Rioting damage at your business? You may be able to claim casualty loss deductions
The recent riots around the country have resulted in many storefronts, office buildings and business properties being destroyed. In the case of stores and businesses with inventory, looters stole products after ransacking property. A commercial insurance property policy should generally cover some, or all, of the losses. But a business may also be able to claim casualty property loss or theft deductions on its tax return. Here’s how a loss is figured for tax purposes: Your adjusted basis in the property MINUS any salvage value MINUS any insurance or reimbursement you receive or expect to receive. It’s important to have proof of losses. Contact us for more information about your situation.
Seniors: Can you deduct Medicare premiums?
If you’re age 65 and older, and you have basic Medicare insurance, you may need to pay additional premiums to get the level of coverage you want. The premiums can be costly, especially if you’re married and both you and your spouse are paying them. But there may be a silver lining: You may qualify for a tax break for paying the premiums. However, it can be difficult to qualify to claim medical expenses on your tax return. For 2020, you can deduct medical expenses only if you itemize deductions and only to the extent that total qualifying expenses exceeded 7.5% of adjusted gross income. Contact us if you want more information about deducting medical expenses, including Medicare premiums.
Does your company have an emergency succession plan?
Succession planning is ideally a long-term project. But, as the novel coronavirus (COVID-19) pandemic has made clear, a business owner can suddenly vanish because of an illness or other disaster. That’s why every company needs an emergency succession plan. Doing so starts with identifying an emergency successor who can take on a credible leadership role. Consider the “domino effect;” that is, who will take on your emergency successor’s role when he or she is busy running the company? An emergency succession plan also needs to be transparent. Thoroughly discuss the role with your successor, and create a communications strategy for employees, customers and suppliers. Contact us for help.
A nonworking spouse can still have an IRA
It’s often hard for married couples to save for retirement when one spouse doesn’t work. An IRA contribution is generally only allowed if you have compensation. However, an exception exists. A spousal IRA allows a contribution to be made for a nonworking spouse. Under the rules, a couple can contribute $6,000 to an IRA for a nonworking spouse in 2020 ($7,000 if the spouse will be age 50 by the end of the year). However, if in 2020, the working spouse is an active participant in an employer retirement plan, a deductible contribution can be made to the IRA of the non-participant spouse only if the couple’s adjusted gross income doesn’t exceed a certain threshold. Contact us for more details.
Business meal deductions: The current rules amid proposed changes
One tax break that President Trump has proposed to help restaurants and entertainment venues is an increase in business meal and entertainment deductions. We’ll let you know if a law passes that enhances deductions. In the meantime, let’s review the rules. Before the pandemic hit, many businesses spent money “wining and dining” customers, employees and others. Under current law, entertainment expenses aren’t deductible. However, you can deduct 50% of the cost of business-related food and beverages, if you meet certain requirements. If you buy food and beverages at an entertainment event, you can deduct 50% of the cost, but only if business was conducted right before, during or afterwards.
Businesses revise sales compensation models during pandemic
Because of the novel coronavirus (COVID-19) pandemic, many businesses are revising their sales compensation models. Nonprofit researchers WorldatWork released a report in late April indicating that 36% of organizations have begun addressing sales compensation in light of the crisis while another 49% are developing plans to do so. Three of the most common actions being taken are: 1) adjusting sales quotas to provide relief to salespeople who find themselves in a reluctant buying environment, 2) modifying wider performance measures such as average deal size and conversion rate, and 3) lowering plan thresholds that qualify sales staffers for specified payouts. Contact us for help.
Student loan interest: Can you deduct it on your tax return?
Many taxpayers with student loans have been hard hit by the economic impact of COVID-19. The CARES Act contains some help. It allows borrowers with federal student loans to stop making monthly payments until Sept. 30, 2020. If you do make student loan payments, you may be able to deduct the interest on your tax return, depending on your income and subject to certain requirements. The maximum amount of student loan interest you can deduct each year is $2,500. For 2020, the deduction is phased out for married taxpayers filing jointly with adjusted gross income (AGI) between $140,000-$170,000 ($70,000-$85,000 for single filers). The deduction is unavailable for taxpayers with AGIs above that.
IRS releases 2021 amounts for Health Savings Accounts
The IRS recently released the 2021 inflation-adjusted amounts for Health Savings Accounts (HSAs). For calendar year 2021, the annual contribution limitation for an individual with self-only coverage under a HDHP is $3,600. For an individual with family coverage, the amount is $7,200. This is up from $3,550 and $7,100, respectively, for 2020. For calendar year 2021, an HDHP is a health plan with an annual deductible that isn’t less than $1,400 for self-only coverage or $2,800 for family coverage. In addition, annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) can’t exceed $7,000 for self-only coverage or $14,000 for family coverage.
Attuning your social media strategy to the pandemic
Social media was important for businesses before the novel coronavirus (COVID-19) pandemic. It’s now become essential to maintaining visibility, building goodwill and perhaps even generating a bit of revenue. But the social media strategy you deployed before the crisis may no longer be effective or appropriate. Start by reviewing your approach to social media so you can identify what adjustments may be necessary. Avoid hard-sell tactics; focus on being helpful and supportive. Customers value brand consistency, so you probably shouldn’t change the look and style of your posts. Seek out opportunities to positively engage with those who follow your accounts. Contact us for more info.
Fortunate enough to get a PPP loan? Forgiven expenses aren’t deductible
The IRS has issued guidance clarifying that certain deductions aren’t allowed if a business has received a Paycheck Protection Program (PPP) loan. Specifically, an expense isn’t deductible if both: 1) the payment of the expense results in forgiveness of a loan made under the PPP, and 2) the income associated with the forgiveness is excluded from gross income under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. IRS Notice 2020-32 states that “this treatment prevents a double tax benefit.” However, two members of Congress say they’re opposed to the IRS stand on this issue. They say they’ll seek legislation to make certain expenses deductible. Stay tuned.