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Tax Law Updates! (American Rescue Plan)

On March 11, 2021, the president signed into law the American Rescue Plan Act of 2021.  This is another massive COVID relief legislation that has significant tax changes to both 2020 (retroactively) and 2021.

Below are the highlights that are most likely to affect many of our clients.  This is not comprehensive coverage of the bill, or even the tax aspects of the bill, but the most important items (from my point of view) to bring your attention to at this time.

 

2020 Retroactive Tax Law Changes

There are two significant changes that are retroactive to 2020:

  • Up to $10,200 in unemployment compensation per person is non-taxable on tax returns with Adjusted Gross Income less than $150,000. (This $150,000 limit applies whether your return is Single or Married Filing Joint – there is no increase/doubling for Joint returns.)
  • There is no repayment of medical insurance subsidy if you purchased your medical insurance on the state exchange (Affordable Care Act plan on Healthplanfinder.org) and received more subsidy than your income allowed for.

If either of these apply to you, you fall into one of three categories:

If we already filed your return – The IRS says “do not file an amended return YET.”  We have you on our list of returns that will need to be fixed as soon as the IRS gives us guidance as to how they want us to fix it (and we receive the appropriate software updates from our tax preparation software vendor).

If we completed your return but have not yet filed it – We will hold off on finalizing / filing your return until the IRS has given us guidance on how to report these items (and we receive the corresponding software updates).  We will let you know if this applies to you, so you know your return is done, except for this issue.

If we have your return in process but not yet completed – We are screening every return for these two items until the IRS and our software vendor have issued updates.  If they do not apply to you, we will finalize & file your return as normal.  If they do apply to you, we will notify you that your return is done but on hold for these updates.

 

2021 New Tax Law Highlights

These changes affect the 2021 tax year ONLY – these are not permanent changes and do not affect future years.

3rd Relief/Stimulus Payment – This is similar to the two prior payments (currently being reported on your 2020 tax return) but with a few critical differences:

  • You should receive $1,400 per person listed (claimed) on your tax return (taxpayer, spouse, and all dependents including adult dependents).
  • If your Adjusted Gross Income (AGI) is $75,000 – $80,000 (single filers) or $150,000 – $160,000 (married joint filers), you will receive a partial payment. If your AGI is over these ranges, you will receive no payment.
  • The IRS will reference your last filed return for your income & eligibility (2019 or 2020).
  • If the IRS overpays you, you will not have to pay it back. If the IRS underpays you, you will get the rest when you file your 2021 tax return.
  • If you owe the IRS taxes on prior years, you should still receive this payment.
  • Please keep documentation of the amount you received – we will ask for it for preparing your tax return next year!

Child Tax Credit:

  • Tax credit amount increased from $2,000 per child to $3,600 per child under age 6 or $3,000 per child ages 6-17.
  • This credit starts getting reduced when your AGI is over $75,000 (single filers) or $150,000 (married joint filers).
  • The IRS has been instructed to pre-pay 50% of this tax credit in monthly payments July-December 2021 based on your last filing (2019 or 2020). Further, the IRS has been instructed to set up an online portal where taxpayers can opt-out of these monthly payments (or report other changes such as new children, marriage, divorce, etc). The IRS has said that this is (nearly) impossible to do with their outdated technology, so expect delays and glitches.
  • Then your 2021 tax return will report a reconciliation of the tax credit based on your actual income in 2021. If you received too much in pre-payments, you will not have to pay back the extra, but you will have to pay tax on it as additional taxable income.  If you received too little, you will get the extra credited on your 2021 tax return.
  • Beware! The tax withholding calculation for your paycheck may already take into consideration the old child tax credit amount ($2,000). Add to that the pre-payments (for example $250 per month Jul-Dec to give you $1,500 or half of the $3,000 credit), and you could easily receive an over-payment of the tax credit and have surprise taxable income on your 2021 tax return.

