We always recommend that small business owners reach out to their trusted financial, legal, and other trusted advisors to keep them up to speed on changing news and regulations. However, we also know that the Internal Revenue Service is another source of information flow — especially in changing and challenging times. IRS small business tax resources to which you can subscribe. This quarterly collection of IRS information is just one example of information from the IRS insight for small businesses. Indeed, the IRS is willing to send you information on a wide range of tax-related information: IRS.gov/newsroom. Here is information from a current email newsletter for small business owners.

IRS provides guidance for employers claiming the
Employee Retention Credit for first two quarters of 2021

The Internal Revenue Service issued guidance for employers claiming the Employee Retention Credit under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) modified by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act). To review these changes, see Notice 2021-23. Additional coronavirus relief information for businesses is available on IRS.gov. At the bottom of the page, you can find links to subscriptions to a range of tax-related newsletters.

1 | Free virtual workshop helps small business owners understand and meet tax obligations

The Small Business Virtual Tax Workshop helps educate small business owners about their taxes. It’s free and available online 24/7. The updated chapters contain direct links to more specific topics within each lesson, like chapters in a book. Viewers can choose the lessons that apply to their small businesses. They can also pause and bookmark lessons so they can review the information later.

2 | The IRS is reallocating taxes on unemployment benefits; refunds to start in May

The IRS will take steps to automatically refund money to people who filed their tax return reporting unemployment compensation before the recent changes made by the American Rescue Plan.

The legislation was signed on March 11. The new IRS guidance includes details for those eligible taxpayers who have not yet filed.

3 | IRS, Treasury disburses more Economic Impact Payments under the American Rescue Plan; Non-filer Social Security and other federal beneficiary stimulus payments

As work continues on issuing millions of Economic Impact Payments to Americans, the IRS and Treasury Department announced that they anticipate payments will begin to be issued this weekend to Social Security recipients and other federal beneficiaries who do not normally file a tax return, with the projection that the majority of these payments would be sent electronically and received on April 7, 2021.

Many federal beneficiaries who filed 2019 or 2020 returns or used the Non-Filers tool last year were issued Economic Impact Payments, if eligible, during the last three weeks.

Most Social Security retirement and disability beneficiaries, railroad retirees and recipients of veterans’ benefits who are eligible for an Economic Impact Payment do not need to take any action to receive a payment.

4 | IRS urges employers to take advantage of the Work Opportunity Tax Credit

Giving someone a work opportunity may translate into a business tax credit for you and greater stability for a family. The Work Opportunity Tax Credit (WOTC) is a federal tax credit available to employers for hiring individuals from certain targeted groups who have consistently faced significant barriers to employment.

5 | Taxable Fringe Benefit Essentials for Employers Webinar

The IRS Tax Exempt and Government Entities Division and the Office of Federal, State and Local Governments would like to invite small businesses to register to watch the free Taxable Fringe Benefit Essentials for Employers Webinar on April 14, 2021 at 1:00 p.m. (ET). This webinar is designed to explain what a fringe benefit is and how to value a fringe benefit. It will cover the most common fringe benefits and explain if those fringe benefits are taxable.

For more information, see Webinars for Tax Exempt & Government Entities.

6 | IRS extends additional tax deadlines for individuals to May 17

The IRS announced that individuals have until May 17, 2021 to meet certain deadlines that would normally fall on April 15, such as making IRA contributions and filing certain claims for refund. This follows a previous announcement that the federal income tax filing due date for individuals for the 2020 tax year was extended from April 15, 2021, to May 17, 2021.

Notice 2021-21 provides details on the additional tax deadlines.

7 | Masks, and other COVID-19 personal protective equipment are tax-deductible

The IRS issued Announcement 2021-7 clarifying that the purchase of personal protective equipment for the primary purpose of preventing the spread of coronavirus are deductible medical expenses. In addition to masks, this includes times such as hand sanitizer and sanitizing wipes.

The amounts paid for personal protective equipment are also eligible to be paid or reimbursed under health flexible spending arrangements (health FSAs), Archer medical savings accounts (Archer MSAs), health reimbursement arrangements (HRAs), or health savings accounts (HSAs).

8 | IRS Criminal Investigation pledges continued
commitment to investigating COVID-19 fraud

The IRS Criminal Investigation Division (IRS-CI) marks the one-year anniversary of the Coronavirus Aid, Relief and Economic Security Act by pledging its continued commitment to investigating COVID-19 fraud.

