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.

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.

What the CARES Act had for you and your business...

Preface

COVID 19 has proven to be a cataclysmic event that has thrown the world into a tizzy. With over 20 million infected worldwide and over 300 thousand deaths here in the USA alone, this novel virus has proven to be one of the worst global events, in recent times. The financial implications are astounding when you consider millions of people have lost their jobs and many small businesses closing their doors in places like my hometown of Jamaica, NY. But, Congress provided over $2 trillion in relief to help many individuals and dying businesses via sweeping legislation called the Coronavirus Aid, Relief and Economic Security Act (or the "CARES Act” as it is commonly known) and Families First Coronavirus Response Act (or "FFCRA"). Today, I will highlight certain provisions (as they relate to businesses) of the Act that will add clarity to or, if nothing else, encourage you to ask your professional about the varied tax implications.

 

IRS Payroll Tax Relief for Small Businesses Impacted by Coronavirus

Small businesses can benefit from various types of federal payroll tax relief through 2020. The changes include a deferral of payroll taxes and several refundable payroll tax credits. These changes are temporary but, taken together, the laws help employers and businesses survive these terrible economic conditions.

 

Deferred payroll taxes

Under the Act, employers can claim payroll tax relief by deferring payment of their part of Social Security contributions, which they should have submitted to the IRS between 27 March 2020 and 31 December 2020. Employers must continue deducting and transferring employees' tax contributions. But, these business owners can delay the 6.2% they would otherwise be required to pay.  By paying 50% of the total amount starting December 2021 and then what is left by 31 December 2022, small business owners can delay their current social security contributions.

Changes may be reflected in the employer's quarterly payroll tax return, Form 941, and company owners are not obligated to take a special election to defer their payments.

While most of Jamaica, NY, employers has the option of deferring the employer's share of social security contributions, those who received a loan through the Paycheck Protection Program were initially only allowed to defer their payments until their loan forgiveness date. But, now can defer paying their share of social security contributions even after the PPP loans have been forgiven. This correction was made by the PPP Flexibility Act of June 2020.

Note this deferral applies only to Social Security taxes. Employers cannot postpone their share of Medicare taxes.

Employee retention credit (or ERC)

For pandemic-affected companies, the CARES Act also provides a tax credit but only when employees are kept working. This credit is designed to help workers on the job and is available to most employers. The equivalent of 50% of the qualifying wages of up to $10,000 for employees paid in the last three quarters of 2020 is allowed as a credit.

Criteria for eligibility: Employee Retention Credit (ERC)

To be considered qualified employers, the business operations must have been partially or completely discontinued due to government orders mandating a shut-down. Alternatively, employers who experience a decline in the gross income of more than 49.99% in a relevant quarter compared to the same quarter of the previous year may qualify too.

Government regulation cannot only suggest that businesses close operation, but there must be a mandatory shut-down. An eatery that needs to close to stop the pandemic, for example, may qualify, but a pharmacy that closed due to a recommendation may not be eligible for the ERC.

Self-employed people that paid themselves wages cannot take the credit but can count the wages they have paid their employees. The PPP Flexibility Act also allows borrowers to defer their payments.

 

How businesses claim the credit for employee retention

Business owners in places like Jamaica, N.Y. can immediately claim the employee retention credit for their employees by withholding payroll tax credits equal to the total of their quarterly payments. Employers can file Form 7200 if the withheld payroll taxes do not cover the entire credit to receive advance payments.

 

How do Small Business Administration Interruption loans affect the ERC?

Since the SBA interruption loan is intended as an alternative to the credit program, companies that have received from SBA are not eligible for the employee retention credit. Employers can only claim the retention credit if they never got an interruption loan from the SBA.

What about the paid leave tax credit?

Under the FFCRA, most small and medium-sized enterprises are obliged to offer paid leave to their employees when such workers are debilitated due to the pandemic. The bill also includes tax credits for paid leave on a dollar-for-dollar basis.

 

Eligibility rules for paid leave tax credits

Most Jamaica, NY (and the surrounding areas) companies with fewer than 500 employees are entitled to paid leave tax credits under the FFCRA and are also subject to statutory leave requirements. Companies with fewer than 50 employees can be, however, exempted from FFCRA requirements for childcare. The exemption applies if the company can prove the cost of childcare would jeopardize the company’s viability.

