Take Advantage of Small Business Tax Benefits for 2022

Take Advantage of Small Business Tax Benefits for 2022

As we enter the last quarter of 2022, now’s a good time to think about taking full advantage of any tax benefits that may apply to you and your small business. Keep these deductions in mind:

Enhanced Business Meal Deduction

Through the end of 2022, you can generally deduct 100% of the cost of business-related food and beverages purchased from a restaurant. Beginning in 2023, the limit is expected to revert back to 50% of the cost of the meal.

To qualify for the higher limit, the business owner or an employee of the business must be present when food or beverages are provided. And the expense cannot be lavish or extravagant. Restaurants include businesses that prepare and sell food or beverages to retail customers for immediate on-premises or off-premises consumption.

For more information about this provision, as well as details on the special recordkeeping rules that apply to business meals, see IRS Publication 463, Travel, Gift, and Car Expenses.

Home Office Deduction

If you own a business and work from home, you may qualify for a home office deduction. Usually, you must use a room or other identifiable portion of your home exclusively for business on a regular basis. Exceptions to the exclusive-use standard apply to home-based daycare facilities and to portions of the home used for business storage, where the home is the only fixed location for that business.

If you’re eligible, you can figure the deduction using either the regular method or the simplified method. Keep in mind that business expenses in excess of the gross income limitation are not deductible (ask us for details).

  • Regular Method: You’ll need to divide the expenses of operating your home between personal and business use. While direct business expenses (e.g., equipment, supplies, etc.) are fully deductible, the deductible portion of indirect expenses (e.g., real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance and repairs) is based on the percentage of your home used for business. When you file your taxes, you’ll use Form 8829, Expenses for Business Use of Your Home.
  • Simplified Method: The simpler method provides for a rate of $5-per-square-foot for business use of the home, with a maximum deduction of $1,500 (based on business use of at least 300 square feet). In this case, you would use the worksheet found in the instructions to Schedule C for sole proprietors.

If you are a homeowner and you choose the simplified option, you cannot depreciate the portion of your home used for business. However, you can still claim any allowable home mortgage interest, real estate taxes and casualty losses as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method. What’s more, business expenses unrelated to the home, such as advertising, supplies and wages paid to employees, are still fully deductible.

Other Tax Benefits

From start-up expenses to the qualified business income deduction to the health-insurance deduction for self-employed individuals, there are a variety of tax benefits that are available to entrepreneurs and other business owners. For details on these and other tax benefits, contact us. today. We can help you determine the best deductions and benefits for your situation.

IRS Increases Interest Rates

The IRS will increase interest rates for the calendar quarter beginning Oct. 1, 2022:

  • For individuals, the rate for overpayments and underpayments will be 6% per year, compounded daily, up from 5% the previous quarter.
  • The rate is 5% for overpayments for corporations, and 3.5% for the portion of a corporate overpayment exceeding $10,000.
  • The rate is 8% for large corporate underpayments.

Mortgage Rates Top 6%

For the first time in 14 years, mortgage rates have risen to 6% — more than double the rate a year ago. This is mostly due to an effort by the Fed to reduce inflation by raising the federal funds rate by 2 full percentage points over four meetings so far this year. With inflation still high in August, the Fed is expected to raise the federal funds rate again when it meets this week.

Number of People Working From Home Tripled

According to the U.S. Census Bureau, the number of people primarily working from home tripled from 5.7% (roughly 9 million people) to 17.9% (27.6 million people) between 2019 and 2021. Nearly half of workers in the District of Columbia worked from home, with the states of Washington (24.2%), Maryland (24.0%), Colorado (23.7%) and Massachusetts (23.7%) following. “Work and commuting are central to American life, so the widespread adoption of working from home is a defining feature of the COVID-19 pandemic,” said Michael Burrows, statistician in the Census Bureau’s Journey-to-Work and Migration Statistics Branch. “With the number of people who primarily work from home tripling over just a two-year period, the pandemic has very strongly impacted the commuting landscape in the United States.” 

Worker Classification: Is Your Worker an Employee or Independent Contractor?

Worker Classification: Is Your Worker an Employee or Independent Contractor?

