fbpx

Talking Tax to Milwaukee

Call Us: 414-545-1890

15    16    17

Hammernik & Associates BBB Business Review

The Tax Slang Movement

This past week, I finally dove into a project that I has been brewing in my mind for a few years. I published my first podcast episode today. Is it any good? I’m not quite sure. To be honest, I’m not too happy with how it turned out. However, I accomplished part of my goal. I think I will get the hang of it and produce better content the more I do it. The podcast is just part of the overall vision. The vision is to educate the public on tax, financial, and general money education in plain English. I have always put an emphasis on being able to explain tax issues to my clients in a straightforward language. Remove all of the technical tax jargon, and give it to them straight. Unfiltered, easy to understand, money education….Tax Slang.

I’ve realized there is a major disconnect between some of the skills that are taught to us in school and the skills that we actually utilize in the real world. More specifically, a lot of the financial responsibilities that we encounter once we become “adults”. How do I fill out a W-4 to give to my employer? How do I file my tax return….more importantly, why am I even being forced to pay taxes? Why is it important to invest? What’s a loan, a mortgage? How does credit card interest work?

I have heard this phrase soooo many times, ” Why didn’t I learn that in school?”; or, ” I wish I would have known this earlier”.

Instead, in school, we are forced to take curriculum that has no use to us later in life. My initial goal is to educate everyone on financial strategies through entertaining, straight to the point podcasts. I will also be providing video and blog content to try and educate across all platforms.

My ultimate goal is to create online financial educational courses. I want to teach the stuff that should be taught in school. Whether a teenager wants to improve their financial knowledge for the first job, a college graduate wants to prepare to open their first retirement account, or if an adult wants become more informed about their current financial situation.

In general, people don’t like to talk about finances. It’s boring, confusing, or they are scared that they don’t know how to approach the situation.

Tax Slang is going to be your resource to learn valuable financial life skills without the confusion.

Please check out the first episode and follow along each week as I hope to continuously improve as a podcaster.

https://www.buzzsprout.com/1512604/6675680-hogwarts-what-a-pathetic-excuse-for-a-school.mp3?blob_id=28034420&download=true

If there are any topics you want me to discuss, email [email protected]

 

Cheers,

Nick

2020 Year-End Tax Savings Tips

Your goal should be to get the IRS to owe you money. Of course, the IRS is not likely to cut you a check for this money (although in the right circumstances, that will happen), but you’ll realize the cash when you pay less in taxes.

 

Here are seven powerful business tax-deduction strategies that you can easily understand and implement before the end of 2020.

 

  1. Prepay Expenses Using the IRS Safe Harbor

 

You just have to thank the IRS for its tax-deduction safe harbors. IRS regulations contain a safe-harbor rule that allows cash-basis taxpayers to prepay and deduct qualifying expenses up to 12 months in advance without challenge, adjustment, or change by the IRS.

 

Under this safe harbor, your 2020 prepayments cannot go into 2022. This makes sense, because you can prepay only 12 months of qualifying expenses under the safe-harbor rule.

 

For a cash-basis taxpayer, qualifying expenses include lease payments on business vehicles, rent payments on offices and machinery, and business and malpractice insurance premiums.

 

Example. You pay $3,000 a month in rent and would like a $36,000 deduction this year. So on Thursday, December 31, 2020, you mail a rent check for $36,000 to cover all of your 2021 rent. Your landlord does not receive the payment in the mail until Tuesday, January 5, 2021. Here are the results:

 

  • You deduct $36,000 in 2020 (the year you paid the money).
  • The landlord reports taxable income of $36,000 in 2021 (the year he received the money).

 

You get what you want—the deduction this year. The landlord gets what he wants—next year’s entire rent in advance, eliminating any collection problems while keeping the rent taxable in the year he expects it to be taxable.

 

Don’t surprise your landlord: if he had received the $36,000 of rent paid in advance in 2020, he would have had to pay taxes on the rent money in tax year 2020.

 

  1. Stop Billing Customers, Clients, and Patients

 

Here is one rock-solid, time-tested, easy strategy to reduce your taxable income for this year: stop billing your customers, clients, and patients until after December 31, 2020. (We assume here that you or your corporation is on a cash basis and operates on the calendar year.)

 

Customers, clients, patients, and insurance companies generally don’t pay until billed. Not billing customers and patients is a time-tested tax-planning strategy that business owners have used successfully for years.

 

Example. Jim, a dentist, usually bills his patients and the insurance companies at the end of each week; however, in December, he sends no bills. Instead, he gathers up those bills and mails them the first week of January. Presto! He just postponed paying taxes on his December 2020 income by moving that income to 2021.

 

  1. Buy Office Equipment

 

With bonus depreciation now at 100 percent along with increased limits for Section 179 expensing, buy your equipment or machinery and place it in service before December 31, and get a deduction for 100 percent of the cost in 2020.

 

Qualifying bonus depreciation and Section 179 purchases include new and used personal property such as machinery, equipment, computers, desks, chairs, and other furniture (and certain qualifying vehicles).

 

  1. Use Your Credit Cards

 

If you are a single-member LLC or sole proprietor filing Schedule C for your business, the day you charge a purchase to your business or personal credit card is the day you deduct the expense. Therefore, as a Schedule C taxpayer, you should consider using your credit card for last-minute purchases of office supplies and other business necessities.