This includes fraud related to:

• Economic Impact Payments
• Paycheck Protection Program
• Employee Retention Credit

IRS-CI encourages the public to share information regarding known or suspected fraud attempts against any of the programs offered through the CARES Act. Here’s how to report a suspected crime and learn more about COVID-19 scams and other financial schemes.

9 | Low Income Taxpayer Clinic application period now open

The IRS announced it will accept applications for an 18-month Low Income Taxpayer Clinic (LITC) matching grant from all qualified organizations.

The LITC matching grant news release provides more information, including:

• Application period
• Budget and performance period
• Eligibility
• Geographically underserved areas

More IRS Tax Resources for Small Business

Small Business and Self-Employed One-Stop Resource
Small Business Forms & Instructions
Small Business Events
Small Business Webinars
e-File for Businesses and Self-Employed
Businesses with Employees
Small Business Products
Self-Employed Individuals
S Corporations

Other Resources

IRS.gov
Find it Fast!
All Forms and Instructions
Filing Your Taxes
Make a Payment
Taxpayer Advocate Service
Retirement Plans
Tax Information for Charities
and Other Non-Profits
State Links
SSA/IRS Reporter
IRS Social Media

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Links to IRS.gov resources

The links below are for taxpayers who file Form 1040 or 1040-SR, Schedules C, E, F or Form 2106, and small businesses with assets under $10 million. Consider the links as a Table of Contents of information found on the IRS website. Updates can be found at the IRS Small Business and Self-Employed Tax Center. Direct questions there, also.

Trending

• Employer ID Numbers (EINs)
• Forms and Publications
• Self-Employment Taxes
• E-file Employment Taxes

Information For

• Self-Employed
• Independent Contractor or Employee
• Business Structure
• Businesses with Employees
• Industries/Professions

Help for Preparing Your Taxes

• Business Tax Credits
• Deducting Expenses
• Recordkeeping
• Employment Taxes

Filing and Paying Taxes

• Filing and Paying Your Business Taxes
• IRS Tax Calendar for Businesses and Self-Employed
• Filing Past Due Tax Returns
• Information Return Reporting
• Calculate Your Employment Taxes

Stages of Owning a Business

• Starting a Business
• Operating a Business
• Closing a Business
• Changing Address
• Changing Business Name

General Topics

• A-Z Index for Business
• Affordable Care Act (ACA)
• Gig Economy (Sharing Economy)
• Report of Foreign Bank and Financial Accounts (FBAR)
• Small Business Retirement Plan Resources
• Tax Reform Provisions that Affect Businesses

Online Learning

• IRS Video Portal
• Small Business Events
• Online Tools & Educational Products
• Small Business Taxes: The Virtual Workshop
• Subscribe to e-News
• Webinars for Small Businesses
• Tax Cuts and Jobs Act (TCJA) Training Materials

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Businesses providing certain goods and services that are subject to excise taxes must file a federal Form 720 quarterly. Here is information provided by the IRS that relates to excise taxes.

What are excise taxes?

Excise taxes are taxes made on a specific good, such as gasoline, rather than a tax on your income or sales tax. They are often included in the price of the product you are purchasing. For example, excise taxes (or highway taxes, in this example) are part of the price per gallon charged for gasoline. They can also be taxes on activities, such as wagering (gambling), indoor tanning, airline tickets, and tires.

Excise taxes may be imposed at the time of:..

• Import
• Sale by the manufacturer
• Sale by the retailer
• Use by the consumer

Often, the collected excise tax will go into trust funds earmarked for related capital projects, such as highway and airport improvements.

Since the taxes are typically blended into the price of a product, the seller or manufacturer of the item or service is responsible for filing these tax payments to the IRS — and filing Form 720.

When should an excise a tax be file?

Businesses must file the form for each quarter of the calendar year. Here are the due dates:

• Quarter 1 – January, February, March: Deadline = April 30
• Quarter 2 – April, May, June: Deadline = July 31
• Quarter 3 – July, August, September: Deadline = October 31
• Quarter 4 – October, November, December: Deadline = January 31

If the due date for filing a return falls on a Saturday, Sunday or legal holiday, the due date is the next business day.

How to file

While the IRS still accepts paper Forms 720, they encourage businesses to file electronically. To help excise taxpayers do this, the IRS posts the contact information on IRS.gov of all approved e-file transmitters for excise forms. Businesses can submit forms online 24 hours a day.

However, not all excise forms can be filed electronically. Here are the forms you can file electronically.

