Coronavirus has caused delays to tax return processing as well as payment processing
The Internal Revenue Service has delayed processing payments and paper returns due to the COVID-19 lockdown that shuttered America. People who sent tax payments to the IRS using paper checks are most affected and it will take some time for the IRS to catch up.
Do not send another paper check if your original paper check still hasn’t cleared the IRS account. It is part of the backlog of tax returns and other unsorted, unopened IRS business mail.
The IRS should not penalize a taxpayer if the IRS, itself, is late opening the mail. If a tax return or check is postmarked by the due date, they will consider it an on-time payment and there will be no fines or fees.
Normally the IRS charges a $25 NSF penalty for bounced checks under $1,250. This year, in response to overwhelming financial hardship and delays at the IRS, it is waiving fees for dishonored checks received between March 1 and July 15.
Update from Sean Core CPA regarding Tax News and Impact from the Coronavirus (COVID-19) April 2020
If a taxpayer missed a filing deadline despite their best efforts, the IRS promises to be flexible and may even offer penalty relief. It has been suggested to write “COVID-19” on the return with a note describing why the payment is late.
The IRS extended the filing deadline to July 15 and allowed an extension to October 15. The IRS also extended the contribution date to an individual retirement account (IRA), health savings account (HSA), Archer medical savings account (Archer MSA), and Coverdell education savings account (Coverdell ESA) to July 15. This gives greater flexibility for taxpayers to claim prior-year contributions, depending on their individual situations.
2020 has been an unusual tax year resulting in unusual delays, but also unusual penalty forgiveness. To avoid unnecessary penalties, document your mailing dates and detail your circumstances on your returns and correspondence–especially if it’s a few days behind.
As the world is now aware, we are amid a global pandemic regarding the COVID-19 virus. At Sean Core CPA PLLC, we understand that there is no portion of society that has not been touched by this event. Due to the ongoing and ever-changing aspects of this healthcare crisis, our practice is making changes in accordance with both government-mandated and common-sense procedures. As always, our number one concern is servicing our clients to the best of our abilities. As soon as possible we will return to our normal in-office operations, but until such time, we put the health and well-being of our customers and practice members at the forefront.
Here is how we will be proceeding over the next few weeks and possibly months:
All essential functions will be conducted to the fullest extent possible.
Communications and meetings will be done via phone or video conference
Documents can still be sent by mail as well as email, fax or uploaded to a secure portal such as google docs or dropbox.
Appointments are still to be scheduled but will be conducted over the phone.
We take neither this global health crisis nor the changes we must make to our normal processes lightly. The COVID-19 pandemic has caused an almost immediate financial crisis across all industry sectors and we understand the effect on everyone’s fiscal well-being. With this in mind, we will continue to ensure that your tax and accountancy needs are met in line with the high standards you’ve come to expect from our practice. Overall, we do not expect an interruption in our normal business services. We sincerely appreciate your business and your continued confidence in our ability to satisfy your needs, especially during this trying time.
Quarter 1 2020 Tax Update
We apologize for this long list of updates but important revisions have occurred (see https://www.irs.gov/newsroom for the details). Many of our clients will be impacted by these new rules (sometimes positively) so we want to make sure you get the necessary information.
In addition to the filing deadline for tax returns being extended from April 15th to July 15th, several other government mandates have been put into place. Please read the following carefully. This is especially true if you are a business owner. Digesting all the information may take several read-throughs. Take your time and please feel free to call or email us with any questions.
The President has signed the Families First Coronavirus Act intended to ease the economic consequences stemming from the Coronavirus outbreak. The Act provides for family and medical leave as well as sick leave, to employees and provides tax credits to employers and self-employed providing the leave. The Act also affects employer-sponsored health plans. Here are the details:
BUSINESS EMPLOYER 2020 TAX UPDATES
Family and medical leave:
The Act includes the Emergency Family and Medical Leave Expansion Act (EFMLEA), which requires employers with fewer than 500 employees to provide both paid and unpaid public health emergency leave to certain employees through December 31, 2020. The emergency leave generally is available when an employee who has been employed for at least 30 days is unable to work or telework due to a need for leave to care for a son or daughter under age 18 because a school or place of care has been closed, or a childcare provider is unavailable, due to an emergency concerning COVID-19 that is declared by a federal, state, or local authority. The first 10 days of leave may be unpaid and then paid leave is required, calculated based on an amount not less than two-thirds of an employee’s regular rate of pay and the number of hours the employee would otherwise be normally scheduled to work, not to exceed $200 per day and $10,000 in the aggregate. Certain exemptions and special rules apply, and a tax credit may be available (see below).
