BIDaWIZ Blog » SMALL BUSINESS

Webinar: Year End Tax Planning For The Small Business

The BIDaWIZ Team — Sun, 05 Nov 2017 15:56:51 +0000

Please join us for this webcast in which we will identify and assess effective small business year-end strategies for 2017 and beyond. We will cover techniques for managing overall income tax liabilities, timing of income and deductions, and the latest regulatory developments applicable to business taxation.

Learning Objectives

Discuss current issues regarding federal tax laws impacting businesses
Identify complexities of the tax code as it relates to businesses
Generate tax planning opportunities for businesses.

Recap Of Our Small Business Twitter TaxChat

The BIDaWIZ Team — Tue, 07 Apr 2015 22:39:12 +0000

We had the pleasure of hosting a small business Twitter TaxChat15 with Andrew Schrage from Money Crashers with the help of MasterCard. We asked 9 thought provoking tax questions to Andrew and the rest of the community. If you were unable to join the chat, we’ve compiled the key highlights from the discussion below.

Not ready to file?
We opened the discussion by asking what a small business should do if they are not ready to file their tax return because they don’t have all of their documentation in place. We recommended that you file and pay as much as you can of the estimated tax liability.

@BIDaWIZ Don't put your head in the sand! File for an extension

— Money Crashers (@MoneyCrashers) April 7, 2015

Does filing an extension increase our chances of an audit?
To the surprise of some, filing for an extension does not in itself increase the probability that the tax return will be subject to an audit.

@BIDaWIZ That is a commonly held belief but there is no reason that will be the case as long as you do your due dilligence #taxchat15

— Money Crashers (@MoneyCrashers) April 7, 2015

Should we file with software or hire a tax professional?
The consensus from the community was that working with a tax professional is easier, quicker and in some cases cheaper than using software to file a small business tax return. We tend to agree.

@BIDaWIZ If you can find a tax pro to help you I'd go that route because software can have extra time-consuming hurdles #taxchat15

— Money Crashers (@MoneyCrashers) April 7, 2015

Do we need to keep all of our receipts to claim expenses?
There were some differences in opinion on this inquiry. Some respondents indicated that we need to keep all receipts if the business is claiming an expense, while others didn’t think you need to have them for small expenses. As we advised, it depends on the type of expense, but it certainly doesn’t hurt to keep receipts for a certain period of time.

@BIDaWIZ @MoneyCrashers I didn't realize that it was so high. Lodging we always keep #taxchat15

— Linda F (@CTSweeper) April 7, 2015

Who is responsible for mistakes on the tax return?
Even if you work with a tax professional, your business is still responsible for any mistakes. Of course, the professional is expected to prepare a return in accordance with the regulations, but the small business still needs to review and ensure the accuracy of the tax return.

@BIDaWIZ @MoneyCrashers Q8 probably since the business signs the return and provides the info #taxchat15

— Linda F (@CTSweeper) April 7, 2015

To follow the entire discussion, you can visit the hashtag: #TaxChat15

Join Our TaxChat For Small Businesses on Tuesday 4/7, 1:30PM EST

The BIDaWIZ Team — Thu, 02 Apr 2015 13:29:47 +0000

BIDaWIZ and our partner, MasterCard, will be hosting a Twitter TaxChat on Tuesday, April 7th at 1:30PM EST to discuss last minute tax filing tips for small businesses with Andrew Schrage from Money Crashers. Andrew is a personal finance and small business expert that leads the Money Crashers team in developing a community of people who try to make financially sound decisions. Andrew as well as our team of tax professionals will be answering all of your last minute tax filing questions in 140 characters or less. Also, BIDaWIZ and Money Crashers will be giving away a $15 Amazon gift card to two lucky winners that participate on the chat as detailed in the Terms & Conditions.

Hashtag: #TaxChat15

Twitter Handles to follow: @bidawiz @moneycrashers @mastercardbiz

How to participate: Follow the hashtag #TaxChat15 and you can easily keep track of the conversation by using our special chatroom here. Anyone can participate, but you must be following @BIDaWIZ and RSVP below so we can send you reminders and a $15 Amazon gift card to two lucky winners*.

Signup for a Reminder & Win A $15 Amazon Gift Card*:To Make it easier for us to keep track of attendees and provide a gift card to the winner*, please RSVP below with your twitter ID (put that in the “Link Title” field), email address, and your twitter URL (put that in the “URL” field, do not put your blog’s url in there).

