Mon - Sat 8.00 - 18.00 Sunday CLOSEDOur Address11 Wall St, New York
Tel: 530-666-6671
2021-07-09_15-02-18.png

September 1, 2021by admin

In employment settings in which women save less for retirement than men, an aggressive educational program can help to narrow the gap. That’s the conclusion of a study conducted by the Center for Retirement Research.

The study

The study focused on the impact of an initiative by the state of Wisconsin to close a retirement savings gender gap among state employees. Although Wisconsin state employees were also covered by defined benefit plans, increasing women’s contributions to a state-sponsored supplemental retirement plan was considered essential to their retirement security.

The study’s authors reported that, while financial education outside of the workplace typically doesn’t correlate with increases in retirement savings, workplace-based education efforts generally are effective. The Wisconsin initiative “delivered information, motivation, and challenges through multiple media over a span of a few months.” For example, women received monthly emails with messages such as “women are twice as likely as men to live in poverty during retirement,” with links to online educational resources and financial planning tools. Such messages apparently hit home.

Women were also invited to attend women-only lunchtime education sessions, and the resulting participation rates were high. Rather than lectures, the program format emphasized peer interaction to overcome what the study’s authors call “the ostrich effect” — a reluctance of people to discuss personal finance matters, especially if they’re already worried about their financial health. Program content directed participants to take specific actions to improve their financial outlook, particularly increasing their participation in the supplemental retirement savings plan.

The results

According to the study, “Differences between men and women in financial knowledge and motivation contribute to gender gaps in retirement savings.” However, the study concluded that using multimedia financial education can increase knowledge and motivate participants.


passthrough.jpg

September 1, 2021by admin

Are you eligible to take the deduction for qualified business income (QBI)? Here are 10 facts about this valuable tax break, referred to as the pass-through deduction, QBI deduction or Section 199A deduction.

  1. It’s available to owners of sole proprietorships, single member limited liability companies (LLCs), partnerships and S corporations. It may also be claimed by trusts and estates.
  2. The deduction is intended to reduce the tax rate on QBI to a rate that’s closer to the corporate tax rate.
  3. It’s taken “below the line.” That means it reduces your taxable income but not your adjusted gross income. But it’s available regardless of whether you itemize deductions or take the standard deduction.
  4. The deduction has two components: 20% of QBI from a domestic business operated as a sole proprietorship or through a partnership, S corporation, trust or estate; and 20% of the taxpayer’s combined qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership income.
  5. QBI is the net amount of a taxpayer’s qualified items of income, gain, deduction and loss relating to any qualified trade or business. Items of income, gain, deduction and loss are qualified to the extent they’re effectively connected with the conduct of a trade or business in the U.S. and included in computing taxable income.
  6. QBI doesn’t necessarily equal the net profit or loss from a business, even if it’s a qualified trade or business. In addition to the profit or loss from Schedule C, QBI must be adjusted by certain other gain or deduction items related to the business.
  7. A qualified trade or business is any trade or business other than a specified service trade or business (SSTB). But an SSTB is treated as a qualified trade or business for taxpayers whose taxable income is under a threshold amount.
  8. SSTBs include health, law, accounting, actuarial science, certain performing arts, consulting, athletics, financial services, brokerage services, investment, trading, dealing securities and any trade or business where the principal asset is the reputation or skill of its employees or owners.
  9. There are limits based on W-2 wages. Inflation-adjusted threshold amounts also apply for purposes of applying the SSTB rules. For tax years beginning in 2021, the threshold amounts are $164,900 for singles and heads of household; $164,925 for married filing separately; and $329,800 for married filing jointly. The limits phase in over a $50,000 range ($100,000 for a joint return). This means that the deduction reduces ratably, so that by the time you reach the top of the range ($214,900 for singles and heads of household; $214,925 for married filing separately; and $429,800 for married filing jointly) the deduction is zero for income from an SSTB.
  10. For businesses conducted as a partnership or S corporation, the pass-through deduction is calculated at the partner or shareholder level.