 

If you operate your business as a corporation, and if the corporation has a credit card in the corporate name, the same rule applies: the date of charge is the date of deduction for the corporation.

 

But if you operate your business as a corporation and you are the personal owner of the credit card, the corporation must reimburse you if you want the corporation to realize the tax deduction, and that happens on the date of reimbursement. Thus, submit your expense report and have your corporation make its reimbursements to you before midnight on December 31.

 

  1. Don’t Assume You Are Taking Too Many Deductions

 

If your business deductions exceed your business income, you have a tax loss for the year. With a few modifications to the loss, tax law calls this a “net operating loss,” or NOL.

 

If you are just starting your business, you could very possibly have an NOL. You could have a loss year even with an ongoing, successful business.

 

You used to be able to carry back your NOL two years and get immediate tax refunds from prior years; however, the Tax Cuts and Jobs Act (TCJA) eliminated this provision. Now, you can only carry your NOL forward, and it can only offset up to 80 percent of your taxable income in any one future year.

 

What does all this mean? You should never stop documenting your deductions, and you should always claim all your rightful deductions. We have spoken with far too many business owners, especially new owners, who don’t claim all their deductions when those deductions would produce a tax loss.

 

  1. Thank COVID-19

 

Let’s be real: there’s little to be grateful for with COVID-19, but one of the several exceptions is the potential opportunity to turn NOLs into cash for your business.

 

Two NOL opportunities come from the Coronavirus Aid, Relief, and Economic Security (CARES) Act:

 

  1. The CARES Act allows NOLs arising in tax years beginning in 2018, 2019, and 2020 to be carried back five years for refunds against prior taxes.
  2. The CARES Act allows application of 100 percent of the NOL to the carryback years.

 

Before the CARES Act, you could not carry back your 2018, 2019, or 2020 losses, and your NOL could offset only up to 80 percent of taxable income before your Section 199A deduction.

 

  1. Deal with Your Qualified Improvement Property

 

In the CARES Act, Congress finally fixed the qualified improvement property (QIP) error that it made in the TCJA.

 

QIP is any improvement made by the taxpayer to the interior portion of a building that is non-residential real property (think office buildings, retail stores, and shopping centers) if you place the improvement in service after the date you place the building in service.

 

If you have such property on an already filed 2018 or 2019 return, it’s on that return as 39-year property. You now have to change it to 15-year property, eligible for both bonus depreciation and Section 179 expensing.

 

2020 Last-Minute Section 199A Tax Reduction Strategies

 

Remember to consider your Section 199A deduction in your year-end tax planning.

 

If you don’t, you could end up with a big fat $0 for your deduction amount. We’ll review three year-end moves that (a) reduce your income taxes and (b) boost your Section 199A deduction at the same time.

 

First Things First

 

If your taxable income is above $163,300 (or $326,600 on a joint return), then your type of business, wages paid, and property can reduce and/or eliminate your Section 199A tax deduction.

 

If your deduction amount is less than 20 percent of your qualified business income (QBI), then consider using one or more of the strategies described below to increase your Section 199A deduction.

 

Strategy 1: Harvest Capital Losses

 

Capital gains add to your taxable income, which is the income that

 

  • determines your eligibility for the Section 199A tax deduction,
  • sets the upper limit (ceiling) on the amount of your Section 199A tax deduction, and
  • establishes when you need wages and/or property to obtain your maximum deductions.

 

If the capital gains are hurting your Section 199A deduction, you have time before the end of the year to harvest capital losses to offset those harmful gains.

 

Strategy 2: Make Charitable Contributions

 

Since the Section 199A deduction uses taxable income for its thresholds, you can use itemized deductions to reduce and/or eliminate threshold problems and increase your Section 199A deduction.

 

Charitable contribution deductions are the easiest way to increase your itemized deductions before the end of the year (assuming you already itemize).

 

Strategy 3: Buy Business Assets

 

Thanks to 100 percent bonus depreciation and Section 179 expensing, you can write off the entire cost of most assets you buy and place in service before December 31, 2020.

 

This can help your Section 199A deduction in two ways:

 

  1. The big asset purchase and write-off can reduce your taxable income and increase your Section 199A deduction when it can get your taxable income under the threshold.
  2. The big asset purchase and write-off can contribute to an increased Section 199A deduction if your Section 199A deduction currently uses the calculation that includes the 2.5 percent of unadjusted basis in your business’s qualified property. In this scenario, your asset purchases increase your qualified property, which in turn increases the deduction you already depend on.

 

2020 Last-Minute Year-End Tax Strategies for Your Stock Portfolio

 

When you take advantage of the tax code’s offset game, your stock market portfolio can represent a little gold mine of opportunities to reduce your 2020 income taxes.

 

The tax code contains the basic rules for this game, and once you know the rules, you can apply the correct strategies.

 

Here’s the basic strategy:

  • Avoid the high taxes (up to 40.8 percent) on short-term capital gains and ordinary income.
  • Lower the taxes to zero—or if you can’t do that, then lower them to 23.8 percent or less by making the profits subject to long-term capital gains.

 

Think of this: you are paying taxes at a 71.4 percent higher rate when you pay at 40.8 percent rather than the tax-favored 23.8 percent.

 

To avoid the higher rates, here are seven possible tax-planning strategies.