As a business owner, you may hire both employees and independent contractors. This is especially true if some of your staff work from home. But you need to know the legal differences between the two so you can classify your workers correctly.

Employee vs. Independent Contractor

An employee is generally considered anyone who performs services, if the business can control what will be done and how it will be done. What matters is that the business has the right to control the details of how the worker performs the services. Independent contractors, on the other hand, normally work in an independent trade, business or profession in which they offer their services to businesses.

Whether a worker is an employee or independent contractor depends on the relationship between the worker and the business. Consider these three general categories:

  • Behavioral control: Does the company control or have the right to control what the worker does and how the worker does the job?
  • Financial control: Does the business direct or control the financial and business aspects of the worker’s job. Are the business aspects of the job controlled by the payer (i.e., how the worker is paid, are expenses reimbursed, who provides tools/supplies, etc.)?
  • Relationship of the parties: Are there written contracts or employee-type benefits, such as pension plan, insurance, vacation pay? Will the relationship continue and is the work performed a key aspect of the business?

Misclassified Workers

Misclassifying an employee as an independent contractor adversely affects a worker because the employer’s share of taxes is not paid, and the employee’s share of taxes is not withheld. Generally, employers must withhold and pay income taxes, Social Security and Medicare taxes, and unemployment taxes for their employees.

Independent contractors, who are often self-employed individuals, are generally required to make estimated quarterly tax payments. They also typically pay self-employment tax (Social Security and Medicare tax) and income tax.

If a business misclassifies an employee as an independent contractor, the business can be held liable for employment taxes for that worker. If you’re unsure of a worker’s status, you can file Form SS-8 to request a determination of the status for purposes of federal employment taxes and income tax withholding.

The IRS offers a Voluntary Classification Settlement Program that provides businesses with an opportunity to reclassify their workers as employees for future employment tax purposes. This program offers partial relief from federal employment taxes for eligible businesses who agree to prospectively treat their workers as employees. Businesses must apply by filing Form 8952, Application for Voluntary Classification Settlement Program, meet certain eligibility requirements and enter into a closing agreement with the IRS.

Questions?

If you have questions about whether your workers are employees or independent contractors, contact us at 706-632-7850 today. We’ll be happy to help you work through the details and forms.

 

Educator Expense Deduction Increases to $300

If you are a teacher who uses your own money to buy classroom supplies, you’ll be glad to know the educator expense deduction has increased $50 this year. The amount you can deduct on your 2022 tax return is now $300, or $600 for married educators filing jointly. Here’s what you need to know:

  • You must be a K-12 teacher, instructor, counselor, principal or aide.
  • You must work at least 900 hours a school year at an elementary or secondary school.
  • Qualified expenses includes professional development fees, books and supplies, COVID-19 protective items, computer equipment and software, and other equipment and materials used in the classroom.

Property Tax Notice Info

If you own property in Fannin County, you should have received an annual assessment notice in the mail recently. If the value went up, do not be alarmed; this is just an estimate based on your current or updated property value using previous millage rates. Because the county and the school board have not yet set millage rates for 2022 — they can’t until the tax digest is approved by the state — the amount will most likely change. In fact, both county and school board officials are anticipating rolling back millage rates. This would likely keep the overall property taxes similar to the previous tax year.

Note that property value changes are driven by increased building costs and home sale prices, and that reassessments are required under state law. However, if you feel the assessment does not reflect current values, you have the right to submit an appeal to the County Board of Tax Assessors. The last date to file a written appeal is Sept. 17, 2022.

IRS Video Tax Tip

See if money you pay for day camp or other child care expenses can help you claim the child and dependent care tax credit. Click the link below.

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.

Do You Qualify for a Home Office Deduction?

Do You Qualify for a Home Office Deduction?

While you may be working from home due to the pandemic, you do not automatically qualify for a home office deduction. For example, if you work as an employee for a company (that’s not yours), you generally cannot claim the home office deduction.

