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April 1, 2020by admin

In addition to the official filing deadline on April 15, 2020, there are several other filing deadlines this month!

April 10, 2o20

Employees – who work for tips. If you received $20 or more in tips during March, report them to your employer. You can use Form 4070.

April 15, 2020

Employers – Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in March.

Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments in March.

Individuals – File an income tax return for 2019 (Form 1040 or Form 1040-SR) and pay any tax due. If you want an automatic 6-month extension of time to file the return, file Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return and pay what you estimate you owe in tax to avoid penalties and interest. Then file Form 1040 or Form 1040-SR by October 15.

Household Employers – If you paid cash wages of $2,100 or more in 2019 to a household employee, file Schedule H (Form 1040 or Form 1040-SR) with your income tax return and report any employment taxes. Report any federal unemployment (FUTA) tax on Schedule H (Form 1040 or Form 1040-SR) if you paid total cash wages of $1,000 or more in any calendar quarter of 2018 or 2019 to household employees.

Individuals – If you are not paying your 2020 income tax through withholding (or will not pay in enough tax during the year that way), pay the first installment of your 2020 estimated tax. Use Form 1040-ES.

Corporations – File a 2019 calendar year income tax return (Form 1120) and pay any tax due. If you want an automatic 6-month extension of time to file the return, file Form 7004 and deposit what you estimate you owe in taxes.

Corporations – Deposit the first installment of estimated income tax for 2020. A worksheet, Form 1120-W, is available to help you estimate your tax for the year.

April 30, 2020

Employers – Federal unemployment tax. Deposit the tax owed through March if more than $500.

Employers – Social Security, Medicare, and withheld income tax. File Form 941 for the first quarter of 2020. Deposit any undeposited tax. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until May 11 to file the return.


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March 28, 2020by admin

To Our Valued Clients and Friends,

We understand the last several weeks have been both confusing and uncertain, elevating levels of stress and anxiety while imposing varying degrees of fear and concern.  To compound the ever-present conditions, it’s the heart of tax season and many individuals and business owners are wondering the extent to which the Coronavirus pandemic and state restrictions will impact your filings.

To those of you who are ill with COVID-19, or have loved ones who are, we hold you in the light and are thinking of you and wishing you a speedy and full recovery. To any who may be grieving, the Ullrich Delevati family grieves with you.  To those with questions about your financial interests and tax filings, we are here to support you in every way!

As an essential business, our firm is staying open and diligently working to complete all tax filings in a timely manner.  Both the State of California and Federal government have extended the filing and tax payment deadlines to July 15, 2020.  We understand this and will use it as necessary.  However, we are aware of the current level of anxiety in the world and are making every effort to complete returns on time, in order to help minimize the stress and anxiety tax day brings and ensure those of you receiving refunds will get your money in a timely manner.

With that said, we have made changes to our internal practices in order to protect both our staff and our clientele.  This includes social distancing and limiting visitors.  We are now conducting client interviews via telephone and kindly request that you send your information electronically or arrange for a drop off, prior to your scheduled appointment.  For client preferring to complete an electronic document transfers, we have a secured web portal and invite you to contact our office to establish your account.  For those wishing to drop off, please call our office to schedule a day and time.

Within our office, we are making every effort to practice social distancing as well as encouraging frequent hand washing and surface cleaning within the office.  Where possible, staff will be working remotely to minimize exposure.  Rest assured we have ramped up our online security to ensure any and all personal and financial data is secured.  We have also requested that any staff showing or feeling any signs of illness stay at home and are monitoring all recommended best practices to prevent and reduce the spread of COVID-19.

We thank you for your continued support and your willingness to accommodate the office modifications during this time.  We are thankful for each of you, appreciate you entrusting us with your tax preparation, and wish you well as we collectively navigate tax season and work to stop the spread of Coronavirus.

