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March 2021 Newsletter

Obscure and Overlooked Tax Deductions, Credits, and Benefits Article Highlights:

• State Income Tax Refund • Social Security Taxes Deduction • NOL Carryback • Charitable Contribution Deduction for Non-Itemizers • PPP Loan Expenses • Military Reservist Travel Expenses • Child’s Private School Expenses • Student-Loan Interest • Extended Tax Benefits • Gambling Losses • Live in a State without a State Income Tax? • Spousal IRA • Economic Impact Payment • Economic Impact Payment Document • Reinvested Dividends • Worthless Stock • Lifetime Learning Credit • Charity Volunteer Tax Breaks • Self-Employed Travel Expenses • Self-Employed Health Insurance Deduction • Summer Camp • Medical Dependent • Income in Respect of a Decedent (IRD)

As tax time approaches, here are some tax issues that taxpayers frequently overlook, ranging from obscure deductions to overlooked tax credits and benefits. Of course, not everything can be included since the tax law has grown significantly in complexity, and it would take a thick book to list everything. But besides what you are probably accustomed to, here are over 20 issues you may not be aware of and that can save you tax dollars.

State Income Tax Refund – For those who took the standard deduction on their 2019 federal return, your state income tax refund received in 2020 is not taxable income. If you itemized your deductions, then the state tax was a federal tax deduction, and to the extent you received a tax benefit from the deduction, the state tax refund you received in 2020 is federally taxable. However, in many cases, the entire refund will be tax-free if you were subject to the alternative minimum tax (AMT) for 2019, the deductible amount was reduced by the $10,000 limit on tax deductions, or part of the deduction pushed your deductions over the standard deduction threshold. Although the Form 1099-G shows the entire amount of the refund, not all of it may be taxable, so you do not want to report more than necessary.

If you owed state income tax on your 2019 return and paid that tax during 2020, then that tax payment can be added to your state tax deduction for 2020, subject to the $10,000 limit for state and local taxes.

Social Security Taxes Deduction – If you are self-employed, you can deduct half of the self-employment tax (Social Security and Medicare tax) that you are liable for on your 2020 net profits. You don’t have to itemize on a Schedule A to take the deduction because it is an adjustment to income.

NOL Carryback – The year 2020 has been challenging for many businesses, especially those that were subjected to COVID-19 closure orders and ended up with a tax loss for the year. However, the CARES Act does allow a 5-year carryback period in which to use the loss (known as a net operating loss) for business owners who cannot utilize the full loss in 2020. This is done by amending prior returns to recover the taxes paid in the earlier year(s). First, the 2015 return is amended, and if not all of the loss is used on that return, then the 2016 return is amended, and so on.

Charitable Contribution Deduction for Non-Itemizers – For the first time ever, taxpayers can claim a cash charitable contribution without itemizing their deductions on Schedule A. Non-itemizers can deduct up to $300 in cash contributions per tax return. Unfortunately, the $300 limit – and not $600 – also applies to married taxpayers filing jointly. So, hold onto those receipts to substantiate the contributions.

PPP Loan Expenses – Don’t forget that the COVID-Related Tax Relief Act passed late in December 2020 confirmed that business expenses paid for with proceeds from a forgiven PPP loan continue to be deductible on the business schedule. However, this may not be true for state taxes.

Military Reservist Travel Expenses – Armed forces reservists who travel more than 100 miles away from home and stay overnight in connection with service as a member of a reserve component can deduct their travel expenses as an adjustment to gross income (they don’t have to itemize deductions). Unreimbursed expenses for the reservist’s transportation, meals (subject to the 50% limit for 2020), and lodging qualify for the above-the-line deduction, but the deduction is limited to the amount that the federal government pays its employees for travel expenses – i.e., the general federal government per diem rate for lodging, meals, and incidental expenses applicable to the locale as well as the standard mileage rate (57.5 cents per mile for 2020) for car expenses plus parking, ferry fees, and tolls.

Child’s Private School Expenses – If your child is attending a private school, the Tax Cuts and Jobs Act allows up to $10,000 per year of Sec. 529 college savings plan funds to be used to pay tuition for kindergarten through grade 12. However, tapping your college savings plan for these expenses may be detrimental to your overall long-term savings plan to pay for college tuition.

Student-Loan Interest – If parents pay back a non-dependent child’s student loans, the IRS treats the transactions as if the money were a gift to the child and the child made the payment. Thus, the child is deemed as having paid any interest included in the payment and can deduct it as student-loan interest, which is deductible without having to itemize deductions, up to the annual limit of $2,500.

Extended Tax Benefits – A number of tax benefits that had expired at the end of 2019 were extended, without much fanfare, and are still available in 2020. In case you missed any of them, they include the following:

• A tax credit of up to $500 for installing energy-efficient improvements in your home, including exterior windows and skylights, exterior doors, metal roofs with appropriately pigmented coatings, asphalt roofing with appropriate cooling granules, energy-efficient heating and air-conditioning systems, insulation materials, or systems designed to reduce heat loss or gain. The $500 limit is a lifetime limit, so if you’ve taken this credit in the past, you need to take into account the amount of credit you claimed previously.

• A tax credit of up to $2,500 for purchasing a qualifying electric motorcycle.

• A deduction for mortgage insurance premiums on a loan used to purchase the home (acquisition debt).

• Forgiveness of qualified cancellation of debt income on a principal residence.

• Tax credits for fuel-cell vehicles and alternative-fuel-refueling property.

Gambling Losses – Gambling losses up to the extent of one’s gambling winnings are allowed as a deduction and can help to offset gambling winnings, provided the taxpayer itemizes deductions.

Live in a State Without a State Income Tax? – If you live in Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, or Wyoming, these states do not have an income tax. Because you can choose to deduct either state income tax or sales tax, if you itemize your deductions, your only choice will be sales tax.

The sales tax that can be deducted is the actual amount paid during the year, which can be determined by the larger of the following:

(1) Actual receipts for purchases OR

(2) The amount from the IRS’s income-based table PLUS sales tax paid when purchasing motor vehicles, boats, and other items specified by the IRS.

Spousal IRA – If one spouse works and the other does not, the tax law allows the non-working spouse to base his or her contribution to an IRA on the working spouse’s income. This tax benefit is frequently overlooked when spouses have been working for years and basing their individual contributions on their own income, and then one of the spouses retires. Even if the working spouse has a pension plan at work and his or her income precludes making a deductible IRA contribution, the non-working retired spouse may still make a contribution based on the working spouse’s income. Spousal contributions can also be made to Roth IRAs if the spouses’ joint income does not exceed IRS limits. As of 2020, the law was changed so that there is no longer an age limitation for making contributions to IRAs.

Economic Impact Payment – If you qualified for an economic recovery payment, in either the first or the second round, and did not receive the amount you were entitled to, you can claim the underpayment on your 2020 tax return as a tax credit.

Economic Impact Payment Document – If you received an economic impact payment, you should have received a Notice 1444, which documents the payment you actually received. The IRS has requested that taxpayers keep this form with all other important tax records, including W-2s from employers, 1099s from banks and other payers, and other income documents and records, to support their tax deductions.

