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.

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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.

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

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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.

American Rescue Plan Features Several Tax Benefits

American Rescue Plan Features Several Tax Benefits

Please note: The new American Rescue Plan Act signed by President Biden last week includes some items — including unemployment income and healthcare premium assistance — that affect 2020 tax returns.

We will hold all tax returns until more info is released. Depending on how quickly the IRS acts, we may have to file an extension. We will keep you updated!

T he American Rescue Plan Act signed by President Biden last week includes several financial changes and quite a few tax provisions. Here’s a brief look at some of the more important items. We’ll look at them more in-depth in the coming weeks.

Stimulus Checks

A 3rd round of Economic Impact Payments (EIP) worth up to $1,400 per individual and dependent have already started going out. The EIP will begin to phase out for single taxpayers with AGIs of $75,000 and joint filers with AGIs of $150,000.

Unemployment Benefits

A $300-per-week supplement to federal unemployment benefits has been extended through September 6, 2021. Also, the first $10,200 in unemployment benefits are tax-free in 2020 for taxpayers making less than $150,000 per year. (This provision affects your current 2020 tax return as noted above!)

Child Tax Credit

The Child Tax Credit is expanded to provide a credit in advance of filing a return — the IRS will estimate each taxpayer’s child tax credit amount and pay it out monthly in advance from July through December 2021. The credit is also increased to $3,000 per child ($3,600 for children under 6), though the increase phases out above certain incomes.

Earned Income Tax Credit

Special rules now apply for individuals with no children: For 2021, the applicable minimum age is decreased to 19, except for students (24) and qualified former foster youth or homeless youth (18), and the maximum age is eliminated. The credit’s phaseout percentage and amounts are also increased.

Child & Dependent Care Credit

For 2021 only, this credit will be refundable. The credit will be worth 50% of eligible expenses, up to a limit based on income. The exclusion for employer-provided dependent care assistance is increased to $10,500 for 2021.

Family & Sick Leave Credits

The credits for sick and family leave originally enacted by the Families First Coronavirus Response Act are extended to September 30, 2021. The limit on the credit for paid family leave is increased to $12,000.

Employee Retention Credit

Originally enacted in the CARES Act, this credit is extended through the end of 2021, and allows eligible employers to claim a credit for paying qualified wages to employees.

COBRA Continuation Coverage

Eligible individuals may receive premium assistance in the form of a refundable tax credit; this applies to premiums and wages paid after April 1, 2021, and through September 30, 2021.

Premium Tax Credit

This credit is expanded for 2021 and 2022 by changing the applicable percentage amounts.

PPP Loans

Eligible companies that receive a first- or second-draw Paycheck Protection Program (PPP) loan after December 27, 2020, can now also receive a Shuttered Venue Operators Grant (SVOG). The amount of the SVOG will be reduced by the amount of PPP funds approved.

EIDLs

Targeted Economic Injury Disaster Loan grants received from the SBA are not included in gross income, and this exclusion from gross income will not result in a denial of a deduction, reduction of tax attributes, or denial of basis increase. Similar treatment is afforded SBA restaurant revitalization grants.

More to Come

In addition to many tax benefits, the new law allocates $50 billion in funding to benefit small businesses through a variety of programs, including EIDL advance payments and additional PPP funds. There is also money for state and local governments, schools, healthcare entities, vaccine distribution and COVID-19 testing.

Obviously, there is much to digest in the new legislation. We’ll be following up in future newsletters with more details on how it may affect you. In the meantime, please contact us with any questions you may have.

March 26 Last Day to Drop Off Tax Returns!

We are working hard to get to everyone’s returns! With all the law changes for 2020 we want to make sure everyone gets their maximum benefit due.

The deadline for dropping off your tax info to us is March 26. If all your info is to us by that date, we will complete your return by April 15.

If we receive your paperwork AFTER March 26, we will file an extension for you.

Thanks everyone for your patience!

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

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.

Timely Tax Tips Help Ensure Correct Returns

Timely Tax Tips Help Ensure Correct Returns

When you provide your paperwork to Premier CPA Services, you’re entrusting us to file your tax return accurately and efficiently. We use sophisticated software to handle the math, find common errors and flag missing information. But we also use our years of experience to ensure you get all the valuable credits and deductions due to you.

