With the year-end fast approaching and a major new bill on the horizon, we wanted to send you our annual newsletter with some of the latest highlights of the bill passed by Congress and some tax tips for year end. With so many pieces up in the air (including presidential signature), we have presented some of the highlights but look out for our follow-up newsletter in early 2021 with some more of the specifics as they are hopefully passed into law.
Our team at Gannon CPA wishes you and your family healthy and happy holidays! To a brighter 2021!
|
|
A Federal $908 billion relief bill with 5,600 pages has been passed this week. It is currently waiting for the President to sign and some sponsors may put forth amendments. This bill comes at a critical time for individuals and small businesses that feel the full impact of the ongoing coronavirus pandemic. This bill includes new guidance on PPP loans, stimulus checks, and information valuable to tax filers.
Here are the highlights as it stands now:
PPP2
- A second round of PPP loans to be made available to new borrowers and certain 2nd time borrowers. At this time these are the requirements:
- Businesses with 300 or fewer employees
- Sustained a 25% or more revenue decline in any 2020 quarter (compared to same quarter 2019 only for 2nd time borrowers)
- All first round PPP funds have been or will be spent
PPP Loan Forgiveness:
-
In the new law, expenses paid with PPP loan proceeds are deductible for federal tax purposes (not necessarily for state purposes). Prior guidance confirmed the loan forgiveness would not be taxable income to borrowers.
- Streamlined one-page forgiveness application for loans under $150,000 with minimal calculations.
- The covered period for PPP loan forgiveness was initially changed to either 24 weeks or the 8 week original period. The new bill expands this to ANY period between 8 and 24 weeks
- Advances of $10k from the EIDL loan do not reduce forgiveness
EIDL Changes & Funding
- The new bill replenishes EIDL advances of up to $10,000 for those who had not yet applied. Previously this grant would have counted against the forgiven loan amount. The new bill removes this requirement effectively making EIDL grants non taxable.
- A New EIDL program was created for businesses in low income communities that suffered economic loss of more than 30% among other requirements
Other Important Items in the Bill:
- Extension of unemployment benefits of up to $300 per week that will start as early as December 27, 2020 and run through at least March 14, 2021.
- Business meals will be fully tax deductible for 2021 and 2022.
- Stimulus checks
- $600 per individual phased for 2019 income between $75,000 and $87,000.
- For taxpayers who file Married Filing Jointly the amount is $1,200 phasing out for 2019 incomes between $150,000 and $174,000.
- An additional $600 for each dependent child under 17 years old.
- Taxpayers who are claimed as a dependent on someone else’s return are not eligible (ie., College students who provide less than half of their own support)
-
The original CARES Act allowed for individuals and married filing jointly who do not itemize to take up to $300 in charitable contribution deductions. This Act extended the law through 2021 and increased the deduction for married filing jointly to $600. (still $300 for single filers)
- The eviction moratorium is extended until January 31, 2021.
- $25 billion is allocated for renters needing emergency assistance
- Tax on withdrawals from retirement accounts due to COVID can be paid over three years and penalties on early withdrawals may be waived
- FSAs don't have to be used by year end. Benefits can be carried over from 2020 to 2021 and from 2021 to 2022.
- Extension of COVID related tax credits for employers
|
|
Business Reminders and Tax Tips |
|
- Bonus depreciation remains at 100% for both used and new equipment.
- If you are able to hire your children, you may be able to pay them up to $12,000 federal income tax free. Please note, however, that you must have documentation of their hours and the tasks they performed.
- Reduce owner's salary in order to maximize the 20% business deduction.
|
|
Penalties on late filing of Form 1099's
Penalties are increasing for 2019, 2020 and beyond for late filing of Form 1099's. The penalties start at $50/per Form 1099 filed late and increase to an unlimited penalty if not filed at all.
The general rule is if you pay over $600 to an individual or unincorporated business for business related services, you must issue a Form 1099 by the end of January of every year for the prior years expenses. That can include everything from rental expenses to cleaning to contract labor.
The IRS has increased their scrutiny on the filing of these forms.
|
|
Paid Family and Medical Leave Act (PFMLA)
As of October 1, 2019, both MA employees and employers were required to begin paying (equally) an additional payroll tax. This new payroll tax will entitle those who require the use of Family and Medical Leave to be eligible to get up to 12 weeks of paid family leave and up to 20 weeks of paid medical leave paid by the Commonwealth of Mass. If you are self-employed, you are not required to contribute, but you can choose to opt-in. These benefits will be available beginning January 1, 2021.
