Traveling for Business? Here’s What You Need to Know

Traveling for Business? Here’s What You Need to Know

Hotel stays, airfare tickets, public transportation costs — it all adds up fast when you’re traveling. The good news is, as a business traveler, you may be able offset some of those expenses by claiming business travel deductions when you file your tax return. Not everything qualifies, however, so be sure you know some of the details.

What Can You Deduct?

Business travel deductions are available when employees must travel away from their main place of work for business reasons. The travel period must be substantially longer than an ordinary day’s work and include a need for sleep or rest to meet the demands of the work while away. Keep in mind:

  • Travel expenses must be “ordinary and necessary.” They cannot be lavish, extravagant or for personal purposes.
  • Employers can deduct travel expenses paid or incurred during a temporary work assignment if the assignment length does not exceed one year.
  • Travel expenses for conventions are deductible if attendance benefits the business (note: there are special rules for conventions held outside North America).

Deductible travel expenses can include the cost of:

  • Travel by airplane, train, bus or car between your home and your business destination.
  • Fares for taxis or other types of transportation between an airport or train station to a hotel, from a hotel to a work location.
  • Shipping of baggage and sample or display material between regular and temporary work locations.
  • Using a personally owned car for business (including increased mileage rates).
  • Lodging and non-entertainment-related meals.
  • Dry cleaning and laundry.
  • Business calls and communication.
  • Tips paid for services related to any of these expenses.
  • Other similar ordinary and necessary expenses related to the business travel.

Claiming Travel Expense Deductions

If you are traveling at the request of your employer, then your employer will most likely reimburse you for any expenses not already covered. In this case, you cannot also claim a deduction for the costs incurred. If you are self-employed and traveling for business, you can deduct travel expenses on Form 1040, Schedule C: Profit or Loss From Business, Sole Proprietorship. Farmers can use Form 1040, Schedule F: Profit or Loss From Farming. National Guard or military reserve servicemembers can claim a deduction for unreimbursed travel expenses paid during the performance of their duty.

Whatever your situation, make good recordkeeping a priority. Well-organized records and copies of receipts, canceled checks and other documents make it easier to prepare your tax return and support your deductions. If you have any questions about what is or is not deductible, please don’t hesitate to contact us at 706-632-7850.

Did You Get Your GA Tax Rebate?

More than 2.5 million Georgia tax refunds have been issued so far. That’s 90% sent out since May, with more coming by next month. Announced in March, eligible Georgians received up to $250 for single filers, $375 for heads of household or $500 for married couples filing jointly.

If you have not yet received the rebate, you may not be eligible (or you may not have noticed it was direct deposited into your account). The refund is only available to residents who filed Georgia tax returns for both the 2020 and 2021 tax years.

IRS Online Account Provides Valuable Info

If you sign up for an IRS Online Account, you’ll have easy access to your tax account information, including balance, payments, tax records and more.

For example, you can view:

  • Key information from your most recent tax return.
  • Your payment history.
  • Any payoff amount (updated daily).
  • The balance for each tax year for which you owe taxes.
  • Payment plan details, if applicable.
  • Digital copies of select IRS notices.
  • Economic Impact Payments, if applicable.
  • Your current address on file.

You can also use your Online Account to:

  • Select an electronic payment option.
  • Set up an online payment agreement.
  • Access tax records and transcripts.
  • Approve and electronically sign Power of Attorney and Tax Information Authorization requests from your tax professional.
Thinking of Starting a New Business?

Thinking of Starting a New Business?

 Last week was National Small Business Week. Because small businesses play a pivotal role in the nation’s economy, the Small Business Administration and the IRS teamed up to highlight the tax benefits and resources available to entrepreneurs. Here are some of the highlights you need to know.

 

Selecting a Business Structure

When opening a new business, you need to decide what form of business entity to establish. Talk with us and your attorney to determine which of these common business structures is best for you:

  • Sole Proprietorship — When you own an unincorporated business by yourself.
  • Partnership — When you form a business with one or more other people.
  • Corporation — When prospective shareholders exchange money, property or both for the corporation’s capital stock.
  • S Corporation — When the corporation elects to pass corporate income, losses, deductions and credits through to its shareholders for federal tax purposes.
  • Limited Liability Company (LLC) — When a business is formed by state statute and is treated as a either a Sole Proprietorship, Partnership or Corporation (depending on elections made) for tax purposes.

Understanding Business Taxes

The form of business you set up determines the type of income tax return you’ll file next year. what taxes you’ll owe and how you’ll pay them. Generally, there are four types of business taxes. Note, however, that you’ll probably need to pay taxes on income by making regular estimated tax payments throughout the year.

  • Income Tax — Your new business must file an annual income tax return, unless you establish a Partnership, which is required to file an information return.
  • Self-Employment Tax — This is a Social Security and Medicare tax paid if you work for yourself. Payments contribute to your Social Security coverage.
  • Employment Tax — If you hire employees, you will have to pay employment tax and file additional forms.
  • Excise Tax — This tax is imposed on various goods, services and activities. Such taxes may be imposed on the manufacturer, retailer or consumer, depending on the specific tax.

Get an Employer Identification Number (EIN)

An EIN, also known as a Federal Tax Identification Number, is used to identify your business entity. You can apply for an EIN from the IRS online and receive it immediately.

 

Choose Your Business Year

Your new small business must use a “tax year,” which is an annual accounting period for reporting your income and expenses. Tax years you can use are:

  • Calendar Year — 12 consecutive months beginning January 1 and ending December 31.
  • Fiscal Year — 12 consecutive months ending on the last day of any month except December. A typical fiscal year runs October 1-September 30.

Keep Good Records

Maintaining adequate records will help you monitor your progress, prepare financial statements, identify sources of income, keep track of deductible expenses, keep track of your property basis, prepare your tax returns, and support items reported on your tax returns. You should keep detailed records for at least three years.

When you’re ready to get started, we can help you make the best choices for your new business. We also recommend you talk with your attorney to help set up the legal paperwork. Then you can get busy on your new endeavor!

FREE Workshop for Small Business Owners

The IRS has created a FREE online workshop of eight lessons to help new business owners understand federal tax obligations. The first four lessons are relevant no matter what kind of business you have. The remaining four lessons apply if you have or are thinking about hiring employees.

You can watch any or all of the lessons free of charge at any time. The topics include:

  • Federal taxes and your new business
  • Schedule C and other small business taxes
  • Filing and paying taxes electronically
  • Business use of your home
  • Federal taxes when hiring employees or independent contractors
  • Managing payroll to withhold the correct amount of taxes
  • Tax deposits and filing a return to report payroll taxes
  • Hiring people who live in the U.S. who aren’t citizens

Tax-exempt? Your Information Return is Due May 16, 2022

If you run a nonprofit, charity or foundation, you need to file a 2021 Information Return by Monday, May 16, 2022. The form you use will depend on the size and type of the organization:

  • Form 990: Return of Organization Exempt from Income Tax
  • Form 990-EZ: Short Form Return of Organization Exempt from Income Tax
  • Form 990-PF: Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation
  • Form 990-N: Electronic Notice, e-Postcard, for Tax-Exempt Organizations Not Required to File Form 990 or Form 990-EZ
  • Form 990-T: Exempt Organization Business Income Tax Return
  • Form 4720: Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code

Note that tax-exempt organizations must file their forms electronically, and that the IRS will reject incomplete or incorrect returns. We can help make sure that you’re using the right return, have fully completed it and don’t have missing schedules. If you need additional time, we can help you request an automatic six-month extension by filing Form 8868.