We’ve created Checklists for both business and personal returns to ensure you provide us with all the necessary materials to prepare your return. You can download those here:

Follow these tips

To further ensure the accuracy of your return, please consider these additional tips:

  • Choose Direct Deposit for your refund (and verify bank routing and account numbers).
  • Verify Social Security numbers.
  • Double-check the spelling of all names.
  • Confirm filing status (i.e., single, married filing jointly, married filing separately, or head of household).
  • Check the final numbers to ensure all income and expenses are accounted for correctly.
  • Review credits and deductions for things like the earned income tax credit, the child and dependent care credit, and the recovery rebate credit.
  • Sign all forms.
  • Return them to us in a timely manner so we can file your forms on time.

Thank you for entrusting us with your tax return. Please let us know if you have any questions or concerns about your tax files.

Tax Tip: Claim Dependent Credit

If you don’t qualify for the child tax credit, you may still be able to claim credit for other dependents, up to a maximum of $500 per dependent. The credit starts to phase out for incomes above $200,000 single, $400,000 married filing jointly.

Dependents must meet certain conditions, including:

  • Be age 17 or older.
  • Have individual taxpayer identification numbers.
  • Be a parent or other qualifying relative you support.
  • Be an unrelated dependent who lives with you.

You can claim the credit if:

  • You claim the person as a dependent on your tax return.
  • You cannot use the dependent to claim the child tax credit or additional child tax credit.
  • The dependent is a U.S. citizen, national or resident alien.

If you’re unsure whether you can claim someone as a dependent, please contact us for details.

Business Returns Due March 15

Don’t forget! While personal tax returns are due April 15, business and corporate returns are due on March 15. To get your business return done on time, please have all your materials to us no later than February 22.

Access your IRS information online

Online Account is a website system where you can securely access your individual account information. You can:

  • See any amounts you owe to the IRS
  • Make a payment, if due
  • View balance details by year
  • Review payment history, including any scheduled or pending payments
  • Review payment plan details and payment plan options, or request a payment plan
  • Get digital copies of select notices from the IRS
  • View any Economic Impact Payments (EIP) you received
  • Review key information from your most recent tax return, or access your tax records via Get Transcript

To gain access to Online Account, you’ll need to create an account by going through a rigorous identity verification process. Click here for more details.

Tax Tip: Sick and Family Leave Credits

If you are self-employed, you may be eligible to claim tax credits for leave taken between April 1, 2020, and December 31, 2020, due to COVID-19 in which you were unable to work or telework for reasons relating to your own health or that of a family member.

Form 7202: Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals will be used to claim the tax credit passed as part of the Families First Coronavirus Response Act (FFCRA). The credits will help offset your federal income tax. Note that you may also be eligible in 2021 for leave taken between January 1, 2021, and March 31, 2021.

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.

8 Top Tax Tips for Year-end 2020

8 Top Tax Tips for Year-end 2020

I think most of us will be glad when 2020 is finally over so we can look forward to a new start in 2021. As the year winds down in the next four weeks, take some time to look over your finances. There may be a few things you can do before the end of the year to get ready for the 2021 tax-filing season.

Check Your Financial To-Do List

#1  Report changes — If you moved in 2020, 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 anymore, the CARES Act passed earlier this year allows you to take a charitable deduction of up to $300 for cash contributions made to qualifying charities. The Coronavirus Aid, Relief, and Economic Security Act also temporarily suspends limits on charitable contributions and temporarily increases limits on contributions of food inventory.

#4 Check your EIP — If you received an Economic Impact Payment (EIP), you should have also received a Notice 1444, Your Economic Impact Payment, which you’ll need to give to your tax preparer. If you did NOT receive an EIP, you may be able to claim the Recovery Rebate Credit if you meet certain criteria. For additional information, visit the Economic Impact Payment Information Center.

If you received interest of at least $10 on a delayed federal tax refund for your 2019 return, you will receive a Form 1099-INT from the IRS. In true IRS fashion, this interest payment is taxable, and must be included on your federal tax return for 2020.

