UPDATE: On April 9, the IRS issued Notice 2020-23, which expands the deadline extension to many more tax returns and payments. The most important is that second-quarter estimated tax payments are also due July 15th now, rather than the original date of June 15th. More here.
Obviously things have been changing daily in the surreal and crazy world we’re all living in right now. As of March 28, 2020, here are the new deadlines for 2019 income tax returns and 1st & 2nd-Quarter Estimated Tax Payments — for both the IRS and Illinois Department of Revenue.
Both Federal and Illinois income tax returns and payments that were due on April 15 are now due July 15. (This includes both calendar and fiscal-year filers, as well as fiscal-year extended due dates that land on April 15th.)
However, keep in mind that the new stimulus checks will be based on 2018 tax returns if the 2019 return is not filed soon — more on that in this excellent article by Tony Nitti. And of course, if you are due a refund, it is best to get that filed sooner rather than later.
An extension can be filed before July 15 to extend the filing date (but not payment date) until October 15, the usual extension date.
Federal 1Q estimated tax payments are also now due July 15 — BUT Illinois 1Q payments are still due April 15.
New automatic, systemic liens and levies are suspended for now. New delinquent accounts will not be forwarded to debt collection for now.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
Gusto is my favorite company to work with for so many reasons… but it just got better as I have been watching how much effort they’ve put into researching cash flow options for their small business clientele.
I’ll be circling back to this list soon to explore these in an order that I think makes most sense for my client base; I’ve also emailed them about some City of Chicago and Cook County resources that should be added to the list.
But in the meantime, please check out their downloadable list of Federal, State, and Private resources for relief, loans and grants available to small businesses.
As they mention in the post:
This spreadsheet will regularly be updated with financial resources for small businesses. Check back for the most up-to-date information, and share it with a business owner who may benefit from the support.
We’ll also be creating similar resources for unemployment benefits and sick leave. Visit the Talk Shop homepage for our latest publications, and see our COVID-19 employer guide for more helpful info.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
I’m getting a lot of questions on this one from clients and figured it would be good info for many out there.
If you own a small business and have had to lay off or furlough staff during this difficult time, you may wish to offer those who would like to assist an opportunity to contribute to a so-called “virtual tip jar”.
The issue is that tips are taxable income that should be run through payroll… whereas most of what we’re talking about right now are rightly termed as “gifts” — which are non-taxable to the recipient. Only if the gift exceeds $15k to any one recipient does the gifter (not recipient) have to file a gift tax return. The IRS requires that to qualify as a gift, the property (usually cash in this case) must be given without expecting to receive something of at least equal value in return.
It is reasonable to argue that these gifts are not lost wages or wage replacement — nor are they income to the company and then payroll to the staff. These are people who have simply lost their jobs through no fault of their own or the business owner’s, and we’ve become friends with these folks through the years and want to help. These are the people who’ve poured us that soothing cup of herbal tea during rough times, or a shot of tequila during rougher ones. They’ve taught us to mold clay, or taught our children music. We’ve gotten to know and love them and we want to help. That’s a gift. So here are a few “tips” for making sure your tips don’t inadvertently become taxable income to your business or your staff.
1) Make sure these are in fact gifts. No fair disguising actual sales of product or services, or trades. Don’t mess this up for everyone else.
2) Use GoFundMe, rather than an existing business method of collecting payments — not Paypal, Square, Stripe or anything else. The reason is that these businesses are required by law to send a 1099-K to you and the IRS, because the government is correct to assume that in general, those funds should be considered income. Whereas, the money in this case isn’t “income” to the business, so we need to make that clear by using GoFundMe, which is set up for arms-length gifting.
3) Secondly, use your personal name and your personal bank account for this — do not run it through the business and do not use the business EIN/ Tax ID. Again, we’re trying to make it clear that this money is just a gift to the employees out of the goodness of everyone’s heart, and not a replacement of wages that would be taxable via payroll.
