Tax Prep, Planning & Strategy Archives - Page 23 of 57

Launching Small Businesses? Here are some Tax Considerations

Tax Prep, Planning & Strategy|June 9, 2021

While many businesses have been forced to close due to the COVID-19 pandemic, some entrepreneurs have started new small businesses. Many of these people start out operating as sole proprietors. Here are some tax rules and considerations involved in operating with that entity.

The pass-through deduction

To the extent your business generates qualified business income (QBI), you’re eligible to claim the pass-through or QBI deduction, subject to limitations. For tax years through 2025, the deduction can be up to 20% of a pass-through entity owner’s QBI. You can take the deduction even if you don’t itemize deductions on your tax return and instead claim the standard deduction.

Reporting responsibilities

As a sole proprietor, you’ll file Schedule C with your Form 1040. Your business expenses are deductible against gross income. If you have losses, they’ll generally be deductible against your other income, subject to special rules related to hobby losses, passive activity losses and losses in activities in which you weren’t “at risk.”

If you hire employees, you need to get a taxpayer identification number and withhold and pay employment taxes.

Self-employment taxes

For 2021, you pay Social Security on your net self-employment earnings up to $142,800, and Medicare tax on all earnings. An additional 0.9% Medicare tax is imposed on self-employment income in excess of $250,000 on joint returns; $125,000 for married taxpayers filing separate returns; and $200,000 in all other cases. Self-employment tax is imposed in addition to income tax, but you can deduct half of your self-employment tax as an adjustment to income.

Quarterly estimated payments

As a sole proprietor, you generally have to make estimated tax payments. For 2021, these are due on April 15, June 15, September 15 and January 17, 2022.

Home office deductions

If you work from a home office, perform management or administrative tasks there, or store product samples or inventory at home, you may be entitled to deduct an allocable portion of some costs of maintaining your home.

Health insurance expenses

You can deduct 100% of your health insurance costs as a business expense. This means your deduction for medical care insurance won’t be subject to the rule that limits medical expense deductions.

Keeping records

Retain complete records of your income and expenses so you can claim all the tax breaks to which you’re entitled. Certain expenses, such as automobile, travel, meals, and office-at-home expenses, require special attention because they’re subject to special recordkeeping rules or deductibility limits.

Saving for retirement

Consider establishing a qualified retirement plan. The advantage is that amounts contributed to the plan are deductible at the time of the contribution and aren’t taken into income until they’re withdrawn. A SEP plan requires less paperwork than many qualified plans. A SIMPLE plan is also available to sole proprietors and offers tax advantages with fewer restrictions and administrative requirements. If you don’t establish a retirement plan, you may still be able to contribute to an IRA.

We can help

Contact us if you want additional information about the tax aspects of your new businesses, or if you have questions about reporting or recordkeeping requirements

Home sales: How to determine your “basis”

Tax Prep, Planning & Strategy|June 2, 2021

The housing market in many parts of the country is strong this spring. If you’re buying or selling a home, you should know how to determine your “basis.”

How it Works

You can claim an itemized deduction on your tax return for real estate taxes and home mortgage interest. Most other home ownership costs can’t be deducted currently. However, these costs may increase your home’s “basis” (your cost for tax purposes). And a higher basis can save taxes when you sell.

The law allows an exclusion from income for all or part of the gain realized on the sale of your home. The general exclusion limit is $250,000 ($500,000 for married taxpayers). You may feel the exclusion amount makes keeping track of the basis relatively unimportant. Many homes today sell for less than $500,000. However, that reasoning doesn’t take into account what may happen in the future. If history is any indication, a home that’s owned for 20 or 30 years appreciates greatly. Thus, you want your basis to be as high as possible in order to avoid or reduce the tax that may result when you eventually sell.

Good Recordkeeping

To prove the amount of your basis, keep accurate records of your purchase price, closing costs, and other expenses that increase your basis. Save receipts and other records for improvements and additions you make to the home. When you eventually sell, your basis will establish the amount of your gain. Keep the supporting documentation for at least three years after you file your return for the sale year.

