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  • IRS Summary for November 22 - November 26

    November 26, 2021 Candace J. Dixon This is a summary of significant tax and IRS happenings the week of November 22-26. November 22, 2021 REG-109128-21, advance copy of proposed regs providing that “minimum essential coverage,” as used in health insurance-related tax laws, does not include Medicaid coverage that is limited to COVID-19 testing November 22, 2021 Internal Revenue Bulletin: 2021-47 Rev. Rul. 2021-22 Section 995 - Taxation of DISC Income to Shareholders. Notice 2021-61 Section 415 of the Internal Revenue Code (the Code) provides for dollar limitations on benefits and contributions under qualified retirement plans. Rev. Proc. 2021-46 This procedure provides specifications for the private printing of red-ink substitutes for the 2021 Forms W-2 and W-3. Actions Relating to Court Decisions Mayo Clinic v. United States, 997 F.3d 789 (8th Cir. 2021). Nonacquiescence to the holding invalidating Treas. Reg. § 1.170A-9(c)(1)’s requirement that the primary function of an educational organization described in section 170(b)(1)(A)(ii) must be the presentation of formal instruction. November 22, 2021 RR-2021-24: December Interest Rates November 22, 2021 IRS resources help taxpayers determine if an offer in compromise is the right way to resolve tax debt November 23, 2021 Interest rates remain the same for the first quarter of 2022 November 23, 2021 Child Tax Credit payments: Nov. 29 is last day for to opt out or make other changes November 23, 2021 What small business owners should know about the depreciation of property deduction November 26, 2021 e-News for Small Business Issue 2021-16 November 26, 2021 Interim final rules implementing provisions of the Internal Revenue Code, the Employee Retirement Income Security Act (ERISA), and the Public Health Service Act (PHS Act), as enacted by the Consolidated Appropriations Act, 2021 (CAA) applicable to group health plans and health insurance issuers offering group or individual health insurance coverage.

  • What’s it Going to Take to Get Through Tax Season?

    by Craig W. Smalley, EA I have been in practice for 30 years and I admit I have been jealous of people that take vacations during tax season. I realized one day that I was killing myself and I did something about it. Here is what I did, and you may want to consider it. Click here to view the original article on Feb 8th 2022 Let’s face it, the last two tax seasons have been rough on tax professionals and a lot are burnt out. In fact, some are considering leaving the business all together. For 20 years I was the Senior Tax Partner for a firm where the philosophy was to take any client they could. We would charge $750 for a business tax return, and $250 for a personal return, no matter the complexity. This created a book of business of 2000 clients and I would kill myself to get all this work done. I missed my kids growing up, I missed holidays, I can even remember working on Christmas. Further, when you take on any client you inevitably have the problem clients. You have the clients that are needy, and don't want to pay for your time. You have the jerks, you have the cheapskates, you have people that just think you just fill out forms and you get disrespected and think you have to take it. If I went out of town I was still working. One day in the middle of tax season I was asked by the majority partner to do something unethical. I slept on it, went into his office and said I wouldn’t do it. Two days later, in the middle of tax season, I was fired. The good part was that most of clients knew only me. So, the next day I set up a virtual office, and sent an email to all my clients telling them what happened and that I had left. I ended up keeping a majority of the clients I dealt with, it was tax season after all. Some of the clients were great, however, there were also some that smelled blood in the water and were cheaper than ever. I was happy because I needed the money, however I was getting burnt out. It was taking a toll on me and making me start to hate what I loved to do. The breaking point was this long-time client had me drive to his mansion complete with an indoor pool. I talked to him for an hour and he asked what I would charge. I gave him the price because it was five returns he needed done. He complained, which he had never done before, and we started negotiating. I was so desperate for money I agreed to do five returns for $300. I was paying per return, and ended up making $50. That is when I had an epiphany. I thought to myself I will drastically raise my prices, do fewer returns, and not kill myself. Long story short, I lost 50 percent of my client base and at the time the thought scared me. I was a one-man show and was doing accounting work monthly, and taxes during tax season. After all, that’s what was done at the firm I came from. I hate accounting work, because it is monotonous. I love tax, and wanted to do more than fill out forms. Every idea I had at the firm I came from to branch out was shot down. So, I got really good research software, and began studying everything. I was working 100-hour weeks learning. Not making any money doing it, and loving it. I started doing things I loved like tax planning, tax resolution and even went back to school to get a Masters in Taxation. Despite initially losing 50 percent of my clients, these were the problem clients anyway, the clients that stayed, respected me. I introduced my new services to my client base and got a couple of hits, charged a lot and never got a complaint. I didn’t get a complaint because I was current on everything, was extremely competent, obtained a really good attorney and financial planner to refer clients to, and they would refer client to me. The first year I went on my own, I made just enough to get by. However, the next year I was making so much it was like Monopoly money. More importantly, I wasn’t stressed and I took vacations, leaving my computer at home and turning my phone off. After all, everyone takes a vacation, and people understood. I had the perfect work life balance. I didn’t take any client off the street. Learned how to advertise for free, and was loving life. The burn out was coming from the problem clients. So, when they left or I accidentally got one, I fired them. I wouldn’t talk to the price shoppers and after meeting with clients, they never asked what I charged and never complained when they got the engagement letter or paid the bill. My advice to you is to find a way to take mental health days even during tax season. Missing one day isn’t going to kill you. Nothing is urgent, and we are dealing with problems that aren’t really problems anyway. Fire the clients that are stressing you out over nothing and they will ultimately be replaced by clients that respect you and support what you do for them.