4) Which brings me to another important point: do not run this through payroll. Think about it: all that is happening is that a disinterested but kind third party (a plain old nice human such as myself) decides to gift money to your staff because I feel bad that they are out of work. So I give you some money, since you’re a trustworthy person who has everyone’s contact info and can fairly distribute it. And you, personally, then take the funds and hand them out. No business account, no payroll, just an altruistic gift that you are passing along as the middle man.
There are certainly situations out there and arguments to be made that in some circumstances, these funds would qualify as income to the business, and then the payments would need to be made to employees via payroll. This is not a comprehensive post designed to address all of those alternative contexts — and should not be relied on as tax advice. Please consult with your CPA or attorney for specific questions about your own business.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
Regular readers of this blog know that I’m a huge fan of Hector Garcia and the various webinar series he’s presented through the years. He has done so much to help QuickBooks ProAdvisors and their clients, that we are all truly indebted to him.
He maintains this helpful approach by offering a free webinar about how to assist small business clients during this difficult time. Here’s the webinar — and I’ve summarized his notes and posted them below.
Summary of Hector Garcia’s COVID-19 for Small Businesses Webinar —
What small businesses need in today’s environment:
• Cash Flow
• Morale
• Purpose
• Retooling
Cash Flow
• Generate more sales – sell online, sell other things, web-based versions of your services
• New channels and forms of income – offer delivery, pre-sell future products/services, offer white-glove “touchless” alternative
• Reduction of expenses – downsize ASAP, cut unnecessary monthly services, ask vendors for “special programs” or reduce services to bare minimum, share expenses/ call friends and colleagues to share plans and services
• Delay payment of expenses – use credit card for purchases, switch to vendors that accept credit cards, ask for payment terms or extend current ones
• Cash Injection (capital or loan) – SBA loans, State-sponsored disaster/ economic relief loans
• Float Payments
Morale
• Mental health (someone to talk to – setup mastermind groups with colleagues)
• Staying in business, staying relevant, sell “something”
• Keeping talented employees (choosing which ones to let go)
• Employees not feeling like they can lose their jobs
• Ability to know that downsized employees are going to be “ok”
• Offer-up excess capacity (staff, tools, infrastructure, knowledge)
Purpose
• Businesses should have a vision/mission statement – is there a way they can still fulfill that even if the business model substantially changes?
• If they change target market, could they still fulfill their purpose?
• If they change business models and purpose, could the new purpose be as fulfilling?
• Do you have a purpose-driven brand?
• Do you have a loyal customer base that you can contact online?
Retool
• Does the business have a valuable online presence or community? If not, time to build it.
• Does the business have a contingency plan for working from home? If not, time to start preparing one.
• Is this business “social distancing” proof? If not, time to build a plan.
• Does the business have ability to sell online? If not, time to create it.
5 Key Advisory Questions
• What opportunities to fix things about your business can you take advantage of during the interruption?
• What have you learned about your business during the interruption that you didn’t know before?
• If you could have done something before the interruption what would it have been?
• As your business returns to normal what opportunities are there for you to better serve your customers?
• What is the question, that if you had the answer, would allow you to more easily recover from the interruption?
Thinking outside the box —
• Digital Tip Jars
• Gift cards, Pre-paid services, packaged discounted future services
• Reduction of services, but maintaining the customer relationship
• Delivery
• Serving the essential industries (food distribution, healthcare)
• Distilleries making sanitizer
• Restaurants (Curbside pickup, free TP/sanitizer, selling frozen food, selling “kits”)
• Farmers (drive trough fresh market)
• Babysitting for healthcare workers working overtime – https://www.mncovidsitters.org
• Drive-through confessions – https://www.deseret.com/platform/amp/faith/2020/3/23/21189502/confessions-drive-upcatholic-sacrament-faith-religion-parishioners-grace-mercy-forgiveness-covid
• Online Classes – “Zoom” version of their business – https://www.facebook.com/GuzmanDojo/?hc_location=ufi
Loans
• Check your state’s Dept of Revenue website
• County & City resources
• Check Gusto’s COVID-19 Resources spreadsheet:
https://docs.google.com/spreadsheets/d/1SRBZE2_6Nftwd02M6Oxj8MoeuZ7y93spXIgIPhkkp2w/edit#gid=0
• SBA Disaster Loan
• SBA Express Bridge Loans
Tips for Loan preparation:
• Owner’s credit will be pulled, so get a copy of the credit report (Experian, Equifax, and Transunion all offer FREE versions).
