Paycheck Protection Program: Current FAQ For Small Business Owners About Loan Forgiveness

 

up close picture of payment protection program

The financial environment and the current state of the economy are ever-changing. For small business owners navigating these difficult waters, we understand the hardships you may have come across this year. With new rules, requirements, protocols, and processes that change almost every day, we know there may be some lingering questions regarding the Paycheck Protection Program which was enacted by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the related loan forgiveness process.

 

As of August 11th, 2020, the Small Business Administration alongside the U.S. Treasury issued new guidance through Frequently Asked Questions (FAQs) aimed at helping business owners who participated in the Paycheck Protection Program. These FAQs discuss simplified PPP loan forgiveness guidelines and help borrowers navigate maximum loan forgiveness.

 

General Loan Forgiveness

Small business owners have been dealt a lot this year, from storefront closings, layoffs, and the paycheck protection program. With the need for clarity on PPP loan forgiveness guidelines, we’re reporting the key highlights of the ten pages of Treasury FAQs below.

 

  • Self-employed individuals, sole proprietors, and independent contractors with no employees at the time of the PPP loan application and who did not include any employee’s salaries in the total of average monthly payroll in the application form automatically qualify to use Form 3508EZ or lender equivalent.
  • The FAQ addresses a common question regarding making payments while awaiting forgiveness. The answer is no. If the borrower submits an application within 10 months of the end of the Covered Period, the borrower is not required to make any payments until the loan amount is sent to the lender by the SBA. If the loan is fully forgiven, the borrower will not be responsible for any payments. If only part of the loan is forgiven, the remaining balance must be paid in full by the borrower on or before the maturity date of the loan.
  • The Covered Period refers to the 24-week period beginning on the date the PPP loan payment date or if the borrower received the loan before June 5, 2020, the borrower could choose an alternate 8-week period.

Loan Forgiveness Payroll Costs

There are various questions surrounding payroll costs and we’re sharing some of the most important elements of Loan Forgiveness Payroll Costs FAQ:

 

  • Payroll costs that were incurred during the Covered Period or the Alternative Payroll Covered Period but paid after the Covered Period or the Alternative Payroll Covered Period are eligible for loan forgiveness if the payroll costs are paid on or before the next regular payroll date after the Covered Period or Alternative Payroll Covered Period.
  • Borrowers must calculate payroll costs for partial pay periods.
  • When computing compensation, borrowers need to use the gross amount before deductions and not the net amount paid to the employees.
  • Payroll costs include all forms of compensation paid to the employees, including commissions, hazard pay, and tips.
  • Expenses for employee group health care benefits that are paid by the employer can be considered payroll costs that are eligible for loan forgiveness. Expenses paid by the employee are not included in payroll costs.
  • Employer contributions for retirement benefits that are paid or incurred by the borrower during the Covered Period or Alternative Payroll Covered Period qualify as payroll costs and are eligible for loan forgiveness.

 

Calculating Non-Payroll Costs

Non-payroll costs include rent, utilities, and interest on loans incurred before the Covered Period, yet paid during, are eligible as part of the loan forgiveness. Other key points to consider include:

 

  • Non-payroll costs incurred during the Covered Period and paid on or before the next regular billing date, even if this date is after the Covered Period are eligible for forgiveness.
  • Payments made on recently renewed leases on payments on refinanced mortgage loans are eligible for loan forgiveness if the original lease or mortgage existed before February 15th, 2020, and the payments are made following the renewed lease during the Covered Period.
  • Another utility payment eligible for forgiveness includes a “payment for a service for the distribution of . . . transportation” under the CARES Act. This refers to transportation utility fees assessed by state and local governments.

 

Reduction in Work or Wages

Layoffs and the inability to rehire or hire new employees has brought about many complicated issues within the PPP program. Recent regulations have changed and the FAQ states:

 

  • A borrower may exclude any reduction in FTE (full-time equivalent) employees if the borrower can document the inability to rehire individuals employed on February 15th, 2020, and similarly qualified individuals for unfilled positions on or before December 31st, 2020. Borrowers are required to inform the unemployment insurance office of any rejected rehires within 30 days of the rejection.
  • Seasonal employers who use a 12-week period between May 1st, 2019, and September 15th, 2019 to calculate their maximum PPP loan amount must use the same 12-week period as the reference period for the calculation of any reduction in the amount of forgiveness.
  • Certain pay reductions that arose for employees during the Covered Period or the Alternative Payroll Covered Period may reduce the amount of loan forgiveness.