As you can see, this substantial deduction is complex, especially if your taxable income exceeds the thresholds discussed above. Other rules apply. Contact us if you have questions about your situation.


pexels-photo-1314544-1280x853.jpeg

September 1, 2021by admin

September 10, 2021

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

September 15, 2021

Individuals – Make a payment of your 2021 estimated tax if you are not paying your income tax for the year through withholding (or will not pay in enough tax that way). Use Form 1040-ES. This is the third installment date for estimated tax in 2021.

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

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

S Corporations – File a 2020 calendar year income tax return (Form 1120S) and pay any tax due. This due date applies only if you timely requested an automatic 6-month extension. Provide each shareholder with a copy of Schedule K-1 (Form 1120S) or a substitute Schedule K-1.

Partnerships – File a 2020 calendar year return (Form 1065). This due date applies only if you were given an additional 6-month extension. Provide each partner with a copy of Schedule K1 (Form 1065) or a substitute Schedule K1.

Corporations – Deposit the third installment of estimated income tax for 2021. A worksheet, Form 1120-W, is available to help you make an estimate of your tax for the year.


employee-retention.jpg

September 1, 2021by admin

The Employee Retention Tax Credit (ERTC) is a valuable tax break that was extended and modified by the American Rescue Plan Act (ARPA), enacted in March of 2021. Here’s a rundown of the rules.

Background

Back in March of 2020, Congress originally enacted the ERTC in the CARES Act to encourage employers to hire and retain employees during the pandemic. At that time, the ERTC applied to wages paid after March 12, 2020, and before January 1, 2021. However, Congress later modified and extended the ERTC to apply to wages paid before July 1, 2021.

The ARPA again extended and modified the ERTC to apply to wages paid after June 30, 2021, and before January 1, 2022. Thus, an eligible employer can claim the refundable ERTC against “applicable employment taxes” equal to 70% of the qualified wages it pays to employees in the third and fourth quarters of 2021. Except as discussed below, qualified wages are generally limited to $10,000 per employee per 2021 calendar quarter. Thus, the maximum ERTC amount available is generally $7,000 per employee per calendar quarter or $28,000 per employee in 2021.

For purposes of the ERTC, a qualified employer is eligible if it experiences a significant decline in gross receipts or a full or partial suspension of business due to a government order. Employers with up to 500 full-time employees can claim the credit without regard to whether the employees for whom the credit is claimed actually perform services. But, except as explained below, employers with more than 500 full-time employees can only claim the ERTC with respect to employees that don’t perform services.

Employers who got a Payroll Protection Program loan in 2020 can still claim the ERTC. But the same wages can’t be used both for seeking loan forgiveness or satisfying conditions of other COVID relief programs (such as the Restaurant Revitalization Fund program) in calculating the ERTC.

Modifications

Beginning in the third quarter of 2021, the following modifications apply to the ERTC:

  • Applicable employment taxes are the Medicare hospital taxes (1.45% of the wages) and the Railroad Retirement payroll tax that’s attributable to the Medicare hospital tax rate. For the first and second quarters of 2021, “applicable employment taxes” were defined as the employer’s share of Social Security or FICA tax (6.2% of the wages) and the Railroad Retirement Tax Act payroll tax that was attributable to the Social Security tax rate.
  • Recovery startup businesses are qualified employers. These are generally defined as businesses that began operating after February 15, 2020, and that meet certain gross receipts requirements. These recovery startup businesses will be eligible for an increased maximum credit of $50,000 per quarter, even if they haven’t experienced a significant decline in gross receipts or been subject to a full or partial suspension under a government order.
  • A “severely financially distressed” employer that has suffered a decline in quarterly gross receipts of 90% or more compared to the same quarter in 2019 can treat wages (up to $10,000) paid during those quarters as qualified wages. This allows an employer with over 500 employees under severe financial distress to treat those wages as qualified wages whether or not employees actually provide services.
  • The statute of limitations for assessments relating to the ERTC won’t expire until five years after the date the original return claiming the credit is filed (or treated as filed).

Contact us if you have any questions related to your business claiming the ERTC.