Mark Your Calendar for Tax Prep Deadlines

Mark Your Calendar for Tax Prep Deadlines

Please note the following deadlines for providing your materials to us in time for the tax-filing deadline:

  • March 1: Corporate/Partnership Tax Returns to file by March 15 (without extension).
  • March 25: Personal Tax Returns to file by April 18 (without extension).

You may bring in your paperwork to our office during regular business hours, or drop it off in our after-hours dropbox out front. To make sure you provide everything we need, please use our 2021 Tax Preparation Checklist (Personal and/or Business). Just click here to download and print out:

Please note that most financial advisor companies are not issuing 1099 forms until February 15 or later. It’s OK to drop off everything else and just send us any lagging paperwork as soon as you receive it.

If you have any questions, please contact us at 706-632-7850 or email our office manager, Kimberly Mortimer, at kimberly@premiercpaservices.com.

 

Don’t Forget to Report Gig Economy Earnings

Whether it’s a full-time job or just a side-hustle, those extra earnings you make need to be reported on your tax return. Here are some things to keep in mind:

  • You should receive a Form 1099-K for any gig or freelance work that exceeds $600 total. The IRS expects you to report it even if you don’t receive a Form 1099-K, though.
  • If you are an independent contractor, you may be able to deduct some of your business expenses. Be sure to keep good records.
  • As an employee, your employer typically withholds income taxes for you. As a freelancer or gig worker, however, you are responsible for your own taxes. If you also have a job that takes out taxes, you can submit a new Form W-4 to your employer to have additional taxes withheld from your paycheck to help cover the difference. Otherwise, you’ll need to make quarterly estimated income tax payments throughout the year, as well as Social Security and Medicare taxes. (We can help you with this.)

If you’re not sure about your status as a worker in the gig economy, let us help. We can help you figure out whether you should be paying additional taxes and how to best set that up. And be sure to provide us with any Form 1099-Ks you receive when you drop off your tax-preparation materials.

Money Minute: Reporting Tips

If you receive tips while working, then you must report them as part of your gross income. Here are some “tips” for reporting your tips. Tips include:

  • Cash tips received directly from customers.
  • Non-cash tips added using credit, debit or gift cards.
  • Tips from a tip-splitting arrangement with other employees.
  • Non-cash items, such as tickets, passes or other items of value.

To help keep track of your tips:

  • Keep a daily tip record.
  • Report tips of less than $20 a month on your income tax return.
  • Report tips of more than $20 a month to your employer by the 10th day of the following month. Your employer must withhold taxes on those reported tips (so you don’t have to).

IRS Video Tax Tip

If you have taxable income from any payer that doesn’t withhold tax for you, check out this IRS video to see if you need to make estimated tax payments.

2021 Tax Preparation Checklists Now Available

2021 Tax Preparation Checklists Now Available

Help yourself (and us!) make tax preparation easier by using these handy Checklists to pull together your tax materials for 2021. With another year of tax law changes and new programs, these Checklists will ensure you’ve got everything you need to file.

Please click on the Checklist name below to download a copy of the checklist. If you prefer, we can email it to you (just call or email Kimberly at kimberly@premiercpaservices.com to request your copy). You can also download both forms here.
Remember: We’re back open on Fridays now for the busy tax preparation season. Please contact us with any questions or concerns you may have.

Venmo, PayPal and Cash App to Begin Reporting Payments of $600+

If you rely on payment apps like Venmo, PayPal and Cash App for your business, you should be aware of a new tax law that took effect this year. Third-party payment processors will now report your business transactions to the IRS if they exceed $600 for the year — and send you a Form 1099-K with this information. (Previously they were required to send you Form 1099-K if your gross income exceeded $20,000 or you had 200 separate transactions within a calendar year.)

The new rule applies to payments for goods and services transactions — NOT for personal payments to your roommate for rent, for example, or to a friend when splitting dinner costs.

Note that you should already be reporting income over $600 to the IRS on your 1040, whether or not you receive a Form 1099-K. This new rule just means the IRS will be able to cross-reference the amounts beginning with your 2022 tax return.

 

Use ID.me for Easy IRS Access

The IRS is now using ID.me to help ensure the privacy and confidentiality of your information when using IRS tools, including:

If you already have an IRS user name, you may continue to use your existing credentials to sign-in — but you will be prompted to create an ID.me account for future access. To verify your identity with ID.me, you’ll need to provide a photo of an identity document, such as your driver’s license, state ID or passport. You’ll also need to take a selfie with a smartphone or a computer webcam. Once your identity is verified, you can securely and easily access IRS online services.

Tax Filing Begins Jan. 24

The IRS will begin accepting and processing 2021 tax year returns beginning next Monday, January 24. The IRS urges you to file electronically to speed processing and refunds — most people receive their refund within 21 days when they use direct deposit.

Note that the tax filing deadline will be April 18 — for both federal and Georgia income taxes. The due date is April 18 instead of April 15 because of the Emancipation Day holiday in the District of Columbia. If you request an extension, you will have until Monday, October 17, 2022, to file.

Money Brief: Report Virtual Currency Transactions

If you received, sold, exchanged or otherwise disposed of any financial interest in virtual currency — like Bitcoin — you’ll need to provide us with that information so it can be included on your Form 1040.

Money Brief: UGA Business Webinars

UGA’s Small Business Development Center offers a wide variety of online training programs to help new business owners, such as “Writing a Business Plan,” “QuickBooks” and “Hiring to Win.” Register today to learn more about operating your small business.

2022 Calendar: Know Your Tax Dates & Deadlines

2022 Calendar: Know Your Tax Dates & Deadlines

We will be developing a new Tax Checklist to help you pull together your tax preparation materials for 2021. We hope to have that ready in our next newsletter. Until then, please take note of these important tax-related dates for the new year:

Tuesday, January 18:

  • Pay estimated taxes for 4th quarter 2021.

Monday, January 31:

  • File Form W-2s and other wage statements if you are an employer.
  • Provide Form W-2s to employees, and Form 1099-MISC, Miscellaneous Income and Form 1099-NEC, Nonemployee Compensation to the appropriate recipients. (Note: If we are filing these forms for you, please get your information to us ASAP.)

Friday, April 1:

  • First RMD due if you turned age 72 in 2021

Monday, April 18*:

  • File your 2021 federal tax return and pay any tax due, or request a 6-month extension.
  • Pay estimated taxes for 1st quarter of 2022.
  • Contribute to your IRA for 2021.
  • Contribute to your HSA for 2021.
  • Contribute to your 401(k) or SEP for 2021 if self-employed.

