Company Retreats – Connect w/ Your Employees or Clients

On June 29th and 30th here at JETRO we held our annual team retreat. Typically we get our staff together in a city for a few days to hang out but due to COVID we were limited to a virtual retreat this year. Given the circumstances our staff made the best of it and we had a great time and covered a lot of ground.

Retreats are important not only for us but for you in your business. Here is why we hold an annual retreat:

  • Get to know each other on a more personal level
  • Be transparent and update your team on the company vision and what the future looks like
  • Make important decisions and involve everyone
  • Show appreciation and how much the team means to you and your company

Whether you bring everyone together or hold a virtual team retreat I encourage to make it happen as you will see it truly unites your team.

On the Small Business Tax Savings Podcast below we share more information on this!

JETRO Goes Xero Gold

JETRO Xero Gold

When JETRO started way back in 2013 we were on the the forefront of virtual accounting. As part of that, we needed to find a cloud accounting solution that we could utilize not only internally but across our client base. We needed something that we could access via the cloud anywhere, anytime. After a lot of research and trial we landed on Xero, who at the time was fairly fresh in the US market.

Since then we have not looked back and continue to introduce Xero to thriving clients across the country. As part of that journey we are proud to announce that we are now a Xero Gold Partner!

Thank you Xero for continuing to innovate and provide such a “beautiful accounting software” to both JETRO and our incredible clients.

Want to learn more about Xero? Reach out to us!

JETRO Giving Back to the Community

Giving Back to the Community

Here are JETRO we take seriously the act of helping others and the community. Every year we make a donation to various charities and initiatives based on the amount of tax returns we file. This year we also included an additional amount for each Small Business Tax Savings Podcast review we received.

As a client of ours and reviewer of our Podcast you play a role in this donation. The amount we contribute is directly related to you partnering with us.

I just want to say, THANK YOU! Thank you for working with us and listening to our Podcast so we can make a donation on your behalf.

This year we are proud to announce our support for the following charities and initiatives:

1. Mobilize MKE

COVID-19 has caused a 35-50% spike in the number of people needing the services of food banks in Metro Milwaukee. This pandemic has also forced the cancellation of many food drives, multiplying the food crisis our neighbors are facing right now. These food pantries tell us they anticipate seeing even greater need in May. Donations made will service local food pantries.

Learn More Here

2. American Foundation for Suicide Prevention

A gift to the American Foundation for Suicide Prevention helps fund their mission to save lives and give hope to those affected by suicide. Each dollar brings us closer to a world without suicide.

Learn More Here

 

3. Make-A-Wish

The mission of the Make-A-Wish Foundation is to create life-changing wishes for children with critical illnesses. The children they serve are fighting for their lives, and their families are doing everything that they can to help them in their battles.

Learn More Here

 

4. National Multiple Sclerosis Society

Multiple sclerosis (MS) is an unpredictable disease of the central nervous system that disrupts the flow of information within the brain, and between the brain and body. The Society’s mission is: People affected by MS can live their best lives as we stop MS in its tracks, restore what has been lost and end MS forever.

Learn More Here

 

Again, we are able to make these donations on your behalf due to your partnership with us. We thank you for that and look to continue to help the communities around us and those that are less fortunate.

Coronavirus (COVID-19) – Accounting and Tax Outlook

*Continuously Updated As More Information Becomes Available*

Welcome to our JETRO Coronavirus (COVID-19) Tax and Accounting Resource Center. Much of this information is rapidly changing. We will be updating information as it becomes available to us. Below are the headlines on various topics listed below. Each topic has buttons on the bottom to link to available resources.

The link directly below is the most comprehensive overview of all relief options to check out, provided by Gusto!

  • General Information
  • Government Loan Information
  • Business Relief Information
  • Personal Relief Information

General Information

Tax Deadlines/Extensions and Student Loan Payments by Employer

  • New Tax Return and Payment Deadline: July 15th (Individuals, Trusts, C Corps) – If you want to extend your return to October 15th that formal extension is also now due by July 15th.
  • 2020 Q1 and Q2 Estimated Tax Payments Due: July 15th (Previously April and June 15th)
  • Employers are allowed to contribute up to $5,250 tax-free annually to assist their employees with student loan payments. This covers payments up until December 31, 2020.