 

If you need assistance with the paycheck protection program or have further questions about the small business loan forgiveness, do not hesitate to contact our team of CPAs. The professionals at SD Associates are here to offer you and your small business the best financial services possible to help you successfully navigate these difficult and uncertain times. Call us today at (215) 517-5600 or contact us here.

7 Signs You Should Invest in a Bookkeeping Service

As a small business owner, you probably wear many hats within your business. You may be preparing invoices one day and dealing with the bank the next. As an entrepreneur, it only makes sense that you want to keep a watchful eye on all the activities of your business. In the beginning, this can be quite resourceful and can help minimize costs. However, over time, this can lead to deeper problems for your company. One of the main culprits, is poor bookkeeping services. When it comes to bookkeeping services for your small business, it’s best to leave this job to the professionals. Whether you’re looking for long-term success, internal growth, or a more sustained profit, the experts at SD Associates are sharing why bookkeepers are essential and eight signs you should invest in a bookkeeping service.

 

Books are outdated

Your company’s general ledger should always be kept up to date. Outdated books and records can equal bad news for your business. You’ll have trouble understanding your cash flow needs and as well as not maintaining a firm handle on your finances. So, if you have paperwork scattered across your dinner table and shoeboxes filled with untracked receipts, it’s time to call in a professional to help you better keep track of your business transactions.

 

Set of books has never been maintained before

You’re an entrepreneur, which probably means you may have not gone to school for finance, and that’s okay! While you may prefer to handle most aspects of your business yourself, if you’ve never tackled bookkeeping before, now is not the time to start. Running a business and trying to learn a whole new field of study can cause some major bumps in the road that will end up costing you more than it saves you.

 

Just too busy

As your business grows, so does your list of responsibilities. Your DIY approach to your bookkeeping will begin to become unsuitable. If you can’t find the time to get everything done, it’s time to reprioritize and outsource your bookkeeping services to help your business continue to grow.

 

Bills are being paid late

With the paperwork piling up and your lack of time, bills are bound to fall through the cracks. Late payments not only make you look unprofessional, but it can also tarnish your business’s reputation. Professional bookkeeping services include proper time management to ensure you never miss a beat (or a bill).

 

Missed out on tax deductions

Just as bills can fall through the cracks, so can tax deductions. Employing a professional bookkeeper can make sure your many business expenses such as digital downloads, phone bills, and online subscriptions never go undocumented. These deductibles can be used to offset the total income owned come tax time each year.

 

Unpredictable cash flow

Have you ever scrambled at the end of the month to cover your expenses due to a lack of cash? While this can happen because of several different scenarios, the bottom line is you have a cash flow problem. When you hire a professional to perform your bookkeeping services, they can track your accounts payable and receivable, ensuring you are always on top of your cash flow needs.

 

Bookkeeping software being used as a replacement

You should never completely replace your general ledger with a bookkeeping software service. While smart tools like QuickBooks can make your process more efficient and streamlined, a computer program can never substitute for a true professional.

 

If you’re ready to grow your business, increase profits, and streamline productivity, it’s time to consider hiring a professional bookkeeper. As your business grows, your DIY approach to managing your finances will become counterproductive. At SD Associates, we can assist you in managing your books and day-to-day financial transactions, so you have more time to make sound business decisions without the added stress of bookkeeping. Call us today at (215) 517-5600 or contact us here.

 

4 Important Things to Know Before the July 15th Tax Deadline

July 15th Tax DeadlineAs part of the CARES Act enacted earlier in the year, the April 15th Tax deadline has been pushed back to July 15th. Unfortunately, there’s more to the story than just pushing the deadline back three months. For some people, this actuality might not make much of a difference in their day to day lives, but for others, July 15th could be a financial nightmare. As with most years, taxpayers who are unable to file this year’s deadline can file a request for extension to October 15, 2020. Understandably, the deadline to file the request itself was moved to July 15. It should be noted that the extension to October 15th is only an extension to file and does not extend the time to pay federal or state income taxes beyond July 15, 2020. The CPA’s at SD Associates are here to help you with tax preparation and are sharing four important things you should know before the July 15th tax deadline.

 

Everything That’s Due on July 15th

In addition to postponing Tax Deadline, the IRS also postponed the first two 2020 quarterly estimated tax payments. The first two 2020 quarterly payments are normally due by April 15th and June 15th. These were both extended to July 15th as well. These payments affect independent contractors and other self-employed individuals. Because of the postponement, it’s possible that these individuals may owe half of their estimated taxes in addition to any taxes owed from their 2019 tax return. This could be a disaster for individuals who have been affected by the economic shutdown or hardships due to the pandemic.

