BIDaWIZ Blog » TAX REPORTING

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

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.

How Much Does It Cost To Hire A Tax Professional To File A Return?

The BIDaWIZ Team — Thu, 15 Jan 2015 20:54:30 +0000

The tax filing season is set to start next week when the IRS will begin accepting tax returns. Tax filers can buy do-it-yourself (DIY) software or hire a tax professional to file their return. Those interested in hiring a tax professional, may be interested to know how much it costs. An annual survey conducted by the National Society of Accountants (NSA) provides some guidance as to what you can expect in fees.

How much does it cost to hire a tax pro to file a 2014 tax return?
According to the National Society of Accountants (NSA), it costs $273 to hire a tax professional to prepare an itemized individual tax return, which includes a state tax return. The tax prep fee increased 4.6% as compared to the $261 average a year ago, but a lower growth rate than the 6.1% year over year increase last year. If the taxpayer is just claiming the standard deduction, the average cost is $159 versus $152 a year ago or an increase of 4.6%. You may be asking yourself how $273 is affordable when you compare that to online tax software program which range from $10 to $72 to file a federal and state tax return. While it is less expensive than the average price to hire a tax professional, there are other factors to consider. First, the tax professional will undoubtedly be able to provide advice and consultations that simply aren’t available with a tax software program. Second, the tax filer does not have to spend time completing online tax forms. Third, the tax filer will have peace of mind that a CPA or Enrolled Agent is partly accountable for their return. Fourth, the $273 fee for an itemized federal return and state return or $159 for a simple return, are only averages. There are many tax preparers that offer services below these rates. Many of the accountants in our network can attest to that as you can submit a request here to file your taxes online and receive quotes from multiple tax professionals.

What are the fees for business tax returns and other services?
The survey indicated a wide range of average prices for different type of services. For instance, the average fee to prepare a business return such as a form 1065 or 1120 can cost $634 and $817 on average versus $590 and $806 a year ago or up 7.5% and 1% respectively. Most accountants offer these services with a one hour free consultation with an average value of $100.

If you’re wondering how the pricing in your area compares to the rest of the country, the survey provided details. Those in the Pacific states (AK, CA, HI, OR, WA) can expect the highest fees at $348 vs. $303 a year ago, followed by the Mid-Atlantic states (NY, NJ, PA) at $314 vs. $274 a year ago, followed by the South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) at $268 vs. $270 a year ago and then the East South Central states (AL, KY, MS, TN) at $262 vs. $294 a year ago. The New England states (CT, ME, MA, NH, RI, VT) were at $246, the West South Central (AR, LA, OK, TX) states were at $205, East North Central states (IL, IN, MI, OH, WI) were at $240, the West North Central states (IA, KS, MN, MO, NE, ND, SD) were at $198, and the Mountain (AZ, CO, ID, MT, NV, NM, UT, WY) states were at $256.

More tax questions? Browse answers or ask 2014 tax questions online. You can also find accountants online here.

How Should Businesses And Accountants Be Filing 1099 Forms?

The BIDaWIZ Team — Thu, 15 Jan 2015 20:00:03 +0000

The tax filing season begins earlier for accountants and small businesses than individuals. This is largely due to the fact that most of the forms that individuals rely on are issued by these providers. Mainly, 1099 and W-2 forms are due starting on February 2nd, 2015. Given this approaching deadline, it’s important that both small businesses and accountants have a proper system in place to ensure that 1099 and W-2 forms are filed accurately and on time. One of the ways to achieve this objective is through technology.

Recently, we had a chance to sit down with Susan Drenning, the President of eFile4Biz.com, to learn more about their 1099 and W-2 form filing solution, which includes print, mail, and electronic filing services. For those that don’t know, eFile4Biz.com is part of the HRdirect family of brands. For more than 25 years, HRdirect has offered innovative, easy-to-use HR products and services to businesses. Susan and her team are passionate about giving small businesses affordable access to the same types of HR tools that larger companies use to streamline their HR responsibilities. As a result, business owners and managers can focus on what matters most: running and growing their businesses.

How is your service helpful for accountants?
Accountants and tax preparers prefer an IRS-authorized e-file solution like eFile4Biz.com because they can set up and file forms for multiple clients under one account. The features and functionality that set us apart from other providers include:

1) Low and all-inclusive pricing
2) Comprehensive data integration with QuickBooks Online, QuickBooks Pro (Desktop) and Xero
3) Easy-to-use Excel template
4) Notifications when recipient copies have mailed & the filings are accepted by the IRS/SSA
5) Ability to run Summary and Totals reports to validate amounts before submitting
6) Data is entered only once and is available each year
7) Secure storage of data and accessibility for four years

How is eFile4Biz.com different and better than the other 1099/W-2 filing solution providers?
With most 1099/W-2 filing solutions, you still do most of the work. As an industry leader and pioneer, eFile4Biz.com strives to make the online processing of 1099s and W-2s as convenient and economical as possible. There’s never any software to download or forms to purchase. You don’t have to worry about printing or mailing your forms, either. It’s as simple as signing up and entering (or importing) your tax form information. Once you’re ready to file, we take care of the rest.

What type of data security measures has eFile4Biz.com taken to protect client data?
The IRS doesn’t regulate how recipient data is handled for security purposes. That’s entirely up to the service provider. Some e-file providers are nothing more than mom-and-pop operations, saving your data in home-grown databases and printing and mailing forms out of their garages. We, on the other hand, take security very seriously. Customer data is encrypted as soon as it is submitted and it stays encrypted through the entire process. In addition, our print/mail and data facilities are certified by the American Institute of Certified Public Accountants (AICPA) to be SOC2-compliant. By combining the latest technologies with stringent business practices, we can assure our customers that their sensitive data is fully guarded against tampering and identity theft.

How much does your service cost?
Depending on the number of forms you’re filing, the price per form ranges from $1.25 to $3.95. It is important to note that our advertised price for 1-10 forms ($3.95 per filing) includes full-service printing, mailing and e-filing. Many competitors may lure customers with a particular price, but it covers e-file only. So even though the price may appear lower, it ends up being more after you add the costs to print and mail recipient copies. It’s important to compare apples to apples, since most customers purchase the full-service print, mail and e-file service.

Do you have any examples of clients that have used eFile4Biz.com?
We serve more than 30,000 customers nationwide, catering to both small businesses and large corporations. For instance, one of our small business customers is a welding subcontractor in South Florida that operates with up to eight employees year-round and supplements with another six to eight independent contractors throughout the year as the workload peaks. The owner outsources payroll processing and hires an accountant for his annual tax return, but he handles his own invoicing, financial recordkeeping and 1099 processing with online tools like Freshbooks and eFile4Biz.com.

Do you have any tax filing advice as we approach the 1099 filing deadline?
Our biggest recommendation is to file as soon as possible! The deadline to provide 1099s to covered recipients is February 2nd (since January 31st falls on a Saturday in 2015). You can also get ahead of the curve by:

1) Reviewing and updating your payer and recipient records. If any payers or recipients moved or changed their names, take a few minutes to update those records. Same with adding any new payers or recipients.

2) Collecting recipient email addresses for e-delivery. If you provide your recipient’s email addresses, we can give them the option to access their forms securely online. Rather than wait for the mail, they will get their forms immediately after you file and can print them on their home or office printers.

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