The tax rules for deducting the computer software costs of your business
Do you buy or lease computer software to use in your business? Do you develop software for use in your business, or for sale or lease to others? You should be aware there are complex rules that may apply to determine the tax treatment of the expenses. The rules depend on whether the software is purchased, leased or developed by your business. For example, you must deduct amounts you pay to rent leased software in the tax year they’re paid, if you’re a cash-method taxpayer, or the tax year for which the rentals are accrued, if you’re an accrual-method taxpayer. We can assist you in applying the tax rules for treating computer software costs in the way that is most advantageous for you.
Trump administration bans most evictions through December, but there’s a catch
Though a moratorium is in effect, tenants are still obligated to pay rent Citing concern about the spread of the coronavirus, the Trump administration on Tuesday announced a moratorium on most residential evictions through the end of the year. The order, made public by the Centers for Disease Control on Tuesday, will prevent landlords from evicting most tenants […]
Can investors who manage their own portfolios deduct related expenses?
In some cases, investors have related expenses, such as the cost of subscriptions to financial periodicals and clerical expenses. Are they tax deductible? Currently, they’re only deductible if you can show that your investment activities rise to the level of carrying on a trade or business. In that case, you may be considered a trader, rather than an investor. A trader is entitled to deduct investment-related expenses as business expenses. A trader is also entitled to deduct home-office expenses if the home office is used exclusively on a regular basis as the trader’s principal place of business. However, be aware that trader status is difficult to achieve. Contact us with questions.
Business website costs: How to handle them for tax purposes
The business use of websites is widespread. But determining the proper tax treatment for the costs involved in developing a website can be difficult. The IRS hasn’t yet released formal guidance on when website costs can be deducted, so you must apply existing guidance that’s available on other costs to the issue of website development costs. The exact treatment of website design costs depends on whether they’re software or hardware and whether they’re part of a start-up business. If you hire third parties to set up and run your website, payments are currently deductible as ordinary and necessary business expenses. Contact us if you have questions or want to plan for website costs.
IRS announces per diem rates for business travel
The IRS recently announced special per diem rates that can be used to substantiate business expenses incurred for travel away from home on or after October 1, 2020. Employers using these rates to set per diem allowances can treat the amount of certain categories of travel expenses as substantiated without requiring employees to prove the actual amount spent. For travel within the continental United States, employers can use the optional high-low method for substantiating lodging, meals and incidental expenses, or for substantiating meal and incidental expenses only. The per diem rules can greatly simplify the process of substantiating business travel expenses. Contact us for more info.
2020 Q4 tax calendar: Key deadlines for businesses and other employers
Here are a few key tax-related deadlines for businesses and other employers during Quarter 4 of 2020. OCT. 15: If you’re the owner or operator of a calendar-year C corp. which filed an extension, file a 2019 income tax return. NOV. 2: Report income tax withholding and FICA taxes for Q3 2020 (unless you’re eligible for a Nov. 10 deadline because you deposited on time (and in full) all of the associated taxes due). DEC. 15: If a calendar-year C corp., pay the fourth installment of 2020 estimated income taxes. Contact us for more about the filing requirements and to ensure you’re meeting all applicable deadlines.
Tax implications of working from home and collecting unemployment
COVID-19 has resulted in many changes in our lives, and some of them have tax implications. For example, many employers have required employees to work from home. Unfortunately, employee business expense deductions (including expenses to maintain a home office) are disallowed from 2018 through 2025. However, if you’re self-employed and work from a home office, you can be eligible to claim home office deductions for your related expenses if you satisfy the strict rules. Another tax-related situation involves people who are laid off and collecting unemployment benefits. Be aware that these benefits are taxable and must be reported on federal income tax returns for the tax year received.
Weighing the risks vs. rewards of a mezzanine loan
The economic impact of the COVID-19 pandemic has hurt many companies but also opened opportunities for others to expand or pivot into more profitable areas. If your business needs working capital to grow, rather than simply survive, consider a mezzanine loan. These work by layering a junior loan on top of a senior (or primary) loan, combining aspects of senior secured debt from a bank and equity-based financing from direct investors. The advantages: a relatively quick approval process and access to working capital that you may be unable to obtain elsewhere. Drawbacks include high interest rates and potential loss of ownership share if delinquency or default occurs. Contact us for more info.
Prioritize customer service now more than ever
As companies adjust to the COVID-19 crisis and resulting economic fallout, prioritizing customer service is more important than ever. Success starts at the top. Encourage your management team and fellow business owners (if any) to regularly interact with customers. Moving down the organizational chart, cultivate customer-service heroes by celebrating achievements and empowering employees. Leverage the latest technology to deploy a system of immediate or at least timely customer feedback. Continually reassess your approach to customer service to suit the changing circumstances of not only the pandemic, but also your industry and local economy. Contact us for help.
Employers have questions and concerns about deferring employees’ Social Security taxes
The IRS has issued guidance to employers about the presidential action to allow employers to defer certain payroll taxes. Notice 2020-65 was issued to implement President Trump’s executive memo signed Aug. 8. The deferral involves wages or compensation paid to an employee beginning Sept. 1, 2020, and ending Dec. 31, 2020, but only if the amount paid for a biweekly pay period is less than $4,000, or an equivalent amount in other pay periods. The guidance postpones the withholding and remittance of the employee share of Social Security tax until the period beginning Jan. 1, 2021, and ending April 30, 2021. Penalties, interest and additions to tax will begin to accrue on May 1, 2021.
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