Wednesday, June 15:

  • Pay estimated taxes for 2nd quarter 2022.

Thursday, September 15:

  • Pay estimated taxes for 3rd quarter 2022.

Monday, October 17:

  • File your 2021 federal tax return if you requested an extension.

 *April 15th is Emancipation Day, a legal holiday in Washington, DC.

 

Important Letters Coming Your Way

If you received advance payments of the Child Tax Credit last year, keep an eye out for Letter 6419 from the IRS. The letter includes the total amount of Advance Child Tax Credit payments you received, if any, in 2021. Note that if you chose NOT to receive advance payments, you can claim the full child tax credit when you file your 2021 tax return. 

If you didn’t qualify for the third Economic Impact Payment (EIP or “stimulus check”), or you didn’t receive the full amount, you may be eligible for the Recovery Rebate Credit when you file your 2021 tax return. The IRS will soon send you Letter 6475, which contains the total amount of the third stimulus payment you received.

We will need a copy of these letters to prepare your 2021 tax return.

Tax Appointments

We’re taking tax appointments now if you’re a new client or have major changes to your taxes. Plan ahead and call 706-632-7850 to reserve your spot. Note that you do NOT need an appointment for us to handle your tax preparation — you can just drop off your files when you’re ready.

2022 Mileage Rates

The IRS updated mileage rates for 2022 based on rising fuel prices and other costs:

  • 58.5 cents per mile for business use (up 2.5 cents per mile).
  • 18 cents per mile for either medical or moving purposes for qualified active-duty members of the Armed Forces (up 2 cents per mile).
  • 14 cents per mile in service of charitable organizations (no change from 2021).

Note that if you choose to use the standard mileage rate, you must opt to use it in the first year the vehicle is available for business use. Then, in later years, you can choose either the standard mileage rate or actual expenses. Leased vehicles must use the standard mileage rate method for the entire lease period if the standard mileage rate is chosen.

Corporate Registration Due by April 1

If you own a business in Georgia, you must renew your corporate registration each year between January 1 and April 1. To do so, simply visit the registration page. Beware of misleading notices you may receive that offer to file your corporate registration for a higher cost than doing so yourself. It’s a quick process you can handle easily online.

Plan Ahead: Consider These 8 Smart Tax Tips for Year-end 2021

Plan Ahead: Consider These 8 Smart Tax Tips for Year-end 2021

With only a few weeks left until the new year, it’s time to take a look at your year-end finances. There are a few things you can do before the calendar changes to get ready for the 2022 tax-filing season.

Your Year-End To-Do List

#1  Report changes — If you moved in 2021, notify the IRS of your new address. Name changes should be updated with the Social Security Administration.

#2 Renew expiring ITINs — If your Individual Taxpayer Identification Number is set to expire at the end of this year, be sure to renew it now. Visit the ITIN page for more details.

#3 Donate to charity — Even if you don’t itemize your deductions, the law now permits you to claim a limited deduction on your federal income tax returns for cash contributions made to certain qualifying charities. Singles and marrieds filing separate returns can claim a deduction of up to $300, while marrieds filing jointly can claim a maximum deduction of $600. Cash contributions include those made by check, credit card or debit card, as well as unreimbursed out-of-pocket expenses in connection with volunteer services to a qualifying charitable organization.

#4 Track Advance Child Tax Credit Payments — If you received advance payments in 2021, you will need to compare the amount of payments you received with the amount of the Child Tax Credit that you can claim on your tax return. If you received less than the amount that you’re eligible for, you’ll claim a credit for the remaining amount of Child Tax Credit. If you received more than you’re eligible for, you may need to repay some or all of that excess payment when you file. The IRS will send you Letter 6419 in January, which will provide the total amount of Advance Child Tax Credit payments that you received in 2021. Provide this letter to your tax preparer when you file.

#5 Check your Recovery Rebate Creidt — If you didn’t qualify for a third Economic Impact Payment (EIP) or did not receive the full amount, you may be eligible for the Recovery Rebate Credit. The IRS will send you Letter 6475 in January, which will provide the total amount of the third EIP and any Plus-Up payments that you received in 2021. You’ll need to provide this letter to your tax preparer when you file. Note that if you received the full amount of your third Economic Impact Payment, you don’t need to include any information about it when you file your 2021 tax return.

#6 Contribute to your retirement plan — Depending on your AGI, you may be able to take a tax credit of 50%, 20% or 10% of:

  • Contributions you make to a traditional or Roth IRA;
  • Elective salary deferral contributions to a 401(k), 403(b), governmental 457(b), SARSEP, or SIMPLE plan;
  • Voluntary after-tax employee contributions made to a qualified retirement plan (including the federal Thrift Savings Plan) or 403(b) plan;
  • Contributions to a 501(c)(18)(D) plan; or
  • Contributions made to an ABLE account for which you are the designated beneficiary.

Rollover contributions do not qualify for the credit. Also, your eligible contributions may be reduced by any recent distributions you received from a retirement plan or IRA, or from an ABLE account.

While the total salary deferral limit for 2021 is $19,500 ($26,000 if you’re 50+), only contributions of up to $2,000 qualify for the credit ($4,000 if married filing jointly), making the maximum credit $1,000 ($2,000 if married filing jointly). See the chart below for details.

There is not a maximum age for traditional IRA contributions, so you can continue to contribute to a traditional IRA at any age as long as you earn compensation. Also, the minimum required minimum distribution (RMD) age is now 72.

#7 Verify your withholding — Use the IRS’s tax withholding estimator to make sure your withholding and estimated taxes align with what you actually expect to pay. Keep in mind that most income is taxable, including unemployment compensation. If you received non-wage income like self-employment income, investment income, taxable Social Security benefits and, in some instances, pension and annuity income, you may be in danger of underpaying your taxes, which could result in penalties. In this case, you can make an end-of-the-quarter estimated tax payment or have additional taxes withheld from your next few paychecks.

#8 Make business purchases — If you own a business, consider purchasing some business supplies now to take the deduction in 2021. Everything from printer ink to a new laptop or desk can qualify as an eligible business expense. Also make sure to keep your receipts related to the temporary 100% business deduction for food or beverages from restaurants. The Taxpayer Certainty and Disaster Relief Act of 2020 added a temporary exception to the 50% limit on the amount that businesses may deduct for food or beverages. The temporary exception allows a 100% deduction for food or beverages from restaurants, as long as the expense is paid or incurred in 2021 or 2022.

Prep Now for a Smoother Tax-Filing Season

While 2021 was not as crazy as 2020, there are still many changes that will affect next year’s tax filing. Start gathering your paperwork now, so you’re ready to go when your Forms W-2, Forms 1099-Misc and other income documents start arriving in the mail. If you have any questions, we’re here to help — just call 706-632-7850 or email us.

