IRS

The Government Shutdown and the IRS

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A large number of IRS employees have been furloughed at a pretty inopportune time. The unusually-complex and rushed tax law changes are already pushing tax season’s opening day into the future (no date yet announced, and it’s already January 4th), and the government shutdown is making it worse.

The IRS has listed a series of activities that will continue to be conducted on a limited or intermittent basis. Per the NATP, those that directly affect tax preparers and our clients include:

  • Completion and testing of the upcoming Filing Year programs
  • Processing of returns with payments
  • Processing remittances including payment perfection
  • Processing disaster relief transcripts
  • Design and printing of tax forms

The following activities will be furloughed and will NOT be conducted:

  • Issuing refunds
  • Processing non-disaster relief transcripts, income verification express service/return and income verification services
  • Processing 1040X, amended returns
  • All audit functions, examination of returns and processing of non-electronic tax returns that do not include remittances
  • Non-automated collections
  • Legal counsel
  • Taxpayer services such as responding to taxpayer questions (call sites)

This short, interesting article from MarketWatch outlines some of the unfortunate results of furloughing so many IRS employees: 3 unfortunate ways the government shutdown will impact you – MarketWatch

QuickBooks Software, Software, Tips

List of State Payroll Tax Returns Filed by Gusto

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Just a quick post — courtesy of a conversation I had with Gusto support yesterday. For those of you using Gusto for your payroll needs (and I highly recommend them — far superior to any payroll company I’ve ever used, and their integration with QuickBooks Online is seamless and available at no extra charge), it turns out there’s a comprehensive list of the state tax returns they file on behalf of their payroll clients.

I (and my clients) have often received payroll documents from various state and local tax agencies and wondered, “is this something I’m supposed to be filling out or does Gusto handle it for me?” In the past I’ve emailed their support team to ask, but at some point apparently they came up with a list, so I don’t have to take that extra step anymore. I figured I’d post it here so that other Gusto users can now do the same thing when that confusing notice arrives at your place of business.

And if you’re not already using Gusto and are interested, use my referral link to get the first month of your subscription free.

Source: State taxes filed by Gusto

Education, IRS, Tips

Hobby Loss Rules – You Can’t Deduct Your Expenses If You Aren’t In It To Make A Profit

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My favorite tax writer has done it again — Tony Nitti does an amazing job in this article of explaining the nine factors the IRS takes into consideration when deciding whether an activity is a business or a hobby.

Where I see this come up most frequently is when someone loves a product (or service) — some examples I’ve seen are essential oils, diet supplements, a brand of clothing, or even a coaching method — and they realize that if they become a reseller of that product or service, they get deep discounts on the products. Bam! All of a sudden they have a business, right? Wrong. If the reason they enter into the activity is to get a personal discount on personal products, that’s not a business. There are specific guidelines and definitions about what constitutes a business, and that’s not one of them.

However, if they engage in that same activity in a businesslike manner and with an intent to make a profit, then it is possible that it might be treated as a business and therefore the expenses can be deducted against the income.

I’ll quote the master to explain further, since he does such a good job with it; but ultimately what I want you to do if you’re in this area (or have a friend claiming they can deduct everything related to their part-time hobby) is to just read the article. I promise, it’s both entertaining and educational.

Some excerpts:

Many activities are not entered into “with the intent of making a profit.” And when that happens, the activity is a hobby rather than a business.

The ramifications of being categorized as a hobby are severe: while a business can generate a loss, when you’re conducting a hobby, you may only deduct your expenses to the extent of your income. But here’s the rub: these hobby expenses have historically been deducted as other miscellaneous itemized deductions on Schedule A. That makes a hobby classification particularly painful in 2018, because as part of the Tax Cuts and Jobs Act, there are no more “other miscellaneous itemized deductions.” So you get the idea: from 2017 on, if you’re conducting a hobby, and not a business, you have to include all of the income, but can’t deduct any of the expenses.

The case history surrounding the hobby loss rules extends FAR beyond 2018. There are countless decisions covering everything from horse breeding to rental activities to cattle ranching to motocross racing… a common theme would quickly emerge: if you don’t take your business seriously, then the IRS and the courts won’t either. Thus, it is absolutely imperative that you conduct your activity in a businesslike manner, and a good start would be to do the following:

  • have a mission statement,
  • maintain a separate bank account,
  • keep separate, accurate, books and records,
  • use those books and records to manage the business; i.e., if a business line isn’t profitable, perhaps you should consider abandoning it,
  • consult with people in the industry to see what has worked for them,
  • make efforts to cut costs if losses are continuing to mount.

In sum, it’s not enough to keep a QuickBooks account. You have to show that you’re really trying to generate a profit, and that means you have to actually, you know… use the information contained within those books and records to try and turn a loss into a profit.