07_12_21_1303112780_SBTB_560x292.jpg

September 1, 2021by admin

There’s a harsh tax penalty that you could be at risk for paying personally if you own or manage a business with employees. It’s called the “Trust Fund Recovery Penalty” and it applies to the Social Security and income taxes required to be withheld by a business from its employees’ wages.

Because taxes are considered property of the government, the employer holds them in “trust” on the government’s behalf until they’re paid over. The penalty is also sometimes called the “100% penalty” because the person liable and responsible for the taxes will be penalized 100% of the taxes due. Accordingly, the amounts IRS seeks when the penalty is applied are usually substantial, and IRS is aggressive in enforcing the penalty.

Wide-ranging penalty

The Trust Fund Recovery Penalty is among the more dangerous tax penalties because it applies to a broad range of actions and to a wide range of people involved in a business.

Here are some answers to questions about the penalty so you can safely avoid it.

What actions are penalized? The Trust Fund Recovery Penalty applies to any willful failure to collect, or truthfully account for, and pay over Social Security and income taxes required to be withheld from employees’ wages.

Who is at risk? The penalty can be imposed on anyone “responsible” for collection and payment of the tax. This has been broadly defined to include a corporation’s officers, directors and shareholders under a duty to collect and pay the tax as well as a partnership’s partners, or any employee of the business with such a duty. Even voluntary board members of tax-exempt organizations, who are generally exempt from responsibility, can be subject to this penalty under some circumstances. In some cases, responsibility has even been extended to family members close to the business, and to attorneys and accountants.

According to the IRS, responsibility is a matter of status, duty and authority. Anyone with the power to see that the taxes are (or aren’t) paid may be responsible. There’s often more than one responsible person in a business, but each is at risk for the entire penalty. You may not be directly involved with the payroll tax withholding process in your business. But if you learn of a failure to pay over withheld taxes and have the power to pay them but instead make payments to creditors and others, you become a responsible person.

Although a taxpayer held liable can sue other responsible people for contribution, this action must be taken entirely on his or her own after the penalty is paid. It isn’t part of the IRS collection process.

What’s considered “willful?” For actions to be willful, they don’t have to include an overt intent to evade taxes. Simply bending to business pressures and paying bills or obtaining supplies instead of paying over withheld taxes that are due the government is willful behavior. And just because you delegate responsibilities to someone else doesn’t necessarily mean you’re off the hook. Your failure to take care of the job yourself can be treated as the willful element.

Never borrow from taxes

Under no circumstances should you fail to withhold taxes or “borrow” from withheld amounts. All funds withheld should be paid over to the government on time. Contact us with any questions about making tax payments.


retirementplan.jpg

August 1, 2021by admin

Determining how much of your retirement nest egg to withdraw each year can be stressful. You want to take out enough to maintain a comfortable lifestyle, yet the idea of running out of money is frightening. The 4% rule can help.

How it works

The 4% rule is derived from a 1994 study of stock and bond returns from the 1920s through the 1970s. The author of the study concluded that, regardless of the market’s ups and downs, there was no historical scenario under which annual 4% inflation-adjusted withdrawals would exhaust a retirement portfolio in less than 33 years.

To apply the rule, begin by withdrawing 4% of your portfolio in the first year of retirement. For example, if you’ve saved $2 million, you would withdraw $80,000 in the first year. To maintain your purchasing power, you would increase your withdrawals each year to keep pace with inflation. For example, if the inflation rate is 2.5%, you would withdraw $82,000 in year two and $84,050 in year three.

Exclusive use discouraged

Although the 4% rule can be a useful tool, relying on it exclusively may be dangerous. As with all investing rules, the fact that it worked in the past is no guarantee it will work the same way in the future. Today’s low bond interest rates may not even support a 4% withdrawal rate. Interest rates were substantially higher when the rule was established, and some experts believe that a 3% rule may be more realistic.

Also, if your portfolio contains more high-risk investments than the typical portfolio, the rule may not protect you in the event of a significant market downturn. What’s more, people are living longer and retirement periods well over 30 years aren’t uncommon. Planning for a 30-year retirement could leave you short of funds.

