Tag Archives: Employee Retention Credit (ERC)

2023 Year-End Considerations — Part 1

Time for Taxes Money Financial Accounting Taxation Concept

{8.5 minutes to read}  Greetings to you and yours, I hope you are staying encouraged in spite of all that’s happening around us.

With the year-end to-do list to accomplish and holiday planning, it is not uncommon for us to feel stretched on all sides.

In this opinionated world we live in, just about anyone can “chime in” on what we ought to do, when we do, with whom we do, and how we do — I am wondering if certain roles are worth the cost. Is there still a role for a leader, or better yet, is a leader now simply a spokesperson who conveys to the public the opinions of the majority?

The nation’s leaders have their hands full — only a few weeks before the year ends, not enough is in the news on the upcoming tax season, and how to plan ahead. The ongoing wars, humanitarian crisis (here in NYC and in the Middle East), election planning, governmental divisiveness, and the list goes — no rest for the weary mind.

The endless outlets for news and information are making it more challenging to step away to do something different. I hope this article is worth your time.

Before I get into the article, from a tax planning viewpoint, it is evident that the current administration is committed to clean air and clean energy — so don’t forget to take advantage of the various credits that may be available to individuals and businesses. From homeowners’ credit, developers’/builders’ credit, and the popular employee retention credit (ERC), the latter is getting the attention of scammers — as such the IRS is scrutinizing it more closely. Please check out this credit on the IRS website. 

This is a two-part news article. The first article will include some tax and planning-related information geared toward individuals. The second part will be more geared towards businesses & entrepreneurs.

For Individuals:

 2023 Year-End Considerations*

  1. Loss Deduction: Ponzi-type or not —  How will the IRS allow the treatment of the loss in the case of financial fraud (most recently, Samuel Bankman-Fried was convicted)?
  2. Social Security Income triggers a higher tax bill for many taxpayers.
  3. Enrollment periods have begun — What changes to consider?
  4. Will the IRS come knocking on taxpayers’ doors? It depends.

* Some may impact the 2024 calendar/tax year. 

Is it a capital loss or a Ponzi-type loss?

As you may already know, the IRS limits certain investment capital losses to $3,000 per year. Unused loss can be carried forward and used against capital gain for subsequent year(s).

Notwithstanding the above, the IRS may allow a more favorable tax treatment to taxpayers who are victims of losses from Ponzi-type investment schemes. One method is the safe harbor rule, under Rev. Proc. 2009-20. Under this rule, a qualified investor may be allowed a deduction of up to 95% of a qualified investment, if such investor does not pursue any potential third-party recovery. What we don’t know is whether the IRS will allow fraudulent cryptocurrency investments to get this favorable treatment. We await guidance from the IRS.

According to Reuters, on November 2, 2023, Samuel Bankman-Fried (SBF), the FTX founder, was convicted of multi-billion-dollar FTX fraud. He was found guilty of “stealing from customers of his now-bankrupt cryptocurrency exchange in one of the biggest financial frauds on record.”  You can read the entire article at Reulers.com. 

The Social Security Income tax threshold has risen by approximately 9%. Who will be impacted?  

Under the Federal Insurance Contributions Act (FICA), taxpayers are required to make contributions by way of Social Security income tax. Many taxpayers will notice that their overall tax/contribution has increased. You may have also noticed that you dug a little deeper in your pocket to pay Social Security taxes in 2023. The cap is $160,200, and in 2024, it is $168,600. Income over the cap is not taxed for Social Security benefits (“SS”). While SS has an income threshold, Medicare tax has no limit. Please see the table below that reflects the Social Security Income threshold for the years listed. *If you are self-employed, you will pay double the taxes.

Year Income threshold Maximum Tax (employee portion at 6.2%) *
2022 $147,000 (for reference only) $9,114.00
2023 $160,200 $9,932.40
2024 $168,800 $10,453.20

It is that time of year — once again — Enrollment period

It is the enrollment period for various health related benefits and insurances. It may be wise to use this time to review other insurance policies, proxies and financial beneficiary designations, power of attorney(s), just to name a few. Don’t forget that relationships do evolve, as such your will, trust and/or next of kin may also need to be updated. In a past article – we share seven-year end essentials – that are still relevant – check out the list here.