Respectfully,

Tony Delevati and the Ullrich Delevati Team

 

Helpful Links:

Learn More about COVID-19

Symptoms of COVID-19

How to Protect Yourself

Latest News from the IRS

 


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March 18, 2020by admin

Are you an employer who owns a business where tipping is customary for providing food and beverages? You may qualify for a tax credit involving the Social Security and Medicare (FICA) taxes that you pay on your employees’ tip income.

How the credit works

The FICA credit applies with respect to tips that your employees receive from customers in connection with the provision of food or beverages, regardless of whether the food or beverages are for consumption on or off the premises. Although these tips are paid by customers, they’re treated for FICA tax purposes as if you paid them to your employees. Your employees are required to report their tips to you. You must withhold and remit the employee’s share of FICA taxes, and you must also pay the employer’s share of those taxes.

You claim the credit as part of the general business credit. It’s equal to the employer’s share of FICA taxes paid on tip income in excess of what’s needed to bring your employee’s wages up to $5.15 per hour. In other words, no credit is available to the extent the tip income just brings the employee up to the $5.15 per hour level, calculated monthly. If you pay each employee at least $5.15 an hour (excluding tips), you don’t have to be concerned with this calculation.

Note: A 2007 tax law froze the per-hour amount at $5.15, which was the amount of the federal minimum wage at that time. The minimum wage is now $7.25 per hour but the amount for credit computation purposes remains $5.15.

How it works

Example: A waiter works at your restaurant. He’s paid $2 an hour plus tips. During the month, he works 160 hours for $320 and receives $2,000 in cash tips which he reports to you.

The waiter’s $2 an hour rate is below the $5.15 rate by $3.15 an hour. Thus, for the 160 hours worked, he or she is below the $5.15 rate by $504 (160 times $3.15). For the waiter, therefore, the first $504 of tip income just brings him up to the minimum rate. The rest of the tip income is $1,496 ($2,000 minus $504). The waiter’s employer pays FICA taxes at the rate of 7.65% for him. Therefore, the employer’s credit is $114.44 for the month: $1,496 times 7.65%.

While the employer’s share of FICA taxes is generally deductible, the FICA taxes paid with respect to tip income used to determine the credit can’t be deducted, because that would amount to a double benefit. However, you can elect not to take the credit, in which case you can claim the deduction.

Get the credit you’re due

If your business pays FICA taxes on tip income paid to your employees, the tip tax credit may be valuable to you. Other rules may apply. Contact us if you have any questions.


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March 3, 2020by admin

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 from $265)
  • Health Savings Account contributions:
    • Individual coverage: $3,550 (up from $3,500)
    • Family coverage: $7,100 (up from $7,000)
    • Catch-up contribution: $1,000 (no change)
  • Flexible Spending Account contributions:
    • Health care: $2,750 (up from $2,700)
    • Dependent care: $5,000 (no change)

These are only some of the tax limits that may affect your business and additional rules may apply. If you have questions, please contact us.


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March 3, 2020by admin

This year, the optional standard mileage rate used to calculate the deductible costs of operating an automobile for business decreased by one-half cent, to 57.5 cents per mile. As a result, you might claim a lower deduction for vehicle-related expense for 2020 than you can for 2019.

Calculating your deduction

Businesses can generally deduct the actual expenses attributable to business use of vehicles. This includes gas, oil, tires, insurance, repairs, licenses and vehicle registration fees. In addition, you can claim a depreciation allowance for the vehicle. However, in many cases depreciation write-offs on vehicles are subject to certain limits that don’t apply to other types of business assets.

The cents-per-mile rate comes into play if you don’t want to keep track of actual vehicle-related expenses. With this approach, you don’t have to account for all your actual expenses, although you still must record certain information, such as the mileage for each business trip, the date and the destination.

Using the mileage rate is also popular with businesses that reimburse employees for business use of their personal vehicles. Such reimbursements can help attract and retain employees who drive their personal vehicles extensively for business purposes. Why? Under the Tax Cuts and Jobs Act, employees can no longer deduct unreimbursed employee business expenses, such as business mileage, on their own income tax returns.

