Good news for many businesses
Senate passes House bill that eases restrictions on how long businesses have to spend funds and how they can allocate them.
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Equity Search devoted to solving IRS tax and financial problems and eliminating their source. We help our clients overcome the stress and difficulty caused by the high-pressure collection techniques of the tax authorities. We have dedicated ourselves to demonstrating that it is possible to prosper in the wake of a seemingly devastating fiscal setback. Working with us, you can protect your assets from seizure and deal more effectively with short-term financial pressures. Call or visit our website today!
Good news for many businesses
Senate passes House bill that eases restrictions on how long businesses have to spend funds and how they can allocate them.
Update on the deductibility of ordinary buiness expenses and forgiveness of debt income as it relates the the Payroll Protection Program (PPP) inside the CARES Act
Some important updates as is relates to the Coronavirus Pandemic, PPP Loans, EIDL Grants, and tax problems.
We are genuinely in a scary time, with many businesses upended by the Covid-19 pandemic. Businesses saddled with IRS and state tax problems face a host of new, complex questions.
For 30 years as a CPA, tax resolution, and business turnaround specialist, I have focused exclusively on helping businesses resolve IRS and state tax problems and the underlying cash flow issues that cause those problems.
I understand what you are facing—I have helped hundreds of businesses like yours. Prepared with a concrete plan of how to manage your limited cash flow you can come out of this strong. But the right advice is critical, especially in these extraordinary times.
First, some good news: this is a great time to handle your tax problem. Here’s why:
Time. Specifically, more of it. For many, the daily treadmill of running a business has slowed, and you may finally have a bit more time to focus on finances and processes.
Even more time. The IRS and states have virtually STOPPED pursuing aggressive collections.
PPP loans or EIDL Grants. These can help a lot if used the right way for your business.
Easier deals. The IRS and states will start pursuing delinquent taxes—even more aggressively— due to budget deficits. But they may be more open than ever to negotiating to make up for tax shortfalls.
Common questions I hear these days from my clients that owe money to the IRS or state:
How do I prepare for a deal once the IRS and State are “back to normal”?
Do I stay closed, given my debt and financial hardship caused by the pandemic and tax problems?
If I reopen or am open what is the best use of my limited cash flow?
What constraints will I face once I reopen? Should I fully staff? Will my employees come back?
Do I have a definitive plan to prosper when I reopen and get back to normal?
I applied for a Paycheck Protection Program (PPL) loan and/or EIDL Grant:
Can a PPP loan relieve my tax debt—while protecting my—and my employees’—future income?
What steps do I take to make sure my loan will be forgiven? Is this the most important consideration?
Do I continue to pay rent, utilities, and interest despite a negotiation not to pay?
How do I strategically balance the 75/25 rule of payroll versus non-payroll eligible expenses?
Would my business be better off taking the Employee Retention Credit under the Cares Act … or the Paycheck Protection Program (PPP)? (you can only take one)
The time to plan and strategize is now. If there is one thing I’ve learned in 30 years of helping clients … the sooner you deal with a tax problem, the better the outcome. The worst thing you can do is ignore the situation. Lift the burden and start on a path to a prosperous, new future! Reach us directly at (703) 847-6686 for a simple, free, confidential consultation with no obligation. We’re open for business—and actively helping clients!
The Paycheck Protection Program, part of the CARES Act, grants loans to businesses under generous terms. Even better, the government will forgive your loan if you meet certain conditions.
Keep in mind, however, that regulations and future adjustments can tweak certain provisions and that there are more details that a qualified professional can help you interpret.
The PPP loans are for small businesses. How do I know if mine is considered small?
You have to be a business or charity with fewer than 500 employees. However, some businesses with more employees may still qualify. For example, in the restaurant and hospitality industries, the 500-employee cap is waived as long as there are no more than 500 employees at any one physical location. The SBA goes into further detail, noting that even businesses with 500+ employees qualify as long as they satisfy the existing statutory and regulatory definition of a "small business concern" under Section 3 of the Small Business Act, 15 U.S.C. 632. Official guidance lists a full range of exceptions.
The CARES Act excludes from the definition of payroll costs any employee compensation in excess of an annual salary of $100,000. Does that include benefits?
