Author Archives: c29455507

COVID-19 Post #1 – Employee Expenses

Employer Tax Deductible Reimbursement Deductions for COVID-19 Employee Expenses

On March 13, 2020, the President of the United States issued an emergency declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act in response to the ongoing Coronavirus Disease 2019 (COVID-19) pandemic (IRS Notice 2020-18), under Section 139.  Although it does not require receipts or other proof of expenses incurred by employees to account for actual expenses, the amount of payments should be reasonably expected to be comparable with the expenses sustained.

Each employer should have a written policy though and include the following to all employees:

  • What employees are eligible for reimbursements
  • What types of expenses and the limits paid
  • Are there receipts or other types of proof that need to be submitted to be eligible for payment
  • What is the start and end date of the program, including the submission timeline for final payments

These are just some suggestions but not necessarily limited to this list:

  • Copays incurred for COVID-19 medical treatment or over-the-counter medications
  • Work-from-home expenses utilized to create a home office such as office equipment, internet access creation/expansion, increased electrical outlets, cell phone costs
  • Dependent care expenses such as increased childcare or tutoring costs due to school closings, remote learning or home-schooling expenses, educational materials, online educational resources, etc.
  • Transportation expenses that are incurred due to a lack of access to public transportation, work relocation
  • Cleaning products to sanitize the home based upon an employee’s known exposure to COVID-19

Sample

Bookkeeping-Results, LLC

COVID-19 Employee Expense Reimbursement Program

All full-time and part-time employees are eligible for reimbursement and should be submitted to their immediate supervisor for review.  The program will begin from March 15, 2020 through June 30, 2020, and all submissions should be received by no later than July 31, 2020.  Each reimbursement should be accompanied by a legible receipt, preferably with a vendor name, date, itemized list of products for reimbursement, and cost of each item noted.  If any information is missing, it should be written legibly on the receipt documentation.

Items considered for reimbursement:

  • Copays incurred for COVID-19 medical treatment or over-the-counter medications
  • Work-from-home expenses utilized to create a home office such as office equipment, internet access creation/expansion, increased electrical outlets, cell phone costs
  • Dependent care expenses such as increased childcare or tutoring costs due to school closings, remote learning or home-schooling expenses, educational materials, online educational resources, etc.
  • Transportation expenses that are incurred due to a lack of access to public transportation, work relocation
  • Cleaning products to sanitize the home based upon an employee’s known exposure to COVID-19

The total amount of reimbursable expenses should not exceed the amount of $500.  Should the employee exceed this amount, then future reimbursements will be reviewed on a case-by-case basis.  Should the program need to be extended past June 30, 2020, due to extenuating circumstances of social distancing, all affected employees will be notified of the necessary changes in writing prior to the conclusion.

Dwayne J. Briscoe

For More Tax Blogs or QuickBooks Training Information

Check Out Our Books on Kindle

Tax Deadlines & Disaster Loans

July 15, 2020 – NOT April 15, 2020

As of today, March 20, 2020, Steve Mnuchin tweeted 2019 IRS tax extension would be extended to July 15, 2020, 3 months past the traditional April 15th deadline.  The purpose of this has been to help alleviate the severity of what has been an unprecedented economic impact due to the Covid-19 pandemic that has caused on the United States economy.  What does that actually mean and what steps you should consider are as follows:

Tax Deadlines, Filing Penalties and Interest Charges

  • Individual taxpayers and businesses will have until July 15th to file without any penalties, their 2019 tax returns.
  • If you are an individual and payments need to be made for your 2019 tax liability, you will not face penalties or interest according to Mnuchin, if it’s paid by July 15th only for balances of up to $1 million.
  • A corporation who needs to make payments for its 2019 tax liability, will not face penalties or interest according to Mnuchin, if it’s paid by July 15th for balances of up to $10 million.
  • If for some reason an individual or a business is still unable to file by the July 15th deadline, it’s vital you still file Form 4868 for your personal or Form 7004 for your business return. The July 15th extension is an automatic, but July 16th will start the clock on interest and penalties for returns accepted afterwards.
  • Due to economic hardship if you’re aware it’s going to be unlikely you can afford to pay your 2019 tax liability, consider the process of a IRS Installment Agreement instead of waiting until you go into collections. Being proactive will not only help safeguard your economic survival, but also your peace of mind.

