COVID-19 has affected small businesses in ways they never could have imagined. It’s more important than ever to have an up-to-date and accurate understanding of your business financials. Outsourcing your bookkeeping to the experts at David Mills, CPA, LLC is the answer.
When the clock struck midnight on Jan. 1, few people could have envisioned the year that 2020 would become. The worldwide COVID-19 pandemic has upended businesses and forced companies large and small to re-evaluate.
Some businesses have struggled during COVID-19 with lost business, redacted productivity, disrupted supply chains and more. Others have found their niche during the pandemic and have experienced business growth.
Businesses on both ends of the spectrum have realized now, more than ever, accurate financial data is key.
With offices in Morton and East Peoria, we’re Central Illinois small business bookkeeping experts. We understand most business owners don’t have the time to learn the skills necessary to accurately keep their set of books. That’s especially true in 2020 when business owners are faced with hundreds of additional decisions and challenges. Outsourcing your bookkeeping is the solution.
Our bookkeepers are current and up-to-date on all bookkeeping and payroll laws, so there’s no need to train your staff. This is especially vital in 2020 where cuts to payroll taxes, PPP loans and other COVID-related government programs have made the year unlike any other.
When you use David Mills, CPA, LLC to provide your small business bookkeeping services, you know you’ll receive timely financial information, allowing you to make sound decisions.
Will you need to take out a small business loan? Should you refinance existing loans? The business climate in 2020 means many are re-evaluating their finances. Up-to-date information gives you the knowledge you need to make the best decisions for your business.
The pandemic has forced Americans to change their habits and spending. Perhaps your business has been one that’s benefitted from COVID-19. Trying to manage your bookkeeping while also staying on top of business demands can be a daunting task.
Running your business and catering to your customers’ needs is what you do best. Leave the bookkeeping to us.
Every month, we will:
All of the information is entered into a QuickBooks file, which can be easily retrieved whenever information is needed.
COVID-19 has made 2020 much more challenging, however, your business bookkeeping doesn’t have to be part of that challenge. Contact David Mills, CPA, LLC today.
While the COVID-19 crisis has devastated many existing businesses, the pandemic has also created opportunities for entrepreneurs to start-up new businesses.
For example, some businesses are being launched online to provide products and services to people staying at home.
Entrepreneurs often don’t know that many expenses incurred by start-ups can’t be currently deducted. You should be aware that the way you handle some of your initial expenses can make a large difference in your tax bill.
If you’re starting or planning a new enterprise, keep these key points in mind:
Start-up costs include those incurred or paid while creating an active trade or business — or investigating the creation or acquisition of one.
Under the Internal Revenue Code, taxpayers can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs in the year the business begins. As you know, $5,000 doesn’t get you very far today!
And the $5,000 deduction is reduced dollar-for-dollar by the amount by which your total start-up or organizational costs exceed $50,000. Any remaining costs must be amortized over 180 months on a straight-line basis.
No deductions or amortization deductions are allowed until the year when “active conduct” of your new business begins.
Generally, that means the year when the business has all the pieces in place to begin earning revenue.
To determine if a taxpayer meets this test, the IRS and courts generally ask questions such as:
Expenses that qualify In general, start-up expenses include all amounts you spend to:
Investigate the creation or acquisition of a business
To be eligible for the election, an expense also must be one that would be deductible if it were incurred after a business began.
One example is money you spend analyzing potential markets for a new product or service.
To qualify as an “organization expense,” the expenditure must be related to creating a corporation or partnership. Some examples of organization expenses are legal and accounting fees for services related to organizing a new business and filing fees paid to the state of incorporation.
Thinking ahead If you have start-up expenses that you’d like to deduct this year, you need to decide whether to take the elections described above. Recordkeeping is critical.
At David Mills, CPA, LLC we’re here to help answer your business start-up questions and to offer advice. Contact us about your start-up plans. We can help with the tax and other aspects of your new business.
The IRS has issued guidance providing relief from failure to make employment tax deposits for employers that are entitled to the refundable tax credits provided under two laws passed in response to the coronavirus (COVID-19) pandemic.