Emergency paid sick time:
Under the Emergency Paid Sick Leave Act (EPSLA) (Division E of the Act), private employers with fewer than 500 employees, and public employers of any size, must provide 80 hours of paid sick time to full-time employees who are unable to work (or telework) for specified virus-related reasons. Part-time employees are entitled to sick time based on their average hours worked over 2 weeks. This amount is immediately available regardless of the employee’s length of employment.
The maximum amounts payable vary based on the reason for absence. Employees who are (1) subject to a quarantine or isolation order, (2) advised by a health provider to self-quarantine, or (3) experiencing symptoms and seeking a diagnosis, must be compensated at their regular rate, up to a maximum of $511 per day ($5,110 total). Employees caring for an individual described in category (1), (2), or (3), caring for a son or daughter whose school is closed or child care provider is unavailable or experiencing a “substantially similar condition” specified by the government must receive two-thirds of their regular rate, up to a maximum of $200 per day ($2,000 total).
Employers cannot require employees to find a replacement worker or use other sick leave before this sick time. Employers may exclude health care providers and emergency responders, and the DOL can issue regulations exempting businesses with fewer than 50 employees. The sick leave mandate takes effect not later than 15 days after March 18, 2020 (the date of the Act’s enactment) and expires December 31, 2020.
Employer tax credits:
The Act provides tax credits to employers to cover wages paid to employees while they are taking time off under the EPSLA and EMFLEA. (Act Sec. 7001; Act Sec. 7003) The credits have several factor::
The EPSLA credit for each employee is equal to the lesser of the amount of his leave payor either (1) $511 per day while the employee is receiving paid sick leave to care for themselves, or (2) $200 if the sick leave is to care for a family member or child whose school is closed. An additional limit applies to the number of days per employee: the excess of 10 days over the aggregate number of days taken into account for all preceding calendar quarters. (Act Sec. 7001(b)) The EMFLEA credit for each employee is the amount of his leave pay limited to $200 per day with a maximum of $10,000. (Act Sec. 7003(b)(1))
The amount of the EPSLA and EMFLEA credits are increased by the portion of the employer’s “qualified health plan expenses” that are properly allocable to qualified sick leave wages or qualified family and medical leave wages. Qualified health plan expenses mean amounts paid or incurred by the employer to provide and maintain a group health plan (as defined in Code Sec. 5000(b)(1) ), but only to the extent that such amounts are excluded from the gross income of employees because of Code Sec. 106(a). (Act Sec. 7001(d); Act Sec. 7003(d))
Also, the credits allowed to employers for wages paid under the EPSLA and EFMFLEA are increased by the amount of the tax imposed by Code Sec. 3111(b) (the 1.45% hospital insurance portion of FICA) on qualified sick leave wages, or qualified family leave wages, for which credit is allowed under Act Sec. 7001 or Act Sec. 7003. (Act Sec. 7005(b)) The credits are refundable to the extent they exceed the employer’s payroll tax. Businesses don’t receive the credit if they’re also receiving the credit for paid family and medical leave in Code Sec. 45S .
The EPSLA and EMFLEA credits may also be taken against the employer’s railroad retirement tax. These rules apply only to wages paid concerning the period beginning on a date selected by the Secretary of the Treasury which is during the 15 days beginning on the date of the enactment of the Act (March 18, 2020), and ending on December 31, 2020.
Employer FICA exclusion:
Wages paid under the EPSLA and EFMFLEA are not considered wages under Code Sec. 3111(a) (employer tax – old age, survivors and disability insurance portion of FICA; 6.2%) or under Code Sec. 3221(a) (employer’s railroad retirement tax). (Act Sec. 7005(a))
The Act also provides for similar refundable credits against the self-employment tax. It covers 100% of a self-employed individual’s sick-leave equivalent amount, or 67% of the individual’s sick-leave equivalent amount if they are taking care of a sick family member, or taking care of a child following the child’s school closing for up to 10 days. The sick-leave equivalent amount is the lesser of average daily self-employment income or either (1) $511/day to care for the self-employed individual or (2) $200/day to care for a sick family member or child following a school closing, paid under the EPSLA. (Act Sec. 7002)
Self-employed individuals can also receive credit for as many as 50 days multiplied by the lesser of $200 or 67% of their average self-employment income paid under the EMFLEA. (Act Sec. 7004)
These rules apply only to days occurring during the period beginning on a date selected by the Secretary of the Treasury, which is during the 15 days beginning on the date of the enactment of this Act (March 18, 2020), and ending on December 31, 2020. (Act Sec. 7002 and Act Sec. 7004)
From our office to you:
We understand that the next few months may be filled with doubt, no matter whether you are directly or indirectly affected by the COVID-19 crisis. As always, we at Sean Core Tax & Business Services will work tirelessly to ensure you have peace of mind. Our top-notch professionals are at your disposal. Together we know that as a national and global community we will get past all the hurdles put in front of us by this terrible pandemic. Thank you once again for your patience and again, please contact us with any questions you may have at any time.
