Friday, January 29, 2021

Things to Watch in the New Presidency

Let’s face it, every new presidency causes us to worry about what might happen, and President-elect Biden has said many worrisome things, especially with regards to taxes. 

Now, this is NOT a partisan email, we’re not about politics here. The fact is that our new president has said repeatedly that he wants to raise taxes.

How much, when, and what actions to take are still far into the future, but one that really worries me is the so called “step up” tax changes he’s proposed from as far back as the summer of 2020. 

Basically, the change he’s suggesting isn’t one that a lot of people would notice, but it’s one that affects just about everyone, not just the ultra-wealthy…

Under current (and, for that matter, traditional) law, assets like a family business are “stepped up” at the time of the decedent’s death to the fair market value then. 

For example, if the founder of a family business died in August of 2019, the value of his or her business would be assessed in August of 2019.  For easy math, let’s say it was $1 million.  If the heirs continue to operate the company into 2020 and finally sell it in December of 2020 for $1.2 million, they are only taxed on the change since the founder passed away.  $200,000, in other words. 

In the plan that seems to keep showing up, the heirs would be taxed on the entire value of the business at the sale. 

All $1.2 million. 

Here’s the challenge:  there are so many other pieces of any tax puzzle, these smaller pieces often get forgotten about, but in the case of a family owned business, one that is multigenerational, the tax consequences could be very large.  Items like this rarely get a lot of press, because it’s a once-in-a-lifetime problem versus a once-a-year problem, like April 15th. 

It’s worth watching and determining a better course of action before losing hundreds of thousands of dollars in taxes in a business you spent years building that was designed to make a better life for your family.

Even if President Biden gets his “wish list” of tax hikes, the reality is, it might take several years to actually get put in place.  That’s great, because it gives us time to work together to determine how best to attack the problem and mitigate the tax consequences of passing a business to your heirs. 

If you’ve suddenly begun to worry, relax:  let’s keep an eye on this and go ahead and schedule a time to discuss how to keep more money in your heir’s pockets.

P.S.  The “step up” isn’t just going to affect businesses, it’s also going to be a direct hit on real estate owned by the decedent.  That house you bought for $150,000 that’s now worth $350,000?  You guessed it!  Your heirs will now have to pay taxes on the total gain from the time you purchased it to the point they sell it.  This should be all over the news, but it isn’t, so make sure to keep a lookout for these sorts of “quiet” changes to taxes that often get forgotten by the media.

IMPORTANT: Our firm specializes in tax resolution. We serve clients virtually so don't hesitate to reach out.  If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm so we can schedule a confidential consultation to explain options to permanently resolve your tax problem.  Make an appointment here!  Or, call Toll-free 1-855-254-1892.

Monday, January 25, 2021

EIP 2nd round

Wayne Scully, CPA (00:03):
Hey, it's Wayne with W Scully CPA PC focused on fixing America's tax problems. I've been getting calls from my clients. They've been asking me about the second round of the stimulus checks, the one you've been hearing on the news. They're going to give us $600 and stuff like that. So, I want to make a quick video about this and pass it on to you, because like I said, I've been getting calls about it. And I figured this might just be a quick way to get it out there.

Wayne Scully, CPA (00:29):
Here's the deal, the treasury was directed to issue an additional $600 in IEP, based on the same criteria for the first IEP. And by the way, IEP means, Economic Impact Payment. And some of the conditions to get that, or eligibility requirements are as follows. Right? AGI, that's your Adjusted Gross Income has to be $75,000, if you're single, 150,000, if you're married, filing jointly, and 112,000, if you're head of household. Right? So, if your AGI exceeds those thresholds, then the payments are reduced and about by 5% of the amount of that exceeds this AGI by. And you also need a valid social security number. If you don't, you won't get that payment. And by that I mean, it has the say, "Valid for employment."

Wayne Scully, CPA (01:18):
So, the other thing is, if you're someone's dependent, you won't get the payment either. And if you are a dead, you won't get the payment. And I hope you're not dead because then I'd be crazy talking to some dead people. But anyway, all jokes aside, if you're a non-resident alien, you also won't get this payment.

Wayne Scully, CPA (01:36):
So those are some of the general eligibility requirements to get the payment. As far as when the payment goes out, most of them start going out on January 4th. Some people probably had it queued, meaning it was just sitting there suspended. But the disbursement would have actually hit your account, meaning the funds, the actual availability of those funds, would have hit your account starting January 4th. And it should go through per the treasury. It should go through the payments, I mean, should happen until the middle of January.

Wayne Scully, CPA (02:07):
Now, we know that goes already. This is the IRS we're dealing with. Everything is already backed up with the Coronavirus and everything. Things are just slower, right? They were slow before, they're even worse now. So, expect those payments to probably happen until the end of February... end of January, sorry. And so, by the time you get to February 12, which is the date that the returns are starting to get processed by the IRS, that's the date they have set out that they're going to start processing returns. Then, if by then you haven't gotten the payment, what you would do is, you would apply for a credit. And I'll talk about that later.

Wayne Scully, CPA (02:43):
So paper checks will take a little longer. They have to be mailed and it takes some time for you to get them in the mail. And sometimes they get lost. So just be aware of that. Okay? Don't expect to get that check right away, if it's going by mail. All right. And some people also get debit cards, which again, will go by a mail. The good thing about debit cards, obviously, you activate the card and you use it. Right? You don't have to deposit a check into your account and wait for it to clear. Right?

