Padgett Business Services - Coraopolis

11/21/2023

Good news from the IRS. You may have heard some version of "if I get over $600 on Venmo/Paypal/etc... from someone I am going to get a 1099." The IRS has pushed this to 2024, so no concerns about this in 2023.

Current rules are that someone that received $20,000 or does 200 transaction in a year will receive a form 1099-K from the third party settlement organization. It appears in 2024 they may make the amount higher than $600, but no confirmation yet.

The IRS announced that it would delay the new $600 Form 1099-K reporting threshold for third-party settlement organizations for 2023.

11/17/2023

You may have heard murmurs over the past year that a new federal business registration system is coming. Well, it appears that day is quickly approaching. The Corporate Transparency Act is supposed to go into effect next year.

What is it and how does it affect you?

Basically, this is a business registration system created by the federal government to help identify and track those with a beneficial relationship in a business. The intent is to crack down on criminal acts including money laundering.

Who Needs to File?

Beneficial owners will need to register, meaning you have either a 25% ownership in a reporting company or you exercise substantial control over such a company. For that second part think CEO, COO, general counsel, etc…

What companies are required to report?

The list includes corporations, LLCs, LLPs, and any other entity created by filing with a secretary of state or similar office. This does include foreign corporations who file to do business in the USA. Large companies will be exempt.

What needs to be reported?

Every beneficial owner has to register themselves in the system and will supply name, date of birth, residential address, and an identifying document (driver’s license and such).

When does this need to happen?

Assuming there are no more delays, existing companies will have until the end of 2024 to get their individuals registered. New companies will have to register in 30 days. Moving forward if an individual moves they need to update their info within 30 days.

What happens if I don’t do it?

Potential penalties are civil penalties of $500 a day up to $10,000, and criminal penalties are up to two years in prison.

Is this a good thing?

That’s a matter of opinion and perspective. Criminals and money launderers use small LLCs to help hide their activities. Stopping them is a very good thing. However, putting more responsibility and potential liability on our small business owners is not an ideal way to promote entrepreneurism. Small business owners already wear many different hats, and this is one more thing they will need to manage. There is sure to be plenty of debate on this in the months ahead. It is advisable to reach out to your senator and/or representative to give them your thoughts.

Please note this is not a comprehensive review of the CTA but instead a brief summary. You should speak to your attorney or CPA to discuss how this affects you.

02/21/2023

More to be uncovered here, but it appears certain tax prep sites are sharing private info with Facebook about taxpayers, including income and refund amounts. Take a look....

The Facebook Pixel and Unauthorized Use and Disclosure of Tax Return and Tax Return Information Last week The Markup, an online investigative journalism site, published a report about the presenc

01/18/2023

Come on PA. Do better!

Pennsylvania was No. 44 — with Utah leading the pack and Alaska last at No. 50.

03/12/2022

Hi all, sorry we have not been posting very often.

One question we get more and more is "What is a taxable event when it comes to cryptocurrency?” Here they are:

Selling crypto for cash.

Trading one crypto for another.

Using crypto as payment.

Receiving airdropped tokens which were the result of a hard fork.

Staking or mining crypto.

Being paid in crypto.

It is really important to note that trading one crypto for another (ex. trading your Bitcoin for Ethereum) is a taxable event.

Simple example, if you have a fraction of a bitcoin that cost you $10, hold it for a bit, then later trade it for $20 worth of Ethereum, this is a $10 gain.

As you can imagine, the tracking of your activity can become very complicated. Be sure you are either using one of the large trading platforms which track this for you, or keeping detailed records of your activity.

04/24/2020

Hi all, for those business owners looking for info on the various loans. I have been sending emails on this to our clients for a couple of weeks, but should have thought to post them as well. See below.

Hi all,

I hope this email finds you healthy and still sane.

As always, please pardon poor grammar, typos, and the occasional sarcastic comment.

Feel free to call and send me questions. Answers I am commonly giving are:
Well, there has been an update that changed that.
Hopefully there is more guidance coming.
Who knows?
We are not piano movers (somewhere on the internet we are listed as piano movers. A couple times a year I get a call that starts, "I have a baby grand on the third floor..."
In all seriousness, feel free to reach out with any questions.

Share this email. If this info helps someone great.

If you see issues in my email (no grammar police!), let me know. I will send out corrections.

One last point before we dig in, do not take this email as the gospel. Everything around these loans, especially the PPP, seems to change daily. We will keep you updated, but use this email to give you some direction and understanding. This email is not intended to be the end all/be all on these programs.

Let's Begin

One big issue - there are many reports of fraudulent calls. Bad guys know there are a lot of business owners out there waiting to hear about a loan. They give a call, guess your bank, and say we just need to verify some info to complete the loan process. Be wary!!!

Lots of things happening, so let's start with a review:

There have been two loans we have been discussing quite a bit (see the attachment for a snapshot) :

Paycheck Protection Loans (PPP) - this is the loan that you must apply through a bank. It ran out of money, but is expected to be replenished soon. If you have not already applied, now is the time. If you have applied but did not make the first wave, ensure with your bank you are in line for the second wave. This loan can be used on payroll, mortgage obligations on business property (incurred before Feb 15), rent (agreements in effect before Feb 15), and utilities (service began before Feb 15).