Childcare Tax Credit

  • The amount of childcare expenses that qualify is increased from $3,000 to $8,000 per child.
  • The tax credit has increased from 35% to 50% (subject to reductions at higher incomes)
  • Employers have the option to offer dependent care benefits up to $10,500 per family (increased from $5,000).

Medical Insurance Subsidy (& Unemployment Income) – These changes affect both 2021 and 2022:

  • The income qualification for receiving the subsidy on medical insurance purchased on the state exchange has changed. Previously, you qualified for subsidy if your income was less than 400% of the poverty level. Now your premium cost is limited to 8.5% of your income (with no comparison to the federal poverty level), anything more is covered by subsidy.
  • If you have any unemployment income at all, you will receive the maximum subsidy, regardless of your overall income. (Please note, this is how the tax law is currently written.  This seems to be an area where the details may have been overlooked and corrective legislation could be passed later in the year.)

Extended items from 2020 legislation – There were several provisions from prior relief laws that have been extended or had additional funding:

  • The Sick Pay and Family Medical Leave Pay from the very first Families First Coronavirus Response Act in March 2020 has been extended to 9/30/21. In addition, there is a second 10 days of Sick Pay allowed for 4/1/21 – 9/30/21 if 10 days were already used in the prior 12 months. (For a refresher on this – see our original blog post about the FFCRA Act here: http://cpabellingham.com/blog/tax-extensions-new-employer-rules/ )
  • PPP / EIDL – There are no new EIDL Grant applications allowed and there is no new (3rd) PPP loan program. However, both the PPP program and EIDL programs have received additional funding.
  • Employee Retention Credit has been extended for the full 2021 year. It is still a 70% credit, up to $10,000 in wages per quarter for businesses with a 20% decrease in cash receipts (compared to the same quarter in 2019).
  • Unemployment compensation supplements of $300 per week have been extended through 9/6/21. There is no provision for this to be nontaxable in 2021 (so far).

Tax Preparation Roadmap

 

Have you ever wondered about what goes on behind the scenes when we are preparing a tax return for you?

Or why it takes a few weeks instead of a few days?

Or why we are so persistent in emailing and calling to follow up on questions we’ve sent you regarding your tax return?

We work hard at preparing your tax return with accuracy, thoroughness, care, and an eye toward tax strategy.  There are a surprising number of steps in the process.

We invite you to watch this short video where we give you a tour of our Tax Preparation Roadmap – we’ll show you the steps involved on our end and where we ask you to take action to help us deliver our best work to you.

Tax Preparation Roadmap graphic

Thank you for watching,

Siobhan

 

 

 

What are estimated tax payments?

 

CPA Siobhan Murphy, of Thrive Business Group, explains estimated tax payments.

 

What are estimated tax payments 2

 

COVID relief payments for no income / low income / and individuals experiencing homelessness

“I don’t file a tax return, how do I get my COVID-19 stimulus payment?”

This question applies to folks who have an income lower than required for filing, including individuals experiencing homelessness.  If this is you, you are still entitled to those payments from the federal government.

At this time, the IRS has closed its system for non-filers to register to receive payments.  As a result, the only way to get a payment is to file a tax return.  This requires access to a computer with internet for e-filing.  It also requires an address for receiving a check or debit card.

Between February 12, 2021 and April 15, 2021, the VITA program provides free tax filing services for low income individuals.  Due to COVID, most of these services are being provided virtually and require a computer.  However, there is very limited in-person services.  There are also free online services for filing yourself.  More details on these resources can be found here: https://www.whatcomabc.org/money-management/taxes/

After April 15th, we expect there will still be many individuals, particularly those experiencing homelessness, who will not have filed anything with the IRS to receive their payments, and will still be eligible.  We are looking forward to using our tax knowledge to assist these folks in filing and receiving their federal COVID relief payments.

If you would like to volunteer to be involved in assisting our local homeless community with filing and receiving COVID relief payments, we will be happy to accept your contact information at this time.  We will add you to our volunteer list and contact you in the spring when we start reaching out to provide community assistance.