Wayne Scully, CPA (03:11):
Okay. The other thing is, don't call the IRS, if you're not getting this payment, if you haven't seen your payment. It's now January 31st and you haven't seen your payment. Where is my payment? You're going crazy, you're pulling your hair out your head. Listen, if you call the IRS and you speak to an agent, they will not be able to give you any more information that's not already on the website. And the website you need to know is www.irs.gov. Right? www.irs.gov. And if you go to that website, you'll see a payment link there where you can check the status of your payment. Okay?

Wayne Scully, CPA (03:45):
If you don't see a payment going out there, it says something like, "Not available" or, "No status available" or whatever, then you know you will have to get what's called, the Recovery Rebate Credit. All right. That's the credit that they have set up just for people who haven't gotten their payment, that were supposed to get a payment. They'll be able to qualify for that recover rebate credit. So, if the date has come, you haven't gotten your tax return, when you... I'm sorry, you haven't gotten the rebate, the check, the stimulus check in the mail, then you will get the credit on your tax return, via this Recovery Rebate Credit.

Wayne Scully, CPA (04:24):
Okay? All right. So one other thing before I go, I wanted to kind of talk a little bit about the retirement plans and people took money out. So if you took money out in 2020, out of your retirement plan, and it's because of COVID, you will be able to get the penalties waived. There's normally a 10% penalty when you take your retirement funds out early, meaning, before the age of 59 and a half. You're now able to get that money... that penalty waived. Okay? So that's huge. $40,000 taken out of the account, you're talking about $4,000. So, that's huge, right? It's waived.

Wayne Scully, CPA (05:02):
And then, as far as the actual disbursements to you from the retirement account, if you pay it back within a certain timeframe to [weirs 00:05:12], all right? You get... either get the tax you paid back, or you get not... you get a tax repaid back basically. Right? You pay the tax on that money now, but then when you pay it back within that period of time, you then get that credit back on that year's tax return. So, just want to kind of give you that extra bit tidbit there.

Wayne Scully, CPA (05:32):
So if you have any questions about this or anything I've said so far, call your tax advisor or a tax preparer. And if you have none, give me a call. My name is Wayne Scully and I'm with W Sculley CPA PC focused on fixing America's tax problems. Our firm specialize in tax resolution matters, and we serve clients virtually. Make an appointment by visiting www.wscullycpa.com. That's www.wsculleycpa.com or call me toll free (855) 254-1892. Okay? Please give me some love, comment on this video, like it, share it. Okay? And guys, take care for now, until next time.

Resolve To Improve Your Skills

 

Okay, we’re a couple weeks in to 2021, and a LOT of folks have already forgotten those New year’s Resolutions from December 31st.  In reality, that’s nothing new, but I want to ask you to make a resolution nobody else made.

I want you to resolve to grow your skills in your job this year. 

Sure, if you want to hit the gym and get in shape, do that too. 

Work on your interpersonal relationships.

Improve your credit score.

Save more money.

…But in reality, ALL of those are better if you learn how to make more money, even if you’re only doing the same job you’ve done for years. 

Think about it:  Would you be able to get in better shape with a personal trainer instead of a free version of Beach Body on Demand? 

Would your relationship with your spouse be better if you never had to worry about the balance in the checking account?  Or how you can afford to take the family on a vacation? 

Would that credit score be better if you were always able to pay off the entire balance, not the monthly minimum? 

Yep.  I’ll bet a LOT of resolutions are a LOT easier to achieve when you have plenty of money. 

So why is it that so few people create resolutions that neglect sharpening the skills they need to make more money? 

I don’t know, but I’m asking you to revise those resolutions to reflect what you’re personally going to do to make more money in 2021.  Maybe it’s training – like taking in a Tony Robbins seminar. 

Maybe it’s finally getting focused on the job you’ve always done, but with an eye to growth instead of subsistence.  Maybe it’s simply asking for more support from mentors and the people you report to. 

I don’t know, but I desperately want you to make 2021 the year that changed everything for you and your life. 

Now, I’m going to ask you to take one more step with me: 

Will you share those financial goals with me? 

Will you be bold enough to write them down and fight like crazy to achieve them this year? 

Will you be bold enough to get excited about being in another tax bracket this year? 

I hope so, and I look forward to hearing from you soon!

IMPORTANT: Our firm specializes in tax resolution. We serve clients virtually so don't hesitate to reach out.  If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm so we can schedule a confidential consultation to explain options to permanently resolve your tax problem.  Make an appointment here!  Or, call Toll-free 1-855-254-1892.

Sunday, January 24, 2021

The Roadmap to IRS Offers in Compromise for 2021

 



I have had the pleasure of serving my clients by helping resolve their tax problems using various strategies—sufficing to say, I find doing this type of work personally gratifying and self-fulfilling. My passion is fueled by my own share of financial problems over the years. For one, in 2006, I had a tax debt which resulted from an Internal Revenue Service (IRS) examination (or audit). This desk audit required I support several items on my “Schedule A” (itemized deductions); specifically, they had concerns about the unreimbursed employee expenses section of my tax return. I was thorough about providing the documentation they required and when it was all said and done, I only paid $315. The point is, during this COVID-19 time when so many people are suffering and most people don’t know how to deal with the IRS, it’s good to know one has options to settle one's tax debt. These options not only allow taxpayers to get a payment plan but allows them to pay way less than what they owe.


Taxpayers who owe their taxes to the tax office have many ways to manage their debts. While many benefit from payment plans, taxpayers whose tax debts far exceed their income and solvency may not consider such solutions feasible. Taxpayers who are unable to repay their debts to the IRS could benefit from another program known as an Offer-in-Compromise.


 Defining an Offer in Compromise?