The two laws are the Families First Coronavirus Response Act, which was signed on March 18, 2020, and the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act, which was signed on March 27, 2020.
The tax code imposes a penalty for any failure to deposit amounts as required on the date prescribed, unless such failure is due to reasonable cause rather than willful neglect.
An employer’s failure to deposit certain federal employment taxes, including deposits of withheld income taxes and taxes under the Federal Insurance Contributions Act (FICA) is generally subject to a penalty.
Employers paying qualified sick leave wages and qualified family leave wages required by the Families First Act, as well as qualified health plan expenses allocable to qualified leave wages, are eligible for refundable tax credits under the Families First Act.
Specifically, provisions of the Families First Act provide a refundable tax credit against an employer’s share of the Social Security portion of FICA tax for each calendar quarter, in an amount equal to 100% of qualified leave wages paid by the employer (plus qualified health plan expenses with respect to that calendar quarter).
Additionally, under the CARES Act, certain employers are also allowed a refundable tax credit under the CARES Act of up to 50% of the qualified wages, including allocable qualified health expenses if they are experiencing:
This credit is limited to $10,000 per employee over all calendar quarters combined.
An employer paying qualified leave wages or qualified retention wages can seek an advance payment of the related tax credits by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19.
The Families First Act and the CARES Act waive the penalty for failure to deposit the employer share of Social Security tax in anticipation of the allowance of the refundable tax credits allowed under the two laws.
IRS Notice 2020-22 provides that an employer won’t be subject to a penalty for failing to deposit employment taxes related to qualified leave wages or qualified retention wages in a calendar quarter if certain requirements are met.
Contact David Mills, CPA, LLC for more information about whether you can take advantage of this relief.
As a small-business owner, it always helps to have expert advice at your fingertips. A QuickBooks ProAdvisor offers that expertise.
For small and medium-sized businesses, QuickBooks is one of the most popular accounting software programs available.
Using QuickBooks, businesses can manage and pay bills, keep track of accounts payable and receivable, oversee financial reporting, organize payroll functions and track employee time.
Relying on a QuickBooks ProAdvisor ensures your business gets the most out of the accounting software.
QuickBook ProAdvisors must complete comprehensive training and pass a certification exam to earn the ProAdvisor title.
The certification ensures all ProAdvisors are experts in the latest QuickBook tools and can help customize QuickBook software to fit your business needs.
At David Mills, CPA, LLC, we have QuickBooks ProAdvisors on staff who are able to train and assist you with all your QuickBooks needs.
We provide one-on-one or small group QuickBooks training sessions, and our on-staff experts can meet in person. Our training is geared toward your business.
Our ProAdvisors will help design and set up the chart of accounts as well as set up payroll, receivables, payables, inventory and other features needed by your business.
Does the idea of being your own boss and being in business for yourself appeal to you?
Many people who launch small businesses start out as sole proprietors. However, there are tax rules and considerations to consider if you’re a sole proprietor.
Here are nine things to consider if you are your own boss
To the extent your business generates qualified business income, you are eligible to claim the 20% pass-through deduction, subject to limitations.
The deduction is taken “below the line,” meaning it reduces taxable income, rather than being taken “above the line” against your gross income.
However, you can take the deduction even if you don’t itemize deductions and instead claim the standard deduction.
The net income will be taxable to you regardless of whether you withdraw cash from the business.
Your business expenses are deductible against gross income and not as itemized deductions.
If you have losses, they will generally be deductible against your other income, subject to special rules related to hobby losses, passive activity losses, and losses in activities in which you weren’t “at risk.”
For 2020, you pay self-employment tax (Social Security and Medicare) at a 15.3% rate on your net earnings from self-employment of up to $137,700, and Medicare tax only at a 2.9% rate on the excess.
An additional 0.9% Medicare tax (for a total of 3.8%) is imposed on self-employment income in excess of $250,000 for joint returns; $125,000 for married taxpayers filing separate returns; and $200,000 in all other cases.
Self-employment tax is imposed in addition to income tax, but you can deduct half of your self-employment tax as an adjustment to income.