Start with the Home Purchase Price

The main element in your home’s basis is the purchase price. This includes your down payment and any debt, such as a mortgage. It also includes certain settlement or closing costs. If you had your house built on land you own, your basis is the cost of the land plus certain costs to complete the house.

You add to the cost of your home expenses that you paid in connection with the purchase, including attorney’s fees, abstract fees, owner’s title insurance, recording fees and transfer taxes. The basis of your home is affected by expenses after a casualty to restore damaged property and depreciation if you used your home for business or rental purposes,

Over time, you may make additions and improvements to your home. Add the cost of these improvements to your basis. Improvements that add to your home’s basis include:

A room addition,
Finishing the basement,
A fence,
Storm windows or doors,
A new heating or central air conditioning system,
Flooring,
A new roof, and
Driveway paving.

Home expenses that don’t add much to the value or the property’s life are considered repairs, not improvements. Therefore, you can’t add them to the property’s basis. Repairs include painting, fixing gutters, repairing leaks and replacing broken windows. However, an entire job is considered an improvement if items that would otherwise be considered repairs are done as part of extensive remodeling.

The cost of appliances purchased for your home generally don’t add to your basis unless they are considered attached to the house. Thus, the cost of a built-in oven or range would increase basis. But an appliance that can be easily removed wouldn’t.

Plan for Best Results

Other rules and requirements may apply. We can help you plan for the best tax results involving your home’s basis. Contact us today!

bFile System Ready for RELIEF Act Sales & Use Tax Credit

NEWS|May 19, 2021

Maryland Comptroller Peter Franchot announced on Tuesday, May 18^th that the State’s bFile system is now available for qualified business owners to claim a Sales and Use Tax Credit under the Relief Act of 2021.

If vendors report $6,000 or less in gross collected sales tax in that period, $3,000 will be the tax credit. If less than $3,000 of sales tax was collected, the credit will be the amount of sales tax collected, bringing the balance owed for that period to zero.

To be eligible for the credit, business owners must file timely returns and sales collections for March, April and May cannot exceed $6,000. The returns are typically filed in April, May, and June. However, the filing deadline for those months have been extended to July 15, 2021.

Read More Here.

As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

WCS in I-95 Business: New Leasing Standards are Here

Industries|May 19, 2021

Principal Karen Dojan, CPA recently contributed to I-95 Business Magazine with a helpful article all about the new leasing standards established by the Accounting Standards Update. Read on for a snippet and link to her full article. As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

“After several postponements, including a one-year COVID-19 extension, the much-anticipated leasing standards established by Accounting Standards Update (AS) NO. 2016-02, Leases are nearing their effective date for nonpublic companies and non-profits. The new accounting standard will become effective for fiscal years beginning after Dec. 15, 2021, essentially starting with calendar year 2022 financial statements.”………….Read More.

American Rescue Plan: More Details on Tax Credits Available

NEWS|April 26, 2021

The IRS and Treasury Department announced today further details of tax credits available under the American Rescue Plan. These credits aim to help small businesses and include paid leave for employees receiving COVID-19 vaccinations.

The American Rescue Plans allows for small businesses to claim refundable tax credits that reimburse them for the cost of providing paid time off for employees receiving the vaccine, providing paid time off for anytime needed to recover for the vaccine and providing paid sick and family leave due to COVID-19.

News release IR-2021-90 details these credits here. You can also find even more in depth information on tax credits available to small employers on the fact sheet provided by the IRS.

As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

digital sales tax | CPAs in Baltimore County | Weyrich, Cronin & Sorra

Maryland Sales and Use Tax on Digital Products

NEWS|March 18, 2021

The Maryland legislation recently overrode Governor Hogan’s veto of House bill 932. The bill expands the current 6% sales and use tax to include the sale of digital products. Maryland recently published Business Tax Tip #29 Sales of Digital Products and Digital Code which gives a nonexclusive lists of possible digital products such as but not limited to:

A sale, subscription or license to access content online
A sale, subscription or license to use a software application
Photographs, artwork, illustrations, graphics and similar products

The release points out that the sales and use tax does not apply to the sale of a non-taxable service performed electronically unless the service results in a digital product. To view the Comptroller’s release click here.