 

How to Avoid the Penalty

Anyone with taxable income is required to pay estimated taxes, even if you’re an independent contractor, self-employed or a retiree. Individuals who are self-employed or are a contractor are required to pay quarterly taxes in April, June, September, and January. To avoid IRS penalties, you must owe less than $1,000 in taxes for the year and pay at least 90% of taxes owed in 2020 or 100% of taxes you paid for in 2019, whichever amount is smaller. If you don’t pay enough, IRS Form 2210 can help you see how much you owe in penalties for underpaying. It’s too early to know whether the penalties will be waived, or the safe-harbor percentages will be lowered in 2020, but sources are suggesting it will “probably be considered.”

 

Stimulus Payments and the PPP Loan Program

What is required to file taxes in 2020? Stimulus checks, loans from the PPP and unemployment benefits will all need to be considered when compiling required documents, which could contribute to further complications. For individuals who received the COVID-19 stimulus check, many wonder if this payment will be treated as taxable income. If so, it needs to be considered for estimated taxes. While the IRS has stated that “the payment is not included in gross income and, therefore, taxpayers will not pay tax on it,” you will still need to report it when you file your 2020 tax return. Experts are advising that it shouldn’t affect the amount of taxes owed or the amount you receive from your refund next year.

 

As for small businesses who received funding from the Payment Protection Program, you may be wondering what is required to file taxes for your business in 2020. In Notice 2020-32, provided by the IRS, no tax deductions are permitted for expenses that are funded by the PPP loan. This can affect the estimated tax calculation for individuals who pass their income through an S Corporation, LLC, or sole proprietorship. This means that your 2020 taxable income could be potentially higher.

 

Unemployment Benefits

Unemployment claims have surpassed 40 million since the start of the pandemic. If you are one of the millions of individuals who have filed for benefits, chances are this is the first time in your life you’ve ever had to do so. You’re not alone, and some confusion has arisen about the tax treatment. Unemployment benefits are taxable by the IRS and states that have income tax. Because of this, you will need to make estimated-tax payments on this income unless you have elected to have federal income taxes withheld using Form W-4V.

 

Our environment is ever changing in the wake of COVID-19. At SD Associates, we want you to know that we are here for you, providing everything you need to file your taxes this year. From consultation services to our helpful tax preparation services, we will be here with you every step of the way if you need help navigating these uncertain waters. Call us today (215) 517-5600 or contact us here.

Round Two of Payment Protection Program: Here’s What You Need to Know

How To Apply For Small Business Loan Corona Virus
Sticky Note With Handwritten “Apply”

Small businesses across the United States have all been impacted in some way by coronavirus (COVID-19) pandemic. Forced closures, reduced hours and layoffs have affected employees and employers everywhere. In an attempt to provide some relief and help for small businesses. The CARES Act was enacted to provide much needed help to individuals, business and others in response the economic distress. One of the programs, is called the Paycheck Protection Program. The loan program will allow businesses suffering due to the coronavirus outbreak to borrow money for a variety of qualified costs related to employee compensation and benefits. The CARES Act calls for a portion of the above-mentioned paycheck protection loans to be forgiven on a tax-free basis.

The initial round, in late March 2020 of funding, provided nearly $350 billion guaranteed paycheck protection loans for small businesses. However, these funds ran out extremely quickly. With a passage of the paycheck protection program and health care enhancement act which was recently signed provides additional relief by providing an additional $310 billion more in funding. Here’s additional information you need to know about the second funding of the coronavirus relief loans for small businesses.

Assistance for Smaller Businesses
Of the $310 billion, $60 billion will be specifically set aside for smaller banks and credit unions. The law also expands the Economic Injury Disaster Loan (EIDL) program by $60 billion: $10 billion for grants and $50 billion for loans. This is welcome news for businesses that desperately need funding to weather the economic uncertainty created by the COVID-19 pandemic. The legislation greatly expands the number of businesses, including individuals who operate as a sole proprietor, or independent contractor (including non-profits). Each business can qualify for a loan to pay employees and other payroll costs and cover other non-payroll expenses like mortgage interest, rent and lease payments as well as utilities. All loans granted will have a 1% fixed interest rate and will be 100% forgiven if the money is used appropriately and within the guidelines set by the SBA.