For 2019, these are due April 15, June 15, September 15 and January 15, 2021.
If you work from a home office, perform management or administrative tasks there, or store product samples or inventory at home, you may be entitled to deduct an allocable portion of some costs of maintaining your home.
And if you have a home office, you may be able to deduct expenses of traveling from there to another work location.
This means your deduction for medical care insurance won’t be subject to the rule that limits medical expense deductions.
Specifically, you should carefully record your expenses in order to claim all the tax breaks to which you’re entitled.
Certain expenses, such as automobile, travel, meals, and office-at-home expenses, require special attention because they’re subject to special recordkeeping rules or deductibility limits.
When you hire employees, you need to get a taxpayer identification number and withhold and pay employment taxes.
The advantage is that amounts contributed to the plan are deductible at the time of the contribution and aren’t taken into income until they’re are withdrawn.
Because many qualified plans can be complex, you might consider a SEP plan, which requires less paperwork.
A SIMPLE plan is also available to sole proprietors that offers tax advantages with fewer restrictions and administrative requirements.
If you don’t establish a retirement plan, you may still be able to contribute to an IRA.
At David Mills CPA, LLC, we work with small businesses throughout the Central Illinois.
We can also help business owners understand the various business structures to ensure their business is structured to best meet their needs.
For more information, contact David Mills CPA, LLC today.
In 2020, the optional standard mileage rate used to calculate the deductible costs of operating an automobile for business decreased by one-half cent, to 57.5 cents per mile.
As a result, you might claim a lower deduction for vehicle-related expenses for 2020 than you can for 2019.
Businesses can generally deduct the actual expenses attributable to the business use of vehicles. This includes gas, oil, tires, insurance, repairs, licenses and vehicle registration fees.
In addition, you can claim a depreciation allowance for the vehicle. However, in many cases, depreciation write-offs on vehicles are subject to certain limits that don’t apply to other types of business assets.
The cents-per-mile rate comes into play if you don’t want to keep track of actual vehicle-related expenses.
With this approach, you don’t have to account for all your actual expenses, although you still must record certain information, such as the mileage for each business trip, the date, and the destination.
Using the mileage rate is also popular with businesses that reimburse employees for business use of their personal vehicles.
Such reimbursements can help attract and retain employees who drive their personal vehicles extensively for business purposes.
Why? Under the Tax Cuts and Jobs Act, employees can no longer deduct unreimbursed employee business expenses, such as business mileage, on their own income tax returns.
If you do use the cents-per-mile rate, be aware that you must comply with various rules. If you don’t, the reimbursements could be considered taxable wages to the employees.
The rate for 2020 Beginning on January 1, 2020, the standard mileage rate for the business use of a car (van, pickup or panel truck) is 57.5 cents per mile.
It was 58 cents for 2019 and 54.5 cents for 2018. The business cents-per-mile rate is adjusted annually.
It’s based on an annual study commissioned by the IRS about the fixed and variable costs of operating a vehicle, such as gas, maintenance, repair and depreciation.
Occasionally, if there’s a substantial change in average gas prices, the IRS will change the mileage rate midyear.
There are some situations when you can’t use the cents-per-mile rate. In some cases, it partly depends on how you’ve claimed deductions for the same vehicle in the past.
In other cases, it depends on if the vehicle is new to your business this year or whether you want to take advantage of certain first-year depreciation tax breaks on it.
As you can see, there are many factors to consider in deciding whether to use the mileage rate to deduct vehicle expenses.
At David Mills CPA, LLC, our expert can help if you have questions about tracking and claiming such expenses in 2020 — or claiming them on your 2019 income tax return.
David Mills CPA, LLC has offices in Morton and East Peoria.
Does your company do business across state lines? If so, it’s a good idea to reexamine your sales tax obligations.
Today, nearly every state with a sales tax has enacted a similar law, which makes it prudent for companies doing business across state lines to review their tax obligations.
South Dakota’s economic nexus statute was upheld, but what’s nexus? A state is constitutionally prohibited from taxing business activities unless those activities have a substantial “nexus,” or connection, with the state.