SBA Disaster Assistance Loans

The Economic Injury Disaster Loans offer up to $2 million in assistance to small business, as a result of the COVID-19, upon a request received from a state’s or territory’s governor.  This includes small businesses and private, nonprofit organizations in designated areas of a state or territory to help alleviate economic injury caused by COVID-19.  Once a declaration is made for designated areas within a state, the information on the application process will be made available.  These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact.  The interest rate is 3.75% for small businesses without credit available elsewhere; businesses with credit available elsewhere are not eligible.  The interest rate for non-profits is 2.75%.  These loans will be available with terms of up to a maximum of 30 years, determined on a case-by-case basis, based upon each borrower’s ability to repay.

SBA Loan Assistance Application

Nothing in life is ever free and there are going to be hoops that you need to jump through.  In the end there’s going to be qualifiers that everyone is going to need to be addressed, and whether it’s being able to file your tax returns late, or consider a SBA loan, it doesn’t mean a free pass not to have adequate financials that you can defend.  Again, the challenge is that if you feel you can bypass performing your due diligence, it can potentially cause you more harm than good.

Dwayne J. Briscoe

For More Tax Blogs or QuickBooks Training Information

Check Out Our Books on Kindle

How Can My Business Survive This Pandemic?

Yes, it’s caught everyone off guard and something like no one has ever experienced in the day and age, but the question is how do so many business owners, self-employed individuals, and everyday workers deal with just basic survival.  At the time of this writing, these two highlighted economic options have likely been more fine-tuned, but the purpose is just to make you aware of what you should be investigating because no one’s answer is going to be a “one size fits all.

Tax Deadlines, Filing Penalties and Interest Charges

Per Tax Talks, “President Trump declared a national emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act in response to the coronavirus.  This declaration allows the Treasury Department at the IRS to extend the deadline for certain taxpayers and small businesses to pay taxes until December 31, 2020 as Treasury Secretary Steven Mnuchin suggested earlier this week.”

Per Bloomberg Law News in the same declaration, “the IRS can choose from a range of powers: abating penalties for failing to file or pay taxes, or postponing federal tax filing and payment deadlines without interest or penalties accruing, according to the agency’s Internal Revenue Manual posted on its website.”

This has not taken effect as of yet, March 13, 2020, and there are a number of major accounting organizations which are working to help formulate a plan for the Internal Revenue Service to work on formulating a plan which would be beneficial for all Americans.  In the meantime, make sure all of your extensions have been filed on time, your returns are filed on time if at all possible, and if you need to set-up an installment agreement, then you complete it now instead of waiting for the government to take action on this issue.

SBA Disaster Assistance Loans

The Economic Injury Disaster Loans offer up to $2 million in assistance to small business, as a result of the COVID-19, upon a request received from a state’s or territory’s governor.  This includes small businesses and private, nonprofit organizations in designated areas of a state or territory to help alleviate economic injury caused by COVID-19.  Once a declaration is made for designated areas within a state, the information on the application process will be made available.  These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact.  The interest rate is 3.75% for small businesses without credit available elsewhere; businesses with credit available elsewhere are not eligible.  The interest rate for non-profits is 2.75%.  These loans will be available with terms of up to a maximum of 30 years, determined on a case-by-case basis, based upon each borrower’s ability to repay.

What does this ultimately mean to you?  Nothing in life is ever free and there are going to be hoops that you need to jump through.  In the end there’s going to be qualifiers that everyone is going to need to be addressed, and whether it’s being able to file your tax returns late, or consider a SBA loan, it doesn’t mean a free pass not to have adequate financials that you can defend.  Again the challenge is that if you feel you can bypass performing your due diligence, it can potentially cause you more harm than good later on.