What You Need to Know

  • The home office deduction can be taken whether you own or rent your home.
  • The term “home” includes:
    • A house, apartment, condominium, mobile home, boat or similar property that provides basic living accommodations.
    • A separate structure on the property such as an unattached garage, studio, barn or greenhouse.
  • Any portion of a home used exclusively as a hotel, motel, inn or similar establishment does NOT qualify as a “home” for purposes of the home office deduction.
  • Generally, your home must meet two basic requirements to qualify:
    • A portion of the home must be used exclusively for conducting business on a regular basis. For example, if you use an extra room to run your business, you can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business.
    • The home (or room) must be your principal place of business. You can meet this requirement if administrative or management activities are conducted, and there is no other location to perform these duties. So if you conduct business outside of your home but also use your home to conduct business, you may still qualify for a home office deduction.
  • Certain expenses can be deducted, including mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent.

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

  1. Simplified Method. This allows a flat rate of $5 per square foot, which is limited to a maximum size of 300 square feet and a maximum deduction $1,500.
  2. Regular Method. This provides for a deductions of indirect expenses based on the percentage of the home devoted to business use, while direct expenses are deducted in full.

If you’re unsure of your situation, contact us. We can help you determine if your home office and related expenses are deductible or not.

2022 Social Security Benefits Increase 5.9%

More than 72 million Social Security and Supplemental Security Income (SSI) recipients will receive a 5.9% cost-of-living adjustment (COLA) for 2022 — the largest increase in nearly 40 years. The annual Social Security COLA is tied to the Consumer Price Index. Also in 2022, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $147,000 from $142,800. Click here for a detailed 2022 Social Security Fact Sheet.

U.S. Inflation Accelerates

The Labor Department reported last month’s consumer-price index — which measures what consumers pay for goods and services — rose by 5.4% from a year earlier. Price increases from pandemic-related labor and materials shortages, including disrupted supply chains, have been pushing the increase. What’s more, spending jumped 11.9% in the second quarter as demand surged due to more people receiving Covid-19 vaccinations, businesses reopening and trillions of dollars in federal aid entering the economy.

IRS Video Tax Tip

Check out this IRS video to learn about the special tax benefits that apply to members of the Armed Forces. You can also get a copy of the IRS’ Armed Forces’ Tax Guide.

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.

What to Consider When Choosing a Payroll Service Provider

What to Consider When Choosing a Payroll Service Provider

Payroll is just one checkbox on an often-overwhelming to-do list. But it’s an important task nonetheless. Your employees will be unhappy if they’re not paid correctly and on time. And you’ll be unhappy if you have to spend hours each week adding up timesheets, calculating pay and filing forms for each employee.

If it’s just yourself and one or two employees, it might not take that much time. But what else could you be doing to further your business instead of pushing paperwork? Maybe it’s time to do a quick time-cost analysis to determine whether the time you spend processing payroll can be better spent ordering, marketing and selling your products.

 5 Things to Consider

If you’re thinking of outsourcing your payroll processing, consider all your options in order to make a smart decision.

1. Payroll Services

What services do you need? Most payroll providers offer a basic set of services. These often include:

  • Processing payroll
  • Time tracking options
  • Generating payroll records and pay stubs
  • Handling tax filing and compliance

Some payroll providers offer additional services that can further streamline your payroll process, including:

  • Tax filing on your behalf
  • New-hire reporting services
  • Vacation time and sick leave management
  • Software integration
  • Management of employee benefits and retirement plans

2. Software Integration

Chance are, your company uses a variety of software programs like QuickBooks, Gusto, BambooHR, Zendesk, Salesforce and others. If so, you’ll want to make sure your payroll system can integrate with your other software, if necessary. This can streamline the payroll process, making things more convenient and efficient.

3. Processing Costs

The costs for payroll processing services will vary depending on the features and price structures. Most processors charge a flat rate every month or pay period, plus a small fee for each employee. Be sure to ask about any additional charges for tax filing, direct deposit or HR services. Cost should not be the only deciding factor when choosing a payroll provider, however. The best payroll service will save you time and effort at a cost-effective price point.

4. Tax Compliance & Updates

An important part of payroll processing is handling tax services, such as calculating and filing Social Security and withholding taxes. Because tax laws are constantly changing, you’ll want to make sure your payroll processor is up to date on laws and forms — to avoid errors and to help you stay in compliance. You might also want to ask whether they provide penalty protection in case of a filing mistake.

