Charity, worker classification, and other tax stuff

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* Charity
* Employees vs independent contractors
* Automation and tax collection

FEELING CHARITABLE?
Corporate charitable giving limit has been increased this year
(25% of taxable income).

Individuals
For those of you who itemize, the tax laws now allow an “increased individual limit” up to 100% of your AGI. This is cash contributions made during the calendar-year 2021.
(Contributions made to qualifying charitable organizations.)

Another change for individuals:
Even if you don’t itemize, you can still give and claim a charitable deduction

EMPLOYEES OR INDEPENDENT CONTRACTORS?
IRS reminds business owners (again!) how important is to correctly classify the people they work with.

Missclassifying employees as independent contractors can be costly.
You and/or your company will be held liable for employment taxes, including Social Security, Medicare, and other taxes.

A good starting point (to determine the correct classification):
1. WHAT service will be done, and
2. HOW the work will be done.

If you, the business owner, can control/direct both (what and how) then that worker is generally an employee.

AUTOMATION AND TAX COLLECTION
It happened again!!
Don’t panic if you received a collection letter from the IRS
You are not alone
Almost 90,000 taxpayers (who filed their taxes timely) received these erroneous collection notices

If you received one don’t stress
There’s no action needed on your part

The lesson in this:
It appears that automation and tax collection still haven’t learned to work well together 🙂

 

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/Comments/in Taxes/by Mariana Fieraru

Possible tax law changes on the horizon

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Investing in infrastructure
Helping families with education, child care and paid family leave

These are topics at the top of the agenda in Washington.

Where do the funds come from?
Tax increases.

Possible tax law changes on the horizon
Congress is discussing proposals and (possible) changes to tax laws.
Estate and gift taxation, FICA, and eliminating the $10,000 limit on SALT taxes — these are some of the tax proposals Congress is considering making changes to.

On the personal level, whether these changes affect you (or not) depends on your income bracket.

Those who will be mostly impacted by these changes include taxpayers with a household income over $400,000, who itemize, and make (or receive) annual gifts.

The big question is whether some of these changes will be made retroactively.
And the effects on individuals and businesses.

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/Comments/in Taxes/by Mariana Fieraru

IRS and Virtual Currency

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At any time during the year
“Did you receive, sell, send, exchange, or otherwise
acquire any financial interest in any virtual currency?”

This question is on the first page of your tax form (US).
And you need to answer it.

Globally, many tax authorities are not sure how to tax cryptocurrency.
We don’t have that problem here.
It’s classified as property.

Cryptocurrency transactions (related to tax evasion and dark web):
IRS (through its Criminal Investigation unit) is using #dataanalytics and #artificialintelligence to address both.
Transactions are traced across borders.
(Obviously these guys don’t believe in border walls 🤣 )

To accomplish this IRS works through groups such as J5 and others.

The goal?
Improved tax compliance.
Globally.

(IRS is hiring tech experts: data scientists and behavioral scientists.
And individuals with significant cryptocurrency knowledge)

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/Comments/in Taxes/by Mariana Fieraru

Tax Talk

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Tax information for
* S Corp filers.
* Corporate givers.
* MNEs

First, you the S Corp filers
IRS has released the 2020 Form 1120-S
Changes include the payroll tax credit.
Make sure to claim it — if you qualify for the credit, of course.
(A portion of it may be refundable.)

/ / / / / / / /

Reminder for the corporate givers:
February 25th is the deadline for your “qualified disaster relief contributions.”
Charitable contributions deductible up to 100% of taxable income.
(Previously capped at 10%)

/ / / / / / / / /

What’s new for MNEs
(Multinational enterprises)

US and Argentina signed an agreement to share information on MNEs
Areas of interest include high-level transfer pricing.
The agreement takes effect beginning with the FY 2018.

What does it mean for you, the US parent of an MNE?
It means that you continue reporting to the IRS on Form 8975.
AND
Know that your CbC Report is shared with Argentina’s Tax Authority.

These governments — so “curious” aren’t they? 🙂

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/Comments/in Taxes/by Mariana Fieraru

PPP Loans for Small Businesses

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This is the second round of PPP loans for small businesses

The small business community has been hit really hard this past year.
And that has prompted #Congress to pass the second round of Payroll Protection Program (PPP) loans package.

The “window” to apply for a second #PPP loan will close on March 31, 2021.
(Earlier if the funds run out.)

Business owners need to get busy.

Start getting together the necessary #documentation.
The #requirements to qualify for a PPP loan include:

* 25% (or more) reduction in gross receipts (2020 compared to 2019)
The drop can be annual; or for any 2020 quarter compared with same quarter in 2019

* The business has 300 #employees or less

* The #business is operational
(You can get the PPP loan even if you had to temporarily close.
Key word here: temporarily. Not permanently.)

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/Comments/in Taxes/by Mariana Fieraru

IRS — the good guy

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When you hear “IRS” – what is the first thing that comes to mind?
For many just a brief mention of the word is enough to get them think (and growl) about taxes.
Either thinking of filing; or how much they owe.

IRS the good guy
IRS the “good guy” doesn’t usually comes to minds.
But it should.

This year, mid August, IRS Criminal Investigation (along with the FBI and Homeland Security) were successful in breaking up three terrorist financed campaigns.
(Cyber-enabled campaigns.)

U.S authorities seized:

  • Cryptocurrency accounts (over 300).
  • Millions of dollars.
  • Plus websites and Facebook pages.

All related to the terrorism activities.