How Much Money Can I Receive?
The maximum amount you can receive is your businesses’ monthly average payroll cost in 2019, multiplied by 2.5 with a maximum of up to $10 million. If you are a newer business, existing after June 30th, 2019, the SBA lender will look at costs from January and February 2020. Seasonal employers’ costs will be calculated differently, using a 12-week period beginning in either February or March 2019 and ending June 30th, 2019.

In an effort to provide the necessary help for small businesses, the goal of these government issued loans is to keep people employed during the span of the pandemic. The loans will be seen as grants from the government as long as the requirements mentioned above are met. The forgivenesses will be reduced, and businesses will be expected to repay the loan if employee counts and employee salaries are reduced by more than 25% under the Protection Payment Program. If you rehire or restore decreased salaries before June 30th, 2020 you will not be penalized or expected to pay back the loan. Adequate record keeping to prove your expenses will be required and your business will need to have spent at a minimum 75% of your loan on payroll to qualify for forgiveness.

We understand that our environment is constantly changing due to COVID-19 and at SD Associates in Elkins Park, PA, we want you to know that we are here for you. From questions about the Payment Protection Program for your small business to financial guidance and payroll assistance, our accountants are here to help you navigate these constantly changing waters. Contact us today for all your needs.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) is Enacted into Law

On March 25, 2020, the Senate unanimously passed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CARES Act provides much needed stimulus to individuals, businesses, and hospitals in response to the economic distress caused by the coronavirus (COVID-19) pandemic. On March 27, 2020, the House of Representatives passed the CARES Act by voice vote. President Trump signed the bill into law that same day.

Here are some of the major takeaways for the CARES Act:

 

Paycheck Protection Program
The Paycheck Protection Loan Program covers the period February 15, 2020 through June 30, 2020.  The loan program will allow businesses suffering due to the coronavirus outbreak to borrow money for a variety of qualified costs related to employee compensation and benefits, including payroll costs, mortgage interest obligations, rent, continuation of health care benefits, employee compensation (of those making less than $100K), and utilities incurred before the covered period.

The legislation greatly expands the number of businesses, including individuals who operate as a sole proprietor, or independent contractor (including non-profits). The loans are fully guaranteed by the federal government  through December 31, 2020 and are generally limited to the lessor of the average monthly payroll costs for the 1 year period ending on the date the loan was made ( an alternative calculation is available for seasonal employers) multiplied by 2.5 or up to $10 million.

The loans will have a maximum maturity of 10 years and in interest rate not to exceed 4%. In addition, the standard fees imposed under section 7 of the Small Business Act are waived, and no personal guarantee is required by the business  owner.

The CARES Act calls for a portion of the above-mentioned paycheck protection loans to be forgiven on a tax-free basis.   Amounts to be considered for forgiveness  is the sum of payments that were made by the borrower that are considered qualified costs, during the 8-week period following the date of the loan. The loan forgiveness cannot exceed the principal.

Please find this link to the US Chamber of Commerce and its guide and checklist.

https://www.uschamber.com/sites/default/files/023595_comm_corona_virus_smallbiz_loan_final_revised.pdf

 

Emergency Government Disaster Loan and Grant
The CARES Act  expanded the Economic Injury Disaster Loans to include businesses under 500 employees but also sole proprietors.  Loans under $200,000 made under this program before December 31, 2020 will have no personal guarantees. This permits a disaster loan to be taken out between January 31, 2020 and the date on which a paycheck protection loan is available for reasons “other than payroll costs”.

 

Individual Stimulus Payments
The individual stimulus payment or “2020 recovery rebate for individuals” , the government will start to distribute  checks directly to taxpayers.  “Eligible individuals” can benefit from a tax credit equal to the sum of  $1,200 for single filers and $2,400 for those filing a joint return plus an amount equal to $500 multiplied by the number of qualifying children. However, the aforementioned tax credits will be “phased-out” by $5 dollars of your payment for every $100 your adjusted gross income (AGI) exceeds the following thresholds: $150,000 for joint-filers, $112,500 for heads of household, and $75,000 for single filers.

The IRS will determine the eligibility by reviewing your 2019 return, or if not available they will use your 2018 return to determine your AGI. If you weren’t required  to filed for example, you collect social security and did not have enough taxable income to necessitate the filing of a return, the IRS will review your social security benefit statement. The payments will be made between now and December 31, 2020 and in many cases will be made electronically if you have provided direct deposit information on either your 2018 or 2019 returns. It’s important to note that these payments received act as an advance payment of a credit towards your 2020 taxes and will be recalculated when that return is filed in 2021.