For more details on the recent change to the sales and use tax rules please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

A reminder that the Comptrollers Office Of Maryland recently extended the Sales and Use tax deadline for sales taking place in March, April, and May of 2021 to July 15, 2021.

tax deadline extended | accountants in Harford County | Weyrich, Cronin & Sorra

Tax Deadline for Individuals Extended to May 17th

NEWS|March 18, 2021

The Treasury department and Internal revenue service announced that the federal income tax deadline for individuals for the 2020 tax year will be automatically extended from April 15, 2021 to May 17, 2021. The IRS will be providing formal guidance in the coming days.

Individual taxpayers can also postpone federal income tax payments for the 2020 tax year due on April 15, 2021 to May 17, 2021, without penalties and interest, regardless of the amount owed. This postponement applies to individual taxpayers, including individuals who pay self-employment tax. This relief does not apply to estimated tax payments that are due on April 15, 2021. These payments are still due on April 15.

The federal tax deadline postponement only applies to individual federal income returns and tax payments, not state tax payments. State filing and payment deadlines vary and are not always the same as the federal filing deadline. Maryland has already extended its filing deadline to July 15th. You can read more on Maryland’s decision to extend the deadline here. For additional states, the IRS urges taxpayers to check with their state tax agencies for additional details.

More information on the IRS’ decision can be found here.

As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

maryland filing deadline | CPAs in Harford County | Weyrich, Cronin & Sorra

Comptroller Extends Maryland Income Tax Filing Deadline

NEWS|March 16, 2021

Comptroller Peter Franchot announced that he is extending the state income tax filing deadline by three months to July 15, 2021. No interest or penalties will be assessed if returns are filed and taxes owed are paid by the new deadline.

This applies to individual, pass-through, fiduciary and corporate income tax returns, including first and second quarter estimated payments and is due to recent and pending legislation at the state and federal levels that impact 2020 tax filings and provide economic relief for taxpayers affected by the COVID-19 pandemic.

The Comptroller’s office will notify the public about the availability of revised and new tax forms on its website and social media accounts. Additional information on tax forms and updates can be found here.

To read more details about the extension and its implications, please read more from the Comptroller’s office here.

As of now, the Internal Revenue Service has kept its filing and payment deadline at April 15. WCS will keep you up to date on any and all changes.

As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

ARPA | tax accountants in Cecil County | Weyrich, Cronin & Sorra

The American Rescue Plan Act (ARPA) has passed: What’s in it for you?

NEWS|March 11, 2021

Congress has passed the latest legislation aimed at providing economic and other relief from the COVID-19 pandemic that has haunted the country for the last year. President Biden is expected to sign the 628-page American Rescue Plan Act (ARPA), which includes $1.9 trillion in funding for individuals, businesses, and state and local governments.

The ARPA extends and expands some of the critical provisions in the CARES Act and the Consolidated Appropriations Act (CAA). It also includes some new provisions that should come as welcome news to many families and businesses.

Key provisions for individuals, businesses and other employers

Here’s a broad overview of some of the provisions that may affect you:

Individuals

Additional direct payments (or recovery rebates) of $1,400 — plus $1,400 per dependent (including adult dependents) will be made to eligible individuals. To qualify, individuals must have an adjusted gross income (AGI) of up to $75,000 per year, ($150,000 for married couples filing jointly and $112,500 for heads of households). The payments phase out and are no longer made when AGI exceeds $80,000 for individuals, $160,000 for married joint filers and $120,000 for heads of household.
For eligible individuals, the Child Tax Credit (CTC) increases to $3,000 for each child age six to 17 and $3,600 per year for children under age six. To be eligible for the full payment, you must have a modified AGI of under $75,000 for singles, $112,500 for heads-of-households and $150,000 for joint filers and surviving spouses. The credit phases out at a rate of $50 for each $1,000 (or fraction thereof) of modified AGI over the applicable threshold.
Parents will begin receiving advance payments of part of the CTC later this year. Under the ARPA, the IRS must establish a program to make monthly payments (generally by direct deposits) equal to 50% of eligible taxpayers’ 2021 CTCs, from July 2021 through December 2021.
Some taxpayers who aren’t eligible to claim an increased CTC in 2021, because their income is too high, may be able to claim the regular CTC of up to $2,000, subject to the existing phaseout rules.
For 2021, there’s an expanded child and dependent care tax credit of up to $4,000 for childcare expenses for one child and up to $8,000 for two or more children for households making up to $125,000.
Any student loan debt forgiven between December 31, 2020, and January 1, 2026, will receive tax-free treatment.
An additional $300 per week in unemployment benefits will be paid through September 6, 2021. In addition, the first $10,200 in unemployment benefits received beginning in 2020 isn’t included in gross income for taxpayers with AGIs under $150,000. (However, for joint filers below the AGI limit, the $10,200 exclusion applies separately to each spouse.)
There’s expanded availability of and increased Affordable Care Act (ACA) subsidies for those who obtain insurance in the ACA marketplaces, for 2021 and 2022.
Federal rental assistance is included for families affected by COVID-19, applicable to past due rent, future rent payments, and utility and energy bills.
There’s expanded eligibility for low-income individuals with no qualifying children to claim the Earned Income Tax Credit.

Businesses and other employers

Pandemic assistance grants will be made to eligible businesses serving food or drinks, including restaurants and food trucks.
There will be additional funding for forgivable loans to eligible businesses under the Paycheck Protection Program (PPP), which is currently scheduled to expire on March 31, 2021.
Nonprofit organizations and online news services will receive expanded PPP eligibility.
New targeted Economic Injury Disaster Loan grants will be available for eligible small businesses in low-income communities.
The Employee Retention Tax Credit is extended for eligible employers that continue to pay employee wages during COVID-19-related closures or experience reduced revenue through December 31, 2021. This includes “recovery startup businesses” (those businesses that launched after February 15, 2020, with average annual gross receipts of $1 million or less).
Tax credits for paid sick and family leave are modified and extended to September 30, 2021.
The excess business loss limitation is extended through December 31, 2026.
The Section 162(m) limits on the tax deduction that public companies can take for executive compensation is extended to cover the CEO, the CFO and the five next highest paid employees, beginning in 2027.

Make the most of the benefits

With vaccination rates climbing, the ARPA may be the last of the major legislative relief packages addressing the effects of the pandemic. We’d be pleased to provide you with more information on how you can make the most of the benefits available to you, your family or your business. Please contact us today to see how this will affect your situation.

2021 Tax Calendar

Tax Prep, Planning & Strategy|January 25, 2021

To help you make sure you don’t miss any important 2021 deadlines, we’ve provided this summary of when various tax-related forms, payments and other actions are due. Please review the calendar and let us know if you have any questions about the deadlines or would like assistance in meeting them.

Date Deadline for February 1 Individuals: Filing a 2020 income tax return (Form 1040 or Form 1040-SR) and paying tax due, to avoid penalties for underpaying the January 15 installment of estimated taxes.

Businesses: Providing Form 1098, Form 1099-MISC (except for those that have a February 16 deadline), Form 1099-NEC and Form W-2G to recipients.

Employers: Providing 2020 Form W-2 to employees. Reporting income tax withholding and FICA taxes for fourth quarter 2020 (Form 941). Filing an annual return of federal unemployment taxes (Form 940) and paying any tax due.

Employers: Filing 2020 Form W-2 (Copy A) and transmittal Form W-3 with the Social Security Administration.

February 10 Individuals: Reporting January tip income of $20 or more to employers (Form 4070).

Employers: Reporting income tax withholding and FICA taxes for fourth quarter 2020 (Form 941) and filing a 2020 return for federal unemployment taxes (Form 940), if you deposited on time and in full all of the associated taxes due.

