. Keeping the 8-week period makes sense if you have already spent the funds on sufficient expenses that provide for full forgiveness.

#2 — 75% Rule Changed to 60%

The new law changes the test that at least 75% of the amounts forgiven have to be spent on payroll expenses. Now, to be eligible to receive PPP loan forgiveness, you are required to use at least 60% of the loan amount for payroll costs, and up to 40% on rent, utilities, etc.

#3 — Workforce Reduction Rule Pushed Back to December 31

Loan forgiveness is reduced in proportion to the reduction in workforce (if the same number of employees are not hired or rehired). The new law uses the 24-week period, which extends the June 30 date to December 31.

#4 —Rehire Exception Rule Modified

There’s an exemption from the reduction in loan forgiveness if you have reduced your workforce because you could not:

  • Find Qualified Employees to Hire. You must establish an inability to rehire individuals who were employees on February 15, 2020, and an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020.
  • Restore Your Business to Full Levels of Activity. You must establish an inability to return to the same level of business activity (as of February 15, 2020) due to social distancing measures or other federal health requirements.

#5 — Repayment Period Now 5 Years

The period for repaying any PPP loans not forgiven is now 5 years (up from 2 years), while the interest rate remains at 1%.

#6 — Payroll Taxes Deferred

You are eligible to defer the payment of Social Security payroll taxes, regardless of whether you receive loan forgiveness. This allows you to defer the payment of the employer’s share (6.2%) — with 50% due in 2021 and 50% due in 2022.

Let Us Help You Figure It All Out

The new legislation is welcome news for our small businesses who need more time and flexibility to use their PPP loan funds. But it, of course, opens up new concerns, too. If you have any questions about the new legislation, please contact us and we’ll help you work through the best solutions for your situation.

Sources: CNN & Journal of Accountancy

 

 

 

MONEY BRIEF

If you have not yet reached age 59½ and need additional income during this time, you may be considering taking that money from a retirement account. The CARES Act provides an exemption on withdrawals of up to $100,000 per person from an eligible IRA or employer-provided retirement plan, such as a 401(k), 403(b) or other type of defined contribution plan.

These withdrawals are now EXEMPT from the usual 10% early withdrawal penalty, plus the 20% automatic withholding, which is used as an advance payment on the taxes that you may owe on employer-plan withdrawals.

Keep in mind that any amount you withdraw now will reduce your future retirement savings. Also, the amount will be added to your annual income for 2020 for tax purposes. The CARES Act allows you to distribute the tax burden over a period of up to three tax years, if you choose. And you can recontribute some or all of the funds that you withdrew by the third year.

Consider whether the loss of retirement savings now makes sense or not. If you’d like to work through the numbers before making any moves, give us a call.

Coming Due: PPP Loan Updates You Need to Know

Coming Due: PPP Loan Updates You Need to Know

On May 15, the SBA released its Payroll Protection Program Forgiveness Application. The Paycheck Protection Program is the forgivable loan program that allows small businesses to cover up to eight weeks of payroll costs, mortgage interest, rent and utilities. The loan amount is based on your average monthly payroll cost for 2019 multiplied by 2.5.

In order to be forgivable, at least 75% of your loan must be used for payroll costs (not including payments to independent contractors). Your forgivable amount will scale in proportion to the amount you spend on payroll, up to the total loan amount. And you must maintain the number of employees on your payroll (within certain guidelines).

Restaurant owners and other businesses have requested an extension on the eight-week forgiveness period due to extended closures. Current bi-partisan support in Congress is looking to make this change, though nothing is certain yet. If the timeline is not extended, then the portion of your loan that is not forgiven will be assessed at a 1% interest rate over 2 years, with no payments due for the first six months. There is no pre-payment penalty.

Safe Harbor Given

If you borrowed less than $2 million from the PPP, you will be given a “safe harbor.” That means that, should you be audited, you will not need to certify that your business needed the money due to economic uncertainty.

If your business borrowed more than $2 million, it may be subject to further review from the SBA. If the SBA deems that your firm lacks adequate basis for certifying that it needed the loan, the SBA will seek repayment of the loan balance and inform your lender that your loan is ineligible for forgiveness.

Tax Surprise Coming?