To join our volunteer list, please:

Email: admin@thrivebusinessgroup.com

Use the subject line:   volunteer – covid relief payments for homeless

In the body of the email, please include your name, phone, and email.

EIDL Loan – Important Details You May Have Missed

As we get further into tax season, I’m seeing more clients with EIDL loans.  I’m also seeing folks not having or understanding all of the information about these loans, so here are the basics:

The EIDL loan proceeds are intended to pay for your normal operating costs of doing business to keep you open & in business when you otherwise would not be able to pay those costs due to COVID-19.

It is appropriate to use these funds for operating costs such as payroll (that is not covered by PPP loan), rent, supplies, utilities, insurance, technology, and all of the other normal operating costs of running a business.

This only applies to the costs of the business that received the loan – so if you have multiple businesses, you cannot use one EIDL loan to cover costs in the other business, you would need an EIDL loan for each business.

 

The EIDL loan funds can NOT be used for:
  • refinancing other debts
  • paying off other debts
  • making loan payments on other federal debts
  • repairing physical damages
  • paying IRS tax penalties
  • paying out dividends/draws to owners
  • paying increased salary to owners (because you’re not taking draws)
  • business expansion into new projects or new lines of business.

 

The EIDL loan also has certain loan covenants that many people missed or misunderstood.  The most critical to know about are the following:

  • For loans over $25,000, the collateral for the loan is EVERY & ALL Assets of your company – both physical and intangible assets.
  • You must obtain SBA approval before you pay out a company dividend/draw to owners. This is also true for any attempt to do the same thing but in a different way such as paying out a big bonus to an owner or paying a large payroll advance, etc.
  • You must obtain SBA approval before you sell any assets, trade-in any assets for others, or otherwise remove any funds or assets from the business (except inventory can be sold without prior approval).
  • You must give SBA 30 days notice prior to moving your business location, changing your business name, or changing your business structure
  • You must keep detailed receipts of how you used the funds for 3 years and full accounting records for the term of the loan plus 3 years. These are subject to review by the SBA.
  • You are required to provide financial statements to the SBA annually (generally due by the end of March for the prior year).

 

If you have further detailed questions about how your specific loan works or what can & cannot be covered with the proceeds, please contact the SBA loan officer working with you.  They are your best source of detailed information for your specific loan.

Cryptocurrency FAQ

 

Cryptocurrency / virtual currency tax reporting – FAQ

We are seeing a lot more of our clients with virtual currency transactions recently, so we’ve put together this FAQ to assist with tax reporting of these transactions.

 

All I did was buy cryptos, do I need to report anything?

Yes. Your tax return includes reporting that you own any virtual currency (there’s a Yes/No box to check on the front page of the tax return).

Purchasing a virtual currency is not a taxable transaction, but if you purchased one currency and then transferred it to a different currency, the IRS treats this as selling the first to purchase the second.  And any sale is a taxable event.

 

What transactions do I need to report?

  • Sale of virtual currency
  • Purchase of products or services with virtual currency
  • Trade virtual currency for other products
  • Receive virtual currency as payment for services
  • Transfer of virtual currency from one type of currency to another
  • Receipt of new cryptocurrency after your existing cryptocurrency went through a hard fork followed by an airdrop
  • Virtual currency received as a result of mining

 

What transactions are not reported?

  • Purchase of virtual currency with cash
  • Transfer of a virtual currency from one wallet to another (without changing the currency type)
  • When a soft fork occurs with existing virtual currency
  • When a hard fork occurs but you do not receive new currency afterward

 

How do I report my virtual currency transactions?

Virtual currency can be reported as self-employment income, ordinary income, or investment income (capital gains/loss).

Virtual currency received as a result of mining or in exchange for services provided is treated as self-employment income (generally reported on a Schedule C).  It is reported at the market value on the date it is received.  This also become your acquisition cost for future capital gains reporting.

Virtual currency received through a hard fork or airdrop is treated as ordinary income (generally reported as “other income” on the Form 1040).  It is reported at the market value on the date it is received.  This also become your acquisition cost for future capital gains reporting.