Dwayne J. Briscoe

For More Tax Blogs or QuickBooks Training Information

Check Out Our Books on Kindle

It’s Not the Welcome Wagon Knocking on Your Door

There is now an increase in IRS physical visits for those taxpayers who are considered high-income (those receiving over $100,000 in a tax year), who not only have not filed tax returns in the past consistently, nor have they actually been making good on their installment agreements should they have been prepared to satisfy their obligations.  Paul Mamo, Director of Collection Operations, Small Business/Self-Employed Division, states “These visits focusing on high-income taxpayers will be taking place across the country.  We want to ensure taxpayers know their options to get right with their taxes and avoid bigger issues later.”

So many people fail to realize the severity of this situation, and may consider this just another tax scam, but if you hadn’t been receiving numerous notices for failure to follow through on your obligations and chosen to ignore them, assumed that they were taken care of by your tax preparer but wasn’t sure if you had actually reviewed and signed them, or were just too busy to be worried about them, then that’s not a plausible excuse as to why you may consider getting that visit from a Revenue Officer.

There’s every excuse in the book that these people have heard, and whether or not you can afford to pay them or not, that doesn’t refute the fact that you need to address the situation and focus on making sure that your obligations are being met, even on a minimal basis.  It’s something that will not be going away, just like when I have had clients try to ignore my bills after I’ve prepared their tax return, which can lead to my own bad debt court filings, as well as notification to the IRS to be removed as their paid preparer.  Yes it may seem extreme in 2020, but you do expect your invoices to be paid when you bill a client, and the IRS expects the same.

What can you do before you get a visit from a Revenue Officer?  Contact the Service, speak with a representative regarding your situation, and determine what options are available to you so that you can avoid the worst-case scenarios.  This may include avoid civil enforcements, credit report filings, as well as criminal cases against you.

In the worst-case scenario that you do receive an unannounced visit:

– they will provide you with two forms of official credentials to include a serial number and photo so be sure to review both

– the officer will explain the entire situation regarding the liabilities and obligations, as well as the consequences of failing to comply with the law

– there will NEVER be a request for funds such as gift cards, threats given, etc.

– you should have been in receipt of numerous notices before an actual visit

– cash will never be accepted, and any payments will be made payable to the United States Treasury ONLY

Dwayne J. Briscoe

For More Tax Blogs or QuickBooks Training Information

Check Out Our Books on Kindle

Can you be Unfaithful to Your Partner Financially?

A recent article posted in the Houston Chronicle by R.A. Schuetz recently noted that nearly half (44%) of all Americans are hiding hidden credit card or loan debt, checking or savings accounts, or cash in their own home or with other relatives or friends, property, etc. compared to last year’s poll responses.  Not surprisingly, when CreditCard.com did the survey of 2,501 Americans, millennials responded with an astounding 57% hiding part of their savings or debt a secret.  Not surprising though, is that a third of these respondents feel that this financial infidelity is worse than having an affair.

You have to wonder who may do this, well one of the most prevalent answers is often business owners in my experience who not only fail to conceal vital information from their spouses or their partners, they also choose to not inform their lenders about potential challenges to their “robbing Peter to pay Paul” scenarios.  Unfortunately, it usually catches up to them, whether in this life or the next.

Several years ago, I was asked to review the books of several partnership entities where a partner had passed away.  Surprisingly, the surviving partner was aware before starting these businesses with his childhood friend, that he was imprisoned for embezzlement for five years, but he thought he had changed.  Unfortunately, he didn’t.  After reviewing and documenting over $800,000 of mismanaged funds, I was told my services were no longer needed, and I hadn’t still completed going through the entities.  Since the person in question had passed and there was no potential recovery, the survivor realized it was pointless to see how ignorant the situation was.

Not all business owners are trying to hide from the situation at hand, or that they’ve made some very bad choices.  However, any time you serve in a situation where you could be held financially responsible, it’s unbelievably important to not only be financially savvy, but also never letting your guard down because you could also be held legally liable for any problems that may arise.

*Background Checks

Any time someone with a financial risk with your business, whether it’s a bookkeeper, a comptroller, or working in some form or fashion within your accounting department, needs regular criminal and credit background checks.  It’s amazing how often this NEVER happens.