  • IRS & Tax News: Week Ending January 14, 2022

    January 23, 2022 Candace J. Dixon Here are some key IRS and tax updates for the week ending January 14, 2022: January 10, 2022 The IRS announced in a news release that tax season begins Monday, January 24, 2022, when they will begin accepting and processing 2021 returns. January 10, 2022 The IRS announced the appointment of nine new members to the Internal Revenue Service Advisory Council (IRSAC) for 2022 in a news release. January 10, 2022 The IRS issued a tax tip with important backup withholding deadlines: Form 945, Annual Return of Withheld Federal Income Tax, is due January 31, 2022 (February 10, 2022 if deposits were made on time and in full); and certain Information Returns are due to the IRS by February 28, 2022 for paper, and March 31, 2022 for electronic. 1099-NEC must be filed with the IRS by January 31, 2022 for both paper and electronically filed returns. January 10, 2022 A Department of Justice News Release announced that Fessum Ogbazion of Cincinnati was sentenced to a year and a day in prison and will pay $933,708 in restitution for conspiring to commit fraud connected with his national tax return preparation company. January 10, 2022 Internal Revenue Bulletin: 2022-2 Rev. Rul. 2022-1 ​- Applicable Federal Rates for January 202 Notice 2022-1 ​- Instructions for Lenders and Loan Servicers Regarding Discharged Student Loans Notice 2022-2 ​- Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates Notice 2022-3 ​- 2022 Standard Mileage Rates Notice 2022-4 ​- Adjusted Applicable Dollar Amount for Fee Imposed by Sections 4375 and 4376 Rev. Proc. 2022-9 ​- Procedures to change methods of accounting January 11, 2022 An advance of Notice 2022-5 - Relief for Qualified Low-Income Housing Projects, providing new relief and extending some temporary relief in Notice 2021-12 in response to COVID-19, was released; it will be in IRB 2022-5, Jan. 14, 2022. January 11, 2022 The IRS published a News Releases for Frequently Asked Questions about the extensive update and streamlining of the 2021 Child Tax Credit and Advance Child Tax Credit Payments Frequently Asked Questions to help people claim it properly on 2021 tax returns in FS-2022-03. January 11, 2022 The IRS announced that Washington victims of flooding and mudslides have until March 15, 2022 to file various individual and business tax returns and make tax payments. January 12, 2022 An IRS news release announced the National Taxpayer Advocate 2021 Annual Report to Congress focusing on taxpayer impact of processing and refund delays. January 12, 2022 The National Taxpayer Advocate's blog announced the release of its 2021 Annual Report to Congress (Executive Summary) and the fifth edition of the National Taxpayer Advocate’s Purple Book with 68 legislative recommendations to Congress, including calling for funding to improve taxpayer service; authorizing the IRS to establish minimum standards for paid tax return preparers, and amending the IRC to prohibit the offset of the Earned Income Tax Credit portion of tax refunds. January 12, 2022 The U.S. Tax Court announced there would be no in-person proceedings in January 2022 because of the rapid increase in COVID-19 cases in this Press Release. January 13, 2022 The IRS issued Fact Sheet 2022-04 and published a News release for frequently asked questions about Frequently Asked Questions and Answers for 2021 Recovery Rebate Credit. January 13, 2022 The IRS encouraged people to use online resources when filing 2021 tax returns, including information on Economic Impact Payments and advance Child Tax Credit payments in a news release. January 13, 2022 The IRS updated its IRS Operations During COVID-19 page. January 14, 2022 IRS e-News for Small Business Issue 2022-01 was published. January 14, 2022 An advance of Revenue Procedure 2022-10 establishing an 18-month pilot program for fast-track processing of private letter ruling requests under Associate Chief Counsel was released; it will be in IRB: 2022-6, February 7, 2022. January 14, 2022 The IRS announced in a news release that Free File is available for qualifying taxpayers. January 14, 2022 The IRS published revised Form 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds including a new Schedule A, Specific Tax Credit Bonds Interest Limit Computation. Correction: Hurricane Ida tax relief guidance The December 22, 2021 news release about Hurricane Ida tax relief was revised with a correct deadline of February 15, 2022 for estimated third and fourth quarter 2021 tax payments. Read Tax Law Weekly Opinion Summaries for January 14, 2022. Further Reading: January 2022 Criminal Investigation Press Releases U.S. Dept. of Justice Press Releases The IRS Weekly Determinations list published every Friday for taxpayer specific rulings and determinations, Technical advice memoranda, and Chief Counsel Advice. See our forum for an ongoing list of IRS News & Updates for January 2022.

  • IRS & Tax News: Week Ending January 7, 2022

    Candace J. Dixon Here is what's happening in IRS and tax news as of the week ending January 7, 2022. January 3, 2022 Internal Revenue Bulletin: 2022-1 Rev. Proc. 2022-1 - Letter ruling and information letter procedures Rev. Proc. 2022-2 - Technical advice memorandum procedures Rev. Proc. 2022-3 - Domestic no-rulings list updates Rev. Proc. 2022–4- Exempt organization no-rulings list Rev. Proc. 2022-5 - Procedures for Exempt Organization determination letters Rev. Proc. 2022-7 - Annual international no-rulings list The IRS revised Form 1024, Application for Recognition of Exemption Under Section 501(a) or Section 521 of the Internal Revenue Code, for recognition of exemption under Sec. 501(a) or Sec. 501(c)(4)) and Sec. 521, to allow electronic filing, publishing a news release and an advance of Rev. Proc. 2022-8 updating procedures for exempt organization determination letters for electronically submitted Form 1024, modifying Rev. Proc. 2022-5. An updated List of Countries Requiring Cooperation With an International Boycott by the Deptartment of Treasury was published in the Federal Register. Tax relief extending the 2021 tax deadline and other dates to May 16 for Colorado wildfire victims was announced in a news release. January 4, 2022 TD 9959 - Final regs. Guidance Related to the Foreign Tax Credit, Clarification of Foreign-Derived Intangible Income were published in the Federal Register. They are in Internal Revenue Bulletin: 2022-3, January 18, 2022. TD 9961 - Final regs. Guidance on the Transition From Interbank Offered Rates to Other Reference Rates providing guidance on tax consequences of the discontinuation of interbank offered rates (IBORs) were published in the Federal Register. They are in Internal Revenue Bulletin: 2022-3, January 18, 2022. January 5, 2022 An IRS tax tip reminded recipients of the third round of Economic Impact Payments that they will start to receive information letters at the end of January to use when preparing their tax returns. The IRS published a news release to remind many people that final 2021 quarterly tax payments are due by January 18 to avoid tax bill and penalties. An advance of Revenue Ruling 2022-02 providing covered compensation tables effective January 1, 2022 was released; it will be in IRB: 2022-4, January 24, 2022. January 6, 2022 Tax Exempt and Government Entities released their Fiscal Year 2021 Accomplishments Letter. January 7, 2022 The IRS updated 2020 Recovery Rebate Credit Frequently Asked Questions in Fact Sheet 2022-02 and published a news release for frequently asked questions with changes to Topic F: Finding the First and Second Economic Impact Payment Amounts to Calculate the 2020 Recovery Rebate Credit. The IRS updated 2020 unemployment compensation exclusion FAQs in Fact Sheet 2022-01 and published a News Release for Frequently Asked Questions to add Question 10, Topic G: Receiving a Refund, Letter, or Notice. IRS Criminal Investigation announced their countdown of the top 10 cases of 2021 in this news release. The IRS provided guidance on new documentation requirements for administrative refund claims of the R&D credit in Research Credit Claims (Section 41) on Amended Returns Frequently Asked Questions and a memo to its employees revising its manual. IRS Tax Stats Dispatch Issue 2022-01 announced releases and updates including Heavy Highway Vehicle Use Tax, Calendar Year 2021 table; updates for 2021 Calendar Year Return Projections by State: 2021-2028 and more available on the SOI's Tax Stats page. The IRS released its Internal Revenue Service Progress Update / Fiscal Year 2021 – Putting Taxpayers First in a News Release, describing their work delivering taxpayer service and compliance efforts during the pandemic. A special edition of the IRS "A Closer Look" column also discussed the ongoing challenges. Read January 2022 Criminal Investigation Press Releases. Read the IRS Weekly Determination list published every Friday.

