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November 2020
Tax News & Updates
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In this issue:
- Tax Corner: 1099-NEC Form
- PPP Updates
- Payroll Clients Alert
- Business Highlight
- Did You Know?
- Tax Facts
- Good Reads
- Important Dates
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Happy Thanksgiving from the CPA team!
As November draws to a close, we want to take a moment to thank you for continuing to trust us with your tax and accounting needs this year. We are so grateful for you and look forward to serving you in the years to come.
Taxes and year-end closing might be far from your mind during the holidays, but rest assured, it’s on ours! So before we break for Thanksgiving, we wanted to share information on the new 1099-NEC form and our newly improved process for 1099s this year. We also wanted to provide some PPP updates, give you a heads up on how to search for unclaimed property (and maybe get some extra dough!), and highlight a great small business forum for business leaders.
As always, if you have any questions, please don’t hesitate to reach out to us.
Wishing you and your families a very happy Thanksgiving!
Susan Clarke & The CPA Team
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Tax Corner: Introducing the1099-NEC Form
and CPA’s Revamped 1099 Process
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There’s a new form in town for the 2020 filing season – and it will impact all of our small business clients that pay independent contractors.
The 1099-NEC form will now be used to report Non-Employee Compensation. Historically, payments to independent contractors have been reported on Form 1099-MISC (in Box 7). Non-employee compensation will be the only item reported on the 1099-NEC Form, similar to a 1099-INT that reports only Interest.
The 1099-MISC isn’t going away – it will be used for reporting all other types of compensation, such as rents, royalties and other miscellaneous income payments.
By separating non-employee compensation into a separate form, the IRS can establish an earlier filing deadline to improve compliance and also thwart fraud.
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CPA has revamped our system, platform and process for producing 1099s this year!
We are super excited about this improvement, because it will alleviate the need for our clients to chase vendors for W9’s (well, that’s our goal!). Our new platform allows us to send a request directly to your vendor, then the vendor can complete the W9 electronically and securely send it back to us.
And that’s not all! We can now deliver 1099s electronically to recipients! YES, that’s correct! No more printing and mailing!
Watch your email inbox for more information and requests for vendor emails from us.
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Earlier this month, the IRS issued new guidance regarding PPP loan forgiveness and the deductibility of PPP loan expenses. If you received a PPP loan, this could impact you.
IRS & Treasury provide Guidance on Deductibility of PPP Loan Forgiveness Costs
Essentially, the IRS and Treasury have doubled down on their position in the new guidance. Below are the 3 most common situations:
- If the PPP Loan is “reasonably” expected to be forgiven, then the costs used to calculate the forgiveness amount are NOT deductible in 2020.
- If forgiveness is not expected, then the costs are deductible.
- If the taxpayer expects forgiveness and does NOT deduct the costs, and in 2021 the loan is NOT forgiven then those costs can be deducted on an amended 2020 return or on the 2021 return.
SBA Ordered to Release Names, Addresses of All Recipients, and Precise Loan Amounts under PPP, EIDL Program
- Read the Memoranda Opinion here. Read an article with highlights here. SBA had previously released some data on loans > $150,000.
Please Note: More Updates May Be Coming
There is still a possibility that Congress will address the deductibility of these expenses in legislation in the next few months. One option that should be given to taxpayers is to extend the return to see if Congress does act to allow the deduction. Stay tuned!
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Business Organization Highlight:
Presidents’ Leadership Council
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Earlier in November, CPA sponsored and attended Catapult – a virtual event hosted by Cultivate Business Advisors, whom we have partnered with for several years. While at the conference this year, I crossed paths with Lori Dann and really fell in love with the organization she is building right here in Chicago – the Presidents’ Leadership Council.
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Presidents’ Leadership Council is an exclusive forum for small business CEOs, presidents and partners to engage, learn and grow through peer relationships, professional speaking events and member socializing.
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Members join PLC to have the opportunity to glean expertise and feedback from the perspectives and experience of a group of leaders that they trust in a monthly confidential meeting. Members work together to help each other scale their businesses, increase sales/profitability, build a great team, balance quality/growth, and build brand identity to name a few.
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I often witness business owners juggling many, if not all, hats in their business. This can lead to an overwhelming sense of “alone” and quite honestly, exhaustion. COVID has brought new challenges and stressors too, like we needed more! So this organization can be an opportunity to network and learn from others who are facing the same challenges and pressures as you are.
Read more about Lori and PLC here.
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You Might Have Unclaimed Property Waiting For You!
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As an individual or entity, you can go to any state’s unclaimed property website and perform a search to see if there is unclaimed property in your name. I did this many months ago and had ~$100 bucks just sitting there! The process to make the claim is pretty simple, and voila! I received the cash! Illinois’ website is here.
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***Have you (as a business) ever paid a vendor or an employee and the check was never cashed? Sure you have! Well, it’s important to understand your obligations here.
If you can reach the person and re-issue the payment, no worries! But, if you cannot get in touch with the person to issue a replacement payment, you need to remit the funds to the state, and they will hold it for the payee. More information for businesses can be found here.
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There Are 7 States That Have No Income Tax
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While everyone pays federal taxes, there are seven states that do not have an income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. (New Hampshire and Tennessee tax only dividends and interest income.) Instead of income tax, revenue comes from sales and property taxes.
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Important Dates & Deadlines
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December 15, 2020
C Corporations – 4th Quarter Estimated Tax Payment
January 15, 2021
4th Quarter 2020 Estimated Tax Payment Due
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