Update
Our winners for the Tax Chat are @ctsweeper and @OHsportsgirl

*:Terms & Conditions Apply

What If Your Business Missed The 1099 Filing Deadline?

The BIDaWIZ Team — Fri, 06 Mar 2015 20:52:32 +0000

The initial 1099 filing deadline passed on February 2nd, 2015. This may have many businesses scrambling. What should businesses do if they are in this predicament and how can they avoid facing penalties. We address this concern and other 1099 tax questions below.

First, take a deep breath, you can still issue the 1099 and possibly avoid a filing penalty if you can show reasonable cause. This would mean that your business was unable to send the 1099 form on time because there was an unforeseen event such as an office fire that made it impossible to do so.

Separately, while this is after the fact for the 2014 tax year, the business can file Form 8809 to request an additional 30 days to file the 1099 or other information return. This form must be filed on or before the earliest 1099 due date or February 2nd, 2015 for the 2014 tax year.

When are the 1099 filing deadlines?
Please note that there are separate 1099 filing deadlines. The deadline is February 2nd, 2015 to send the form to the recipients or independent contractors. The deadline to send the form on paper to the IRS is March 2nd and if you e-file it, the deadline is March 31st.

Is the earliest due date February 2nd, 2015 for all 1099 forms?
The earliest due date is February 2nd for most 1099 Forms. However, if the transaction is to report the following items, the due date is February 17th.

All payments reported on Form 1099-B, Proceeds From Broker and Barter Exchange Transactions.
All payments reported on Form 1099-S, Proceeds From Real Estate Transactions.
Substitute payments reported in box 8 or gross proceeds paid to an attorney reported in box 14 of Form 1099-MISC, Miscellaneous Income.

Do we issue a 1099 form for goods provided as well as services?
Please note that the 1099-Misc form is generally issued for payment of services provided. However, if the goods and supplies are part of the services provided by the independent contractors & LLCs, they would be included in the 1099-Misc form. If they are not part of the service provided, the payer should not report payments for equipment, supplies, or other tangible goods, including inventory. This is referenced in the 1099-Misc instructions as well as Internal Revenue Code Section 6041(a).

How do we know that the information from the W-9 Form is correct?
The IRS has a taxpayer identification number (TIN) matching program to allow businesses to verify that the information provided by the payee/recipient on the W-9 form is accurate. As a side note, the W-9 form should be completed by the recipient before any payment is made by the payer. The TIN matching program is helpful, but not as much after payment is made and you find an incorrect TIN.
If you find an incorrect TIN, request a corrected W-9 from the payee. This will prevent issues such as receiving a whole series of CP2100 notices from the IRS (i.e. CP2100) and following up with the payee.

More Questions? Browse Answers or ask your 1099 tax questions online.

Are Health Insurance Reimbursement Plans Now Allowed Per The IRS?

The BIDaWIZ Team — Mon, 23 Feb 2015 19:29:23 +0000

If you haven’t already heard, the IRS released an update on the tax rules for health insurance reimbursement plans as it relates to the Affordable Care Act (ACA) and S Corporations. This update addresses small businesses that do not offer healthcare coverage, but do reimburse employees for insurance purchased on the healthcare exchanges. The IRS is now waiving noncompliance penalties for the 2014 tax year and the first half of 2015. How does this impact your business and what else has changed?

Is there still a noncompliance penalty?
No, the IRS has provided relief for businesses to transition to the new ACA rules. Specifically, any employer with less than 50 full-time employees will not be subject to the infamous $36,500 Section 4980D penalty per employee. The relief applies to employers that are conducting an employee reimbursement plan for 2014 and through June 30th, 2015. However, penalties will still be applied beginning on July 1, 2015.

What about S Corp owners?
As you may recall, notice 2013-54 indicated that if an S Corporation is reimbursing or paying premiums on non-employer sponsored health insurance for more than one S corporation employee, then the reimbursement arrangement may be considered a “group plan” subject to ACA because it covers more than one employee. In this instance, the S Corporation would be required to include FICA on the reimbursed amount because the ACA provisions have been violated. However, per this latest Notice 2015-17, the IRS will not assert the Section 4980D penalty on an S corporation that reimburses the insurance premiums of a more than 2% shareholder. Furthermore, the notice indicates that the IRS and the DOL are contemplating publication of additional guidance on reimbursement plans for 2% plus S Corp owners.

Are the new rules set in stone for S Corps?
As of now, the guidance suggests that S Corporation owners fall within the definition of an employee and are subject to the ACA provisions. However, it is certainly possible that the IRS and/or the Department of Labor (DOL) will issue a clarifying notice that supports IRS Notice 2008-1 and excludes all S Corporation owners from the requirement.