February 16 Businesses: Providing Form 1099-B, 1099-S and certain Forms 1099-MISC (those in which payments in Box 8 or Box 10 are being reported) to recipients.

Individuals: Filing a new Form W-4 to continue exemption for another year, if you claimed exemption from federal income tax withholding in 2020.

March 1 Businesses: Filing Form 1098, Form 1099 (other than those with a February 1 or February 16 deadline) and Form W-2G and transmittal Form 1096 for interest, dividends and miscellaneous payments made during 2020. (Electronic filers can defer filing to March 31.) March 10 Individuals: Reporting February tip income of $20 or more to employers (Form 4070). March 15 Calendar-year S corporations: Filing a 2020 income tax return (Form 1120S) or filing for an automatic six-month extension (Form 7004), and paying any tax due.

Calendar-year partnerships: Filing a 2020 income tax return (Form 1065 or Form 1065-B) or requesting an automatic six-month extension (Form 7004).

March 31 Employers: Electronically filing 2020 Form 1097, Form 1098, Form 1099 (other than those with an earlier deadline) and Form W-2G. April 12 Individuals: Reporting March tip income of $20 or more to employers (Form 4070). April 15 Individuals: Filing a 2020 income tax return (Form 1040 or Form 1040-SR) or filing for an automatic six-month extension (Form 4868), and paying any tax due. (See June 15 for an exception for certain taxpayers.)

Individuals: Paying the first installment of 2021 estimated taxes, if not paying income tax through withholding (Form 1040-ES).

Individuals: Making 2020 contributions to a traditional IRA or Roth IRA (even if a 2020 income tax return extension is filed).

Individuals: Making 2020 contributions to a SEP or certain other retirement plans (unless a 2020 income tax return extension is filed).

Individuals: Filing a 2020 gift tax return (Form 709) or filing for an automatic six-month extension (Form 8892), and paying any gift tax due. Filing for an automatic six-month extension (Form 4868) to extend both Form 1040 and, if no gift tax is due, Form 709.

Household employers: Filing Schedule H, if wages paid equal $2,200 or more in 2020 and Form 1040 isn’t required to be filed. For those filing Form 1040, Schedule H is to be submitted with the return and is thus extended to the due date of the return.

Trusts and estates: Filing an income tax return for the 2020 calendar year (Form 1041) or filing for an automatic five-and-a-half month extension to October 1 (Form 7004), and paying any income tax due.

Calendar-year corporations: Filing a 2020 income tax return (Form 1120) or filing for an automatic six-month extension (Form 7004), and paying any tax due.

Calendar-year corporations: Paying the first installment of 2021 estimated income taxes.

April 30 Employers: Reporting income tax withholding and FICA taxes for first quarter 2021 (Form 941), and paying any tax due. May 10 Individuals: Reporting April tip income, $20 or more, to employers (Form 4070).

Employers: Reporting income tax withholding and FICA taxes for first quarter 2021 (Form 941), if you deposited on time and in full all of the associated taxes due.

May 17 Exempt organizations: Filing a 2020 calendar-year information return (Form 990, Form 990-EZ or Form 990-PF) or filing for an automatic six-month extension (Form 8868) and paying any tax due.

Small exempt organizations (with gross receipts normally of $50,000 or less): Filing a 2020 e-Postcard (Form 990-N), if not filing Form 990 or Form 990-EZ.

June 10 Individuals: Reporting May tip income, $20 or more, to employers (Form 4070). June 15 Individuals: Filing a 2020 individual income tax return (Form 1040 or Form 1040-SR) or filing for a four-month extension (Form 4868), and paying any tax and interest due, if you live outside the United States.

Individuals: Paying the second installment of 2021 estimated taxes, if not paying income tax through withholding (Form 1040-ES).

Calendar-year corporations: Paying the second installment of 2021 estimated income taxes.

July 12 Individuals: Reporting June tip income, $20 or more, to employers (Form 4070). August 2 Employers: Reporting income tax withholding and FICA taxes for second quarter 2021 (Form 941), and paying any tax due.