5. Customer Support

It’s bound to happen … so what will you do when something goes wrong? If you’re using simple online payroll software, you might have a hard time tracking down customer service. Or you may have a question, but can’t find the answer in the many FAQs and online forums. When you’re shopping for a payroll processor, be sure to find out about customer support options, as well as ease of use.

Premier Payroll Services Handled Locally

Premier CPA Services uses myPay Solutions, a service of Thomas Reuters. With myPay Solutions, you’re ensured of accurate and timely payroll services for your business. What’s more, you have a dedicated team you can contact directly with any payroll questions — whether simple or complex — right here in Blue Ridge, Georgia.

We can provide you with complete payroll processing, including federal tax services and state tax filing, direct deposit and integration with a variety of software. When you need a payroll report, just send us a quick email and we’ll pull it together for you.

We guarantee that your taxes will be paid accurately and on time; and if the IRS or your local tax agency should ever contact you, our tax experts will handle the matter for you. You’ll have no more worries about ever-changing payroll tax rates, policies or potential penalties with our payroll tax services.

It’s time to hit “delete” on time-consuming payroll tasks. Call us at (706) 632-7850 or email Jackie at jackie@premiercpaservices.com to request more details on how our payroll services can help you and your business.

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!

l

Back-to-School: Some Teacher Expenses Are Deductible

If you are a teacher or administrator, the Educator Expense Deduction allows you to deduct up to $250* from your taxes. You can only claim this deduction for expenses that were not reimbursed by your employer, a grant or other source.

To be eligible, you must be a K-12 teacher, instructor, counselor, principal or aide. You must also work at least 900 hours a school year.

Be sure to keep your receipts for purchases including:

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

*The deduction is $500 if you and your spouse are both educators and file jointly.

Online Access Keeps You In-Touch

Did you know that you can set up an Online Account with the IRS? It’s a safe and easy way to view specific details about your federal tax account.

What You Can Access:

  • Your federal tax payoff amount, if any (updated each day).
  • The balance for each tax year for which you owe taxes.
  • Your tax payment history.
  • Key information from your most current tax return.
  • Payment plan details (if you have one).
  • Digital copies of select IRS notices.
  • Economic Impact Payments you have received, if any.
  • Your current address on file with the IRS.

What You Can Do:

  • Select an electronic payment option.
  • Set up an online payment agreement.
  • Request a 1040 transcript.
  • Authorize who can represent you before the IRS or view your tax records.
  • Approve and electronically sign Power of Attorney and Tax Information Authorization requests from your tax professional.

To access your information online, you must register through Secure Access, the IRS’ two-factor authentication process that protects your personal information.

Need to Know: New Lodging Tax Begins on July 1

Need to Know: New Lodging Tax Begins on July 1

Beginning July 1, 2021, owners of certain short-term rentals must begin paying hotel taxes under House Bill 317, which was signed into law by Governor Kemp last month. The law requires that home rental companies, such as Airbnb and VRBO, collect Georgia’s $5-per-night lodging tax as well as local excise taxes.

House Bill 317 imposes the $5 fee on all lodging facilities and rooms except those that do not provide shelter and extended-stay rentals (30+ days). The costs will be passed on to renters in their bills.

Lodging Tax Expanded

In short, House Bill 317 revised the state definition of “innkeeper” (used to calculate lodging excise taxes) to include Airbnb and other marketplace-based innkeepers. It adds a $5 nightly tax to short term rentals in addition to the sales tax, and Fannin County and City of Blue Ridge lodging taxes already levied. The county’s tax rate is currently 6%, while rentals within the city limits pay 8%.

Total lodging taxes for all local rentals are now:

  • 7% Sales Tax
  • 6% Fannin County Lodging Tax
  • 2% City of Blue Ridge Lodging Tax (if applicable)
  • $5-per-night Hotel Tax

More Money for Local Spending

The lodging tax is projected to raise $17 million for the state in 2022, while local governments could receive $20 to $30 million annually. In Fannin County, the hotel/motel tax is split 50/50 with the Chamber of Commerce, with the county funds spent mostly on public safety projects. The Chamber’s 50% is spent on marketing and tourism, which helped generate $273.3 million in direct visitor spending in 2020, including $65.6 million in lodging.