If you do use the cents-per-mile rate, be aware that you must comply with various rules. If you don’t, the reimbursements could be considered taxable wages to the employees.

The rate for 2020

Beginning on January 1, 2020, the standard mileage rate for the business use of a car (van, pickup or panel truck) is 57.5 cents per mile. It was 58 cents for 2019 and 54.5 cents for 2018.

The business cents-per-mile rate is adjusted annually. It’s based on an annual study commissioned by the IRS about the fixed and variable costs of operating a vehicle, such as gas, maintenance, repair and depreciation. Occasionally, if there’s a substantial change in average gas prices, the IRS will change the mileage rate midyear.

Factors to consider

There are some situations when you can’t use the cents-per-mile rate. In some cases, it partly depends on how you’ve claimed deductions for the same vehicle in the past. In other cases, it depends on if the vehicle is new to your business this year or whether you want to take advantage of certain first-year depreciation tax breaks on it.

As you can see, there are many factors to consider in deciding whether to use the mileage rate to deduct vehicle expenses. We can help if you have questions about tracking and claiming such expenses in 2020 — or claiming them on your 2019 income tax return.


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March 3, 2020by admin

Many people who launch small businesses start out as sole proprietors. Here are nine tax rules and considerations involved in operating as that entity.

1. You may qualify for the pass-through deduction. To the extent your business generates qualified business income, you are eligible to claim the 20% pass-through deduction, subject to limitations. The deduction is taken “below the line,” meaning it reduces taxable income, rather than being taken “above the line” against your gross income. However, you can take the deduction even if you don’t itemize deductions and instead claim the standard deduction.

2. Report income and expenses on Schedule C of Form 1040. The net income will be taxable to you regardless of whether you withdraw cash from the business. Your business expenses are deductible against gross income and not as itemized deductions. If you have losses, they will generally be deductible against your other income, subject to special rules related to hobby losses, passive activity losses and losses in activities in which you weren’t “at risk.”

3. Pay self-employment taxes. For 2020, you pay self-employment tax (Social Security and Medicare) at a 15.3% rate on your net earnings from self-employment of up to $137,700, and Medicare tax only at a 2.9% rate on the excess. An additional 0.9% Medicare tax (for a total of 3.8%) is imposed on self-employment income in excess of $250,000 for joint returns; $125,000 for married taxpayers filing separate returns; and $200,000 in all other cases. Self-employment tax is imposed in addition to income tax, but you can deduct half of your self-employment tax as an adjustment to income.

4. Make quarterly estimated tax payments. For 2019, these are due April 15, June 15, September 15 and January 15, 2021.

5. You may be able to deduct home office expenses. If you work from a home office, perform management or administrative tasks there, or store product samples or inventory at home, you may be entitled to deduct an allocable portion of some costs of maintaining your home. And if you have a home office, you may be able to deduct expenses of traveling from there to another work location.

6. You can deduct 100% of your health insurance costs as a business expense. This means your deduction for medical care insurance won’t be subject to the rule that limits medical expense deductions.

7. Keep complete records of your income and expenses. Specifically, you should carefully record your expenses in order to claim all the tax breaks to which you’re entitled. Certain expenses, such as automobile, travel, meals, and office-at-home expenses, require special attention because they’re subject to special recordkeeping rules or deductibility limits.

8. If you hire employees, you need to get a taxpayer identification number and withhold and pay employment taxes.

9. Consider establishing a qualified retirement plan. The advantage is that amounts contributed to the plan are deductible at the time of the contribution and aren’t taken into income until they’re are withdrawn. Because many qualified plans can be complex, you might consider a SEP plan, which requires less paperwork. A SIMPLE plan is also available to sole proprietors that offers tax advantages with fewer restrictions and administrative requirements. If you don’t establish a retirement plan, you may still be able to contribute to an IRA.