  • Clarifications and Complexities of the New 1099-K Reporting Requirements

    January 7, 2022 By Candace J. Dixon Click here to read the original post on If you are self-employed, a freelancer, work on a contract basis with no taxes withheld, or are part of the gig economy, you may be used to receiving Form 1099-NEC or a 1099-K (formerly 1099-MISC), from business clients or customers who paid you at least $600 during the year. If you accept credit/debit cards or use third-party settlement organizations like PayPal, you may receive a form you’ve never seen before beginning in 2023 for 2022 tax return filings, - Form 1099-K, Payment Card and Third-Party Network Transactions, and it may get a bit trickier, especially if you’re not prepared. What Is Form 1099-K? Form 1099-K, Payment Card and Third-Party Network Transactions, is an information return that tracks payments including those made with credit cards; cash apps such as Venmo or Square Cash App; online payment services like PayPal or Stripe; and freelancing platforms that manage payments such as Uber or Upwork. It reports the gross amount of reportable transactions for both the calendar year and its corresponding months to the IRS and to the people who accept the payment cards or payments made by third-party settlement organizations. New Rules Form 1099-K is sent to payees who accept credit cards or payments settled through third-party networks. The “de minimis” also known as minimal amounts exception for reporting by third-party network transactions has been payments exceeding $20,000 and 200 transactions for the year. This threshold has been dramatically reduced from $20,000 to $600 in 2022, with no minimum number of transactions. Why the Big Change? Payment settlement entities (merchant acquiring entities and third-party settlement organizations) must report payment card and third-party network transactions. This reporting requirement began in early 2012 for payment card and third-party network transactions. The COVID-19 pandemic created an influx of gig economy workers, joining the others before them already misreporting or underreporting their income – either intentionally or unintentionally - since they were not receiving a Form 1099-K. Third party information reporting has been shown to increase voluntary tax compliance and improve collections and assessments within IRS. The Importance of Recordkeeping It’s more important than ever to be aware of all the deductions available to you and how to properly claim them, because the "gross amount" on the 1099-K is the total unadjusted dollar amount of the payment transactions made to you. This amount is not to be adjusted to account for any fees, refunds, or any other amounts before it’s reported on the 1099-K and to the IRS. This means that Form 1099-K shows the value of the transactions processed for you in the past year, as well as any expenses paid on your behalf by your clients, such as processing fees deducted before payment reaches you, meaning that your 1099-K should include those expenses, reporting an income higher than you received. If you let your customers receive cash back when they use their debit cards for purchases, your Form 1099-K will include the cash back amounts as part of the gross amount of payment card transactions. You typically would not include cash back amounts on your income tax return or claim it as a business expense. It is important that you maintain records of customer cash back activity over the course of your tax year. If you allow your customers to receive cash back when they use their debit cards for purchases, the 1099-K you receive will include those cash back amounts as part of the gross payment card transactions. Generally, you would not include cash-back amounts as part of your gross receipts on your income tax return. It is important that you maintain records of customer cash back activity over the course of your tax year. If you shared your credit card terminal with another person or business, your Form 1099-K will include payment card transactions belonging to the person or business that shared your terminal, in addition to your own payments. When required, you’ll need to file and furnish information returns for those you shared a card terminal with, including the total payment card transaction amount and any other income belonging to them. Where required, you should file and furnish the appropriate information return (e.g., Form 1099-K or 1099-MISC) for each person or business with whom you shared a card terminal. The information return should include the total payment card transaction amount in addition to any other income belonging to the other person or business. You should retain records of payments issued to each person or business sharing your terminal, including but not limited to shared terminal written agreements and cancelled checks. This is also an excellent example of why you should not mix your personal and business finances together: the 1099Ks will have all of your transactions on them. While should only report the business expenses on your tax return, the IRS won’t know any differently, and the possibility of questions – and audits - arises. 1099-K versus the 1099-MISC (Now the 1099-NEC for nonemployee compensation) Another error to watch out for is duplicate transactions. The IRS has directed that any 1099-NEC or 1099-MISC payments that are reported on a 1099-K should be reported on the latter form only. To avoid double taxation, keep detailed sales records and watch for duplicate payments. Businesses must provide a 1099-NEC for non-employee compensation of $600 or more. Payments made with a credit card must be reported on Form 1099-K, not Form 1099-NEC, but if the transactions occurred through credit card or third-party processors, there is a possibility of them being reported incorrectly on both forms. Reporting 1099-K Information After thoroughly reviewing your credit card/payment card receipt records and merchant statements to confirm that the amount is accurate, you’ll report gross receipts or sales and business expenses on the tax form that you would normally file. If you’re a sole proprietor, you’ll record the information from Form 1099-Ks as income and deduct fees and other business expenses included in the total on Schedule C. Amounts related to rental activity are reported on Schedule E, and farming on Schedule F. Remember, the gross amount of a reportable payment on Form 1099-K doesn’t include adjustments such as credits, discount amounts, fees, refunded amounts, or other amounts. Partnerships and corporations report Form 1099K amounts as part of their gross revenue on their appropriate income tax return. If your business has more than one source of income, you might need to report Form 1099K amounts on more than one line, return or schedule; for example, if you have both a retail business and rental income and you use the same credit card terminal for both ventures, your 1099-K will include gross credit card receipts for both. You’ll need to rely on your own accurate recordkeeping to properly report gross retail receipts on Schedule C, and rental activity amounts on Schedule E. Contacting the Filer or the Payment Settlement Entity Listed on Form 1099-K You will need to contact the filer of the Form 1099-K using the information in the upper left corner of the form if you receive a Form 1099-K that doesn’t belong to you, if it contains errors or has a Merchant Category Code that doesn’t accurately describe your, or in other cases to figure out why you received it or to request a corrected Form 1099-K. If you don’t recognize the filer, you can contact the Payment Settlement Entity using the name and number in the lower left corner of the form to determine why you received it or request a corrected Form 1099-K. Be sure to keep all correspondence and relevant documentation regarding errors. Per the IRS, if you can’t get your Form 1099-K corrected, you can report your income correctly and attach an explanation to your tax return. If you use Forms 1120, 1120S or 1065 to report your business income and then receive a Form 1099-K with your individual name and social security number, request a corrected Form 1099-K with your business’s tax identification number and request that they use the business number in the future. If you changed your business structure during the year such as converting from a sole proprietorship to a partnership and continued using the same card terminal, the amount on the 1099-K may not correspond with your new entity’s tax return, notify your merchant acquirer of any change to the name and tax identification number that links the terminal to your current business structure. Another case where you should request a corrected Form 1099-K is if you bought or sold your business during the year and your Form 1099-K includes payments for transactions made before or after the transaction because the tax identification number and business name associated with a credit card terminal were not updated. Hobby or Business? Online auction sites such as eBay are an example of the importance of this. While eBay sellers will receive Form 1099-Ks, they may or may not have to report and pay tax depending on how they are selling on the site. If it’s considered to be a hobby by the IRS, the income must be reported, but expenses can’t be taken. If they are running their eBay account more like a business, they should be reporting your sales to the IRS but are allowed to take deductions. Even something like having a craft business during the holidays can raise questions. If you take credit cards doing a craft show, you will receive a Form 1099-K; in addition, if you also accept payments from a third-party settlement organization, you will receive a 1099-K from that also if the aggregate amount of payments for goods and services exceeds $600 during the year, whereas previously you would only have received one for the latter. While the new rules are necessary for IRS oversight as the “gig economy” and freelancing continues to expand, they can and will affect people even if they are receiving them for a relatively small side hustle and not as a primary source of income. Seek the assistance of a tax professional if you are in doubt.