 

Strategy 1

 

Examine your portfolio for stocks that you want to unload, and make sales where you offset short-term gains subject to a high tax rate such as 40.8 percent with long-term losses (up to 23.8 percent).

 

In other words, make the high taxes disappear by offsetting them with low-taxed losses, and pocket the difference.

 

Strategy 2

 

Use long-term losses to create the $3,000 deduction allowed against ordinary income.

 

Again, you are trying to use the 23.8 percent loss to kill a 40.8 percent rate of tax (or a 0 percent loss to kill a 12 percent tax, if you are in the 12 percent or lower tax bracket).

 

Strategy 3

 

As an individual investor, avoid the wash-sale loss rule.

 

Under the wash-sale loss rule, if you sell a stock or other security and purchase substantially identical stock or securities within 30 days before or after the date of sale, you don’t recognize your loss on that sale. Instead, the code makes you add the loss amount to the basis of your new stock.

 

If you want to use the loss in 2020, then you’ll have to sell the stock and sit on your hands for more than 30 days before repurchasing that stock.

 

Strategy 4

 

If you have lots of capital losses or capital loss carryovers and the $3,000 allowance is looking extra tiny, sell additional stocks, rental properties, and other assets to create offsetting capital gains.

 

If you sell stocks to purge the capital losses, you can immediately repurchase the stock after you sell it—there’s no wash-sale “gain” rule.

 

Strategy 5

 

Do you give money to your parents to assist them with their retirement or living expenses? How about children (specifically, children not subject to the kiddie tax)?

 

If so, consider giving appreciated stock to your parents and your non-kiddie-tax children. Why? If the parents or children are in lower tax brackets than you are, you get a bigger bang for your buck by

 

  • gifting them stock,
  • having them sell the stock, and then
  • having them pay taxes on the stock sale at their lower tax rates.

 

Strategy 6

 

If you are going to make a donation to a charity, consider appreciated stock rather than cash, because a donation of appreciated stock gives you more tax benefit.

 

It works like this:

 

  • Benefit 1. You deduct the fair market value of the stock as a charitable donation.
  • Benefit 2. You don’t pay any of the taxes you would have had to pay if you sold the stock.

 

Example. You bought a publicly traded stock for $1,000, and it’s now worth $11,000. You give it to a 501(c)(3) charity, and the following happens:

 

  • You get a tax deduction for $11,000.
  • You pay no taxes on the $10,000 profit.

 

Two rules to know:

 

  1. Your deductions for donating appreciated stocks to 501(c)(3) organizations may not exceed 30 percent of your adjusted gross income.
  2. If your publicly traded stock donation exceeds the 30 percent, no problem. Tax law allows you to carry forward the excess until used, for up to five years.

 

Strategy 7

 

If you could sell a publicly traded stock at a loss, do not give that loss-deduction stock to a 501(c)(3) charity. Why? If you sell the stock, you have a tax loss that you can deduct. If you give the stock to a charity, you get no deduction for the loss—in other words, you miss out on that tax-reducing loss.

 

2020 Last-Minute Year-End Tax Strategies for Marriage, Kids, and Family

 

If you are thinking of getting married or divorced, you need to consider December 31, 2020, in your tax planning.

 

Here’s another planning question: Do you give money to family or friends (other than your children, who are subject to the kiddie tax)? If so, you need to consider the zero-taxes planning strategy.

 

And now, consider your children who are under age 18. Have you paid them for work they’ve done for your business? Have you paid them the right way?

 

Here are five strategies to consider as we come to the end of 2020.

 

  1. Put Your Children on Your Payroll

 

If you have a child under the age of 18 and you operate your business as a Schedule C sole proprietor or as a spousal partnership, you absolutely need to consider having that child on your payroll. Why?

 

First, neither you nor your child would pay payroll taxes on the child’s income.

 

Second, with a traditional IRA, the child can avoid all federal income taxes on up to $18,400 in income.

 

If you operate your business as a corporation, you can still benefit by employing the child even though both your corporation and your child suffer payroll taxes.

 

  1. Get Divorced after December 31

 

The marriage rule works like this: you are considered married for the entire year if you are married on December 31.

 

Although lawmakers have made many changes to eliminate the differences between married and single taxpayers, in most cases the joint return will work to your advantage.

 

Warning on alimony! The TCJA changed the tax treatment of alimony payments under divorce and separate maintenance agreements executed after December 31, 2018:

 

  • Under the old rules, the payor deducts alimony payments and the recipient includes the payments in income.
  • Under the new rules, which apply to all agreements executed after December 31, 2018, the payor gets no tax deduction and the recipient does not recognize income.

 

  1. Stay Single to Increase Mortgage Deductions

 

Two single people can deduct more mortgage interest than a married couple.

 

If you own a home with someone other than a spouse, and you bought it on or before December 15, 2017, you individually can deduct mortgage interest on up to $1 million of a qualifying mortgage.

 

For example, if you and your unmarried partner live together and own the home together, the mortgage ceiling on deductions for the two of you is $2 million. If you get married, the ceiling drops to $1 million.

 

If you bought your house after December 15, 2017, then the reduced $750,000 mortgage limit from the TCJA applies. In that case, for two single people, the maximum deduction for mortgage interest is based on a ceiling of $1.5 million.

