Michael P. Rudy and Associates - mrcpa.net

IRS Offers Guidance on 100% Business Tax Deduction for Food and Beverages

The Treasury Department and the Internal Revenue Service have issued Notice 2021-25 providing guidance under the Taxpayer Certainty and Disaster Relief Act of 2020. The Act added a temporary exception to the 50% limit on the amount that businesses may deduct for food or beverages. The temporary exception allows a 100% deduction for food or beverages from restaurants.

Stimulus Check Update: IRS Is Processing Checks

  • The IRS on Friday began processing stimulus checks, which could arrive in Americans’ bank accounts as soon as this weekend.
  • Unlike the prior rounds of checks, families will get a payment for all their dependents claimed on a tax return, not just their qualifying children under 17.
  • Americans can check the status of their third payment by using the Get My Payment tool starting on Monday.

Officials from the Treasury Department and the IRS told reporters Friday afternoon that most Americans do not need to take any additional action to receive their payments and most will be delivered via direct deposit.

IRS officials said that full $1,400 payments are slated to go to individuals with adjusted gross incomes of up to $75,000, heads of households that make up to $112,500 and married couples filing jointly with annual income up to $150,000.

The third round of payments will be based on the taxpayer’s latest processed tax return from either 2020 or 2019. Americans can check the status of their third payment by using the Get My Payment tool starting on Monday.

End Of Year Business Checklist (for business clients)

Happy Holidays!
I hope you have been enjoying this holiday season!  Below are some business reminders as the end of the year approaches.

PPP Loan Forgiveness Applications
If you received PPP funding, reach out to your bank as soon as possible to complete the online PPP Loan Forgiveness application.  Amounts under $50,000 qualify for the EZ application.   If your bank does not provide guidance to you, don’t hesitate to call, email, or text me if you have any questions regarding this application.

 

  For purposes of 1099’s being issued to your subcontractors,
please total the payments made in 2020 to each subcontractor who provided services to your business.  Review the name used on the check to each subcontractor.  Any payments made to company with a designation of: Inc, Incorporated, Corp or Corporation can be ignored since 1099’s are not required to be issued to corporate subcontractors.  Please note than an LLC is not a corporation.  For all those who were paid $600 or more, they will need to complete and give you a W-9.  The form can be obtained from the IRS.gov website.  Please provide all W-9 forms including the total amount paid to each subcontractor in 2020 to us no later than 1/8/2021 so we can timely prepare the 1099’s for you for 2020.  Remember this information for 2021 & subsequent tax years and do not pay a subcontractor over $600 until they give you a completed W-9. Keep all W-9 forms securely in your files and forward to us on January 2nd each year.

 

Retirement plan contributions for 2020
Try to max out your retirement contribution for 2020 by the plan due date (including allowable extensions).  If you have questions regarding the amount you are allowed to contribute, the due date, or type of allowable plan for your business, don’t hesitate to call, email, or text me.

 

Inventory on 12/31
For those who have parts, supplies, products, etc. that were purchased in 2020 to be used or sold in 2021, a physical inventory count should take place as close as possible to 12/31 each year.  Inventory on hand at 12/31 should documented at your cost.  We will need this information to prepare your 2020 business tax return.

 

Asset Purchase prior to 12/31
Before you make a last minute purchase before midnight on 12/31, make sure that you really need that equipment, furniture or vehicle.  Deductions for last minute purchases will help reduce your profit, help reduce your taxes, but will also reduce your bank account balance.  Contact me if you would like to discuss the tax advantage of a purchase you are considering.

 

Loan Balances as of 12/31
For any outstanding business or vehicle loan, line of credit, &/or credit card balance(s) as of 12/31, please contact the company to get the loan balance you owe them as of 12/31/2020.  I will need this information to adjust your balance sheet &/or to record on your 2020 business return.

Expenses used for PPP loan forgiveness: Deductible or not?