The IRS program, Offer in Compromise, allows taxpayers to pay their tax debt for less than they owe. Power to accept less than is owed is granted by 26 US statute Code § 7122. Under the law, taxpayers can reach compromises to settle their tax debts through a lump sum payment or periodic payment offers as a compromise to settle their liabilities through many periodic payments. If a taxpayer makes an offer to the IRS for a lump sum, they must make a down payment with the offer. Persons who submit periodic payment offers as a compromise must submit the amount of the first periodic payment together with their offers.


Under IRM 5.8.1, the IRS accepts an offer if it otherwise considers the tax liability to be non-recoverable. It can also accept an Offer In Compromise if there are doubts about the liability due, and it supports effective tax administration. The goal of the OIC program is to negotiate a legal payment arrangement that is in the interest of taxpayers and the IRS.


Doubt as to collectibility


The first reason for agreeing to an Offer in Compromise is when the IRS has doubts about its ability to collect the tax debt, as the taxpayer is unable to pay the full amount owed. Doubts about the recoverability of tax debts can arise if a taxpayer's income and assets are insufficient to satisfy the full tax liability. This is the most common basis for an offer in Compromise. Some taxpayers who elect an Offer in Compromise for tax debts deemed unrecoverable can settle their liabilities for a fraction of the total debt. Pursuant to IRC § 7122 (d) (3) (A), the IRS may not reject an Offer in Compromise if its refusal relates solely to the amount offered.


Under the IRS P-5-100 policy statement, the agency will accept an Offer in Compromise through doubts about recoverability if the IRS determines it is unlikely to recover the tax debt in full. However, the amount that the taxpayer is offering must be what the IRS believes it can recover through judicial and administrative means. The amount the IRS considers collectable is called a reasonable amount. To calculate the RCP, the IRS analyzes basic taxpayer costs of living. In certain circumstances, the agency could accept an offer lower than the RCP, but that is rare.


 What should I offer in compromise to the IRS?


The Offer in Compromise program was created to help taxpayers who are unable to pay their tax debts without suffering economic hardship. IRS offers in compromise statistics are instructive. In 2019, the IRS received 54,225 compromise offers and 17,890 were accepted. The total value of accepted offers was $289,422,000. While this shows the compromise offer can be an excellent solution for many taxpayers, it is also important to recognize that the IRS has turned down more offers than it has accepted for a total of 36,335 rejected offers. These IRS Offers in Compromise statistics show how important it is to analyze an offer in Compromise before determining the answer to the question "How much should I offer in Compromise to the IRS?"


If you have a large tax liability, you must prove you are unable to pay the full amount owed, that you do not owe the amount in dispute, or that there are special circumstances that make acceptance of the offer formidable in the interest of the IRS and the taxpayer. In general, the IRS is more likely to accept an offer if it is the largest amount of money that the IRS could reasonably collect within a reasonable period. The first step in assessing whether the OIC program is a satisfactory choice for you to receive tax relief is to consider the eligibility requirements.


Offer in Compromise Eligibility requirements


A taxpayer must fulfill all the following conditions to be eligible for the OIC program:


•            Has filed all tax returns


•      Assessed for one or more tax liabilities included in the offer


•      Requires ongoing estimated tax payments


•      Businesses with employees must set up current quarterly tax deposits


The IRS will also take several factors into account when assessing whether a taxpayer would run into financial difficulties if he or she were forced to pay the entire liability, including his or her income, assets, expenses, and lifestyle. When examining a taxpayer's lifestyle, the IRS will critically review all relevant information. It is unlikely that people with assets worth significant amounts will be approved for an Offer in Compromise, for example, due to insufficient income.


When a taxpayer submits a compromise offer to the IRS, he is required to complete and submit IRS Form 656, IRS Form 433-A and / or IRS Form 433-B for businesses. While much of the information about the taxpayer's finances comes from the data on Form 433, the IRS employee examining the application is also conducting an investigation. Special circumstances must justify unusually high living costs. However, the IRS need not force the taxpayer to sell a vehicle or house to satisfy his tax liability. An installment agreement might be a better option than making an Offer in Compromise for any taxpayer with a luxurious lifestyle.


The reasonable collection potential (RCP) calculation


Assuming you to qualify for the OIC program, care should be taken to calculate the appropriate collection potential to determine the offer amount. The IRM 5.8.4.3.1 provides the IRS's approach to calculating the RCP related to an Offer in Compromise.


In calculating the RCP, you will need to figure out how much of the net equity in your assets is realizable, and then add that amount to your future income. One of the first things you should do is determine the fair market value of all your property to arrive at the net realizable equity. The next step is to apply any discounts resulting from a property and then subtract any loans (i.e., mortgages, etc.) against the property. To determine the fair market value (FMV) of your property, you may need to retain an appraiser to receive a formal analysis.


Use form 433-A, form Section 7 to calculate your future income. Enter your income from all sources and your usual cost of living. The IRS may not permit all the expenses you claim because they have different rules on acceptable living costs, as the service relies on national and local standards to calculate the RCP. Remaining income is what is left after applying the standards and subtracting expenses.


Multiply remaining income by 12 to arrive at a lump sum offer. For a periodic payment offer, multiply your remaining income by 24. This number is then added to get your asset number to your minimum offer amount.


 OIC process steps 


It is important to understand the IRS OIC rules. You must include all your tax liabilities in your Offer in Compromise.


1. Prepare and submit any unfiled returns.


Compliance is King! You may need to prepare at least 3 years of unfiled tax returns and file them to determine the full amount of liability. With regard to trust fund recovery penalties or withholding taxes at issue, you must complete assessments for each quarter for which there is a liability. The IRS will not accept an offer from a non-compliant taxpayer, so all relevant tax returns should be filed before making an offer.