• Form 720, Quarterly Federal Excise Tax.
• Form 2290, Heavy Highway Vehicle Use Tax.
• Form 8849, Claim for Refund of Excise Taxes, Schedules 1, 2, 3, 5, 6 and 8.

When businesses file a Form 720 electronically, it reduces processing time and errors. However, the business taxpayer’s provider will typically charge a filing fee. In other words, there’s an excise tax on filing an excise tax.

More information:

• Form 720 e-file providers page
• 2290 Modernized e-file Providers
• 8849 Modernized e-file Providers
• Excise Tax Forms and Publication

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Millions of people enjoy hobbies that are also a source of income. From catering to cupcake baking, crafting homemade jewelry to glass blowing — no matter what a person’s passion. Sometimes, however, people try to use hobbies as a means to avoid taxes. For example, they may try to use expenses related to their hobby as a business expense. While you should always seek help from your trusted tax advisor before making any decision regarding your personal or business tax decisions, here are some tips (and warnings) the IRS considers when determining the difference between a business and a hobby.

A hobby is done mainly for recreation or pleasure.

Here are some factors the IRS will consider when determining if an activity is a hobby or business.

• To be a business, you should carry on the activity in a businesslike manner and maintain complete and accurate books and records.
• The time and effort you put into the activity must indicate you intend to make it profitable.
• You depend on income from the activity for your livelihood.
• Your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business).
• Whether or you change business methods to improve profitability (insead of continue to run the business in way that suggests your goal is to generate losses for tax purposes.
• Whether you or your advisors have the knowledge needed to carry on the activity as a successful business.
• Whether you were successful in making a profit in similar activities in the past.
• Whether the activity makes a profit in some years and how much profit it makes.
• Whether you can expect to make a future profit from the appreciation of the assets used in the activity.

You may find more information on this topic in section 1.183-2 (b) of the Federal Tax Regulations.Additional Information Publication 535, Business ExpensesPublication 17, Your Federal Income Tax for Individuals Category Small Business, Self-Employed, Other Business Sub-Category Income & Expenses

• The Tax Cuts and Jobs Act, which went into effect last year (2018), included a new 20% small business tax deduction for owners.
• Taxpayer qualifed for the deducation if their taxable income was $157,500 (if single) or $315,000 (if married and filing jointly).
• So far, more than 14 million taxpayers claimed this deduction on their 2018 returns (through May 23, 2019).

Note | Whe it comes to tax and financial decisions, always consult your personal, trusted tax advisor as each taxpayer has unique circumstances.

Early uncertainty

Can you qualify for the home office tax deduction?

Some accountants decided to proceed with caution on the small business tax deduction this spring, as the IRS proposed new guidelines for the rules were not issued until January, according to CNBC. Those updated guidelines included proposed guidance on the tax break for rental real estate owners — a safe harbor they can follow to be sure they qualify for the 20% deduction.

Some taxpayers that fall under a “specified service trade or business,” including doctors, lawyers and accountants, can’t take the deduction at all if their taxable income exceeds $207,500 if single or $415,000 if married.

See CNBC | “Here’s how many people claimed this new 20% small-business tax break”

Taxpayers who have deducted the business use of their car on past tax returns should review whether or not they can still claim this deduction. Some taxpayers can. Some cannot. Here is a breakdown of which taxpayers can claim this deduction when filing their tax returns. (Note: Even though this information is provided by the IRS, always get advice from your personal, trusted advisor as each small business situation is unique.)

For Business Owners | Individuals who own a business or are self-employed and use their vehicle for business may deduct car expenses on their tax return. If a taxpayer uses the car for both business and personal purposes, the expenses must be split. The deduction is based on the portion of mileage used for business. There are two methods for figuring car expenses:

1. Using actual expenses, including

• Depreciation
• Lease payments
• Gas and oil
• Tires
• Repairs and tune-ups
• Insurance
• Registration fees

2. Using the standard mileage rate

• Taxpayers who want to use the standard mileage rate for a car they own must choose to use this method in the first year the car is available for use in their business.
  
• Taxpayers who want to use the standard mileage rate for a car they lease must use it for the entire lease period.

The standard mileage rate for 2018 is
54.5 cents per mile. For 2019, it‘s 58 cents.

Note | There are recordkeeping requirements for both methods. 

For Business Employees |Employees who use their car for work can no longer take an employee business expense deduction as part of their miscellaneous itemized deductions reported on Schedule A. 