IRS Audits are not fun! How does the IRS decide who to audit, and who not to? The IRS is increasing automated ways to trigger audit suggestions. Discover here the 4 triggers and FAQ about IRS audits to pay attention to in 2019
You may feel triumph or relief when you send in your taxes. However, make sure to file your work papers and documentation with care. Not only will you want to be able to refer to them next year, there is always the possibility of an IRS audit.
The IRS checks all tax returns against other data it receives. For example, if you are employed, your employer files a W2 with the IRS. If you have interest or dividend income, your financial institution will file a 1099 with the IRS. If you neglect to include the information from these forms in your tax return, the IRS will notice and will probably contact you.
The IRS also runs automatic statistical checks to look for outliers. If what you claim looks very different from what others in similar situations claim, then your tax return is more likely to be pulled out and reviewed. Even this does not mean that you will definitely be audited. The IRS employee may look through your return, compare it to other information, and decide everything is fine. However, if the rest of the tax return is not satisfactory, then you’re more likely to receive an audit.
Sometimes your tax return is not the main target in an audit. If you do business with another person, and that person is being audited, your taxes may be checked as well in order to make sure everything is in order.
“Do You Know the Safe Harbor Conditions of the IRC Section 199A Deduction? If not, you can know about it only by clicking on the following image.”
Flags for IRS audits
Here are situations that make your tax return more likely to receive an audit:
• Earning a lot of money. The greater your income is, the greater is the probability that you will receive an audit.
• Filing a Schedule C. A Schedule C means that you’re self-employed. If you show losses from year to year, the IRS may want to know if you are pretending that a hobby is really a business.
• Not reporting all taxable income. Remember the IRS gets all those W2s and 1099s and several other pieces of information as well.
• Not reporting all foreign bank accounts. Because of pressure that the United States has put on other countries, there’s a good chance that your foreign bank is also communicating with the IRS.
How the IRS will contact you
The IRS has a policy of contacting US taxpayers by mail, at least for starting an audit So, if you receive a phone call pretending to be from the IRS, this is almost always a scam. Do not fall for it; it could cost you seriously. Of course, after you have a genuine relationship with someone working at the IRS, they may arrange to call you.
Audits themselves can be conducted entirely by mail, in which the auditor may pose certain questions, for example about deductions or expenses, for which you supply answers your answers by mail along with copies of documentation. You may also experience an in-person audit. These audits may either be “office audits” (at an IRS office) or “field audits” (such as your home, your business, or somewhere else).
The IRS tries to conduct audits within three years
The IRS keeps tax returns for six years. You may be audited on any of those years, so you should retain your documents and tax returns for at least six years. If your more recent taxes are intertwined with earlier years – for example, when you bought or sold stocks – you will want to keep those years and the supporting documents for the earlier years as well.
However, the IRS usually tries to audit taxes within three years of their being filed, so the probability of being audited on earlier years is very low.
Although this may be good for each individual taxpayer and business, the under-staffing at the IRS is not good for the revenue supplying the government. Fewer workers at the IRS means that fewer cheaters are being caught, and that means that less money is flowing in.
Even if you do get audited, you may not have to pay more
If you have followed the tax code and can document your decisions, you may not have to pay more after being audited. Unfortunately for auditees, most taxpayers have to pay extra more after they are audited – as well as penalties and fees.
Being audited is something few people anticipate with pleasure. If you follow the rules, the likelihood of your being audited is very low. If you keep your files and documents in order, being audited should be only a minor inconvenience.
If you are looking for a CPA with experience, and are located, or have property in the Phoenix area, we are accepting a few new clients. Please contact us by phone at 480-626-5043 or visit our Mesa office to set up an appointment to meet with one of our accountants!
The IRS issued a notice on January 18, 2019 about specific conditions under which your rental real estate enterprise may be treated as a trade or business.
This safe harbor is available to taxpayers who want to claim the section 199A deduction with respect to a rental real estate enterprise. If you can meet the safe harbor requirements, your real estate enterprise will be treated as a trade or business.
To qualify for this safe harbor your enterprise must satisfy several requirements, as follows.
Qualifiers for the IRC Section 199A Deduction
1. You must maintain separate books and records showing income and expenses for each rental real estate enterprise.
2. You (or your staff or contractors) must perform at least 250 hours of rental services during the tax year for each rental real estate enterprise. You may not combine commercial and residential rentals within the same real estate enterprise. Rental services that qualify include:
Advertising to rent or lease the real estate
Verifying information on the tenant applications
Negotiating and executing leases
Maintenance and repair of the property
Daily operation, maintenance and repair of the property, including:
Purchase of materials for repairs
Supervision of employees and independent contractors
As the property owner, you may perform these services yourself or have your employees, agents or independent contractors do so.