Most other virtual currency transactions are considered sale of property and reported on Schedule D, taxed as capital gains income.  These transactions are reported like buying & selling stocks or other financial assets and any increase is value is taxed as a capital gain and losses are deductible (with limits).

 

If you are preparing my tax return, what information do you need from me to report my virtual currency transactions?

To report your virtual currency transactions, we need a listing of each transaction showing the following:

  • The date of acquisition
  • Cost/value at the date of acquisition
  • The date of sale/transfer
  • Cost/value at the date of sale/transfer
  • Capital gain or loss amount

 

For example, imagine the following set of (fictitious) facts:

1/1/18 purchased $1,000 worth of Bitcoin (valued $13,500 per coin = 0.074 Bitcoin received)

6/1/18 traded half of that bitcoin for Ethereum  (Bitcoin valued at $7,500 so 0.074 Bitcoin valued at $555, half of which is traded ($277).  Ethereum valued at $577 per coin = 0.480 Ethereum)

10/30/18 sold the other half of the Bitcoin for $229 (valued $6,200 per coin and 0.037 Bitcoin sold)

10/30/19 sold the Ethereum for $92 (valued $192 per coin and 0.480 Ethereum sold)

 

Most virtual currency wallets will provide a list of transactions with the transaction market value, but they do not report your purchase date or acquisition cost.  The transactions in the example above would show in a virtual currency transaction list as follows:

1/1/8 buy 0.074 Bitcoin $1,000

6/1/18 trade 0.037 Bitcoin for 0.480 Ethereum

10/30/18 sell .0.037 Bitcoin $229

10/30/19 sell 0.480 Ethereum $92

 

These same transactions would show on a tax return Schedule D as follows:

6/1/18 sale date Bitcoin – sales price $277, purchase date 1/1/18 – cost $500 – capital loss $223

10/30/18 sale date Bitcoin – sales price $229, purchase date 1/1/18 – cost $500 – capital loss $271

10/30/19 sale date Ethereum – sales price $92, purchase date 6/1/18 – cost $277 – capital loss $185

 

As you can see, the wallet transaction list is incomplete for tax reporting.  Also note that this is a very simple example – imagine 25 different purchases of Bitcoin, 12 exchanges between different 4 different virtual currencies, and 8 currency sales.  The tracking for tax purposes gets complex quickly!

 

You have three options of how to organize your virtual currency transactions, to bridge the gap between the wallet transaction list and the full tax reporting details:

  • Use a third-party services that will connect to your wallet data to create tax reports. A few examples of these are cointracking.info, cointracker.io, bitcoin.tax and essentials.lukka.tech
  • Create a spreadsheet and calculate your tax info yourself.
  • Hire a bookkeeper or accountant who understands the taxation of virtual currency to create a spreadsheet to calculate your tax info for you.

 

How important is this really?  I’m not buying/trading/selling that much.

The IRS is taking the stance that not reporting your virtual currency transactions is tax fraud.  In other words, they are not treating it as an honest error that is fixable and possibly subject to penalties.  Instead, they are treating it as criminal activity and intentional tax evasion.

They will not accept the excuse of not knowing the tax rules.  They are taking it very seriously and putting a lot of resources into cracking down on non-reporters.  The consequences of not reporting can be very severe, including $250,000 fine and up to 3 years in prison.

 

COVID Legislation Quick Updates 12.28.2020

 

On December 21, 2020 the House & Senate passed a new round of COVID-relief legislation, which was signed into law on December 27, 2020.  Below are the primary updates that apply to many of our clients.  Please note that this is not comprehensive (the bill is over 5,000 pages long!) and we are waiting for a lot more information on procedures for many of these provisions.

PPP Loans – new forgiveness rules

Originally forgiven loan amounts were not taxable income, but expenses paid with those proceeds were not deductible, in effect making the forgiven amount taxable.  Under the new law, the forgiven amount is not taxable AND the expenses paid with those proceeds ARE deductible.