 

Distributions from Retirement funds
Coronavirus-related distributions (i.e. those who are directly afflicted with the disease, spouse or dependent  or who experiences adverse financial consequences as a result of being quarantined, laid off or being unable to work due to lack of child care) made from both eligible employer sponsored retirement plans and individual retirement accounts  are exempt from the 10% early distribution penalty tax. These distributions can be made up to $100,000. These distributions are subject to regular income tax, although it may be spread over three years.

The CARES Act temporarily waives the minimum distribution requirements for qualified plans and other individual retirements account (IRA).  This applies for all required minimum distributions that otherwise would have been required to be made in 2020.

 

Tax Treatment of Charitable Donation
Beginning in 2020, the  CARES Act allows taxpayers to take an “above-the-line” deduction for qualified charitable contributions of up to $300 in computing their adjusted gross income.  This deduction is only available to a taxpayer who does not itemize their deductions such as mortgage interest, real estate taxes and medical expenses.

 

Employer Payment of Student Loan Debt
The CARES Act permits an employer to pay up to $5,250 in 2020 of an employee’s student loan or other qualified educational expenses (master’s program), with the payments being tax-free to the employee.  To the extent that the employee’s student loan is paid, the employee cannot deduct the interest on the related debt under Section 221.

 

Unemployment Compensation
The CARES Act extends unemployment insurance to workers who are not normally eligible for such benefits at the state level so long as their unemployment is connected to COVID-19. Those who will now be eligible include part-time employees, independent contractors, the self-employed, freelancers and gig workers. In addition, the federal government will provide $600/week to individuals who are eligible for unemployment insurance for up to four months, through July 31, 2020, which will complement existing state unemployment benefits. The CARES Act also extends state-level unemployment insurance by an additional 13 weeks (from 26 to 39 weeks in Pennsylvania) through December 31, 2020.

 

Qualified Improvement Property Fix
As part of the CARES Act, it corrects a much-needed technical correction in the Tax Cuts Act and Jobs Act of 2017 (TCJA), whereby changing the life on certain “qualified improvement property” (QIP). The depreciation life on QIP property was reduced from 39 years to 15 years and thus enables companies to have 100% bonus depreciation  being available for all assets with lives less than 20 years. This change is retroactive to January 1, 2018, thus, enabling taxpayers to file amended returns for the benefit of this accelerated depreciation.

 

Delay of Payment of Employer Payroll Taxes
The CARES Act will allow for most employers to defer paying their share of applicable employment taxes from the time the CARES Act is signed into law through December 31, 2020. Half of this deferred amount would be due on December 31, 2021 and the other half by December 31, 2022 under Section 1109.

 

Changes to Net Operating  Loss Rules
The CARES Act temporarily reversed the TCJA, whereas post 2017 net operating losses were disallowed to be carried back and provided for an indefinite carryforward period.  The CARES Act permits losses from years 2018, 2019 and 2020 to be carried back for a period of 5 years. As  was the previous case, a taxpayer can forgo the carryback and instead elect to carry the loss forward.

As a result, the taxpayers can file an amended return to claim a refund.

 

Limitation on Business Interest
The CARES Act temporarily increases the amount of interest expense businesses are allowed to deduct on their tax returns, by increasing the 30-percent limitation of adjusted taxable income (as imposed under the Tax Cuts and Jobs Act) to 50 percent of adjusted taxable income (with adjustments) for 2019 and 2020. A partnership does not get to use the 50% limited adjusted taxable income, instead and disallowed interest is passed out to the partners and is suspended at the partner level under normal rules.  In 2020, 50% of the suspended interest will be permitted to be freed up and will be fully deductible. The remainder is suspended until the partnership allocates excess taxable income or excess interest income to the partner.

Understanding the Coronavirus (COVID-19) and Your Taxes

The novel coronavirus, COVID-19, is fast making its way across the United States. The global health pandemic has been impacting major corporations to local businesses and everyone in between. In response to everyone feeling the effects of COVID-19, the IRS, United States Treasury and the federal government have recently announced several changes that could impact you and your business. You may have heard about the 90-day tax extension plan, but are not sure who—or what—that covers. The experts at SD Associates are sharing everything you need to know about the tax deadline extension and are here to help you navigate the changes with ease. The IRS will continue to monitor issues related to the COVID-19 virus, and updated information will be posted on a special coronavirus page on IRS.gov.