PPP loan recipients may be in for a tax surprise. As of now, you will NOT be able to write off expenses that would otherwise be deductible if the expenses are covered by the PPP proceeds and the loan is forgiven. That could result in a higher tax bill as you prepare to pay your first and second quarter estimated taxes, both due on July 15.

The IRS is currently blocking the deduction to prevent PPP borrowers from “double-dipping” — both exempting the PPP loan from taxes and permitting the write-off of salaries and other expenses. However, lawmakers in Congress have proposed a bill to fix the rule and allow the deductibility of expenses. The bill, the Small Business Expenses Protection Act of 2020, is currently under review in the Senate Finance Committee.

Contact Us for Help

Here at Premier CPA Services, we’re doing our best to stay on top of the constantly changing tax and financial rules — so you can make the most of these changes, keep your doors open and stay in business. If you have any questions or need guidance, please don’t hesitate to contact us. We’re here to help you, and we appreciate your business!

Are Your Important Papers Up-to-Date?

With so much going on right now, it brings to mind the need to make sure your essential documents are current and secure. Now is a good time to contact your attorney to establish or update your:

  • Will, which not only distributes your assets, but also names guardians for your children under 18.
  • Durable power of attorney for financial matters, which names someone to handle legal matters related to your finances.
  • Beneficiary designations for assets such as retirement accounts, which may be affected by the Setting Every Community Up for Retirement Enhancement (SECURE) Act.
  • Living will, which includes your healthcare wishes and considerations (i.e., medical directives and DNR orders).
  • Healthcare proxy, which authorizes another person to make medical decisions for you if you are unable to.
  • HIPAA release permitting another person to talk with medical providers about your medical history and treatment.

MONEY BRIEF #1

The IRS announced temporary changes to Section 125 Cafeteria Plans because of the Coronavirus. The IRS is offering extra flexibility to users by:

  • Extending the claims periods for you to apply unused amounts remaining in your health FSA or dependent care assistance program for expenses incurred through December 31, 2020.
  • Expanding your ability to make mid-year elections for health coverage, health FSAs and dependent care assistance programs in response to changes in needs as a result of the pandemic.
  • Applying earlier relief for high-deductible health plans to cover expenses related to COVID-19, and a temporary exemption for telehealth services retroactively to January 1, 2020.
  • Increasing (for inflation) the $500 permitted carryover amount for health FSAs to $550.

MONEY BRIEF #2

More taxpayers are using IRS.gov than ever before. As of May 8, the agency’s website had been visited a record 1 billion times — that’s up 141% compared to the same time last year.

MONEY BRIEF #3

Nearly 4 million people are receiving their Economic Impact Payment by prepaid debit card instead of a paper check or direct deposit. These EIP Visa cards are issued by MetaBank, and can be used to make purchases, get cash from ATMs or transfer funds to a personal bank account — all without fees. You can learn more at www.eipcard.com. Other EIP questions and answers can be found here: https://www.irs.gov/coronavirus/economic-impact-payment-information-center

COVID-19 Update: 3 New Tax Credits May Apply to Your Small Business

COVID-19 Update: 3 New Tax Credits May Apply to Your Small Business

The IRS has announced three new tax credits available to employers affected by the COVID-19 crisis. You may qualify for one or more of them:

Employee Retention Credit

This refundable tax credit is designed to keep employees on your payroll. It provides a credit of 50% of up to $10,000 in wages paid. The credit is available to most businesses, including tax-exempt organizations, but not state and local governments and their instrumentalities, or small businesses that have taken small business loans.

To qualify, you must fall into one of two categories:

  • Your business is fully or partially suspended by government order due to COVID-19 during the calendar quarter.
  • Your gross receipts are below 50% of the comparable quarter in 2019. Once your gross receipts go above 80% of a comparable quarter in 2019, they no longer qualify after the end of that quarter.

Paid Sick Leave Credit

This tax credit allows your business to get credit for any employee who is unable to work (including telework) due to Coronavirus quarantine or self-quarantine, or has Coronavirus symptoms and is seeking a medical diagnosis. Those employees are entitled to paid sick leave for up to 10 days (up to 80 hours) at your employee’s regular rate of pay — up to $511 per day and $5,110 in total.

