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“Extender” Legislation Impacts Individuals and Small Businesses

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Sorenson & CompanyThe federal spending package that was enacted in the waning days of 2019 contains numerous provisions that will impact both businesses and individuals. In addition to repealing three health care taxes and making changes to retirement plan rules, the legislation extends several expired tax provisions. Here is an overview of several of the more important provisions in the Taxpayer Certainty and Disaster Relief Act of 2019.

Deduction for Mortgage Insurance Premiums

Before the Act, mortgage insurance premiums paid or accrued before January 1, 2018, were potentially deductible as qualified residence interest, subject to a phase-out based on the taxpayer’s adjusted gross income (AGI). The Act retroactively extends this treatment through 2020.

Reduction in Medical Expense Deduction Floor

For 2017 and 2018, taxpayers were able to claim an itemized deduction for unreimbursed medical expenses to the extent that such expenses were greater than 7.5% of AGI. The AGI threshold was scheduled to increase to 10% of AGI for 2019 and later tax years. Under the Act, the 7.5% of AGI threshold is extended through 2020.

Qualified Tuition and Related Expenses Deduction

The above-the-line deduction for qualified tuition and related expenses for higher education, which expired at the end of 2017, has been extended through 2020. The deduction is capped at $4,000 for a taxpayer whose modified AGI does not exceed $65,000 ($130,000 for those filing jointly) or $2,000 for a taxpayer whose modified AGI is not greater than $80,000 ($160,000 for joint filers). The deduction is not allowed with modified AGI of more than $80,000 ($160,000 if you are a joint filer).

Credit for Energy-Efficient Home Improvements

The 10% credit for certain qualified energy improvements (windows, doors, roofs, skylights) to a principal residence has been extended through 2020, as have the credits for purchases of energy efficient property (furnaces, boilers, biomass stoves, heat pumps, water heaters, central air conditions, and circulating fans), subject to a lifetime cap of $500.

Empowerment Zone Tax Incentives

Businesses and individual residents within economically depressed areas that are designated as “Empowerment Zones” are eligible for special tax incentives. Empowerment Zone designations, which expired on December 31, 2017, have been extended through December 31, 2020, under the new tax law.

Employer Tax Credit for Paid Family and Medical Leave

A provision in the tax code permits eligible employers to claim an elective general business credit based on eligible wages paid to qualifying employees with respect to family and medical leave. This credit has been extended through 2020.

Work Opportunity Tax Credit

Employers who hire individuals who belong to one or more of 10 targeted groups can receive an elective general business credit under the Work Opportunity Tax Credit program. The recent tax law extends this credit through 2020.

Call us today at 801-553-1120 to schedule your free consultation. As a thank you gift for scheduling your consultation, we’ll provide a free book, The Great Tax Escape.

Who Owes You? 5 QuickBooks Online Reports That Can Tell You Fast

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QuickBooks - Sorenson & CompanyKeep a constant watch on your accounts receivable to improve cash flow.

Quick: How many of your invoices are unpaid? Have any of your customers gone over 30 days past due? Did you bill all of the time and expenses for that project you just completed for a customer?

If you’re doing your accounting manually, there’s simply no way to get that information quickly. Depending on your bookkeeping system, you may not be able to get it at all.

QuickBooks Online has more than one solution for this problem. You see the first one every time you log in. The Dashboard contains a graphic in the upper left corner that tells you how many invoices are overdue and unpaid. Click on the colored bar labeled OVERDUE, and you’ll see a list of invoices with the unpaid ones right at the top.

You can tell at a glance how much of your money is tied up in unpaid invoices.

While this is important information for you to have as you start your workday, it doesn’t tell the whole story. To get that, you’ll need to access some of QuickBooks Online’s reports – five of them in particular. Click Reports in the left vertical pane, and then scroll down to the heading labeled Who owes you.

These reports are listed in two columns. Each has the outline of a star next to it. Click on the star, and the report will be added to the Favorites list at the top of the page. Click on the three vertical dots next to it, and you’ll be able to Customize the report. And as you hover over the title, you’ll see a small, circled question mark. Click on this to get a brief description of the report.

There are several reports in this list that can provide insight into where your outstanding revenue is. We recommend you run five of them at least once a week – more frequently if your business sells large quantities of products and/or services. The suggested are:

Accounts receivable aging detail

This report provides a list of invoices that are overdue, along with aging information. There are several columns in the report, but you’ll want to pay special attention to the last one: OPEN BALANCE.

Tip: If you have many customers or simply a high volume of unpaid invoices, you might consider running the Accounts receivable aging summary instead.

Changing the Content

Before you run the report, you should explore the customization tools provided for it. They won’t be the same for every report, but you can start to get an idea of what can be done. Hover over the report title and click Customize. A panel like the one pictured below will slide out of the right side of the screen.