Then there’s the risk that a 4% annual withdrawal is less than you can afford and will lead you to miss out on some of the pleasures of retirement. The rule provides some protection against running out of money, but a large percentage of retirees who follow it end up maintaining or even increasing the size of their nest eggs by the end of the 30-year time horizon.

Better solution

So think of the 4% rule as a guideline. You might withdraw 4% the first year and then re-evaluate the lasting power of your savings annually. Talk to your financial advisor about a withdrawal strategy that takes into account your unique circumstances.


06_21_21_102284864_SBTB_560x292.jpg

August 1, 2021by admin

As we continue to come out of the COVID-19 pandemic, you may be traveling again for business. Under tax law, there are a number of rules for deducting the cost of your out-of-town business travel within the United States. These rules apply if the business conducted out of town reasonably requires an overnight stay.

Note that under the Tax Cuts and Jobs Act, employees can’t deduct their unreimbursed travel expenses through 2025 on their own tax returns. That’s because unreimbursed employee business expenses are “miscellaneous itemized deductions” that aren’t deductible through 2025.

However, self-employed individuals can continue to deduct business expenses, including away-from-home travel expenses.

Here are some of the rules that come into play.

Transportation and meals

The actual costs of travel (for example, plane fare and cabs to the airport) are deductible for out-of-town business trips. You’re also allowed to deduct the cost of meals and lodging. Your meals are deductible even if they’re not connected to a business conversation or other business function. The Consolidated Appropriations Act includes a provision that removes the 50% limit on deducting eligible business meals for 2021 and 2022. The law allows a 100% deduction for food and beverages provided by a restaurant. Takeout and delivery meals provided by a restaurant are also fully deductible.

Keep in mind that no deduction is allowed for meal or lodging expenses that are “lavish or extravagant,” a term that’s been interpreted to mean “unreasonable.”

Personal entertainment costs on the trip aren’t deductible, but business-related costs such as those for dry cleaning, phone calls and computer rentals can be written off.

Combining business and pleasure

Some allocations may be required if the trip is a combined business/pleasure trip, for example, if you fly to a location for five days of business meetings and stay on for an additional period of vacation. Only the cost of meals, lodging, etc., incurred for the business days are deductible — not those incurred for the personal vacation days.

On the other hand, with respect to the cost of the travel itself (plane fare, etc.), if the trip is “primarily” business, the travel cost can be deducted in its entirety and no allocation is required. Conversely, if the trip is primarily personal, none of the travel costs are deductible. An important factor in determining if the trip is primarily business or personal is the amount of time spent on each (although this isn’’t the sole factor).

If the trip doesn’t involve the actual conduct of business but is for the purpose of attending a convention, seminar, etc., the IRS may check the nature of the meetings carefully to make sure they aren’t vacations in disguise. Retain all material helpful in establishing the business or professional nature of this travel.

Other expenses

The rules for deducting the costs of a spouse who accompanies you on a business trip are very restrictive. No deduction is allowed unless the spouse is an employee of you or your company, and the spouse’s travel is also for a business purpose.

Finally, note that personal expenses you incur at home as a result of taking the trip aren’t deductible. For example, the cost of boarding a pet while you’re away isn’t deductible. Contact us if you have questions about your small business deductions.



August 1, 2021by admin

Here are some of the key tax-related deadlines affecting businesses and other employers during the third quarter of 2021. 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.

Monday, August 2 

  • Employers report income tax withholding and FICA taxes for second quarter 2021 (Form 941) and pay any tax due.
  • Employers file a 2020 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or request an extension.

Tuesday, August 10

  • Employers report income tax withholding and FICA taxes for second quarter 2021 (Form 941), if you deposited all associated taxes that were due in full and on time.

Wednesday, September 15

  • Individuals pay the third installment of 2021 estimated taxes, if not paying income tax through withholding (Form 1040-ES).
  • If a calendar-year corporation, pay the third installment of 2021 estimated income taxes.
  • If a calendar-year S corporation or partnership that filed an automatic extension:
    • File a 2020 income tax return (Form 1120S, Form 1065 or Form 1065-B) and pay any tax, interest and penalties due.
    • Make contributions for 2020 to certain employer-sponsored retirement plans.