FFCRA Update: Mandated Leave Ending, Credits Extended
The FFCRA created new paid family and paid sick leave provisions for certain reasons related to COVID-19. The COVID-related Tax Relief Act of 2020 (CTRA) extends the tax credit portion of the FFCRA for employers that voluntarily offer paid leave, but not the mandatory leave portion, through March 31, 2021. FFCRA earnings and memo codes needed for employers to claim these tax credits will be available for use through March 31, 2021. IMPORTANT: Please note that eligible wage amount limits were not reset for 2021. FFCRA Wage Amount Limits Wages eligible for the tax credit are $5,110 for care required for the employee; $2,000 for care provided to others; and $10,000 in family leave if the employee is unable to work or telework. These amounts are not reset for 2021. Therefore, if such amounts were exhausted for an employee in 2020, any leave payments to that employee in 2021 do not qualify for the tax credit in 2021.
McVay's 1099 Proprietor system will track and send W-9 forms electronically and when prepared will send your 1099's to your vendors through our secure online portal electronically. McVay monthly clients will receive this service automatically. Businesses can sign up for this service. If you sign up for our 1099 processing service we will waive the set-up fee for 2020-2021. A $150.00 savings. Call Mike McVay, Tax Accountant @ 850-725-5696 Mike@MikeMcVay.com * www.PensacolaFLTax.com Trade or business reporting only. Report on Form 1099-MISC only when payments are made in the course of your trade or business. Personal payments are not reportable. You are engaged in a trade or business if you operate for gain or profit. However, nonprofit organizations are considered to be engaged in a trade or business and are subject to these reporting requirements. Other organizations subject to these reporting requirements include trusts of qualified pension or profit-sharing plans of employers, certain organizations exempt from tax under section 501(c) or (d), farmers' cooperatives that are exempt from tax under section 521, and widely held fixed investment trusts. Payments by federal, state, or local government agencies are also reportable. Don't open yourself up for huge I.R.S penalties for not filing your business 1099's for 2020. We can do it all for you!12/21/2020 McVay Business Services Q&ATaxes:
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12/19/2020 Why preparing your Individual taxes yourself and with individual tax software may land you an audit![]() Recent studies show that people that use individual tax software to prepare their own taxes could land you an I.R.S. Audit. Self-prepared returns are five time more likely to be targeted for an audit. The I.R.S has special coding that looks at your return and scores the return based on many factors, including but not limited to if the return was self-prepared, expenses are not an average ratio based on others in your geographical area or by business industry type. The IRS has a computer system called Discriminant Information Function (DIF) that's specifically designed to detect anomalies in tax returns. It scans every tax return the IRS receives. DIF looks for things like duplicate information—maybe two or more people claimed the same dependent—as well as deductions and credits that just don’t make sense. The computer compares each return to those of other taxpayers who earned approximately the same income. For example, most people who earn $40,000 a year don’t give $30,000 of that money to charity and claim a deduction for it, so DIF is pretty much guaranteed to throw a flag if you do. DIF's flag prompts review by human agents. Many of the current tax software use an array of questions to determine your ability to deduct or apply credits you may be intitled to. If one of these questions are answered wrong or by mistake, then your return could be incorrect when you complete it. Current law needs to be applied to your individual circumstances. These questions are broad and sometimes confusing. Sole proprietors and freelancers are entitled to a host of tax deductions that most other taxpayers don’t get to share, such as home office deductions, mileage deductions, and deductions for meals, travel, and entertainment. These expenses are tallied up on Schedule C and are deducted from your earnings to determine your taxable income from your business. DIF is on the lookout for deductions that are above the norm for various professions. It might be expected that you would spend 15% or so of your income on travel each year if you're an art dealer, because that's about what other art dealers spend. You can probably expect the IRS to take a closer look at your return if you claim 30%. Have you noticed those occupational codes that appear on your tax return? The IRS uses those to make sure that your travel expenditures are in line with others who report those same codes. You'll most likely get a second look from the IRS if you've claimed a lot more than the average for your profession. Likewise, if you use your car for business purposes and you want to deduct your expenses or mileage, the IRS doesn’t want to hear that 100% of your travel was solely for business purposes, especially if you have no other vehicle available for personal use. Presumably, you drove to do personal errands at some point. Mike McVay is a licensed Tax Professional with over 25 years experience preparing individual, sole-proprietor, partnership, LLC, S-Corp and C-Corp tax returns. McVay charges fees that will fit your budget and has many options when it comes to tax appointments. Remote tax appointment available in 2021. McVay says that many new clients have come to seek his professional tax preparation that used self-prepare tax software in the past. In some cases McVay has found additional money due to the taxpayer when reviewing past years returns. Many are not paying much more than the past years tax software cost to get their taxes done professionally. Mike McVay, Tax Accountant * 850-722-5696 * Mike@MikeMcVay.com 12/18/2020 Start Your 2021 Payroll off Right !
Don't get caught off guardIf you've been collecting unemployment benefits, you may not realize that that income, like your regular paycheck, isn't yours to keep in full. While unemployment benefits aren't subject to the payroll taxes that are used to fund Social Security, you have to pay federal taxes on that income. Generally, you'll be given the option to have 10% of your weekly benefit withheld for this purpose before you start collecting that money. Otherwise, you can collect your benefits in full and then make estimated quarterly tax payments to the IRS. But you can't sit back and assume that you won't face any tax liability on those benefits, because that's just not reality. And unfortunately, a lot of people are uninformed in this regard. In a recent survey, 38% of respondents said they didn't know that unemployment benefits were taxable in the first place. Furthermore, 61% of respondents have not withheld or set aside money from their unemployment pay for their 2020 income taxes. This year there is real potential for refund shock. A large number of people receiving unemployment benefits don't know that the benefits are taxable, that taxes are not automatically withheld, or that unemployment pay can impact other tax credits. This group, especially those accustomed to getting a refund, might be shocked to see that they actually owe taxes come April 15. This could be due to not withholding tax from unemployment pay. If you're collecting unemployment benefits and don't want to deal with a tax headache later on, try having a portion of that income withheld for federal tax purposes -- even if you didn't do so initially. (Some states will allow you to change your tax withholding once you begin collecting benefits.) And if you've been collecting benefits for the better part of the year and haven't paid a dime of taxes on that money, plan to make an estimated quarterly payment to the IRS by Jan. 15. If you let that tax debt sit, thinking you'll just repay it when you go to file your 2020 return in April 2021, you'll risk racking up interest and penalties on that unpaid sum. Remember, our tax system works on a pay-as-you-go basis. The IRS wants its share of your unemployment income as you collect it. The better you prepare now, the less likely you'll be to encounter a shock when April rolls around. Mike McVay, Tax Accountant can help you navigate your way in the unpresented time. 2020 Taxes could be more confusing and hold many unexpected surprises. 850-725-5696 * Mike@MikeMcVay.com.
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