 

  1. Get Married on or before December 31

 

Remember, if you are married on December 31, you are married for the entire year.

 

If you are thinking of getting married in 2021, you might want to rethink that plan for the same reasons that apply in a divorce (as described above). The IRS could make big savings available to you if you get married on or before December 31, 2020.

 

You have to run the numbers in your tax return both ways to know the tax benefits and detriments for your particular case. But a quick trip to the courthouse may save you thousands.

 

  1. Make Use of the 0 Percent Tax Bracket

 

In the old days, you used this strategy with your college student. Today, this strategy does not work with the college student, because the kiddie tax now applies to students up to age 24.

 

But this strategy is a good one, so ask yourself this question: Do I give money to my parents or other loved ones to make their lives more comfortable?

 

If the answer is yes, is your loved one in the 0 percent capital gains tax bracket? The 0 percent capital gains tax bracket applies to a single person with less than $40,000 in taxable income and to a married couple with less than $80,000 in taxable income.

 

If the parent or other loved one is in the 0 percent capital gains tax bracket, you can get extra bang for your buck by giving this person appreciated stock rather than cash.

 

Example. You give your aunt shares of stock with a fair market value of $20,000, for which you paid $2,000. Your aunt sells the stock and pays zero capital gains taxes. She now has $20,000 in after-tax cash to spend, which should take care of things for a while.

 

Had you sold the stock, you would have paid taxes of $4,284 in your tax bracket (23.8 percent times the $18,000 gain).

 

Of course, $5,000 of the $20,000 you gifted goes against your $11.4 million estate tax exemption if you are single. But if you’re married and you made the gift together, you each have a $15,000 gift-tax exclusion, for a total of $30,000, and you have no gift-tax concerns other than the requirement to file a gift-tax return that shows you split the gift.

 

2020 Last-Minute Year-End Medical Plan Strategies

 

All small-business owners with one to 49 employees should have a medical plan in their business. Sure, the tax law does not require you to have a plan, but you should.

 

Most of the tax rules that apply to medical plans are straightforward when you have fewer than 50 employees.

 

Here are the six opportunities for you to consider:

 

  1. If you did not obtain a Paycheck Protection Program loan, then you should make sure to claim the federal tax credit equal to 100 percent of required emergency sick leave and emergency family leave payments made pursuant to the Families First Coronavirus Response Act. And as long as you are doing that, make sure to obtain the employee retention tax credit too.
  2. If you have a Section 105 plan in place and you have not been reimbursing expenses monthly, do a reimbursement now to get your 2020 deductions, and then put yourself on a monthly reimbursement schedule in 2021.
  3. If you want to but have not implemented your Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), make sure to get that done properly now. You are late, so you could suffer that $50-per-employee penalty should you be found out.
  4. But if you are thinking of the QSEHRA and want to help your employees with more money and flexibility, be sure to consider the Individual Coverage Health Reimbursement Arrangement (ICHRA). The ICHRA has more advantages.
  5. If you operate your business as an S corporation and you want an above-the-line tax deduction for the cost of your health insurance, you need the S corporation to (a) pay for or reimburse you for the health insurance, and (b) put it on your W-2. Make sure that the reimbursement happens before December 31 and that you have the reimbursement set up to show on the W-2.
  6. Claim the tax credit for the group health insurance you give your employees. If you provide your employees with group health insurance, see whether your pay structure and number of employees put you in a position to claim a 50 percent tax credit for some or all of the monies you paid for health insurance in 2020 and possibly in prior years.

 

Hammernik & Associates is offering a complimentary Tax Savings Discovery for any business owner that is profiting at least $75,000 for this year, or is expecting to meet that mark in 2021. If you would like to take advantage of this offer, please contact one of our team members.

COVID-19 Tax Updates

Covid_Taxes_IRS.5e9760e6d05f0

 

With the 2019 Tax Filing Season just behind us, it is difficult to think of the next filing season, however, there are many issues that need to be addressed now, rather than wait.

At this most difficult time for our taxpayers, we want to assure you that our firm is here to assist you with your questions and concerns.

Economic Impact Payment – Stimulus

Many of you received an Economic Impact Payment, known as the Stimulus.  Whether you received a direct deposit, a check or a debit card, you also received a letter from the Internal Revenue Service.  If you received this letter, Notice 1444 in the mail we will need it to prepare your 2020 U. S. Federal Income Tax Return to determine if you qualify for additional payment.

 

If you did not get your payment, you can check the Get My Payment tool on the IRS website to double-check that it has been issued.

 

You can initiate a trace on your payment by calling the IRS at 800-919-9835,expect long wait times, or submitting Form 3911.  The United States Department of Treasury has requested for any deceased taxpayer who received a stimulus, their estate should return the payment to the Internal Revenue Service.

 

Unemployment Compensation

According to the IRS, unemployment benefits are taxable income. This means that any unemployment compensation that you receive from a state or the federal government must be included in your income and will be taxed at your ordinary income tax rate

To access 1099-G tax statements, claimants can go to https://dwd.wisconsin.gov/uiben/1099.htm and then follow a few easy steps to obtain an electronic copy of their 2020 benefit payment records.