2. Preparing and submitting the proper IRS forms


When submitting an Offer in Compromise, you must use the correct IRS Offer in Compromise form. Individuals need to submit IRS Form 656 together with Form 433-A. Business owners are required to submit Form 433-B. Find out how to complete these forms by reviewing IRS Publication 1854.


3. Lump-sum or deferred payment offer?


The IRS's goal is to ensure they can collect the most amount of money in the shortest span of time, so they prefer the lump-sum option. Failure to establish a lump-sum payment may result in the acceptance of an installment agreement. Per the Revenue Manual section 5.8.2.3, creating a cash offer means paying the offer off in five payments once the IRS accepts the offer. Taxpayers are strongly encouraged to submit a deposit with a lump-sum Offer in Compromise. But, this is not a requirement.


If the taxpayer wishes to get a deferral or a periodic payment offer, include those when any portion of the amount that the taxpayer offers will be paid more than six months after the offer is accepted. Generally, you cannot defer an other-than lump-sum payment offer that will beyond 24 months after it is accepted. For the most part, the IRS will not an offer that can be paid within 2 years unless there are circumstances that establish the need for a shorter repayment period. If you desire a deferred payment offer, that term should be clearly stated.


Offer in Compromise received. Now what?


Initially, IRS in-take staff will perform a review of your Offer in Compromise to ensure it is process-able. Any offers that cannot be processed will be returned which can be frustrating. The following are likely circumstances where an offer may be deemed not process-able:


•      Missing or illegible signatures


•            Unidentified taxpayer


•            Unidentified liabilities


•      No offer amount (must be at least $1)


•            Financial statements not included


•            Net equity is not reasonably reflected in the offer


•            Use of an dated Form 656


•            Altered or deleted terms


If an Offer in Compromise is returned because it is cannot be processed, DO NOT file an appeal. Instead, there are procedures in place for fixing such deficient or incomplete offer packages.


Process-able offers are forwarded to an Offer Examiner. Such an examiner will carefully review all the documents submitted, paying keen attention to any "red flags". The examiner will also investigate the taxpayer's financial circumstances. For approved offers, a notification is sent. To make the offer effective, the taxpayer must honor it and within the specified time frame requested.


 What is the effect of an OIC acceptance?


Acceptance (by both the taxpayer and the IRS) of an Offer in Compromise, creates a contract. This mutually binding contract prevents any further inquiry into the included matters. Unless there's a material mistake or fraud, none of the parties may recover any consideration given. However, fraudulent offers can be set aside.


An accepted Offer in Compromise simply means the IRS agrees to accept the offer as a full settlement of the taxpayer's debt. Simultaneously, the taxpayer will pay the offered amount and the IRS will release any liens filed. The offeror also promises to remain in compliance with the tax laws for the subsequent five years. The IRS will also retain the authority to offset any tax refund the taxpayer may be due for the current or previous years. Any tax refund for the year in which the offer is accepted must return it to the Service. Failure to abide by these terms may result in retroactive denial of the offer and a reinstatement of the tax liability.


 Appealing a rejected Offer in Compromise


A request for an independent review of a denied offer may be made which would be conducted by the IRS Appeals Office. The IRS will send the appeal rights procedures along with the denial. Within 30 days, the taxpayer must use the form 13711to file a written protest of the IRS's decision. It is expected you can include new information with the protest for evaluation by the examiner. Most times, the case file and protest are simply forwarded to the Appeals Office without review by the examiner.


Examiners are required to prepare Form 1271, a rejection memorandum which outlines, in detail, the reasons the Offer in Compromise was rejected. If the offer is through doubt as to collectibility, the narrative will include detailed facts about an acceptable amount and the term. The narrative may be used to win the case on appeal.


The form 1271 is not sent automatically, so great care should be taken obtaining it because its value in preparing for an appeal. Request a copy either under the Freedom of Information Act or by asking the offer examiner directly.


Your appeal must be firmly grounded with enough specificity and persuasiveness in evidence to establish your position. Strategically compare your Form 433-A with the income and expense and asset tables. You should include supporting documents for each point of disagreement that you identify.


If your case qualifies, an appeals conference will be scheduled. The Service conducts this informal conference by telephone or face-to-face. Try to avoid belittling the examiner. To avoid litigation, the appeals office focuses on trying to settle tax controversies early. There are many instances when a rejected Offer in Compromise can be renegotiated and settled through the appeals process. Ideally, it is best to negotiate a settlement before it must go to court.


 How to negotiate an appeal


If you will be appealing a denial of your Offer in Compromise, you will need to gather evidence and records to support your position. During the appeal process, the appeals officer will communicate with you. To win your appeal, you must rely on your records, IRM, case law and Internal Revenue Code.


Appeals Officers are independent of the examiner who rejected your offer. This allows you to refer your original case to the appeals officer if you believe it has sufficient evidence. You can also make the case stronger by submitting additional evidence before it is sent to appeals.


The Offer in Compromise program offers taxpayers a chance to make a fresh start. But yearly, the IRS rejects more offers than it accepts. Therefore, it is important for you to carefully consider whether it is the best strategy to resolve your outstanding tax debt. If you qualify and are eligible for one of the three categories, careful attention is needed to filling out forms and compiling all the supporting documents can increase the chances that your offer will be accepted. Taxpayers willing to make an offer in compromise will also have to meet their current tax obligations while the offer is pending and five years after receiving the commitment. If you meet all the conditions, you can welcome a fresh start and pay much less than your outstanding tax debt.


