With working remotely more common now, many business owners are looking closely at how they might deduct some of the costs associated with maintaining their home offices.
Although the Tax Cuts and Jobs Act (TCJA) of 2017 eliminated the home office expense deduction for most employees until 2026, business owners may still be able to deduct such expenses—but only if they meet a number of conditions. These conditions vary depending on how the business entity is structured. (more…)
After several rounds of revisions and reversals, the IRS is about to release its final version of instructions for partnerships to use when calculating and reporting their partners’ capital accounts on Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc. The instructions, which the IRS is expected to finalize within a few weeks, will apply to the 2020 tax year—the tax preparation season that is already underway for most organizations.
The IRS says it will provide penalty relief for the 2020 requirement as long as partnerships “take ordinary and prudent business care in following the form instructions”. On January 21, 2021, the IRS issued Notice 2021-13 providing additional penalty relief applicable to the calculation of beginning capital balances. Compliance could require considerable data gathering and complex calculations, so partnerships should begin working on these tasks immediately. (more…)
The CARES Act clearly states that a forgiven PPP Loan would not be treated as taxable income. However, it did not specify if the eligible expenses would be deductible. In April, the IRS issued Notice 2020-32 taking the position that these expenses would not be deductible. The Notice did not address how a taxpayer would report these non-deductible expenses if they were incurred in one tax year and loan forgiveness occurred in a subsequent tax year. (more…)
Action Required On December 1, 2020
In September 2020, California enacted Senate Bill 1447, the Small Business Hiring Tax Credit (SBHTC) to provide financial relief to qualified businesses and encourage hiring and retaining employees. The tax credit is $1,000 per increase in full-time equivalent (FTE) employee up to a maximum credit of $100,000 per employer. Unlike most tax credits, this credit can benefit unprofitable businesses that do not have an income tax liability as the credit can also be applied to offset the payment of sales and use tax deposits. The credit will be administered by the California Department of Tax and Fee Administration (CDTFA) which is requiring employers to reserve an allocation of the credit beginning December 1, 2020. (more…)
One of the changes businesses will see during the upcoming tax season is a redesign of the 1099 series of information reporting forms. This year, taxpayers must use a new Form 1099-NEC (Nonemployee Compensation) to report payments to nonemployees such as independent contractors, freelancers, and other service providers, rather than reporting them on Form 1099-MISC as they did in years past.
While the new Form 1099-NEC is relatively simple to complete, the redesign also triggered several rule and deadline changes that affect other information reporting forms. (more…)
While stimulus checks and forgivable loans have received a lot of attention during the COVID-19 shutdown, businesses and individuals should not overlook other available relief provisions that could help them reduce taxes and improve cash flow. Several of these measures could enable a taxpayer to file amended federal tax returns to recover taxes paid in previous years and request a refund. (more…)
By Abe Livchitz, CPA, Senior Tax Manager & Jimmie Machlan, CPA, Tax Manager
ASL Real Estate Group
This November, voters will be deciding many national and state issues. Californians will be asked to make important decisions on measures impacting commercial property owners and residential homeowners. California Proposition 15, also called the “split roll tax” would require commercial and industrial properties to be taxed on current market value. California Proposition 19 would change certain property tax exemptions and transfer rules. If either proposition passes, the changes will not only impact how property tax is calculated but also result in significant tax increases for many property owners. The State Legislative Analyst estimates that in 2025 property tax revenues could be $8 to $12 billion higher if Proposition 15 is enacted. (Official Voter Information Guide – Prop 15) (more…)
One consequence of the long-term shift toward a service-based economy is a change in how states determine the corporate income tax, sales tax, and employee payroll withholding requirements for companies that are active in multiple states. The lack of a consistent nationwide approach can create complexities for companies that have facilities, sales, or personnel in multiple jurisdictions.
Further, the rise in telecommuting during the COVID-19 pandemic has focused additional attention on the issue. So far, only a handful of states have issued specific guidance regarding the tax questions that arise when a company’s employees work remotely from other states. Telecommuting employees can create income tax, sales tax, and payroll withholding issues for their employers. (more…)
Below is a summary of the Federal COVID-19 related updates from August 2020. (more…)