Family Leave Credit

Like the Paid Sick Leave Credit, here you can receive a credit for employees who are unable to work due to caring for someone with Coronavirus or caring for a child because the child’s school or place of care is closed, or the paid childcare provider is unavailable. Those employees are entitled to paid sick leave for up to two weeks (up to 80 hours) at two-thirds (2/3) the employee’s regular rate of pay — up to $200 per day and $2,000 in total. Up to 10 weeks of qualifying leave can be counted towards the Family Leave Credit.

How to Receive the Credit

If you qualify, you are entitled to immediately receive a credit in the full amount of the required sick leave and family leave, plus related health plan expenses and your share of Medicare tax on the leave, for the period of April 1, 2020, through December 31, 2020.

You can be reimbursed for the credit by reducing your required deposits of payroll taxes that have been withheld from your employees’ wages by the amount of the credit. You must report your total qualified wages and the related health insurance costs for each quarter on your quarterly employment tax returns, or Form 941, beginning with the second quarter. If your employment tax deposits are not sufficient to cover the credit, you may receive an advance payment from the IRS by submitting Form 7200 (Advance Payment of Employer Credits Due to COVID-19).

Here for You

Please contact us if you have any questions about these new credits. The IRS has also posted Employee Retention Credit FAQs and Paid Family Leave and Sick Leave FAQs on its website to help answer your questions.

MONEY BRIEF #1

Good news! The Economic Impact Payment you may have received will NOT be counted as taxable income. It will not reduce your refund or increase the amount you owe when you file your 2020 federal income tax return.

MONEY BRIEF #2

The IRS has a new web page, Filing and Payment Deadlines Questions and Answers, to answer tax and financial relief questions most asked by self-employed taxpayers, business owners and their employees. It will be updated often to reflect latest information.

MONEY BRIEF #3

You can now request FREE credit reports — every week — if you’re feeling anxious about your financial health. To get your free reports, go to AnnualCreditReport.com. The three credit reporting agencies are making these reports free for the next year.

New Tax Relief Notices Announced by the IRS

New Tax Relief Notices Announced by the IRS

Notice #1: Additional Returns Postponed

As previously announced, the IRS has provided filing and payment relief for federal income tax returns and payments due April 15, 2020. Last week, additional automatic (no application required) tax-filing and payment-deadline relief — also now July 15, 2020 — was announced in a new notice issued by the IRS. Notice 2020-23 applies to individuals, partnerships, trusts, estates, corporations and other noncorporate tax-filing entities filing Forms 1120, 1065, 1066, 1041, 706 and 709, among others.

Notice #2: Estimated Tax Payments Postponed

The IRS has also postponed the June 15 deadline for second quarter Estimated Tax Payments to July 15. Now, both first quarter AND second quarter estimated taxes are due on July 15, 2020.

Notice #3: New Employee Retention Credit Announced

The IRS announced a new Employee Retention Credit for businesses. This new relief option is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages a business pays to employees between March 12, 2020, and January 1, 2021. Eligible employers get immediate access to the credit by reducing employment tax deposits they are otherwise required to make. Also, if the employer’s employment tax deposits are not sufficient to cover the credit, the employer may get an advance payment from the IRS.

For each employee, wages (including certain health plan costs) up to $10,000 can be counted to determine the amount of the 50% credit. Because this credit can apply to wages already paid after March 12, 2020, many struggling employers can get access to this credit by reducing upcoming deposits or requesting an advance credit on Form 7200, Advance of Employer Credits Due To COVID-19.

Employers, including tax-exempt organizations, are eligible for the credit if they operate a trade or business during calendar year 2020 and experience either:

  • the full or partial suspension of the operation of their trade or business during any calendar quarter because of governmental orders limiting commerce, travel or group meetings due to COVID-19, or
  • a significant decline in gross receipts (50% less than the prior year’s quarter).

The definition of qualified wages varies depending on if you have more than or less than 100 full-time employees. And the credit is also impacted if you take advantage of other relief provisions, such as the Paycheck Protection Program.

If you’re not sure if you qualify for this new Employee Retention Credit, please contact us. We can help you determine the best relief program for your business.

What You Need to Know About Unemployment

What You Need to Know About Unemployment

Thanks to the Coronavirus Aid, Relief and Economic Security (CARES) Act, unemployment payment amounts will increase, more folks will qualify, and benefits will be available longer.

Previously, only those workers who receive W-2s from their employer qualified for unemployment benefits. However, with the new Pandemic Unemployment Assistance (PUA) through the CARES Act, folks who are self-employed, gig workers, 1099 independent contractors or have a limited work history can now also file for unemployment benefits.