*Rubber Signature Stamps

Review your bank accounts online at least weekly, if not more often, and do not EVER use a rubber stamp signature for your checks.  A banker once told me that a business owner lost several thousand dollars because their bookkeeper used their stamp signature without authorization, but the bank’s liability was limited because of the stamp.

*Personal Credit Score Reviews

Believe it or not, because you are often asked to personally guarantee loans or lines of credit, review your credit score at least monthly to confirm nothing has been opened without your consent.  Your business is your livelihood, and if you have a horrible credit rating because someone has raided your social security number for their own use, it can destroy what you’ve worked years to build up.

These are just a few of the ways that people can destroy what you’ve built your business up to be, and end up bringing about a total distrust in outsiders.  However, when you hide these problems from those that are directly affecting, i.e. your spouse, your business partner, your life partner, your business investor, etc. then you become the person they cannot trust and they could have helped not only avert a bigger financial pitfall but help salvage the situation.  Secrets always have a way of destroying lives.

Dwayne J. Briscoe

For More Tax Blogs or QuickBooks Training Information

Check Out Our Books on Kindle

 

 

Construction Projects Have Budgets but Does the Average Contractor?

In the construction industry there’s a rule of thumb to always be developing, monitoring, and always working to come under budget from the smallest of renovation projects to multi-million-dollar buildings.  Due to the amount of financial constraints from investment partners to bank loans to mortgage lenders, the numbers not only have to make sense they also have to stay on target.  When they go over budget the money has to come from somewhere and justified, or the project can easily go off the rails and if the contractor doesn’t look at all of the possibilities, then it not only can ruin them financially it also can easily kill their reputation.

Superintendents and lead contractors have laser sharp focus on where their numbers are at all times to avoid potential pitfalls.  Unfortunately, often it falls behind when it comes to their own company’s financial health because they’re always worrying about everyone else and not always their own company’s survival.  It’s very easy to stay focused on what you know when it comes to building and renovation, but if it’s something you don’t know well like budgeting your business and finances that’s outside of your comfort zone, speaking from experience it’s to just push it to the side.

How do I start a budget?

  • If you’ve been in business for a few years, look at what you’ve submitted to your tax preparer and go line-by-line and write it out on a spreadsheet what the total was for each item you’ve spent, i.e. advertisement, payroll, rent, utilities, auto expense, etc.
  • If your tax preparer possibly merged items together, again look at what you submitted because that’s what you used. From there, put a separate column for different years with the amount that you spent each year.  This also includes your income by types of jobs.

2017                2018                2019                2020

Remodels                    10,000             15,000             20,000             ?????

New Construction        30,000             32,000             35,000             ?????

 

Advertising                   5,000               6,000               7,000               ?????

Auto                             4,000               8,000               10,000             ?????

Rent                            12,000             13,000             14,000             ?????

If you have a few years’ worth of data, then you can determine what is you should be budgeting for the current year and determine where your company’s budget could and should be.  Again, when you’re working with budgets on projects for clients, you cannot forget to focus on your own business’ success.  Whether you utilize Excel or consider utilizing the QuickBooks® budgeting tool already installed in the file, it’s vital to stay on track.

Dwayne J. Briscoe

For More Tax Blogs or QuickBooks Training Information

Check Out Our Books on Kindle

 

 

Paying the “Stupid Tax”

Yes, we’re in the midst of tax filing season and everyone is either scrambling to get all of their paperwork together to get it turned in and their returns filed on time, while others are slowly going through their faded receipts, typing everything in their spreadsheets, and gathering their bank and credit card statements for someone else to go through to put together since that’s what they do every year.  But the upside is yes there’s always the opportunity for getting that 6-month extension, however,

#1 it’s not automatic, you must physically file it and verify with your tax preparer it’s been done

#2 if you owe taxes, you will still accumulate interest and penalties to pay on top of those taxes and the extension doesn’t exempt you from getting them

Below is a few examples of the interest rates and penalties for those who end up owing taxes and either hadn’t paid them on time by the end of the year or from filing an extension with.