If score is under 700, have statement ready to explain areas of issues in the credit
• Use the credit report to build debt (liabilities) portion of Personal Financial statement
• Identify debt that is listed both on the individual’s (owner) personal credit and also on business balance sheet (have that narrative ready)
Beyond loan application and submitting tax returns, proactively prepare:
• Personal Financial Statements for all owners (SBA form 413)
• Business Debt Schedule SBA form 2202
• Monthly sales figures: 3 years historic, plus current year with estimate/forecast – SBA form 1368
• Have all 4506-T Forms readily signed for personal and business tax returns
• Have copies of extensions filed for 2019 returns (if extension was filed)
• Have books completed up to last month prior to loan application
• Draft a Loan narrative of what the loan proceeds will be used for, how you will be able to stay in business and keep employees on staff
• Draft Financial projections that show the post-interruption numbers supporting a profitable business that can REPAY the loan
Loan forgiveness “Paycheck protection loan” – may be passed by Congress today
Keep tight records of:
• Payroll costs (burdened)
• Rents and mortgage interest
• Utility payments
• Essential costs to maintain business operational
Comparing 8-week period from loan proceeds vs. previous year
How can accountants with multiple clients help?
• Make inventory of all your clients’ excess capacity (laid off workers, kept workers (and their skillsets), information about hours they work or are available, list of tools/infrastructure with excess capacity, unique knowledge/knowhow how team members)
• Make a database public within your client base (use Google Sheets or Airtable)
• Help them do business with each other or barter
Companies/Industries growing and hiring – if you need a job NOW…
• US Census
https://2020census.gov/en/jobs.html
• Monster.com’s top 100 Companies Hiring:
https://www.monster.com/career-advice/article/companies-hiring-now
• Amazon is hiring 100,000 new associates:
https://blog.aboutamazon.com/operations/amazon-opening-100000-new- roles
• Telecommunication software companies (Slack and Zoom)
https://jobs.lever.co/zoom
https://slack.com/careers#openings
• Grocery Stores, Pharmacies, Walmart, etc.
• Logistics and delivery companies
• Restaurants that do delivery
• 50,000+ Work from home Jobs:
https://www.indeed.com/jobs?q=work+from+home&l=Miami%2C+FL
&from=homepage_relatedQuery
• 200,000+ transportation Jobs:
https://www.indeed.com/q-Transportation-jobs.html
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
Just before 2019 ended, Congress passed the SECURE Act (“Setting Every Community Up for Retirement Enhancement”). It had been languishing for months and was suddenly wrapped up in the budget legislation and passed accordingly — a surprise to most of us. It’s designed to make retirement plans more available to American workers, but there are also quite a few revenue-raisers in the bill as well that will throw a wrench into existing estate planning.
As a result: for employers, it’s a good time to revisit the retirement options you’re offering your staff; and for taxpayers, it’s a good time to revisit your retirement and estate planning.
Several rules related to tax-advantaged retirement accounts were altered. Here’s what will change:
The age at which retirement plan participants need to take required minimum distributions (RMDs) has changed to age 72 (changed from 70 ½). This only applies to those who hadn’t reached 70 ½ by the end of 2019.
Limited to $10,000 annually, the IRS has approved the use of 529 accounts for qualified student loan repayments.
For child adoption and family planning, individuals can withdraw up to $5,000 from 401(k) accounts penalty-free to assist in the cost.
Employers with an automatic enrollment into a 401(k) or SIMPLE IRA plan will receive a maximum tax credit of $500 per year.
Part-time employees who work at least 1,000 hours throughout a year or have 500 hours of service within three consecutive years can enroll in the employer-sponsored retirement plan.