In response to customer service trends toward the convenience of online self-service, claimants who have logged onto UI’s online benefits services system are being notified their 1099-G statements for 2020 will be accessible online and that they should not expect to be mailed paper copies. DWD securely stores 1099-G forms online for all claimants to access and print for their records. Claimants’ statements are available online for the past six years, which is helpful if claimants have to file amended tax returns. The UI Division is required to send 1099-G information to the Internal Revenue Service and the Wisconsin Department of Revenue

This tax form shows the amount of unemployment benefits you received and the amount of taxes withheld.   Unemployment benefits will also be taxable to your state if you live in a state with state income tax.  We will need the Form 1099-G to prepare your 2020 tax return.

You may wish to have withholding taken from your payment or may make Estimated Tax Payments to the IRS and the State. If you received Unemployment benefits, you may want to plan ahead for the potential tax impact so that there are not any surprises when you file your 2020 tax return.

 

Payroll Protection Plan Loans

Payroll Protection Plan (PPP) loans obtained to assist you keep your business open and your staff employed will undoubtedly have some impact on your 2020 tax filing.  The United States Congress is considering additional legislation to determine if debt forgiveness will not allow deductions used to eliminate the debt to be deductible or if there will be a blanket allowance of up to $150,000 of the PPP to be considered a grant and non-taxable. Currently, the part of the loan that is forgiven will not be allowed as deductible expenses, i.e. payroll, rent, utilities. This may increase your profits subject to tax. Tax Planning will be very important if this legislation does not change.

 

RMDs – Required Minimum Distributions

The CARES Act enabled any taxpayer with an RMD due in 2020 from a defined-contribution retirement plan, including a 401(k) or 403(b) plan, or an IRA, to skip those RMDs this year. This includes anyone who turned age 70 1/2 in 2019 and would have had to take the first RMD by April 1, 2020. This waiver does not apply to defined-benefit plans.

In addition to the rollover opportunity, an IRA owner or beneficiary who has already received a distribution from an IRA of an amount that would have been an RMD in 2020 can repay the distribution to the IRA by August 31, 2020. The notice provides that this repayment is not subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs.

 

These issues and many others have impacted our clients so far this year including changes in the tax code that may require amendment of prior tax returns.

 

Additionally the Supreme Court is scheduled to hear oral arguments concerning the constitutionality of the Patient Protection and Affordable Care Act, ACA, case California vs. Texas.  Should the Supreme Court over-turn the ACA it will overturn such tax issues as the Additional Medicare Tax and the Net Investment Income Tax.  It remains to be seen the full tax scope of such a decision.

 

Again, we understand the need to stay safe and well, it is our priority for our firm as well.

We are taking the precautions to keep you, our staff and us safe during these times.

 

We are ready to serve you.  Please call our office for an appointment, either face-to-face or by telephone.

 

Our best of wishes for your health and well-being.

 

Team Hammernik

Milwaukee Restart Grant Program

mke flag

The goal of the Milwaukee Restart Program (Restart) is to help local businesses that suffered as a result of the pandemic to reopen and adapt to the “new normal”

Eligibility

Restart grants will assist for-profit businesses located in the City of Milwaukee that have 20 or fewer full-time or full-time equivalent employees and greater than $0 but less than $2 million in 2019 revenue. Restart grants shall be limited to one per business owner. All applicants must be current on property taxes owed to the City of Milwaukee up through the 2018 tax bill.

For-profit Daycares will be eligible if they can demonstrate they have not continued to receive W-2 allocations during the pandemic or federal assistance.

The following business types are NOT eligible to apply:
gambling or gaming, national franchises, adult establishments, massage parlors, pawn shops, pay day loan or auto loan stores, home-based businesses, not-for-profits, tobacco stores, home-based businesses and liquor stores

Eligible Expenditures

Businesses may apply for the following expenses associated with re-starting business operations:

  • Personal Protective Equipment for employees (Limit of $100 per FTE; maximum of $2,000.00)
  • Modifications to business space and operations to adapt to COVID-19 pandemic (Limit of $3 per square foot of business storefront space; maximum of $7,500.00)
  • Restock of perishable inventory (Limited to $7,500.00; purchase of alcoholic beverages shall not exceed 25% or $1,875.00)

These calculations are provided to assist applicants to understand the maximum amount allowed. However, please note that final allocations will depend on available funding and demand for the program.

How to apply

As part of the application process, applicants are required to upload electronic versions of these documents:

  • Tax Return and K-1s for the business for the most recently completed year, or company-prepared Financial Statements for 2019
  • Documentation indicating the number of employees who worked during 2019 (Form 941, payroll report, etc.)
  • A current W9 form Rev. Version 2018
  • Photos of the interior and exterior of the business
  • Plan for spending the grant for the eligible expenses, including estimated amounts and descriptions of the expenditures

Applications must be made online between 9:00 AM CDT on May 28, 2020 and will be accepting applications until 5:00 PM CDT on June 12, 2020. Applicants will need to create an account to apply. This will allow users to save progress on their applications should they need additional time to fill out the application. Please make sure to keep a note of your user name and password. Click here for the Milwaukee Restart Application.

Grant Follow Up 

All businesses receiving Restart assistance will be required to complete a follow-up survey after the grant is awarded. Grant recipients must keep detailed records on reopening dates, receipts for expenditure of grant funds, and staff and payroll records.