No. This refers only to cash compensation. You do not have to count any of the following toward the $100,000 ceiling: contributions to retirement plans, insurance premiums to group health plans, or state and local payroll taxes the business has to remit.
Are we eligible even though we're a seasonal business?
Yes. A lender may consider whether a seasonal borrower was in operation on February 15, 2020, or for an 8-week period between February 15, 2019, and June 30, 2019.
We work through a PEO. Are we still eligible?
Yes. Payroll documentation provided by the payroll provider that indicates the amount of wages and payroll taxes reported to the IRS by the payroll provider for the borrower's employees will be considered acceptable PPP loan payroll documentation. For purposes of the PPP, employees of the eligible borrower will not be considered employees of the eligible borrower's payroll provider or PEO.
We make payments to independent contractors and sole proprietors. Are these payments included in calculations of our payroll costs?
No. Those payments are not considered payroll. However, the independent contractors or sole proprietors may themselves be eligible for their own PPP loans.
Do companies have to apply for the loan in person?
No. Major banks like Bank of America and Chase, for example, have created an online process.
How can my loan be forgiven?
To turn the loan into a grant, you must spend at least 75% as payroll. You are allowed to use PPP loan proceeds for various other expenses, but that portion of the loan will not be forgiven. If the full amount is forgiven, you owe no interest. Any unforgiven portion will accrue interest at an annual 1% rate and mature in 2 years with a 6-month deferment.
It's also essential to keep an eye on your staffing to be eligible for forgiveness: Your loan forgiveness will be reduced if (1) you decrease your full-time employee headcount or (2) you decrease salaries and wages by more than 25% for any employee who made less than $100,000 annualized in 2019. You have until June 30, 2020, to restore your full-time employment and salary levels for any changes made between February 15, 2020, and April 26, 2020.
Because of the ongoing financial turmoil, the IRS is cutting some slack to a great many individuals and businesses. They now have until July 15 to pay any federal income taxes they owe. The delay is available to individuals who owe $1 million or less and corporations that owe $10 million or less. The IRS will not charge interest or penalties for this delay.
Previously the IRS had only postponed payment, not filing, but on March 20 the Treasury announced filing would be postponed as well.
This could be an enormous boon to those who owe money. It's never easy finding the cash to write the government a check, but it's especially difficult now, as the coronavirus has curtailed so many activities: Many businesses and employees are seeing a drastic drop in income, and decimated stock portfolios may force some investors to sell at a loss to cover tax bills. Hopefully, in three months, taxpayers will be in a better position to pay.
For those who have already filed and are expecting a refund, nothing has changed; this does not mean they will have to wait any additional time for their refunds. Those expecting a refund have no reason to take advantage of the delay--it's to their advantage to file as soon as possible.
This delays in filing and payment only affect federal returns, not state. However, some states are offering similar relief. The American Institute of CPAs has created a list of what each state is doing. Note that this is a fast-moving story, so even if your state has nothing planned as of today, that may change by tomorrow.
Getting Into Details
This tax postponement plan began as an oral promise, but the IRS has started to issue more details and guidance in its e-newsletter:
The individual taxpayer relief includes all individual returns, includes self-employed individuals, and all entities other than C-corporations, such as trusts or estates.
The IRS will automatically provide this relief to taxpayers. Taxpayers do not need to file any additional forms or call the IRS to qualify for this relief.
For C Corporations, income tax payment deadlines are being automatically extended until July 15, 2020, for up to $10 million.
This relief also includes estimated tax payments for tax year 2020 that are due on April 15, 2020.
The relief only applies to federal income tax, not to any other kind of federal tax.
Since this is a very new program, we will be closely monitoring the situation for additional official guidance.
Updated, as of now, returns must be filed by 4/15/20 but you do have extension of time to pay for 90 days. These guidelines are constantly changing so please check with your accountant or CPA to get the latest news.
The Treasury is granting extra time to pay taxes owed from last year, but the reprieve doesn't apply to your tax return. You must file your return by April 15, said Steven Mnuchin, Treasury Secretary.
Deadline to file extended 90 days but if you are due a refund file ASAP especially if you are out of work and need the funds.
