February 9, 2021 Update

Mike Sylvester • Feb 12, 2021

February 9, 2021

A few quick thoughts from SBS CPA Group

This is the second email of 2021 and it is a much shorter email.  The prior emails were much longer and explained various new tax law changes.

Individuals

Once you have everything gathered for your 2020 income taxes please drop everything off including a filled-out tax planner (You have to fill out at least page one of the tax planner).  Please do not drop anything off until you have everything.  Once you have everything please drop off fairly quickly because if you drop off now you can still beat the rush.

The largest problem we are having is in regards to the stimulus payments.  We need you to tell us exactly how much you were paid for round 1 and then we also need you to tell us exactly how much you were paid in round 2, and round 2 was received in January of 2021.  We must have both numbers and they cannot be combined into one number.  The 2 nd  stimulus payment paid in January of 2021 is reported on your 2020 income tax returns.

If you collected unemployment, please download your 1099-G form from the Department of Workforce Development website, and give it to us.

Businesses

Please make sure you tell your CPA when the SBA tells you that your round 1 PPP loan was forgiven, we must have this information.

Far fewer businesses qualify for the 2 nd  round of PPP loan funding; however, about 25% of our business clients might qualify for this funding.  Please contact your CPA if you have questions about this 2 nd  round of PPP loan funding.  Congress does not expect the 2 nd  round of PPP loan funding to be used; however, some of the banks are saying the money is going fast.  About 73 billion dollars in round 2 PPP loans have been distributed and the program has about 202 billion dollars left in it.  If you want to apply for a 2 nd  round PPP loan please contact your CPA this week.  If you get a 2 nd  round PPP loan please tell your CPA the amount of the loan and exact date you got the money.

As discussed in prior emails the rules surrounding the 2020 Employee Retention Credit (ERC) have changed.  This is a complicated program and only a few of our clients will qualify for the 2020 ERC.   That being said, we have a few clients who will be eligible for hundreds of thousands of dollars of ERC credits.  If you have any quarter in 2020 where your gross receipts (business revenue not counting PPP loans and EIDL advances) decreased by more than half please contact your CPA.  If your business was shut down for an extended period due to the Covid-19 lockdown and you paid your employees wages contact your CPA.

There is an expanded ERC for 2021 that will be easier to qualify for and is a much larger credit.  Our business clients really need to look at their 1 st  quarter 2021 gross receipts in early April.  You will qualify for a much larger Employer Retention Credit if either of the following is true for your business for Q1 2021:

Your Q1 2021 gross receipts are more than 20% less than your Q1  2019  gross receipts OR

Your Q4 2020 gross receipts are more than 20% less than your Q4 2019 gross receipts

You will qualify for the ERC for Q2 2021 if:

Your Q2 2021 gross receipts are more than 20% less than your Q2  2019  gross receipts OR

Your Q1 2021 gross receipts are more than 20% less than your Q4 2020 gross receipts

We are currently working on income taxes primarily; however, we are also looking at our clients as we do their income taxes to see if they qualify for the 2020 ERC.  Most of our clients do NOT qualify for the 2020 ERC; however, the few who do will get hundreds of thousands of dollars of credits.

Please watch your gross receipts in the first 2 quarters of 2021 and contact your CPA if you think you qualify for ERC 2021.  This credit can be as high as $7,000 per employee in both the 1 st  and 2 nd  quarters of 2021.  Currently the program ends June 30 th , 2021.   Businesses that qualify could get as much as $14,000 per employee just for the 1 st  two quarters of 2021.

If you know other business owners please feel free to forward this email to them and feel free to forward our prior emails to them.  There is a lot of help available for businesses due to Covid-19.

Mike Sylvester, CPA

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New Overtime Rules

By Mike Sylvester • 24 Apr, 2024
The rules for who is paid overtime have just been changed by The Department of Labor. This matters to you if you or someone you know is an employee. This matters to you if you own a business and pay payroll. There are specific rules regarding which employees are exempt from overtime pay. Employees are often exempt from the rules forcing the employer to pay overtime and time and a half if they are employed in a bona fide executive, administrative, or professional (EAP) capacity. 1/1/20 – 6/30/2024 the EAP employee could only be exempt from overtime pay if their annual salary was $35,568 or more per year. On 7/1/2024 this annual salary increases to $43,888 per year. On 1/1/2025 this annual salary increases to $58,656 per year. This is a very significant increase. Further these thresholds will be increased once every three years. What this means is roughly four million more workers will be required to be paid overtime pay when they work more than 40 hours per week at time and a half, unless their annual salaries are increased above the thresholds listed above!  If we handle your payroll and you wish to discuss this with us, please reach out to the partner overseeing your account! Mike Sylvester, CPA

Back to Normal Hours

15 Apr, 2024
April 16th , SBS will go back to normal hours: Monday - Friday 8:30am to 5:00pm.

Tax season is in full swing at SBS CPA Group!

