Tag: tax

13 Aug 2020
Stimulus Package 2
Covid-19, News Pearson & Co, PC 0 comment

PANDEMIC STIMULUS PACKAGE 2

PANDEMIC STIMULUS PACKAGE 2
We Don’t Know What We Don’t Know!

stimulus

Nearly every American has been directly affected by the original $2.2- trillion stimulus package provided for earlier this year as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The financial relief terms and benefits expired and are awaiting further Congressional action.

CARES Act Financial Relief

Here’s a summary of the key provisions of the CARES Act that delivered significant economic assistance to many:

Individuals

  • One-time payment: of $1,200 per taxpayer plus $500 for each qualifying child
  • Unemployment Benefits: Unemployment insurance expanded if job loss is due to COVID-19. Once regular state benefits expire, eligible recipients may collect up to an additional 13 weeks of benefits plus an additional $600 per week which expired on July 31.
  • Evictions: Tenants in federally-backed housing granted 120 days of eviction relief to July 25, 2020.

    Note: This eviction moratorium does not relieve tenants the obligation to pay rent.

Businesses

  • The Paycheck Protection Program (“PPP”): Authorizes forgivable loans to small businesses to pay their employees during the COVID-19 crisis.

  Note: Provisions of the PPP were revised on June 5, 2020, by the Paycheck Protection Program Flexibility Act (PPPFA) in        response to complaints about the original bill. Click here for a review of the major provisions of the PPPFA.

  • Employee Retention Credit: Designed to encourage businesses to keep employees on their payroll.
  • Paid Sick Leave Credit & Family Leave Credit: Small and midsize employers can claim two new refundable payroll tax credits … paid sick leave credit and the paid family leave credit. Each fully reimburses eligible employers for the cost of providing COVID-19 related leave to their employees … and to make that repayment immediate.
  • Evictions: Financially strapped apartment landlords with government-backed mortgages can avoid foreclosure if they don’t evict tenants. The order applies to the Fannie Mae and Freddie Mac mortgage companies, which will extend mortgage forbearance to any landlord “negatively affected by the coronavirus national emergency,” according to the Federal Housing Finance Agency.

Congress Stalled … President Acts

Both Democrat and Republican lawmakers have proposed extensions to major provisions of the CARE Act. The Democrat proposal is embodied in a bill called HEROES. The Republican version is the HEALS Act.

However, after considerable negotiations, Congress adjourned having been unable to reach agreement on a bi-partisan compromise to reestablish much needed monetary aid to both individuals and businesses.

One day after coronavirus relief negotiations fell apart in Congress, President Donald Trump signed multiple executive actions intended to help people struggling financially due to the coronavirus pandemic. There are four major provisions of the executive order:

  •  Suspension of payroll taxes;
  •  Federal unemployment payments of $400 a week (a $200 cut from the previous $600)
  •  Deferrals on student loan payments through the end of the year
  •  Efforts to minimize evictions at federal housing.

Notably: The order does not include another round of stimulus payments.

Both Republicans and Democrats have indicated they are in favor of another round of stimulus payments. Since the decision on a second stimulus was excluded from Trump’s order, it would have to be stand-alone legislation passed by Congress or part of a broader-based compromise bill.

There will likely be delaying actions initiated to prevent President Trump’s executive orders to be implemented. That said, there is much discussion that the president’s executive action may motivate Democrat and Republican leaders to reconvene and agree on extensions to most, if not all, of the CARES Act provisions.

Summary

So, while we don’t know what we don’t know … this is an election year and taxpayers of every stripe are under significant financial stress. Our inclination is to anticipate Congressional resolution sooner rather than later.

If any of the foregoing seems unclear as to how it applies to your specific circumstances, please keep in mind that Pearson & Co. will help.
Give us a call or drop an email. We’ll respond immediately.
29 Jul 2020
News, Retirement Pearson & Co, PC 0 comment

SENIORS & RETIREES … ANOTHER FINANCIAL BREAK

SENIORS & RETIREES … ANOTHER FINANCIAL BREAK
No Need to Deplete Your Retirement Fund in 2020
And If You Have … At Your Option, Return Distributions to Your Account

Financial BreakEarlier this year, we reported that President Trump signed the SECURE Act into law raising the Required Minimum Distribution (RMD) age to 72 from 70½ . That proved to be a boon for taxpayers who can afford to delay IRA withdrawals. Delaying receipt of the RMD until age 72 significantly reduced taxable income for many taxpayers. Be sure to click here for the details

More Financial Relief for Seniors & Retirees

Now there is further financial relief triggered by The Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The Act provides for RMDs to be waived during 2020 for IRAs and retirement plans. That expansion of benefits includes beneficiaries with inherited accounts.

Participants in virtually all defined contribution retirement plans qualify, i.e.:

  • traditional IRAs
  • SEP IRAs
  • SIMPLE IRAs
  • 401(k) plans
  • 403(b) plans
  • 457(b) plans
  • profit sharing plans.

Note: The RMD suspension does not apply to qualified defined benefit plans.

Already Took Your RMD for 2020 … Good News!

At your option, you may return the distribution to your qualifying plan. Additionally, the suspension of the RMD rule for this year means your distribution is likely eligible for rollover to another IRA/qualified retirement plan as well as return to the original plan. The key is to repay the distribution to the distributing plan no later than Aug. 31, 2020, to avoid paying taxes on that distribution.