Employers: Filing a 2020 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or requesting an extension.

August 10 Individuals: Reporting July tip income, $20 or more, to employers (Form 4070).

Employers: Reporting income tax withholding and FICA taxes for second quarter 2021 (Form 941), if you deposited on time and in full all of the associated taxes due.

September 10 Individuals: Reporting August tip income, $20 or more, to employers (Form 4070). September 15 Individuals: Paying the third installment of 2021 estimated taxes, if not paying income tax through withholding (Form 1040-ES).

Calendar-year corporations: Paying the third installment of 2021 estimated income taxes.

Calendar-year S corporations: Filing a 2020 income tax return (Form 1120S) and paying any tax, interest and penalties due, if an automatic six-month extension was filed.

Calendar-year S corporations: Making contributions for 2020 to certain employer-sponsored retirement plans, if an automatic six-month extension was filed.

Calendar-year partnerships: Filing a 2020 income tax return (Form 1065 or Form 1065-B), if an automatic six-month extension was filed.

October 1 Trusts and estates: Filing an income tax return for the 2020 calendar year (Form 1041) and paying any tax, interest and penalties due, if an automatic five-and-a-half month extension was filed.

Employers: Establishing a SIMPLE or a Safe-Harbor 401(k) plan for 2020, except in certain circumstances.

October 12 Individuals: Reporting September tip income, $20 or more, to employers (Form 4070). October 15

Individuals: Filing a 2020 income tax return (Form 1040 or Form 1040-SR) and paying any tax, interest and penalties due, if an automatic six-month extension was filed (or if an automatic four-month extension was filed by a taxpayer living outside the United States).

Individuals: Making contributions for 2020 to certain existing retirement plans or establishing and contributing to a SEP for 2020, if an automatic six-month extension was filed.

Individuals: Filing a 2020 gift tax return (Form 709) and paying any tax, interest and penalties due, if an automatic six-month extension was filed.

Calendar-year C corporations: Filing a 2020 income tax return (Form 1120) and paying any tax, interest and penalties due, if an automatic six-month extension was filed.

Calendar-year C corporations: Making contributions for 2020 to certain employer-sponsored retirement plans, if an automatic six-month extension was filed.

November 1 Employers: Reporting income tax withholding and FICA taxes for third quarter 2021 (Form 941) and paying any tax due. November 10 Individuals: Reporting October tip income, $20 or more, to employers (Form 4070).

Employers: Reporting income tax withholding and FICA taxes for third quarter 2021 (Form 941), if you deposited on time and in full all of the associated taxes due.

November 15 Exempt organizations: Filing a 2020 calendar-year information return (Form 990, Form 990-EZ or Form 990-PF) and paying any tax, interest and penalties due, if a six-month extension was previously filed. December 10 Individuals: Reporting November tip income, $20 or more, to employers (Form 4070). December 15 Calendar-year corporations: Paying the fourth installment of 2021 estimated income taxes. December 31 Employers: Establishing a retirement plan for 2021 (generally other than a SIMPLE, a Safe-Harbor 401(k) or a SEP).

Contact WCS to see how we can help you meet these deadlines.

Launching Small Businesses? Here are some Tax Considerations

The pass-through deduction

Reporting responsibilities

Self-employment taxes

Quarterly estimated payments

Home office deductions

Health insurance expenses

Keeping records

Saving for retirement

We can help

Home sales: How to determine your “basis”

How it Works

Good Recordkeeping

Start with the Home Purchase Price

Plan for Best Results

bFile System Ready for RELIEF Act Sales & Use Tax Credit

WCS in I-95 Business: New Leasing Standards are Here

American Rescue Plan: More Details on Tax Credits Available

Maryland Sales and Use Tax on Digital Products

Tax Deadline for Individuals Extended to May 17th

Comptroller Extends Maryland Income Tax Filing Deadline

The American Rescue Plan Act (ARPA) has passed: What’s in it for you?

2021 Tax Calendar

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