Taxpayers are about to get a three-month reprieve to work on their income tax returns, Treasury Secretary Steven Mnuchin said at a press conference on Tuesday.
Will update with more info as we learn more in the coming days. Best advice, if you know you are not going to have them done by the 4/15 deadline anyway, file the extension now while you can or your accountant is still operating.
The Trump administration is calling for tax deadline relief, but CPAs and taxpayers are still uncertain as to when documents must be filed and payments need to be made. Here are the next steps you should take.
Maybe IRS finally starting to get a little more aggressive.
IRS audits have been sliding for years as the federal tax collector’s staffing has been reduced.
When kids make money at a summer job, who files their taxes?
5 questions and answers about kids and money.
IRS Offers Summertime Tax Tips
Buying a home? Working a summer job? Volunteering? Activities that are common in the summer often qualify for tax credits or deductions. And, while summertime and part-time workers may not earn enough to owe federal income tax, they should remember to ...
Offer In Compromise harder to get approved than many people think.
Snipes still owed $23.5 million in back taxes when he was set free. In order to resolve his tax debt, the actor made an OIC of $850,000, or about 4% of the amount he owed.
Modernization is badly needed. Hopefully upgrades are on the way.
New proposed legislation that puts taxpayers first is understandably drawing approvals from both sides of the aisle in Congress. On March 28, the top tax writers from the House Ways & Means Committee and the Senate Finance Committee (SFC) introduced...
Sometimes it pays to think twice about filing jointly with your spouse. If you have questions as to whether or not you should be filing jointly or if you have previously filed jointly with your spouse and and think you may qualify for Equitable Relief, give us a call. 1-888-447-7457.
As far as federal income taxes go, it’s usually “until death do us part” for joint filers, but a recent Tax Court case ruled otherwise.There are
If you have seriously delinquent IRS debt and want to travel, read the below and contact us if you need help.
IR-2019-23, February 27, 2019 ― The IRS today reiterated its warning that taxpayers may not be able to renew a current passport or obtain a new passport if they owe federal taxes.
Don't fall victim to a scam. See the below for tips on how to avoid making this mistake.
To give you a better idea of how these scams work, and to help prepare you to defend against them, we decided to engage one of the scammers and follow their ploy.
Use this to help with your 2018 tax prep.
The Tax Cuts and Jobs Act pretty much doubled the standardized deduction, which means for millions of people, itemizing no longer makes sense. As this is the first tax season since the TCJA passage, MarketWatch has created a calculator to help guide you through the decision on whether to itemize or....
IRS Waives penalty for many whose tax withholding and estimated tax payments fell short in 2018
If required, make sure you make your estimated tax payments on time despite the shutdown.
The deadline to pay your estimated quarterly taxes is on Jan. 15. And no, the shutdown won't earn you a reprieve.
IRS will issue tax refunds during shutdown, White House says
In the briefing with reporters, Vice President Mike Pence said that Trump directed OMB to lessen the impact of the shutdown on everyday Americans.
The Clock Is Ticking: Small Business Tax Strategies to Do This Year
Make a few smart moves now and you can close out the year with the peace of mind that you made the best tax moves for your business.
The tax reform passed at the end of 2017 runs to about 70,000 words. It's a large and complicated piece of legislation, and we can look forward to additional guidance and clarifications. For now, here are summaries of some of the key provisions:
Key changes for individuals
Standard deduction amount increased. For 2018, the standard deduction amount has been significantly increased for all filers, as noted below. Some taxpayers who previously itemized their deductions may no longer find that necessary.
Single or married filing separately: $12,000.
Married filing jointly or qualifying widow(er): $24,000.
Head of household: $18,000.
Deduction for personal exemptions suspended. For 2018, you can't claim a personal exemption deduction for yourself, your spouse or your dependents.
Changes to deductions. Those who still will be itemizing should note the following changes and plan accordingly:
Your itemized deductions are no longer limited if your adjusted gross income is over a certain amount.
You can deduct the part of your medical and dental expenses that is more than 7.5 percent of your AGI.
Your deduction of state and local income, sales and property taxes is limited to a combined total of $10,000 ($5,000 if married filing separately).