If you need assistance computing or filing lodging and excise taxes, please contact us at (706) 632-7850. We can help you update your systems for the new tax rates. 

Where’s My Refund?

Still waiting on your federal or state tax refund? You can start checking your federal refund status within 24 hours after an e-filed return is received by using the Where’s My Refund? tool on the IRS website. The tool provides a personalized refund date after the return is processed and a refund is approved.

The IRS updates the Where’s My Refund? tool once a day, usually overnight, so you don’t need to check the status more often. You will need to allow time for your financial institution to post the refund to your account or for it to be delivered by mail.

To Use the Tool, You Will Need:

  • Your Social Security number or Individual Taxpayer Identification number
  • Your tax filing status
  • The exact amount of the refund claimed on your tax return

Where’s My Refund? Links:

Reporting Tip Income

Generally, income you receive from any source, such as tips, is taxable. This includes:

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

If you receive $20 or more in tips in any one month, you must report your tips for that month to your employer by the 10th day of the next month. Your employer must withhold federal income, Social Security and Medicare taxes on your reported tips.

Common Tax Deductions to Know for Your New Business

Common Tax Deductions to Know for Your New Business

When you first start a business, you don’t know what you don’t know. This can be especially true when it comes to taxes. As a new business owner, you may not be aware of the many tax deductions available that can help take the sting out of starting up.

The IRS defines a business expense as a cost of carrying on a trade or business. “Ordinary and necessary” expenses are usually deductible if you are operating the business to make a profit. When you deduct an expense on your tax return, you lower your taxable income — and reduce your tax liability. When you reduce the amount you owe the IRS, you have more money to re-invest back into your business.

Which Expenses Are Deductible?

With tax laws always changing, it’s often hard to keep up. Below is a general guide, but be sure to check with us to verify that these deductions are still current — and how they may apply to you and your situation.

1. Startup Costs — You may not realize that you can claim business expenses that hit prior to your business’ launch. There are conditions, of course, but most small businesses can deduct up to $5,000 on the first year’s return.

2. Taxes, Interest, Fees & Charitable Contributions — If your business pays tax to a state or local jurisdiction, you may be able to deduct those taxes as a business expense. If you pay for business expenses with credit cards, you can deduct interest and late fees. You can also deduct bank fees, credit card processing fees, payment fees, and other fees incurred on your business banking accounts (i.e., QuickBooks fees). Money you borrowed to start the business can be recorded as a business liability and any interest can be expensed accordingly. Also, charitable contributions may be deductible as well.

3. Wages and Payroll Taxes — Employee wages and payroll taxes are deductions for your business. But being an employee in your own business has benefits, too. When you pay yourself a wage or salary rather than a distribution or dividend, you avoid paying self-employment tax on your personal return. And that allows you to pass the payroll tax deduction onto the business.

4. Retirement Plan Contributions — The benefits are two-fold here: Contributing to a retirement plan will not only give you a deduction now, but it will increase your retirement savings for the future. As a small business, you can establish an inexpensive 401(k) plan or other retirement account option for both you and your employees.

5. Bad Debt — Whether it’s loans to clients or suppliers, goods sold but not paid for, or the sale of a mortgaged property, bad debts are just one cost of doing business. You can claim bad debt as a deduction if the amount owed is included in your gross income or lent out as cash. You’ll just need proof that the debt is worthless.

6. Home Office — Do you run your business out of your home? There are plenty of home-related expenses that can be deducted, including insurance, utilities, property taxes, repairs & maintenance, basic office supplies and more. You do need to have a dedicated space for running your business, and it needs to be your principal place of operation.

7. Health Insurance — Depending on the type of business, you may be eligible for a self-employed health insurance deduction. Given the costs of health insurance, this could be a pretty significant deduction.

8. Education & Training — Investing in education — whether your own or your employees’ — is always a smart move. That’s especially true when you can deduct fees and costs for attending workshops, conferences, tradeshows and other types of classes that will improve your business knowledge.