While the CARES Act excludes the loan forgiveness from gross income, it does not specifically address whether the expenses used to achieve the loan forgiveness would continue to be deductible. On April 30, 2020, the IRS issued Notice 2020-32 to provide guidance regarding the deductibility for federal income tax purposes of certain otherwise deductible expenses incurred in a taxpayer’s trade or business that the taxpayer uses to support loan forgiveness. The notice states that no deduction is allowed under the Internal Revenue Code for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a PPP loan because the income associated with the forgiveness is excluded from gross income for purposes of the Code under CARES Act Section 1106(i). The notice cites Sec. 265 as the specific disallowance provision and also notes that case law and published rulings would disallow the deduction because the taxpayer has a reasonable expectation of reimbursement of those amounts.

Final thoughts
In deciding whether to take a position contrary to Notice 2020-32 and Rev. Rul. 2020-27 by deducting expenses used for receiving forgiveness for a PPP loan, practitioners should also consider their responsibilities under the AICPA’s Statements on Standards for Tax Services No. 1, Tax Return Positions, Circular 230, Regulations Governing Practice Before the Internal Revenue Service (31 C.F.R. Part 10), and Sec. 6694, Understatement of Taxpayer’s Liability by Tax Return Preparer.  It is important that taxpayers decide the tax position they want to take, with help from professional advisers, and that the professional adviser document the client’s decision.

Reasonable compensation of S Corporation Shareholders

As a reminder, the IRS requires all S Corporation shareholders to take “reasonable compensation”.  After the 2nd year of operations of your S Corporation, if the IRS challenges that reasonable compensation was not paid & reported on quarterly payroll returns and an annual W-2, they will reclassify 100% of shareholder distributions as wages.

Reasonable salary needs to be related to services performed.  If there are other employees working in the S Corporation and business would continue with very little involvement from the owner, an argument could be raised for a lower salary to the shareholder.

What is a deductible medical expense?

If you itemize your deductions for a taxable year on Schedule A (Form 1040 or 1040-SR), Itemized Deductions PDF, you may be able to deduct expenses you paid that year for medical and dental care for yourself, your spouse, and your dependents. You may deduct only the amount of your total medical expenses that exceed 7.5% of your adjusted gross income. You figure the amount you’re allowed to deduct on Schedule A (Form 1040 or 1040-SR).

Tax checklist for newly married couples

Marriage changes a lot of things and taxes are on that list. Newlyweds should know how saying “I do” can affect their tax situation.

Here’s a checklist of items for newly married couples to review:

Read more

Deadlines to register for an Economic Impact Payment are just around the corner

Federal benefit recipients who don’t normally have a filing requirement but do have qualifying children must register by Wednesday, Sept. 30 to receive a $500 catch-up payment per child. Other non-filers have until Thursday, Oct. 15 to register for their Economic Impact Payment.

Anyone using the Non-Filers tool can speed up the arrival of their payment by choosing to receive it by direct deposit. Those who don’t choose direct deposit will get a check.
The deadline to claim a $500 payment for a qualifying child is Wednesday, Sept. 30, 2020.

Read more

Our Staff Continues to Service Clients

UPDATE 3/20/20 4:50pm: US Treasury Department Secretary automatically extends 2019 Individual Federal tax return due date and payment due date to July 15, 2020.  Anyone expecting a federal refund should still file as soon as possible to receive it.


By order of Governor Tom Wolf, all non-life-sustaining businesses in PA are to close physical locations and all employees are working from home.  Our accounting/tax office is permitted to remain open. Michael P. Rudy & Associates staff will continue to service our clients. Due to social distancing, our clients will be required to drop off or submit documents electronically to us.

All tax clients may drop off their 2019 tax information in our office using our drop box or they may upload all information using the secure “Client Document Submission” feature on our website.

For drop offs: Gather all applicable tax information, put it in secure, sealed envelope with your name, cell phone number, email address and appointment date/time (if applicable) and place it in our drop box on the right side of our building.  We will call or email you once your information is reviewed.

Thank you and be safe!

03.19.2020-GOV-ORDER-COVID-business-closure

Coronavirus (COVID-19)

We are closely monitoring the evolving Coronavirus (COVID-19) situation focusing on the well being and safety of you and our staff.  Please note that we have taken measures by having a hands free sanitizer dispenser in our lobby and sanitizing all counters, door handles, pens, etc frequently though out each business day.  Read more

Next Page »