By Mike Sylvester • 05 Mar, 2024
Our turnaround time for tax returns is four weeks or less from when you drop everything off. Please gather all your information; then drop everything off all at once. Please do not drop anything off until you have everything. In all cases you must completely fill out the first two pages of the tax planner. There are four ways you can drop off: 1. You can drop off a package to our office during business hours. We are open Monday – Friday 8:30 AM – 6 PM and Saturdays 9 AM – 4 PM through April 13th. 2. We have a 24-hour drop box. 3. You can mail them to us. 4. You can send the partner who handles your taxes an email and they can send you a link to our secure portal. All three partners in our firm file extensions for our own income tax returns every year. There is nothing wrong with filing extensions and per IRS statistics a record number of people will file extensions this year. Filing an extension does not increase your chances of being audited and is honestly not a big deal. As is normal, any returns for which we do not have everything dropped off by 6 PM on 3/15/2024 will be extended and done after the April 15th deadline. The time to drop off your income tax returns, only if you have everything, is now. If you know you will need an extension, please send the partner who handles your account an email. Mike Sylvester, CPA

Tax season is here!

By Mike Sylvester • 10 Feb, 2024
Tax season is in full swing! Please gather all of your important tax documents! After you are certain that you have everything, please send us everything via our secure web portal or drop it off to our office (We do have a 24 hour drop box you can use). Please remember, all clients must completely fill out the first two pages of our tax planner. There is still time to beat the rush! Please make sure you drop off complete copies of all brokerage statements. Please do not drop anything off until you have all brokerage statements. Those of you that have accounts with TD Ameritrade and E*TRADE please read the next part carefully. TD Ameritrade was purchased by Charles Schwab, and you will get one 1099 from each company for each account. E*TRADE was bought by Morgan Stanley, and you will get one 1099 from each company for each account. Mike Sylvester, CPA

Tax Season Hours

30 Jan, 2024
Tax Season | February 1st - April 15th Monday through Friday: 8:30am to 6:00pm Saturday: 9:00am - 4:00pm Sunday: Closed

Augusta Rule gone WRONG

By Mike Sylvester • 21 Jan, 2024
The Augusta Rule is one of the most talked about “Tax Secrets of the Rich!” I see from non-tax influencers on social media. Most of what these "influencers say is flat out wrong! It’s the Augusta Rule - which allows you to not claim rental income on a property you own if you rent it out for 14 days or less during the year. Apparently, what the wealthy do, is they will have their business rent their property under this rule, thus getting a rental expense on the business side, and not have to claim income on the personal side. Let’s be clear - this is a legitimate tax strategy when implemented correctly. This involves renting the property at a reasonable FMV, transferring the expenses in question, issuing a 1099-Misc for the rental payments made to the business owner, and reporting the income and Augusta Rule deduction appropriately on your Schedule E, which is part of your personal 1040 tax filing. A recent tax court case that deals directly with the August Rule was Sinopoli v. Commissioner . In this case, the taxpayers used the Augusta Rule to expense $290,000 worth of rental expenses over three years through having monthly shareholder meetings in their homes. The courts ruled against the taxpayers and disallowed the majority of the deduction for the following reasons: 1. The defendants couldn’t produce record of what business was discussed during these meetings 2. The FMV of the meeting spaces were much lower than the taxpayers claimed The IRS adjusted the rent down to $500 for each meeting where they could produce evidence of what business was discussed - bringing the actual deduction to $10,500 for the three tax years in question, down from $290,000. For the IRS - this case was a slam dunk. The rent charged was so egregious and the evidence the taxpayers had was so minimal, it makes me wonder why they even tried contesting it in the first place. If you have tax planning questions, please reach out to the partner handling your account! Mike Sylvester, CPA

Yes - Staking is Taxable Income

By Mike Sylvester • 19 Jan, 2024
In a surprise to no-one who works in tax - the IRS has ruled that cryptocurrency received for staking is taxable when received. Staking is when users pledge (I call it loaning) crypto they own, to help others (usually computers) verify transactions that are happening on the blockchain. Crypto Bros do this in order to earn rewards (interest and dividends) on the crypto they are staking (loaning). The IRS has now issued clear guidance and staking is taxable income. Cryptocurrency is something the Internal Revenue Service and the Securities and Exchange Commission are taking a hard look at. If you have cryptocurrency please talk to us about it so we can ensure your tax returns are correct. Mike Sylvester, CPA

