Kansas Tax Pros LLC

03/14/2024

So, I post when there is something really important, and this is one of those posts. If you have a small business structured as a LLC, partnership or Corporation with less than $5,000,000 in sales and less than 20 employees, you MUST file these documents with the US Treasury Department by Dec 31, 2024 or face $500/day fine up to $10k and/or 2 years in prison. If you start a business after January 1, 2024 you only have 90 days - 90 DAYS, to get this done. Please spare me the conspiracy theory stuff and the Biden or Trump stuff. This is step 1 in preventing money laundering and non reporting of income on your tax returns. Do NOT ask me to teach you how to do this. I can do this reporting as part of my consulting package for my clients. The report is called the Beneficial Ownership Interest report. 1 report for the business and 1 report for each owner with copies of IDs. Here's the Web Link if you are so inclined. If not call me - I can help you after tax season.

HTTPS://WWW.FINCEN.GOV/BOI

12/26/2022

Major update to the 1099k that was coming from cash apps like Venmo PayPal etc. The IRS has just announced a 1 year delay in the implementation of these reporting rules. That being said, this is your chance to clean it up. Which means if you have a business, use a cash app business account. If you receive funds that are personal in nature - GET A PERSONAL ACCOUNT! DO NOT intermix personal and business receipts. Tick tock!

IR-2022-226, December 23, 2022 — The Internal Revenue Service today announced a delay in reporting thresholds for third-party settlement organizations set to take effect for the upcoming tax filing season.

12/16/2022

PREPARE! THE END IS NEAR.

Yep it's almost the end of the tax year, so here are some things to help save you some tax dollars or at least delay some tax dollars.

Watch for my next post on vehicle purchases by December 31 as well!

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 2022 prepayments cannot go into 2023. 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 Friday, December 30, 2022, you mail a rent check for $36,000 to cover all of your 2023 rent. Your landlord does not receive the payment in the mail until Tuesday, January 3, 2023. Here are the results:

• You deduct $36,000 in 2022 (the year you paid the money).
• The landlord reports taxable income of $36,000 in 2023 (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.

2. Stop Billing Customers, Clients, and Patients

Here is one rock-solid, straightforward strategy to reduce your taxable income for this year: stop billing your customers, clients, and patients until after December 31, 2022. (We assume here that you or your corporation is on a cash basis and operates on the calendar year.)

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

Example. Jake, a dentist, usually bills his patients and the insurance companies at the end of each week. This year, however, he sends no bills in December. Instead, he gathers up those bills and mails them the first week of January. Presto! He postponed paying taxes on his December 2022 income by moving that income to 2023.

3. 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 2022.

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).

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

5. 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 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, but 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 this all mean? Never stop documenting your deductions, and 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.

6. Deal with Your Qualified Improvement Property (QIP) IMPORTANT DEADLINE

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

QIP is any improvement made by you to the interior portion of a building you own 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.

The big deal: QIP is not real property that you depreciate over 39 years. QIP is 15-year property, eligible for immediate deduction using either 100 percent bonus depreciation or Section 179 expensing. To get the QIP deduction in 2022, you must place the QIP in service on or before December 31, 2022.

IMPORTANT:
Planning note. If you have QIP property on an already filed 2019 return that you did not amend, it’s on that return as 39-year property. You need to fix that—and likely add some cash to your bank account because of the fix. Example: You can deduct what you thought was 39 years’ worth of deductions in 1 year.

IMPORTANT ALERT:
Venmo, Paypal, CashApp Amazon will all send a 2022 1099k's if the total yearly amount received is greater than $600, in a business account. Example, if you paid for your family reunion and got reimbursed from your family members thru your business PayPal account, you’re going to get a 1099k for that and all the rest of your business transactions. DO NOT mix personal transactions with your business VENMO Paypal etc accounts. You'll have to report, then explain.

02/12/2022

Operation Hidden Treasure is HERE!
I told my clients about actions the IRS was taking to force the reporting of virtual currency transactions on their tax returns. 2 years ago the IRS issued 30,000 letters warning taxpayers as a shot across the bow. They have all the transactions from Coinbase at the minimum as a compromise with Coinbase. Be mindful of the perjury statement when signing your tax return and of the receipt sales, exchanges or dispositions of VC's. Please read the Forbes article if you doubt this post!