Money Brief: Jan. 31, 2022, Deadline

Year-end wage and tax statements will be due on January 31, 2022. Mark your calendar if you are required to file:

  • Form W-2, Wage and Tax Statements;
  • Form W-3, Transmittal of Wage and Tax Statements;
  • Forms 1099-MISC, Miscellaneous Income; and
  • Forms 1099-NEC, Nonemployee Compensation.

Automatic extensions of time to file Forms W-2 are not available. If you need assistance filing any of these forms for your employees, please contact us as early in January as possible. You might want to get a head start now on verifying or updating employee information like names, addresses and Social Security numbers.

Money Brief: Inflation Adjustments for Tax Year 2022

The IRS recently announced inflation adjustments for the 2022 tax year (for returns filed in 2023).

Standard Deduction Increases:

  • To $25,900 for marrieds filing jointly (up $800).
  • To $12,950 for singles and marrieds filing separately (up $400).
  • To $19,400 for heads of household (up $600).

Marginal Rates:

  • 37% for singles with incomes greater than $539,900 ($647,850 for marrieds filing jointly);
  • 35% for singles over $215,950 ($431,900 for marrieds filing jointly);
  • 32% for singles over $170,050 ($340,100 for marrieds filing jointly);
  • 24% for singles over $89,075 ($178,150 for marrieds filing jointly);
  • 22% for singles over $41,775 ($83,550 for marrieds filing jointly);
  • 12% for singles over $10,275 ($20,550 for marrieds filing jointly).
  • 10% for singles at $10,275 or less ($20,550 for marrieds filing jointly).

IRS Video Tip:

With more taxpayers and tax preparers working remotely, identity thieves are trying to use COVID-19 to scare and scam people out of their identities or money. Everyone should remember to take basic steps to protect themselves.

Is Your Worker an Employee or Independent Contractor?

Is Your Worker an Employee or Independent Contractor?

As a small business owner, it’s important to classify your workers properly. Federal and state withholding, Social Security and Medicare, and unemployment taxes are all dependent on this classification.

Independent Contractor Vs. Employee

Whether a worker is an independent contractor or an employee depends on the relationship between the worker and your business. Generally, there are three categories to consider:

  1. Behavioral Control: Do you control what the worker does, and how and when the worker does the job?
  2. Financial Control: Do you direct or control the financial and business aspects of the worker’s job. This includes things like how the worker is paid, whether expenses are reimbursed, and who provides tools/supplies, etc.
  3. Relationship of the Parties: Do you have written contracts or employee-type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of your business?

In general, employees perform services for a business that specifies what to do and how to do it. What matters is that you control the details of how and when your workers perform the services. In this case, you would withhold and pay income taxes, Social Security and Medicare taxes, as well as unemployment taxes, and provide a Form W-2 to each employee at the beginning of each tax year.

Independent contractors, on the other hand, typically offer their services to several businesses, or to the public. Doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, freelance web designers and others are generally considered independent contractors. Since independent contractors do not have taxes withheld, they are responsible for paying these taxes themselves. Rather, you (the business “hiring” the independent contractor) provide a Form 1099 at the beginning of each tax year.

Keep in mind: If you misclassify an employee as an independent contractor without a reasonable basis, you can be held liable for employment taxes for that worker.

What About Self-Employed & Gig Workers?

Generally, someone is self-employed if any of the following apply to them.

  • They carry on a trade or business as a sole proprietor or an independent contractor.
  • They are a member of a partnership that carries on a trade or business.
  • They are otherwise in business for themselves (part-time or full-time).

Self-employed individuals generally are required to file an annual tax return and pay estimated tax quarterly. They must pay self-employment tax (Social Security and Medicare tax) as well as income tax. This is true even if their income is: from part-time, temporary or side work; not reported on a Form 1099-K, 1099-MISC, W-2 or other income statement; or paid in any form, including cash, property, goods or virtual currency.

Do You Have Employees or Independent Contractors?

If you’re not sure how to classify your workers, contact us for guidance. We can help you determine the best course of action for each instance — and make sure you avoid penalties for misclassification.

Premier CPA Services 10 year anniversary logo

May 31 was our 10-Year Anniversary! To celebrate, we will be offering some great giveaways to our clients and Facebook friends. Be sure to follow us and stay tuned!

Keep Track of Payments for Form 1099-MISC

You will need to request a person’s or business’ Taxpayer Identification Number (TIN) via Form W-9 when you pay them at least $600 during the year for:

  • Rents.
  • Prizes and awards.
  • Other income payments.
  • Medical and healthcare payments.
  • Crop insurance proceeds.
  • Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish.
  • Generally, the cash paid from a notional principal contract to an individual, partnership, or estate.
  • Payments to an attorney.
  • Any fishing boat proceeds.

In addition, you’ll use Form 1099-MISC to report when you made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.

Cost of COVID-19 Home Testing Is Eligible Medical Expense

The cost of purchasing a home testing kit for COVID-19 is an eligible medical expense that you can pay for or be reimbursed through your health flexible spending arrangement (health FSA), health savings account (HSA), health reimbursement arrangement (HRA) or Archer medical savings account (Archer MSA). The costs of personal protective equipment, such as masks, hand sanitizer and sanitizing wipes, for the primary purpose of preventing the spread of COVID-19 are also eligible medical expenses.

Video Tax Tip

Here are a few tips for small businesses, trusts, estates, charities and others about the Employer Identification Number (EIN). For more details, visit https://www.irs.gov/ein.

American Rescue Plan Updates Employer Paid Sick & Family Leave Tax Credits

American Rescue Plan Updates Employer Paid Sick & Family Leave Tax Credits

Paid Sick & Family Leave Credits were enhanced under the American Rescue Plan (ARP), which was enacted in March. The credits reimburse small and mid-size (and certain governmental) employers for the cost of providing paid sick and family leave to their employees for reasons related to COVID-19, including vaccinations. The updates apply to leave taken from April 1 – September 30, 2021.

How the Credits Work

As an employer, the paid leave credits are provided as tax credits against your share of the Social Security and Medicare tax. The tax credits are refundable, which means that you are entitled to payment of the full amount of the credits if it exceeds your share of the tax. The credit is equal to:

  • The sick leave wages paid for up to two weeks (80 hours), limited to $511 per day and $5,110 in total, at 100 percent of the employee’s regular rate of pay; or
  • The family leave wages paid for up to 12 weeks, limited to $200 per day and $12,000 in total, at 2/3rds of the employee’s regular rate of pay.

Note that the amount of the tax credits is increased by allocable health plan expenses and contributions for certain collectively bargained benefits, as well as the employer’s share of social security and Medicare taxes paid on the wages (up to the respective daily and total caps).

How to Claim the Credit

You can claim the credits on your Form 941, Employer’s Quarterly Federal Tax Return, by keeping the federal employment taxes that you otherwise would have deposited — including federal income tax withheld from employees, the employees’ share of social security and Medicare taxes, and your share of social security and Medicare taxes. The Form 941 instructions PDF explains how to do this.