As of March 20th, 2020, the Treasury Department announced that Tax Day this year will now fall on July 15th, 2020.
Normally, all tax returns and anything you owe are due by April 15th, 2020. With this new extension, you now have an additional 90 days to file and pay your 2019 taxes. You will not need to file an extension to file past April 15th, 2020. The new July 15th, 2020 tax deadline is applied automatically to all taxpayers. If you need more time to file, you can request an extension to October 15th, 2020. The IRS urges taxpayers who are due a refund to file as soon as possible. Most tax refunds are still being issued within 21 days.

The deadline for taxpayers who make quarterly income tax payments (self-employed) is also extended to July 15th, 2020.
This means that estimated payments that were due for the first quarter of 2020 are due on July 15th, 2020.

Pennsylvania’s state taxes are also extended.
Many states are adopting the federal extension of July 15th, 2020 and Pennsylvania is included.

If you owe taxes for 2019, you can delay your payment to the IRS until the extension date.
You will not incur any penalties or interests until July 15th, 2020.

Who is eligible for the extension deadline?
Individuals who use Form 1040, corporations who use Form 1120, partnership, associations and trusts and states who use Form 1041. While uncommon, fiscal year partnerships, associations and companies that also recognized the April 15th, 2020 filing deadline are also eligible for the extension.

If you have a tax payment and already filed and scheduled your payment, you will need to reschedule.
If you have filed and scheduled your payment for April 15th, 2020, you will need to cancel your payment and reschedule it. All changes to payments must be completed two days prior to the extension deadline of July 15th, 2020.

Families First Coronavirus Response Act
This legislation provides additional relief for individuals, self-employed and businesses impacted by COVID-19 including emergency and paid sick leave.

During this extension period, SD Associates in Elkins Park, P.A., is here to help you every step of the way and answer all of your questions. We’re all navigating uncertain waters together, and that’s why we want to provide you with the most up-to-date-information available. We understand how important your refund is now more than ever and we’re here to help you maximize your tax return. Contact us today for all your tax needs.

Tax Prep Checklist: What to Gather Before Filing

Tax season is upon us, and the experts at SD Associates want you to be prepared. We recognize this task can oftentimes be put off until the last minute, but sooner or later, that April 15th deadline will be here. To make your filing process go more quickly and smoothly this year, we’ve put together a checklist of necessary files and forms to gather before you begin.  Remember, a little advanced preparation can save you time, money, and less headaches in the long run.

Personal Information

Starting with the most obvious information, the IRS needs to know who’s filing and who is covered in your tax return. This information includes:

  • Social security numbers for yourself, spouse and all dependents.
  • Dates of birth for everyone listed on your return.
  • Did you move during the tax year or subsequent to year end?
  • Did you get married during the tax year?

Information About Your Income and Adjustments to Your Income

Gather all necessary documents that show where you received your income from in the past year, including investments. 

  • W-2 forms for you and your spouse.
  • Interest and dividend income for 1099’s.
  • Broker statements that include all sales of stock or other investment. Review these statements to ensure the cost basis is included on all sales.
  • Alimony received or paid and any unemployment compensation.
  • Other miscellaneous income, records including jury duty, gambling winnings, lottery payouts, etc.
  • Retirement income (form 1099R) and Social Security income (form SSA).
  • All self-employment business income and expenses (schedule C) or have rental properties, the income and related expenses (Schedule E).
  • All K’1 income from partnerships, trusts and S-corporations. 

Deductions 

The government offers several deductions and credits to help reduce your taxable income, which means more money in your pocket. Some common deductions include:

  • Childcare costs (providers name, address, EIN and amounts paid for each dependent).
  • Foreign taxes paid.
  • Medical bills ( health insurance premiums and co-pays and other medical costs).
  • Educational expenses (form 1098 T from the college or university).
  • Real Estate taxes paid.
  • Home mortgage interest (form 1098 from your mortgage company.
  • Charitable donations (separated into cash and non-cash contributions to charities).
  • Student loan interest paid.

Taxes You’ve Already Paid

Having this information available can prohibit you from overpaying when it comes time to file. This can include documents such as:

  • State and local incomes taxes paid
  • Estimated tax payments made for Federal, state or local 
  • Real estate taxes paid both personal and for rental properties

Our checklist covers some of the common documents and forms you will need to file your return. Taxes are different for everyone, so make sure you take the time to learn and gather all the correct documents unique to your situation. Please review your prior year return to make sure you don’t miss any income or expenses that might have been listed on the last years return.