  • Filing a late Form 1120S tax return, each shareholder listed could be fined a late filing penalty of $195.00 per month for each month or part of the month the return is late, up to 12 months.
  • Filing a late Form 1065 tax return, each shareholder listed could be fined a late filing penalty of $195 per month for each month or part of the month the return is late, up to 12 months.
  • Filing a late Form 1120 tax return with an outstanding tax debt, the corporation will be charged a monthly late-filing penalty of 5% of the outstanding tax up to 5 months or when the return is more than 60 days late, the minimum penalty is the smaller of the tax due or $135
  • Interest is accrued indefinitely until the tax debt has been paid. The interest rate is determined quarterly and is the federal short-term rate plus 3%, and the interest compounds daily.
  • The failure-to-pay penalty is one-half of one percent for each month, or part of a month, up to a maximum of 25%, of the amount of tax that remains unpaid from the due date of the return until the tax is paid in full.

Again, these are just a few highlights of filing late for businesses and potentially taxes, not to mention the penalties and interest for personal tax returns which follow a different set of guidelines.  Judge Lynn Toler who hosts Divorce Court often will refer to the “stupid tax” people pay with regards to what they waste their money on by breaking things, throwing away their loved ones’ treasures, etc.  This is what business owners do when they don’t bother to review and manage their financials to ensure their tax returns are filed on time.  They could end up paying the stupid tax.

Dwayne J. Briscoe

For More Tax Blogs or QuickBooks Training Information

Check Out Our Books on Kindle

Starting Your 2019 Year-End Closing – Part 2

Its February 2020, and it’s time to begin finishing getting things ready for your tax preparation.  The biggest challenge is focusing on key elements on what you need to do so you don’t overstate or under report your business profit.

6. Loans and Lines of Credit – Always do a year-end review to make sure that the interest payments you record match the interest payments received by your lender, i.e. car payments, loan payments, vendor payments, etc. If there is a discrepancy, ask for an amortization schedule to determine the difference.

7. Credit Card Customers – If you receive credit card payments from customers, understand that you will be receiving a Form 1099K from your merchant processor, in January 2012. The purpose of the form is to alert you and the IRS how much you received, and how much was paid in fees.  This may be a wake-up call for some owners and give them the opportunity to reconsider searching out other processors, but this has to match your books and your tax form, because this will be compared when you submit your paperwork to the IRS.

8. Vendors 1099 Information – You are required to issue a Form 1099 for every vendor who is considered a sole proprietor. This could be an individual or a company who is listed as an LLC who files as a sole proprietor.  To determine this, a Form W-9 from the IRS must be completed, and the vendor will let you know what tax status they are.  The Taxpayer Identification Number, address, and amount paid to the vendor must be correct in order to prevent penalties to the business owner.  However, if you fail to properly file the information, below are the penalty phases:

Correct Filing – $30.00 per return, a maximum of $75,000 for small businesses, filed up to 30 days after the required filing date; more than 30 days late but on or before August 1st, $60.00 per return, a maximum of $200,000 for small businesses; after August 1st, $100.00 per return, a maximum of $500,000 for small businesses

Incorrect Filing – if the return is sent without the required information intentionally, it is $250.00 per return or 10% of the amount required to be reported on 1099-MISC and certain other returns

Payee Statement – if the return is not furnished to the payee, $100.00 per return, a maximum of $500,000 for small businesses

9. Closing the Books – Once everything has been completed and you’ve prepared your tax return after the adjusting entries from your tax preparer have been received, close your books and password protect them from anyone who has access. As IRS auditors continue to increasingly legally request electronic copies of a business owner’s financial records, if they don’t match with the tax return, there could be serious repercussions.

10. Back-Up Data and Closing the Books – With the increasing use of technology, it’s imperative to back-up your information on a continuous basis. Considering the amount of work hours and money used to create these financial reports, it’s nearly impossible to calculate how much it would cost a business having to reconstruct their financial records from scratch should their file become corrupted or lost altogether.

Dwayne J. Briscoe

Check Out Our Books on Kindle

Starting Your 2019 Year-End Closing – Part 1

Its January 2020, and it’s time to start getting things ready for your tax preparation.  The biggest challenge is focusing on key elements on what you need to do so you don’t overstate or under report your business profit.