When In Doubt, Get Professional Assistance


The Offer in Compromise process can be elementary for many tax debtors, especially if you have no significant assets and are low income. But if you have assets and/or have middle to high income, own a business, you can still qualify for an Offer, but the process becomes much more complicated.

 

IMPORTANT:

Our firm specializes in tax resolution. We serve clients virtually so don't hesitate to reach out.  If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm, so we can schedule a confidential consultation to explain options to permanently resolve your tax problem.  Click here to make an appointment!!  Or, call Toll-free 1-855-254-1892.


Friday, January 22, 2021

Watch out for Sneaky Tax Hikes

Let’s face it, every new presidency causes us to worry about what might happen, and President Biden has said many worrisome things, especially with regards to taxes. 

Now, this is NOT a partisan message, we’re not about politics here. The fact is that our new president has said repeatedly that he wants to raise taxes.

How much, when, and what actions to take are still far into the future, but one that really worries me is the so called “step up” tax changes he’s proposed from as far back as the summer of 2020. 

Basically, the change he’s suggesting isn’t one that a lot of people would notice, but it’s one that affects just about everyone, not just the ultra-wealthy…

Under current (and, for that matter, traditional) law, assets like a family business are “stepped up” at the time of the decedent’s death to the fair market value then

For example, if the founder of a family business died in August of 2019, the value of his or her business would be assessed in August of 2019.  For easy math, let’s say it was $1 million.  If the heirs continue to operate the company into 2020 and finally sell it in December of 2020 for $1.2 million, they are only taxed on the change since the founder passed away.  $200,000, in other words. 

In the plan that seems to keep showing up, the heirs would be taxed on the entire value of the business at the sale. 

All $1.2 million. 

Here’s the challenge:  there are so many other pieces of any tax puzzle, these smaller pieces often get forgotten about, but in the case of a family owned business, one that is multigenerational, the tax consequences could be very large.  Items like this rarely get a lot of press, because it’s a once-in-a-lifetime problem versus a once-a-year problem, like April 15th

It’s worth watching and determining a better course of action before losing hundreds of thousands of dollars in taxes in a business you spent years building that was designed to make a better life for your family.

Even if President Biden gets his “wish list” of tax hikes, the reality is, it might take several years to actually get put in place.  That’s great, because it gives us time to work together to determine how best to attack the problem and mitigate the tax consequences of passing a business to your heirs. 

If you’ve suddenly begun to worry, relax:  let’s keep an eye on this and go ahead and schedule a time to discuss how to keep more money in your heir’s pockets.

P.S.  The “step up” isn’t just going to affect businesses, it’s also going to be a direct hit on real estate owned by the decedent.  That house you bought for $150,000 that’s now worth $350,000?  You guessed it!  Your heirs will now have to pay taxes on the total gain from the time you purchased it to the point they sell it.  This should be all over the news, but it isn’t, so make sure to keep a lookout for these sorts of “quiet” changes to taxes that often get forgotten by the media.

IMPORTANT: Our firm specializes in tax resolution. We serve clients virtually so don't hesitate to reach out.  If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm so we can schedule a confidential consultation to explain options to permanently resolve your tax problem.  Make an appointment here!  Or, call Toll-free 1-855-254-1892.


Monday, January 18, 2021

Why Many Americans Won’t Recover

This email isn’t what it sounds like.  Even while we continue to fight COVID-19 and its impact on the economy, many perfectly healthy folks who don’t have any physical challenges are doomed. 

Not by the virus, but by the negativity they’ve become used to – you know, the continuous flow of negativity from social media, the news, and their personal relationships. 

There’s actually five easy ways to beat this mental breakdown, and if 2020 seems to still be dragging you down, here’s the antidote for you…

·       Become Consistent.   If you are really ready to succeed in life, regardless of what the Coronavirus has in store for you, your family, or your job, you HAVE to become more consistent.  When will you wake up?  What do I do next?  What do I do when I get to work?  If I don't have work how will I get work? Get consistent and quit making it up. Successful people don’t change their approach unless it doesn’t work — they only change to change with conditions. 

·       Quit striving to be “normal.”  Look, doing anything “normal” today means ONLY doing something average today.  Average isn’t good.  Average isn’t enough.  And average is never going to get you noticed and allow you to rise in any position in your company or to make the kind of money you want to make.  Let’s face it, even though there is plenty of money floating around on this planet, most people don’t have much of it. It’s because most people won’t take more actions to get more money even in a crisis.

·       Not setting goals.  As much as many people hate it, goal setting might be the biggest reason for anyone to become successful.  With the New Year, a lot of people have made resolutions, but very few actually thought about them.  I’m asking you to really dig in and set realistic – and optimistic – goals to allow you to blow right past the competition in your industry, your company, and even your co-workers. 

·       A sense of entitlement.  We’ve seen this over and over again during the pandemic.  People who argue for a “living wage” or a “universal basic income” but refuse to take the time to improve their own skills.  Entitled people will never work hard enough to earn any real money because they feel things should be given to them. Nobody who accepts government handouts is rich — and they never will be unless they change their mindset.  Slaves get just enough to survive.

·       Realizing that “sales” skills are relevant in all walks of life.  It doesn’t matter if you’re a plumber, a car salesman, or a regional manager, everything you want in life is a sale when you really think about it.  It’s an exchange of value, or ideas, of materials, of money … for something else.  We live and work in an economy, and that economy is driven by sales.  Those who have sales skills – or can adapt them to their particular job – will thrive while those who don’t will subsist. 

For 2021, I want to challenge you to think about these five observations and use them to help guide you in the new year.  Even more importantly, I want you to use them to make yourself have the biggest financial rewards you’ve ever gotten in one year. 