NOTES FROM 3/18/20 PODCAST:

These next few weeks (or months?) for business owners and individuals alike will be tough. However, as business owners this poses an opportunity for leadership.

I touch on this specific topic in this weeks Small Business Tax Savings Podcast episode which I have provided before.  Here is a brief summary:

1. Be A Leader

To your employees, clients, and community.

 

2. Embrace the Situation

Think of ways you can modify your business to maintain during this tough time. Do not just stick your head in the sand and give up. INNOVATE! 

 

3. Do Planning

Plan for the various situations (good, bad, ugly) and determine what your business will do if you hit those certain benchmarks. 

As we are navigating these unexpected waters together, let us know how we can help. We are that partner on your team to get through this together!

NOTES FROM 3/25/20 PODCAST:

1. Do Planning

Put together a plan on how your business will react at certain thresholds. Do a Good (3 weeks), Bad (2 months), Ugly (3-4+ months) plan so you know ahead of time what actions your business needs to take depending on how long this lasts.

 

2. Expense Cutting

Go down your income statement and see what items you can cut or downgrade. If you have any software fees is there any you can move down a package (Premium to Standard) temporarily. Start implementing these cuts today to maintain cash.

 

3. Slow Down Cash Outflow

Do you have any bills or rent payments that you can negotiate for short period of time? Reach out to loan providers and see if you can move to interest only payments temporarily. If they say no today, try again in a couple days.

 

4. Funding

Look into an SBA loan if you need cash now. Look into zero interest credit cards to see if those may be an option for you.

Government Loan Information

Paycheck Protection Program (PPP) Updates

The House, Senate and President signed the PPP update bill into law. Here are the changes:

🔸Amount of loan needed to be spent on payroll moves from 75% to 60%

🔸Amount of time to spend the funds moved from 8 weeks to 24 weeks (or end of 2020)

🔸Pushes back June 30th deadline to rehire workers to December 31st

🔸Repayment term of unforgiven amount moves from 2 years to 5 years

A few more updates we talk about in this weeks Small Business Tax Savings Podcast:

🆓 Free Tool for Forgiveness Application: https://lnkd.in/shrtslug

💰Funding is still available if you have not already received PPP funds

PPP Loan Certification Clarification, Taxability and Forgiveness Application

  1. PPP Certification Clarification: Originally when applying you certified that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant”. The SBA and Department of Treasury have determined that there will be a safe harbor regarding that certification.

    The safe harbor is: Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.

  2. PPP Loan Taxability: Per IRS guidance, the PPP loan amount forgiven itself is not taxable however the corresponding expenses you used the forgiven funds for, you cannot claim as tax deductions.
  3. Forgiveness Application: This has finally been released while still some questions remain but here are some things we do know:

    -Time Period: You can choose between 8 weeks from the day the loan hit your account or 8 weeks that begins on your first payroll date following the disbursement.

    -Payroll Reduction Exemption: There has been new guidance that your forgiveness amount will not be reduced (as it relates to employee retention) if you have reductions related to: Individuals you have made a written offer to rehire but the employee declined, employees whose employment was terminated for cause, or employees who voluntarily resigned.

    -Owner’s Cap: The forgiveness amounts paid to owners eligible for forgiveness is capped at the lower of $15,385 (which is the $100k annualized) or the 8 week equivalent of the owners compensation in 2019, again whichever is lower.

PPP Forgiveness Information

PERIOD: 8 Weeks (Starting the date of first disbursement of PPP funds)

WHAT IS FORGIVABLE?

  • Payroll Costs (Capped at $100k of annualized basis per employee) including: gross wages, health care benefits, retirement benefits, state and local taxes but NOT employer portion of FICA or FUTA
  • Interest on Mortgages Signed Before 2/15/20
  • Interest on Debt Incurred Before 2/15/20
  • Rent for Lease Agreements Signed Before 2/15/20
  • Utility Payments

NOTES

  • Payroll costs must make up 75% of forgiven amount (Ex: $100k PPP Loan, at least $75k payroll)
  • Forgiveness amount proportionately reduced by decease in head count or employee wages unless employer reverses that prior to June 30, 2020
  • Keep documentation of expenses (payroll reports, tax filings, receipts, etc) to backup the items for proof of forgiveness

Also important to note that things are ever changing so this is what we know now but we expect more details to come from the government regarding the topic of forgiveness.