For some time now, there has been a federal law in place which may lead to some confusion. The FMLA only provides unpaid leave.
Paid family leave may be taken to:
- Care for a sick family member
- Bond with a newborn child
- Bond with a child after adoption or foster care placement
- Manage family affairs when a family member is on active duty in the armed forces
This leave can be coordinated with the Covid leave provided for in the original CARES Act. For additional information please reference the MA DOR PFML Fact Sheet.
|
|
- Maximize your retirement contributions. If you are over 50, you can put more away.
- Maximize your charitable donations.
-
For 2020 & 2021, even those who do not itemize may take up to $300 in an above the line charitable deduction ($600 for Married Filing Joint)
- If you have investments, harvest tax losses.
- Maximize your FSA through your company. This can now be carried over.
- Maximize on an HSA through your company or open your own HSA.
- Contribute to a Roth IRA's using the rollover rules if your income is low in 2020 or using the "back door" Roth IRA contribution method.
|
|
Other 2020 tax filing issues:
-
Payroll tax deferral - in September, there was an option to defer payroll taxes until 2021 Q1. This deferral was extended in the new bill until December 31, 2021. If your paycheck was larger this fall, it may be smaller in 2021, when you are paying back the taxes.
- All federal government employees were auto enrolled in this election.
- Self-employed taxpayers and partners in partnerships have options to defer a portion of the SE tax due for 12/31/2020 for the next two years.
|
|
Health Savings Accounts
Health Savings Accounts (HSAs) continue to be one of the best tax deductions as well as a great way to save for retirement. When contributions are made to HSAs, the contribution is considered pre-tax and as long as the money is used for medical expenses it remains tax free. Thereby giving you a completely tax free vehicle on the federal side. A single person may contribute up to $3,550, while families can contribute up to $7,100, for 2019. (Additional $1,000 after 55 years old)
|
|
529 Plans
Contributions to 529 plans are now deductible in Massachusetts up to $2,000 for those who are married, filing jointly and $1,000 for all other individuals. To be eligible for this deduction, the taxpayer must be contributing to a Massachusetts plan.
|
|
Fraudulent activity remains a significant threat. Our firm takes security very seriously and we think you should as well. Fraudsters continue to refine their techniques and tax identity theft remains a significant concern. Beware if you:
- Receive a notice or letter from the Internal Revenue Service (IRS) regarding a tax return, tax bill or income that doesn’t apply to you
- Get an unsolicited email or another form of communication asking for your bank account number or other financial details or personal information
- Receive a robocall insisting you must call back and settle your tax bill
- Unemployment claims have been among the other fraudulent activity for 2020. The scammers are using other peoples social security. If you receive a notice that doesn't seem correct, please let us know.
Make sure you’re taking steps to keep your personal financial information safe. It is never safe to email personal information unless using encryption. Let us know if you have questions or concerns about how to go about this. Contact us first.
|
|
Did you move? make sure to change your address on a change of address form with both the IRS and your state of filing. This also helps mitigate fraudulent filing on your behalf.
|
|
Use the below links to pay your estimated tax payments. |
|
SCANNING
If you regularly scan documents to the portal, we have found that the following settings make the scan most legible:
DPI of 300
Black & White print
PDF
|
If you want to take pictures with your phone, this app converts the pages from JPG to a PDF. It is offered by Microsoft and available on all phones and tablets. |
|
READING ELECTRONIC DOCUMENTS
Download the latest Adobe Acrobat reader
|
Quickbooks Online App-
if you are not using the app in order to scan in receipts, you are missing out. After scanning in the receipts, you can categorize and the receipt is contained with your books for easy access.
|
|
To access our portal with your existing
|
|
Need access to our portal to upload documents? Click here.
|
|
|
|
P.O. Box 421
22 Central Square
Chelmsford, MA 01824
|
|
|
|
|
We are accepting new clients. The highest compliment a client can give us is the referral of a friend, family member, or a business associate.
If you have had a great experience with us, please consider recommending us. We would love a recommendation on LinkedIn!
|
|
|
|
|
|
|