Additional Grant Becomes Available For Wisconsin Small Businesses

WereAllIn_Grey-300x190

Over the past few months COVID-19 has changed the way a lot of small businesses operate. Some have been unable to be open, some have adapted and changed, and some have even thrived. The Government had made a few loans available to try and help small businesses keep their employees employed and to also cover some overhead expenses. Now, locally, the State of Wisconsin is offering a grant of their own to local small businesses.

“We’re All In” is a pandemic relief grant for small businesses in the State of Wisconsin.

HOW IT WORKS

Funded by the federal Coronavirus Aid, Relief and Economic Security (CARES) Act, the We’re All In Small Business Grant Program will provide $2,500 to 30,000 Wisconsin small businesses to assist with the costs of business interruption or for health and safety improvements, wages and salaries, rent, mortgages and inventory.

ELIGIBILITY REQUIREMENTS

To be eligible, businesses must:

  • be a Wisconsin-based, for-profit business;
  • employ 20 or fewer full-time equivalent (FTE) employees, including the owner;
  • earn greater than $0 but less than $1 million in annual revenues (gross sales and receipts); and
  • have started operating prior to Jan. 1, 2020, and have been in business as of Feb. 2020. (Seasonal businesses should use the highest total FTEs employed during the season.)
  • APPLICATION PERIOD

    The online grant application will be accessible for one week from 8 a.m. Monday, June 15, through 11:59 p.m. Sunday, June 21.

  • BE PREPARED

    Applicants are encouraged to prepare for the one-week application period by gathering the following required documents:

    • 2018 or 2019 federal tax return for business (If you started your business in 2020, you are not eligible for this grant). Applicable tax returns are:
      • IRS form 1065 Partnership Return (no K-1s required)
      • IRS form 1120 Corporation Return (no schedules required)
      • IRS form 1120S S Corporation Return (no K-1s required)
      • IRS form 1040 (sole proprietors) and the following:
        • Schedule C, Profit and Loss from Business
    • Signed W-9 form available at www.irs.gov/pub/irs-pdf/fw9.pdf
    • A letter or email of acknowledgement from a community organization indicating your business was in operation in February 2020. The letter or email can be from any of the following:
      • Chamber of commerce
      • Main Street or Connect Communities organization
      • Local business improvement district
      • Neighborhood economic development association
      • Local economic development organization
      • County economic development organization
      • Municipality, including tribal government
      • County
      • Local bank, credit union or community development financial institution
      • Regional UW Small Business Development Center
      • U.S. Export Assistance Center – Wisconsin
      • Regional economic development organization
      • Regional Planning Commission
      • Trade association
    • Sample text for a letter or email can be downloaded here (file will be saved to your downloads folder automatically). An electronic letter submitted to you via email is acceptable.

Find out more information regarding the We’re All In Small Business Grant, please review this page of frequently asked questions.

Finding the Right Accountant to Successfully Guide You Through the Tax Maze

Choosing an Accountant Who Puts Your Goals First

There is an endless supply of do-it-yourself tax preparation tools and websites, and the sheer volume of options can lead you to believe the process of filing your returns is simple.

However, a DIY approach only works if you are satisfied with paying more than necessary. Tax preparation software handles all of the basics, importing income and considering common tax deductions. Unfortunately, when it comes to careful application of less-common tax-reduction techniques, these programs simply can’t compete with a skilled tax professional.

The Amazon Best Selling book, The Great Tax Escape, walks you through the process of choosing an accountant. Specifically, you will learn what to look for – and what to avoid – if you want a tax specialist who will help you keep your tax bill low.

Five Reasons to Hire a Highly-Qualified Accountant

As you know from your experience in business settings, companies that focus on their core mission are more successful. Devoting internal resources to creating excellent products and services, while outsourcing peripheral functions like IT and HR, makes it possible to innovate and deliver best-in-class solutions.

Focusing on your core mission is just as critical when it comes to tax preparation. The time you would spend trying to track down tax information is better applied elsewhere, and you are likely to pay more in the end anyway. These are five ways your accountant will free up resources for you to use in ways that will further your personal mission:

  • The tax code is constantly changing, and deductions that were available last year may not be appropriate today. Conversely, expenses you couldn’t deduct in previous returns may now be permitted. A skilled accountant stays on top of these changes and applies them to your situation, so you don’t have to complete extensive research.
  • Much of the tax code is spelled out and clarified based on specific cases. Unless you are following industry developments day in and day out, you are likely to miss all but the most significant decisions. Your accountant has years of experience with filing returns, and continuing education is required in every state. You can be sure that these professionals understand what works – and what doesn’t.
  • Experience also helps when it comes to developing your long-term tax savings strategy. Accountants have watched businesses grow and change, and they know how to get results. Their expertise in complex decisions like choosing a business entity or whether to consider cost segregation can be invaluable.
  • Different types of income are taxed at varying rates, and do-it-yourself filers often assume there is nothing that can be done to change their circumstances. Talented accountants know better. With the help of a skilled professional, it may be possible to move income from high-tax categories to low-tax categories, which can mean significant savings. .
  • Finally, timing is always important in the financial world, and that holds true when it comes to your tax strategy. Accountants have a deep understanding of the economy’s ebb and flow, and they notice patterns that have played out over the course of their careers. They use this experience to advise on when and how to apply tax strategies for maximum savings.

Learn more about why and how to choose the right accountant for all of your tax preparation needs by requesting a copy of The Great Tax Escape from our website.