If you do not have enough federal employment taxes set aside for deposit to cover amounts provided as paid sick and family leave wages, you may request an advance of the credits by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19. You will account for the amounts received as an advance when you file your Form 941 for the relevant quarter.

Note that if you are self-employed, you may claim comparable tax credits on your individual Form 1040.

If you need assistance filing for the tax credits, please contact us. We’ll be happy to help you work out all the details.

Beware of These Costly Errors When Claiming Credits

Errors on your Form 941 can be costly. If we handle the filing for you, then we’ll be responsible for any errors made. If you file the forms yourself, however, keep these tips in mind:

  • Ensure line 1 (number of employees) is accurate.
  • Report advanced credits received, not the requested payment of credits.
  • Use Form 7200 to request the advance payment of a credit only, not for reporting the credit.
  • Inform your third-party payers or reporting agents of any credits requested and received.
  • Use fractions of cents line correctly.
  • Only claim credits you are entitled to and don’t exceed the limitations.
  • Complete amended tax returns in detail and be sure they are accurate.
Premier CPA Services 10 year anniversary logo

May 31 was the 10-Year Anniversary of Premier CPA Services! Over the next few months, we will be offering some great giveaways to our clients and Facebook friends to celebrate! Be sure to follow us and stay tuned!

Let Us File Your Payroll Taxes & Forms

Are you filing your payroll taxes electronically? It can save you time and effort, because it’s secure and efficient. Plus, the IRS provides 24-hour confirmation.

You can submit the forms yourself if you have IRS-approved software (there may be a fee).

Or, you can let us file the necessary forms for you. Because we are an authorized IRS e-file provider, we can help you electronically file the following forms:

  • Form 940, Employer’s Annual Federal Unemployment Tax Return
  • Form 941, Employer’s Quarterly Federal Tax Return
  • Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees
  • Form 944, Employer’s Annual Federal Tax Return
  • Form 945, Annual Return of Withheld Federal Income Tax

Are you ready to simplify your payroll accounting? Contact Amber today at amber@premiercpaservices.com for details on how we can help.

What to Do If You Get a Letter from the IRS

What to Do If You Get a Letter from the IRS

Tax Return Deadline: May 17

While the IRS has extended the federal income tax filing due date for individuals to May 17, we can no longer accept returns to meet that deadline. If we have NOT yet received your paperwork, we will be happy to file an extension for you.

To help you prepare your files, please download a copy of our 2020 Personal Tax Preparation Checklist.

First of all, don’t panic! The IRS mails letters or notices for a variety of reasons, including if:

  • You have a balance due.
  • You are due a larger or smaller refund.
  • The IRS has a question about your tax return.
  • The IRS needs to verify your identity or that of a dependent.
  • The IRS is requesting additional information.
  • The IRS made changes to your tax return.

What to Do and Not Do

Follow these tips if you receive a notice from the IRS:

Don’t ignore the letter. Most IRS letters and notices are about your federal tax return or tax account. The notice or letter will explain the reason for contacting you and provide instructions on what to do.

Read the notice. Read the letter carefully and take the appropriate action. If the IRS changed your tax return, compare the information provided in the notice with the information in your original return. Generally, you do NOT need to contact the IRS if you agree with the notice.

Respond quickly. If the letter requires a response by a specific date, be sure to reply in a timely manner. This will minimize any additional interest and penalty charges, and preserve your right to appeal.

Pay any amount due. If you owe money, you should pay as much as you can, even if you cannot pay the full amount. You can pay online or apply for an Online Payment Agreement or Offer in Compromise. The IRS offers several payment options.

Keep a copy of the notice. Be sure to keep a copy of any notice or letter you receive with your other tax records. You may need these documents later.

Contact the IRS only if necessary. If you must contact the IRS by phone, use the number provided in the upper right-hand corner of the notice, and have a copy of your tax return and letter when calling. Typically, you only need to contact the IRS if you don’t agree with the information, if the IRS requests additional information, or if you have a balance due. Generally, it’s best if you write to the IRS at the address on the notice and keep a copy for yourself; allow at least 30 days for a response.

Beware of scams. The IRS will not contact you using social media or text message. The first contact from the IRS usually comes in the mail. If you are unsure if you owe money to the IRS, you can review your tax account information on IRS.gov.

 

We’re Here to Help

While getting a letter from the IRS in the mail can be intimidating, you don’t have to worry. If we prepared your taxes, we’ll help you respond to the IRS letter with the appropriate information. Just email us a copy of the letter you received. If you have any questions or concerns, please contact us. We’re here to help!

Reminder: Dine Out and Take a Tax Deduction

The Taxpayer Certainty and Disaster Relief Act of 2020 (enacted in December) temporarily allows a 100% business expense deduction for meals as long as the expense is for food or beverages provided by a restaurant. The previous deduction was limited to 50%. This provision is effective for expenses incurred from January 1, 2021, through December 31, 2022.

Should You Be Paying Excise Taxes?

An excise tax is imposed on the sale of specific goods or services, such as fuel, airline tickets, heavy trucks, highway tractors, tires and tobacco, or on certain uses, such as indoor tanning. Excise taxes typically help fund projects related to the taxed product or service, such as highway paving projects or airport improvements.

Depending on the good or service, excise tax may be imposed at the time of:

  • Import,
  • Sale by the manufacturer,
  • Sale by the retailer, or
  • Use by the manufacturer or consumer.

If you are subject to excise tax, you must file one or more of the following forms:

  • Form 720, Quarterly Federal Excise Tax
  • Form 2290, Heavy Highway Vehicle Use Tax
  • Form 8849, Claim for Refund of Excise Taxes, Schedules 1, 2, 3, 5, 6 and 8

If you’re unsure if your business should be paying and filing excise taxes, give us a call. We can help you determine your status and take care of any paperwork.

The Latest Tax Info You Need to Know

The Latest Tax Info You Need to Know

Tax Return Deadline Extended to May 17

The IRS has extended the federal income tax filing due date for individuals from April 15 to May 17. To accommodate the new deadline, we will accept returns until Thursday, April 15th. If we receive your paperwork AFTER April 15, we will file an extension for you. To help you prepare your files, please download a copy of our 2020 Personal Tax Preparation Checklist.

Note that the deadline for estimated tax payments has NOT changed. First quarter payments are still due on April 15.

The American Rescue plan, which was signed by President Biden on March 11th, and other tax law changes probably affected your finances and returns for both 2020 and 2021. Here are some of the details you need to know:

Contribution Deadlines Extended to May 17

In addition to extending the tax return filing deadline to May 17, the IRS has extended other deadlines that would normally fall on April 15. You now have until May 17, 2021, to make 2020 contributions to your:

  • Individual Retirement Arrangements (IRAs and Roth IRAs),
  • Health Savings Accounts (HSAs),
  • Archer Medical Savings Accounts (Archer MSAs), and
  • Coverdell Education Savings Accounts (Coverdell ESAs).

This new deadline also applies to the reporting and payment of any 10% additional tax due on 2020 distributions from IRAs or workplace-based retirement plans.