  • Hurricane Ida Tax Deadlines Extended in 6 States

    January 4, 2022 by Candace Dixon The deadline for those who were hurt by Hurricane Ida to file tax returns and make payments has been extended again. In this article, Candace Dixon provides an overview of the tax deadlines for these disaster victims in six states. Click here to read the original article on Victims of Hurricane Ida in six states now have until February 15, 2022, to file various tax returns and make tax payments. The deadline had initially been extended until January 3, 2022. The new deadline covers the entire states of Louisiana and Mississippi and parts of New York, New Jersey, Connecticut and Pennsylvania. The postponement period start date varies according to the state: Louisiana: August 26, 2021 Mississippi: August 28, 2021 Pennsylvania: August 31, 2021 New York, New Jersey and Connecticut: September 1, 2021 Individuals and businesses have until February 15, 2022, to file returns and pay taxes that were originally due during this period, including: Individual returns with extensions for 2020 normally due October 15, 2021 (Since tax payments related to these 2020 returns were due May 17, 2021, they are not eligible for the tax relief.) Calendar-year partnerships and S corporations with 2020 extensions normally due September 15, 2021 Calendar-year corporations with 2020 extensions normally due October 15, 2021 Calendar-year tax-exempt organizations with 2020 extensions normally due November 15, 2021 Quarterly payroll and excise returns normally due on November 1, 2021, and January 31, 2022 The extended deadline also applies to quarterly estimated tax payments normally due on September 15, 2021, and January 18, 2022. People can postpone making their estimated tax payments for both the third and fourth quarters of 2021 and include them when they file their 2021 returns instead. The IRS Disaster Assistance and Emergency Relief for Individuals and Businesses page lists other returns, payments and related activities that qualify for the extended tax relief.