Reinvested Dividends – If you are invested in a mutual fund, you are probably reinvesting the annual dividends. Reinvested dividends add to the basis of your investment, and when you sell the mutual fund, having a higher basis will reduce the gain. Mutual funds are required to track your basis for mutual fund shares purchased after 2012. Some even track the basis and reinvested dividends going further back. However, some do not, and it would be your responsibility to track the reinvested dividends so that you get the benefit of all reinvested dividends when you sell.

Worthless Stock – If you are like most investors, you occasionally will pick a loser that declines in value. Sometimes, a security can even become totally worthless when the issuing company goes out of business. Whatever you do, don’t wait until it’s too late to claim your loss. If the IRS challenges the loss and the security is found to have become worthless in an earlier year, then the current year’s loss will be denied.

Lifetime Learning Credit – The American Opportunity Credit (AOTC) is the education credit most familiar to taxpayers because it is available for the first four years of post-secondary education and provides a higher credit. It also requires the student to attend the college or university on at least a half-time basis and to pursue a program leading to a degree or other recognized educational credential. On the other hand, the Lifetime Learning Credit (LLC) is available for all years of post-secondary education and for courses to acquire or improve job skills. The student doesn’t need to be pursuing a program leading to a degree or other recognized education credential, and it is available for one or more courses. Many individuals who do not qualify for the AOTC overlook the LLC.

Charity Volunteer Tax Breaks – If you volunteered your time for a charity or governmental entity during the COVID-19 pandemic, then you probably qualify for some tax breaks. These rules actually apply to all charity volunteers, not just COVID-19 volunteers. Although no tax deduction is allowed for the value of services performed for a qualified charity or a federal, state, or local governmental agency, some deductions are permitted for out-of-pocket costs incurred while performing the services, such as away-from-home travel, lodging, and meals; automobile travel; and uniforms.

Self-Employed Travel Expenses – If you are self-employed and travel for business, don’t overlook highway tolls, porter fees, airline baggage fees, tips, taxi fares, Uber fees, car rentals, laundry, cleaning, or other incidentals while away, in addition to the normal meal, lodging, and transportation expenses.

Self-Employed Health Insurance Deduction – A self-employed individual (or a partner or a more-than-2%-shareholder of an S corporation) can generally deduct, as an above-the-line expense, 100% of the amount paid during the tax year for medical insurance on behalf of themselves, their spouse, and their dependents limited to the self-employed taxpayer’s net income from self-employment.

However, no deduction is allowed for any month when the self-employed individual is eligible to participate in a subsidized health plan maintained by an employer of the taxpayer, the taxpayer’s spouse, any dependent, or any child of the taxpayer who hasn’t attained age 27 as of the end of the tax year. The term “subsidized” means that the employer pays at least 50% of the coverage’s cost.

The health insurance premiums claimed as an above-the-line self-employed health insurance expense cannot also be claimed as a Schedule A medical expense.

Summer Camp – If you are single and working, or married and both you and your spouse work, you may not realize that the costs of day camp during the summer generally count as expenses toward the child and dependent care credit allowing you to work. A day camp or similar program may qualify even if the camp specializes in a particular activity, such as soccer or computers. The credit ranges from 20% to 35% of the day camp’s cost, not exceeding $3,000 for one child or $6,000 for two or more. Overnight camps do not count.

Medical Dependent – You may not realize that if you itemize your deductions, you can deduct medical expenses paid for certain individuals who are not your dependents. One such situation involves divorced parents, in which the non-custodial parent can deduct medical expenses they pay for their child, even when the other parent claims the child as a dependent. Another situation, which we refer to as a medical dependent, involves paying the expenses for someone who would qualify as your dependent except that their gross income is too much, which disqualifies them. For 2020, the gross income limitation is $4,300. Example – The taxpayers’ adult son was seriously injured in a motorcycle accident and did not have medical insurance. His parents paid all of his medical expenses for the year. Their son meets all of the dependent qualifications, except that his gross income of $20,000 is too much, which disqualifies him. However, under the exception, they can still include his medical expenses on their 1040 Schedule A.

Income in Respect of a Decedent (IRD) – One of the most overlooked tax deductions is what is referred to as the IRD deduction. IRD is the acronym for income in respect of a decedent. IRD income is income that is taxable to the decedent’s estate and also taxable to the estate’s beneficiaries. Thus, it is double taxed; as a result, the beneficiaries generally receive a deduction equal to the difference between the decedent’s estate tax figured with and without the taxed income. Beneficiaries will only have this deduction if the decedent’s estate was large enough to be subject to the estate tax.

If you have questions about how these or other tax issues apply to your particular tax circumstances, please give this office a call. Tax Relief for Victims of 2020 Natural Disasters Article Highlights:

• Legislation for Major Disasters • Definitions • Qualified Disaster Distributions • Re-Contributing Withdrawals for Home Purchases • Retirement Plan Loans • Loss Limitations, Revised • Relief for Non-Itemizers • Employee Retention Credit • Other Disaster Area Tax Issues

Most of us will always remember the year 2020, as much as we may like to forget it. On top of the COVID-19 emergency, street protests (both peaceful and not), and hotly contested election races, the U.S. has had numerous natural disasters – hurricanes, an unprecedented number of wildfires, severe windstorms, flooding, and what seems like everything except a plague of locusts (so far, the gigantic swarms of the insects that have invaded Africa and the Middle East haven’t made it across the Atlantic).

Congress typically passes legislation to provide some temporary tax relief to the victims of major disasters. Recently, Congress did just that when it passed the Taxpayer Certainty and Disaster Tax Relief Act of 2020, which the president signed on December 27, 2020. If you

were a victim of one of the disasters covered by this bill, you may be interested to see if any of the tax benefits may be of help for you. First, a few definitions:

“Qualified disaster area” means any area in which a major disaster was declared by the president, during the period beginning on January 1, 2020, and ending on February 25, 2021, if the incident period of the disaster began on or after December 28, 2019 and on or before December 27, 2020. However, any area in which a major disaster was declared only because of COVID-19 is not included.

“Qualified disaster zone” is the portion of any qualified disaster area that the president, during the date parameters noted above, determined to warrant individual or individual and public assistance from the federal government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act because of the qualified disaster in that disaster area.

“Incident period” means, with respect to any qualified disaster, the period specified by the Federal Emergency Management Agency (FEMA) as the period when a disaster occurred. (However, for the purposes of this act, that period shall not be treated as beginning before January 1, 2020, or ending after January 26, 2021.)

For a current listing of all affected areas and the dates of storms, floods, wildfires, and other disasters occurring in 2020 in federal disaster areas, go to https://www.irs.gov/newsroom/tax-relief-in-disaster-situations

Here are the highlights of the tax-relief measures included in the Taxpayer Certainty and Disaster Tax Relief Act of 2020:

Qualified Disaster Distributions – If you have sustained an economic loss because of a qualified disaster, you are allowed to withdraw from your eligible retirement plans – such as a 401(k) or 403(b) – and IRAs up to $100,000, less the aggregate amounts treated as qualified disaster distributions in prior years, without paying the 10% early-withdrawal penalty that applies if you are under age 59½. The distribution is still taxable, but if you choose to, the income from the qualified distribution can be spread over a three-year period beginning with the year of distribution, rather than you paying all of the tax in the distribution year.