Source: The Top Tax Court Cases of 2018: Reunited With The Hobby Loss Rules And It Feels So Good

Education, Illinois

Dec 12-21 Chicago Business Education Workshops

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Chicago’s Department of Business Affairs & Consumer Protection (BACP) offers small business workshops every Wednesday and Friday. Workshops vary each month and are conducted by City Officials, experts, and partner business organizations. There are only four left in 2018:

Press Release Basics: Wed, December 12, 3:00pm – 4:30pm
Drawing Web Traffic – Increase Your Audience, Grow Your Business: Fri, December 14, 9:30am – 11:00am
The Basics of Employment Policies, Handbooks & Contracts: Wed, December 19, 3:00pm – 4:30pm
Everything You Need To Know About Business Insurance: Fri, December 21, 9:30am – 11:00am

All workshops are free and open to the public. Workshops are held at BACP’s offices located in Room 805 and Room 1103 at City Hall, 121 N. LaSalle St., in downtown Chicago. The full calendar is here.

To register for a workshop, email BACPoutreach@cityofchicago.org or call 312.744.2086.

Also, in case you weren’t aware, BACP offers a Business Start-Up Certificate Program, designed to give business owners the essential elements in starting and growing a business. Attend nine workshops at BACP and learn the essentials of business planning, financing, marketing, legal issues, technology and more. Complete the program workshops within six months and earn your certificate, as well as get free advice on your business plan. You can register for the Business Start-Up Certificate Program at any BACP workshop. Learn about the full set of BACP offerings here.

And visit their Business Video Library here.

Source: City of Chicago :: Business Education Workshop Calendar

Education

NSAC Cooperative Accounting Webinar Dec 11

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If you’re a client, friend or regular reader of this blog (or all three), you’ll know that I am passionate about education, especially when it comes to accounting for cooperatives. I believe that the cooperative structure is the most viable entity when it comes to achieving balance between social and economic goals. It is conducive to conducting both small- and large-scale businesses while not ignoring the needs of the community, its members, and our broader culture and society.

As such, I’ve encouraged my clients to consider adopting co-op structures and policies, and have encouraged my accounting colleagues to consider broadening the scope of their offerings to include co-op accounting and taxation. In my work with the National Society of Accountants for Cooperatives (NSAC), the National Cooperative Business Association‘s Co-op Professionals Conference (NCBA CPC), and the Cooperative Economy Summit, I’ve tried to build bridges and help mentor and develop the next generation of co-op accountants.

This upcoming course offered by NSAC is a three-hour introduction to accounting for cooperatives (plus a one-hour break for lunch). It covers the basics of what a co-op is, co-op taxation, and co-op GAAP.

Basic A&A Session 1
Date: Tuesday, December 11, 2018
Time: 11:00 AM ET / 10:00 AM CT / 09:00 AM MT / 08:00 AM PT
Approximate Duration: 240 minutes
Presenter(s): Phil Miller, Asst. NSAC Education Director & Meegan Moriary, USDA
Objective: This will be a 3 part CLN covering, What is a Cooperative, Basic Co-op Tax and Basic Co-op Accounting. There will be a 1 hour lunch break from 1-2 PM ET.
Field of Study: .5 tax .5 accounting
Program Level: Basic
CPE Credit: 3 Credit Hours
Delivery Method: Group-Live
No advanced preparation or prerequisites are required for this course.

Course Description
Introduction to Co-ops
This 50-minute course is one of the modules contained in the NSAC Basic Accounting Course, taught at a basic level. The course discussion includes:
What is a Cooperative?
Cooperative History
Cooperatives in the Community
Benefits of Cooperatives

Basic Co-op Taxation I
This 50-minute course is one of the modules contained in the NSAC Basic Accounting Course, taught at a basic level. The course discussion includes:
Tenets of Co-op Taxation
Co-op Taxation History
Applicable Internal Revenue Codes
Patronage Refunds
Section 521
Examples

Co-op GAAP
This 50-minute course is one of the modules contained in the NSAC Basic Accounting Course, taught a basic level. The course discussion includes:
GAAP Applicability
AICPA AcSEC SOP 85-3
AICPA Audit & Accounting Guide
FAS 71 Accounting for Regulation
Co-op GAAP Within FASB Codification

Source: NSAC Cooperative Learning Network – Basic A&A Session 1

IRS, Tips

New IRS “Tax Transcript” Email Scam

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From the IRS, November 27th 2018:

The IRS and Security Summit partners recently warned the public of a problematic scam affecting businesses. A surge of fraudulent emails impersonating the IRS and using tax transcripts as bait to entice users to open documents containing malware are on the rise. If a business’s employees open the malware, it can spread throughout the network and potentially take months to successfully remove.

This well-known malicious code, known as Emotet, generally poses as specific banks and financial institutions in its effort to trick people into opening infected documents. However, in the past few weeks, the scam masqueraded as the IRS, pretending to be from “IRS Online.” The scam email carries an attachment labeled “Tax Account Transcript” or something similar, and the subject line uses some variation of the phrase “tax transcript.”