  1. Company Bank and Credit Cards – Correctly reconcile all bank and credit card accounts. If they don’t match up or if there’s a reconciliation discrepancy account created because they didn’t match up during the year, try to make sure it’s an insignificant amount.  There is no hard and fast rule about what is acceptable, if any amount, however it’s important to see if you need to go back and re-reconcile the account(s).

 

  1. Fixed Assets – You should already have a list of your fixed assets on your Balance Sheet, showing accumulated depreciation, based on what’s on your prior years’ tax return. Verify if any of these items are still in the possession of the company, if you sold any of those items, rendered them obsolete and disposed of them, donated them, tell your tax preparer to make sure it’s properly reported.  Everything you put on the tax return is expected to be in your possession at the time of reporting.  If you purchased any new equipment, also inform your tax preparer of the total cost including freight, sales tax, set-up charges, and other fees associated with the purchase and installation.

 

  1. Accounts Receivable – Review your delinquent accounts receivables. If they are over 90 days old, it will be difficult to collect on them outside of potentially going to small claims court, through mediation such as the Better Business Bureau, or seeking out a lien.  If you are on a cash basis for your tax filing (verify this with your tax preparer), then you cannot write them off as bad debt expense.  If you are on an accrual basis you can write them off as bad debt.  Part of the process for being able to write off bad debt is that you performed due diligence in contacting them, sending certified letters, etc. to try to collect the payment.

 

  1. Payroll – Review your payroll expenses from what was filed on your 941 forms and what was recorded in your financial software. If they don’t match you need to research what the discrepancy is.

 

  1. Inventory – If your company has inventory, try to make a physical inventory count and match it up against what’s in your system. Because of shrinkage throughout the year, if you don’t monitor it on a regular basis, it’s important that you don’t pay taxes on what you don’t have.  Make sure you perform an adjustment into your inventory account so you have a correct balance.

Dwayne J. Briscoe

Check Out Our Books on Kindle

Business Financials and the IRS Challenge

Business owners are feeling the pressure to start getting 2019 financials ready for tax filing because the deadlines are coming up before you know it and the amount of penalties and interest are not only being attached more but also becoming more costly.  The IRS is now on a hiring spree, according to Commissioner Charles Rettig, with an estimated 10,000 in the current fiscal year as of November 2019, according to an article published in Forbes magazine, with an additional 5,000 in the works.

When people start getting notices from audits to questions about specific tax return line items, these can take anywhere from 3 months to a year, although it can be carried out longer if the business being reviewed takes longer to respond or fails to adequately submit the proper documentation.  One key point though you must always remember though is that the challenge is that once you submit it, trying to go back and change it doesn’t always make sense because it can cause a stigma that you haven’t been honest in the first place.

Another challenge is that not only are the annual tax returns at risk for being reviewed, payroll reports could also be pulled out separately or part of the entire process being considered.  Because you have many more working parts versus an individual return, there’s a lot more opportunities that you could end up in trouble, so you need to be making regular checks to minimize your risk as much as possible.

Unbelievably people who feel the IRS is “out to get them” only feel that way when they’re usually trying to hide unreported income or failure to properly report proper expenses.  The average salary of IRS revenue agents as reported by the Bureau of Labor Statistics is in the $50,000 range, so there are easier ways these employees could be making a salary versus being resented as much as they are.  It’s a job like most any other and their position is to move through a case as quickly and effectively as possible.  Just like closing on a sale or completing a work project, they are also measured on closing their audits in a timely manner.

What do you need to be considering?

  • How many times over the years have you lost money and not paid taxes at all?
  • How often do you file late, i.e. within the normal extension period versus over years?
  • How does your profit compare to prior years where you can’t justify your final profit?
  • Does the 1099-K (credit card reporting statement) confirm with what you’re reporting in your income section, in addition to checks and cash?
  • Can you match your total income against your bank account deposits for the year?
  • Pigs are greedy – hogs get slaughtered. Are you taking too many deductions?
  • Verify everything before you get your taxes prepared and then put your financials side-by-side against the return to see if anything is out-of-line, and ask questions before you sign because once it’s signed then amending is another set of challenges..

Dwayne J. Briscoe

Check Out Our Books on Kindle