Before Wayfair, simply selling to customers in a state wasn’t enough to establish nexus. The business also had to have a physical presence in the state, such as offices, retail stores, manufacturing or distribution facilities, or sales reps.
In Wayfair, the Supreme Court ruled that a business could establish nexus through economic or virtual contacts with a state, even if it didn’t have a physical presence.
The Court didn’t create a bright-line test for determining whether contacts are “substantial,” but found that the thresholds established by South Dakota’s law are sufficient.
Out-of-state businesses must collect and remit South Dakota sales taxes if, in the current or previous calendar year, they have
The vast majority of states now have economic nexus laws, although the specifics vary. Many states adopted the same sales and transaction thresholds accepted in Wayfair, but a number of states apply different thresholds.
And some chose not to impose transaction thresholds, which many view as unfair to smaller sellers (an example of a threshold might be 200 sales of $5 each would create nexus).
According to state officials, marketplace facilitators who meet state nexus thresholds are required to register to collect and remit Illinois Use Tax for sales made through their marketplace.
Marketplace sellers selling through the marketplace are not responsible for collecting and remitting Illinois Use Tax on these sales. (Read more about Illinois nexus requirements)
If your business makes online, telephone or mail-order sales in states where it lacks a physical presence, it’s critical to find out whether those states have economic nexus laws and determine whether your activities are sufficient to trigger them.
If you have nexus with a state, you’ll need to register with the state and collect state and applicable local taxes on your taxable sales there. Even if some or all of your sales are tax-exempt, you’ll need to secure exemption certifications for each jurisdiction where you do business.
Alternatively, you might decide to reduce or eliminate your activities in a state if the benefits don’t justify the compliance costs.
If you make sales through a “marketplace facilitator,” such as Amazon or Ebay, be aware that an increasing number of states have passed laws that require such providers to collect taxes on sales they facilitate for vendors using their platforms.
If you need assistance in setting up processes to collect sales tax or you have questions about your responsibilities, call David Mills, CPA, LLC. Our experts can help answer all your small business tax questions.
Keeping track of key tax-related deadlines for your business is an ongoing concern. Here are some of the key tax-related deadlines affecting businesses and other employers during the first quarter of 2020.
Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you.
Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.
January 31 is the deadline to File 2019 Forms W-2 “Wage and Tax Statement,” with the Social Security Administration and provide copies to your employees.
Provide copies of 2019 Forms 1099-MISC, “Miscellaneous Income,” to recipients of income from your business where required.
File 2019 Forms 1099-MISC reporting nonemployee compensation payments in Box 7 with the IRS. File Form 940, “Employer’s Annual Federal Unemployment (FUTA) Tax Return,” for 2019.
If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it’s more than $500, you must deposit it.
However, if you deposited the tax for the year in full and on time, you have until February 10 to file the return.
File Form 941, “Employer’s Quarterly Federal Tax Return,” to report Medicare, Social Security and income taxes withheld in the fourth quarter of 2019.
If your tax liability is less than $2,500, you can pay it in full with a timely filed return.
If you deposited the tax for the quarter in full and on time, you have until February 10 to file the return. (Employers that have an estimated annual employment tax liability of $1,000 or less may be eligible to file Form 944, “Employer’s Annual Federal Tax Return.”)
File Form 945, “Annual Return of Withheld Federal Income Tax,” for 2019 to report income tax withheld on all nonpayroll items, including backup withholding and withholding on accounts such as pensions, annuities and IRAs.
If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 10 to file the return.
February 28 File 2019 Forms 1099-MISC with the IRS if 1) they’re not required to be filed earlier and 2) you’re filing paper copies. (Otherwise, the filing deadline is March 31.)
March 16 If a calendar-year partnership or S corporation, file or extend your 2019 tax return and pay any tax due.
If the return isn’t extended, this is also the last day to make 2019 contributions to pension and profit-sharing plans.
If you have questions about meeting applicable deadlines or to learn more about filing requirements, contact David Mills CPA, LLC. We have offices in Morton and East Peoria or can arrange a video conference with you.
Don’t let the holiday rush keep you from taking some important steps to reduce your 2019 tax liability.
