Axley & Rode, LLP

Even after your 2020 tax return has been successfully filed with the IRS, you may still have some questions about the return. Here are brief answers to three questions that we’re frequently asked at this time of year. Are you wondering when you will receive your refund? The IRS has an online tool that can tell you the status of your refund. Go to irs.gov and click on “Get Your Refund Status.” You’ll need your Social Security number, filing status and the exact refund amount. Which tax records can you throw away now? At a minimum, keep tax records related to your return for as long as the IRS can audit your return or assess additional taxes. In general, the statute of limitations is three years after you file your return. So you can generally get rid of most records related to tax returns for 2017 and earlier years. (If you filed an extension for your 2017 return, hold on to your records until at least three years from when you filed the extended return.) However, the statute of limitat...

Vaccines for COVID-19 have been available for months now. As of this writing, about half of adults in the United States are fully vaccinated, and many more than that have had at least one shot. Yet, in all this time, employers haven’t received much guidance from the U.S. Equal Employment Opportunity Commission (EEOC) regarding the legal implications of requiring proof of vaccination from employees or incentivizing employees to get vaccinated. That changed on May 28, when the EEOC updated and expanded its technical assistance related to the COVID-19 pandemic. Proof of vaccination The latest guidance reinforces existing guidance stipulating that employers may require most employees to provide proof of vaccination as long as exceptions are allowed for employees with disabilities and those with sincerely held religious beliefs. In the new guidance, the EEOC warns employers that, when requiring proof of vaccination, they should ensure compliance with the reasonable accommodation provisi...

While many businesses have been forced to close due to the COVID-19 pandemic, some entrepreneurs have started new small businesses. Many of these people start out operating as sole proprietors. Here are some tax rules and considerations involved in operating with that entity. The pass-through deduction To the extent your business generates qualified business income (QBI), you’re eligible to claim the pass-through or QBI deduction, subject to limitations. For tax years through 2025, the deduction can be up to 20% of a pass-through entity owner’s QBI. You can take the deduction even if you don’t itemize deductions on your tax return and instead claim the standard deduction. Reporting responsibilities As a sole proprietor, you’ll file Schedule C with your Form 1040. Your business expenses are deductible against gross income. If you have losses, they’ll generally be deductible against your other income, subject to special rules related to hobby losses, passive activity losses and losses in...

No matter what an employer’s purpose, be it a for-profit company or government agency, financial solvency and strength must be a major objective. An organization capable of not just meeting the budget but beating it stands a much greater chance of accomplishing strategic objectives, ensuring stability and growth. To this end, employees play a critical role. When staff members understand how they can contribute to your organization’s financial success, everyone should be able to better work together as a team — improving efficiency and productivity. Start with strategic planning Every employer’s financial stability is at least partly attributable to a sensible strategic plan for the year. Generally, such a plan should include efforts to uncover and eliminate operational shortcomings that are inhibiting profitability (if that’s your objective) or budgetary success. One typical example is employees interacting with customers poorly, giving a bad impression or providing inaccurate inform...

Eligible parents will soon begin receiving payments from the federal government. The IRS announced that the 2021 advance child tax credit (CTC) payments, which were created in the American Rescue Plan Act (ARPA), will begin being made on July 15, 2021. How have child tax credits changed? The ARPA temporarily expanded and made CTCs refundable for 2021. The law increased the maximum CTC — for 2021 only — to $3,600 for each qualifying child under age 6 and to $3,000 per child for children ages 6 to 17, provided their parents’ income is below a certain threshold. Advance payments will receive up to $300 monthly for each child under 6, and up to $250 monthly for each child 6 and older. The increased credit amount will be reduced or phased out, for households with modified adjusted gross income above the following thresholds: $150,000 for married taxpayers filing jointly and qualifying widows and widowers; $112,500 for heads of household; and $75,000 for other taxpayers. Under prior law, the...

A 401(k) plan, or some other type of retirement savings vehicle, has become an imperative for most employers. Among the biggest challenges organizations face when implementing a 401(k) is managing the complex array of IRS rules for nondiscrimination testing regarding elective deferrals and matching contributions. Some employers may be able to automatically pass nondiscrimination testing by creating a safe harbor 401(k) plan. However, a common question that arises when considering this move is: Can a safe harbor 401(k) become top-heavy? Exempt vs. nonexempt According to the IRS, “A plan is top-heavy when the owners and most highly paid employees (‘key employees’) own more than 60% of the value of the plan assets.” A safe harbor 401(k) that has only elective deferrals and safe harbor matching contributions is generally exempt from being top-heavy. If the plan is making a nonelective contribution of 3% to all employees, it automatically satisfies the top-heavy contribution requireme...

Before the COVID-19 pandemic hit, the number of people engaged in the “gig” or sharing economy had been growing, according to several reports. And reductions in working hours during the pandemic have caused even more people to turn to gig work to make up lost income. There are tax consequences for the people who perform these jobs, which include providing car rides, delivering food, walking dogs, and providing other services. Bottom line: If you receive income from freelancing or from one of the online platforms offering goods and services, it’s generally taxable. That’s true even if the income comes from a side job and even if you don’t receive an income statement reporting the amount of money you made. Basics for gig workers The IRS considers gig workers as those who are independent contractors and conduct their jobs through online platforms. Examples include Uber, Lyft, Airbnb and DoorDash. Unlike traditional employees, independent contractors don’t receive benefits associated with ...

Merger and acquisition activity in many industries slowed during 2020 due to COVID-19. But analysts expect it to improve in 2021 as the country comes out of the pandemic. If you are considering buying or selling another business, it’s important to understand the tax implications. Two ways to arrange a deal Under current tax law, a transaction can basically be structured in two ways: 1. Stock (or ownership interest). A buyer can directly purchase a seller’s ownership interest if the target business is operated as a C or S corporation, a partnership, or a limited liability company (LLC) that’s treated as a partnership for tax purposes. The current 21% corporate federal income tax rate makes buying the stock of a C corporation somewhat more attractive. Reasons: The corporation will pay less tax and generate more after-tax income. Plus, any built-in gains from appreciated corporate assets will be taxed at a lower rate when they’re eventually sold. The current law’s reduced individu...

Under the Internal Revenue Code, an employer would typically be penalized for failing to deposit certain federal employment taxes by the designated deadline. Examples include deposits of withheld income taxes and FICA taxes. However, the IRS recently provided additional penalty relief for employers who have failed to timely deposit their employment taxes because those deposits were reduced in anticipation of various employment tax credits introduced under laws passed during the COVID-19 pandemic. Various measures Employers paying qualified sick leave wages and qualified family leave wages, as well as qualified health plan expenses allocable to qualified sick and family leave wages, are eligible for refundable tax credits that can be claimed against their employment taxes. Under the Families First Coronavirus Response Act (FFCRA), the sick and family leave credits were originally scheduled to expire at the end of 2020. However, subsequent legislation — namely the Consolidated Appro...