Finding the right accountant to successfully guide you through the tax maze

BusinessCoaching

 

Choosing an Accountant Who Puts Your Goals First

There is an endless supply of do-it-yourself tax preparation tools and websites, and the sheer volume of options can lead you to believe the process of filing your returns is simple.

However, a DIY approach only works if you are satisfied with paying more than necessary. Tax preparation software handles all of the basics, importing income and considering common tax deductions. Unfortunately, when it comes to careful application of less-common tax-reduction techniques, these programs simply can’t compete with a skilled tax professional.

The Amazon Best Selling book, The Great Tax Escape, walks you through the process of choosing an accountant. Specifically, you will learn what to look for – and what to avoid – if you want a tax specialist who will help you keep your tax bill low.

Five Reasons to Hire a Highly-Qualified Accountant

As you know from your experience in business settings, companies that focus on their core mission are more successful. Devoting internal resources to creating excellent products and services, while outsourcing peripheral functions like IT and HR, makes it possible to innovate and deliver best-in-class solutions.

Focusing on your core mission is just as critical when it comes to tax preparation. The time you would spend trying to track down tax information is better applied elsewhere, and you are likely to pay more in the end anyway. These are five ways your accountant will free up resources for you to use in ways that will further your personal mission:

  • The tax code is constantly changing, and deductions that were available last year may not be appropriate today. Conversely, expenses you couldn’t deduct in previous returns may now be permitted. A skilled accountant stays on top of these changes and applies them to your situation, so you don’t have to complete extensive research.
  • Much of the tax code is spelled out and clarified based on specific cases. Unless you are following industry developments day in and day out, you are likely to miss all but the most significant decisions. Your accountant has years of experience with filing returns, and continuing education is required in every state. You can be sure that these professionals understand what works – and what doesn’t.
  • Experience also helps when it comes to developing your long-term tax savings strategy. Accountants have watched businesses grow and change, and they know how to get results. Their expertise in complex decisions like choosing a business entity or whether to consider cost segregation can be invaluable.
  • Different types of income are taxed at varying rates, and do-it-yourself filers often assume there is nothing that can be done to change their circumstances. Talented accountants know better. With the help of a skilled professional, it may be possible to move income from high-tax categories to low-tax categories, which can mean significant savings. .
  • Finally, timing is always important in the financial world, and that holds true when it comes to your tax strategy. Accountants have a deep understanding of the economy’s ebb and flow, and they notice patterns that have played out over the course of their careers. They use this experience to advise on when and how to apply tax strategies for maximum savings.

Learn more about why and how to choose the right accountant for all of your tax preparation needs by requesting a copy of The Great Tax Escape from our website.

Does my Rental Property Qualify for the New Section 199A Deduction Under Tax Reform?

rental

 

How do you know if your rental property qualifies for the 20 percent tax deduction under new tax code Section 199A? Just what we need–something else to learn along with all of the other tax code changes this year.

Well, maybe not.

There is a piece of good news: we won’t be required to learn this tax code because everything we need to know about it is in the new regulations proposed by the IRS. Existing rules govern.

Does the IRS deem your rental property a business? If so, then yes, your property qualifies for the deduction.

It might sound strange to think of your rental property as a business, especially if you now report the rental on Schedule E of your 1040.

If your rental property is carefully selected, maintained indoors and out, and managed efficiently, it can provide residual income, capital gains, and tax advantages, including the 199A deduction in many cases.

How Does a Rental Property Qualify as a Business?

If the rental property you own earns a profit, you own a business. Whether you manage it or you hire a company or individual to manage it, it still qualifies for the 199A deduction.

And the news gets better….

Schedule E rentals also qualify for even sweeter tax benefits. There are two ways the IRS treats rental activity as a business for the Section 199A deduction:

  1. Tax-favored Section 1231 treatment
  2. Businesses use an office in your home (and if it’s a principle office, and you have more than one rental property, you qualify for related business deductions for travel to and from your properties.)
    Your rental property will qualify for the 20 percent Section 199A deduction if you rent it to a commonly controlled trade or business, even if your rental property does not qualify as a Section 162 trade or business.

All of this can be confusing. Would you like help discerning whether your rental properties qualify for the new 20 percent Section 199A tax deduction? If so, please contact one of our qualified tax professionals. We can help with all of your Milwaukee rental property tax questions.

Do You Truly Know Your Business Costs? You Better!

outsource-profit-730x410

Your company’s profitability depends not only on sales, but also on effective cost management. Are you adequately addressing the cost side of the business equation?

Analyze Your Cost Structure

You probably can readily identify the products and/or services that are generating your greatest sales volume. But can you identify all the costs associated with providing each product or service? Only when you know your true costs can you effectively allocate resources to the work that is most profitable for your company.

Actively Monitor Operations

As the busy owner of a small business, you can’t be everywhere all the time. But you do need to stay in circulation, regularly observing the day-to-day operations of your business and talking to your managers and employees. By staying visible and encouraging an open dialogue, you’ll be in a better position to uncover costly problems before they seriously erode your company’s bottom line.

Solicit Bids

Even if you are satisfied with a current vendor, you may want to talk to the competition from time to time. You won’t necessarily want to switch vendors simply because you are quoted a better price. But you may be able to use that price in negotiating more favorable terms from your existing supplier.