Re-contribution Option – Further, you can re-deposit any amount of the qualified disaster distribution in one or more re-contributions over the three-year period beginning on the day after the date of the distribution. For example, let’s say you take a qualified disaster distribution of $30,000 from your IRA on Dec. 10, 2020, and opt to spread the tax over years 2020, 2021, and 2022 by including $10,000 of the distribution amount in each year’s return. In 2022, you are financially able to re-deposit the $30,000 to your IRA, which you do on Nov. 1, 2022. You would then need to amend your 2020 and 2021 returns to remove the $10,000 income from each year and claim a refund of the taxes paid on those parts of the distribution. None of the distribution would be reported on your 2022 return.

Waived 20% Withholding Requirement – Normally, 20% of a retirement plan distribution is withheld as income tax. This 20% withholding rule will not apply to a qualified disaster distribution.

Distribution Timing – Only distributions made on or after the first day of the incident period of a qualified disaster and before June 25, 2021, can qualify.

Special Rule for Individuals Affected by More Than One Disaster — The $100,000 limitation is applied separately to distributions made with respect to each qualified disaster.

Re-Contributing Withdrawals for Home Purchases – If you are under 59½, the general rule is that you’ll owe a 10% penalty on the taxable part of a distribution from an IRA (or an employer’s retirement plan). However, this 10% early-withdrawal penalty doesn’t apply to a

distribution (lifetime maximum $10,000) from an IRA used by a first-time homebuyer to pay the qualified acquisition costs for a principal residence, if the funds are spent within 120 days of receiving the distribution. When disaster strikes, the taxpayer’s plans to purchase or construct a home sometimes are upended, and the funds from the withdrawal can’t be spent during the allotted time period.

To prevent the 10% penalty from kicking in when this happens, the act provides that any individual who received a qualified distribution during the period beginning 180 days before the first day of the incident period of a qualified disaster and ending 30 days after the last day of the incident period may make one or more contributions to an eligible retirement plan that total no more than the amount of the qualified distribution. The re-deposit must occur during the period beginning on the first day of the incident period of the qualified disaster and ending on June 25, 2021.

To qualify to make the recontribution, the amount distributed must have been intended to be used to purchase or construct a principal residence in a qualified disaster area but was not so used due to the qualified disaster in that area.

If the funds are re-contributed, then the taxpayer can amend their tax return for the year when the distribution was taxed for a refund of the taxes paid on the withdrawal.

Increased Limit on Retirement Plan Loans – Generally, a loan from a qualified employer plan to a participant or beneficiary is treated as a plan distribution unless the loan amount is at least the lesser of $50,000 or half of the present value of the employee's nonforfeitable accrued benefit under the plan. An exception allows a loan up to $10,000 without regard to the accrued benefit rule – such a loan must be repaid within five years (longer repayment can be used for a principal residence plan loan).

The act eased the requirements for qualified individuals who sustained an economic loss because of the qualified disaster, by doing the following:

• Increasing the maximum amount a plan participant or beneficiary can borrow from a qualified employer plan from $50,000 to $100,000. The “half of present value” test was changed to “the present value of the nonforfeitable accrued benefit of the employee.”

• Allowing a longer repayment period, generally of one year. To be eligible for this relaxation of the plan-loan rules, the individual’s principal place of abode at any time during the incident period of any qualified disaster must have been located within the qualified disaster area of the qualified disaster. Loss Limitations Revised – Generally, to deduct a personal casualty or disaster loss, each event must be reduced by $100, and the overall loss must be reduced by 10% of the taxpayer’s adjusted gross income. The act modifies these rules by eliminating the 10% reduction and increasing the $100 reduction to $500. Relief for Non-Itemizers – The personal casualty loss deduction is part of the itemized deductions claimed on Schedule A, so normally, a taxpayer who doesn’t itemize because their standard deduction is greater than the total of their itemized deductions won’t have any tax benefit from the casualty loss. However, under the act, a taxpayer claiming a “net disaster loss” who does not itemize their deductions may add their “net disaster loss” to their standard deduction. Employee-Retention Credit – The act provides an employee-retention credit for an employer that conducted an active trade or business in a qualified disaster zone at any time during the incident period of the qualified disaster AND when the trade or business became inoperable as a result of damage sustained because of the qualified disaster at any time during the period beginning on the first day of the incident period and ending on December 27, 2020.

The credit is 40% of the qualified wages of each eligible employee of the eligible employer for the taxable year. The amount of qualified wages for any individual is limited to no more than $6,000. As a result, the maximum credit is $2,400 per employee. To be an eligible employee, the employee’s principal place of employment with the employer just before the qualified disaster must have been in the qualified disaster zone. Qualified wages are wages paid by the employer starting when the trade or business became inoperable at the principal location where the employee was employed and through the date when the business resumed significant operations at the employee’s principal place of employment or, if earlier, 150 days after the last day of the incident period of the qualified disaster.

• Qualified wages include wages paid without regard to whether the employee performed no services, performed services at a different place of employment than their principal place of employment, or performed services at their principal place of employment before significant operations resumed.

• Qualified wages generally do not include wages paid to the employer’s relatives or wages that the employer uses in computing other tax credits, such as for the Work Opportunity Tax Credit, Research Credit, and others.

Other Issues – Briefly, here are a few other items that were already in the tax code that those affected by qualified disasters should be aware of: Extended Deadlines – The IRS has the authority to postpone certain tax deadlines by up to one year for taxpayers affected by a federally declared disaster. Examples of deadlines the IRS will postpone in disaster areas include those for filing income, excise, and employment tax returns; paying income, excise, and employment taxes; and contributing to IRAs. When to Claim Disaster Losses – Special rules apply to losses that occur in areas that the president declares eligible for federal disaster assistance. The losses must result from the disaster. The FEMA website lists the designated disaster areas. Taxpayers may elect to claim the loss 1. On the return for the year when it occurs, or

2. On the preceding year’s return (either the original or an amended return).

When to take the loss depends upon a number of factors and should be analyzed carefully to determine which year will be the most beneficial. Some of the factors to consider include the tax brackets for each year, the need for immediate cash, the effect on self-employment tax for those with business-disaster losses, and whether the loss will be used up against other income for the year. If the disaster loss is not fully used up in the year when it is first deducted, then it can create a net operating loss, which can be deducted on either a prior year or future year return (depending on which year the loss occurred). Insurance Proceeds – A taxpayer whose principal residence (or its contents) is damaged in a disaster can qualify for special tax treatment regarding certain insurance proceeds received as a result of the casualty. To qualify, the residence must be located in a presidentially declared disaster area. If you have been in a qualified disaster and have questions about the new provisions in the 2020 disaster legislation or want more information about the special tax rules for claiming disaster losses, please contact this office. Unemployment Fraudsters May Create a Tax Nightmare for Unsuspecting Taxpayers

As if this past year with all of its pandemic perils has not been stressful enough, the Office of the Inspector General for the Department of Labor has just added to our anxieties by announcing that at least at least $36 billion and possibly as much as $63 billion has been

lost to improper unemployment payments having been made. In many cases the improper payments are a result of fraudsters who spent the earliest months of the pandemic filing unemployment claims using stolen personal data. What this means is that millions of unsuspecting Americans are about to receive federal forms reporting unemployment benefits that they never received. Not only does this leave them potentially vulnerable to identify theft issues, but in the short term it also means that the federal government is expecting them to pay income taxes for money somebody else received.