 

Mandated paid leave credits

Business owners whose employees are ill or have been diagnosed with COVID-19 can receive 100% credits for each employee who takes paid sick leave. The tax credit reimburses the cost up to $511 per day of required paid sick leave. The company must pay the employee his regular wage for up to 80 hours through paid sick leave.

If an employee is forced to take leave due to pandemic-related circumstances to care for a family member, (including caring for a child whose school is closed or a family member quarantined) and the employer pays wages then 33% of the regular wage will be reimbursed to the employer up to $200 per day for up to 10 days.

Under certain circumstances, employers may also claim an additional child care credit at a reimbursement rate of 66.6% of the employee's regular rate for up to 10 weeks. The credit is available for up to $200 per day.

Getting the paid leave credits

Companies that are required by COVID-19 by the FFCRA to offer paid leave to an employee may deduct the money they paid for paid leave from their contributions to payroll taxes which would include the employee and employer share of Medicare and Social Security taxes, as well as the federal income tax that would have been paid.  Companies can request an accelerated refund if the payroll taxes they pay are insufficient to cover the cost of paid sick leave.

These temporary changes will be effective until 31 December 2020. Companies can benefit from applying for the refundable payroll tax credits and the deferral of their payroll tax payments. Tax relief can really help these businesses stay viable during the pandemic.

 

In conclusion

The government should stand up for its constituents. And, it is remarkable that our elected officials have passed these laws to help small businesses like me here in Jamaica, N.Y. so that we have a fighting chance. The stimulus packages associated with the CARES Act have had positive results, but taxpayers need to know how these programs work, so talk to your tax expert to ensure you are on the right track.

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.

All the Stimulus You Need!

 

We’ve made it through 2020 now, and amidst all the noise in the news about vaccines and stimulus bills that seem to be funding everyone BUT business owners in the United States, I want to share a few things:

First of all, while Congress did eventually pass another stimulus bill that does have have provisions in it for small businesses, we can’t depend on that always happening.  A lot of money got spent keeping companies afloat in 2020 and those debts are going to come due soon – some of my PPP clients are already in the process of getting those loans forgiven (or at least a good deal of the principal reduced).  It’s CRITICAL if you received any kind of help from the SBA last year that you attend to that paperwork WELL in advance of Tax Day.

…In short, that means now. 

Seriously, just like when the “new” tax laws went into effect in 2017/2018, there are a lot of pieces of the SBA/PPP loans that are unprecedented.  While we, as tax professionals, “know” what the laws say, many times, when new laws are enacted, there is always room for those laws and programs to be interpreted. 

So the deal is simple:  YOU HAVE TO MAKE SURE ALL YOUR FINANCIAL DUCKS ARE IN A ROW!

This is certainly not a time to wait, either.  Act now, while it’s early, and go back through that paperwork.  Look at all those emails from the SBA, dig into anything you might have signed last year in the Spring and Summer and make sure you’ve lived up to your obligations. 

That is literally the difference between repayment and forgiveness. 

Now, let’s be real for a moment…

I know that a lot of folks signed a lot of paperwork last year, and the SBA tasked banks to fund the PPP (Paycheck Protection Program) loans.  So it’s important to remember that if you have a PPP loan, it originated from a bank. Nearly ALL the big national banks were “in” on it, and many, many regionals.  Some of those banks, like BB&T, merged and became other banks – namely, Truist. Also, the bank that originated your loan may no be the current servicer of your loan.

Could there be some challenges with the documentation as a result? 

You bet! 

All the more reason to get your ducks in a row now rather than at the 11^th hour in March and April. 

So, this week – not next, or the next, or the next – I want you to be systematic in your search and track down all the documentation you signed for any SBA/PPP monies your business received last year. 

Once you’ve done that, I want you to review what standards you’ll need to achieve to be able to have that loan forgiven, and if you have ANY questions or worries about it, then set up a call with me immediately. 

It’s incredibly important that you do this right, as there are literally thousands of dollars in savings on the line – but only if you do it correctly. 

Let’s Chat Soon-

IMPORTANT: Our firm specializes in tax resolution. We also 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 and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.  Make an appointment here!  Or, call Toll-free 1-855-254-1892. 

Retirement funding...

This month, I’ve been spending a lot of time discussing retirement accounts.  It’s no secret, and it’s for a good reason – most Americans don’t know where they’ve put their 401(k) funds. 

