State and Local wage reporting for remote workers in 2020

 Accounting & Taxation, Current Events, Tax Tips  Comments Off on State and Local wage reporting for remote workers in 2020
Nov 062020
 

The COVID-19 pandemic has raised a number of perplexing tax issues, and it doesn’t seem like there’s an end in sight. A good example is the state and local wage reporting conundrum for businesses and for workers.

Working from home has a unique set of perqs, but it also has its pitfalls. Combine those pitfalls with how many people were effectively “stuck” in their second homes, often in remote locations from their tax homes (across state lines, in many cases), and the income tax reporting can get very tedious.

For employers with remote workers, it is entirely possible that the location(s) of those workers may have triggered a nexus in a state (or states) where those employers would not otherwise be considered to “have employees.” This means that these businesses will have to report wages and should possibly have withheld income taxes in those locations, have registered with the related authorities, and possibly have paid contributions to state unemployment insurance funds there.

For employees, the situation is not any easier. It’s possible that income tax returns will have to be filed in states where those taxpayers may have maintained a second home, but where they have never before generated any income.

The AICPA has provided the following guidance for taxpayers, which states, in essence:

  1. Compile a list of any states where you’ve worked remotely during 2020.
  2. If you didn’t track the specific number of days worked in other states, try to approximate the number of days as best you can.
  3. Depending upon the state, income taxes may also be levied by cities, counties, municipalities, school districts, or other jurisdictions. Make sure you also track this level of detail.
  4. Consult a qualified tax advisor. He or she should be able to help determine relevant questions to ask based upon where services were performed and for how long.
  5. Check your state tax withholding (for as many states as may be required) and make any necessary adjustments. If your withholding (in any one of them) is too low, you may owe (additional) state taxes, interest, and penalties when you file your 2020 return(s).
  6. Going forward, be sure keep an ongoing record of all jurisdictions where you work remotely.

Again, this is not something that do-it-yourself, off-the-shelf tax software can provide. Only a qualified professional has the skills to advise as to the best course of action in these matters. There is no one-size-fits-all solution to issues such as these, but rather, each situation (for employers and for employees) must be considered on its own.

Rosenthal & Rosenthal, LLC is a public accounting firm comprised of principals who are Enrolled Agents, recognized to practice before the Internal Revenue Service. We stand ready to assist in these troubling times. Feel free to contact us to discuss your concerns.

2020 Year end tax planning for small businesses

 Accounting & Taxation, Current Events, Current Events, Tax Tips  Comments Off on 2020 Year end tax planning for small businesses
Oct 302020
 

2020 has turned many things upside down, not the least of which is year end tax planning. Where in years past, it was generally good strategy to accelerate deductions into the current year (and defer income, for those on cash basis), it might make more sense this year to wait on those larger expenditures until after January 1, and instead accelerate income (where possible) into 2020.

Rehiring? The Work Opportunity Tax Credit (WOTC) is slated to expire December 31. This is a one-time (use it or lose it) tax credit for hiring from targeted groups (long-term unemployed, veterans, vocational rehab referrals, and a few more). While this credit could be extended, we have heard nothing affirmative, so this may be your last chance to snag it.

These are topics for discussion with a qualified professional (do-it-yourself tax prep software or whatever software you might use to manage your business checking account can’t do this). We invite you to contact either of our offices for a consultation.

2020 Coronavirus (COVID-19) Economic Impact – IRS People First Initiative

 Accounting & Taxation, Current Events, Current Events, Tax Tips  Comments Off on 2020 Coronavirus (COVID-19) Economic Impact – IRS People First Initiative
May 042020
 

Key collection and compliance activities have been temporarily suspended by the IRS in the wake of the COVID-19 pandemic. These include existing installment arrangements, pending arrangements, offers in compromise, non-filer programs, and others. In general, activity has been postponed until July 15, 2020, however the impact on running statutes of limitations has yet to be fully determined.

See the second link, below, for specific information.