We’ve all been told to watch out for identity theft, but this newest method feels particularly cruel in the face of all of the other struggles brought by the pandemic. The scammers have taken advantage of the CARES Act’s high unemployment payouts, which included an extra $600 per week to offset the pandemic’s worst effects on the economy. In an effort to get the relief out quickly, the Pandemic Unemployment Assistance program required little-to-no documentation, and this attracted quick attention from those eager to take unethical advantage. For those whose identify was stolen, what this means is that they may receive a form known as the 1099-G from the federal government, which treats unemployment benefits as taxable income.

If You Receive a 1099-G

There is a solution if you are sent a 1099-G for unemployment benefits that you did not receive, and though it represents a bit of work from the victim, the IRS has indicated that it is aware of the problem and working as hard as it can to help those who have been wronged. They say that recipients of an inappropriate, incorrect 1099-G need to contact their state’s unemployment agency and ask them to send a corrected, revised form that will reflect the correct amount provided to them. Though this may be difficult if you live in a state where the unemployment agency’s response rate has been slowed by the pandemic and increased need for assistance, some states have established hotlines dedicated to addressing this specific issue and have increased the number of support staff available to help. Much of this increase in attention is the result of guidance that the IRS issued to states at the end of 2020, notifying them of the identity fraud issue.

If you aren’t able to get a revised form by the tax filing deadline, the IRS indicates that you should simply file a return that accurately reflects the amount that you received. Be sure to discuss with our office how we can best document your issue.

No Other Steps Required

It’s completely natural to feel a bit panicked if you receive one of these forms erroneously, and to worry about the impact of having been the victim of identity theft, but the IRS has indicated that there is no need to file an Identity Theft Affidavit. The agency says that those affidavits are specifically for taxpayers whose e-filed tax return is rejected as a result of a duplication of the use of their Social Security number for a tax filing. Still, if you are concerned and want to take additional steps to protect your identity then you can ask for an Identity Protection PIN when you file your income taxes. Having this unique number will help keep anybody else from being able to use your Social Security number to file a fraudulent tax return.

Beyond that measure specific to the IRS, the Georgia Department of Labor has suggested the following steps you can take to protect yourself against the impact of identity theft.

• Update your passwords on all personal accounts, including banking, shopping and email

• Notify creditors, banks and others with whom you have an account that you may have been a victim of identity theft. They will place a special alert on your account.

• Contact your local police department to file a report and keep a copy of that report to provide to credit agencies and others if needed.

• Start monitoring your credit report, keeping a sharp eye open for any transactions that you are not associated with. If you need to, dispute transactions with your credit cards or the three credit reporting agencies (Equifax, TransUnion or Experian), and if necessary ask them to freeze your credit until the situation is fully addressed and remedied.

If you have been sent a 1099-G for unemployment benefits you did not receive, contact our office immediately. Employee Retention Credit Extended Article Highlights:

• The Extension • About the Credit • Advance Payment • Employer Qualifications • Qualified Wages • Impact on Other Tax Provisions • Claiming the Credit

In order to help trades and businesses to retain employees and keep them employed during the COVID-19 crisis, the Coronavirus Aid, Relief, and Economic Security (CARES) Act created the Employee Retention Credit for 2020. As part of the Consolidated Appropriations Act, 2021 (CCA), the credit has been extended through June 2021.

The credit is actually a government-sponsored program to keep workers employed and is funded by providing qualifying employers with a refundable credit against certain employment taxes equal to 70% (up from 50% prior to 2021) of the qualified wages that an eligible employer pays to employees after March 12, 2020, and before July 1, 2021. (Before the extension, the credit ended on December 31, 2020.)

If the employer's employment tax deposits are insufficient to cover the credit, the employer may get an advance payment from the IRS by filing Form 7200, Advance of Employer Credits Due to COVID-19.

For each employee, up to $10,000 in wages (including certain health-plan costs) per quarter (versus $10,000 per year in 2020) can be counted to determine the amount of the 70% credit.

Employers, including tax-exempt organizations, are eligible for the 2021 credit if they operate a trade or business between January 1, 2021, and June 30, 2021, and experience either:

1. the full or partial suspension of the operation of their trade or business during any calendar quarter because of governmental orders limiting commerce, travel, or group meetings due to COVID-19; or

2. a significant decline in gross receipts.

A significant decline in gross receipts for 2021 occurs when an employer’s gross receipts for a calendar quarter are less than 80% of its gross receipts for the same calendar quarter in 2019 (in other words, when gross receipts for the 2021 quarter are reduced by more than 20% of the corresponding 2019 quarter’s gross receipts).

• If the business didn’t exist at the beginning of the same calendar quarter in calendar year 2019, substitute “2019” for “2020.”

• Employers, by election, can apply the gross-receipts test by using the immediately preceding calendar quarter. For example, instead of comparing the gross receipts of the first quarter of 2021 with those of the first quarter of 2019, an employer can elect to compare the gross receipts of the fourth quarter of 2020 to the gross receipts from the fourth quarter of 2019.

The credit applies to qualified wages (including certain group health-plan expenses) paid during this period or any calendar quarter when operations were suspended. Eligible health-plan expenses are the amounts paid by the employer to provide and maintain group health-plan coverage, to the extent that the amounts are nontaxable to the employees.

Qualified Wages – The definition of qualified wages depends on how many employees an eligible employer has. For the 2021 credit, if an employer averaged more than 500 full-time employees during 2019 (versus 100 for the 2020 credit), qualified wages are generally the wages, including eligible health-care costs (up to $10,000 per employee per quarter) paid during that quarter to employees who were not providing services because they were laid off or furloughed.

If an employer averaged 500 or fewer full-time employees during 2019 (versus 100 for the 2020 credit), qualified wages are wages, including eligible health-care costs (up to $10,000 per employee per quarter), paid to any employee during the quarter when operations were suspended or for which the decline in gross receipts applies, regardless of whether its employees were providing services.

The rules for claiming credits based on the payment of “qualified health plan” expenses for eligible employees are retroactive to March 23, 2020. If, as a result of these changes, additional credits are due to an employer for prior calendar quarters based on the payment of qualified health-plan expenses, then those credits are to be claimed when filing IRS Form 941 for the fourth quarter of 2019.

Impacts of Other Credit and Relief Provisions – An eligible employer's ability to claim the Employee Retention Credit is impacted by other credit and relief provisions as follows:

• If an employer receives a Small Business Interruption Loan under the Paycheck Protection Program, as authorized under the CARES Act, then the employer was not eligible for the Employee Retention Credit in 2020. However, the CCA changed this rule, retroactive to March 23, 2020, and borrowers of PPP loans are now eligible to claim the Employee Retention Credit. However, to the extent that an eligible employee’s wages are used to substantiate the forgiveness of a PPP loan, those same wages cannot also be used to claim the Employee Retention Credit.