QuickBooks Online provides deep customization tools for reports.

You can see some of your customization options in the image above. Beyond these, you can also work with filters and headers/footers. When you’re satisfied with your changes, click Run report.

If you want to run a report with its default settings, just click on the report title in the list to display it. You’ll have access to limited customization from there.

Four other reports you should be generating regularly are:

  • Customer Balance Summary: Shows you how much each customer owes your business
  • Open Invoices: Lists invoices for which there has been no payment
  • Unbilled Charges: Just what it sounds like: tells you who hasn’t been invoiced yet for billable charges
  • Unbilled Time: Lists all billable time not yet invoiced

We don’t expect you’ll have any trouble understanding reports like these; they’re fairly self-explanatory. QuickBooks Online offers many other reports, the standard financial reports that need to be generated monthly or quarterly, like Balance Sheet, Profit and Loss, and Statement of Cash Flows. You’ll absolutely need these should you apply for a loan or need to supply in-depth financials for any other reason. We can help you analyze them to get a comprehensive, detailed picture of your company’s fiscal health.

4 Areas to Consider When Transitioning Employees to Working From Home

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Sorenson & Company QuickBooksFor businesses that haven’t traditionally embraced remote employees, it may be difficult to get up to full speed with the current turn of events.  To make the inevitable transition less overwhelming, we assembled a handy checklist of actions to consider while adjusting to the new workplace reality.

Organization

  • Access your staff members and/or roles that are able to work remotely, those that can’t work remotely, and those where remote work may be possible with some modifications.
  • Conduct an employee survey to determine the availability of computers that can be used for working remotely, as well as availability to high-speed internet access.
  • Create company guidelines covering remote employees, including inappropriate use of company assets and security guidelines.
  • Develop and conduct work-at-home- training for using remote access, remote tools, and best practices.
  • Select a video-conferencing platform for services, such as Zoom, Cisco WebEx, or Go To Meeting.
  • Develop a communications plan to involve remote employees in the daily activities of the organization.

 Security

  • Create and implement a company security policy that applies to remote employees, including actions such as locking computers when not in use.
  • Implement two-factor authentication for highly-sensitive portals.
  • If needed, confirm all remote employees have access to and can use a business-grade VPN, and that you have enough licenses for all employees working remotely.

Staff

  • Institute a transparency policy with your staff and communicate frequently.
  • Check in on your staff, daily if possible, to confirm they are comfortable with working from home. Find and address any problems they may be experiencing.
  • Make certain each staff member has reliable voice communications, even if this results in adding a business-quality voice over IP service.
  • Don’t attempt to micro-manage your staff. Remember their working conditions at home won’t be ideal, and they will need to work out their own work patterns and schedules.
  • Create a phone number and email address where staff members can communicate their concerns about the firm, working at home, or even the status of COVID-19.

Infrastructure

  • Ensure that you have ample bandwidth coming in to your company to handle all of the new remote traffic.
  • Make sure you have backups of your services so your staff is able to keep working in the event extra traffic causes your primary service to go down.

You may need to adjust or expand this list to match the specific needs of your firm and the conditions affecting your organization.  Use this list to get you started and to help guide you through the process.

To set up your free consultation, contact us at 801-553-1120 today.

Deducting Business Expenses: Your Motor-home or Recreational Vehicle

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Sorenson & Company - Deducting Business ExpensesHere’s an idea: Why not purchase a motorhome or recreational vehicle and deduct it as a business expense?

As long as you use it for business this could be a really sweet deal. And if you just happen to use it for pleasure once or twice, that’s no big deal, right?

You won’t be the first person to think of this and if you don’t follow the IRS rules, you won’t be the last to experience the consequences. The courts and the IRS have battled this discussion out several times. Both have been challenged trying to confirm when the motor home is a business vehicle and when it is a business lodging facility.

Does it matter?

It does. The business aspects of owning a motorhome will qualify for tax deductions, but this comes with a set of rules.

Bear this in mind: if you travel for business and plan to deduct your motorhome as a lodging facility, be sure to count the number of nights you use it for business purposes and use that to measure the number of permissible deductions.

On the other hand, if you use your motor home or RV as a second home, you would deduct the business percentage of its use for business travel without having to consider Section 280A impediments.

It can be complicated, so be sure you understand the guidelines.

Before you can deduct the business expenses associated with your motorhome you need to determine what it actually costs to operate the business-related usage. Along with depreciation and interest or lease payments, be sure to add insurance to the equation.