9. Marketing — Marketing your business through advertising and promotion is not only necessary to succeed, but a deductible expense, too! Some of the expenses that qualify include print materials (e.g., business cards and brochures), print and web ads, website development, email marketing and more.

10. Travel & Entertainment — Some business travel and entertaining expenses have been curtailed over the past few years. The Taxpayer Certainty and Disaster Relief Act of 2020, however, temporarily allows a 100% business expense deduction for meals as long as the expense is for food or beverages provided by a restaurant. This provision is effective for expenses incurred through December 31, 2022. Some other expenses are still deductible up to certain limits.

Keep Track of Your Expenses

Whether you’re just starting a new business or have been running one for 25 years, you know how important it is to take advantage of every possible tax deduction. The money you save not only affects your bottom line, but can be re-invested to help grow the business. We can help you identify which deductions you may qualify for and help you make the most of them — now and at tax time. Call us today at 706-632-7850 to make an appointment with Jackie or Donna.

Source: Score.org 

Do You Need an Extension?

If you have not yet filed your federal income tax return, we can file an extension for you. The deadline to file your taxes or file an extension is Monday, May 17. This will give you until October 15 to file your tax return. Keep in mind, however, that an extension to file is NOT an extension to pay. Any tax due must still be paid by May 17 to avoid penalties and interest. To help you prepare your files, please download a copy of our 2020 Personal Tax Preparation Checklist.

Tax Credits Available for Vaccine-Related Leave

Are you providing paid leave for your employees to receive COVID-19 vaccinations? If so, you may receive a tax credit, available as part of the American Rescue Plan. This also applies to self-employed individuals, who can claim comparable credits.

Eligible employers can receive a tax credit for providing paid time off for each employee to receive the vaccine and for any time needed to recover from it. If you offer your employees a paid day off to get vaccinated, you can receive a tax credit equal to the wages paid to employees for that day. The tax credits are available for leave from April 1, 2021, through September 30, 2021.

The credits are claimed on Form 941, Employer’s Quarterly Federal Tax Return. You’ll keep 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.

Let us know if you need assistance filing for the vaccine credit. You can contact us here.

American Rescue Plan Targets Help to Restaurants

American Rescue Plan Targets Help to Restaurants

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 $1.9 trillion coronavirus relief bill signed by President Biden on March 11, 2021, allocates help to struggling small businesses — especially restaurants — through grants, additional aid, and an expansion of existing credits such as the Employee Retention Tax Credit.

New Restaurant Revitalization Fund Provides Grants

The new law creates a $28.6 billion Restaurant Revitalization Fund (RRF) grant program. Hard-hit restaurants and bars can apply for grants up to $10 million based on lost gross revenue between 2019 and 2020. The vast majority of restaurants and bars will be able to apply for these grants, including those considered: “restaurant, food stand, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brewpub, tasting room, taproom, licensed facility or premise of a beverage alcohol producer where the public may taste, sample, or purchase products.” Those not eligible for the grants include state- or local-government-owned entities, or owners with more than 20 restaurants, though most franchise operators will be eligible.

The Small Business Administration (SBA) will administer and disperse the RRF grants, but the program does not yet have a launch date. In the meantime, if you are a restaurant owner, you should register for the program using the System of Award Management (SAM) here. Also, work with us to prepare relevant paperwork that shows your gross revenue loss in 2020 as compared to 2019.

Employee Retention Tax Credit Extended

In the December 2020 coronavirus relief bill, Congress expanded the Employee Retention Tax Credit (ERTC) to help struggling small businesses for the first two quarters of 2021. The American Rescue Act further helps those same businesses by extending the ERTC for the third and fourth quarters of 2021. The ERTC provides up to $7,000 per employee per quarter for four quarters to help you keep your employees on the payroll.

PPP Deadline Extended to May 31

The Paycheck Protection Program application deadline was just extended, thanks to the passage of the PPP Extension Act. The application deadline is now May 31, 2021, extending the filing deadline for PPP applications by 60 days. It also provides an additional 30 days for the SBA to finish processing applications received by May 31.