You still have time to execute a few strategies, including:
Thinking about purchasing new or used heavy vehicles, heavy equipment, machinery or office equipment in the new year? Buy it and place it in service by December 31, and you can deduct 100% of the cost as bonus depreciation.
Although “qualified improvement property” (QIP) — generally, interior improvements to nonresidential real property — doesn’t qualify for bonus depreciation, it’s eligible for Sec. 179 immediate expensing. And QIP now includes roofs, HVAC, fire protection systems, alarm systems and security systems placed in service after the building was placed in service.
You can deduct as much as $1.02 million for QIP and other qualified assets placed in service before January 1, not to exceed your amount of taxable income from business activity.
Once you place in service more than $2.55 million in qualifying property, the Sec. 179 deduction begins phasing out on a dollar-for-dollar basis. Additional limitations may apply.
If you don’t already have a retirement plan, you still have time to establish a new plan, such as a SEP IRA, 401(k) or profit-sharing plans (the deadline for setting up a SIMPLE IRA to make contributions for 2019 tax purposes was October 1, unless your business started after that date).
If your circumstances, such as your number of employees, have changed significantly, you also should consider starting a new plan before January 1.
Although retirement plans generally must be started before year-end, you usually can deduct any contributions you make for yourself and your employees until the due date of your tax return. You also might qualify for a tax credit to offset the costs of starting a plan.
If your business operates on a cash basis, you can significantly affect your amount of taxable income by accelerating your deductions into 2019 and deferring income into 2020 (assuming you expect to be taxed at the same or a lower rate next year).
For example, you could put recurring expenses normally paid early in the year on your credit card before January 1 — that way, you can claim the deduction for 2019 even though you don’t pay the credit card bill until 2020.
In certain circumstances, you also can prepay some expenses, such as rent or insurance and claim them in 2019.
As for income, wait until close to year-end to send out invoices to customers with reliable payment histories. Accrual-basis businesses can take a similar approach, holding off on the delivery of goods and services until next year.
Proceed with caution
Bear in mind that some of these tactics could adversely impact other factors affecting your tax liability, such as the qualified business income deduction. For more information about small business tax liability or other business advisement services, contact the experts at David Mills CPA, LLC.
On payday, your employees expect their paychecks to be correct. Errors or oversights on a paycheck can anger and unnecessarily stress an employee. Save the hassle and outsource your payroll.
Ensuring your employee payroll is accurate is vitally important, yet for many small business owners in the Peoria and Central Illinois area, the process is laborious, stressful and never-ending.
When you outsource payroll responsibilities to the experts at David Mills CPA LLC, you get more time to concentrate on your core business. You will have peace of mind knowing your payroll operations are being handled correctly and professionally.
Pay period follows pay period. Accurately completing your company’s payroll requires time and attention.
By outsourcing payroll responsibilities, you can be assured that all special deductions, such as wage garnishments, savings, and health deductions are properly calculated.
Do you know the updated payroll regulations for 2020? With outsourced payroll services, the experts at David Mills CPA LLC ensure your firm is compliant with all current payroll laws.
At David Mills CPA LLC, payroll tax deposits are electronically filed and quarterly payroll tax forms are prepared and filed. They also complete year-end W-2 and 1099 forms as well as worker’s comp audits and any requests for payroll information.
Hiring experts to complete your company’s payroll helps avoid IRS mistakes and penalties.
When you work with David Mills CPA LLC, you are able to establish a direct deposit option for your employees. Direct deposit saves employees a trip to the bank to cash their paycheck and has become a convenience employees expect.
Outsourcing your payroll eliminates the need to train or cross-train employees to handle payroll. When payroll is handled in-house, a burden is placed on the company every time the person responsible for payroll goes on vacation, takes a leave of absence or quits the company.
When the payroll employee leaves or retires, they walk out with valuable knowledge that can be hard to regain.
Outsourcing your payroll responsibilities means a knowledgeable team is in place to seamlessly handle your company’s needs.
Contact the professionals at David Mills CPA LLC today to see how their payroll service can meet the needs of your business. David Mills CPA LLC has offices in both Morton and East Peoria.