Tax season can be confusing, and you don’t have to go through it alone. Our tax advisors at SD Associates are here to help. Whether you need help creating a financial strategy plan for your business, an easy way to maximize your tax deductions or you just need assistance preparing the necessary documents, contact us today for accurate and timely tax returns that can help you and your business save money.

2020 Tax Filing Season


2020 tax filing season promises slightly smoother than 2019.  There are still a number of changes that taxpayers should be aware of.

Tax Forms

Form 1040SR: U.S. Tax Return for Seniors
Form 1040SR was created for taxpayers age 65 and older. While these forms are similar to the standard Form 1040, the fonts are larger, and it includes a chart of the standard deduction and additional standard deduction amounts for taxpayers over 65 years old or blind.

Form 1040: Revised and Redesigned
Form 1040 has been updated for 2019 there are now three schedules instead of the six schedule that appeared in 2018. Some of the forms have been combined for ease of reading. The signature line was moved to the end.

Notable Tax Changes

Alimony is No Longer Deductible.
Alimony is no longer deductible to the payer and is no longer taxable to the payee for separation, divorce agreements or decrees that were effective on or after January 1, 2019.

Eliminated Health Insurance Mandate Penalty.
The IRS has eliminated the penalty for failing to obtain health insurance coverage under the Affordable Care Act. However, some states have their own health insurance mandates requiring coverage. To date, California, the District of Columbia, Massachusetts, New Jersey, Rhode Island, and Vermont have passed state individual mandates.

Medical Expense Deduction Threshold Remains at 7.5 Percent.
The medical expense deduction threshold was extended to 7.5 percent threshold through 2020 (including tax year 2019).

Standard Deductions.
The standard tax deduction is $12,200 for single filers and $24,400 for married couples filing jointly and $18,350 for head of household. If you’re 65 or older and married, you may increase your standard deduction by $1,300; as a single filer 65 or older, you increase will be $1,650.

10 Issues Taxpayers Should be Paying Attention to This Season

As Mark Twain once famously stated, “the secret to getting ahead is getting started.” This quote is applicable across all aspects of life, with the 2020 tax season being no exception. Whether you are unaware of the new changes being made to your next tax return or need a brief refresher on the details, the accounting & financial experts at SD Associates are shedding some light on the most common tax problems you could be facing in 2020:

1: Filing Late Penalties

Statistics show that 1 in 5 people file their taxes either after the due date or neglect to file altogether. While it’s common knowledge that avoiding to file will result in consequences with the IRS, there are expected to be just as many people making this mistake—if not more – this upcoming season. Avoid being penalized for filing late by getting ahead with our experienced accountants.

2: Retirement Contribution Limits Change

The new tax season brings new changes to the retirement contribution limits. Individuals are able to put away more money in their tax-advantaged retirement accounts, possibly decreasing their tax liability. Tax year 2020 contribution limits are as follows:

  • The IRS has raised the employee contribution limit for 401(k), 403(b) and most 457 plans to $19,500, up from $19,000 in 2019.
  • If you are 50 or older, you can put away another $6,500 in your workplace retirement plan. That’s up from $6,000 in 2019.
  • The contribution limit for individual retirement accounts, whether traditional or Roth, is holding steady at $6,000, plus another $1,000 for those that are 50 and over.

3: Estate and Gift Taxes

For 2020, the lifetime gift and estate tax exemption will be $11.58 million per individual, up from $11.4 million in 2019.

The annual gift exclusion (the amount you can give to any other person without it counting against your lifetime exemption) will hold steady at $15,000 for 2020.

 4: Alterations to Health Savings Account (HSA) Limit

These accounts allow you to put away pretax or tax-deductible money and have it grow free of taxes. You can take a tax-free withdrawal to cover qualified necessary health expenses.

 In 2020, you can save up to $3,550 if you’re an individual with self-only health coverage. That’s up from $3,500 in 2019. Account holders with family plans can save up to $7,100 in this account (up from $7,000 in 2019).

5: Threshold of Medical Expenses Deduction

In 2017 and 2018, the threshold for medical expense deductions was decreased to 7.5% by the Affordable Care Act. Effective January 1, 2019, the threshold will increase to 10%. For those taxpayers that itemize their deductions, this will make it a bit more difficult for them to qualify for the medical expense deduction, even though it may not seem like a drastic increase.

6: Confusion Over Alimony Deduction

The Tax Cuts and Job Act eliminates the alimony deduction this year, if  made under a divorce or separation agreement executed after Dec. 31, 2018. Being unaware of this change can cost people up to thousands of dollars, so taxpayers should keep an eye out for this change and/or speak with their accountant sooner rather than later.