If you have any questions about the new coronavirus relief law or other tax questions, please don’t hesitate to contact us. We’re here to help!

Key Due Dates

April 1: Fannin County business property tax report

April 1: Georgia Secretary of State business registration

April 15: Deadline to get your tax return files to us to avoid an extension

April 15: First quarter estimated tax payment

April 30: First quarter payroll tax report

May 17: Individual tax return

t

Where’s My Refund?

If you are expecting a refund and haven’t received it yet, you can use the IRS’s “Where’s My Refund?” tool to check the status. Just go to the IRS website or click here to begin. You can start checking your refund status within 24 hours after the IRS receives your e-filed return.

PPP Loans Temporarily Expanded for Even Smaller Businesses

PPP Loans Temporarily Expanded for Even Smaller Businesses

I f you’re a sole proprietor, independent contractor or owner of a very small business, now’s your time to apply for a Paycheck Protection Program (PPP) loan.

Thanks to a temporary rule change by the Biden Administration, the SBA will ONLY accept applications for PPP loans from firms with fewer than 20 employees during a 2-week priority window: February 24 through March 10, 2021.

While the typical PPP loan is determined by multiplying average monthly payroll costs by 2.5, the updated formula will use gross income instead of payroll costs or net income, meaning you may be eligible for a bigger — forgivable — loan amount.

 

98% of small businesses employ fewer than 20 people, but have received only 45% of PPP so far, according to the SBA.

Also Keep in Mind

1) You can apply for either a first or second PPP loan. To qualify for a second loan, you must have spent or plan to spend all of your first loan, and show you had a 25% or more drop in revenue in any quarter of 2020.

2) The new rules also eliminate some restrictions on small business owners:

  • with prior non-fraud felony convictions;
  • struggling with student loan debt delinquency; and
  • who are non-citizen, U.S. residents with Individual Taxpayer Identification Numbers (ITIN).

Apply Now!

The window on this special program for extra small businesses closes March 10, so hurry and apply soon if you’re interested. Note that other types of businesses can also still apply for a PPP loan before the program expires on March 31, 2021.

Personal Tax Return Paperwork Due March 26

If you have not yet provided us with the documents to complete your individual income tax returns, please do so no later than March 26. If you will not have them ready by then, let us know if you want us to file an extension for you. To help you prepare your files, please download a copy of our 2020 Personal Tax Preparation Checklist.

Support Your Local Restaurant

The last COVID relief law passed 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.

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!

Z

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).

l

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.

Take a $300 Charitable Deduction Thanks to the CARES Act

Take a $300 Charitable Deduction Thanks to the CARES Act

When the Tax Cuts and Jobs Act (TCJA) was passed in 2017, it changed the way charitable contributions were handled at tax time. Basically, you can only deduct donations to charity if you itemize your deductions. And the TCJA makes itemizing less enticing for most taxpayers.

With the CARES (Coronavirus Aid, Relief, and Economic Security) Act, passed in April 2020, a certain portion of your charitable contributions may now be deductible for tax year 2020.

What Has Changed

#1 — Taxpayers who do NOT itemize deductions may now take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations. Qualifying organizations include:

  • Religious
  • Charitable
  • Educational
  • Scientific
  • Literary

To make sure the organization qualifies, you can check its status on the IRS’ “Tax Exempt Organization Search” page here.

#2 — The CARES Act also suspends limits on charitable contributions. Previously, the amount of charitable cash contributions you could deduct on Schedule A as an itemized deduction was limited to a percentage (typically 60%) of your adjusted gross income. To qualify, however, the contribution must be:

  • a cash contribution;
  • made to a qualifying organization; and
  • made during the calendar year 2020.

#3 — The CARES Act temporarily increases limits on contributions of food inventory. This special rule allows enhanced deductions by businesses for contributions of food inventory for the care of the ill, needy or infants. For contributions of food inventory in 2020, business taxpayers may deduct qualified contributions of up to 25% (previously 15%) of their aggregate net income from all trades or businesses from which the contributions were made or up to 25% of their taxable income.