Take into consideration all of the expenses associated with maintaining your RV. Here are a few other expenses to include in your calculation:

  • Motor oil
  • Gas
  • Car Washes
  • Tires
  • Licensing Fees
  • Property Tax
  • Parking
  • Tolls

Of course, you’ll only be limited to deducting your business-related expenses. Will painting or wrapping your recreational vehicle with advertisements qualify when deducting personal miles?

You know the answer….

It will not.

Maintain Good Records

The best way to ensure you maximize your allowable deductions on your motorhome or RV is to keep impeccable records. Keep a mileage log and record every single trip—business and pleasure. Make sure you have accrued more than 50 percent business nights.

Even if you think you have a great memory, don’t store this information in your head. Record every single night you use your motorhome for business or personal lodging.

Last but certainly not least, keep IRS Section 280(f)(4) top of mind. This section says the use of your motorhome for overnight business lodging produces deductions for business travel and that business travel is not subject to the vacation home rules.

For a clear explanation of tax deductions for motorhomes or RVs, contact one of our tax professionals. Better to plan ahead than to clean up a mess after the fact.

Contact us today by calling 801-553-1120 or request your free consultation online now. As a thank you for scheduling your consultation, we’ll provide a free tax planning book, The Great Tax Escape.

What Is Your Most Valuable Asset?

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Sorenson & Company - Most Valuable AssetYour most valuable asset isn’t your real estate or the tech stocks you bought in the 90s that have done well. It isn’t even your business per se. Your most valuable asset is you — specifically your ability to run a profitable company and make money.

Are you protecting that asset from the risk that a disabling illness or accident might prevent you from working? If you don’t have disability income insurance, you’re not protected.

What Are the Odds?

People generally think the odds of becoming disabled are low. But the numbers say otherwise: More than one in four 20-year-old workers become disabled before reaching retirement age.1 Here’s another reality check: Serious accidents are not the leading cause of long-term disability; chronic conditions are. Muscle and bone disorders (such as a back disorder or joint or muscle pain) are responsible for more than one in four disabilities.2

How Long Could You Go Without an Income?

Even a short period of disability could be devastating. The average group long-term disability claim lasts 2.6 years.3 Even if you have reserves you could tap, your personal finances would take a hit. If and when you were able to start earning an income again, you might have to start all over.

What Would Happen to Your Business?

Your involvement is vital to your company’s financial success. If you’re unable to work, you might have to hire someone to take your place and borrow money to pay the bills until you’re back on the job. Bottom line? If you’re sidelined by a long disability, it could jeopardize the success or even the survival of your business.

What Can You Do?

Contact us today by calling 801-553-1120 or request your free consultation online now. As a thank you for scheduling your consultation, we’ll provide a free tax planning book, The Great Tax Escape.

Source/Disclaimer:

1Social Security Administration. The Facts About Social Security’s Disability Program, Publication No. 05-10570, January 2017.

2Council for Disability Awareness. CDA 2014 Long Term Disability Claims Review (most recent).

3Councl for Disability Awareness. The Disability Disconnect, 2015 (most recent).

Filing Taxes for Businesses: What Are the Options?

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Sorenson & Company - Business TaxBusinesses and self-employed taxpayers have many options for filing their taxes. Click through for an introduction to the requirements and the pros and cons of different methods.

Filing taxes doesn’t have to be time-consuming. The IRS wants it to be as easy as possible for taxpayers so that they can pay their taxes on time. For business owners and self-employed individuals, e-filing (otherwise known as electronic filing) makes the task simple and efficient.

e-File Options

The various e-file options are on the IRS site. First, you must know under what business entity you will file. Are you filing as a partnership, LLC, S-corporation or another business entity? Each type calls for its own forms.

The IRS e-file forms can all be filled out online. To make the process easier:

  • Gather all the necessary materials to e-file before you sit down at the computer. This includes your corporate EIN or taxpayer EIN, income statements and other financial information.
  • Make sure you have a secure Internet connection.
  • Create your accounts and security questions, if necessary.
  • Complete the forms.
  • Check them for accuracy.
  • Print a copy for your records.
  • If you feel the forms are complete, submit them online.

You will need to create an e-file account. These accounts are free and secure. The first time you use the IRS site, it will take an additional 10-15 minutes to set up your account. It’s a good idea to create a folder on your computer and for your paper-based records to store all of your e-file document copies and other pertinent information. Many companies only use this information quarterly, and it’s easy to forget it after a while, but having a file makes it simpler to remember account numbers and other identifying information.

It’s Free

There is no cost to file your tax information or Social Security or Medicare payments electronically. If you encounter a website that wants to charge you to complete this information, leave immediately. It’s either a phishing scam or an unnecessary expense!

Contact us today by calling 801-553-1120 or request your free consultation online now. As a thank you for scheduling your consultation, we’ll provide a free tax planning book, The Great Tax Escape.