There will be a new forgiveness application for loans under $150,000 that will not require backup documentation to the bank/lender.  However, the SBA can still review your loan so you must have the backup documentation ready if requested by the SBA.

This streamlined forgiveness application will require:

  • The number of employees you were able to retain because of the loan
  • The estimated amount of the loan spent on payroll costs
  • The total loan amount
  • Your attestation to the accuracy and compliance with the loan rules

Finally, under the original law, if you also received an EIDL Grant, this reduced the amount of the PPP loan that was forgivable.  Under the new law, your full PPP loan amount can be forgiven, even if you received an EIDL Grant.

PPP Loans – new round of funding

The new law funds a new round of PPP loan funding.  This new funding is limited to businesses who had at least a 25% decrease in revenue in any quarter in 2020 as compared to the same quarter in 2019.  If you qualify because of reduced revenue, then you can apply – even if you previously received a PPP loan in the original program.  This loan application will be made through your bank, similar to the first rounds of the program.

PPP Loans – Employee Retention Tax Credit

The original law did not allow PPP loan recipients to also receive the employee retention tax credit.  The new law does allow both, although not for the same wages, expands the tax credit, and extends the tax credit through June 30, 2021.  There are several updates including:

  • The credit is increased from 50% to 70% of qualifying wages
  • The wage limit per employee is increased from $10,000 per year to $10,000 per quarter
  • The required reduction in gross receipts has is reduced from 50% decline to 20% decline
  • New employers can now qualify to receive the tax credit

Unemployment Benefits

Federal unemployment benefits and Pandemic Unemployment Assistance have been extended into March 2021.

Economic Impact (“Stimulus”) payment

There will be another round of economic impact (“stimulus”) payments.  These will be $600 per adult and $600 per dependent child. Similar to the first payment, this is limited to individuals making up to $75,000 per year and married couples making $150,000 per year (based on your 2019 tax filing).

Similar to the first payment, this is an advanced payment on a tax credit on your 2020 tax return, so if your income was over the threshold in 2019 but below it in 2020, you will receive the payment as a credit on your 2020 tax return.

Charitable Contributions  

[This paragraph updated 1/5/2021]

The original law allowed for a new charitable contribution deduction for cash donations up to $300 for individuals who do not itemize deductions.  For 2020, this is $300 per tax return, whether it was a single individual or married couple.  The new law expands this for 2021 and future years to mean $300 per adult on the tax return, so single filers have a $300 deduction and married couples filing jointly $600.

Business meals deduction for restaurant meals in 2021-2022

Historically business meals expenses have been deducted at 50% of the cost.  The new law allows 100% deduction for business meals purchased from restaurants in 2021-2022.  Note that this does not apply to 2020.

Applying for PPP loan forgiveness – is it time?

 

Applying for PPP loan forgiveness – is it time?

This is a question we are receiving almost daily and the answer is, “it depends.”

When you apply for PPP loan forgiveness, your bank has up to 60 days to review and approve your forgiveness.  Then they send it to the SBA.  The SBA has up to 90 days to review and approve your forgiveness and make the final determination.  Combined, this is potentially a 5 month process (assuming no delays with the SBA, which is not necessarily a safe assumption).

Over the last several months, Congress has been on and off in negotiations to pass another COVID relief bill.  In those negotiations, there has been some bipartisan support for including new legislation that would provide automatic forgiveness for all PPP loans under $150,000.

If this legislation is passed, it will likely make the paperwork requirements simpler and potentially the approval process faster. There are no guarantees of this legislation being enacted, nor a guarantee that it will speed up the approval process, but these changes still seem reasonably possible.

As a result, many PPP loan recipients are waiting to apply for loan forgiveness in case an easier, faster way is introduced, while others prefer to apply now.

If your PPP loan is over $150,000 and you have used all of the funds, then yes, go ahead and start your PPP loan forgiveness application. There has been no discussion of a simpler, faster process for these loans.

