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IRS Announces Per Diem Rates For Business Travel

In Notice 2020-71, the IRS recently announced per diem rates that can be used to substantiate the amount of business expenses incurred for travel away from home on or after October 1, 2020. Employers using these rates to set per diem allowances can treat the amount of certain categories of travel expenses as substantiated without requiring that employees prove the actual amount spent. (Employees must still substantiate the time, place and business purposes of their travel expenses.)

The amount deemed substantiated will be the lesser of the allowance actually paid or the applicable per diem rate for the same set of expenses. This notice, which replaces Notice 2019-55, announces:

Rates for use under the optional high-low substantiation method,
Special rates for transportation industry employers, and
The rate for taxpayers taking a deduction only for incidental expenses.

Updated general guidance issued in 2019 regarding the use of per diems under the Tax Cuts and Jobs Act (TCJA) remains in effect.

High-low method

For travel within the continental United States, the optional high-low method designates one per diem rate for high-cost locations and another for other locations. Employers can use the high-low method for substantiating lodging, meals and […]

By Linkenheimer LLP|2020-09-25T15:49:17+00:00September 25th, 2020|business, expensing, irs|0 Comments

Can Investors Who Manage Their Own Portfolios Deduct Related Expenses?

In some cases, investors have significant related expenses, such as the cost of subscriptions to financial periodicals and clerical expenses. Are they tax deductible? Under the Tax Cut and Jobs Act, these expenses aren’t deductible through 2025 if they’re considered expenses for the production of income. But they are deductible if they’re considered trade or business expenses. (For tax years before 2018, production-of-income expenses were deductible, but were included in miscellaneous itemized deductions, which were subject to a 2%-of-adjusted-gross-income floor.)

In order to deduct investment-related expenses as business expenses, you must figure out if you’re an investor or a trader — and be aware that it’s more advantageous (and difficult) to qualify for trader status.

To qualify, you must be engaged in a trade or business. The U.S. Supreme Court held many years ago that an individual taxpayer isn’t engaged in a trade or business merely because the individual manages his or her own securities investments, regardless of the amount of the investments or the extent of the work required.

However, if you can show that your investment activities rise to the level of carrying on a trade or business, you may be considered a […]

By Linkenheimer LLP|2020-09-22T16:10:41+00:00September 22nd, 2020|deduction, deductions, expensing, investment, New Tax Laws|0 Comments

Weighing The Risks Vs. Rewards Of A Mezzanine Loan

To say that most small to midsize businesses have at least considered taking out a loan this year would probably be an understatement. The economic impact of the COVID-19 pandemic has lowered many companies’ revenue but may have also opened opportunities for others to expand or pivot into more profitable areas.

If your company needs working capital to grow, rather than simply survive, you might want to consider a mezzanine loan. These arrangements offer relatively quick access to substantial funding but with risks that you should fully understand before signing on the dotted line.

Equity on the table

Mezzanine financing works by layering a junior loan on top of a senior (or primary) loan. It combines aspects of senior secured debt from a bank and equity-based financing obtained from direct investors. Sources of mezzanine financing can include private equity groups, mutual funds, insurance companies and buyout firms.

Unlike bank loans, mezzanine debt typically is unsecured by […]

By Linkenheimer LLP|2020-09-18T15:33:42+00:00September 18th, 2020|business, small business|0 Comments

IRS Provides Tax Relief For Victims Of California Wildfires; Oct. 15 Deadline, Other Dates Extended To Dec. 15

Victims of the California wildfires that began Aug. 14 now have until Dec. 15, 2020 to file various individual and business tax returns and make tax payments, the Internal Revenue Service announced today.

The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance. Currently this includes Lake, Monterey, Napa, San Mateo, Santa Cruz, Solano, Sonoma and Yolo counties in California, but taxpayers in localities added later to the disaster area will automatically receive the same filing and payment relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

The tax relief postpones various tax filing and payment deadlines that occurred starting on Aug. 14, 2020. As a result, affected individuals and businesses will have until Dec. 15, 2020, to file returns and pay any taxes that were originally due during this period. This means individuals who had a valid extension to file their 2019 return due to run out on Oct. 15, 2020, will now have […]

By Linkenheimer LLP|2020-09-03T20:02:01+00:00August 25th, 2020|Blog, business, fire, individuals, irs, New Tax Laws, tax deadlines|0 Comments

CARES Act Made Changes To Excess Business Losses

The Coronavirus Aid, Relief and Economic Security (CARES) Act made changes to excess business losses. This includes some changes that are retroactive and there may be opportunities for some businesses to file amended tax returns.

If you hold an interest in a business, or may do so in the future, here is more information about the changes.

Deferral of the excess business loss limits

The Tax Cuts and Jobs Act (TCJA) provided that net tax losses from active businesses in excess of an inflation-adjusted $500,000 for joint filers, or an inflation-adjusted $250,000 for other covered taxpayers, are to be treated as net operating loss (NOL) carryforwards in the following tax year. The covered taxpayers are individuals, estates and trusts that own businesses directly or as partners in a partnership or shareholders in an S corporation.

The $500,000 and $250,000 limits, which are adjusted for inflation for tax years beginning after calendar year 2018, were scheduled under the TCJA to apply to tax years beginning in calendar years 2018 through 2025. But the CARES Act has retroactively […]

By Linkenheimer LLP|2020-09-03T20:02:03+00:00August 24th, 2020|act, business, cares act, New Tax Laws, tcja|0 Comments