4/27/20 Update: The Government has approved more funding to the PPP and will begin taking applications again 4/27/20.

4/16/20 Update: The PPP loan has reached its funding capacity. News is that Congress is working on allocating more funding to this program.

NOTE: UPDATE TO PPP PROGRAM AFTER RECORDING

-Interest Rate: 1% – Updated as of 3/31/20
-Term: 2 Years – Updated as of 3/31/20

Business Relief Information

Employee Retention Tax Credit (ERTC)

We’ve talked heavily about EIDL and PPP but what about ERTC? Don’t you love all the acronyms?

In order to be eligible for the ERTC you need to prove that you either:

1) Suspended operations fully or partially due to a COVID-19 shutdown order OR
2) Show a 50% or grater decline in revenue as compared to the same quarter of the prior year.

If you are eligible you can get a ERTC which is a refundable payroll tax credit of 50% up to $10,000 of wages per employee which essentially is a max of $5,000 per employee.

The ERTC cannot be combined with the PPP.

Example: Eligible employer pays 6 employees $10,000 each in the eligible period for Q2. The ERTC available to the employer would be $5,000 per employee or $30,000.

Personal Relief Information

The 1099-Misc Filing Date Is Just Around The Corner—Are You Ready?

THE 1099-MISC FILING DATE IS JUST AROUND THE CORNER – ARE YOU READY?

Article Highlights:

  • Independent Contractors
  • Non-employee Compensation
  • 1099 Filing Requirement
  • Due Dates
  • Penalties
  • Form W-9 and 1099 Worksheet

If your business engages the services of an individual (independent contractor), other than one who meets the definition of an employee, and you pay him or her $600 or more for the calendar year, then you are required to issue that person a Form 1099-MISC to avoid penalties and the prospect of losing the deduction for his or her labor and expenses in an audit. Payments to independent contractors are referred to as non-employee compensation (NEC).

Note: The IRS has cautioned taxpayers who are treating rental activities as a trade or business for purposes of claiming the 20% passthrough deduction that they are required to issue 1099-MISC forms to their services providers who meet the $600 test for those rental activities.

Because so many fraudulent tax returns are filed right after e-filing opens up in January, the IRS requires 1099-MISCs for NEC to be filed by January 31 and will not release refunds for individual income tax returns that include the earned income tax credit until the NEC amounts can be verified.

Thus, the due date for filing 2019 1099-MISC forms for NEC is January 31, 2020. This is also the same due date for mailing the recipient his or her copy of the 1099-MISC.

It is not uncommon for a business or rental property owner to have a repairperson go out early in the year, pay him or her less than $600, use his or her services again later in the year, and have the total paid for the year be $600 or more. As a result, the business or landlord may have overlooked getting the needed information from the individual to file the 1099s for the year. Therefore, if you own a business or are a landlord, it is good practice to always have individuals who are not incorporated complete and sign an IRS Form W-9 the first time you engage them and before you pay them. Having a properly completed and signed Form W-9 for all independent contractors and service providers will eliminate any oversights and protect you against IRS penalties and conflicts. If you have been negligent in the past about having the W-9s completed, then it would be a good idea going forward to establish a procedure for getting each non-corporate independent contractor and service provider to fill out a W-9 and return it to you.

The government provides IRS Form W-9, Request for Taxpayer Identification Number and Certification, as a means for you to obtain the vendor’s data you’ll need to accurately file the 1099s. It also provides you with verification that you complied with the law, in case the vendor gave you incorrect information. We highly recommend that you have potential vendors complete a Form W-9 prior to engaging in business with them. The W-9 is for your use only and is not submitted to the IRS.