If your PPP loan is under $50,000 and you were taxed as a sole proprietor with no employees at the time of receiving the loan, then there is a very simple application available for you that requires very little back up documentation. I do not expect that a simpler form will be introduced for these loans, however there is still a possibility that a faster approval process could result from new legislation.

If your PPP loan is under $50,000 and you had employees at the time of receiving the loan, then there is a very simple forgiveness application available for you, but it does require full back up documentation including bank statements, payroll tax returns, proof of eligible payments, lease agreement, and utility bills.  If new legislation is passed, these documentation requirements may be simplified, and the approval process may be faster.

If your PPP loan is between $50,000 and $150,000, your loan is the most likely to benefit from potential new legislation as there is no simplified application at this time, and full back up documentation is required, including bank statements, payroll tax returns, proof of eligible payments, lease agreement, and utility bills. New legislation could simplify and speed up the loan forgiveness process.

Ultimately, this is an individual choice. If your bank is accepting loan forgiveness applications, you can use the existing forms & procedures to submit your application now.  If you prefer to wait for possible new legislation that might make the process easier & faster, this legislation is most likely to be passed either in December or soon after January 20th.

 

Filing 1099 Forms

Filing 1099 Forms

Between complex rules and changes in filing requirements over the years, there is a lot of confusion around 1099s.  This article covers, who is required to file 1099s, to whom they need to be issued, when they are due, and a few related resources to help you with how to file them.

 

Who Needs to Issue 1099s

If you have a small business, are self-employed, or own a rental property treated as a business, then you are required to issue 1099s.  This includes sole proprietors, corporations, partnership, LLCs, nonprofits, and individual rental property owners.  Individuals making personal payments are not required to issue 1099s.

 

Rental Property Owners

The requirement for rental property owners is new – it started in 2018 with the creation of the Qualified Business Income Deduction (QBID). The QBID allows taxpayers to deduct 20% of qualified business income from their taxes, thus reducing the amount of taxable income and income tax to pay.

The QBID applies to sole proprietorships, s-corporations, partnerships, and sometimes rental properties.  Rental properties qualify for this deduction if they qualify as a business.  The IRS has not provided definitive, black & white guidance as to when a rental property qualifies as a business (as of the date of publishing this article). So, it has been left to taxpayers and their tax advisors to make this judgment.

At Thrive Business Group, we use a few simple tests to determine if a rental property qualifies as a business for the purposes of the QBID and therefore the requirement to issue 1099s.

  1. In owning the rental property, is your intention to make a profit?
  2. Do you (or an agent such as a property manager) engage in regular and considerable activity on the rental property?

If you can answer yes to both of the above, then most likely your rental property qualifies as a business in this context and you are required to file 1099s.  If you are still not sure, err on the side of caution and issue 1099s.  If you claim the QBID on your rental income, then you are required to file 1099s.

 

To Whom 1099s are issued

1099s are issued to any business or individual that your business or rental property has paid $600 or more for any kind of service or rent.

Many small business owners believe that 1099s are only issued to subcontractors, however this requirement is much broader, extending to all service provider payments and rent payments (including real estate/property rent, machinery rent, and pasture rent).

There are some additional special payment types that are required to be reported on 1099s, however they are uncommon and quite specialized and therefore not addressed here.

 

Exceptions

There are a few exceptions to be aware of.  Although this is not a comprehensive list of exceptions and special cases, it covers the most common scenarios in small business.

  • If the business you have paid is taxed as a corporation, you are not required to issue a 1099 (unless they are an attorney or law firm, then they still need a 1099). See the discussion below about how to know if a business is taxed as a corporation or not, especially for payments to LLCs.
  • If the organization you have paid is a tax-exempt nonprofit, you are not required to issue a 1099.
  • If you have paid using a credit card, Paypal, Venmo, Square, Stripe, or similar electronic processing service, you are not required to issue a 1099.
  • If you paid rent to a realtor or property manager, you are not required to issue a 1099.