Watch for Discounts

In the interests of cash flow, your company may routinely pay its bills only when they come due. While this generally is a sensible strategy, it may not be wise if you are passing up generous cash discounts for earlier payment. In the current low interest rate environment, borrowing the funds you need to take advantage of discounts may be a better move. For example, suppose a vendor offers your company a 2% discount for paying a $10,000 invoice 20 days early. Passing up the discount will cost you $200. Instead, you might borrow $9,800 from your bank, pay the discounted invoice, and repay the loan in 20 days. If the rate on your bank line of credit is 8%, you’ll owe about $45 of interest — for a net savings of $155 on just one invoice.

Effective cost management requires good information and careful planning.

2018 Tax Changes: Frequently Asked Questions

 

As we move closer to the tax filing season, the Tax Cuts and Jobs Act (TCJA) has raised many questions in regards to tax preparation for Milwaukee taxpayers. Below are answers to some of them.

Do I need to adjust my withholding allowances, given that tax brackets have changed?

You may notice a change in your net paycheck as a result of the tax law, which alters tax rates, brackets, and other items that affect how much tax is withheld from your pay. The IRS has already issued new withholding tables, and your employer should adjust its withholding without requiring any action on your part. But you may want to take the opportunity to make sure you are claiming the appropriate number of withholding allowances by filling out IRS Form W-4. This form is used to determine your withholding based on your filing status and other information. The IRS suggests that you consider completing a new Form W-4 each year and when your personal or financial situation changes.

Can I take advantage of the new deduction for pass-through business income?

The new rules for owners of pass-through entities — partnerships, limited liability companies, S corporations, and sole proprietorships — allow them to deduct 20% of their business pass-through income. The 20% deduction is available to owners of almost any type of trade or business whose taxable income does not exceed $315,000 (joint return) or $157,500 (other returns). Above those amounts, the deduction is subject to certain limitations based on business assets and wages. Different deduction restrictions apply to individuals in specified service businesses (e.g., law, medicine, and accounting).

Can I still deduct mortgage interest and real estate taxes paid on a second home?

Yes, but the new rules limit these deductions. The deduction for total mortgage interest is limited to the amount paid on underlying debt of up to $750,000 ($375,000 for married individuals filing separately). Previously, the limit was $1 million. Note that the new restriction will not apply to taxpayers with home acquisition debt incurred on or before December 15, 2017. Additionally, the deduction for interest on home equity loans (new and existing) is suspended and will not be available for tax years 2018-2025.

Note that the law also establishes a $10,000 limit on the combined total deduction for state and local income (or sales) taxes, real estate taxes, and personal property taxes. As a result, your ability to deduct real estate taxes may be limited.

Are there any changes to capital gains rates and rules that I should know about?

The rules concerning how capital gains are determined and taxed remain essentially unchanged. But since short-term gains (for assets held one year or less) are taxed as ordinary income, they will be taxed at the new ordinary income rates and brackets. Net long-term gains will still be taxed at rates of 0%, 15%, or 20%, depending on your taxable income. And the 3.8% net investment income tax that applies to certain high earners will still apply for both types of capital gains.

2018 Long-Term Capital Gains Breakpoints

Rate Single Filers Joint Filers Head of Household Married Filing Separately
0% Below $38,600 Below $77,200 Below $51,700 Below $38,600
15% $38,600-$425,799 $77,200-$478,999 $51,700-$452,399 $38,600-$239,499
20% $425,800 and above $479,000 and above $452,400 and above $239,500 and above

Can I still deduct my student loan interest?

Yes. Although some earlier versions of the tax bill disallowed the deduction, the final law left it intact. That means that student loan borrowers will still be able to deduct up to $2,500 of the interest they paid during the year on a qualified student loan. The deduction is gradually reduced and eventually eliminated when modified adjusted gross income reaches $80,000 for those whose filing status is single or head of household, and over $165,000 for those filing a joint return.

I have a large family and formerly got to take an exemption for each member. Is there anything in the new law that compensates for the loss of these exemptions?

The new law suspends exemptions for you, your spouse, and dependents. In 2017, each full exemption translated into a $4,050 deduction from taxable income which, for large families, added up. Compensating for this loss, the new law almost doubles the standard deduction to $12,000 for single filers and $24,000 for joint filers. Additionally, the child tax credit is doubled to $2,000 per child, and the income levels at which the credit phases out are significantly increased. Depending on your situation, these new provisions could potentially offset the suspension of personal exemptions.

I have been gifting friends and relatives $14,000 per year to reduce my taxable estate. Can I still do this?

Yes, you may still make an annual gift of up to $15,000 in 2018 (increased from $14,000 in 2017) to as many people as you want without triggering gift tax reporting or using any of your federal estate and gift tax exemption. But TCJA also doubles the exemption to an estimated $11.2 million ($22.4 million for married couples) in 2018. So anyone who anticipates having a taxable estate lower than these thresholds may be able to gift above the annual $15,000 per-recipient limit and ultimately not incur any federal estate or gift tax. Note, however, that the higher exemption amount and many of TCJA’s other changes to personal taxes are scheduled to expire after 2025, unless Congress acts to extend them.

This communication is not intended to be tax advice and should not be treated as such. Each individual’s tax circumstances are different. You should contact your tax professional to discuss your personal situation.

1 2 3 15