Seek assistance

If you want additional information regarding the tax aspects of your new business, or if you have questions about reporting or recordkeeping requirements, please contact us.


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March 3, 2020by admin

Do you conduct your business as a sole proprietorship or as a wholly owned limited liability company (LLC)? If so, you’re subject to both income tax and self-employment tax. There may be a way to cut your tax bill by using an S corporation.

Self-employment tax basics

The self-employment tax is imposed on 92.35% of self-employment income at a 12.4% rate for Social Security up to a certain maximum ($137,700 for 2020) and at a 2.9% rate for Medicare. No maximum tax limit applies to the Medicare tax. An additional 0.9% Medicare tax is imposed on income exceeding $250,000 for married couples ($125,000 for married persons filing separately) and $200,000 in all other cases.

Similarly, if you conduct your business as a partnership in which you’re a general partner, in addition to income tax you are subject to the self-employment tax on your distributive share of the partnership’s income. On the other hand, if you conduct your business as an S corporation, you’ll be subject to income tax, but not self-employment tax, on your share of the S corporation’s income.

An S corporation isn’t subject to tax at the corporate level. Instead, the corporation’s items of income, gain, loss and deduction are passed through to the shareholders. However, the income passed through to the shareholder isn’t treated as self-employment income. Thus, by using an S corporation, you may be able to avoid self-employment income tax.

Salary must be reasonable

However, be aware that the IRS requires that the S corporation pay you reasonable compensation for your services to the business. The compensation is treated as wages subject to employment tax (split evenly between the corporation and the employee), which is equivalent to the self-employment tax. If the S corporation doesn’t pay you reasonable compensation for your services, the IRS may treat a portion of the S corporation’s distributions to you as wages and impose Social Security taxes on the amount it considers wages.

There’s no simple formula regarding what is considered reasonable compensation. Presumably, reasonable compensation is the amount that unrelated employers would pay for comparable services under similar circumstances. There are many factors that should be taken into account in making this determination.

Converting from a C to an S corp

There can be complications if you convert a C corporation to an S corporation. A “built-in gains tax” may apply when appreciated assets held by the C corporation at the time of the conversion are subsequently disposed of. However, there may be ways to minimize its impact.

As explained above, an S corporation isn’t normally subject to tax, but when a C corporation converts to S corporation status, the tax law imposes a tax at the highest corporate rate (21%) on the net built-in gains of the corporation. The idea is to prevent the use of an S election to escape tax at the corporate level on the appreciation that occurred while the corporation was a C corporation. This tax is imposed when the built-in gains are recognized (in other words, when the appreciated assets are sold or otherwise disposed of) during the five-year period after the S election takes effect (referred to as the “recognition period”).

Consider all issues

Contact us if you’d like to discuss the factors involved in conducting your business as an S corporation, including the built-in gains tax and how much the business should pay you as compensation.


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March 2, 2020by admin

Tax season is in full swing and while taxes are officially due in April, there are several tax deadlines in March 2020!

March 2, 2020

Farmers and Fishermen – File your 2019 income tax return (Form 1040 or Form 1040-SR) and pay any tax due. However, you have until April 15 to file if you paid your 2019 estimated tax by January 15, 2020.

Health Coverage Reporting – If you are an Applicable Large Employer, provide Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, to full-time employees. For all other providers of minimum essential coverage, provide Form 1095-B, Health Coverage, to responsible individuals.

Large Food and Beverage Establishment Employers – with employees who work for tips. File Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips. Use Form 8027-T, Transmittal of Employer’s Annual Information Return of Tip Income and Allocated Tips, to summarize and transmit Forms 8027 if you have more than one establishment. If you file Forms 8027 electronically your due date for filing them with the IRS will be extended to March 31.

March 10, 2020

Employees who work for tips. – If you received $20 or more in tips during February, report them to your employer. You can use Form 4070.

March 16, 2020

Employers – Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in February.

Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments in February.