Basically, I want you to have a tax problem because you’ve made so much “extra” money this year!

IMPORTANT: Our firm specializes in tax resolution. We serve clients virtually so don't hesitate to reach out.  If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm so we can schedule a confidential consultation to explain options to permanently resolve your tax problem.  Make an appointment here!  Or, call Toll-free 1-855-254-1892.

Friday, January 15, 2021

PPP loan 2nd Draw

So, Wayne Scully with W Scully CPA PC, focused on fixing America's tax problems. Folks, listen. Recently, my son went into a major bank to open a business bank account to start his own business. So proud of the kid. He was told by a banker that he qualifies for the PPP law. Now, I have to sit and explain to my son that, "Hey, son. You don't qualify for this loan," because really his business started in 2021, and that's what folks need to know. The business must have started no later than February of 2020 for you to qualify for this loan. So, it was totally misinformed, but it was my job to obviously explain to him that, "Hey, son. This is just not going to happen for you, unfortunately."

               So, basically today I'm here to talk about the new PPP loan program offered by the Small Business Administration, otherwise known as SBA and the Paycheck Protection Program, or as it's called PPP. This has to do with the Second Draw. The First Draw last year, that program ended, closed out towards the end of the year. Then they restarted the program, and they call it the Second Draw. So January 6th, the Economic Aid to Hard-hit Small Businesses, Nonprofits, and Venues Act was signed into law and resulted in the new PPP guidelines. This basically provides funding up until March 31st of this year, and the Second Draw sets priorities for small business and allots $284 billion towards that effort.

               Included in that, they were talking about job retention and covering certain expenses. So the changes provide really targeted relief and simplifies the loan forgiveness process to ensure a path to recovery for small businesses so hard hit. I mean, we can all appreciate that, right? We either know someone or we ourselves are in that kind of bind that we need this help. So it's good that this program is around, and it's there to help folks. The PPP program reopened its doors for lending on January 11th, and it's open to existing and also to new borrowers. January 11th, as I mentioned before, is the beginning date for the First Draw, and January 13th is the beginning date for the Second Draw.

               January 15th is going to be open to small lenders, and in January 19th opened to large lenders. So, that's just going to give you a timeline as far as if you're looking to get money from this program, you have to be attuned to those dates. So, key updates. The loan covers any period between eight to 24 weeks by the borrower's choice, so you choose what period you want to pay to disperse those funds over. Then it covers additional costs such as rent, utilities, equipment, property damage costs, supplier costs, and worker protection.

               It's eligibility was expanded to include a 501(c)(6) entities such as business leagues, trade boards, et cetera, housing co-ops, and destination marketing organizations known as tourism boards and other types of organizations would qualify. As I said before, it's looking to help nonprofits. So, that's that. It provides greater flexibility for seasonal employees and certain existing borrowers can modify the First Draw or in other words they can refinance their first loan, and it gives them an opportunity to modify the first loan. Then existing borrowers can also be eligible for a Second Draw, certain existing borrowers, not everyone.

               Guys, here's some general eligibility requirements for the Second Draw. Number one, you must have received the First Draw, spent it, or you're going to spend in full for authorized purposes. Okay? That's important. If it's not spent for authorized purposes, you may have an issue, and your business can't have more than 300 employees. All right. You have to be able to show that your gross receipts reduced by at least 25% when you compare two quarters in 2019 and 2020. A

               And just one more tidbit for you guys. There's a huge fraud alert I have to make you aware of. I learned just recently from a former IRS revenue officer that the IRS will be auditing the PPP loans. I suppose the IRS has greater knowledge and tools and resources with respect to audit these kinds of loans, whereas the SBA may not. So I suppose that joint venture between the two agencies to audit those loans. So please be careful. Use the loan for an authorized purpose. First of all, make sure you quantify for the loan. Don't you know, trying to get a loan that you don't qualify for because it may come back and bite you in the proverbial you know what.

               So, basically for any information call your tax advisor, and if you have none, give me a call. My name is Wayne Scully, and I'm with W Scully CPA PC focused on fixing America's tax problems. Our firm specializes in tax resolution matters, and we serve clients virtually. Make an appointment by visiting ww.wscullycp.com. That's ww.wscullycpa.com, or call me toll free (855) 254-1892. Please comment, like, and share this video. Thanks guys. Talk to you soon.

 


What’s the Play for 2021?

 It’s no secret that many of my emails are about growing your money (or at least keeping more of your money), but the fact is, now we’ve all made it through 2020, it’s time to get back on track. 

What do I mean? 

Well, how many of us slowed down our investing or savings in 2020? 

Exactly. 

Now, though, with the New Year in full swing, new resolutions we’re all working on, and an economy that – while it isn’t great, it’s still showing some signs of recovery (or at least stability).

Just like a morning-after vow to never drink booze again, though, you can’t let the naysayers get you down or negatively impact your own goals. 

Seriously, what are you doing to keep growing your money and your investments? Reply to this email and let me know.

Why do I want to know?  Simple – when I see a large group of my clients and friends doing something, I like to study it and see how my own expertise can provide value for them. 

Take everyone’s “go-to” investment – real estate. 

Now, a LOT of people think about real estate investment in terms of owning single family homes and renting them out, but there are hundreds of different investment models for real estate. 

Ground leases, sale/leasebacks, fix and flips, buy and holds, 1031 Exchanges, and so on. 

The truth is, you can study real estate for a lifetime and never use all the various methods, but the sheer number of ways to make money in real estate means one thing: 

There is always something making money in real estate. 