• Wages for this credit do not include wages for which the employer received a tax credit for paid sick and family leave under the Families First Coronavirus Response Act.

• Wages counted for this credit can't be counted toward the credit for paid family and medical leave.

• Employees are not counted toward this credit if the employer is allowed a Work Opportunity Tax Credit.

Claiming the Credit – In order to claim the new version of the Employee Retention Credit, eligible employers must report their total qualified wages and the related health-insurance costs for each quarter on their quarterly employment tax returns, which will be Form 941 for most employers. The credit is taken against the employer's share of Social Security tax, but the excess is refundable under normal procedures.

If you have questions about whether or how this credit might apply to your business, please give this office a call.

Interaction between PPP Loans and the Employee Retention Credit Article Highlights:

• Consolidated Appropriations Act, 2021 • Interaction between PPP loans and the ERC • PPP Loan Forgiveness Denied • Amending Forms 941 • Qualified but Never Claimed the ERC

The Consolidated Appropriations Act, 2021 (CCA), which was passed by Congress and signed by the president late last December, included a very tax-beneficial provision that liberalized the interaction between PPP loans and the Employee Retention Credit (ERC). Prior to its passage, if an employer obtained a Paycheck Protection Program (PPP) loan, the employer was ineligible to claim the ERC.

However, under the legislation, an employer that is eligible for the ERC can claim the ERC even if the employer has received a PPP loan, under the following circumstances.

• An eligible employer can claim the ERC on any qualified wages that are not counted as payroll costs in obtaining PPP loan forgiveness.

• Any wages that could count toward eligibility for the ERC or for PPP loan forgiveness can be applied to either of these two programs but not both.

This gives rise to some beneficial tax opportunities. • PPP Loan Forgiveness Denied – If an employer received a PPP loan and included

wages they paid in the second and/or third quarter of 2020 as payroll costs in support of an application to obtain forgiveness of the loan (rather than claiming the ERC for those wages) and if the request for forgiveness was denied, then the employer can claim the ERC related to those qualified wages retroactively by amending their Forms 941 for 2020. This is done by using Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund.

• Business Qualified but Never Claimed the ERC – If a taxpayer did not obtain a PPP loan, qualified for the ERC in 2020, and did not previously take the payroll credit, they can still do so by filing Form 941-X. Form 7200, which is used to request advance payment of the credit, cannot be used in this situation because it must be filed before the original 941 forms are.

The ERC is a government-sponsored program to keep workers employed and is funded by providing qualifying employers with a refundable credit against certain employment taxes. For 2020, the credit is a refundable payroll tax credit equal to 50% of qualified wages, up to maximum wages of $10,000 per employee. Thus, $5,000 is the maximum credit for qualified wages paid to any employee for 2020.

Example 1: Eligible Employer pays $10,000 in qualified wages to Employee A in Q2 2020. The Employee Retention Credit available to Eligible Employer for the qualified wages paid to Employee A is $5,000. Example 2: Eligible Employer pays Employee B $8,000 in qualified wages in Q2 2020 and $8,000 in qualified wages in Q3 2020. The credit available to Eligible Employer for the qualified wages paid to Employee B is equal to $4,000 in Q2 and $1,000 in Q3 due to the overall limit of $10,000 on qualified wages per employee for all calendar quarters of 2020.

No credit is available for any period for which an employer is allowed a Work Opportunity Credit with respect to an employee.

Please give this office a call to determine if your business might benefit from this law change or other employer-beneficial changes to the ERC that are effective for 2021 and aren’t covered in this article.

Solar Tax Credit Extended for Two Years Article Highlights:

• Credit Amounts • Deceptive Advertising • Refundability • Worth the Cost? • Qualifying Property • When Is the Credit Available? • Who Gets the Credit • Multiple Installations • Battery • Installation Costs • Basis Adjustment • Association or Cooperative Costs • Mixed-Use Property • Newly Constructed Homes • Utility Subsidy

A federal tax credit for the purchase and installation costs of a residential solar system has been extended through 2023. The credit for 2021 and 2022 is 26% of the cost of the solar installation but drops to 22% for 2023, the final year of the credit (unless extended again by Congress).

The credit is nonrefundable, meaning it can only reduce your tax liability to zero. However, the portion of credit that is not allowed because of this limitation may be carried to the next tax year and added to the credit allowable for that year. The tax code infers that any credit carryover can be added to the credit allowed in the subsequent year. However, what is unclear is whether any carryover will be allowed in 2024 once the credit expires at the end of 2023. In addition to the credit reducing the regular tax, it also reduces the alternative minimum tax, should you be subject to it.

When you see those TV ads for home solar power, you may get the impression that Uncle Sam is going to pick up 26% of the cost, and you only have to come up with the other 74%. That is not necessarily the whole picture. It is true that the federal government has a 26%

tax credit for the cost of a qualified solar installation (some states also have solar credits or other incentives). However, the federal credit is non-refundable and can only be used to offset your current tax liability; any excess carries over to future years, as long as the credit still applies in future years. Currently, the credit is allowed through 2023. This means that you may not get all the credit in the first year, as you might have been led to believe or assumed based upon the TV ads or a salesperson’s pitch.

For example, suppose in 2021, your solar installation costs $25,000. That would qualify you for a solar tax credit of $6,500. But suppose the income tax on your tax return is only $4,000. Then, the credit would reduce your tax liability to zero, and the other $2,500 ($6,500–$4,000) of the credit is carried over to 2022’s tax return, where the credit will be limited to that year’s tax amount. If your tax is again less than the amount of the credit, the excess credit carries to the following year, and so on, until the credit is used up or expires.

Compare the cost of the system (and the interest you will be paying, if you are financing it) to conventional electricity costs. How many years will it take to recover your cost? Do you plan to live in your home beyond that time? Is a solar system really worth the cost? Electricity costs can vary significantly according to locale.

Even if not financially beneficial, there are situations in which the cost may not be the deciding factor. Some areas experience frequent power outages; you may simply want to go green or go off the grid where electric service is not reliable.

If you plan to go ahead with a solar installation, here are some of the issues you need to be aware of. Qualifying Property – Only the following solar power systems are eligible for the credit:

• Qualified solar electric property – property that uses solar energy to generate electricity for use in a main or second residence.

• Qualifying solar water heating property – qualifies if used in a dwelling located in the U.S. used as a main or second residence where at least half of the energy used to heat water is derived from the sun. Heating water for swimming pools or hot tubs does not qualify for the credit. The solar equipment must be certified for performance by the Solar Rating Certification Corporation or a comparable entity endorsed by the state government where the property is installed.

When is the Credit Available? – The credit may be claimed on the tax return of the year during which the installation is completed. So, for example, if you purchase and pay for a system completed in 2022, the credit will be 26% of the cost. But if the project isn’t completed until 2023, the credit will only be 22%. This becomes an even a bigger issue for systems installed during 2023 that aren’t completed before 2024, when the credit rate will be zero. If you plan to purchase a solar system in 2023, the purchase should be made early enough in the year to ensure the installation is completed before 2024.

Who Gets the Credit? – It may come as a surprise, but you need not own the residence where the solar property is installed to qualify for the credit; you need only be a “resident” of the home. The tax code does not specify that an individual has to own the home, only that it is their residence. For example: A son lives with his mother, who owns the home. The son pays to have the solar system installed; the son is the one who qualifies for the credit.