IRS is stepping up Crypto enforcement with Operation Hidden Treasure. Spoiler Alert: crypto holders are not so hidden.

03/15/2021

If you received unemployment compensation during 2020, the new stimulus bill excludes the first $10,200 from taxation. However, software companies need to redesign their software AND deal with 50 different states and US possessions on how they are going to deal with the new kink to the tax season. If you have already filed your return claiming unemployment, the IRS is advising you to wait until they have in place a method to handle those amended returns. Guidance from the IRS on the new Advance Premium Tax Credit is still pending from the IRS.

I'll have more updates later when I see them. So many changes. So late in the tax season.

01/23/2021

EIP cards - don't throw those away. Apparently many taxpayers have thrown these away thinking it is a scam. The Treasury department indicates whether you got a direct deposit, a check, or an EIP card last time doesn't mean you'll get the same thing this time. Look for any of these options. If you don't get any of these you can claim a Recovery Rebate Credit on your tax return and get the stimulus payments that way.

12/04/2020

Tax deductions for businesses prior to year end. Lengthy write up but great info.
Here’s some great ideas to reduce your tax burden. All legitimate all allowable. Please call me if you would like to discuss and if you’re looking for a tax professional, by all means please call.

Charlie Schwarz Kansas Tax Pros LLC 316.259.2115

The purpose of this letter is 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.

2. 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 Schafback, 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.

3. 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).

4. 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.

5. 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 this all 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.

6. Thank COVID-19

Let’s be real: there’s little to be grateful for with COVID-19, with one of the several exceptions being the potential opportunities 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.

7. Deal with Your Qualified Improvement Property (QIP)

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.

I trust that you found the seven ideas above worthwhile. If you would like to discuss any of them, please call me on my direct line (316.259.2115).

Charlie Schwarz Kansas Tax Pros LLC 316.259.2115

Copyright 2020, Bradford Tax Institute.

11/04/2020

Time is almost up. November 21st at 3PM is the last time to get your economic stimulus payment from the IRS. 2 weeks ago I helped a couple who moved from western Kansas to Wichita but were using a PO Box for their mail which had long gone dormant. I filed for them based on their 2018 return and in 1 week they received the $2,400. From IRS website: Didn't file a return in 2018 or 2019? If you have a filing requirement and have not filed a tax return for 2018 or 2019, you must file a 2019 tax return to receive the payment. Here is the web-link, or if you need to file a return I can assist you.

Use Get My Payment to get information about your payment status and payment type.

08/24/2020

Urgent - if you have taken a Required Minimum Distribution from your IRA, in 2020, Treasury notice 2020-51 allows you to repay the distribution from your IRA, back into your IRA. That amount will not be taxable income to you. This MAY open tax planning measures such as decreased capital gains tax and potentially reduced taxation on your Social Security.

Why this URGENT notice - you must repay by August 31, 2020.

Act quickly to save some taxes in 2020!

05/01/2020

Some points from a Metro South Chamber of Commerce Zoom meeting today with members of the US Chamber of Commerce and The SBA office in DC. OSHA is working to establish guidelines for what is considered frivolous lawsuits when businesses open. Bad actors will still be taken to the woodshed, but OSHA is attempting to protect honest businesses from litigation. The IRS and Treasury Department are still silent as to the loan forgiveness funds being a taxable event and in need of a 1095C or NOT?! Some questions surrounding placement of PPP funds outside of a companies usual bank accounts (maybe not titled in the name of the business) and what has been rumored to be automatic audit bait. Tracking of the PPP funds should be a priority. More to come!

04/29/2020

After several weeks of not getting a response out of the IRS on the stimulus program, SUCCESS. If you did not direct deposit last year, and haven't filed this year. Finally the IRS will confirm your direct deposit. If you are in this situation, you can go to the IRS website and Input either taxpayers SSN, your address, zip, the adjusted gross from 2018 or 2019, if you owed anything on those tax returns and how much. Once that is confirmed, instantaneously, you will be directed to include the routing number and acct number to get the DD. Yeah!!! No snail mail!