An option for plan sponsors to use annuities in workplace plans to reduce liability if the insurer cannot meet its financial obligations.
If you’re an employer, definitely take a look at the credit available toward starting up a company retirement plan, and if you’re an employee, let your boss know about this credit, and that many part-time employees are now eligible to participate, but without tipping the scales away from full-time, highly-compensated employees. It’s a win-win.
As an employee, remember that there is still a credit for lower-income taxpayers for saving toward retirement, called the Retirement Savers Credit. In my work as a tax preparer I see this as an underused but very valuable perk toward getting folks started on saving for the future. Nerd Wallet wrote up a nice summary of the credit.
The SECURE Act also impacts so-called “Stretch” and Roth IRAs. It caps the distribution period for Stretch IRAs (a type of inherited Traditional IRA plan) to ten years, inflating the taxable income for recipients who otherwise would have taken smaller distributions over a longer period of time. This makes Roth IRAs more attractive — because when a Roth is inherited, it doesn’t have the same effect of bumping beneficiaries into a higher tax bracket (since with a Roth, the tax was paid before the IRA was funded).
Regardless of your tax bracket or plans for retirement, the SECURE Act will likely affect you in some way, shape, or form… so be proactive and work with your CPA or lawyer to make sure you’re making the most of it.
The IRS has a partnership with ten leading tax preparation software companies that allows users with income of $69,000 or less to use their Free File Software program — though fees for state returns and/or e-filing will apply, and the service is not available for all tax forms.
(As a tax preparer, I feel an obligation to point out that how much money a person makes rarely correlates to their being qualified to self-prepare tax returns, and that there are many situations when working with a qualified and responsible CPA or EA will be a much better decision. However, if you are going to be preparing and filing your own taxes anyway, why not take advantage of the Free File program if you meet the requirements?)
Free File Software provides free federal tax prep and e-file for taxpayers. Select a brand-name software program, create an account, and then the software guides you through return preparation.
Use free brand-name software to prepare and print.
Software guides you through return preparation.
Need Help with an error or the software? Contact the company for free customer service.
State return preparation and e-file is available for free but fees may apply.
Each month the City of Chicago offers twice-weekly (Wed & Fri) FREE business education workshops presented by experts in private practice as well as representatives from various city departments. There are quite a few good ones this month — see the list below — and they’re all offered at City Hall (right downtown and near public transit). To register for any of them, email BACPoutreach@cityofchicago.org or call 312.744.2086.
City Inspections – Ask Questions, Get Answers Wed, February 5, 3:00 PM – 4:30 PM City Hall, 121 N. LaSalle St. – 8th Floor, Room 805 Presented by the City of Chicago To operate a successful business in Chicago you need to know what it takes to maintain compliance. Officials from several City departments will provide insight on how to operate safely, stay compliant, help prepare for inspections and highlight the do’s and don’ts of operating a business.
Construction Project Management Fri, February 7, 9:30 AM – 11:00 AM City Hall, 121 N. LaSalle Street – 11th Floor, Room 1103 Presented by City of Chicago Department of Business Affairs & Consumer Protection (BACP) and Department of Planning & Development (DPD) Working with design and construction professionals to make your business dream a reality takes smart planning and organization. Learn the best practices for establishing your schedule and budget, hiring the right professionals and dealing with unforeseen challenges to ensure your project is completed on-time and on-budget.
NO WORKSHOP DUE TO HOLIDAY
2020-02-12
Speak Up and Speak Out: Public Speaking Training for Small Business Owners Fri, February 14, 9:30 AM – 11:00 AM City Hall, 121 N. LaSalle Street – 11th Floor, Room 1103 Presented by Michele Williams MSW, MA, Public Speaking Consultant and Columbia College Speech Instructor You have started or plan to start your own business. You know you have something special to offer but does the rest of the world? Whether it’s giving an elevator pitch, hiring staff, giving a community lecture, talking to a loan officer, or speaking at a National Conference knowing the basics of public speaking will enhance your ability to confidently speak up and speak out. Your speaker Michele Williams has been adjunct faculty at Columbia College for over 32 years and is a public speaking consultant. She has helped over 1,000 people become more confident public speakers. Topics include: choosing topics, types of speeches, organizing the speech, dealing with fear, relaxation, non verbal communication, relating to the audience, use of language and creating new opportunities.