Multiple Installations – The credit is available for multiple installations. For instance, after the initial installation, if you add additional panels to increase capacity, these would be treated as original installations and qualify for credit at the credit rate applicable for the year the additional installation was completed, provided that the installation is done before 2024. On the other hand, if you had to replace damaged panels or perform other

maintenance on the system, these items would not be an original system and their costs would not qualify for the credit.

Battery – A battery qualifies for the credit if it’s charged only by solar energy and not off the grid. Storage batteries have become popular in areas where there are frequent power outages. However, this may be more of a convenience than a necessity, so consider the cost carefully. A software-management tool—whether part of the original installation or added later (before 2024)—also qualifies for the credit in cases in which the software is necessary to monitor the charging and discharging of solar energy from a battery attached to solar panels.

Installation Costs – Amounts paid for labor costs allocable to onsite preparation, assembly, or original installation of property eligible for the credit—or for piping or wiring connecting the property to the residence—are expenditures that qualify for the credit. This includes expenditures relating to a solar system installed on a roof or ground-mounted installations.

Basis Adjustment – With respect to a home, the term “basis“ generally refers to the cost of the home plus improvements and is the amount subtracted from the sales price to determine the gain or loss when the home is sold. The cost of a solar system adds to a home’s basis, but because the solar credit is a tax benefit, the credit reduces the basis. This will generally create a different basis for federal and state purposes where a state does not provide a solar credit, or it differs from the federal solar credit amount.

Association or Cooperative Costs –If you are a member of a condominium association for a condominium you own or a tenant-stockholder in a cooperative housing corporation, you are treated as having paid your proportionate share of any qualifying solar system costs incurred by the condo, cooperative association, or corporation.

Mixed-Use Property – In cases in which you use a portion of your residence for deductible business or rent part of your home to others, the expenses must be prorated, and only your personal portion of the qualified solar costs can be used to compute the credit. There is an exception if less than 80% of the property is used for nonbusiness purposes, in which case the full amount of the expenditure is eligible for the credit.

Newly Constructed Homes – If you are planning on purchasing a newly constructed home that includes a solar system, you may be entitled to claim the solar credit. However, to do so, the costs of the solar system must be separate from the home construction costs and certification documents must be available.

Utility Subsidy – Some public utilities provide a nontaxable subsidy (rebate) for the purchase or installation of energy-conservation property. In that case, the cost of the solar system eligible for the credit must be reduced by the amount of the nontaxable subsidy that was received.

As you can see, there is a lot to consider before making the final decision to install a solar system. Is it worth it, and is it the right financial move for you? Please call for a consultation before signing any contract to make sure a solar system is appropriate for you.

Tax Deductions Without Itemizing Article Highlights:

• Charitable Contributions • Educator Expenses • Performing Artist Expenses

• State and Local Government Officials’ Expenses • Health Savings Account Contributions • Moving Expenses for Members of the Armed Forces • Student Loan Interest Deduction • Tuition and Fees Deduction • Deduction for Early Withdrawal of Savings • Deductible Part of Self-employment Tax • Self-employed Health Insurance Deduction • Alimony Deduction (pre-2019 divorce agreements) • Business Pass-through Deduction • Retirement Plan Deductions

Most taxpayers think they have to itemize their deductions to claim them on their tax return. However, that is not entirely true. There are certain deductions that can be claimed while still using the standard deduction. Here is a list of those deductions: Charitable Contributions

• For 2020, non-itemizers can deduct up to $300 of cash contributions above-the-line. The $300 limits apply both to single and married taxpayers. Donations to donor-advised funds and private foundations aren’t eligible for the above-the-line deduction (2020 and 2021). The term “above-the-line” is a shorthand way of saying that the deduction reduces gross income when figuring adjusted gross income (AGI). Eligibility for many credits, some other deductions and sometimes the phaseout of the amount of the credit or deduction are based on AGI or modified AGI.

• For 2021, non-itemizers filing a joint return can deduct up to $600 of cash contributions, while taxpayers using the other filing statuses continue to be limited to $300. Unlike the 2020 version of this deduction, which is an above-the-line deduction, the 2021 deduction is claimed after the AGI is determined.

Educator Expenses – A qualified educator can annually deduct above-the-line to a maximum of $250 of qualified unreimbursed classroom expenses. These expenses include:

• Books, • Supplies (other than nonathletic supplies for courses of instruction in health

or physical education), • Computer equipment (including related software and services) and other

equipment, • Supplementary materials used by the eligible educator in the classroom, • Professional development courses that are beneficial to the students for whom the

educator provides instruction, and • Personal protection equipment (PPE), disinfectant and other supplies used for the

prevention of the spread of coronavirus after March 12, 2020.

A qualified educator is generally a kindergarten through grade 12 teacher, instructor, counselor, principal or aide and works in a school at least 900 hours during the school year.

Performing Artist Expenses - Some performing artists are allowed to deduct their employment-related expenses as an adjustment to gross income. For taxpayers to qualify for this special rule, all of the following criteria must be met:

(1) They must have had two or more employers in the performing arts field during the tax year (don’t count nominal employers who pay less than $200),

(2) Their business expenses must be more than 10% of their gross income earned as a performing artist, and

(3) Their AGI before deducting the performance-related expenses can’t be more than $16,000. Married performers must file joint returns unless they lived apart all year. The two-employer requirement and 10%-of-gross-income requirement are applied to each spouse separately. However, the $16,000-AGI requirement applies to married performers’ joint income.

State and Local Government Officials’ Expenses – Employee business expenses for a state or local government official are deductible above-the-line if the official is compensated in whole or in part on a fee basis. This provision is intended for officials who provide certain services to the government and who hire employees and incur expenses in connection with their official duties.

Health Savings Account Contributions – Contributions to Health Savings Accounts (HSA) are also an above-the-line deduction. HSAs can only be established by eligible individuals who are covered by high-deductible health plans and generally not covered under any other health plan. There are statutory limits to the amounts that can be contributed to an HSA. Subject to statutory limits, eligible individuals may make contributions to HSAs, and employers as well as other persons (e.g., family members) may contribute on behalf of eligible individuals. An account holder gets a deduction for contributions to their HSA even if someone else (e.g., a family member) makes the contributions. However, since an employer’s contributions to an employee’s HSA are excludable from the employee’s income, the employee can’t also claim a deduction for those contributions. Amounts in HSAs accumulate tax-free, and distributions are tax-free if used to pay or reimburse qualified medical expenses. Some individuals use HSAs as supplemental retirement plans when they are maxed out on other available tax beneficial retirement plans.

Moving Expenses for Members of the Armed Forces – Although an above-the-line deduction for taxpayers’ moving expenses in general has been suspended until after 2025, deduction of moving expenses is still allowed for members of the armed forces that have to move as a result of a permanent change of station. There are no requirements for distance or length of time at the new station.