Knock, knock — who is it? Could it be the IRS?

The IRS does make unannounced home or field visits to non-compliant taxpayers (individuals and businesses). However, only a few taxpayers are likely to get such a visit.

This past summer, the IRS announced it will end most (not all) unannounced visits to taxpayers by Revenue Officers (“RO”). Instead, taxpayers (individuals and businesses) with outstanding balances will be mailed letters to schedule in-office meetings with a RO. So, who will likely get a visit? According to the IRS, only “extremely limited situations where unannounced visits will occur.” What sparked this change? Read the details here on the IRS website.

Part 2 of this article will be geared towards entrepreneurs (independent contractors and small businesses)

If this is where you will get off — in the spirit of gratefulness — my hope is that we embrace a posture of gratitude in all seasons of life. In essence, gratitude is important for our overall well-being.

Gratitude

In recent months, I find myself reflecting on genuine human connections, considering our growing entitlement ways of being. I resided on this question: Is it of any value to express gratitude for that which I am entitled to?

According to the Oxford Dictionary, entitlement is “the belief that one is inherently deserving of privileges or special treatment.” On the other hand, gratitude is “the quality of being thankful; readiness to show appreciation for and to return kindness.”

In an article titled, “The Antidote to Entitlement” published by Heartofconnecting.com The article added that “research shows that gratitude is healthy for us and benefits kids and adults alike — gratitude plays a major role — protects us from entitlement, stress, and depression — gratitude is known to increase self-esteem, hope, empathy, and optimism.”

A similar article was published by growing leaders author, Tim Elmore. The author noted that, “gratitude enriches human life. It elevates, energizes, inspires and transforms.” Read the entire article here.

Let’s embrace and encourage a posture of gratitude — it’s a worthwhile contribution to our overall well-being, so choose wisely.

Be on the lookout for Part 2 of 2023 Year-end Considerations that impact our finances.

Thank you for reading.
With gratitude,
Nadine

Nadine Riley, CPA
Founder, Masterpiece Accounting Group
Phone: (212) 966-9301
Email: info@mpagroupllc.com

The Masterpiece Accounting Group web, blogs, and articles are not rendering legal, accounting, or other professional advice. Tax strategies and techniques depend on your specific facts and circumstances. You should implement the information in this newsletter only with the advice of your tax and legal advisors.   

There is Still Money on the Table — Take Steps to Reduce Your 2021 Tax Bill

Handwriting text Tax Refund, Internet Concept excess payment of paid taxes returned to business owners Building An Unfinished White Jigsaw Pattern Puzzle With Missing Last Piece

Greetings,

{6 minutes to read} I hope you are taking some time to enjoy the summer days — with care, Outdoor spaces are priceless.  

First, if you received a PPP loan in 2020 and have not yet submitted your PPP loan forgiveness application, what are you waiting for? The process has been simplified for loans not exceeding $150,000. Some banks make the process simpler and there is no documentation required.

In this article I will share some notes on the following topics, that might impact both individuals and businesses:

  • Advance Child Tax Credit (for individuals)
  • Rent Assistance – up to 12 months (for individuals)
  • Grants for Small Businesses
  • Employee Retention Credit (for business)

So, what’s worth acting upon in August?

Advance Child Tax Credit for Individuals

Many taxpayers, who reside in the US have begun getting their monthly child tax credit. In the previous article, I explained, at length, how the credit operates. Basically, the American Rescue Plan Act (ARPA) allows individual taxpayers to qualify to take a child credit of $3,000 for children under age 18 and $3,600 for children under 6, on the last day of the year. Unlike in the past, qualified taxpayers can take the credits at the time they file their tax returns. ARPA allows advance payments of this credit to be made — automatically — before you file your 2021 tax returns; payments are made on a monthly basis (using your 2019 or 2020 filed tax returns). The IRS created a portal for this credit where you can opt-in or opt-out – Click Here to access the portal.