Economic Injury Disaster Loans (EIDL) - this is the loan thru the SBA that offers an upfront grant of $1,000 per employee up to $10,000, whether you take the loan or not. Again, this ran out, but is to be replenished. If you have not applied, you should look at this. This loan can be used on fixed debts, payroll, accounts payable and other operating expenses that would have been paid if the disaster had not happened.
Updates on EIDL

We have had a number of clients receive their grant in the past four days. It should arrive via direct deposit into your account, with a description like "SBAD TREAS 310." You will not receive any info, so check your bank. It will be in increments of $1,000 based on how many employees you reported. If you do get a loan, you do not have to take it and still can keep the grant. Be aware, this grant will reduce your PPP loan forgiveness!! Not much to discuss here, beyond you can still apply. Again, this grant will directly reduce forgiveness on the PPP loan.

Updates on PPP

We have seen a number of clients receive this as well. Your bank will contact you, have you sign off, and you will receive your funds. The big question here is on the forgiveness portion. Here are the basics:

You have eight weeks that the potential forgiveness falls into, and this begins the day you receive your funds.

For the self employed (not S-corps), remember that 8/52 (8 weeks of the year) of your 2019 profits are included as payroll.

Whatever amount is forgiven, 75% has to be on payroll. The other 25% can be spent on interest on business mortgages on business property, rent payments on leases, and utility payments (all of these had to be in effect before Feb 15, 2020). This is the 75/25 rule. So, if you receive a $20,000 loan and only spend $7,500 on payroll, the most that can be forgiven is $10,000. Easy, right? No so fast! There are several other calculations that go into loan forgiveness.

FTE count - The amount of forgiveness can be reduced by the reduction in FTEs (Full Time Equivalents). So, if you had 10 employees and now have 9, you lose 10% of your forgiveness. The base time period is either Feb 15 thru June 30 2019 or Jan 1 thru Feb 29 2020. Seasonal employers must use the 2019 time period.

Wages levels - Also, you must maintain wage amounts. Wages cannot reduce more than 25%. If they do, then the loan forgiveness will be reduced proportionately.

After reading this you might be thinking, "Geez, there is no way this loan will work out for me. With all of these parameters I am only getting a loan I have to pay back." A couple of thoughts and silver linings:

First and foremost, there is an elimination of reduction waiver. If you get your FTEs and Wages back to even with the base time period by June 30, all is made ok and you will not have a reduction in potential forgiveness. The 75/25 rule still applies.

If you do want a loan, this loan has very good terms. It is a two year loan at only a 1% interest rate.

Even if you get partial forgiveness, that is free money. Pay the rest back ASAP if you did not want a loan. You can prepay this loan.

If I had to bet, I would bet that the parameters for forgiveness will be loosened up. NO GUARANTEES! Our political overlords (there's that sarcasm) are receiving a ton of pressure from all sides to do just that. As these quarantine measures continue to stretch out I find it hard to believe they can expect businesses to meet these demands. Most companies applied for this loan intending to receive the forgiveness, and that will be tough if these parameters are kept in place. Again, no guarantees anything will be changed.

Other Opportunities

There are a couple of credits/deferrals available for those who do not take the PPP.

Employee Retention Credit

Refundable tax credit of 50% of wages paid to employees to a max of $5,000 per employee. Is used to reduce employment tax deposits. You can have the refund advanced, however.
Must have experienced hardship in your business, defined as:
operations fully or partially suspended
a reduction of over 50% in quarterly receipts vs the same time period last year
There are some other caveats to this, but in general this should give you a good idea.

Payroll tax deferral

Please note this is not a credit, but a deferral to pay.
The deferral only applies to the employer's share of social security tax.
Amounts owed between March 27, 2020 and Dec 31, 2020 can instead be deposited half on Dec 31, 2021 and half on Dec 31, 2022.
Final Thoughts

First, I completely agree this is super confusing and rather frustrating. However, issues are to be expected when shoveling billions of dollars out in a matter of weeks. Hang in there!

Second, if you have not been minding your Ps and Qs when it comes to record keeping, consider this your come to Jesus moment. We do not know what the level of scrutiny will be when verifying information for forgiveness, but I would have to believe it will be high. If you have not been great with record keeping, today is your day to start.

Regards,

Dan

04/10/2020

Money on the way! We have received an update that stimulus checks "SHOULD" start going out this weekend!

Remember, the IRS will send a letter about the economic impact payment to taxpayers’last known address within 15 days after the payment is paid. The IRS said that the letter will provide information on how the payment was made and how to report any failure to receive the payment.

04/03/2020

Employers eligible for the new Employee Retention Credit include those experiencing a significant decline in gross receipts. The IRS has posted FAQs to help you figure out this new credit: www.irs.gov/coronavirus

03/25/2020

Attention: This is a bit speculative, but here are some things to at least consider with the stimulus package that should pass shortly.

What you should know about the Government Stimulus Checks!
Adults get $1,200 each, with an additional $500 per child. The payment is progressively reduced for higher-income earners, starting at $75,000 for single, or $150,000 for a joint return.
The IRS will look first at the 2019 tax return, if filed, otherwise the 2018 return will determine the amount of the check. Taxpayers who have not filed in either year will not receive a check.
Clearly, delinquent filers should file asap! Depending on the taxpayer situation, some taxpayers may wait to file 2019 so the IRS will refer to their 2018 return, others may want to file 2019 as their benchmark.
We do NOT know when the IRS will be looking at returns to determine the dollar amount! So act fast if you need to file.
We expect money to be sent out in about two weeks.
The IRS will send money via direct deposit to the bank account shown on the return. If banking information is not present, checks will be mailed to the address on the tax return. Prepare yourself for delays if you closed your bank account or moved to another address.

03/21/2020

Hello everyone, a quick update. It appears that they have updated the list of life sustaining businesses and accountants are in the green. We expect to be back in the office on Monday.

03/20/2020

Hi all, it appears that the IRS has just announced that the filing deadline, not just the payment date, for federal income tax returns will be July 15.