Partnerships – File a 2019 calendar year income tax return (Form 1065). Provide each partner with a copy of their Schedule K-1 (Form 1065-B) or substitute Schedule K-1. To request an automatic 6-month extension of time to file the return, file Form 7004. Then file the return and provide each partner with a copy of their final or amended (if required) Schedule K­1 (Form 1065) by September 15.

S Corporations – File a 2019 calendar year income tax return (Form 1120S) and pay any tax due. Provide each shareholder with a copy of Schedule K-1 (Form 1120S), Shareholder’s Share of Income, Credits, Deductions, etc., or a substitute Schedule K-1. If you want an automatic 6-month extension of time to file the return, file Form 7004 and deposit what you estimate you owe in tax. Then file the return, pay any tax, interest, and penalties due and provide each shareholder with a copy of their Schedule K-1 by September 15.

S corporation election – File Form 2553, Election by a Small Business Corporation, to choose to be treated as an S corporation beginning with calendar year 2020. If Form 2553 is filed late, S corporation treatment will begin with calendar year 2021.

March 31, 2020

Electronic Filing of Forms – File Forms 1097, 1098, 1099 (except Form 1099-MISC), 3921, 3922, and W-2G with the IRS. This due date applies only if you file electronically. The due date for giving the recipient these forms generally remains January 31.

Electronic Filing of Form W-2G – File copies of all the Form W-2G (Certain Gambling Winnings) you issued for 2019. This due date applies only if you electronically file. The due date for giving the recipient these forms remains January 31.

Electronic Filing of Forms 8027 – File copies of all the Forms 8027 you issued for 2019. This due date applies only if you electronically file.

Electronic Filing of Forms 1094-C and 1095-C and Forms 1094-B and 1095-B – If you’re an Applicable Large Employer, file electronic forms 1094-C and 1095-C with the IRS. For all other providers of minimum essential coverage, file electronic Forms 1094-B and 1095-B with the IRS.


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February 11, 2020by admin

The beginning of the year can be a busy time for business owners and executives, because you no doubt want to get off to a strong start in 2020.

One danger of a hectic beginning is setting an early precedent for distancing yourself from rank-and-file staff. After all, a busy opening to the year may turn into a chaotic middle and a frantic conclusion. Hopefully all’s well that ends well, but you and your top-level executives could wind up isolating yourselves from employees — and that’s not good.

Here are some ways to stay connected with staff throughout the year:

Solicit feedback. Set up an old-fashioned suggestion box or perhaps a more contemporary email address where employees can vent their concerns and ask questions. Ownership or executive management can reply to queries with the broadest implications, while other managers could handle questions specific to a given department or position. Share answers through company-wide emails or make them a feature of an internal newsletter or blog.

Hold a company meeting. At least once a year, hold a “town hall” with staff members to answer questions and discuss issues face to face. You could even take it to the next level by organizing a company retreat, where you can not only answer questions but challenge employees to come up with their own strategic ideas.

Be social. All work and no play can make owners and execs look dull and distant. Hold an annual picnic, host an outing to a sporting event or throw a holiday party so you and other top managers can mingle socially and get to know people on a personal level.

Make appearances. Business owners and executives should occasionally tour each company department or facility. Give managers a chance to speak with you candidly. Sit in on meetings; ask and answer questions. Employees will likely get a morale boost from seeing you take an active interest in their little corner of the company.

Learn a job. For a potentially fun and insightful change of pace, set aside a day to learn about a specific company position. Shadow an employee and let him or her explain what really goes into the job. Ask questions but stay out of the way. Clarify upfront that you’re not playing “gotcha” but rather trying to better understand how things get done and what improvements you might make.

By staying visible and interactive with employees, your staff will likely feel more appreciated and, therefore, be more productive. You also may gather ideas for eliminating costly redundancies and inefficiencies. Maybe you’ll even find inspiration for your next big strategic move. We can assist you in assessing the potential costs and benefits of the strategies mentioned and more.