Further information

Here are some helpful links for more information, which should be updated on a regular basis:

https://www.irs.gov/coronavirus
https://www.irs.gov/newsroom/irs-unveils-new-people-first-initiative-covid-19-effort-temporarily-adjusts-suspends-key-compliance-program

2020 Coronavirus (COVID-19) Economic Impact – Information for small businesses

 Accounting & Taxation, Current Events, Current Events, Tax Tips  Comments Off on 2020 Coronavirus (COVID-19) Economic Impact – Information for small businesses
May 042020
 

This is the second installment in our series directed to our clients who are financially affected by the 2020 Coronavirus pandemic.

This post focuses on information specific to small business financial assistance and compliance matters.

Due dates

Federal and State filings and payments

Please see the first article in this series and refer to the commentary there regarding filing due dates, as these apply to business filing deadlines, as well.

Reconciliation of Federal and State filing dates

Where applicable and as possible, we will be filing State extensions so as to take full advantage of the Federal postponement to July 15. This would pertain to those clients who have filings due to states which have not moved their due dates to at least July 15.

Note that some tax filings have no availability of extension (Sales and Use Tax is a good example). Please refer to the state information link in the first article in this series for additional information and a good reference for state information.

Paycheck Protection Program

Note that this Program was re-funded by Congress and the SBA resumed accepting applications from participating lenders on Monday, April 27, 2020 at 10:30am EDT.

The Paycheck Protection Program is in reality an SBA loan. As such, businesses must apply through a local bank or SBA lending institution for these funds. Specifically, any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Not all lenders are participating, so you should check with yours as to its status.

The Program provides for loan forgiveness if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. Note that of the foregoing categories, at least 75% of loan proceeds must be used for payroll in order to qualify for forgiveness. Also, current IRS guidelines preclude the deductibility of any expenses which have been offset with forgiven loan money.

COVID-19-affected eligible businesses include:

  • Any small business concern that meets SBA’s size standards (either the industry based sized standard or the alternative size standard) – typically, this will cover more than just what most of us consider “a small business”;
  • Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or Tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:
    • 500 employees, or
    • That meets the SBA industry size standard if more than 500
  • Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location
  • Sole proprietors, independent contractors, and self-employed persons (but note that these entities must have one or more employees; this is not for independents without payroll expense – and payroll means payroll, not subcontractors)

When not forgiven, these loans have a 2 year term at 1% interest.

The loan application itself may be downloaded here, though you should request your lender’s form for filing.

Lenders participating in the Paycheck Protection Program by state as of May 1, 2020 are listed here.

 

Further information

Here are some helpful links for more information, which should be updated on a regular basis:

https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program/
https://www.irs.gov/coronavirus
https://www.irs.gov/newsroom/economic-impact-payments-what-you-need-to-know
https://www.drakesoftware.com/archive/economic-impact-payments-the-facts/

2020 Coronavirus (COVID-19) Economic Impact – Information for all taxpayers

 Accounting & Taxation, Current Events, Current Events, Tax Tips  Comments Off on 2020 Coronavirus (COVID-19) Economic Impact – Information for all taxpayers
Apr 032020
 

Recent events have unfolded very rapidly; perhaps too rapidly for processes to keep pace. This is the first entry in a series to hopefully help bring some current information together in one place for our clients who are financially affected by the 2020 Coronavirus pandemic.

This post focuses on general taxpayer information, due dates, and economic impact payments.

Due dates

Federal filings and payments

Per IRS Notice 2020-18, any individual, trust, estate, partnership, association, company, or corporation1 with a Federal income tax payment or a Federal income tax return due April 15, 2020, such payment or return is automatically postponed to July 15, 2020. There is no limitation on the amount of the payment that may be postponed, and no extension filing is required.

No interest or penalty which would otherwise be charged or would accrue between April 15 and July 15 will be charged on any amount due.

Essentially, for tax purposes, July 15 is April 15, this year.

