Who in a small business can be hit with the “Trust Fund Recovery Penalty?”
There’s a harsh tax penalty that you could be at risk for paying personally if you own or manage a business with employees. The Trust Fund Recovery Penalty applies to the Social Security and income taxes required to be withheld by a business from employees’ wages. Because taxes are considered government property, the employer holds them in “trust” on the government’s behalf until they’re paid over. The penalty is also sometimes called the “100% penalty” because the people liable and responsible for the taxes will be penalized 100% of the taxes due. The amounts the IRS seeks when the penalty is applied are usually substantial, and the IRS is aggressive in enforcing the penalty.
5 ways to take action on accounts receivable
No matter the size or shape of a business, one really can’t overstate the importance of sound accounts receivable policies and procedures. If your company’s collections aren’t as efficient as you’d like, consider the following five suggestions: 1) Redesign your invoices to ensure they’re clear and easy to understand, 2) Appoint a collections champion who has the primary responsibility of following up on past due invoices, 3) Expand your payment options to include the latest mobile technology, 4) Acquaint (or reacquaint) yourself with your B2B customers’ procedures for invoice formatting and submission, and 5) Generate accounts receivable aging reports. Contact us for help.
IRS extends administrative relief for 401(k) plans
In Notice 2021-40, the IRS recently announced a 12-month extension (through June 30, 2022) of its temporary relief from the requirement that certain signatures must be witnessed “in the physical presence” of a 401(k) plan representative or notary public; instead, audio-video technology can be used. The relief was provided primarily to facilitate plan loans and distributions under the CARES Act, but it applies to any signature that is required to be witnessed in the physical presence of a plan representative or notary public. This includes spousal consents. Notice 2021-40 also requests comments regarding whether permanent modifications should be made. Contact us for more information.
IRS audits may be increasing, so be prepared
The IRS just released audit statistics for the 2020 fiscal year and fewer taxpayers had their returns examined compared with prior years. Overall, just 0.5% of individual returns were audited. Historically, this is very low. However, even though a small percentage of returns are being audited these days, that will be little consolation if yours is one of them. Plus, the Biden administration has announced it would like to increase tax compliance. The easiest way to survive an IRS audit is to prepare. On an ongoing basis, maintain documentation (invoices, bills, canceled checks, receipts, or other proof) for items reported on your returns. Contact us if you receive an IRS audit letter.
10 facts about the pass-through deduction for qualified business income
Are you eligible to take the deduction for qualified business income (QBI)? This valuable tax break is also referred to as the pass-through or Section 199A deduction. It’s available to owners of sole proprietorships, single member limited liability companies, partnerships and S corps. The deduction is intended to reduce the tax rate on QBI to a rate closer to the corporate tax rate. It’s available regardless of whether you itemize or take the standard deduction. The deduction is complex but is generally equal to 20% of qualified business income. There are two other limitations based on W-2 wages and on some “specified service trades or businesses.” Contact us with questions.
MIOSHA Rescinds COVID-19 Emergency Workplace Rules
On Tuesday, 6/22/21, the Michigan Occupational Safety and Health Administration (MIOSHA) officially rescinded the existing COVID-19 Emergency Workplace Rules. The rules were replaced with a new standard for health care employers that is in alignment with the federal OSHA Emergency standard for health care settings. Because the COVID-19 rules were rescinded, decisions regarding the following […]
Eligible Businesses: Claim the Employee Retention Tax Credit
The Employee Retention Tax Credit (ERTC) is a valuable tax break that was extended and modified by the American Rescue Plan Act (ARPA). Originally, the ERTC applied to wages paid after March 12, 2020, and before Jan. 1, 2021. Congress later modified and extended the ERTC to apply to wages paid before July 1, 2021. The ARPA again extended and modified the ERTC to apply to wages paid after June 30, 2021, and before Jan. 1, 2022. The maximum ERTC available is generally $7,000 per employee per calendar quarter or $28,000 per employee in 2021. Other modifications have also been made that may be beneficial to your business. Contact us if you have questions about your business claiming the ERTC.
Are you a nonworking spouse? You may still be able to contribute to an IRA
Married couples may not be able to save as much as they need for retirement when one spouse doesn’t work outside the home. An IRA contribution is generally only allowed if you earn compensation. But an exception exists. A spousal IRA allows a contribution for a nonworking spouse. For 2021, a couple can contribute $6,000 to an IRA for a nonworking spouse ($7,000 if the spouse will be 50 by the end of the year). However, if in 2021, the working spouse is an active participant in an employer retirement plan, a deductible contribution can be made to the IRA of the nonparticipant spouse only if the couple’s adjusted gross income doesn’t exceed a certain threshold. Contact us for more details.
Critical path method can propel IT projects
For many businesses, IT projects look good on paper but get bogged down in “scope creep,” missed deadlines and disagreements. One potential solution is critical path method (CPM), a scheduling technique used to calculate a project’s duration and illustrate how schedules are affected when variables change. It identifies the “critical path,” which is the most efficient sequence of scheduled activities that drives a project to completion. Typically, CPM involves creating a flow chart showing the “activity sequence” and calculating the project timeline. Dedicated CPM software can be used for larger, more complex projects. Contact us for help keeping your IT projects on time and within budget.
Are your company’s job descriptions pulling their weight?
Outdated, vague or inaccurate job descriptions can lead to longer hiring times, bad hires, workplace conflicts and even legal exposure. For these reasons, business owners should regularly ask themselves: Are our job descriptions pulling their weight? Conduct a review to determine whether yours are current and comprehensive. As necessary, revise wording to better summarize the duties and responsibilities of a position as it exists today. Use your updated job descriptions to increase organizational efficiency in areas such as recruiting, compensation, workload distribution, cross-training and performance management. Ensure yours are actively contributing to your company’s success.
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