Rent Assistance for Individuals

In spite of President Biden’s intent to extend the rent moratorium, some states will not be extending the rent eviction moratorium beyond August 31, 2021. This means late fees could be assessed and possible eviction could result from non-payment of rent. In an article written by Ann O’Connell, Attorney at Nolo.com, she highlights the states which will put a hold on eviction and those which will implement the deadline. You can read the details here. 

Consider taking advantage of government assistance. Check with your state of residency to see if you qualify for rent assistance programs. 

For NY, the state extends an Emergency Rental Assistance Program (ERAP). This will provide some assistance to certain renters to cover rent/utility arrears. For more information, click here. 

Among the requirements is an income limitation — see the income per county and household size here.

Some states offer assistance for homeowners by placing a hold on property tax payments — check your individual state’s website. 

Before I close out on this topic, if I may, I would suggest that if you can afford to make a partial payment to your landlord, consider doing so. It would be a show of good faith — Landlords, too, have expenses.

Business

Grants for Businesses

Various states are still offering grants for businesses that have been impacted by the pandemic. Please check with your state for information.

For NYS — there are various grants available. One is the New York State COVID-19 Pandemic Small Business Recovery Grant Program. With this program, a business can get up to $50,000 in a grant. The amount is calculated based on gross revenue, up to $500,000. See the details here.

Employee Retention Credit (ERC)

The intent of the ERC is to encourage employers to keep their employees employed. This is not a loan — this reduces payroll expenses. No forgiveness or pay-back steps are necessary. 

This is a payroll tax credit for employers who have W-2 employee(s). Your payroll service provider is your best resource to assist you with this credit application; don’t go it alone. This is a credit available under the CARES Act and ARPA which extended the credit for wages paid before January 1, 2022. However, Congress is considering ending the credit on September 30, 2021. See the full IRS Notice 2021-23 for this credit here.

To qualify there are a few criteria you must meet:

    •  A substantial reduction in gross receipts. A quarter-over-quarter comparison should show evidence of more than 20% gross receipt reduction.
    • No double-dipping allowed. Wages previously used for other loans, including loans for PPP forgiveness, the Work Opportunity Credit, or Paid Sick and Family Leave are not allowed to be used for this credit. And for the 3rd and 4th quarters only, wages were used for the Shuttered Venue Operators Grant and Restaurant Revitalization Grant.
    • The business must have been in operation before Feb. 15, 2020 – however, there is an exemption for certain companies, referred to as “recovery start-up businesses.” This exception allows qualified companies that started operation after Feb 15, 2020, to apply for the credit.  Please see IRS Notice 2021-23.

What’s the Maximum Amount for This Credit?

    • For the calendar year 2020: 50% of eligible wages and qualified health care costs up to $10,000 for the year. The maximum credit of $5,000 per employee per year – wages paid between March 13 and December 31, 2020, inclusive 
    • For 2021: 70% of eligible wages and qualified health care costs up to $10,000 per quarter, with a maximum credit of $7,000 per employee per quarter.

As with most governmental types of assistance, some patience is needed with the application process. Consider setting aside some uninterrupted time if you wish to seek assistance.

In closing, we are almost at the end of the eighth month of the year, which means we have four months left for tax planning. All the current tax rules are still in effect, so take advantage of the tax benefits that are still on the table. President Biden’s hefty tax budget bill is moving down the pipeline. It is likely to positively impact those among us who fit the description of low- and middle-income earners. It will negatively impact those among us who do not meet that description.

For businesses (small and large), the proposed rate is 28%. Tax planning for 2021 should be a top priority, in my opinion, considering that there is a proposed tax increase in the future. 

If you would like to schedule a tax planning consultation, please don’t hesitate to reach out.

Nadine Riley, CPA
Founder, Masterpiece Accounting Group
Phone: (212) 966-9301
Email: info@mpagroupllc.com

The Masterpiece Accounting Group web, blogs, and articles are not rendering legal, accounting, or other professional advice. Tax strategies and techniques depend on your specific facts and circumstances. You should implement the information in this newsletter only with the advice of your tax and legal advisors.