The penalty for failure to file a required information return due in 2020, such as the 1099-MISC, is $270 per information return. The penalty is reduced to $50 if a correct but late information return is filed no later than the 30th day after the required filing date of January 31, 2020, and it is reduced to $110 for returns filed after the 30th day but no later than August 1, 2020. If you are required to file 250 or more information returns, you must file them electronically.

In order to avoid a penalty, copies of the 1099-MISCs you’ve issued for 2019 need to be sent to the IRS by January 31, 2020. The forms must be submitted on magnetic media or on optically scannable forms (OCR forms).

Note: Form 1099-MISC is also used to report other types of payments, including rent and royalties. Payments to independent contractors are reported in box 7 of the 1099-MISC, and the dates mentioned in this article apply when box 7 has been used. When the 1099-MISC is used to report income other than that in box 7, the due date to the form’s recipient is January 31, 2020, while the copy to the government is due by February 28, 2020.

If you have any questions, please call. This firm prepares 1099s for submission to the IRS along with recipient copies and file copies for your records. Use the 1099 worksheet to provide this office with the information needed to prepare your 1099s.

7 Biggest Legal Loopholes For Attorneys & Law Firms In The New Tax Law

7 Biggest Legal Loopholes For Attorneys & Law Firms In The New Tax Law

We could all stand to pay less in taxes, right? Fortunately, the new tax law has given law firms plenty of opportunities. There are seven major ways to slash your taxes and put more profit in the bank each year. I call them “loopholes” because so few people know about them but all seven are perfectly legal tax strategies provided for in the new tax law.

You can make a few adjustments to how your business is set up or how you handle your expenses and save big at tax time. Whether you’re able to take advantage of one, two, or all seven of these strategies, it’s well worth your time and effort to implement them. Without further ado, here are seven legal tax loopholes for law firms:

1. The August Rule

This loophole allows you to literally pay rent to yourself, tax-free, and we owe it all to golf in the 1970s.

If you’re a golfer, you know the Masters Tournament is held every year in Augusta, Georgia. Like the Superbowl or the Olympics, the Masters draws a lot of visitors who are always looking for lodging nearby. Wealthy home-owners near the course rented their homes during the tournament and lobbied for that income to be tax-free since they weren’t full-time rental homes.

The result? When you rent your personal home for up to 14 days per year, that income is not taxable. This is true even if you rent the home to a business you own.

Next time you need to hold a corporate meeting or a staff off-site, hold it in your home rather than a hotel or another rental. You can claim the rental expense for your business, as long as you document the business use and confirm that it was a reasonable rate (find comparables by getting quotes from hotels or even Airbnb rentals in the area).

Tax-deductible for your business and tax-free for your personal income taxes equals and win/win.

2. Mixing Business and Pleasure

If you’re as busy as most law firm owners, finding time for a vacation is a challenge. Your best bet may be to fit business and vacation time into the same trip.

Thankfully, that can mean a lot of vacation expenses are picked up by your business, completely tax-deductible.

In order to deduct a trip as a business expense, you need to be conducting business the majority of the time. The IRS measures in days, meaning you’d need to spend at least 4 days out of a one week trip mainly on business (business needs to be 25% of your trip if it’s outside of the U.S.). Traveling to and from your destination is considered part of the business trip, so that already gives you two days. Plus, if you’re in meetings or attending
a conference from 9-5, there’s no reason you can’t enjoy some R&R after hours.

Travel expenses for flights, car rentals, or vehicle expenses (you need to leave your tax home to incur business travel expenses) can all be deducted. So can lodging and 50% of meals expenses related to your business transactions.

If you’re bringing the family along on the trip, just make sure your expenses are “necessary and ordinary.” You can deduct the cost of a single room, but not the cost of a family-sized suite, for example. As long as you document, feel free to rent the suite and only deduct the portion that coincides with a single-room rate.

3. Learning the Value of Work has Tax Benefits

Do you want your children to learn the value of a hard-earned dollar and maybe even take in interest in the family business?

The new tax law makes it better than ever to hire your children.

If your firm isn’t incorporated, there are some great perks to hiring your own dependent children. Instead of giving them an allowance or paying them to mow the lawn, why not pay them a reasonable wage to work around the firm? Their income will be exempt from Social Security, Medicare, and federal unemployment tax withholdings. They’ll also be able to shelter a significant amount of that income with their standard deduction since it’s earned income.