The normal unemployment application is being modified for these types of workers and is now available on the Georgia DOL website. If you have already filed a claim with the GDOL and will be eligible to potentially receive benefits under this program, you do NOT have to refile your claim. Instead, you will be sent an email with a link to provide additional information for the PUA Program.

Other Important Details

GDOL expects to start distributing an additional $600 from the Federal Pandemic Unemployment Compensation next week. This would be added on top of Georgia’s existing unemployment benefits package, which ranges from $55 to $365 weekly. So, the most someone could receive weekly is $965 with the federal and state packages combined.

  • The Georgia DOL time period for receiving unemployment benefits has been extended from 14 weeks to 26 weeks.
  • With the CARES Act, the time period could increase 13 more weeks.
  • UI recipients can earn up to $300 per week before earnings begin to count against their benefits.
  • If your employer files the unemployment claim for you (the preferred method), you should receive your first payment within a week or so. If you file a claim yourself, it could take up to three weeks.
  • Payments will arrive via a “Way2Go” Debit MasterCard that has been sent to you or by direct deposit.

You can visit the GDOL website to access an application and follow step-by- instructions and video tutorials on applying for unemployment.

The Georgia Department of Labor processed 390,132 unemployment claims during the week of March 29-April 4 — more claims in seven days than were processed in all of 2019! And the U.S. Department of Labor announced that around 10% of the total American workforce are currently unemployed.

8 Year-end Tax Tips for Small Businesses

8 Year-end Tax Tips for Small Businesses

With December 31 only a few weeks away, now is your last opportunity to make some smart moves to benefit your April tax bill. Keep in mind that your tax rate for 2019 and 2020 will essentially be the same (with modest adjustments for inflation) under the Tax Cuts and Jobs Act (TCJA). Here are a few things to consider:

#1 – Review Year-end Reports

It’s hard to make any financial decisions if you don’t know where you’re at. If you haven’t already met with us to discuss your year-end situation, take the time to run a few reports now. Walk through them before taking any steps. You’ll also be more prepared when it’s time to close out your books for 2019 and get your paperwork ready for tax filing. This includes reviewing names and addresses for both W-2 and 1099 workers.

#2 – Defer Income & Accelerate Deductions

The advice to defer income into the new year while accelerating deductible expenditures for 2019 still applies, especially if you expect to be in the same or lower tax bracket for 2020. (The opposite advice applies if you expect to be in a higher tax bracket next year.) So stock up on supplies and inventory, for example, and pre-pay expenses like insurance, rent and subscriptions.

#3 – Buy Depreciable Assets

The TCJA increased the Section 179 limit in 2018, which provides for first-year depreciation on qualifying equipment. For the 2019 tax year, small businesses can write off up to $1 million PLUS a 100% bonus on both new and used equipment. So, consider making additional acquisitions by December 31 if you can take advantage of this tax break. (We previously wrote about Section 179 expensing here.)

#4 – Write off Bad Debts

Take a look at your aging collections before year-end. Do you have a customer who you expect will never pay? You may be able to remove the customer’s balance from your total sales to reduce income. Be sure you want to write off the debt now because you’ll have to add it back later if the customer ends up finally paying.

#5 – Write off Obsolete Equipment & Inventory

Pull a list of all your current equipment and inventory. Are there items that are obsolete, damaged or unusable? You may be able to write off their full or partial value.

#6 – Pay Bonuses Now

Year end is a great time to reward your employees and contractors with a bonus, gift and/or holiday party. Many of these expenses can be treated as a deductible business expense. Be sure to run any bonuses through your payroll system for proper accounting.

#7 – Save for Retirement

If you haven’t already set up a retirement account for you and/or your employees, now is a great time. While you typically have until April 15 to actually fund the plan, some types of plans must be established before the end of the year in order to take advantage of the tax deduction. Not sure about your situation? Give us a call!

#8 – Make Note of Tax Changes

If you pay Georgia sales taxes, you should have received a letter from the Department of Revenue indicating your filing status for 2020. It may be the same or it may have changed frequency, so be sure to make any adjustments for the new year as needed. Note that there are NO changes to sales tax amounts in any Georgia county for January 2020.