The criminals employed sophisticated cyber-tools.
And donations were coming in from around the world.

ISIS was in charge of one of these terrorist campaigns: selling protective equipment for COVID-19 was part of their arsenal.
They were selling N95 respirator masks (not FDA approved).
Targeted for use by hospitals, nursing homes, and fire departments.

“While these individuals believe they operate anonymously in the digital space, we have the skill and resolve to find, fix and prosecute these actors under the full extent of the law.”

– says United States Attorney Michael R. Sherwin.

This seizure – the largest seizure of cryptocurrency (terrorism related) – is a victory for the good guys.
And IRS CI played a significant part in this operation.
IRS — the good guy.

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/Comments/in Money,Taxes/by Mariana Fieraru

Do my taxes start with a wine? Or two?

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“Feel like I’m gonna puke
’cause my taxes are due”

No, this is not one of my clients talking.

This is borrowed from AJR’s hit song Bang!
I listened to it when I went walking the other day
(Yes, I know. Me, being so active!
I surprised myself too.)

Bang – fun song to listen to!

(As for taxes, in case you need a reminder:
If you’ve filed an extension
Taxes are due in 15 days.)

Back to the song.
“Feel like I’m gonna puke
’cause my taxes are due
Do my password begin with
a one or a two? “

Ok, #AJR
There’s room for improvement here.

Imagine how much better would sound
if you change the password line with this:

“Do I start my taxes with a wine?
Or two?”

We’re not gonna worry about grammar here.
Obviously.

After all we are working on taxes.
And wine.
At the same time

(Multitasking at its best?)

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/Comments/in Taxes/by Mariana Fieraru

Tax Talk: 1040 changes, new deductions, and more

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2020 Form 1040: Schedules 1, 2, and 3

Currently used for 1040 and 1040-SR, the Schedules will also be used for 1040-NR.

(1040-SR tax return for Seniors

1040-NR tax return for Nonresident Alien)

Another notable change for 2020:

$300 ‘above-the-line’ charitable deduction.

(That means you can deduct the $300 even if you don’t itemize deductions.)

 

IRS Enforcement Activities – IRS employees are instructed to “approach with caution”

Given the hardship many taxpayers are going through (including and not limited to personal and business monetary loss) IRS employees are instructed to use an approaching method that is both sensitive and sensible.

 

IRS Criminal Investigation, DOJ, FBI and Department of Homeland Security

A coordinated inter-agency operation resulted in dismantling terrorist cryptocurrency fund-raising campaigns.

And millions of dollars seized.

 

Tax Court Files:

Loss form sale of property (used in trade/business) not deductible

The Tax Court ruled that taxpayer could no deduct a loss from their sale of real property.

Why?

Because they failed to establish their basis in the property.

(Not keeping good records can be costly.)

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/Comments/in Money,Taxes/by Mariana Fieraru

Family Business — Qualified Joint Venture

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Husband and wife start a small family business.
And they want to keep things simple.
(Since neither is fond of formalities.
Or too much paperwork.)

At the same time, they do want to make sure they
1. Use the right business organization type for them, and
2. They employ the right tax strategy.

After some research they both decide Qualified Joint Venture meets most of their requirements.

What is a Qualified Joint Venture (QJV)?
As its name imply, QJV is a joint venture where both spouses materially participate in the business.
And elect not to be treated as a partnership.

For federal income tax reporting they are treated as sole proprietors.
The business’ income, deductions, and credits are allocated to each spouse.
(On separate Schedule C.)
According to each one’s interest/participation in business.

IRS requirements for QJV
For the husband and wife business owners (aka the averse-to-paperwork team) the QJV seems to fit the bill for what they want.
But are they eligible for it?

IRS’ requirements for a business to operate as QJV

  1. Not incorporated: if your business is incorporated then you no longer fit the QJV requirements
  2. Partnerships: with the exception of general partnership no other type of partnerships qualify for the QJV.
  3. LLCs: if you reside in a community property state, an LLC does qualify for QJV (just like a general partnerships).
  4. Husband and wife must be the only owners of the business AND materially participate in the business’s operations.
  5. They must file a joint income tax return.

Our friends, the husband and wife business owners, have decided on QJV.
Now they need to move on to the next decision on their agenda:
Who’s the boss?

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/Comments/in Management,Money,Taxes/by Mariana Fieraru

Home visits — once upon the time… and now

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Imagine soft music playing in the background.
And a soothing voice saying:

“Once upon the time, we used to get home visits
From the milk-man; the doctor.
Home visits — those were the days.”

Nostalgia for the days gone by

But be nostalgic no more.
Good news: in 2020 home visits are back in vogue
This time from IRS
(Did the soft music abruptly stopped?)

Home-visits from IRS agents


Do you know someone who has an outstanding tax liability?
And has this someone repeatedly ignored IRS’ payment-request letters?
Then you may want to warn them of impending IRS agent home visit.

Yes.
IRS is now going to send their agents on home-visits.
Furthermore, the visit will almost always be unannounced.
(Never underestimate the element of surprise!)

How will you know he (or she) is from the IRS?
Ask for ID’s, obviously.

Your rights as taxpayer:
The IRS officer needs to show you two (2) forms of identification.
That include serial number and photo.
You have the right to request to see both.

Now go make sure you have a fresh pot of coffee on.
You gotta show some hospitality when your friendly IRS agent drops by for visit, right?

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/Comments/in Management,Money,Taxes/by Mariana Fieraru