Don’t Forget About Qualified Charitable Distributions

Did you know that if you are 70½ or older, you can make a qualified charitable distribution from your IRA – up to $100,000 – directly to an eligible charity? This is generally a nontaxable distribution made by the IRA trustee to the charitable organization of your choice. What’s more, this qualified charitable distribution counts toward your minimum distribution requirement for the year.

We Can Help

Not sure whether you qualify for a charitable deduction? Just provide us with all your tax information and receipts come tax-time next year, and we’ll make sure you’re taking advantage of every deduction possible. As always, please feel free to contact us with questions.

 

SBA Will Require PPP Loan Necessity Form from Large Borrowers

Businesses and nonprofits that received $2+ million Paycheck Protection Plan (PPP) loans are required to complete a loan necessity questionnaire. The new forms (one for businesses and one for nonprofits) are designed to collect supplemental information to evaluate the good-faith certification PPP borrowers made that economic uncertainty made their loan request necessary.

The forms are SBA Form 3509, Paycheck Protection Program Loan Necessity Questionnaire (For-Profit Borrowers) (PDF here), and SBA Form 3510, Paycheck Protection Program Loan Necessity Questionnaire (Non-Profit Borrowers) (PDF here). They will be sent from the lender to the borrower, who will then have 10 business days to return the completed form and supporting documents. Warnings on the new forms say that, “failure to complete the form and provide the required supporting documents may result in SBA’s determination that you were ineligible for either the PPP loan, the PPP loan amount, or any forgiveness amount claimed, and SBA may seek repayment of the loan or pursue other available remedies.”

The nine-page forms each include 21 questions, many of which have multiple parts and require supporting documents. If you need assistance completing Form 3509/3510, please contact us as soon as you receive it. We can help you put the reasoning behind your PPP application into the context of the pandemic’s early days, when the length and severity of business shutdowns were unknown.

Source: AICPA

Money Brief: PPP Loan Expenses

Because Congress did not enact specific legislation affecting expenses related to Paycheck Protection Program (PPP) loans, the Treasury and IRS has clarified the tax treatment of those expenses:

  • If you took out a PPP loan that has been forgiven or you expect to be forgiven, then your expenses related to the loan are NOT deductible (whether you have filed for forgiveness or not).
  • If your PPP loan has not or will not be forgiven, then you will be able to deduct related expenses.

The reasoning: Since businesses are not taxed on the proceeds of a forgiven PPP loan, the expenses are not deductible. The Treasury is encouraging businesses to file for forgiveness sooner rather than later.

Money Brief: Tax Deductions

In an update to the Tax Cuts and Jobs Act’s $10,000 cap on state and local tax deductions, the IRS issued regulations earlier this month (Notice 2020-75) regarding taxes paid by Partnerships and S-Corps. Essentially, state and local taxes will be allowed as a deduction in computing the Partnership’s or S-Corps’ non-separately stated taxable income or loss, and are therefore NOT subject to the state and local tax deduction limitation for partners and shareholders who itemize deductions. Taxpayers can apply these rules to a tax year ending after December 31, 2017.

Money Brief: Taxpayer Relief

The IRS announced a Taxpayer Relief Initiative to help taxpayers who owe taxes but are struggling financially due to the pandemic. These initiatives include:

  • Taxpayers who qualify for a short-term payment plan may now have up to 180 days to resolve their tax liabilities instead of 120 days.
  • The IRS is offering flexibility for some taxpayers who are temporarily unable to meet the payment terms of an accepted Offer in Compromise.
  • The IRS will automatically add certain new tax balances to existing Installment Agreements, for individual and business taxpayers who have gone out of business.
  • Certain qualified individual taxpayers who owe less than $250,000 may set up Installment Agreements without providing a financial statement if their monthly payment proposal is sufficient.
  • Some individual taxpayers who only owe for the 2019 tax year and owe less than $250,000 may qualify to set up an Installment Agreement without a notice of federal tax lien filed by the IRS.
  • Qualified taxpayers with existing Direct Debit Installment Agreements may be able to use the Online Payment Agreement system to propose lower monthly payment amounts and change their payment due dates.

While tax relief is not automatic, taxpayers can request additional payment relief via a variety of other, existing options, including:

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.

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.