How to Obtain a Sidewalk Café Permit Wed, February 19, 3:00 PM – 4:30 PM City Hall, 121 N. LaSalle St. – 8th Floor, Room 805 Presented by the City of Chicago Department of Business Affairs & Consumer Protection (BACP), Public Way Use (PWU) Unit, Anthony Bertuca Come learn about the Sidewalk Café Permit Application process by attending this informative workshop. We will explain the application process, inform you of all the requirements, and help you get prepared to submit an application. The entire application process may take up to 30 days and the 2020 Sidewalk Cafés Season begins on March 1st.
Choosing the Right Legal Entity: A Small Business Entity Workshop Fri, February 21, 9:30 AM – 11:00 AM City Hall, 121 N. LaSalle Street – 11th Floor, Room 1103 Presented by Chicago Lawyers’ Committee for Civil Rights (CLC) As an entrepreneur starting a new business, you will be faced with many important decisions; one of the first and most important decisions will be selecting the right legal structure for your business. The legal entity you choose will impact many critical aspects of your business, such as your ability to raise capital, how your company will be managed, its tax treatment, liability protection for managers and more. At “Choosing the Right Legal Entity: A Small Business Entity Workshop”, CLC equitable development and small business attorney, Akele Parnell, will discuss the advantages and disadvantages of various business structures including the Sole Proprietorship, C-Corp, S-Corp, LLC, Benefit Corporation, Cooperative Association and more.
What You Need to Know About Your Business & Taxes Wed, February 26, 3:00 PM – 4:30 PM City Hall, 121 N. LaSalle St. – 8th Floor, Room 805 Presented by the Internal Revenue Service (IRS) and Ladder Up This workshop will answer important tax questions for your business including: Are you required to file a tax return? Is your worker an independent contractor or an employee? What will the IRS request during an audit? Are you required to make estimated tax payments? What resources does the IRS have for small business owners?
Digital Mindset for Growth 101 Fri, February 28, 9:30 AM – 11:30 AM City Hall, 121 N. LaSalle Street – 11th Floor, Room 1103 Presented by Grow With Google #GoogleDigitalCoaches with JinJa Birkenbeuel Learn how to change your mindset from analog to digital by translating your entrepreneurial dreams into online action for your brand and your business. We will give guidance on how to create goal-based strategies for your business that will help it become more “discoverable’ and recognized online so you can connect with customers. We will touch on creative branding, social media, YouTube and content strategies. Come ready with your mobile phone to work and learn!
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.
Big news from the IRS that we’ve been waiting on for a while — how will charitable donations of virtual currency be treated for tax purposes? Forbes summarizes things for us:
The Internal Revenue Service (IRS) has issued guidance for donors (and charities) on the FAQ page of its website. The IRS addressed whether gifting virtual currency to a charity could result in income, gain, or loss. The IRS confirmed that if you donate virtual currency to a charitable organization, you will not recognize income, gain, or loss from the donation. That’s the same result as giving stock or other appreciated assets, which are also characterized as capital assets.
The IRS also explained how to calculate the value of a gift of virtual currency to a charity; addressed the charity’s responsibilities for gifts of virtual currency; and reviewed charity reporting requirements to the IRS.
UPDATED 12/31/2021: Due to a new law, Illinois S-Corps and Partnerships should generally now pay quarterly IL state (not federal) taxes through the business, rather than personally. This post below is about how to pay IRS and IL taxes personally; here’s how to make IL business tax payments.
There are multiple options for paying personal quarterly estimated taxes. You can a) have your tax preparer create vouchers for you, that you then print and mail with a check; b) prepare your own vouchers for the IRS and IL DoR; c) pay online.