  • What’s New in QuickBooks: December 2021

    As we "wrap" up the year, here's a look at some of the latest developments with QuickBooks Online. QuickBooks Cash is Now QuickBooks Checking QuickBooks Cash is now called QuickBooks Checking. The name change will start in mid-December. QuickBooks Checking is an all-in-one business bank account that is free to open, doesn't require a minimum balance or charge monthly service fees². Services and features include a virtual and physical debit card¹, 1.00%⁶ APY on balances, bill pay and instant deposit with QuickBooks Payments at no additional cost for eligible customers³. Small business owners can take advantage of these features all within QuickBooks, and since QuickBooks Checking is integrated with QuickBooks Online, payments and expenditures sync, automatically keeping the books up to date. Manage Cash Flow Cash Flow Planner* predicts cash flow 30 and 90 days out using machine learning and data analysis, alerting business owners and providing them with recommendations when cash flow could become a problem. Envelopes lets businesses set money aside for both planned and unexpected expenses. Latest Updates Digital wallet: Apple Pay® and Google Pay™ compatibility provides the convenience, flexibility and speed of letting you pay with a tap using your mobile phone. Mobile remote check deposit*: Checks from customers or vendors can be deposited from anywhere using the QuickBooks mobile app to take a picture of it. Read More on the QuickBooks Blog QuickBooks and Intuit are a technology company, not a bank. Banking services provided by our partner, Green Dot Bank. **Important offers, pricing details and disclaimers. Apple® and Apple Pay® are registered trademarks of Apple Inc. and Google Pay™ is a trademark of Google LLC. ¹Account opening subject to identity verification and approval by Green Dot Bank. ²Other fees and limits apply. See Deposit Account Agreement here. ³Includes use of Instant Deposit without additional cost, an additional service offered by QuickBooks Payments, subject to eligibility. Standard rates apply for ACH, swiped, invoiced, and keyed card transactions. Deposits are sent to the account linked to your QuickBooks Debit Card in up to 30 minutes; times may vary for third party delays. ⁶Annual percentage yield accurate as of September 1, 2021 and may change at any time. Get Paid Upfront Get Paid Upfront is an invoice financing product from QuickBooks Capital that offers financing options to businesses, reducing the wait time to get paid on qualifying invoices by paying business owners up front on the invoiced amount. By paying 3% per financed invoice, business owners can also access credit up to $30,000. Financed invoices are interest free for 30 days, and there are no additional fees on ACH or credit card transactions when clients pay the invoices through QuickBooks Payments within the first 30 days. Read more in QuickBooks Support. Onboard Employees to QuickBooks Time with Codes Beginning in January 2022, admins will have the option to skip the individual invitations to get new employees in QuickBooks Time and onboard them with a unique 6-digit or QR code instead. How It Works: New hires use a 6-digit or QR code to access timekeeping records. Employees can start tracking time without waiting for the admin. since the code is unique to each company. Admins can onboard multiple workers with a single code. Admins don’t have to manually add each person with their contact information before sending out invitations. Sources & Disclosures Some content and images adapted from Intuit / QuickBooks source materials, including support websites; QuickBooks Blog; Firm of the Future; & Intuit Developer Blog. Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