You can no longer deduct job-related expenses or other miscellaneous itemized deductions that were subject to the 2 percent of your AGI floor. You may still deduct certain other items on Schedule A, such as gambling losses.
No more deductions for tax preparation fees or investment expenses, including investment management fees.
For indebtedness incurred after Dec.15, 2017, the deduction for home mortgage interest is limited to interest on up to $750,000 of home acquisition indebtedness. This new limit doesn't apply if you had a binding contract to close on a home after Dec. 15, 2017, and closed on or before April 1, 2018, and the prior limit would apply.
You can no longer deduct interest on home equity indebtedness, which means indebtedness not incurred for the purpose of buying, building or substantially improving the qualified residence secured by the indebtedness.
The limit on charitable contributions of cash has increased from 50 percent to 60 percent of your AGI.
Children and dependents. The law made some significant changes here.
Child tax credit and additional child tax credit. For 2018, the maximum credit increased to $2,000 per qualifying child. The maximum additional child tax credit increased to $1,400. In addition, the income threshold at which the credit begins to phase out is increased to $200,000 ($400,000 if married filing jointly).
Credit for other dependents. A new credit of up to $500 is available for each of your dependents who does not qualify for the child tax credit. In addition, the maximum income threshold at which the credit begins to phase out is increased to $200,000 ($400,000 if married filing jointly).
Marriage. Alimony and separate maintenance payments are no longer deductible for any agreement executed or modified after Dec. 31, 2018.
What isn't changing. The new tax law changed a lot, but not everything. The IRS has noted that the following provisions and numbers remain the same. For tax year 2018:
The annual exclusion for gifts is $15,000.
The monthly limitation for the qualified transportation fringe benefit is $260, as is the monthly limitation for qualified parking.
The AGI amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $114,000.
Social Security. Not related to tax reform changes, but still important to individuals and businesses, is the decision to give Social Security recipients a 2.8 percent cost-of-living raise in 2019. Also changed is the maximum taxable amount subject to Social Security tax. This number will increase to $132,900 from $128,400. The tax rate itself is unchanged: 7.65 percent each for employees and employers and 15.30 percent for those who are self-employed.
Key changes for businesses
Based on the kind of business you run, you may see significant changes under the new laws.
Pass-through provisions. Many owners of sole proprietorships, partnerships, trusts and S corporations may be eligible for a new deduction — referred to as the Qualified Business Income Deduction — allowing them to deduct up to 20 percent of their qualified business income.
Meals and entertainment. The new law generally eliminated the deduction for any expenses related to activities considered entertainment, amusement or recreation. However, under the new law, taxpayers can continue to deduct 50 percent of the cost of business meals if the taxpayer (or an employee of the taxpayer) is present and the food or beverages are not considered lavish or extravagant.
Temporary 100 percent expensing. The new law temporarily allows 100 percent expensing for business property acquired and placed in service after Sept. 27, 2017, and before Jan. 1, 2023. The 100 percent allowance generally decreases by 20 percent per year in taxable years beginning after 2022 and expires Jan. 1, 2027.
Expensing depreciable business assets. The law increased the maximum deduction to $1 million and increased the phase-out threshold to $2.5 million. It also modifies the definition of section 179 property to allow the taxpayer to elect to include certain improvements made to nonresidential real property.
New employer credit for paid family and medical leave. The Tax Cuts and Jobs Act added a new tax credit for employers that offer paid family and medical leave to their employees. The credit applies to wages paid in taxable years beginning after Dec. 31, 2017, and before Jan. 1, 2020.
Opportunity Zones. Investments in Opportunity Zones provide tax benefits to investors. Investors can elect to temporarily defer tax on capital gains that are reinvested in a Qualified Opportunity Fund (QOF). The tax on the gain can be deferred until the earlier of the date on which the QOF investment is sold or exchanged, or Dec. 31, 2026.
Sexual harassment. This provision did not get a lot of attention, but the new law makes it clear that no deduction is allowed for certain payments made in sexual harassment or sexual abuse cases.
What's the bottom line?
This isn't everything you need to know, of course. There are a lot of details and additional guidance. The key is to be proactive and speak to us about withholding adjustments and other tax planning issues in the new year.
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