7: No IRS Penalty for the Individual Mandate

Starting with the 2019 tax year and into 2020, the Shared Responsibility Payment no longer applies.

Some states have their own individual health insurance mandate, requiring you to have qualifying health coverage or pay a fee with your state taxes for the 2019 plan year. If you live in a state that requires you to have health coverage and you don’t have coverage, you’ll be charged a fee. Please consult with us if you have any questions or concerns.

8: Failure to Report All Income

The rapid rise in “under the table” jobs means there are more people that have been slipping by with unreported income. Most people receive penalties right off the bat, while some will be faced with penalties later on. As a resource, our website is equipped with financial calculators to help you understand your income breakdown to avoid leaving anything out.

9: No Quarterly Estimated Taxes

As our society fosters more freelancers and independent contractors, taxes must be paid as you earn or receive income during the year, through estimated tax payments. If you don’t pay enough tax through withholding and estimated tax payments, you may be charged a penalty. You also may be charged a penalty if your estimated tax payments are late, even if you are due a refund when you file your tax return.

10: Underpaying Estimated Tax Payments

For a beginner or inexperienced freelancer or independent contractor, making sure that you report correct amounts is a necessity this tax season. Some advice to avoid underpaying your estimates includes being organized and overestimating the totals rather than underestimating. It’s recommended to allocate 22-25% of each payment you receive into a separate savings account in case of any estimated tax payments that must be made during the year.

Don’t fall victim to penalties or changes this upcoming tax season. SD Associates is here to support you with a variety of tax services to keep you focused on your business and less concerned about the little things in between. Contact us today for a successful tax season.

If you’re looking for assistance, our highly qualified shareholders at SD Associates offer consulting services that will steer you down the correct path towards a successful & uneventful tax season.

Tax Strategy: What’s New for the 2019 Tax Returns

A word to the wise: It’s never too early to start preparing for something! Whether it be out of excitement or fear of procrastinating, getting ahead of the game in most things in life makes everything a lot easier down the line, and preparing for the new tax season is no exception. Because the upcoming tax season is expected to bring some changes, the tax experts at SD Associates are here to fill you in, so you can know exactly what to expect for your 2019 tax filing.

New Year, New Forms
There will be at least three new forms making their debut in the 2019 tax season: the 1040-SR, 8995 and 8995-A. Here’s a quick breakdown of each:

  • 1040-SR: Equipped with a standard deductions chart, this form is meant to be easier to read and easier to navigate for seniors.
  • 8995: This form is a simplified computation of Qualified Business Income (QBI), Real Estate Investment Trust (REIT) dividends or have earned income from a Publicly Traded Partnership (PTP).
  • 8995-A: This form is for taxpayers who  have Qualified Business Income (QBI) from a Specified Service Trade of Business, Real Estate Investment Trust (REIT) dividends or have earned income from a Publicly Traded Partnership (PTP).

Whether we like it or not, taxes are something we all must deal with. If you’re a business owner who doesn’t have time learn the tax code, or deal with annual changes in the tax code, this may be the year to start utilizing the services from a tax professional.

NO more Affordable Care Act Penalties
Congress have thus far been unsuccessful in repealing the Affordable Care Act, the Tax Cuts and Jobs Act did eliminate the individual mandate — aka the “Obamacare penalty.” This is the penalty you pay for not having health insurance.

This penalty is only repealed in tax years 2019 and beyond. If you didn’t maintain qualifying health coverage throughout 2018, you still may face the penalty when you file your tax return in 2019.

Changes to the 1040 Form
Differing from 2018, this new season’s 1040 form has changed slightly to make things a bit easier. The IRS has combined schedules 2 and 4, and 3 and 5, to reduce the number of stand- alone schedules.

Sad Goodbyes to This Tax Break
The 2019 season is giving us something to “wine” about. The tax breaks on beer, wine and distilled spirits (a result from the Tax Cut and Jobs Act), are set to expire at the end of this fiscal year. This tax break—which once allowed small distilleries to fairly compete with wine and beer industries—will now cause owners, as well as customers, to pay more for alcohol. If you’re concerned about how the expiration of other tax breaks might impact your personal budget or business, SD Associates can help you estimate your taxes in preparation for your 2019 tax filing.

No matter what tax changes may occur from season to season, you can always count on the team at SD Associates in Elkins Park, PA to provide you with the most attentive, high-quality service. Contact us today to schedule an appointment with one of our tax experts!