On your end, the wage expenses are fully tax-deductible, just as they would be if you hired someone else. Depending on your child’s age, this is a great way to get cleaning and lawn care, light office work, or some computer support at your firm.

4. Get More Mileage out of Your Vehicle Expense

If your firm uses a vehicle at least 50% for business purposes, you can deduct a number of expenses. The big decision is whether you’ll track those expenses one by one (actual expense method) or simply multiply the miles driven by the predetermined rate (standard mileage rate method). The standard rate has always been popular because it’s easier to track, but the Tax Cuts and Jobs Act just made the actual expense method much more appealing.

The actual expense method allows you to include depreciation on your vehicle. Under the newest tax update, the limits on vehicle depreciation were greatly increased and bonus depreciation can be applied to many vehicles. Bonus depreciation allows a business to take additional depreciation expense deduction when a vehicle is first put
into use.

Additionally, if you have a more expensive vehicle with higher than average repair and maintenance costs, the actual expense method is likely going to be your best bet.

5. Shrinking Meals Expense Deductions

Client networking and employee fringe benefits have been a part of professional businesses for years. Recent tax changes have cut back on the deductibility of a lot of these expenses, making it harder to justify those expenses. The changes have also made the details so complicated that even the IRS isn’t quite sure what they mean.

What was once meals and entertainment expense deduction now excludes entertainment. Taking a client or prospect out for lunch or a round of golf used to be deductible expenses. The golf is now off the table. Eating in a setting that includes entertainment (like a dinner theater or club) is also disallowed, although some CPAs
would argue for the deductibility of the eating portion.

Another big change is the deductibility of fringe benefits such as an employee cafeteria. Unless they’re part of an event like an employee Christmas party, these items are now 50% deductible instead of fully deductible as they were before. Don’t worry, the morning coffee and donuts should be considered a “de minimis” expense that’s not big enough to be consequential for tax purposes.

6. The Hidden (Fringe) Benefits of Hiring Your Spouse

If you have a small, family-owned practice, there could be big tax incentives for hiring your spouse. Hiring them on a part-time basis and paying them in the form of fringe benefits can be both a deductible expense for the business and a tax-free source of compensation for your family.

A Section 105 medical reimbursement plan can form most or all of the reasonable compensation paid to your spouse for their work, as long as it is within limits. These contributions are a wages expense for the employer and can be used by the employee to cover out of pocket medical and dental expenses and insurance premiums.

There are a few words of caution on this loophole. In order to be allowed by the IRS, the Section 105 plan needs to be carefully planned out and documented. Make sure the compensation you provide to your spouse isn’t too much or too little and that they are actually performing a necessary job in your firm.

Also, if you have multiple employees in the firm, you need to be careful. Since this is a health care expense reimbursement plan, you can’t discriminate between employees and offer it only to one, even if the one is your spouse and even if it’s their only form of compensation.

7. The Perfect Business Structure for Your Firm

Choosing the ideal business structure for your firm effects both your liability and your tax situation. As a law firm, you’re fully aware of the liability issues but the Tax Cuts and Jobs Act has just had a huge impact on the tax implications of your structure.

Pass-through entities such as S-corps and LLCs may qualify for a 20% deduction on qualified business income. This helps to balance the tax cut given to corporations, but it’s limited in availability. SSTBs (Specified Service Trade or Business) can only take the deduction is income is below $207,500 for individuals and $415,000 for couples. At the higher end of this limit, the deduction starts to phase out.

If your income is higher than the limits, you may want to look into becoming a C-corp. Although C-corporations face double taxation (paying at both the corporate and personal levels) the corporate tax rate has been reduced to a flat 21% across C-corps. Consider the necessary steps and hoops and talk with your tax advisor about which entity would give you the best results.

These 7 tax law loopholes can save you thousands at tax time. You just need to know which ones are a fit for you and how to fit them into your overall tax strategy.

If you don’t have a tax advisor, you’re paying way more than you should be. Click here to book your complimentary strategy session with me.