#5 Verify retirement plan distributions — The CARES Act waived required minimum distributions (RMDs) during 2020 for IRA or retirement plan accounts, and allowed eligible individuals to take a coronavirus-related distribution of up to $100,000 by December 30, 2020. Ask us for more details, or visit the IRS’s page on retirement plan relief.

#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 eligible contributions to your IRA or employer-sponsored retirement plan. While the total salary deferral limit for 2020 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.

Also note that the Setting Every Community Up for Retirement Enhancement (SECURE) Act repealed the 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. The SECURE Act also increased the minimum RMD age from 70½ to 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 2020. Everything from reams of paper to a new computer or desk can qualify as an eligible business expense.

Also note that the CARES Act fixed a technical issue with bonus depreciation, a provision that allows businesses to immediately deduct the full cost of many types of investments. The legislation expands bonus depreciation to qualified improvement property (QIP), which applies to almost any improvement to the interior of a building that is either owned or leased. The fix is retroactive, so businesses can deduct qualified improvements dating back to January 1, 2018, either by amending their 2018/2019 returns, or by employing an accounting method change.

Prepare Now for a Smooth Tax-Filing Season

With so many changes affecting tax filing for 2020, we expect there could be confusion and delays. 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: Feb. 1, 2021, Deadlines

Wage and tax statements normally due on January 31 of each year will be due on Monday, February 1, 2021, because January 31 falls on a Sunday next year. Keep this in mind and plan ahead 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: IRS Interest Rates

Interest rates charged by the IRS will remain the same for the first quarter of 2021:

  • 3% for overpayments (2% in the case of a corporation);
  • 5% for the portion of a corporate overpayment exceeding $10,000;
  • 3% for underpayments; and
  • 5% for large corporate underpayments.

Money Brief: Newly Marrieds

If you got married in 2020, consider this quick checklist:

  • Name and Address Changes — If you plan to change your name, be sure to notify the Social Security Administration. The name on your tax return must match the one on file with the SSA to avoid refund delays. To update your information, file Form SS-5, Application for a Social Security Card, available at SSA.gov, by phone at 800-772-1213 or at your local SSA office. If you changed your address, send the IRS Form 8822, Change of Address.
  • Withholding Taxes — Ask your employer for a new Form W-4, Employee’s Withholding Allowance. Depending on how you choose to file, you may want to adjust your withholding amount. Check the IRS Withholding Estimator or give us a call to help you complete a new Form W-4.
  • Filing Status — If you are married as of December 31, you are considered married for the whole year for tax purposes. And as a newly married couple, you can choose to file your federal income taxes jointly or separately next year. In most cases, filing jointly is typically more beneficial. But we can help you determine the best method for your personal situation.

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:

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.

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

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

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

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

What Is Deductible?

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

Figuring Your Deduction

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

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

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

Wallet of money

What You Need to Know About Payroll Tax Deferral

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

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

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

MONEY BRIEF #1

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

MONEY BRIEF #2

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

MONEY BRIEF #3

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

MONEY BRIEF #4

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

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

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

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

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

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

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

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

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

 

The Various Deadlines

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

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

Keep Your Paperwork in Order

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

No Changes to Auto Depreciation Limits

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

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

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

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

 

MONEY BRIEF #1

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

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

MONEY BRIEF #2

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

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

Tax Tips for Gig Workers

Tax Tips for Gig Workers

Are you a “gig” worker?

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

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

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

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

Retirement Plan Changes Due to COVID-19

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

Do You Qualify?

To qualify, you must:

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

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

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

Consider All Your Options

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

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

MONEY BRIEF #1

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

MONEY BRIEF #2

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

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

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

Retirement Planning: Are Your Social Security Benefits Taxable?

Retirement Planning: Are Your Social Security Benefits Taxable?

If you are retired now or planning on retiring soon, you’ll need to determine if any of your Social Security benefits will be taxed. It’s an important part of figuring your income and expenses during this time of your life.