Note that this also applies to Federal estimated income tax payments. Thus, the payment due date schedule for 2020 is currently:

  • 1st quarter – July 15, 2020
  • 2nd quarter – June 15, 2020
  • 3rd quarter – September 15, 2020
  • 4th quarter – January 15, 2021

ONLY THE PAYMENTS AND FILINGS DUE APRIL 15 HAVE BEEN AFFECTED BY THIS CHANGE. FURTHER, FISCAL YEAR ENTITIES WITH PAYMENTS AND FILINGS DUE IN MAY AND JUNE REMAIN ON THE ORIGINAL SCHEDULE.

State and local filings and payments

These vary by taxing authority, and vary widely. For an updated list, see Taxing Subjects: Did COVID-19 Change My State Individual Income Tax Deadline?

Reconciliation of Federal and State filing dates

Where applicable and as possible, we will be filing State extensions so as to take full advantage of the Federal postponement to July 15. This would pertain to those clients who have filings due to states which have not moved their due dates to at least July 15.

As always, an extension of time to file is not an extension of time to pay any tax which would otherwise be due (the Federal postponement is different, in that it is in fact, a postponement and specifically not an extension, and it pertains to payments as well as filings). Thus, if any State tax would be due on the original (or as adjusted) due date for filing that return, this tax should be paid or it will generally be subject to penalty and interest on the underpayment and may invalidate the State extension.

Economic impact payments

Amounts

Subtitle B-Rebates and Other Individual Provisions, SEC. 2201. 2020 RECOVERY REBATES FOR INDIVIDUALS as stated in the CARES Act, provides for the following tax rebates or economic impact payments to all eligible taxpayers2:

  • $1,200 ($2,400 for joint filers), plus
  • $500 for each qualifying child3

This is (currently) a one-time rebate (cash payment). See the next section on how income levels are determined for the purpose of this payment.

These amounts phase out at the rate of $5 for each $100 above the following thresholds:

  • $75,000 of adjusted gross income for single filers
  • $150,000 of adjusted gross income for joint filers

Single filers with AGI in excess of $99,000 and joint filers with AGI in excess of $198,000 with no children are not eligible for any rebate (fully phased out).

Adjusted gross income

Taxpayers who have filed 2018 or 2019 returns will automatically receive a payment as calculated above.

Method of payment

If direct deposit information has already been provided to the Internal Revenue Service on the most recent income tax return filing (or in some other fashion), this information will be used to directly deposit the rebate amount.

Treasury Secretary Mnuchin has stated publicly that it is the intention of the Treasury, through the Internal Revenue Service, to provide an online portal for taxpayers to provide their banking information if not already on file with the IRS. Alternatively, payments may (apparently) be sent in the form of debit cards or paper checks.

Timing of payments

Disbursements are reportedly to begin sometime during the week of April 6, 2020.

Non-filers for 2018 who have returns due

If you have not yet filed a 2018 Federal income tax return, while our normal procedure is to prepare returns chronologically, we can prepare these based on the information at hand, simply to satisfy the filing requirement for rebate eligibility. Note that you should fully expect to have us amend such filings if one or more preceding year(s) need to be prepared and where such earlier return(s) would have an impact on 2018. Contact us to get started.

Non-filers for 2018 and/or 2019 who did not or do not have a filing obligation

If your gross income was below the filing threshold or other circumstances would have rendered you not required to file a return for 2018 (and 2019), supposedly there will be an “abbreviated” return filing which will be made available. As such forms have not yet been released, our best advice is to have us prepare a standard 2018 tax return showing what income you did have, even if it was below the filing threshold or even if you were exempted from filing for that year. No tax or penalty should be due with the late filing of the return (assuming no return would have been statutorily required originally).

Further information

Here are some helpful links for more information, which should be updated on a regular basis:

https://www.irs.gov/coronavirus
https://www.irs.gov/newsroom/economic-impact-payments-what-you-need-to-know
https://www.drakesoftware.com/archive/economic-impact-payments-the-facts/

Show 3 footnotes

  1. As provided in section 7701(a)(1) of the Internal Revenue Code.
  2. Any individual who is NOT: a nonresident alien individual, any individual who is a dependent of another, or an estate or trust.
  3. Within the meaning of section 24(c).