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California Tax Updates for May 7th

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Update 1:

Are you selling goods in California? Now that so many people are looking for alternate ways to make an income due to the novel coronavirus (COVID-19) pandemic, selling goods from home is attracting a lot of people. Depending on the details, you may need a seller’s permit. The CA Dept. of Tax and Fee Administration (CDFTA) has issued an updated publication entitled “Do You Need a CA Seller’s Permit?” Generally, if you make three or more sales in a 12-month period, you are required to have a seller’s permit, even if the sales were made through internet auctions houses or websites or offered through online classified ads. Here’s more from the CDFTA: https://bit.ly/353Cd9v

Update 2:

San Francisco will require public health emergency leave for some employees during the novel coronavirus (COVID-19) pandemic. The federal Families First Coronavirus Response Act provides sick leave to employees who are unable to work or telework due to […]

By |May 7th, 2020|business, employer|0 Comments
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Do You Have Tax Questions Related To COVID-19? Here Are Some Answers

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The coronavirus (COVID-19) pandemic has affected many Americans’ finances. Here are some answers to questions you may have right now.

My employer closed the office and I’m working from home. Can I deduct any of the related expenses?

Unfortunately, no. If you’re an employee who telecommutes, there are strict rules that govern whether you can deduct home office expenses. For 2018–2025 employee home office expenses aren’t deductible. (Starting in 2026, an employee may deduct home office expenses, within limits, if the office is for the convenience of his or her employer and certain requirements are met.)

Be aware that these are the rules for employees. Business owners who work from home may qualify for home office deductions.

My son was laid off from his job and is receiving unemployment benefits. Are they taxable?

Yes. Unemployment compensation is taxable for federal tax purposes. This includes your son’s […]

By |May 5th, 2020|business, deduction, deductions, disaster, employer, individuals, ira, irs, New Tax Laws, roth ira, small business, tax credit, tax deductions, tax implications, tax planning|0 Comments
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Paycheck Protection Program Loan Forgiveness

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Dear Clients and Friends:

Congratulations if you received a Paycheck Protection Program (PPP) loan! We hope it provides much needed cash during these uncertain times. Now that you have the funds, we want to point out certain steps you should take over the next eight weeks to ensure maximum forgiveness of your PPP loan.

Use the Funds for Forgivable Purposes. Forgiveness of your PPP loan depends largely on whether you use the money to pay forgivable expenses. These include (1) payroll costs (if you’re self-employed, these costs include the net profit amount from your business, as reported on your 2019 tax return), (2) interest payments on mortgages incurred before 2/15/20, (3) rent payments on leases dated before 2/15/20, and (4) utility payments under service agreements dated before 2/15/20. However, according to the Small Business Administration (SBA), not more than 25% of the forgivable loan amount (the amount of the loan used to pay forgivable expenses) may be attributable to nonpayroll costs. In other words, at least 75% of the loan must be used for payroll costs.

To help you meet this requirement, consider implementing the following best practices:

  • Set up a separate bank account for […]
By |May 4th, 2020|business, employer, liability, New Tax Laws|0 Comments
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IRS Extends Some (But Not All) Employee Benefit Plan Deadlines

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The IRS recently issued Notice 2020-23, expanding on previously issued guidance extending certain tax filing and payment deadlines in response to the novel coronavirus (COVID-19) crisis. This guidance applies to specified filing obligations and other “specified actions” that would otherwise be due on or after April 1, 2020, and before July 15, 2020. It extends the due date for specified actions to July 15, 2020.

Specified actions include any “specified time-sensitive action” listed in Revenue Procedure 2018-58, including many relating to employee benefit plans. The relief applies to any person required to perform specified actions within the relief window, and it’s automatic — your business doesn’t need to file any form, letter or other request with the IRS.

Filing extensions beyond July 15, 2020, may be sought using the appropriate extension form, but the extension won’t go beyond the original statutory or regulatory extension date. Here are some highlights of Notice 2020-23 specifically related to employee benefit plans:

Form 5500. The relief window covers Form 5500 filings for plan years that ended in September, October or November 2019, as well as Form 5500 deadlines within the window as a result of a previously filed […]

By |April 22nd, 2020|business, contributions, employer, hsa, retirement|0 Comments
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Relief From Not Making Employment Tax Deposits Due To COVID-19 Tax Credits

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The IRS has issued guidance providing relief from failure to make employment tax deposits for employers that are entitled to the refundable tax credits provided under two laws passed in response to the coronavirus (COVID-19) pandemic. The two laws are the Families First Coronavirus Response Act, which was signed on March 18, 2020, and the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act, which was signed on March 27, 2020.

Employment tax penalty basics

The tax code imposes a penalty for any failure to deposit amounts as required on the date prescribed, unless such failure is due to reasonable cause rather than willful neglect.

An employer’s failure to deposit certain federal employment taxes, including deposits of withheld income taxes and taxes under the Federal Insurance Contributions Act (FICA) is generally subject to a penalty.

COVID-19 relief credits

Employers paying qualified sick leave wages and qualified family leave wages required by the Families First Act, as well as qualified health plan expenses allocable to qualified leave wages, are eligible for refundable tax credits under the Families First Act.

Specifically, provisions of the Families First Act provide a refundable tax credit against an employer’s share of the Social […]

By |April 13th, 2020|employer, irs, New Tax Laws, relief, tax cuts, tax deductions, tax planning|0 Comments
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Answers to Questions About the CARES Act Employee Retention Tax Credit

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The recently enacted Coronavirus Aid, Relief, and Economic Security (CARES) Act provides a refundable payroll tax credit for 50% of wages paid by eligible employers to certain employees during the COVID-19 pandemic. The employee retention credit is available to employers, including nonprofit organizations, with operations that have been fully or partially suspended as a result of a government order limiting commerce, travel or group meetings.