  • What Freelancers Should Know About Taxes

    Click here to read the original post on by Candace Dixon December 21, 2021 Whether you have a side hustle or work for yourself full time, freelancers should know about the tax implications of the work they do. In this article, tax accountant Candace Dixon breaks down what freelancers need to file with the IRS and how professional advisors can help these self-employed clients. Due to the COVID-19 pandemic and other extenuating circumstances, more people than ever are freelancing. Whether you are part of the “gig” economy (Uber, Airbnb, etc.) or are working as a freelancer, you should be aware of the many tax implications of freelance work. Typically, you will receive a 1099-NEC (Non-Employee Compensation) and/or a 1099-K (Payment Card and Third Party Network Transactions) if you’re part of the gig economy, both of which are information returns that are reported to the IRS and matched against your tax return. Even if no 1099 form is received, you are required to report your income on your tax return if you make $400 or more. Whether you have a side hustle or freelancing is your main job, you are required to, at a minimum, file a Schedule C Profit or Loss from Business with your tax return. A Schedule C reports the income or loss from either you on your own, or you as a single-member disregarded entity of an LLC. Either way, there are some taxes you should be aware of. There are seven tax brackets for the 2021 tax year: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 37 percent. The highest individual tax bracket for 2021 is 37 percent based on an income of $523,600 for a single taxpayer. There are six additional tax brackets that depend on your filing status. According to Fundera, the average salary for a full-time freelancer is $68,300 a year, taxed at 22 percent for a single taxpayer in 2021. In addition to your tax rate, you must pay self-employment tax, another 15.3 percent on top of any income taxes. If you stop and think about it, you could very easily be paying 40 percent in taxes and not even know it. Nobody wants to give the government 40 percent of their income if they don’t have to. If you are a freelancer who has chosen to protect your assets by forming a limited liability company (LLC), you may not have chosen to be taxed as anything other than a single-member disregarded entity and are still filing a Schedule C. A little-known fact is that you can remain an LLC and make an election to be taxed as either an S-Corporation or a C-Corporation. You could choose to be taxed as a C-Corporation and pay a flat tax of 21 percent at the federal level, but C-Corporations are not for everybody. There is something called “double taxation.” If you take out anything more than a salary, you are taxed twice – once on any profit, and again on the “dividend” you’re taking out. Most freelancers who form a small business will find themselves better off being taxed as an S-Corporation for this reason. An S-Corporation does not pay tax; instead, profits and/or loss flow to the taxpayer and is claimed on their personal tax return. Self-employment tax is not charged because you are not considered self-employed for tax purposes. Self-employment tax is Social Security and Medicare (FICA). When you’re an employee of a company, 7.65 percent is withheld from your paycheck for FICA, and your employer matches the 7.65 percent. When you’re self-employed, you are both the employee and the employer and must pay the full 15.3 percent self-employment tax. While S-Corporation income isn’t subject to self-employment taxes the way sole proprietor income is, if you elect to be taxed as an S-Corporation, you must pay yourself a salary in the form of W-2 wages that are subject to FICA taxes, which is known as reasonable compensation. Therefore, saying that you’re “saving” 15.3 percent isn’t exactly true, because you are still going to pay FICA on the amount you take out in reasonable compensation. There are many ways to arrive at reasonable compensation. One way is to think about what you would make doing the same job if you were working for a company that does the same thing that you do. On the other hand, since the gig economy is a relatively new space, reasonable compensation should be at least half of what your profits are. Revenue Ruling 74-44 gives the IRS the authority to recharacterize S-Corporation distributions or “dividends” as wages subject to employment taxes. Reasonable compensation is a complex issue and not for the faint of heart, and it’s not something you should try to figure out on your own. S-Corporations are audited for this very reason. Electing to be an S-Corporation isn’t something that needs to be done immediately - you can elect the S status when you file your first tax return by filling out form 2553. Typically, you have until the fifteenth day of the third month to file your S-election; however, if you miss the deadline, you are allowed to file a late 2553 per Rev. Proc. 2013-30 as long as you have an acceptable reason, which could simply be that you didn’t know about it until you sought professional advice. As you can see, this all has the potential to become complicated, and you should not take blanket advice to become an S-Corporation. Filling out form 2553 is not all there is to it: Most of the time, freelancers will see that the good thing about freelancing is that there is no overhead. The bad thing is, come tax time, there is no overhead. If you’re working from home as a freelancer, you can take the home office deduction provided you use part of your home exclusively and regularly as the principal place for your business. However, as with any good tax law, there are pros and cons. Depending on which method you use, when you sell the home, you will have to carry back all the depreciation on the part that you called business property. This is a main deduction that freelancers take, but as you are effectively depreciating the home that you live in, the deduction you take today may not outweigh the taxes you pay tomorrow. If you rent, you don’t have to be concerned about depreciation. You must keep records of the square footage of your home and what portion of it you are using as a home office, because electricity, water, insurance, taxes and other direct and indirect expenses are determined by the percentage you are using for business. Other possible deductions include car and truck expenses, maintaining an online presence, the cost of supplies not in your inventory and more, for which there are exceptions, specific requirements and/or more than one way to calculate them. Then there are temporary rules related to COVID-19 that come into play: for example, while business entertainment is no longer deductible per the Tax Cuts and Jobs Act (TCJA) of 2017, business meals are still 50 percent deductible, and because of the pandemic, they are temporarily 100 percent deductible for 2021 and 2022, as described in Notice 2021-63. In my career, I have seen many freelancers who don't think the income they earn “counts," or that it isn’t being reported to the IRS and doesn’t need to be reported on their tax return. Underreporting your income can and will be blown apart at an audit – the IRS is not stupid. Don’t think you can beat the tax man by getting paid in cash and telling the IRS you made less than what your actual living expenses were. Cash is traceable, just like a check, and even if you don’t deposit it, the IRS has various ways to reconstruct your income. It could be as simple as doing a cash flow analysis to figure out what your house payment was and then factoring in that you had to eat something, you had to wear clothes – you get the point. If you’re not reporting at least that much in income, then what did you live on? This is not the IRS’s first rodeo (Revenue Ruling 74-44 was, after all, written in January of 1974) and, no, they aren’t distracted by the pandemic. Trust me, you just can’t hide or disguise your income. Accountants and authors alike cite the home office deduction and other freelancer “red flags” for a freelancer or small business audit, but you don’t need to rely on their opinions. The IRS itself specifically states that computer screening selects returns for small business audits based on a statistical formula that compares your tax return to the norms for similar returns. Returns may also be chosen for audit because they include transactions you did with someone else who is being audited (i.e., the person who pays you in cash that you may be tempted to not report). As you can see, there are many ways to determine your income, many tax brackets in which that income can be taxed and many deductions, both temporary and permanent, you may be able to take. These complexities make it more important now than ever to get professional advice. While the IRS has an excellent partnership with tax chains who will do your return for free if you qualify, freelancer returns are not necessarily Free File returns. You may need professional help from a licensed accountant who specializes in tax and has experience working with freelancers and the gig economy. You might think you can get some free information and proceed by yourself, but the potential unknowns of the current tax laws make it important that you hire a licensed accountant who specializes in taxation. Many people assume that all accountants specialize in taxes, but just because someone is a CPA or has a degree in accounting doesn’t necessarily mean that they specialize in taxation. Tax is a subculture of the accounting industry. A person is required to take only one tax class to receive a bachelor’s degree in accounting. The gig economy may have boomed during the pandemic, but numerous surveys and publications suggest a noticeable increase in that direction well before COVID-19 that continues today. About 41 million people in the United States were classified as gig workers in 2018 and 2019. Both companies and workers alike are continuing to choose remote or freelance work. A person can now select “remote” as a location rather than a city and state when searching for jobs on, and the United States Bureau of Labor Statistics shows that 20.2 million workers left their employers between May and September of 2021, a move that’s been dubbed The Great Resignation. The 1099-K Requirement coming in 2022 didn’t become part of the American Rescue Plan Act for no reason. The IRS needs to keep track of increasingly unreported income from freelancers, whether it’s intentional or not, and collect taxes due. Whether you’ve found yourself with a side hustle or derive all your income from freelancing, you can avoid a tax pitfall by getting professional advice.

