On March 27, 2020, the President signed a bill known as the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). This bill will provide economic relief to individuals, families, small businesses and other sectors of the United States economy. The following is a summary of some key CARES Act Provisions for businesses and individuals: BUSINESSES: Paycheck Protection Program: The Paycheck Protection Program guarantees loans to small businesses. A portion of this loan can be forgiven if used for certain payroll costs and operating costs during the current pandemic. The following is a list of the general provisions for the paycheck protection program: Lenders: Local financial institutions. Covered Period: February 15, 2020 to June 30, 2020. Eligibility: Businesses with 500 employees or less, sole proprietors, and independent contractions. Maximum Loan Amount: The amount available to any eligible business will be the lesser of: (a) 2.5 x Average total monthly payroll costs for the 1-year period prior to the loan or (b) $10,000,000.00. Payroll Costs Defined: Salaries, wages, payroll taxes, and benefits. Payroll Costs Excluded: Any individual employee with payroll costs in excess of $100,000 is excluded from the maximum loan amount, and any payroll costs for employees residing outside of the United States. Allowable Use: Payroll costs, interest payments on mortgage obligations, rent, and utilities. Guarantees and collateral: None. Fees: None. Interest Rate: No higher than 4%. Terms: 10 years, with 6 to 12 months payment deferral for most significantly impacted businesses. Loan Forgiveness: Available allowable use expenditures made during the 8-week period beginning the date of loan origination. Reduction of Forgiveness: (1) Average number of full time equivalent employees (FTE) per month during the 8-week period. Divided by either (a) or (b) Average FTE [...]
On March 18, 2020, the Treasury Department and the Internal Revenue Service released Notice 2020-17 and then issued Notice 2020-18, which clarifies the tax filing and payment relief related to the COVID-19 pandemic. Here is what this means for you: Filing Relief: Individual and Businesses with a April 15, 2020 filing their respective tax returns until July 15, 2020. Extension Form 4868 and Form 7004 relating to extending your tax return time to file are now due on July 15, 2020. Payment Relief: The due date for individual and business federal income tax payments due on April 15, 2020 has been extended to July 15, 2020, but only for the Applicable Postponed Payment Amount. The Applicable Postponed Payment Amount is: Up to $1,000,000 for a non-corporate taxpayer (e.g., an individual, estate or trust). Up to $10,000,000 for each corporate taxpayer. For individual taxpayers, the limitation is the same for a single individual and married individuals filing a joint return. The payment relief also includes 2019 federal extension payments and 2020 federal estimated income taxes due on April 15, 2020. This deferral also applies to self-employment taxes. However, it does not apply to other taxes (i.e. payroll tax, sales tax, and etc.). Penalties and interest for failure to pay the Applicable Postponed Payment Amount will not begin to accrue until July 16, 2020. The professionals of Biel Fisette Iacono will continue to serve our clients’ needs during this Pandemic. We are taking all necessary precautions to ensure the safety of our team and our clients, and to ensure our clients tax, bookkeeping, payroll, audit and advisory needs are met. As a result, many of us will be working remotely from home to comply with all restrictions placed on [...]
For millions of small businesses and freelancers every year, estimated tax payments are a year-round aspect of their tax payments. Most people don’t have to deal with those changes, but small businesses and some individuals will have to pay these taxes throughout the year. In this short blog, we’ll give you a crash course in estimated tax payments so you can stay on top of it this year. Estimated Tax Payments: What Are They? Estimated tax is tax collection on the income that is not subject to withholding. Think certain income, self-employment, alimony, rent, interest, dividends, etc. This typically applies to small businesses and self-employment, among other special employment/income situations. Generally, taxpayers need to pay at least 90% of their taxes through a combination of withholding or estimated tax. Underpaying (or paying late) can lead to being financially penalized by the IRS. In 2020, estimated taxes are due quarterly, specifically on these dates: April 15th June 15th September 15th January 15th, following year If your fiscal year doesn’t start on Jan. 1, the payment schedule would be the 15th day of the 4th, 6th, 9th, and 1st month of the fiscal year. Do I Need To Pay Estimated Tax? S corporation shareholders, partners, and individuals (including sole proprietors) will usually need to pay estimated tax if they expect to owe $1000 or more after filing their return. For corporations, the threshold is held at $500. According to the IRS, you will not have to pay estimated tax if all three of the below criteria are met: You had no tax liability for the prior year You were a U.S citizen or resident for the whole year Your prior tax year covered a 12-month period If [...]
Understanding what your business is worth and monitoring the trend in the value of your business can be very helpful in determining if you are reaching your financial and retirement goals.
While much has been written about the importance of having a financial plan, still many if not most people don’t even do basic financial planning. Utilizing a professional planner such as a CPA or CFP can be beneficial to the process. However, many will not spend the money to do so. This does not mean most of us can not start with a basic approach.
The Tax Act in 2018 has changed the deductibility of meals and entertainment expenses. Most businesses will now need to track the meals and entrainment expenses in multiple account classifications. Based on public comments from the IRS, and other information, the following is a reasonable understanding of what the deductibility of meals and entertainment, if any, is allowed starting in 2018.
here are times and situations where a business hires independent contractors to address certain business related needs. When the business pays an independent contractor, they receive nonemployee compensation. Nonemployee compensation includes payments of fees, commissions, prizes, and awards for services.
If you are a privately held business, family owned or not, failing to plan for succession can have a significant negative impact on the preservation of the wealth you have built. A solid succession plan can drive growth, reduce taxes, set the stage for retirement and enhance the ultimate value of your business.
Simply put, the Break-Even Point (BEP) can be easily defined, but the calculation can be elusive. BEP can be described as a point where there is no profit on loss, when sales covers variable and fixed expenses.
The IRS is on the lookout for S Corporations that fail to pay reasonable salaries to shareholders who preform services for the corporation. The failure to pay adequate salary- or no salary at all – to the shareholder employee is a “Red Flag” for audit by the IRS. It’s important for a S Corporation to properly compensate working shareholders to avoid a big employment tax bill in the future along with interest and penalty. The key to establishing a reasonable salary is determining what the shareholder does for the S Corporation. Initially we need to understand the source of the S corporation ‘s gross receipts.