The basics of a 1031 exchange

By Mike Sylvester • 19 Jan, 2024
A 1031 Exchange is an exchange of property you can do when trading one investment property for another, and allows you to defer any gain you would have had upon the sale of the first investment, and roll it forward into the new investment. But - the key here is, it has to be an INVESTMENT property - a primary residence or a vacation home are not eligible for a 1031 Exchange. If you try and do this - that gain is taxable. Additionally, there are strict timelines associated with it - the property with which the exchange is occurring has to be identified within 45 days of the sale of the first property, AND you have to close within 180 days of the sale of the first property. If you don’t - yep, now that gain is taxable. Last - you need to use a QUALIFIED intermediary - meaning the funds from closing on the first property that are going toward the second property, are not allowed to touch the taxpayer's hands. If they do? You guessed it - that’s now a taxable gain. A 1031 exchange can be a powerful tool to defer taxable gain, if you are considering this please contact the CPA in charge of your account well in advance. Mike Sylvester, CPA

Parking at SBS CPA Group

By Mike Sylvester • 19 Jan, 2024
We look forward to everyone dropping off their taxes. Please drop nothing off until you can drop off everything including a completed tax planner. If you are claiming energy credits you must carefully fill out and sign and date page five of the tax planner. The office park we reside in is full and has no vacancies. The parking lots have more cars than previously and it is harder to park. It is possible you will not be able to park in the parking lot next to our building and you can park in another parking lot in the complex. Please remember, we have a 24 hour drop box and you can drop things off to us using this drop box anytime. The office complex is not busy outside of normal office hours. Some of our clients mail everything to us to avoid a trip to our office. If you are concerned about parking, the best times to drop things off between February 1st, 2024 and April 15th, 2024 are: Saturdays between 9 AM and 4 PM. Monday - Friday, 9 AM - 11 AM OR 2 PM - 4 PM You can always email us using our secure portal, just send the partner handling your account an email! Mike Sylvester, CPA

FinCEN's Beneficial Ownership Reporting Requirements

By Mike Sylvester • 17 Jan, 2024
Congress passed a sweeping new law that will affect most businesses in the United States in 2024. The Financial Crimes Enforcement Network (FINCEN) will be the Federal Agency administering this new law. This sweeping new law was passed to fight money laundering. You will fill out our tax planner before we do your personal income taxes. This new reporting regime is such a big deal it is the first question on our tax planner this year. “Are you an owner of an LLC or Corporation?” It is extremely important that you fill this out correctly and give us a list of all companies that you own, and all companies owned by anyone listed on your personal income tax returns. The new rules are complicated and will require businesses to file new initial reports with the Financial Crimes Network and to further update those reports in certain circumstances. This is something we will discuss when we finish your 2023 income tax returns in 2024. This is a big deal and the penalties for non-compliance are a fine of up to $10,000 and up to two years in jail. All of our clients will have to sign and date a separate engagement letter for each business they own. Due to the seriousness of the fines and jail sentences; all of our clients will either sign and date the engagement letter hiring us to file the initial report OR our clients will sign and date an engagement letter certifying they will handle the report or hire a third party, such as an attorney, to file these reports for them. Further, we will only file these reports for Indiana companies, and we will either handle both the Indiana Secretary of State entity renewals and the FINCEN BOI reports, or we will handle neither. SBS CPA Group has been open for over 22 years and this is the first time we are going to have our clients sign an engagement letter opting into us providing an add-on service or opting out of SBS CPA Group providing this service for you. These new laws are a very big deal, and the initial reports will require valid photo identification to be uploaded to the FINCEN website for certain owners and a few managers of certain companies. The engagement letter is a full three pages long and has a lot of very important information that business owners will need to understand. When you come in to pick up your income taxes, please set aside the time needed to read this engagement letter! We will NOT be filing FINCEN reports until after tax season. Instead, we are collecting engagement letters from our clients, and we will deal with this after tax season is over! We do not have time to deal with new programs like this during our busiest time of the year! The Federal Government expects 32.6 million initial reports to be filed in 2024 and projects that it will take businesses owners and the professionals they rely on well over 119 million hours in 2024 to deal with these far-reaching new requirements. Many accounting firms and some attorneys will not be filing these reports for their clients. We plan on providing this service based on the current rules. Mike Sylvester, CPA
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