How Else May Seniors Benefit?

Why does skipping your RMD in 2020 matter? Like most people, you funded your IRAs and 401(k)s with tax-deferred dollars. Particularly if you are among the many Americans struggling in 2020 because of the pandemic, having more flexibility on distributions can be a financial bonus.

Additionally, both the equity and fixed income markets have been extremely volatile. You may win by giving your retirement portfolios another year to recover.

If any of the foregoing seems unclear as to how it applies to your specific circumstances, please keep in mind that Pearson & Co. will help.
Give us a call or drop an email. We’ll respond immediately.
30 Mar 2018
2018 Tax Law Insights from Pearson & Co. CPAs
Tax Law Pearson & Co, PC 0 comment

NEW TAX LAW AND THE GIG ECONOMY

NEW TAX LAW AND THE GIG ECONOMY
Attractions and Aversion for Workers and Employers

Pearson CPAs New Tax Law and the Gig Economy

The 21st Century worker landscape is rapidly gaining altitude in the gig economy sector … that’s the increased motivation and availability by both employers and workers, respectively, to hire and be hired as independent contractors.

The percentage of workers that make up the gig economy is reported in wide swings depending on the source. Even the Bureau of Labor Statistics has admitted difficulty in counting the exact number of independent contractors and contingent workers. That said, one reliable statistical resource, Intuit, estimates that gig workers represent 34 percent of the workforce, and will grow to be 43 percent by 2020.

Driving this growth is the internet and its capability to support workers functioning remotely from their employer. Additionally, successes such as Uber and Airbnb has called attention to many who had not considered the potential to perform as contingent workers either as their primary occupation or, in current vernacular, as a side-hustle.

The Tax Cuts and Jobs Act

Now the new tax law may accelerate that trend by rewarding workers who convert their status as employees to that of independent contractors. A distinct benefit under the new tax law is the “20% pass-through” tax deduction. In simplest terms, this allows sole proprietors, partnerships and S Corporations to deduct 20 percent of their “qualified business income” from their taxable income … meaning only 80 percent would remain taxable.

Admittedly, it’s difficult to predict how many workers will choose this route. For couples filing jointly, $315,000 is the cap above which the deduction is phased out. That said, joint filers who approximate that figure could find it to be a compelling option to make the change. Estimates are that the tax savings could approximate $15,000 per year in this scenario.

Many employers may benefit from this new provision in the tax law as well … particularly those who are seeking to reduce their payroll costs. Often independent contractors tend to be cheaper, plus payroll taxes that are the employer’s responsibility are passed on to the contingent worker.

Consider This

So caution to workers is the prudent route before taking steps to convert from employee to gig worker. Here are just a few considerations:

  • Loss of unemployment insurance;
  • No longer covered by workers compensation;
  • No predictable, steady income – subject to peaks and valleys of assignments;
  • Need to pay both the employer and employee portion of federal payroll taxes;
  • The Department of Labor and IRS have increased scrutiny in determining a workers status as truly being an independent contractor or must be treated as an employee.

As ever, we stand ready to help. A phone call or email to Pearson & Co. is all it takes.

25 Feb 2018
Virginia Consumer Use Tax
Business Pearson & Co, PC 0 comment

VIRGINIA CONSUMER USE TAX

VIRGINIA CONSUMER USE TAX
Small Business Owners … Don’t Get Caught in Non-Compliance

Virginia Consumer Use Tax 1

OK, Virginia small business owners … you know all about paying sales taxes, because anything requiring that tax to be collected is done so by Virginia-based sellers/vendors you deal with. Likewise, you are familiar with the sales tax because you are required to collect it from buyers of your goods that are taxable.

Now let’s add another dimension to the world of taxable events … the consumer use tax. Generally, the consumer use tax becomes an issue when you rent, lease or buy tangible items that you didn’t pay sales tax on at the time of purchase. Practically speaking, this typically occurs when you buy something outside the state via the internet, by phone, through mail order or even an out-of-state purchase that you bring back to Virginia to use here.

Note: We’re not talking about “double taxation” on your purchases. They are subject to either sales tax or use tax, not both. Items exempt from sales tax in Virginia are also exempt from consumer’s use tax.

So for example, let’s say you order printer ink cartridges through a website of a company based in Texas and are not charged sales tax. You are required to pay use tax at the same rates as the Virginia sales tax. Sales tax rates in Virginia currently are:

Of course, there are exemptions. Rather than try to list those in this article, why not give us a call to discuss the specifics of your purchases and whether they are taxable or exempt.

The use tax is due for calendar-year filers by May 1. If you are a fiscal-year filer, your due date is the 15th day of the 4th month after the close of your taxable year.

Yes, there are penalties and interest charged for non-payment, underpayment or late payments. Click here for more info Penalty and interest … or better yet give us a call or drop an email. We’ll respond promptly.

Virginia Consumer Use Tax 2

Summary

Small business owners especially need to be mindful of the need to comply with the requirements to declare purchases subject to use tax and to remit the applicable taxes.

Keep in mind that the Virginia Department of Taxation routinely conducts audits to enforce compliance. That activity is likely to become even more aggressive in this age of borderless commerce that is particularly fueled by the internet. The state has a vested interest in ensuring that businesses of all sizes pay either the sales tax or use tax on purchases that are not exempt.

As ever, we stand ready to help. A phone call or email to Pearson & Co. is all it takes.

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