Employees can’t deduct this cost even if their employer doesn’t reimburse the employee for using their own car. This is for tax years after December 2017. The Tax Cuts and Jobs Act suspended miscellaneous itemized deductions subject to the two percent floor.  

However, certain taxpayers may still deduct unreimbursed employee travel expenses, this includes Armed Forces reservists, qualified performing artists, and fee-basis state or local government officials.

Where to Find More Information on This Topic from the IRS| Publication 535, Business Expenses

This chart was supplied by IRS.gov. It compares the old tax law provisions vs. the new that are part of the Tax Cuts and Jobs Act (TCJA). The side-by-side comparison can help you understand the changes — but you should also seek advice from your trusted and professional accounting, finance, and tax advisors.  Provisions of the TCJA that affect individual taxpayers can also affect business taxes. Businesses and self-employed individuals should review tax reform changes for individuals and determine how these provisions work with their business situation. One more time, remember: Different small businesses may have different factors that will cause the provisions to be different than yours. Also, see the IRS PDFs for more detail.: Publication 535, Business Expenses; Publication 946, How to Depreciate Property.

Deductions

Businesses with employees: Changes to fringe benefits and new credit

For businesses that have employees, there are changes to fringe benefits and a new tax credit that can affect a business’s bottom line.

Business structure and accounting methods

Opportunity for tax-favored investments

As we always advise, small business owners should seek advice regarding taxes and finance from a trusted business, tax, or financial professional. This year, that advice is especially important. Why? Because last year’s tax legislation begins to have an impact on your taxes for the first time this year (in 2018). The increased deductions most small businesses will see will start showing up on the federal income tax return you file in 2019. Here are some things the IRS would like you to know. (Also, see the bottom of this page for a collection of IRS services we’ve posted.)

Eligible taxpayers may deduct up to 20 percent of certain business income from domestic businesses operated as…

• Sole proprietorships
• Partnerships
• S corporations
• Trusts
• Estates
• Certain dividends

Things business owners should know about the 20 percent deduction

• The deduction applies to qualified:– Business income
  – Real estate investment trust dividends
  – Publicly traded partnership income
• Qualified business income is the net amount of qualified items of income, gain, deduction and loss connected to a qualified U.S. trade or business. Only items included in taxable income are counted.
• The deduction is available to eligible taxpayers, whether they itemize their deductions on Schedule A or take the standard deduction.
• The deduction is generally equal to the lesser of these two amounts:– Twenty percent of qualified business income plus 20 percent of qualified real estate investment trust dividends and qualified publicly traded partnership income.
  – Twenty percent of taxable income computed before the qualified business income deduction minus net capital gains.
• For taxpayers with taxable income computed before the qualified business income deduction that exceeds $315,000 for a married couple filing a joint return, or $157,500 for all other taxpayers, the deduction may be subject to additional limitations or exceptions. These are based on the type of trade or business, the taxpayer’s taxable income, the amount of W-2 wages paid by the qualified trade or business, and the unadjusted basis immediately after acquisition of qualified property held by the trade or business.
• Income earned through a C corporation or by providing services as an employee is not eligible for the deduction.
• Taxpayers may rely on the rules in the proposed regulations until final regulations appear in the Federal Register.

 Also on SmallBusiness.com

IRS Resources Related to How the New Tax Law May Affect Your Business | Q3-2018

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Some small business owners may be a little more confident in their financial practices than they should be, according to a recent survey from Clutch, a business-to-business research and reviews company. Here are two examples of risky financial practices and some financial advice you should follow instead.

Advice #1 | Use professional tax help

The decision to prepare and pay taxes without the help of a professional tax preparer or accountant may be a practice that seems to save money but could lead to a greater loss (especially for 30 percent of the survey respondents).

30% | Percentage of small business owners who believe they overpay their taxes and could claim more deductions and credits.
93% | Percentage of small business owners who rate themselves as “very” or “somewhat confident” in their ability to accurately file taxes.

Or, in other words, 30 percent of survey respondents simultaneously believe they can accurately file taxes while think they overpay.

Advice #2 | Keep personal and business banking in two separate accounts

Here’s another financial practice small businesses should follow, but many don’t.

27% | Percentage of small businesses who do not keep their personal and business finances in separate bank accounts.
23% | Percentage of small businesses who have experienced challenges with mixing business and personal finances in the past year.

Or, in other words, nearly the same percentage of small business owners who co-mingle their business and personal bank accounts have experienced a financial challenge due to the practice.

Bottom line | Do the math. Get help doing your taxes and have two separate bank accounts.

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