Businesses should instruct employees to not open the email or the attachment, and to instead delete or forward the scam email to phishing@irs.gov.

Source: Tax Scams/Consumer Alerts | Internal Revenue Service

IRS, Tips

Censured Tax Professionals Can Now Be Looked Up Online

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When looking for a tax professional, you want to make sure they’re in good standing with the IRS. However, until recently, the public could only learn that a practitioner was sanctioned by reviewing each of the announcements of discipline published in the Internal Revenue Bulletin (IRB) on irs.gov, or by using a commercial subscription service that reports instances of “Circular 230” discipline (Circular 230 is the document that describes who is covered by the standards we must follow, and what those are).

The Office of Professional Responsibility’s (OPR, the organization responsible for making sure tax professionals follow the standards of their practice) solution was to compile the information into a searchable Excel document file; their disciplinary look-up contains searchable information regarding censures of practitioners for Circular 230 misconduct and suspensions and disbarments of individuals from practice before the IRS.

The list contains basic information on over 3,000 OPR censures, suspensions, disbarments, and miscellaneous restrictions on practice, such as permanent injunctions and denials of limited practice to unenrolled tax return preparers due to misconduct; it covers the last 25 years. The spreadsheet is searchable using the “Sort & Filter” and “Find & Select” features, and will be updated to add new entries when a disciplinary announcement is published in the IRB.

Hopefully this new tool will make folks more inclined to report unprofessional behavior to the OPR, knowing that it will be made public and others could be prevented from similar experiences. To report issues, concerns or any problems, contact the OPR at Internal Revenue Service, Office of Professional Responsibility, SE:OPR, Room 7238/IR, 1111 Constitution Avenue NW., Washington, DC 20224 or fax to (202) 317-6338.

Source: Search for Disciplined Tax Professionals | Internal Revenue Service

Education

End-Of-Year Payroll Considerations Webinar, Nov 28

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Today I came across a free one-hour webinar that I’d love to share with those in my line of work — or with clients who want to better understand how different types of income are reported (for themselves or their partners, employees and contractors).

The webinar is titled, “End of Year Payroll Considerations for Your Clients: W-2, 1099 & K-1 Distributions” and is being offered for free by CPA Academy on November 28, at 11 am Central Time.

Their description:

In this webinar, a TriNet payroll expert will provide information to help attendees guide their clients through the end of the year payroll process, including how to explain the difference between a W2, 1099 and K1 distribution, when each is required, as well as why this information is important to HR compliance and business success. Attendees will leave with more information on how to prepare their clients with the information they need for accurate, compliant payroll reporting and filing.

The difference between these types of income has even more effect on the bottom line where taxes are concerned than ever before, thanks to the new tax laws, and confusion still exists as to what goes where and why. Get a leg up on this before it’s time to issue these documents for clients or to employees.

Source: CPA Academy

Education, Illinois

City of Chicago Pop-Up Business License Workshop Nov 28

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Wed, November 28, 3:00pm – 4:30pm
City Hall, 121 N. LaSalle St. – 8th Floor, Room 805
 

Starting December 1st, the City’s new Pop-Up User and Pop-Up Host business licenses will be available for short-term general retail or food sales, providing new options to entrepreneurs and owners of commercial spaces. Learn about the unique features which allow the User to “pop-up” around the City during the license term, the license application requirements and process, as well as the benefit provided to existing Shared Kitchen Users and Retail Food license holders. Be ready to become one of the first to obtain these innovative licenses.

To register, please email BACPoutreach@cityofchicago.org or call 312.744.2086.

Source: City of Chicago :: Business Education Workshop Calendar

Education, Tips

Help Clients Save Money On Prescription Drugs & Medicare Part D

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When studying to become an accountant, it never occurred to me to take psychology classes; but in fact, much of the work we do involves areas of clients’ lives that are deeply personal. Yet no one ever trains us in divorce consulting, human resources, vehicle purchasing, credit counseling, health insurance brokerage, or, in the case of this recent interesting article I’d like to share: prescription drug coverage.

The author, James Sullivan, is a financial planner who specializes in working with clients suffering from chronic illnesses (and their families). He recently published a piece on how to assist clients when choosing a Medicare Part D prescription coverage plan, and related tips on saving money at the pharmacy. He offers a simple follow-along example that illustrates the main points:

Clients need to consider more than cost when choosing a Part D plan. Before selecting one, they should think about several questions:

Is your prescription drug(s) on the plan’s formulary?

Is your favorite local pharmacy in-network, a preferred pharmacy, or out-of-network?

What is your out-of-pocket cost if you use the local pharmacy versus using mail order?

Are you comfortable using mail order?

Once these questions are answered, the client should consider the plan’s annual deductible, the co-payments and co-insurance, its drug tiers, and any drug restrictions.

I encourage you to read the full article in Journal of Accountancy here, especially for the real-life illustration that offers some great tips.

Source: Help clients save money on prescription drugs

Accounting Services for Small Businesses