IRS to Review Returns, Issue Refunds for Unemployment Benefits

The IRS will automatically begin refunding money in May if you filed your 2020 tax return and reported unemployment compensation before the American Rescue Plan was passed. The new law allows taxpayers who earned less than $150,000 in modified AGI to exclude 2020 unemployment compensation up to $20,400 (married filing jointly) or $10,200 (other taxpayers).

If you already filed and figured your tax based on the full amount of unemployment compensation, the IRS will determine the correct taxable amount. Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed. So there is no need to file an amended return unless the change makes you eligible for additional federal credits and deductions.

If we filed your tax return for you before March 11, we will automatically check it for additional credits and deductions, then let you know if an amended return should be filed. If we have not yet filed your taxes, we will take the new law into account for you. Please contact us if you have any questions about this.

3rd EIP Is Different from Earlier Payments

You may notice that the third Economic Impact Payment you receive(d) is different from the first and second payments. Here’s how:

• The 3rd EIP is an advance payment of the 2021 recovery rebate credit. The two earlier payments are advance payments of the 2020 recovery rebate credit. If you didn’t get a first or second EIP or got less than the full amounts, you may be eligible to claim the 2020 recovery rebate credit on your 2020 tax return.

• The 3rd EIP may be larger. You will receive up to $1,400 as a single taxpayer or $2,800 as a joint filer. If you have qualifying dependents, you will receive up to $1,400 per qualifying dependent.

• More dependents qualify. You will get a payment for all qualifying dependents claimed on your return, not just for children under age 17. This may include older family members like college students, adults with disabilities, parents and grandparents.

• Income phase-out amounts are different. You will not receive a 3rd EIP if your AGI exceeds:

  • $160,000 if married filing jointly or as a qualifying widow/er.
  • $120,000 if filing as head of household.
  • $80,000 if filing single or married filing separately.

• You may be eligible for additional funds. The amount of the 3rd EIP is based on your latest processed tax return (either 2020 or 2019). If it’s based on your 2019 return and is less than the full amount, you may qualify for a supplemental payment after your 2020 return is processed.

Small Businesses: Take Advantage of the Employee Retention Credit

The Employee Retention Credit was modified by the Taxpayer Certainty and Disaster Tax Relief Act of 2020, and applies to the first two calendar quarters of 2021. The changes include:

  • Increasing the maximum credit amount,
  • Expanding the category of employers eligible to claim the credit,
  • Modifying the gross receipts test,
  • Revising the definition of qualified wages, and
  • Revising the ability of employers to request an advance payment of the credit.

Eligible employers can claim a refundable tax credit against the employer share of Social Security tax equal to 70% of the qualified wages they pay to employees after from January 1-June 30, 2021. Qualified wages are limited to $10,000 per employee per calendar quarter in 2021. Thus, the maximum employee retention credit available is $7,000 per employee per calendar quarter, for a total of $14,000 per employee for 2021.

Employers can access the Credit for the 1st and 2nd calendar quarters of 2021 prior to filing their employment tax returns by reducing employment tax deposits. Small employers may request advance payment of the credit (subject to certain limits) on Form 7200, Advance of Employer Credits Due to Covid-19.

Note that the Employee Retention Credit is also available to eligible employers during the third and fourth quarters of 2021, thanks to the American Rescue Plan. The IRS will provide further guidance on this soon.

If you need assistance on how to calculate and claim the Employee Retention Credit, please contact us today.

Second Round of PPP Loan Funding Now Open

Second Round of PPP Loan Funding Now Open

T/he SBA recently reopened the Paycheck Protection Program for both “First Draw” and “Second Draw” PPP loans for eligible small businesses. This second go-round is intended to make PPP loans more flexible, helpful and accessible, especially to hard-hit restaurants. Here’s how:

2nd PPP loan available Businesses that got a PPP loan the first time can apply for a second loan, as long as they’re not a public company, don’t employ more than 300 people, have used or will fully use their first PPP loan for authorized uses, and can show at least a 25% drop in gross receipts in the first, second or third quarters of 2020 compared to the same quarters in 2019.

Targeted funds for vulnerable businesses — $15 billion-$25 billion is earmarked for community development financial institutions that typically lend to minority-owned businesses in underserved communities, and for businesses with fewer than 10 employees, as well as those in low-income areas.

Restaurants get more — Restaurants and lodging businesses can apply for loans equal to 3.5 times their monthly payrolls. Other eligible businesses are limited to 2.5 times their average monthly payroll expenses. All PPP loans are capped at $2 million (down from $10 million previously).

Greater use flexibility — To be fully forgiven, at least 60% of the loan funds must be used for payroll expenses. The remaining 40% may be used to cover a now-broader array of business expenses (beyond mortgage interest, rent and utility payments), including personal protective equipment and other COVID needs, certain operations, property damage and supplier costs.

Simpler forgiveness process — Businesses that borrow $150,000 or less will simply need to submit a one-page certification, which includes the number of employees the business retained as a result of the loan and an estimate of how much of the loan was spent on payroll.

Better tax breaks — PPP loans will continue to be tax-free for recipients if used for authorized purposes. But thanks to the new law, payroll and operating expenses will still be deductible.

For more help determining your PPP loan amount and specifics, give us a call today.

Don’t Miss Out on the COVID Tax Credit for Employers

The Taxpayer Certainty and Disaster Tax Relief Act of 2020 (enacted Dec. 27, 2020), made a number of changes to Employee Retention Credits (ERC) previously available under the CARES Act. The new law makes it easier for businesses that choose to keep their employees on the payroll despite COVID-19 challenges.

Benefits/updates include:

  • The ERC has been modified and extended through June 30, 2021.
  • Eligible employers can claim a refundable tax credit against the employer share of Social Security tax equal to 70% of the qualified wages they pay to employees from January 1-June 30, 2021. Qualified wages are limited to $10,000 per employee per calendar quarter in 2021 (thus maximum ERC is $7,000 per employee per quarter, total of $14,000 in 2021).
  • Employers can access the ERC for the 1st and 2nd quarters of 2021 prior to filing their employment tax returns by reducing employment tax deposits. This must be reported on Form 941.
  • Small employers may request advance payment of the credit on Form 7200, Advance of Employer Credits Due to Covid-19. Keep in mind that Form 7200 is used to request the advance payment of employer credit, not claim it.
  • Employers are eligible if they operate a trade or business January 1-June 30, 2021, and experience either:
    – A full or partial suspension of their trade or business due to governmental orders limiting commerce, travel or group meetings due to COVID-19, or
    – A decline in gross receipts in a quarter in 2021 that are less than 80% of the gross receipts in the same quarter in 2019 (or 50% less in the same 2020 quarter).
  • Paycheck Protection Program (PPP) loan recipients can claim the ERC for qualified wages that are not treated as payroll costs in obtaining forgiveness of the PPP loan.

If you need help determining your business’s eligibility for Employee Retention Credits or filing Form 941, please give us a call. We’re here to help!