 

When to file 1099s

Beginning 1/1/2020, there are two 1099 forms commonly used in small business, with two different filing due dates.

Form 1099-NEC is due by 1/31. This form is used for all service provider payments, except attorneys.

Form 1099-MISC is due by 2/28 when filed on paper or 3/31 when filed electronically. This form is used for all rent payments and payments to attorneys.

 

How to file 1099s

The first step is to gather the information you need for preparing the 1099s.  You will need to have a Form W-9 completed by the business or individual you will be sending the 1099 to.  This is how you obtain their legal name, address, and tax ID number.  This is also how you find out if an LLC is taxed as a corporation (and therefore exempt from the 1099 requirement) – they are required to indicate their tax classification on the form.

A best practice is to obtain a W-9 form from each applicable payee at the time you issue your very first payment to them during the year.  Don’t wait until December or January to request this information. It will leave you scrambling when you have a tight deadline.  We also recommend that you review your records in November to double check that you have all W-9 forms you need and obtain any missing forms.

I recommend using an online filing service for preparing and filing 1099 forms.  The IRS makes pdf forms available online for download, but they are not compliant for printing and mailing to the IRS.  You can also request compliant forms to be mailed to you from the IRS, but this can take several weeks (or months) to arrive.  Purchasing compliant forms from an office supply store can be costly.

Using the QuickBooks 1099 service only yields accurate results when set up correctly and all applicable payments are recorded correctly, which is rare (it’s very easy to have just one payment recorded slightly differently to yield an incorrect 1099). Their service also tends to cost a bit more than other options.

Online filing services solve all of these issues and are very inexpensive, generally charging less than $5 per 1099 form.  An online service will use the data you enter to mail (or email) the 1099 to the recipient and file the government copies electronically with the IRS.

There are many online filing services available – a few are listed below. Thrive Business Group has no affiliation with any particular service and makes no specific recommendations or assurances as to their service.

https://www.efile4biz.com/

https://www.efilemyforms.com/

https://www.track1099.com/

https://www.1099online.com/

https://www.tax1099.com/

 

Putting It All Together

As you can see, 1099 compliance is a bit more complex than just issuing 1099s for subcontractors.  However, it doesn’t have to be a burden.  With proper understanding of the 1099 filing requirements, being proactive in obtaining W-9 forms throughout the year, and using an online filing service, it can be relatively quick and inexpensive to file all required 1099 forms.

 

EIDL Loan Basics

I’m starting to hear reports of a few clients receiving EIDL loan funds from the SBA, and we are receiving questions on this program, so here are the basics:

The EIDL loan proceeds are intended to pay for your normal operating costs of doing business to keep you open & in business when you otherwise would not be able to pay those costs due to COVID-19.

Loan amounts vary (I don’t know how they come up with the amount they offer). Interest is 3.75%, payments are deferred for 12 months, and terms vary (I’m mostly hearing 15 – 30 year terms). The EIDL also provides an advance of $1,000 per employee up to $10,000 that is the forgivable portion of the loan.

It is appropriate to use these funds for operating costs such as payroll, rent, supplies, utilities, insurance, technology, and all of the other normal operating costs of running a business.  This only applies to the costs of the business that received the loan – so if you have multiple businesses, you cannot use one EIDL loan to cover costs in the other business, you would need an EIDL loan for each business.

If you have both an EIDL and PPP loan, you can only use the EIDL to cover PPP qualifying expenses after the PPP funds have been exhausted, and any EIDL Advance will decrease the amount of the PPP that is forgiven.

The EIDL loan funds can NOT be used for refinancing other debts, paying off other debts, making loan payments on other federal debts, repairing physical damages, paying IRS tax penalties, paying out dividends/draws to owners, or business expansion into new projects or new lines of business.

If you have further detailed questions about how your specific loan works or what can & cannot be covered with the proceeds, please contact the SBA loan officer working with you.  They are your best source of detailed information for your specific loan.

 

B. Siobhan Q. Murphy
CPA, CMA, CFM, MBA
Thrive Business Group