  • Tax-Planning Tips to Put Money in Clients' Hands

    Click here to read the original article on December 3, 2021 by Craig W. Smalley, EA The evolving tax landscape has led to changes to certain deductions for clients. In this article, tax guru Craig Smalley offers some tax tips to put tax-free money in your clients' pockets, as well as some best practices from his years as a tax planner. I have provided tax planning to clients for the past 15 years. There are many ways to do tax planning; however, finding ways to put tax-free money into my clients’ hands has been the best approach. Here are some tips to help you do the same for your clients. Should I Use Tax Planning Software? When I first started doing tax planning, software programs that did this ancillary service did not exist. Today, there are several programs that will do tax planning. However, not all of these programs are up to par with my needs. Most provide only mathematical feedback, without any accompanying advice, similar to tax software. This is why I don’t use any software to do tax planning. When Should Tax Planning Be Done? First, tax planning should be done once a quarter. If your specialty is taxation, you should be providing advice to your client. For example, if you are merely doing accounting work for a client and sending them financial statements, the client likely doesn’t understand what you are sending them. Fewer than one percent of clients will even look at what you are sending them because they don’t know what it means. Some people wait until the end of the year to do tax planning. However, the reality is that every business has cash flow issues. November and December especially are horrible for most businesses, unless they are retail. Therefore, your client may not have the cash to implement what you tell them to do. A Misconception in Tax Planning There is one theory among tax planning that is incorrect. Most people know that you can use the Section 179 deduction for any equipment that was bought in any year, provided it doesn’t exceed taxable profit. Further, you can use bonus depreciation, provided the equipment commences with the taxpayer. In some schools of thought, the advice is to buy equipment that you may or may not need and take these deductions. However, this is short-sighted advice. Tax planning should consider the future as well as the present. While these deductions can be valuable, unless the client needs the equipment, they are spending cash just to get a deduction. When thinking about tomorrow, remember that if the equipment is sold or junked and the Section 179 deduction was used, you must now carry back that depreciation, and your client may now be in a higher tax bracket. How the TCJA Affects Tax Planning My mantra in tax planning has always been the more money a client puts in their pockets tax free, the better. After the Tax Cuts and Jobs Act (TCJA) of 2018, tax election is extremely important. For example, setting up a company as an S-Corporation to avoid self-employment tax on a portion of the profits used to be the best advice 99 percent of the time. However, that may no longer be the case. Under TCJA, there is the qualified business income deduction (QBI). However, there are several caveats to this deduction. For example, licensed professionals are excluded from this deduction and usually subject to a higher tax bracket. In addition, there are adjusted gross income (AGI) limitations. Conversely, a C-Corporation pays a flat 21-percent tax. I realize there can be double taxation; however, if converting from an S-Corporation to a C-Corporation, Rev. Proc. 2019-1 allows the client to take all of the profit that has accumulated in the accumulated adjustments account (AAA) up to zero because it is previously taxed income. Further, in a C-Corporation, the owner can now reap the benefits of non-taxable fringe benefits, therefore avoiding the need to take a dividend. The next situation that arises is reasonable compensation. In an S-Corporation, reasonable compensation is important because the avoidance of self-employment tax is just Social Security and Medicare. In a C-Corporation, taking too much compensation could be construed as the avoidance of taxes. Reasonable compensation is also important because retirement plans are based on it. For example, you have defined compensation plans like SEPs, SIMPLEs, 401(k) plans and KEOUGHs, and then you also have defined benefit plans. All of these plans are based on earned income. In short, the more a client pays themselves, the more they can put into these plans. For example, a business owner with or without employees can either start a safe harbor 401(k) plan or a Solo 401(k) plan, respectively. Both plans, between salary deferrals and employer matches, can be as high as $58,000 among those age 49 or under or $64,500 among those 50 or older. What an employer does for themselves they must do for their employees. However, with a safe harbor 401(k), they only have to match the employee’s salary deferral by three percent. Typically, most employees do not participate in the plan. A safe harbor 401(k) and Solo 401(k) must be opened before the fourth quarter of the year. For high net-worth clients, a defined benefit plan may be the way to go. Depending on the age of the owner, the owner can put up to $250,000 into the plan. They have to include the most senior employee in the plan; however, at a much lower rate than the owner. With a defined benefit plan, you can also have a safe harbor 401(k) plan; however, the owner can only match his salary deferrals by three percent.

  • What Freelancers Should Know About the IRS & Venmo

    Click here to view the original article on Candace Dixon Nov 30th 2021 The American Rescue Plan Act (ARPA) of 2021 has a provision for businesses that you may not be aware of, and it certainly seems to be making waves across the internet lately. In fact, the Internet Association even wrote a letter to Congress protesting it. Section 9674 of ARPA amended certain sections of the Internal Revenue Code, including tightening the de minimis exception, lowering the threshold for reporting third-party settlement network payments on Form 1099-K to $600 starting in January 2022. Currently, 1099-K's are only required when users of cash apps such as Venmo receives over $20,000 in goods and services transactions and has more than 200 transactions for goods and services transactions in a calendar year. Venmo is a cash app, or digital wallet, owned by PayPal used to send and receive money. While the tax reporting by Third Party Settlement Organizations (TPSOs) is changing, requiring them to report transactions made for goods and services made by customers with $600 or more in annual gross sales on 1099-K forms, these changes in 1099-K reporting didn’t change tax obligations. Form 1099-K, Payment Card and Third-Party Network Transactions, is simply an IRS information return used to report payment transactions to improve voluntary tax compliance. If you're using Venmo, or other cash apps to receive business income, you should have been reporting that income all along, and so you have nothing to worry about. The ARPA measure only applies to transactions for commercial sales of goods and services, which are already considered taxable income. ARPA clarified that TPSO reporting obligations do not apply to personal payments. Venmo transactions between friends for splitting the tab for a ride or dinner or reimbursing friends and family for expenses aren't affected. If you've been keeping your business and personal income separate like you should, you won't have a problem. ARPA also clarified that this new rule doesn't apply to commercial transactions that may not be considered taxable after expenses are deducted. It doesn't apply to people who use Venmo to make charitable contributions or for payments of royalties or rents. Why such a dramatic change to the commercial users though? The pandemic caused an entire new workforce dynamic, on filled with gig economy and self-employed workers. This burgeoning new workforce joined others before them who already may have been misreporting or underreporting their income from cash app payments since they didn’t receive a 1099-K form from the company. According to IRS Tax Gap studies, it's estimated that 63 percent of income is misreported when third parties do not provide information to the IRS, such as with a 1099-K, according to a 2019 report on the gig economy by the Treasury Inspector General for Tax Administration. Digital work platforms allow users to earn money from their labor while other platforms allow them to earn money from their capital (in other words, things that they own or possess). A Pew Research survey looked at two types of capital platforms: home-sharing sites, where people can rent out all or part of their homes for a brief period of time (less than 1 percent of people used home sharing sites to supplement their income), and online selling platforms, where users can sell items ranging from used goods to crafts they make - 18 percent of Americans have earned money in the last year from selling something online. The Internet Association's letter to Congress claimed that these new tax reporting requirements would discourage small sellers, holding back the online economy. The scathing letter cited potential issues including "burdensome paperwork," possible overpayments, and privacy concerns, and asked the question, "Do we really want to mandate additional headaches and risk noncompliance when filing taxes for folks just trying to clear out clothes from their closet?" This is quite a interesting statement, being that you don't have to be pay taxes at all on income you make from selling your own items as long as you sell them for less than they cost you. According to Pew, 74 percent of online sellers have earned money in the last year by selling their own used or second-hand goods, while just 2 percent earned money by selling handmade items online and 2 percent by selling a line or brand of consumer goods. The lack of some sort of "national campaign to educate gig economy workers on paying taxes" is another huge trigger for people - but if you're a freelancer, you should have already been receiving form 1099-MISC or 1099-NEC if you earned $600 or more, and you have to pay taxes on the income whether or not you receive the form. That's what separates work from a hobby. It shouldn't be a shock that you have to pay taxes on the work you do. This isn't even the first attempt to raise the threshold - H.R. 1625, S. 700 introduced in 2019 sought to bring the thresholds for both forms to $1,000. The IRS clearly states that you must file a tax return if you have net earnings from self-employment of $400 or more from gig work, even if it's a side job, part-time or temporary, and you must pay tax on income you earn from gig work. Also, the gig economy has been covered quite a bit during the pandemic in order to educate people. Technology expert Shankar Maruwada said that "policymakers also need to make sure they are well equipped to manage the technology and are able to regulate and moderate this trend" back in 2018, when there were already 57 million gig workers in the United States. The average gig worker income was $17,445 in 2020 according to a survey by daVinci Payments- so no matter whether a 1099-K is sent on $600 or $20,000, those workers were responsible for paying taxes on that income. Why weren't gig workers and freelancers already prepared to pay their taxes? The 1099-K is a listing of transactions, not a magical piece of paper that mandates taxes. Tax existed on the work regardless of if there is a 1099-K or not. Venmo in particular was only supposed to be used for personal reasons before 2021 – it explicitly stated on its site that you should not use it for business payments. In 2021, the company launched a feature called “Business Profiles,” which allows users to send and receive business payments, but the business accounts must apply and be explicitly authorized to accept Venmo for purchases of goods and services. Will the new legislation stick? We'll find out. H.R.3425, the Saving Gig Economy Taxpayers Act, was introduced to reinstate the exception for de minimus payments by third party settlement organizations for payments made in settlement of payment card and third-party network transactions, as in effect prior to the enactment of the American Rescue Plan Act.