Student Loan Interest Deduction – A taxpayer can deduct up to $2,500 above-the-line of interest paid by the taxpayer on a student loan on behalf of the taxpayer, spouse or dependents. The student must be at least half-time. However, the deduction is phased out for higher-income taxpayers. The $2,500 limit applies per year per return, regardless of the number of eligible students or number of loans. Tuition and Fees Deduction – This above-the-line deduction is allowed for qualified tuition and related expenses for any year only to the extent the expenses are in connection with enrollment at an institution of higher education during that tax year. The expenses are limited to $2,000 or $4,000 depending upon the taxpayer’s adjusted gross income. For joint returns with an AGI below $130,000, the maximum deduction is $4,000. Between $130,000 and $160,000, the maximum deduction is $2,000, and above $160,000, it is zero. For other filing statuses, the AGI limits are half of those for joint filers, except that married taxpayers using the married separate filing status aren’t eligible for any deduction. The same expenses can’t be used for this deduction and the American Opportunity Credit or the Lifetime Learning Credit, and 2020 is the last year for this deduction.

Deduction for Early Withdrawal of Savings – When someone closes a savings account or CD prematurely, they may get penalized by the financial institution. This is referred to as an interest penalty and is deductible above-the-line.

Deductible Part of Self-employment Tax – A self-employed taxpayer can deduct one-half of the self-employment tax computed on Schedule SE for the year.

Self-employed Health Insurance Deduction – A self-employed individual (or a partner or a more-than-2%-shareholder of an S corporation) may be able to deduct 100% of the amount paid during the tax year for medical insurance on behalf of themselves, their spouse and dependents as an above-the-line expense. However, the deduction is limited to the amount of the individual’s net SE income and the individual, spouse or dependent can’t have participated in a health plan subsidized by an employer.

Alimony Payments May Be Deductible – For divorce or separation instruments entered into before 2019 that haven’t been modified to include the tax law change effective for post-2018 instruments, an individual may be able to claim an above-the-line deduction for alimony payments made during the year if certain requirements (not covered in this article) are met. Effective for divorce or separation instruments entered into after 12/31/2018, alimony payments aren’t deductible by the payer and aren’t taxable to the recipient.

Business Pass-through Deduction – As part of the 2018 tax reform, certain businesses are allowed a deduction that is generally equal to 20% of their qualified business income (QBI). This deduction is most commonly known as a pass-through income deduction because it applies where the business income passes through to the individual’s, partner’s or stockholder’s 1040 income tax return. This category includes income from sole proprietorships, partnerships, S-corporations, rentals, farms, real estate investment trusts (REITs) and pass-through income from publicly traded partnerships. While not an above-the-line deduction because it doesn’t reduce gross income, this pass-through deduction, like the standard and itemized deductions, is subtracted from AGI to figure taxable income.

Retirement Plan Deductions – Contributions to traditional IRAs, self-employed SEPs, SIMPLEs and other qualified retirement plans are above-the-line deductions. However, the deduction for some of these contributions for an employee won’t appear as a line item on the tax return because the tax benefit has already been applied by reducing their taxable wages. The most common example of this treatment is 401(k) plan contributions in which the employee designates a percentage of their wage that is contributed to the plan and their gross wages are reduced by the contribution amount, leaving the balance of the wages as taxable.

If you have questions about how any of these deductions might apply to your tax return, please give this office a call.

The Number of Americans Who Didn't Pay Their Mortgage Hit 5% in December 2020

Obviously, the still-ongoing COVID-19 pandemic has been a major challenge for all of us since it kicked into high gear in March of 2020. In the months since, millions of people have found themselves out of a job and the ones that remained were suddenly faced with working remotely for the foreseeable future.

Even though a vaccine is in the process of being rolled out and a proverbial light at the end of the tunnel seems to finally be in sight, there's no denying that the impact of the pandemic will continue to be felt for quite some time. Case in point: according to one recent study conducted by the Mortgage Brokers Association's Research Institute for Housing

America, about five million Americans were unable to make their rent or mortgage payments on December of 2020. To put this into context, that number translates to more than 5% of all renters and mortgage holders in the country.

COVID-19 and a Potential Mortgage Crisis: What You Need to Know

In addition to the significant numbers outlined above, the same study indicated that about 2.3 million additional renters and 1.2 million mortgage holders themselves believed that they were at risk of eviction or foreclosure. Many were worried that they would be forced to move out of their current homes at some point within the next 30 days, pointing towards heightened anxiety that is only adding fuel to an already difficult situation for so many.

But while these numbers may seem shocking to many, it's important to understand that they do actually represent an improvement from the way things were in the spring and especially during the summer months. In September, for example, about six million households missed mortgage or rent payments - representing about 8.4% of renters and 7% of mortgage holders.

The number of people who feel they're at risk of being evicted has also gone down, though the level is still high. During August, between 6 and 8% of renters said that they felt they were at risk of being evicted or that they would be forced to move within 30 days. Fascinatingly, about 5% of renters who didn't actually miss any payments at all also felt that burden.

However, it's difficult to say that nobody saw this coming. During the initial months of the pandemic when the vast majority of jobs were shut down, the economic damage was already being predicted to be catastrophic. All told, about 9.3 million jobs were lost during the course of 2020 - accompanied by the biggest rise in the poverty rate since the 1960s.

Overall, there were a number of fascinating lessons to be learned from the study. First off, it seems as though the owners of rental property are feeling the biggest effect from people who can't pay rent. It was estimated that they lost a combined $7.2 billion in the fourth quarter of 2020 alone, due in large part to missed rent payments. While it's true that this was a decline from the previous quarter, it's still a massive number that could paint a harrowing picture of the weeks and months ahead. For the record, losses from rental property grew to a combined $9.1 billion in the third quarter.

Likewise, it seems that the COVID-19 stimulus programs instituted last year are a big part of the reason why this problem isn't somehow worse. Experts agree that direct stimulus checks, enhanced unemployment benefits and the various rental assistance and mortgage forbearance efforts have allowed people to remain in their homes for as long as possible. Obviously, the federal eviction moratorium helped a great deal, too.

The number of people receiving unemployment insurance benefits has also trended downward very slowly. Among renters receiving UI benefits, the number grew from 3% at the beginning of April to a steady 7% by the end of September. In December, that number dropped to 6%. It has remained at about 3% among mortgage holders since the beginning of April.

All told, there are a number of important takeaways from this report - including the larger idea that things are, slowly but surely, declining from their mid-pandemic highs in a lot of

key areas. Hopefully, the distribution of multiple effective vaccines will both slow the COVID-19 pandemic itself and continue to help ease a lot of the economic burden that people are feeling. Additionally, the White House announced on February 15th a program to extend mortgage relief and a moratorium on home foreclosures through June.

Keep Up With Payables: Paying Bills in QuickBooks It’s not your favorite accounting task, but QuickBooks makes bill-paying easier. This month, we’ll discuss paying your bills in QuickBooks. Click Pay Bills on the home page or open the Vendors menu and select Pay Bills. The screen that opens displays bills that you’ve entered that need to be paid. You can choose to list those due on or before a date you specify or all bills.

