Merendino Accounting and Tax Services, PLLC

The Internal Revenue Service mistakenly sent letters to many taxpayers saying it would be reducing their Economic Impact (stimulus) Payments to pay off the taxes they owed. More than 100,000 taxpayers have received such letters even though the stimulus payments are not supposed to offset any past tax debts. Even though the notices were wrong, and the IRS has since explained the matter on its website, many of the taxpayers will not be receiving their full stimulus payments and... will need to wait to claim the rest of the payment as a Recovery Rebate Credit on their tax returns this year. The problem with the mistaken notices is one of many issues the IRS has faced since it began delivering stimulus payments in response to the pandemic. The IRS has been able to successfully process millions of payments, but many Americans also encountered difficulties receiving the payments and reaching someone at the agency who could help.

Self-employed individuals may be eligible for tax credits in 2020 if they had to take sick leave or family leave to care for themselves or someone in their family due to COVID-19. The tax credits would be claimed on IRS Form 7202. To be an eligible self-employed person, both of the following must be true: 1. You regularly carried on a trade or business within the meaning of IRS section 1402. ... 2. You would have been eligible to receive qualified sick leave wages under the Emergency Paid Sick Leave Act if you had been an employee of an employer (other than yourself), and/or eligible to receive qualified family leave wages under the Emergency Family and Medical Leave Expansion Act if you had been an employee of an employer (other than yourself). Each eligible self-employed individual must file a separate Form 7202. If the taxpayer is filing a joint tax return and both spouses are eligible self-employed individuals, each must attach a separate Form 7202 to the return. Taxpayers must maintain appropriate documentation to show that you are an eligible self-employed individual. #COVID19 #taxseason #incometaxes

As tax season officially starts one week from today I will share some accounting humor on this Friday: "The best things in life are free, but sooner or later the Government will find a way to tax them." Anonymous

The beginning of a new year, along with a transition in our Government may be a good time for some to seek out some new or fresh financial advice. My firm has a professional alliance with Michael Cooper, CPA/PFS, CFP a financial advisor with the Michael Cooper Group, a financial advisory practice of Ameriprise Financial Services, Inc. They are not employed by Merendino Accounting and Tax Services, LLC., but are available to clients as an excellent resource for financial pla...nning, wealth management and protection. For more information on Ameriprise Financial, visit: https://www.ameripriseadvisors.com/michael.b.cooper/

The Wall Street Journal reported that Democrats in Congress are considering to add a provision to the next pandemic relief bill that would repeal the $10,000 Federal cap on deductions for state and local tax (SALT), which was imposed as part of the Tax Cuts and Jobs Act back in 2017. Congress included the cap on SALT deductions, which had previously been unlimited, in the Tax Cuts and Jobs Act to get the bill to fit certain budgetary constraints. But since the states that wou...ld be most affected were ones with Democratic leadership, some saw the provision as a targeted punishment of those states. But now with Democrats in the control of the Senate Majority Leader Chuck Schumer (D-N.Y.) has introduced a measure repealing the SALT cap entirely, and he is currently working to get more members of his party behind it. However, the move puts Democrats in something of a bind: Supporters argue that Americans need tax relief now more than ever, but opponents say it would mostly help wealthy people and reduce revenue at a time when the Government needs money more than ever. The Biden administration has been largely indifferent on the issue so far. The Democrats have said that they would like the bill to be bipartisan, but they are preparing to move ahead on their own if the talks break down as they have before. It will be interesting to see if the SALT deduction issue becomes part of any new legislation.

As businesses are getting ready to apply for the second round of Paycheck Protection Program (PPP) loans, many had issues with their lender during the first round. This was especially true with smaller businesses that do their banking with the larger banks. Some of these banks (without mentioning any names) took care of larger customers first, many whom should not have even been available for loans under the PPP in my humble opinion. Please note that while going to your bank may be the first thought that there may be other lending resources available. The program is open until March 31, 2021, so there is some time to look into that. #PPP #covidrelief