  • IRS Summary for November 15 - November 19

    November 26, 2021 Candace J. Dixon This is a summary of significant tax and IRS happenings the week of November 15-19. November 15, 2021 California wildfire relief was extended to January 3. 2022 for certain areas by the IRS. November 15, 2021 The Internal Revenue Service launched a new online tool that performs a quality review of data before it's submitted to the IRS to help U.S. withholding agents comply with reporting and withholding responsibilities of Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding. November 16, 2021 The Internal Revenue Service issued Notice 2021-63 to provide guidance on how the per diem rates and the temporary 100% deduction for food or beverages from restaurants and apply to taxpayers applying the rules of Revenue Procedure 2019-48 in a news release. November 16, 2021 A news release announced that tax professionals can order up to 30 Transcript Delivery System (TDS) transcripts per client through the Practitioner Priority Service® line effective Nov. 15, 2021, an increase from 10 transcripts. November 17, 2021 The IRS issued FS-2021-16, a Fact Sheet (FAQs) for state and local governments on taxability and reporting of payments from Coronavirus State and Local Fiscal Recovery Funds along with a news release. November 17, 2021 An IRS news release announced that victims of Hurricane Ida now have until January 3, 2022 to file various individual and business tax returns and make tax payments in the entire state Mississippi. November 17, 2021 The IRS announced the 2022 contribution limit for 401(k) plans and cost‑of‑living adjustments that could affect pension plans and other retirement-related savings next year. November 17, 2021 The Internal Revenue Service Advisory Council (IRSAC) issued its annual Public Report for 2021 including recommendations to the IRS on 24 new and continuing issues in tax administration on 24 issues. November 17, 2021 The Internal Revenue Service announced the launch of an improved identity verification and sign-in process allowing people to securely access and use IRS online tools and applications. November 18, 2021 IRS Criminal Investigation released their annual IRS-Criminal Investigation (IRS-CI) Fiscal Year 2021 Annual Report highlighting over 2,500 criminal investigations, more than $10 billion from tax fraud and financial crimes, and a nearly 90% conviction rate. November 18, 2021 The Internal Revenue Service gave a statement informing taxpayers and advisers of the disposition of protective claims for refund filed by or on behalf of a taxpayers pending the resolution of CALIFORNIA ET AL. v. TEXAS ET AL. As a result of the Supreme Court's ruling in CALIFORNIA ET AL. v. TEXAS ET AL., the IRS will not allow any of the protective claims held in suspense and will take no further action with respect to these claims. November 19, 2021 The Internal Revenue Service and Security Summit announced in a News Release the 6th Annual National Tax Security Awareness Week will be November 29–December 3, focusing attention on taxpayers protecting sensitive financial information against identity thieves. Advance Notice of IRS Guidance issued this week RR-2021-24 REG-109128-21 RP-2021-50 RP-2021-49 RP-2021-48 N-2021-62 N-2021-63 RR-2021-23 Latest Internal Revenue Bulletin November 15, 2021 Internal Revenue Bulletin: 2021-46 ​highlighted Notice 2021-35 - Credit for Carbon Oxide Sequestration 2021 Section 45Q Inflation Adjustment Factor publishing the inflation adjustment factor for the carbon oxide sequestration credit for 2021 and including a statement that the IRS is not certifying that 75 million metric tons of qualified carbon oxide has been taken into account by taxpayers filing on annual report The IRS published the latest executive column “A Closer Look,” featuring James Lee, IRS Criminal Investigation Chief, and Damon Rowe, Executive Director, IRS Office of Fraud Enforcement, taking a glimpse of how the IRS investigates and helps prosecute fraud November 19, 2021 A Tax Court Press Release announced that Special Trial Judge Daniel A. Guy, Jr. received the J. Edgar Murdock Award for distinguished service to the United States Tax Court. Read this week's Criminal Investigation Press Releases. November 19, 2021: The IRS updated their list of weekly written determinations.

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