QuickBooks provides templates that you can use when you’re entering bills. You have to complete these forms before you can apply payment. By default, all vendors are represented in the table. If you want to only see bills from one specific vendor, click the down arrow in the Filter By field and select he correct one. You can also sort the list by any of a number of criteria, including Due Date, Vendor, and Amount To Pay by clicking the down arrow in the Sort By field. Once the table is displaying your bills the way you want, it’s time to select the ones you want to pay. You can either click in the box in front of each to make a checkmark or click on Select All Bills below the table. When you select one, the Amount To Pay field will change to reflect the Amount Due. If you can’t afford the whole payment, replace the 0.00 in the Amount To Pay field with your actual planned payment.

You can select individual bills to pay in QuickBooks or click on Select All Bills below the table. QuickBooks provides additional information in the table of bills to be paid beyond Date Due, Vendor, and Amount To Pay. You’ll see a column for a reference number, but there are other columns that can display vendor-issued discounts and credits that could be applied to individual bills. Vendors sometimes offer discounts for early payment, for example, and credits can be issued to settle things like returns or overpayment. Warning: If you’ve never worked with discounts and credits, we can help you learn about them, create them, and apply them. It’s complicated. When you’re satisfied with the information in the table, look below it. Highlight a bill by clicking on it to see what your options are there. You can click Go to Bill to see the original form. If there are discounts or credits available, they will appear there as Sugg[ested] Discount and Total Credits Available. You’ll also notice that any discounts or credits will have been applied in the table above. To change these, click Set Discount or Set Credit. Make sure the payment Date is correct and select the payment Method. If you select Check, you’ll have to choose between To be printed or Assign check number (for handwritten checks, you’ll be able to specify the number or let QuickBooks assign it in the next window). Select the correct payment Account and click Pay Selected Bills. A Payment Summary appears in the window that opens. You can either click Pay More Bills or Done. If you’re paying bills using more than one payment method, you’d go back to the previous screen and repeat the process.

The lower half of the Pay Bills window Helpful Automation As you saw in this example, QuickBooks applied discounts and credits automatically when you selected a bill. To set this up, open the Edit menu and select Preferences, then Bills. Click on the Company Preferences tab, which opens the screen for company-wide preferences that are established by the Administrator. Click in the boxes in front of Automatically use credits and Automatically use discounts. Then click on the down arrow in the field next to Default Discount Account to open the list. There should be an Income account labeled Discounts. Select this one, then click OK. QuickBooks provides three reports that help prevent bills from slipping through the cracks. Open the Reports menu and go to Vendors & Payables, then A/P Aging Summary and Detail, and Unpaid Bills Detail. If you’re running into problems with your accounts payable workflow and want some guidance on that or any other element of QuickBooks, we’d be happy to work with you. March 2021 Individual Due Dates March 10 - Report Tips to Employer If you are an employee who works for tips and received more than $20 in tips during February, you are required to report them to your employer on IRS Form 4070 no later than March 10. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 12 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed.

March 15 - Time to Call for Your Tax Appointment It is only one month until the April due date for your individual income tax returns. If you have not made an appointment to have your taxes prepared, we encourage you to do so before it becomes too late.

Do not be concerned about having all your information available before making the appointment. If you do not have all your information, we will simply make a list of the missing items. When you receive those items, just forward them to us.

Even if you think you might need to go on extension, it is best to prepare a preliminary return and estimate the result so you can pay the tax and minimize interest and penalties. We can then file the extension for you.

March 2021 Business Due Dates March 1 - Payers of Gambling Winnings File Form 1096, Annual Summary and Transmittal of U.S. Information Returns, along with Copy A of all the Forms W-2G you issued for 2020. If you file Forms W-2G electronically, your due date for filing them with the IRS will be extended to March 31. The due date for giving the recipient these forms was February 1.

March 1 - Information Returns Filing Due File government copies of information returns (Form 1099) and transmittal Forms 1096 for certain payments you made during 2020, other than the 1099-NECs that were due February 1. There are different 1099 forms for different types of payments.

March 1 - Farmers and Fishermen File your 2020 income tax return (Form 1040 or 1040-SR) and pay any tax due. However, you have until April 15 to file if you paid your 2020 estimated tax by January 15, 2021. March 1 - Applicable Large Employer (ALE) - Form 1095-C If you’re an Applicable Large Employer, file 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and 1095-C with the IRS. For all other providers of minimum essential coverage, file paper Forms 1094-B, Transmittal of Health Coverage Information Returns, and 1095-B with the IRS. If you’re filing any of these forms with the IRS electronically, your due date for filing them will be extended to March 31. See the Instructions for Forms 1094-B and 1095-B and the Instructions for Forms 1094-C and 1095-C for more information about the information reporting requirements. March 1 - Large Food and Beverage Establishment Employers File Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips. Use Form 8027-T, Transmittal of Employer’s Annual Information Return of Tip Income and Allocated Tips, to summarize and transmit Forms 8027 if you have more than one establishment. If you file Forms 8027 electronically, your due date for filing them with the IRS will be extended to March 31.

March 2 - Applicable Large Employers (ALE) & Self-Insuring Employers Provide employees with annual information statement of health insurance coverage, Form

1095-C, Employer-Provided Health Insurance Offer and Coverage. This date reflects an extension from the statutory due date of January 31 provided by the IRS (Notice 2020-76). This extended due date also applies to insurers who are required to provide Form 1095-B, Health Coverage, to individuals. The government’s copies of these forms were due March 1 (or March 31 if filed electronically).

March 15 - Partnerships File a 2020 calendar year return (Form 1065). Provide each partner with a copy of their Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc., or a substitute Schedule K-1. If you want an automatic 6-month extension of time to file the return and provide Schedules K-1 or substitute Schedules K-1 to the partners, file Form 7004. Then, file Form 1065 and provide the K-1s to the partners by September 15. March 15 - S-Corporations File a 2020 calendar year income tax return (Form 1120-S) and pay any tax due. Provide each shareholder with a copy of Schedule K-1 (Form 1120-S), Shareholder’s Share of Income, Deductions, Credits, etc., or a substitute Schedule K-1 (Form 1120-S). To request an automatic 6-month extension of time to file the return, file Form 7004 and pay the tax estimated to be owed. Then file the return; pay any tax, interest, and penalties due; and provide each shareholder with a copy of their Schedule K-1 (Form 1120-S) by September 15.

March 15 - S-Corporation Election File Form 2553, Election by a Small Business Corporation, to choose to be treated as an S corporation beginning with calendar year 2021. If Form 2553 is filed late, S treatment will begin with calendar year 2022. March 15 - Social Security, Medicare and Withheld Income Tax If the monthly deposit rule applies, deposit the tax for payments in February. March 15 - Non-Payroll Withholding If the monthly deposit rule applies, deposit the tax for payments in February. March 31 - Electronic Filing of Forms 1098, 1099 and W-2G If you file Forms 1098, 1099 (other than 1099-NEC), or W-2G electronically with the IRS, this is the final due date. This due date applies only if you file electronically (not paper forms). Otherwise, February 1 or March 1 was the due date, depending on the form filed. The due date for giving the recipient these forms was February 1. March 31 - Applicable Large Employers (ALE) – Form 1095-C If filing electronically, file Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, with the IRS. If filing on paper the due date was March 1, 2021.

March 31 - Large Food and Beverage Establishment Employers If you file Forms 8027 for 2020 electronically with the IRS, this is the final due date. This