3. You must maintain contemporaneous records to document these hours of services, including time reports, logs or a similar description of the services performed, the dates on which they took place and who performed them. This means you must track everything, including your personal time and the time of those you employ. Maintaining a log book and invoice file scrupulously will satisfy these requirements. Your records should be available for inspection at the request of the IRS. The records requirement does not apply to taxable years beginning prior to January 1, 2019.
If you cannot satisfy these requirements, your rental real estate enterprise may still be treated as a trade or business for purposes of section 199A if the enterprise otherwise meets the definition of trade or business in § 1.199A-1(b)(14).
The tax experts at Sean Core CPA can help you determine if your enterprise meets the requirements for the safe harbor IRC section 199A deduction. Call us today at 480 626-5043 or contact us online.
The 2018 tax year will bring with it several changes to the tax code. With the alterations, it is important to plan ahead for your business filings and individual taxes. This way, you can prepare yourself for different filing dates while ensuring you have the necessary monetary amounts covered (if you need to pay in). As a business owner in Arizona, here are important tax dates for 2018 each of you need to know.
January 16, 2018
Coming up quickly is your 2017 fourth quarter estimated tax payments. Whether you own a business or are self-employed, it is necessary to pay this quarterly amount. Make sure to have it postmarked no later than the 15th of January.
March 15th, 2018
Partnership and S Corp Business Tax Returns are due. You may file an extension which allows an additional 6 months to file.
April 17, 2018
Individual Taxes Due. So for business owners who are filing personal tax returns, this is the day their return is do. All tax returns must be postmarked by midnight on April 18, unless an extension has been submitted.
If you are applying for an extension for your individual return, it is also due on this day. Applying for an extension will extend the filing of your return until October 15 of 2018. However any taxes owed must be paid with the extensions.
C Corporation Business tax returns and taxes are due. An extension may be submitted to extend the filing of your business return until October 15 of 2018.
Additionally, your second quarter 2018 business estimates are due on this day.
June 15, 2018
Your second quarter business estimates are due on June 15, so make sure you have your paperwork and payments postmarked by June 15.
September 17, 2018
Your third quarter business estimates are due on September 17. Have everything postmarked by the end of the 17th.
Your Partnership and S Corp Business tax returns are due.
October 15, 2018
If you filed for an extension back in April for your personal tax returns, today is the day your extension is due. You need to make sure you have everything postmarked by the 15th.
January 15, 2019
This is the day your final fourth quarter business estimate payments are due.
Staying on top of your business tax returns is so important. As a business owner filing is a bit different, as you likely need to file quarterly. Plus, with the recent changes to the tax codes going into 2018, it is a good idea to give yourself a bit more time to file. This way, you can understand what is going on with your personal and business tax returns. Just make sure to stay on op on these dates as it will help you stay on top of both your IRS and your Arizona Department of Revenue tax returns.
Just remember, if you need help with your tax returns, have questions or would like to know more about the changes in the tax code, feel free to contact our office to help you with your business taxes or individual taxes, or send us an email at your earliest convenience.
If you filed for an extension for your corporate business tax return, the deadline of October 15th, 2017 is fast approaching. Typically, these returns and individual tax returns are due on the 15th of the fourth month following the tax year end, December 31st 2016 for individuals and most businesses. A six-month extension gave you until October 15th 2017. Schedule C sole proprietorships and single member LLC’s also have the luxury of waiting until October, with a six-month extension.
New Deadlines for Partnerships and LLCs
Beginning with the 2016 tax year filing in 2017, Partnerships and S-Corps filed on a form 1065 and form 1120s respectively, are required to file returns by March 15th. This provides the necessary time to send Schedule K-1 to business owners for filing on their personal returns.
If you were part of a partnership filing Form 1065, your deadline is September 15th if you filed an extension by March 15th. In case you missed this deadline, or if you have any questions about these or any other tax deadlines, contact Sean Core CPA PLLC, for tax and business services. We provide business tax services related to Individuals, S Corps, C Corps, LLCs and Partnerships, and filing of all required schedules including K1’s.
Sean Core CPA for a Wide Range of Tax and Business Services
Our small business focused accounting firm provides tax preparation services including payroll tax returns for federal and state withholding (940, 941, 943, and 944), all State Unemployment returns, sales tax, and property tax returns. Sean Core CPA provides personal attention to small business, with a wide range of business planning and financial services such as monthly bookkeeping with compilation of financial statements, and business tax services.
Sean Core CPA has been assisting small business owners in and around Mesa, AZ including businesses in Chandler, Scottsdale, Tempe and Phoenix with accurate and timely tax and business services that you can trust.
Never miss a tax deadline again! Contact Sean Core, CPA today to maximize your return regardless of your business structure. We have the knowledge and experience to reduce your tax debt and maximize your return with timely tax filings.