The credit is also provided to employers who have experienced a greater than 50% reduction in quarterly receipts, measured on a year-over-year basis.

IRS issues FAQs

The IRS has now released FAQs about the credit. Here are some highlights.

How is the credit calculated? The credit is 50% of qualifying wages paid up to $10,000 in total. So the maximum credit for an eligible employer for qualified wages paid to any employee is $5,000.

Wages paid after March 12, 2020, and before Jan. 1, 2021, are eligible for the credit. Therefore, an employer may be able to claim it for qualified wages paid as early as March 13, 2020. Wages aren’t limited to cash payments, but also include part of the cost of employer-provided health care.

When is the operation of a […]

By |April 6th, 2020|business, credit, employer, New Tax Laws, relief, small business, tax credit, tax planning|0 Comments
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SBA Loans and the Paycheck Protection Program

California Capitol building in Sacramento

Dear clients, family and friends,

We hope you all are well and safe. At Linkenheimer, our staff continue to work hard from home to help our clients find peace of mind and navigate this difficult, evolving situation. As the shelter in place continues for Sonoma County and California, we understand that many of our clients are feeling the stress of protecting and paying employees, managing rent and overhead costs and keeping their business afloat. On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). The CARES Act contains many provisions for businesses and individuals, but the most impactful provision for small businesses in the immediate future is the Paycheck Protection loan program (PPP). This new program will provide up to $349 billion in federally guaranteed loans for small businesses. The Program will provide much-needed relief to millions of small businesses so they can sustain their businesses and keep their workers employed.

“This legislation provides small business job retention loans to provide eight weeks of payroll and certain overhead to keep workers employed,” said Secretary Mnuchin. “Treasury and the Small Business Administration […]

By |April 3rd, 2020|business, employer, federal, filing deadline, New Tax Laws, self employed, small business, tax cuts, tax deadlines, tax deductions|0 Comments
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California COVID-19 Tax Updates and the WARN Act

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Update 1

An important employment law, the WARN Act, is suspended in California for now. The WARN Act requires employers with 75 or more employees to provide 60 days’ written notice of a mass layoff, relocation or termination affecting 50 or more employees. CA Governor Gavin Newsom has issued an executive order suspending the law in light of the coronavirus (COVID-19) pandemic. Per the order, businesses must still provide employees with written notice, but are not subject to the 60-day advanced notice. Employers must give as much notice as practicable and must contain a brief statement that the termination is COVID-19-related. Here’s more: https://bit.ly/3aizZVA

Update 2

California Governor Gavin Newsom recently issued an executive order on the coronavirus (COVID-19) including certain tax relief. His order suspends interest and penalties for individuals and businesses who are unable to file a timely tax return or make timely payments due to compliance with COVID-19 guidance. Suspension gives taxpayers […]

By |April 1st, 2020|california, employer, filing deadline, New Tax Laws|0 Comments
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The New COVID-19 Law Provides Businesses and Employees With More Relief

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On March 27, President Trump signed into law another coronavirus (COVID-19) law, which provides extensive relief for businesses and employers. Here are some of the tax-related provisions in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). 

Employee retention credit

The new law provides a refundable payroll tax credit for 50% of wages paid by eligible employers to certain employees during the COVID-19 crisis.

Employer eligibility. The credit is available to employers with operations that have been fully or partially suspended as a result of a government order limiting commerce, travel or group meetings. The credit is also provided to employers that have experienced a greater than 50% reduction in quarterly receipts, measured on a year-over-year basis.

The credit isn’t available to employers receiving Small Business Interruption Loans under the new law.

Wage […]

By |March 30th, 2020|business, disaster, employer, filing deadline, gift tax, individuals, irs, New Tax Laws, small business, tax deadlines, tax implications, tax planning, taxpayer|0 Comments
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Numerous Tax Limits Affecting Businesses Have Increased For 2020

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An array of tax-related limits that affect businesses are annually indexed for inflation, and many have increased for 2020. Here are some that may be important to you and your business.

Social Security tax

The amount of employees’ earnings that are subject to Social Security tax is capped for 2020 at $137,700 (up from $132,900 for 2019).

Deductions

  • Section 179 expensing:
    • Limit: $1.04 million (up from $1.02 million for 2019)
    • Phaseout: $2.59 million (up from $2.55 million)
  • Income-based phase-out for certain limits on the Sec. 199A qualified business income deduction begins at:
    • Married filing jointly: $326,600 (up from $321,400)
    • Married filing separately: $163,300 (up from $160,725)
    • Other filers: $163,300 (up from $160,700)

Retirement plans

  • Employee contributions to 401(k) plans: $19,500 (up from $19,000)
  • Catch-up contributions to 401(k) plans: $6,500 (up from $6,000)
  • Employee contributions to SIMPLEs: $13,500 (up from $13,000)
  • Catch-up contributions to SIMPLEs: $3,000 (no change)
  • Combined employer/employee contributions to defined contribution plans (not including catch-ups): $57,000 (up from $56,000)
  • Maximum compensation used to determine contributions: $285,000 (up from $280,000)
  • Annual benefit for defined benefit plans: $230,000 (up from $225,000)
  • Compensation defining a highly compensated employee: $130,000 (up from $125,000)
  • Compensation defining a “key” employee: $185,000 (up from $180,000)

Other employee benefits

  • Qualified transportation fringe-benefits employee income exclusion: $270 per month (up […]
By |March 3rd, 2020|business, deduction, deductions, employer, New Tax Laws, retirement|0 Comments
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