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Download Our Tax Preparation Checklist

We put together two checklists to help you pull together your 2020 tax files. If you haven’t yet, you can download them here:

If you prefer, we can email them to you (just call or email Amber at amber@premiercpaservices.com to request your copy).

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Key Filing Dates!

TODAY! Feb. 1: W-2s and 1099s due to recipients

Feb. 12: IRS begins accepting and processing 2020 tax returns

Feb. 22: Projected date for “Where’s My Refund” tool to open

Apr. 15: Tax filing deadline

Oct. 15: Tax extension filing deadline

Money Brief: Tax Filing Season Begins Feb. 12

The IRS will begin accepting and processing 2020 tax year returns no sooner than February 12, 2021. The February 12 start date allows the IRS time for programming and testing following the recent tax law changes. The IRS urges taxpayers to file electronically with direct deposit to speed processing and refunds — nine out of 10 taxpayers should receive their refund within 21 days of when they file electronically with direct deposit (assuming no issues).

We’re now accepting tax returns. If you’ve pulled together all your files, you can drop them off at our office either in person or in the dropbox outside.

2021 Appropriations Act Provides Additional Pandemic Relief

2021 Appropriations Act Provides Additional Pandemic Relief

On December 27, 2020, President Trump signed into law the newest $900 billion COVID-19 relief bill. The legislation, part of the Consolidated Appropriations Act, 2021, provides additional pandemic relief and clarifies the deductibility of business expenses paid with forgiven Paycheck Protection Program (PPP) loans. Key provisions of the new law include:

  • $166 billion for Economic Impact Payments of $600 to each eligible taxpayer (see Money Brief at right).
  • $120 billion for $300 per week in extended weekly unemployment benefits (December 26, 2020-March 14, 2021).
  • $25 billion in emergency rental aid, plus an extension of the national eviction moratorium (through January 31, 2021).
  • $325 billion in aid for small businesses, including $284+ billion for additional PPP loans; $20 billion for Economic Injury Disaster Loan (EIDL) Grants; $15 billion for shuttered live venues, independent movie theaters and cultural institutions; and $12 billion for businesses in low-income and minority communities.
  • $45 billion in transportation funding (for airlines, transit systems, state highways and more).
  • $82 billion in funding for colleges and schools, plus $10 billion in childcare assistance.
  • $22 billion for state, local, tribal and territorial governments.
  • $13 billion for emergency food assistance, including a six-month, 15% increase in SNAP benefits.
  • $7 billion for broadband expansion.

The new law also extends the Employee Retention Tax Credit and several expiring tax provisions, and temporarily allows a 100% business expense deduction for meals (up from the current 50%) as long as the expense is for food or beverages provided by a restaurant. This provision is effective for expenses incurred January 1, 2021, thru December 31, 2022.

Second Round of PPP Funds Available

The new round of PPP — or PPP2 — is similar to the first round of PPP loans, but includes several important differences:

1) PPP2 loans are available to both first-time qualified borrowers and to businesses that previously received a PPP loan. Specifically, previous PPP recipients may apply for another loan of up to $2 million if they:

  • Have 300 or fewer employees.
  • Have used or will use the full amount of their first PPP loan.
  • Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.

2) PPP2 loans are now available to Sec. 501(c)(6) business leagues, such as chambers of commerce, visitors’ bureaus, and destination marketing organizations, if:

  • They have 300 or fewer employees, and
  • Their lobbying activities comprise no more than 15% of their total activities, and cost no more than $1 million during the most recent tax year that ended prior to February 15, 2020.

3) Other first-time borrowers that may now apply for PPP loans include:

  • Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.
  • Sole proprietors, independent contractors, and eligible self-employed individuals.
  • Not-for-profits, including churches.
  • Accommodation and food services operations (those with NAICS codes starting with 72) with fewer than 300 employees per physical location.

4) Borrowers that returned all or part of a previous PPP loan may reapply for the maximum amount available to them.

Perhaps the best part of the new law specifies that business expenses paid with forgiven PPP loans ARE tax-deductible. This reverses previous IRS guidance that such expenses could not be deducted.

PPP Forgiveness Criteria Expanded

As before, the costs eligible for loan forgiveness include payroll, rent, covered mortgage interest and utilities. However, PPP2 also makes the following potentially forgivable:

  • Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
  • Expenditures to suppliers that are essential to the recipient’s current operations.
  • Covered operating costs, such as software, cloud computing services and accounting needs.

To be eligible for full loan forgiveness, PPP2 borrowers will have to spend no less than 60% of the funds on payroll over a period of either eight or 24 weeks. PPP2 borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs in the year prior to the loan or the calendar year, but the maximum loan amount has been cut to $2 million. PPP2 borrowers with NAICS codes starting with 72 (hotels and restaurants) can get up to 3.5 times their average monthly payroll costs, subject to the $2 million maximum.

The new COVID-19 relief law creates a simplified forgiveness application process for loans of $150,000 or less. It also repeals the requirement that PPP borrowers deduct the amount of any EIDL advance from their PPP forgiveness amount.

Tax Deductibility for PPP Expenses Clarified

Perhaps the best part of the new law specifies that business expenses paid with forgiven PPP loans ARE tax-deductible. This reverses previous IRS guidance that such expenses could not be deducted. The new law states that “no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided” by Section 1106 of the CARES Act (which has been redesignated as Section 7A of the Small Business Act). This provision applies to both PPP1 and PPP2 loans.

Keep in mind, however, that the state of Georgia may not follow the new federal rules regarding business expenses. For example, for taxable years beginning on or after January 1, 2018, and before January 1, 2019, Georgia has NOT adopted any of the 2019 or 2020 federal changes, including the federal CARES Act. So we may need to wait a bit — or file an amended state return — to find out how Georgia will handle the newly passed federal tax law.

We’re currently putting together a list of items we’ll need from you to file your taxes. Please bear with us as we negotiate all the changes involved due to COVID-19. If you have any questions, please feel free to contact us.

Source: Journal of Accountancy

Prepare Now for Tax Season

We expect tax season to be a little more chaotic this year, so we’ll be putting together a checklist of items you’ll need to supply with your paperwork for us to prepare and file your taxes. Look for it early next year!

Beginning on January 8, 2021, we’ll be open on Fridays to assist you with your tax and financial planning needs.

We’re also taking tax appointments now if you’re a new client or have major changes to your taxes. Plan ahead and call Amber at 706-632-7850 to reserve your spot. Note that you do NOT need an appointment for us to handle your tax preparation — you can just drop off your files when you’re ready.

Money Brief: New $600 Stimulus Payments

You can expect to receive $600 directly deposited into your bank account within the next week or two, if you haven’t already. Paper checks have also started mailing out. The payments are part of the COVID-19 relief package signed by President Trump on December 27. Eligible individuals who meet income limits will receive $600; couples, $1,200; and families, an additional $600 per child. As before, your most recent tax return determines your eligibility for the stimulus payment — you’ll receive the full amount if you made under $75,000 as an individual or $150,000 as a couple.