Employee vs. Independent Contractor- Many businesses choose to pay workers as independent contractors to save money on payroll taxes and employee benefits. The misclassification can lead to back payment of payroll taxes along with late payment penalties, so it is important to understand the difference. On January 6, 2021, the Department of Labor (Department) announced a final rule clarifying the standard for employee versus independent contractor under the Fair Labor Standard...s Act (FLSA). The effective date of the final rule is March 8, 2021. In the final rule, the Department: Reaffirms an economic reality test to determine whether an individual is in business for him or herself (independent contractor) or is economically dependent on a potential employer for work (FLSA employee). Identifies and explains two core factors that are most probative to the question of whether a worker is economically dependent on someone else’s business or is in business for him or herself: The nature and degree of control over the work. The worker’s opportunity for profit or loss based on initiative and/or investment. Identifies three other factors that may serve as additional guideposts in the analysis, particularly when the two core factors do not point to the same classification. The factors are: The amount of skill required for the work. The degree of permanence of the working relationship between the worker and the potential employer. Whether the work is part of an integrated unit of production. The actual practice of the worker and the potential employer is more relevant than what may be contractually or theoretically possible. Provides six fact-specific examples applying the factors.

Happy February everyone! Those living in my area are dealing with a little blast of winter on this first day of February. If you are unable to work from home why not take advantage of the time to organize your income tax information? Although the IRS will not be able to accept tax returns until February 12th being ready to file on or close to that date will likely result in a faster tax refund. For those that do not get money back you will have peace of mind, plus you can al...ways wait until April 15th to pay your tax bill. Tax appointments for me are starting this week, so some people are already following my recommendation.

Here's another reason not to use H&R Block: The IRS is once again depositing the latest round of Economic Impact (Stimulus) Payments in the wrong bank accounts in a replay of problems experienced last year by many taxpayers. The problem stems in part from tax preparation companies that used temporary bank accounts in previous years where taxpayers could receive their refunds, while those companies took a portion of the refund for payment. The temporary bank accounts were late...r closed, but the IRS relied on the old information it had on file for those bank accounts when it began making direct deposits this week of the latest round of stimulus payments. Some customers of both H&R Block and Intuit’s TurboTax have reportedly been among those who have been affected and the two companies are providing some information about how to deal with the problem.

Optional standard mileage rates to calculate the deductible costs of operating an automobile for business, charitable, and medical purposes are changing, starting on January 1, 2021. The new rates are: 56 cents per mile for business use, down 1.5 cents from the rate for 2020, 16 cents per mile for medical purposes, down one cent from the 2020 rate; and,... 14 cents per mile in service of charitable organizations, unchanged from 2020. Taxpayers always have the option of calculating the actual costs of using their vehicle, rather than using the standard mileage rates. However only a percentage of the business use of the vehicle is deductible, so mileage records still must be kept. Taxpayers can use the standard mileage rate but must choose to use it in the first year that the car is available for business use. Then, in later years, they can choose either the standard mileage rate or actual expenses incurred. Leased vehicles must use the standard mileage rate method for the entire lease period if the standard mileage rate is chosen.

This question is likely to come up a lot this tax season. Many taxpayers had to adjust to the coronavirus pandemic by moving out of state or by working remotely from home, but that could produce complex issues regarding taxes that they will need to address. For example, under New York’s convenience of the employer rule, wages are attributable to the employee’s New York office, regardless of where the work is actually performed, unless the remote location is for a specific bus...iness need of the employeras opposed to the convenience of the employee. That means the wages of an employee opting to work from home in another state generally continue to be treated as New York wages and are subject to New York taxation and withholding. The question is whether these same tests apply to the current environment where state governments, and possibly the employers, have mandated that employees work from homes as opposed to their offices. A significant concern is how wages should be sourced for personal income tax and withholding purposes, such as which jurisdiction can tax the wages. As states deal with revenue shortfalls resulting from the pandemic you can bet that they are going to resort to any legal ways that they can use to hold on to taxpayers' money.

Happy New Year Everyone! I thought that I would start with some tough love in 2021. I understand that last year was difficult for many, but If you are desperately needing the economic stimulus payment that the Government is currently issuing then you really need to change your financial strategy. If 2020 thought us anything it was to be prepared for the unexpected. No one should be in the position where just $600 is so important for their livelihood. Here are some suggestions... that can help you manage your finances better for this year and beyond: Identify financial goals- To increase the chances of being successful be specific. Target certain areas that need attention. Stick to a budget- Begin tracking expenses and identify those that can be cut back. There are software programs available that can help with this. Assemble a financial team- Enlist the help of a trusted family member, financial advisor, and tax preparer. A recommendation is that someone uses at least two people to get some different perspective. I also recommend that a financial advisor and tax preparer not be the same person, as those two individuals may not always have the same goals in mind. #2021 #financetips