Period. 

Even systems that may not be overly popular right now might prove to be perfect for you in your situation. 

Maybe you get a smoking deal on a fourplex in an up-and-coming section of a small city. 

Maybe you learn about a family that is just trying to walk away from a home they inherited and cannot afford the upkeep on. 

Maybe you… who knows!

The point is, real estate offers a ton of ways to make and save money, but it’s very often one that requires you to have ready access to liquidity.

That’s where I can help.  As a tax professional, I can see ways that even modest amounts of cash on hand can allow you to move in on investments, and with the traditional returns on real estate far outpacing the stock markets or mutual funds, NOW is the time to get on track and understand what kind of buying power you’ve got…

…And how to get more!

Here’s the deal:  I don’t care HOW bad 2020 was, I’m challenging you to share with me what your investment goals are for 2021 and – if you’d like to take that one step further, to schedule a time with me to discuss how you can put more money in your pocket – the idea, of course, being to be ready to capture that investment when the time comes. 

Make 2021 your year AND the year you got “back!”

IMPORTANT: Our firm specializes in tax resolution. We serve clients virtually so don't hesitate to reach out.  If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm so we can schedule a confidential consultation to explain options to permanently resolve your tax problem.  Make an appointment here!  Or, call Toll-free 1-855-254-1892.

Monday, January 11, 2021

It’s Almost Tax Time!


With the New Year, it’s time to begin to sort out taxes.

W-2s will be in the mail soon, and time is rapidly running out for you to make contributions to retirement accounts.  If, like many folks, you’re ready to go ahead and get your taxes filed, let me make a few suggestions BEFORE we sit down to file…

First things first:  remember, you have to claim ALL your income, so if 2020 saw your branching out into various “gigs” like delivery driving, maybe some “cash and carry” work, or contracting, you’re legally required to document that and pay taxes on it.  At the same time, a lot of those jobs don’t take out any taxes on your earnings.

That means you’re responsible for it. 

Now, some companies will send you a 1099 for it, but, in my experience, a lot of them conveniently “forget” to do so. 

You need to make notes on that income and make sure you have it documented before you file, because not doing so can result in a “surprise” tax bill when you least expect it. 

Next – and we already touched on this a bit – if you haven’t maxed out your retirement account contributions, you need to do that prior to filing.  This isn’t just idle talk, either.  I’ve worked with many clients on tax prep that “rounded up” their 401(k) contributions at the end of the financial year to allow them to slide into a lower tax bracket.  In one case, the amount they contributed actually saved them nearly $1,000 due to the difference in their tax bills for the year. 

Besides, you’re putting this money into your retirement accounts, so you’re really “keeping” it. 

The last thing is probably the hardest. 

You need to get all your paperwork, receipts, and documentation together.  I know, many companies and financial institutions seem to take forever to send this material out to you, but filing your taxes isn’t about speed, it’s about whether or not you’ve gotten them filed correctly. 

Eventually, the IRS catches up with mistakes, and over the years, I’ve seen taxpayers get letters discussing shortcomings years after the fact.  Accuracy counts for a lot, and the only way to be accurate is to have all the date you need.  Even worse?  In some cases, the IRS can assess penalties and make those retroactive with interest to the tax year in question. 

Who wants to get hit with a tax bill three years later for $500?

Nobody, that’s who.

There’s one other part of this whole process I see very few families doing, and I’ve never really gotten a clear reason for it. 

Teaching your kids. 

Even your fifth grader probably understands the concepts of taxes, and by taking time each year to explain and share your own knowledge about income taxes and how they work – and the consequences of not following the laws – will help your kids to develop a healthy respect for money and budgeting.  You may not feel comfortable discussing your income with them, and I understand that – but sharing with them how deductions and write-offs work allows them to learn that, while we all have to pay taxes, the IRS allows us to spend less when we take certain actions. 

A car you use for business, for example. 

Your uniform allowance, or how you can deduct childcare expenses, and so on. 

They’re not going to learn this in school, sadly, and a piece of software, while useful, can only give them so many prompts to determine their tax bills. 

When you take the time to teach them, you’re helping them to think critically and maybe even inspiring them to become better money managers as they grow up. 

This time of year, of course we’re getting busier, but I’m always here if you have questions about your own returns.  As crazy as 2020 was, I have even opened up my calendar more to be available to anyone who is really puzzled about their next steps, too.

IMPORTANT: Our firm specializes in tax resolution. We serve clients virtually so don't hesitate to reach out.  If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm so we can schedule a confidential consultation to explain options to permanently resolve your tax problem.  Make an appointment here!  Or, call Toll-free 1-855-254-1892.

Don’t Fall For The Bitcoin Gamble

 

Okay, perhaps the title to this email is a little misleading – there is a LOT of activity in the world of cryptocurrency these days … and that’s kind of the problem. 

There are hundreds of “coins” out there, and a lot of shady places to buy them.  Even worse?  With so many types, it can be nearly impossible to truly understand what you’re buying and how to track its value. 

On the other hand, with the type of growth and returns we’ve seen in the last year in cryptocurrencies, it’s certainly worth learning more about, and, even if the prices tumble in a (not unexpected) bubble bust, the fact is, it’s unlikely that Bitcoin – or many others – can lose ALL their value. 

So let’s go over a “primer” of sorts for getting involved with crypto… stuff you’ll need before you ever buy anything…

·       You’ll need to choose an exchange.  Think of an exchange as a brokerage platform that allows you to convert legal tender (U. S. dollars, for example) to cryptocurrency.  Some exchanges act more like banks while others simply offer an opportunity to buy and sell crypto.  In the United States, the most common exchanges are Coinbase, Kraken, and Gemini, and while these offer a great means to exchange coins, they are not the truly anonymous cryptocurrency exchanges many people think of when they envision Bitcoin.  Obviously, you need to choose your exchange based on your plans. 