Since 1984, Social Security beneficiaries with total incomes exceeding certain thresholds have been required to pay federal income tax on some of their benefit income. And because those income thresholds have remained unchanged while wages have increased, the proportion of beneficiaries who pay income tax has risen over time. On average, more than half of beneficiaries typically owe federal income tax on part of their Social Security benefits.

Will You Have to Pay?

Here’s how to determine if your Social Security benefits are taxable:

Add one-half of your (and your spouse’s, if married) Social Security income to all your other income, including pensions, wages, interest, dividends and capital gains.

  • If you’re single and your total added-up income equals more than $25,000, then part of your Social Security benefits may be taxable.
  • If you’re married filing jointly and your total income equals more than $32,000, then part of your Social Security benefits may be taxable.

Up to 50% of your benefits may be taxable if you are:

  • Filing single, head of household, or qualifying widow or widower with $25,000 to $34,000 income.
  • Married filing separately and lived apart from your spouse with $25,000 to $34,000 income.
  • Married filing jointly with $32,000 to $44,000 income.

Up to 85% of your benefits may be taxable if you are:

  • Filing single, head of household, or qualifying widow or widower with more than $34,000 income.
  • Married filing jointly with more than $44,000 income.
  • Married filing separately and lived apart from your spouse with more than $34,000 income.
  • Married filing separately and lived with your spouse at any time during the past year.

If you’re like most, a certain percentage of your monthly retirement, survivor and/or disability benefits is potentially taxable, depending on your income and filing status. Of course, there are a lot of other factors that go into figuring your income (and expenses) during retirement. And all of that information can help you figure out the best time for you to retire.

We’re here to help you make those important calculations — and ensure they’re correct — so you can enjoy your retirement without worrying about how to pay for it. Contact us when you’re ready.

Rollover Relief for RMDs

 

If you already took a Required Minimum Distribution (RMD) this year from certain types of retirement accounts, you can roll those funds back into your retirement account, thanks to the CARES Act. The 60-day RMD rollover period has been extended to August 31, 2020.

In addition to rollovers, this also applies if you are an IRA owner or beneficiary who has already received an RMD distribution this year. You can repay the distribution to the IRA by August 31, 2020. Further, this repayment is NOT subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs.

This relief applies if you had an RMD due in 2020 from a defined-contribution retirement plan, including a 401(k) or 403(b) plan, or an IRA. It also applies if you turned 70½ in 2019 and would have had to take your first RMD by April 1, 2020. Note that the waiver does NOT apply to defined-benefit plans.

If you have any questions about this RMD relief, please don’t hesitate to contact us.

 

MONEY BRIEF #1

The PPP loan deadline has been extended to August 8, 2020, after being signed by President Trump on Saturday. This 5-week extension re-opens the application window for the Paycheck Protection Program (PPP), keeping open a source of funding for struggling small businesses while Congress works on a second, more targeted funding program. The SBA had stopped accepting loan applications on June 30 before the extension was approved. As of June 30, the SBA had approved more than $520 billion in PPP funding, with approximately $129 billion in funds remaining available.

MONEY BRIEF #2

If you received an Economic Impact Payment, you should keep Notice 1444, Your Economic Impact Payment, with your tax records.

Notice 1444 provides details about the amount of your payment, how the payment was made and how to report any payment that wasn’t received. The IRS mailed this notice to your last known address within 15 days after sending the EIP. It’s especially important to keep this notice if you think your payment amount is wrong.

When you file your 2020 tax return, we’ll use your Notice 1444 to claim any additional credits, if you are eligible for them. Keep this notice on hand with your other important tax records, including W-2s, 1099s, and other income documents and records. Remember, you should be keeping copies of your past tax returns and supporting documents for at least three years.

New & Easier PPP Loan Forgiveness Applications Now Available

New & Easier PPP Loan Forgiveness Applications Now Available

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

You can access the new applications here:

Revised Application Changes

The revised PPP Loan Forgiveness Application includes several changes:

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

New EZ Application Highlights

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

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

New SBA Rules Issued

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

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

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

Other PPP Modifications

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

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

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

Source: Journal of Accountancy

Have You Been Counted?

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

MONEY BRIEF

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

MONEY BRIEF

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

MONEY BRIEF

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