As of March 2020, federal and state agencies and the Postal Service are having so many challenges with paper-mailed checks and vouchers that we are encouraging everyone to make any tax payments online.
If you want to pay online, the easiest way to do this is to use IRS Direct Pay and IDOR MyTaxIllinois. Paying online offers confirmation that the payment made it to the agency, reducing the chance of issues down the road, especially if the check is lost in the mail or routed incorrectly in the processing department. It also allows taxpayers to be very clear about what type of tax and tax period are being submitted, again eliminating confusion on the part of the agency and preventing future problems.
If you are paying online, I recommend making payments one day before the due dates, as sometimes it takes overnight for the agencies’ systems to process payments. The funds are usually pulled from your bank account the same day or one day later, so there is very little wiggle room.
You do not have to have an account with either the IRS or IL DoR in order to make payments using these methods.
Internal Revenue Service (IRS)
For the IRS, once you get to the site, select the following options (noted in the screen shot below) — 1) the reason for the payment, 2) the form you would be mailing in if you weren’t doing this online, and 3) the year to which the payment should apply… for example, for 4th-quarter 2019 personal estimated taxes, you’d select the following:
Here’s a nice little video that walks you through the process of verifying your identity.
Illinois Department of Revenue (IDOR)
For the IDOR, go to the MyTax Illinois site (if you already have an account for sales taxes or another reason — do not log in, unless you are making business tax payments), and then click the “> Make an IL-1040, IL-1040-ES, or IL-505-I payment” link (see print screen below).
Then follow the instructions for making a quarterly estimated tax payment; it will make you enter your personal information (SSN, etc.) and ask you what kind of tax payment you wish to make.
It may require you to enter your driver’s license information or your AGI from a past tax return to confirm identity and get your IL-PIN.
Then it will take you to a Payment Information page.
You’ll want to select “IL-1040 Estimated Payment” and enter your tax year. Make sure it’s for the correct year and quarter — this is very important. The example below is for the fourth quarter of 2021.
Then, enter your payment information and click the Submit button.
It will require you to enter and confirm your email address before clicking OK.
Make sure to print the confirmation screen, even though they will send you an email receipt — every once-in-a-while IDOR fails to push the request through, and the amount is not debited or recorded. If you have the print-screen, you can prove you attempted to pay it on-time and that the mistake was theirs.
It will also include a confirmation code, the date/time of the request, the reporting period and amount, and bank withdrawal information. You can click “Printable Confirmation” or just print the webpage to pdf.
Please make sure to note how much you paid to each agency and on which dates — and let your tax preparer know this information as well. Securely uploading copies of the final confirmation screen to your tax preparer or bookkeeper is a great practice, so they can easily store the info in your file.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
If for some reason your employee does not consent to online delivery, or if they do not have an email address, you can print the W-2 and give or mail it to them.
Gusto files the required federal, state and local copies of W-2 forms to the appropriate tax agencies, so you don’t need to order special paper stock in order to print and mail copies of W-2s — you can just print them on regular paper for those employees who may need it.
To recap, there are three methods to issuing your employees their W-2 forms —
Method 1: Enable your employees online access to their Gusto accounts so that they can obtain their W-2 forms electronically.
Method 2: Download individual W-2s, and distribute them to specific employees.
Method 3: Print the entire W-2 PDF bundle, and distribute them to all employees.
As you probably know if you are a regular reader of my blog, I am a big fan of Gusto. They have made many improvements over the past few years, and at this point they really blow away the competition, especially with their QuickBooks Online integration. (I am not being paid to say any of this — I am simply a big fan, having spent way too many years dealing with payroll company frustrations.)
And if you are a client of mine, but aren’t using Gusto payroll yet and would like to — just let me know, or sign up here! You will receive a 15% discount, since I do not accept revenue shares.
For those of you who are not clients of mine, but are interested in using Gusto for payroll, sign up here!
And for colleagues who are interested in offering Gusto as an option to your own bookkeeping and accounting clients, let me know and I’ll introduce you to my rep, Annie Arthur — who is seriously the best.