Money Brief: GDOL Update

If you are a Georgia business owner, note that your 2021 Annual Unemployment Insurance (UI) Tax Rate Notice will be delayed. The Georgia Department of Labor expects to release the notices on the Employer Portal in February. Because of this, Employer Quarterly Tax and Wage reports will NOT be accepted for the 1st quarter of 2021 until the new tax rates are released. Look for an email once the 2021 tax rate notices are published — they will NOT be mailed. If you are not already registered on the GDOL Employer Portal, be sure to register to avoid delays in receiving your notice. Go to dol.georgia.gov, click on the Employers tab, and select Employer Portal.

Money Brief: 2021 Mileage Rates Decrease

The standard mileage rate for business use of a vehicle is decreasing in 2021 — to 56 cents per mile — down from 57.5 cents per mile in 2020. The rate applies for self-employed taxpayers who deduct automobile expenses if they qualify as ordinary and necessary business expenses, and employers who reimburse their employees for operating an automobile for business.

Money Brief: EITC/ACTC May Delay Refunds

If you claim the Earned Income Tax Credit or Additional Child Tax Credit, your refund (if any) may be delayed. By law, the IRS must hold the entire refund — even the portion not associated with EITC/ACTC — until at least mid-February. If you choose direct deposit, EITC/ACTC-related refunds should be available by the first week of March.

Need to Know: 2021 Retirement Plan Income Ranges and Tax Brackets Adjusted for Inflation

Need to Know: 2021 Retirement Plan Income Ranges and Tax Brackets Adjusted for Inflation

Each year, the IRS adjusts income thresholds, deduction amounts and tax tables for inflation using the Chained Consumer Price Index (C-CPI) as the basis for its changes. The adjustments recently announced will affect your 2021 deduction limits and tax brackets (for returns filed by April 2022).

You can deduct contributions to a traditional IRA if you meet certain conditions, including income limitations and whether you or your spouse are covered by a retirement plan at work. For 2021, you will see a small increase in your income limits for IRAs and Saver’s Credits (retirement savings contributions credits). Most other employee retirement plan contribution limits will remain the same, however. Note that IRA contribution limits remain unchanged at $6,000, as does the additional catch-up contribution limit of $1,000 if you’re 50+.

Traditional IRA Income Phaseout Ranges for 2021:

  • $66,000-$76,000: Single taxpayers covered by a workplace retirement plan.
  • $105,000-$125,000: Married couples filing jointly (when the spouse making the IRA contribution is covered by a workplace retirement plan).
  • $198,000-$208,000: Married couples filing jointly (when the taxpayer not covered by a workplace retirement plan is married to someone who is covered).
  • $0-$10,000: Married filing a separate return (when covered by a workplace retirement plan).

Roth IRA Income Phaseout Ranges for 2021:

  • $125,000-$140,000: Single taxpayers and heads of household.
  • $198,000-$208,000: Married couples filing jointly.
  • $0-$10,000: Married filing separately.

Saver’s Credit Income Limits for 2021:

  • $66,000: Married couples filing jointly.
  • $49,500: Head of household.
  • $33,000: Singles and married individuals filing separately.

Other Contribution Limits Unchanged for 2021

If you participate in a 401(k), 403(b) or 457 plan, or a federal Thrift Savings Plan, your contribution limit remains unchanged from 2020 at $19,500. If you’re age 50+, your catch-up contribution limit also remains unchanged at $6,500.

The limits for SIMPLE retirement accounts also remain unchanged at $13,500.

Tax Tables Adjusted for Inflation

For 2021, the top marginal income tax rate of 37% will affect taxpayers with taxable incomes of $523,600 and higher for single filers and $628,300 and higher for married couples filing jointly (see table below). Meanwhile, the Standard Deduction will increase to $25,100 for married individuals filing jointly or surviving spouses, $18,800 for heads of household, and $12,550 for unmarried individuals and married individuals filing separately.

The maximum Earned Income Tax Credit in 2021 for single and joint filers is $543 if the filer has no children, $3,618 for one child, $5,980 for two children, and $6,728 for three or more children. The maximum amount of the adoption credit increases to $14,440 (up from $14,300).

Exemption amounts for the alternative minimum tax will be $114,600 for married individuals filing jointly and surviving spouses, $73,600 for unmarried individuals, $57,300 for married individuals filing separately, and $25,700 for estates and trusts (all increased from 2020).

The qualified business income threshold under Sec. 199A will increase to $329,800 for married individuals filing jointly, $164,925 for married individuals filing separately, and $164,900 for single individuals and heads of household.

The annual gift tax exclusion remains at $15,000. The basic exclusion amount for determining the unified credit against the estate tax will increase to $11,700,000 for decedents dying in calendar year 2021.

Make Your Appointment Now

We’re currently taking appointments — both in-person and virtually — for year-end tax planning assistance. Contact Amber today (see box above) to set up your appointment. We can help you get ready to file your 2020 taxes, as well as plan ahead for 2021.

Source: Tax Foundation

Make Your Appointment

Don’t miss your chance to make a 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 today.

Money Brief: Employee Social Security Tax Deferral

If you are an employer, did you take advantage of President Trump’s August 8th memorandum allowing you to defer your employees’ portion of Social Security tax from September 1 through December 31, 2020? If so, keep in mind:

  • To repay the deferred amount of the employee Social Security tax, you will need to withhold additional Social Security tax from your employees’ paychecks from January 1 through April 30, 2021.
  • At year-end, when you report total Social Security wages paid to your employees on Form W-2, Wage and Tax Statement, you should include any wages for which you deferred withholding and payment of Social Security tax in box 3, “Social Security Wages,” and/or box 7, “Social Security Tips.” Do NOT include in box 4, “Social Security Tax Withheld,” any amount of deferred employee Social Security tax that has not been withheld.
  • Any employee Social Security tax deferred in 2020 that is then withheld in 2021 and that was not reported on your 2020 Form W-2s should be reported in box 4, “Social Security Tax Withheld,” of Form W-2c, Corrected Wage and Tax Statement. On Form W-2c, you will enter tax year 2020 in box C and adjust the amount previously reported in box 4 of the Form W-2 to include the deferred amounts that were withheld in 2021. All Forms W-2c should be filed with the Social Security Administration, along with Form W-3c, Transmittal of Corrected Wage and Tax Statements, as soon as possible after you have finished withholding the deferred amounts.
  • You will also need to provide your employees with copies of Forms W-2c.
  • To report the amount of Social Security tax deferred, use lines 13b and 24 of 2020 Form 941, Employer’s Quarterly Federal Tax Return, which the IRS has revised. The instructions for the form have also been updated to explain these rules.

If you are an employee who had Social Security tax deferred, you should receive a Form W-2c from your employer(s). In some cases, you may need to file a Form 1040-X, Amended U.S. Individual Income Tax Return, to claim a credit for any excess Social Security tax withheld.

Please feel free to contact us with any questions you have regarding payroll tax deferrals.

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.