Seriously. When I was still in the workaday world, I would ask my coworkers about their investment strategies and they either knew exactly what they were doing or nothing about it at all. 

Some folks bought because they liked the company, or their parents had worked there, or they liked the way the prospectus was laid out. 

Very few times did I receive answers that could be regarded as “informed.”

Take the term “growth” in mutual funds. 

A lot of employees assume that “growth” is going to result in higher earnings, and it usually isn’t so.  Yes, the companies in the fund are “growing” but the usual result is a lower dividend. 

…And potentially lower “perceived” value from investors, keeping the value of the fund down. 

It’s great for investors making the long play, but maybe not so good for building value in a 401(k). 

Of course, the biggest problem with company-based 401(k)s is they are rarely administered by the company, usually that’s handled by another company contracted to do that. 

…And those guys rarely have a fiduciary responsibility to take care of that business’ employees.  Instead, they want to push “their” portfolio into the employee pool to drive the value of the overall investment higher. 

And make money.  Whether that employee makes any.  Whether that employee can ever afford to retire. 

A lot of you guys – myself included many years ago – bought right into this scam. 

It’s time to “buy” out it!

There’s never been an easier time to get educated on your options for retirement and it’s really never been easier to invest in the specific platform you feel most comfortable with.  Just as critically, I HAVE to strongly suggest that 2020 should have proven to you how little many companies’ care for employees. 

If there was ever a situation that required employees to become smarter about how they can control their own destinies, this is it!

There are dozens of ways to create the retirement you want, but they all begin with one thing – the capital to enjoy it. 

Having that capital begins with understanding who you have investing those funds and having faith they are truly acting in your best interests and growing YOUR money, not just their bank accounts. 

There are loads of ways to do this and when you’re ready to get started, my team and I are here to help you get pointed in the right direction. 

Let’s make this a GREAT 2021!

IMPORTANT: Our firm specializes in tax resolution. We also 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 and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.  Make an appointment here!  Or, call Toll-free 1-855-254-1892. 

This month, I’ve been concentrating on more intangibles within the ideas of busines success, but before you get toooo critical of me, let me explain my logic:

2020 has changed a lot of things for a lot of people.

If you’re still trying to do “business as usual” with an unchanged model – maybe the same one you opened up with in 2020, then your days are numbered, and that’s the point of this email. 

It’s to point out that the companies and individuals who have thrived in this year are those who have critically analyzed how they do business or how they approach the operations of their business to ensure its survival.

In many cases, as I’ve learned from talking to scores of them, they di that by rethinking how they spend time. 

An “easy” example is this one:  do you mindlessly scroll through your social media feeds each day, or do you actively target other “scrollers” through your marketing plans and advertisements?

In other words, are you creating things for others to consume or are you consuming things others have created? 

One will bring leads into your business, the other will keep you from making money. 

…And it’s not just social media, either, it’s how you show up in your hometown.  Do people know what you do?  Have you boiled down the core of your business into something that can be easily consumed by a public that has a shorter and shorter attention span? 

“I move entrepreneurs from frustration to freedom,” is one I saw and liked from a digital marketing agency recently, and – obviously – it stuck with me. 

Do you have that “blurb” that captures a potential lead when they see it or hear it?  Do you believe it, too?   

A month or so ago, I shared in my emails about being clear on your dream – the founding idea of your company – and this sort of statement is very much a part of that.  The two ideas are linked, and they are critical for you as an entrepreneur. 

…But do you feel them? 

After all the craziness of 2020, do you still feel that burning desire to change lives? 

To make an impact? 

To create and live your life on your terms, not those dictated to you by the government, or a boss, or a mindless career job buried in some kind of cubicle Hell?

If you do, then I suggest you continue to monitor how you let minutes slip away and always focus on creating, not consuming. 

Create a family that’s a team, create a business that’s a family, a marriage that’s unbreakable, friendships that will be lifelong. 

Be better, and refuse to allow yourself to get sidetracked from your goals by living vicariously through what social media tells you is relevant. 

All the best-

P. S. …And if you find yourself wondering how to “jump start” this whole process because you need to sort out advertising, take heart!  There are a lot of ways to find that money, and if you’re struggling with it, let’s sit down and talk about budgets for your business and the potential tax benefits and rewards of a properly built marketing plan. 

IMPORTANT: Our firm specializes in tax resolution. We also 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 and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.  Make an appointment here!  Or, call Toll-free 1-855-254-1892.