Give Us a Call: 706-632-7850

We’ll be happy to answer any questions you might have regarding your year-end tax situation. We’re also booking appointments for tax filing beginning in January, so call us if you’re ready to get started!

2020 Census Coming

The 2020 census aims to count the entire population of the U.S. at the location where each person usually lives. Census questions include how many people live or stay in each home, and the sex, age and race of each person.

Federal funds, grants and support to states, counties and communities are based on population totals and breakdowns by sex, age, race and other factors. So accurate census data is important for our community to get its fair share of the more than $675 billion per year in federal funds for schools, hospitals, roads, public works and other vital programs.

Businesses use census data to decide where to build factories, offices and stores, thus creating jobs. Developers use the census to build new homes and revitalize neighborhoods. Local governments use the census for public safety and emergency preparedness. Residents use the census to support community initiatives involving legislation, quality-of-life and consumer advocacy.

The original legal purpose of the decennial census is the apportionment of representatives among the states, which is mandated by the U.S. Constitution. Apportionment is the process of dividing the 435 seats in the U.S. House of Representatives among the 50 states based on the population counts that result from the census.

Click the image above for more census details.

Source: Census.gov

The information provided here by Premier CPA Services PC is for general information only. It does not constitute legal, accounting, tax or other professional advice or services, and is presented without any representation or warranty as to the accuracy or completeness of the information. Please contact us for information as it relates to your circumstances.

2020 Tax Season Updates Announced

2020 Tax Season Updates Announced

Over the last couple weeks, the IRS has announced a few updates that will apply to the 2020 tax-filing season (for returns processed in 2021). Keep these changes in mind while planning your finances.

Retirement Plan Contribution Limits Increased

» The limit on elective deferral contributions to Sec. 401(k) plans, Sec. 403(b) plans, most Sec. 457 plans, and the federal government’s Thrift Savings Plan increases to $19,500 in 2020, up from $19,000 in 2019. If you’re 50+, the catch-up contribution limit increases to $6,500 in 2020, up from $6,000 in 2019.

» The maximum deductible IRA contribution for 2020 remains at $6,000. If you also have a workplace retirement plan, your ability to deduct your IRA contribution is phased out depending on your adjusted gross income (AGI):

  • $65,000-$75,000 for singles and heads of household
  • $104,000 to $124,000 for married couples filing jointly, where the spouse who makes the IRA contribution is covered by a workplace retirement plan
  • $196,000 and $206,000 for married couples filing jointly, where the spouse who makes the IRA contribution is NOT covered by a workplace retirement plan but is married to someone who is.

» If you contribute to a Roth IRA, the phaseout range for determining the maximum contribution increases to $196,000 to $206,000 for married couples filing jointly, and $124,000 to $139,000 for singles and heads of household.

» The AGI limit for the Retirement Savings Contribution Credit (Saver’s Credit) also increases slightly for 2020: $65,000 for married couples filing jointly, $48,750 for heads of household, and $32,500 for single taxpayers and for married individuals filing separately.

Inflation Adjustments and Tax Table Changes

» The Standard Deduction increases to $24,800 for married individuals filing joint returns or surviving spouses, $18,650 for heads of household, and $12,400 for unmarried individuals (other than surviving spouses) and married individuals filing separate returns.

» The Earned Income Tax Credit (for taxpayers with three or more children) increases to $6,660, up from $6,557 in 2019. The Adoption Tax Credit also increases to $14,300, up from $14,080 in 2019.

» The 2020 exemption amounts for the Alternative Minimum Tax rises to $113,400 for married individuals filing joint returns and surviving spouses, $72,900 for unmarried individuals (other than surviving spouses), $56,700 for married individuals filing separate returns, and $25,400 for estates and trusts.

» The Sec. 179 depreciation deduction for small businesses increases to $1,040,000, with a phaseout threshold of $2,590,000.

» The Sec. 199A income deduction threshold for a qualified trade or business increases to $326,600 for married individuals filing joint returns, and $163,300 for married individuals filing separate returns, single individuals, and heads of household.

For more details on these updates, or help planning your finances in relation to these changes, please give us a call today.

The information provided here by Premier CPA Services PC is for general information only. It does not constitute legal, accounting, tax or other professional advice or services, and is presented without any representation or warranty as to the accuracy or completeness of the information. Please contact us for information as it relates to your circumstances.