·       With your exchange sorted out, the next step is to create a wallet and set up your payment options.  Just like your real wallet, this acts as the digital meeting point of your funds – the account(s) you’ll purchase from and the digital/crypto holdings you own.  Your wallet is linked to the exchange, and, in the case of a brokerage style exchange, this is where purchases and sales of coins will be able to be deposited.  (It’s worth noting that some of the “do it yourself” guides online wait to discuss wallets until after you set up your purchase… for obvious reasons, having your wallet set up is far smarter than waiting…)

·       With your exchange sorted, your wallet in place, and your accounts linked up, it’s time to buy … but what?  THAT’S the real challenge, isn’t it?  There are so many choices, and the best plan is really the simplest – do your research.  As of this writing, it seems like there are cryptocurrencies available based on a variety of things – from computer network payment tracking to marijuana-based coins.  What is “right” for you?  You’ll have to sort that out for yourself. 

Now, obviously, there’s more to investing in Bitcoin and cryptocurrencies than this, but there are hundreds of “how-to’s” online that can really get you far more detail. 

Cryptocurrency is going to be an important part of many people’s investments in the coming years, so adopting now is not only a great idea, it’s also a useful one for the long haul. 

Now, let me be blunt:  I’m a tax professional, not a cryptocurrency expert, so while I’m happy to help you find the funds in your budget to invest (or at least investigate) crypto, if you have some interest, let’s sit down and look at your budget to see how you can use this newer tool to round out your wealth strategy.

IMPORTANT: Our firm specializes in tax resolution. We serve clients virtually so don't hesitate to reach out.  If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm so we can schedule a confidential consultation to explain options to permanently resolve your tax problem.  Make an appointment here!  Or, call Toll-free 1-855-254-1892.

Friday, January 8, 2021

PPP Loan Forgiveness and business expenses


In recent months, there has been an ongoing national debate about the deductibility of business expenditures paid from the proceeds of a PPP loan. Why? Because the Treasury has recently announced, it will abide by the normal tax protocol on deductibility of expenditure paid out of the proceeds of a loan forgiven.


What do I mean? It is normal that a business  is not allowed to double dip and receive a tax benefit from the same item twice. For me, as a tax expert, this is typical tax logic. Allow me briefly to explain the normal logic behind this. The theory is that a particular business expenditure, or even a personal expenditure, should not be a double tax benefit associated with one item.


What happened with the Paycheck Protection Program was that small businesses - and yes, some large businesses - were given free money from taxpayers, and that the money should go primarily to payroll to keep people busy during the coronavirus pandemic, but also to pay for some other necessary expenses to keep their business afloat. Well, this was structured as a loan, but the loan was forgivable, so it was free money. Most of the time, the IRS is required to collect income tax on those forgiven debts, but the original CARES Act, which created the PPP loan program, states that the IRS will not collect taxes on the forgiven amount of the loan.


Now that they cannot levy taxes on the enacted portion, the IRS came back and said the expenses paid with the enacted loan money could not be forgiven under the doctrine of not receiving a double tax benefit because that money was provided for free. By eliminating the deductions, the IRS eliminated the double tax advantage. It is simply logical that the tax deductibility that the company would normally have for the same business expenditure should not be allowed.


For me, as a tax expert, this is only logical. I take this for granted, but I fully understand how the wider small business community has been baffled by this.


They viewed it as a double whammy. The first blow came from the drop in revenue caused by the pandemic and orders to stay home. And now they are being told they cannot deduct their normal business expenses, which will lead to a higher tax bill - what money, some asked.


I fully understand where a small business owner would come from who is arguing against this measure.


But in the Omnibus Spending Act of December 21, 2020, which included this $900 billion pandemic relief package, Congress included a legal fix that directly suspended the normal protocol and reversed the IRS announcement. What Congress has done is to include it in the statute because it did not exist before - that the legislative intent of the original CARES Act was that there would be no change in the deductibility of the corporate expenditure paid for by the free money from the PPP loan. These are therefore aimed at the massive concerns of companies, especially as we are only a few months away from the due date for their business tax returns.


Again, although the expenditure was paid for by free money from the PPP loan, there is now a NO change in the deductibility of business expenditure. So if you are a small business owner and you are worried about it, that worry is now gone. The expenses you have paid with your PPP loan money will not change the way you deduct it.


It solves this whole problem. This is a big deal for small business owners, who face potentially huge tax burdens. The expenses you have paid with your PPP loan are fully deductible as normal operating expenses, and the loan will still be forgiven.


They have also included in the law a simplified procedure for writing off loans below $150,000. They also approved a second round of loans for small businesses that observed sales drop 25 percent or more due to the pandemic.


These are issues that are unlikely to receive nearly as much mainstream media attention as some of the bill's other provisions, including extending unemployment benefits.

 

But if you are a small business owner and are afraid of a potentially higher tax burden than you might have expected because some of these business expenses are not deductible, then don't worry any more because it is clear.


IMPORTANT: Our firm specializes in tax resolution. We serve clients virtually so don't hesitate to reach out.  If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm so we can schedule a confidential consultation to explain options to permanently resolve your tax problem.  Make an appointment here!  Or, call Toll-free 1-855-254-1892.


“We’re the Folks That…”

  For years now, when I converse with small business owners, I’ve heard the common complaint, “we can’t make any money, and we’re busier tha...