Can employers increase employee pay to cover the cost of insurance?
Yes, the IRS notice confirms that an employer can increase an employee’s compensation as long as it is not conditioned upon the employee using those funds to cover out-of-pocket health insurance costs.

More Questions? Browse Answers or ask your IRS notice 2015-17 questions online.

Sales & Use Tax Compliance For The Small Business Owner

The BIDaWIZ Team — Wed, 18 Feb 2015 16:00:13 +0000

Small businesses owners need to stay up to date on all of the regulatory changes that surround sales and use tax laws to avoid potentially devastating penalties to their business. Fortunately, Avalara provides a unique perspective of the sales tax complexities that businesses face as well as the best ways to mitigate the risks associated with sales tax compliance. Join us for this free sales tax webinar. Read More.

Does Gross Revenue Reconcile With Your 1099-K Form?

The BIDaWIZ Team — Tue, 10 Feb 2015 05:09:33 +0000

The IRS requires payment processors to issue 1099-K forms in an effort to prevent merchants from under-reporting their income. Despite this requirement, many businesses are facing problems with matching the amount reported on the form with their gross revenue. What should you do if your business receives an incorrect form?

What will be on the 1099-K form?
The form is to be issued to businesses that have 200 transactions or more for the year and generate at least $20,000 in income from a particular payment processor. The form shows the gross amount of merchant card and third-party payments for the year and on a monthly basis. Unfortunately, the form does not indicate charge-backs, refunds and credits. This could lead to problems as the amount reported by the credit card processor or service may not coincide with your books and records.

The payment processor fees are included in amounts paid to your company
Many processors will include the processing fees associated with the payment period at the end of the quarter. Unfortunately, many of these fees offset sales transactions. This can complicate reporting since the IRS requires that the processor reports the gross amount on the Form 1099-K.

What if the gross income reported on the 1099-K form is incorrect?
The first option is to contact the issuer and explain the problem. Ask them to file an amended 1099-K to show the adjustment to the IRS. If they agree to this before you file your taxes and it’s processed by the IRS, then this will be the easy fix. However, there may not be enough time for this to be filed by the issuer and processed by the IRS. If that’s the case, then there’s another option. Report the income on Schedule C as you normally would for 1099-K income, but claim an expense on Part V – Line 48 for the difference and document the mistake for the IRS. You of course need to get a hold of all of the receipts related to the transactions to provide support in case of an audit.

More Questions? Browse Answers or ask your 1099-K tax questions online.

Is Your Company Eligible For S Corporation Late Election Relief?

The BIDaWIZ Team — Sun, 08 Feb 2015 22:44:37 +0000

Many new businesses and existing C Corporations elect to be treated as an S Corporation for the tax benefits. In some instances, companies fail to meet the filing deadline, which is 75 days after incorporating or 2 months and 15 days after the beginning of the tax year. If your business failed to meet this deadline, you may still qualify for S Corporation late election relief.

Electing to be taxed as an S Corp
The IRS sends a CP261 Notice to businesses to confirm acceptance of the S Corporation election; that is protocol. If the business doesn’t know if they received the letter or not, they should contact the IRS directly at their Business and Specialty Tax Line at (800) 829-4933 (M-F, 7am-7pm).

How to qualify for S Corporation late election relief
If your company did not file the Form 2553 on time, but still meets the late election relief criteria in IRC Section 1362(b)(5) detailed below, the next steps should be to file the IRS Form 2553. When filing the form, write at the top of the form the following words: “FILED PURSUANT TO REV. PROC. 2013-30.” Furthermore, if you make the election with your first tax return, write in the top margin of the first page of Form 1120S “INCLUDES LATE ELECTION(S) FILED PURSUANT TO REV. PROC. 2013-30.

The Corp. meets the S-Corp. eligibility criteria:
1) The corporation intended to be classified as an S corporation as of the date entered on line E of Form 2553;
2) The corporation fails to qualify as an S corporation on the effective date entered on line E of Form 2553 solely because Form 2553 was not filed by the due date
3) The corporation has reasonable cause for its failure to timely file Form 2553 and has acted diligently to correct the mistake upon discovery of its failure to timely file Form 2553
4) Form 2553 will be filed within 3 years and 75 days of the date entered on line E of Form 2553

Please note that to request late election relief when the above requirements are not met, the corporation generally must request a private letter ruling and pay a user fee in accordance with Rev. Proc. 2014-1, 2014-1 I.R.B. 1.

