business

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 […]

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

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 […]

SBA Offering Loans to Small Businesses Hit Hard by COVID-19

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Every company has faced unprecedented challenges in adjusting to life following the widespread outbreak of the coronavirus (COVID-19). Small businesses face particular difficulties in that, by definition, their resources — human, capital and otherwise — are limited. If this describes your company, one place you can look to for some assistance is the Small Business Administration (SBA).

New loan, relaxed criteria

The agency has announced that it’s offering Economic Injury Disaster Loans under the Coronavirus Preparedness and Response Supplemental Appropriations Act, which was recently signed into law.

Here’s how it works: The governor of a state or territory must first submit a request for Economic Injury Disaster Loan assistance to the SBA. The agency’s Office of Disaster Assistance then works with the governor to approve the request. Upon completion of this process, affected small businesses within the state gain access to information on how to apply for loan assistance.

To speed the process, […]

By |March 25th, 2020|business, New Tax Laws, relief, small business|0 Comments

Getting Help With a Business Interruption Insurance Claim

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To guard against natural disasters and other calamities, many companies buy business interruption insurance. These policies provide cash flow to cover revenues lost and expenses incurred while normal operations are limited or suspended.

But buying coverage is one thing — making a claim and receiving the funds is quite another. Depending on the scope of your loss, the insurer may enlist its own specialists to audit and reduce your claim. Fortunately, you can enlist a CPA to help you prepare a claim, quantify business interruption losses and anticipate your insurer’s challenges.

Major roles

There are two major roles your accountant can play in managing the claims process:

1. Point person. He or she can be the primary contact with the insurer, dealing with the typical onslaught of document requests. This leaves you free to run your business and bring it back up to speed.

By |March 9th, 2020|business, disaster|0 Comments

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 […]

Your Home Office Expenses May Be Tax Deductible

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Technology has made it easier to work from home so lots of people now commute each morning to an office down the hall. However, just because you have a home office space doesn’t mean you can deduct expenses associated with it.

Regularly and exclusively

In order to be deductible for 2019 and 2020, you must be self-employed and the space must be used regularly (not just occasionally) and exclusively for business purposes. If, for example, your home office is also a guest bedroom or your children do their homework there, you can’t deduct the expenses associated with the space.

Two options

If you qualify, the home office deduction can be a valuable tax break. There are two options for the deduction:

  • Write off a portion of your mortgage interest, property taxes, insurance, utilities and certain other expenses, as well as the depreciation allocable to the office space. This requires calculating, allocating and substantiating actual expenses.
  • Take the “safe harbor” deduction. Only one simple calculation is necessary: $5 times the number of square feet of the office space. The safe harbor deduction is capped at $1,500 per year, based on a maximum of 300 square feet.

Changes through 2025

Under […]

By |February 4th, 2020|business, deduction, expensing, New Tax Laws|0 Comments

2020 Q1 Tax Calendar: Key Deadlines for Businesses and Other Employers

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Here are some of the key tax-related deadlines affecting businesses and other employers during the first quarter of 2020. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

January 31

  • File 2019 Forms W-2, “Wage and Tax Statement,” with the Social Security Administration and provide copies to your employees.
  • Provide copies of 2019 Forms 1099-MISC, “Miscellaneous Income,” to recipients of income from your business where required.
  • File 2019 Forms 1099-MISC reporting nonemployee compensation payments in Box 7 with the IRS.
  • File Form 940, “Employer’s Annual Federal Unemployment (FUTA) Tax Return,” for 2019. If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it’s more than $500, you must deposit it. However, if you deposited the tax for the year in full and on time, you have until February 10 to file the return.
  • File Form 941, “Employer’s Quarterly Federal Tax Return,” to report Medicare, Social Security and income taxes withheld in the fourth quarter of 2019. If your tax liability is […]
By |January 10th, 2020|business|0 Comments

5 Ways to Strengthen Your Business for the New Year

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The end of one year and the beginning of the next is a great opportunity for reflection and planning. You have 12 months to look back on and another 12 ahead to look forward to. Here are five ways to strengthen your business for the new year by doing a little of both:

1. Compare 2019 financial performance to budget. Did you meet the financial goals you set at the beginning of the year? If not, why? Analyze variances between budget and actual results. Then, evaluate what changes you could make to get closer to achieving your objectives in 2020. And if you did meet your goals, identify precisely what you did right and build on those strategies.

2. Create a multiyear capital budget. Look around your offices or facilities at your equipment, software and people. What investments will you need to make to grow your business? Such investments can be both tangible (new equipment […]

By |January 10th, 2020|business|0 Comments

Do You Have a California Business That Collects Sales Tax?

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California businesses that collect sales tax from customers must correctly report the sales and remit the tax on time or face a possible 25% fraud penalty. The CA Dept. of Tax and Fee Administration (CDTFA) found that one restaurant owner significantly underreported sales and underpaid the related sales tax. On that basis, the CDTFA determined that he was not only subject to the 25% fraud penalty, but that he also met the criteria for a higher penalty of 40%. That is, evidence showed he knowingly collected sales tax to be remitted and failed to remit the full tax collected; also, the amount exceeded an established threshold. The CA Office of Tax Appeals upheld the penalty. If you have questions, please contact your Linkenheimer CPA.

By |December 11th, 2019|business, ca, CA tax, sales tax|0 Comments