Still have questions after you file your tax return?
After filing a tax return, you may have questions. 1) When will you receive your refund? Go to irs.gov and click on “Get Your Refund Status” to find out. 2) How long should you save tax records? In general, save records for three years after filing although you should keep the actual returns indefinitely. However, there are exceptions to this general rule. 3) If you overlooked claiming something on your return, can you still claim a refund for it? You can generally file an amended return to claim a refund within three years after the date you filed the original return or two years of the date you paid the tax, whichever is later.
An S corporation could cut your self-employment tax
If your business is organized as a sole proprietorship or a wholly owned limited liability company, you’re subject to both income tax and self-employment (SE) tax. There may be a way to cut your tax bill by operating as an S corporation. SE tax is imposed on 92.35% of SE income at a 12.4% rate for Social Security up to $142,800 for 2021 and at a 2.9% rate for Medicare. An extra 0.9% Medicare tax is imposed on income exceeding $250,000 for married filers and $200,000 for singles. If you conduct business as an S corp, you’re subject to income tax, but not SE tax, on your share of business income. But the S corp must pay you a reasonable salary. Contact us if you want to discuss these issues.
Look at your employee handbook with fresh eyes
Many businesses have revised their policies and procedures during the COVID-19 pandemic. If yours has done so, be sure to accurately document the changes in your employee handbook. And while you’re at it, review the entire handbook with fresh eyes. Ask your attorney to assess its legal soundness and make all recommended changes. Use the handbook to express to workers how you’re supporting their well-being, thoroughly describing employee benefits, paid sick time and leave policies, and fringe benefits. Avoid using prefabricated templates or boilerplate language; revise the handbook so it’s truly your own. Our firm can help you develop cost-effective solutions to your employment challenges.
Working in the gig economy results in tax obligations
Before the pandemic hit, the number of people engaged in the “gig” or sharing economy was growing. And even more people turned to gig work during the pandemic to make up lost income. There are tax consequences for the people who perform these jobs. Generally, if you receive income from gigs or freelancing, it’s taxable. That’s true even if the income comes from a side job and if you don’t receive a 1099-NEC or other form reporting the money you made. You may need to make quarterly estimated tax payments because your income isn’t subject to withholding. Some or all of your business expenses may be deductible on your tax return, subject to the normal tax rules. Contact us to learn more.
Help ensure the IRS doesn’t reclassify independent contractors as employees
Many businesses use independent contractors to help keep costs down. If you’re among them, make sure workers are properly classified for federal tax purposes. If the IRS reclassifies them as employees, it can be a costly error. It can be complex to determine whether a worker is an independent contractor or an employee for federal income and employment tax purposes. The IRS and courts have generally ruled that individuals are employees if the businesses they work for have the right to control and direct them in their jobs. Otherwise, they’re generally contractors. Contact us if you’d like to discuss how the rules apply to your business. We can help ensure your workers are properly classified.
The Restaurant Revitalization Fund is now live
The COVID-19 pandemic has affected various industries in very different ways. Widespread lockdowns and discouraged movement have led to increased profitability for some manufacturers and many big-box retailers. The restaurant industry, however, has had a much harder go of it — especially smaller, privately owned businesses in economically challenged areas. In response, the Small Business […]
Tax filing deadline is coming up: What to do if you need more time
This year, the deadline for filing 2020 individual tax returns is May 17, 2021. The April 15 due date was postponed due to the pandemic. If you still aren’t ready to file, request a tax-filing extension. Anyone can request an automatic extension with IRS Form 4868. This extends the filing deadline until Oct. 15, 2021. Be aware that a filing extension doesn’t grant you an extension of time to pay your taxes. You need to estimate and pay any taxes owed by the deadline to help avoid possible penalties. In some special situations, people can receive more time without filing Form 4868. This includes victims of certain disaster victims, military members in a combat zone and U.S. citizens abroad.
Providing education assistance to employees? Follow these rules
Many businesses provide education fringe benefits so their employees can improve their skills and gain knowledge. An employee can receive, on a tax-free basis, up to $5,250 each year from an employer for education under a “qualified educational assistance program.” For this purpose, education means any instruction or training that improves or develops an individual’s capabilities. It doesn’t matter if it’s job-related or part of a degree program. Different rules apply if the education is job-related. In addition to education assistance, some employers offer student loan repayment assistance. Contact us to learn more about setting up an education assistance or student loan repayment plan.
Is your wellness program built on a solid foundation?
In a society increasingly conscious of well-being, many businesses have established or are considering offering an employee wellness program. To fulfill objectives such as reducing absenteeism and controlling benefits costs, your company must build such a program on a solid foundation. First, be sure you have total leadership commitment. Successful wellness programs are driven by total management buy-in, from the C-suite down through middle management to leaders in every department. Second, a wellness program needs to be a natural and appropriate extension of your company’s existing culture. Look to patiently and persistently create a “culture of wellness.” Contact us for more info.
Why it’s important to meet the tax return filing and payment deadlines
The May 17 deadline for filing your 2020 individual tax return is coming up. It’s important to file and pay your tax return on time to avoid penalties imposed by the IRS. Here are the basic rules. Separate penalties apply for failing to pay and failing to file. The failure-to-pay penalty is 1/2% for each month (or partial month) the payment is late. The maximum penalty is 25%. The failure-to-file penalty is a more severe rate of 5% per month (or partial month) to a maximum of 25%. If you obtain an extension to file (until Oct. 15), you’re not filing late unless you miss the extended due date. However, a filing extension doesn’t apply to your responsibility to pay. Contact us with questions.
You must be logged in to post a comment.