More Questions? Browse Answers or ask your s corporation tax filing questions online.

What Accountants And Businesses Need To Know About Form 3115

The BIDaWIZ Team — Wed, 28 Jan 2015 22:16:41 +0000

This tax season will have many businesses and accountants spending more time preparing returns as a result of the new form 3115 requirement. For those late to the party, the final regulations have been issued by the IRS for the tax treatment of tangible property. The purpose of the new requirement is to ensure that tangible property items have been properly capitalized or expensed. The impact is widespread as almost every business has tangible property and even if the business is already compliant with the new regulations, they still should file the form to confirm it.

How should you prepare for form 3115?
First and foremost, you should inform your client of the new requirement to avoid any last minute surprises. Of course, every client will want to know how much it will cost. You can respond after assessing the client’s tangible property. However, you should know that it will certainly take at last several hours to review and prepare the form.

In addition to the cost, you should explain that there are many benefits to filing the form. Specifically, it’s possible to benefit financially given the additional deductible expenses that may be claimed. Also, explain the steep penalties that the client can face by not filing the form.

Second, be prepared to spend time reviewing accounting records. The IRS has actually provided guidance for practitioners to understand and apply the law. Specifically, the IRS recommends 20 hours to learn the law, 39 hours to review work papers and 24 hours to prepare the form. While we believe that these estimates are a bit far-fetched, it will still take several hours.

In your review, you will need to focus on pre-2014 depreciation schedules. These schedules will allow you to determine what items the client is still depreciating and whether any of those items should be classified as currently deductible expenses. Please note that fully depreciated property is exempt from the new regulations. Also, review expenses that were deducted that should have been capitalized. You will need to determine if those expenses are an improvement by testing for betterment, adaptation, or restoration; if not an improvement under this test, it is a repair expense. In addition, if your client is using a Unit of Property (UOP) that is inconsistent with the final regulations, you will need to change it and include the change on the form. The other major point to keep in mind is that the new requirement will allow your client to change their accounting method to utilize segmented depreciation if they hadn’t done so in the past. This can translate into more deductions and greater savings.

What specific rules are impacted by the new filing form?
The key regulations relate to Internal Revenue Code Sections 1.263(a)-1, 1.263(a)-2, 1.263(a)-3, 1.263(a)-6, 1.162-3, 1.162-4, 1.162-11, 1.167(a)-4, 1.168(i)-1, 1.168(i)-7, 1.168(i)-8 and 1.1016-3. Furthermore, the following codes may be relevant as you file the form.

Method #184 with a citation to 1.162-4 – Ability to deduct repair and maintenance costs

Method 184 with a citation to 1.263(a)-3(i)) – Ability to employ the new routine maintenance safe harbor of 1.263(a)-3(i)

Method #186 (non-incidental) and/or #187 (incidental)) – Ability to deduct up to $200 per unit of property for either incidental or non-incidental materials and supplies costs; Ability to employ the new TPR rules for non-incidental and incidental material and supplies

Method #192 – Ability to properly capitalize and depreciate amounts paid to acquire or produce tangible property

More Questions? Browse Answers or ask your form 3115 tax questions online.

Does Letting Employees Telecommute Create Tax Nexus?

The BIDaWIZ Team — Tue, 27 Jan 2015 23:03:33 +0000

The telecommuting phenomenon continues to grow among US companies. More and more employers are providing employees with an option to work from home or telecommute, according to the Census Bureau’s annual American Community Survey. The benefits for employees are obvious, but what about employers? Yes, there will be more room in the office, but can that mean more state tax filings?

How does telecommuting impact state tax nexus?
A company can establish state tax nexus if they have a business location, perform services or generate sales within a particular state. In certain states, this includes employees that regularly and consistently telecommute across state lines. This is true even if the out-of-state employer made no sales in the state and the employee telecommuted only part time. Furthermore, there are some states in which nexus is triggered even if the telecommuters are performing back office administrative functions.

What are the implications for establishing tax nexus?
The result is that the out-of-state employer may be subject to additional corporate tax liabilities and required to file additional returns. The implications can also be long-lasting as several states also have trailing nexus rules.

Should your company offer telecommuting as an option?
While telecommuting provides employees with significant work/life balance, the business must evaluate the financial benefits for providing that option versus the potential additional corporate income tax liabilities and the administrative costs of filing additional state income tax returns. It’s certainly possible that it may be worthwhile to offer telecommuting, but the state tax requirements must first be reviewed.

More questions? Browse answers or ask telecommuting state tax questions online.