Make 2021 Great for Your Business !

Beware of Taxable Employee Gifts

It is common practice this time of year for employers to give their employees gifts. Where a gift is infrequently offered and has a fair market value so low that it is impractical and unreasonable to account for it, the gift's value would be treated as a de minimis fringe benefit. As such, it would be tax-free to the employee, and its cost would be tax deductible by the employer.

De Minimis Benefits - In general, a de minimis benefit is one that, considering its value and the frequency with which it is provided, is so minor as to make accounting for it unreasonable or impractical. De minimis benefits are excluded from income under Internal Revenue Code section 132(a)(4) and include items not specifically excluded under other sections of the Code. Examples of de minimis benefits include such items as:

• Controlled, occasional employee use of a company photocopier.
• Occasional snacks, coffee, doughnuts, etc., furnished to employees.
• Occasional tickets for entertainment events given to employees.
• Holiday gifts from the employer to the employees.
• Occasional meal money or transportation expenses paid for by the employer for employees working overtime.
• Group-term life insurance on the life of an employee's spouse or dependent with a face value not more than $2,000.
• Flowers, fruit, books, etc., provided to employees under special circumstances, such as a birthday or illness.
• Personal use of a cell phone provided by an employer primarily for business purposes.

In determining whether a benefit is de minimis, you should always consider its frequency and value. An essential element of a de minimis benefit is that it is occasional or unusual in frequency. It also must not be a form of disguised compensation. Whether an item or service is de minimis depends on all the facts and circumstances. In addition, if a benefit is too large to be considered de minimis, the entire value of the benefit is taxable to the employee, not just the excess over a designated de minimis amount.

The IRS has ruled previously that items with a value exceeding $100 cannot be considered de minimis, even under unusual circumstances.

Holiday Gifts - A gift of cash, regardless of the amount, is considered additional wages and subject to employment taxes (FICA) and withholding taxes.

Caution: If the gift recipient is a W-2 employee, the employer may not issue them a Form 1099- NEC or a 1099-MISC for a holiday gift of cash; the amount must be treated as W-2 income.

When an employer gives gift certificates, debit cards or similar items that are convertible to cash, the value is considered additional wages regardless of the amount. However, if the gift is a coupon that is nontransferable and convertible only into a turkey, ham, gift basket or the like at a particular establishment, the gift coupon is not treated as a cash equivalent.

Holiday group meals, cocktail parties, picnics or similar events for employees are also treated as de minimis fringe benefits.

So before you create unexpected tax consequences for both your employees and your business or if you have questions about the tax treatment of holiday gifts to employees, please give us a call.

Spousal IRAs Can Save You Money!

One frequently overlooked tax benefit is the spousal IRA. Generally, IRA contributions are only allowed for taxpayers who have compensation (the term "compensation" includes wages, tips, bonuses, professional fees, commissions, taxable alimony received, and net income from self-employment). Spousal IRAs are the exception to that rule and allow a non-working or low-earning spouse to contribute to his or her own IRA, otherwise known as a spousal IRA, as long as the spouse has adequate compensation.

The maximum amount that a non-working or low-earning spouse can contribute is the same as the limit for a working spouse, which is $6,000 for 2020. If the non-working spouse's age is 50 or older, that spouse can also make "catch-up" contributions (limited to $1,000), raising the overall contribution limit to $7,000. These limits apply provided that the couple together has compensation equal to or greater than their combined IRA contributions.

Example:
Tony is employed and his W-2 for 2020 is $100,000. His wife, Rosa, age 45, has a small income from a part-time job totaling $900. Since her own compensation is less than the contribution limit for the year, she can base her contribution on their combined compensation of $100,900. Thus, Rosa can contribute up to $6,000 to an IRA for 2020.

The contributions for both spouses can be made either to a traditional or Roth IRA, or split between them as long as the combined contributions don't exceed the annual contribution limit.

Caution: The deductibility of the traditional IRA and the ability to make a Roth IRA contribution are generally based on the taxpayer's income:

• Traditional IRAs - There is no income limit restricting contributions to a traditional IRA. However, if the working spouse is an active participant in any other qualified retirement plan, a tax-deductible contribution can be made to the IRA of the non-participant spouse only if the couple's adjusted gross income (AGI) doesn't exceed $196,000 in 2020 (up from $193,000 in 2019).
• Roth IRAs - Roth IRA contributions are never tax deductible. Contributions to Roth IRAs are allowed in full if the couple's AGI doesn't exceed $196,000 in 2020 (up from $193,000 in 2019). The contribution is ratably phased out for AGIs between $196,000 and $206,000 (up from a range of $193,000 to $203,000 in 2019). Thus, no contribution is allowed to a Roth IRA once the AGI exceeds $206,000.

Example:
Rosa from the previous example can designate her IRA contribution as either a deductible traditional IRA or a nondeductible Roth IRA because the couple's AGI is under $196,000. Had the couple's AGI been 201,000, Rosa's allowable contribution to a deductible traditional or Roth IRA would have been limited to $3,000 because of the phase-out. The other $3,000 could have been contributed to a traditional IRA and designated as nondeductible.

Please give us a call if you would like to discuss IRAs or need assistance with your yearend retirement planning.

Business Value Spotlight

Processing Costs:

How much do you spend for your total cost of taking credit cards ?
Do any of these describe your situation?

• Customers charge whole bill to get "their points" or "Cash Back"?
• Hidden fees add up to make your "real costs" higher than before?
• You pay equipment rental/lease payment to process credit cards?
• You pay a monthly fee to use the Merchant Account?
• Quoted rates are not the rate for your customer charges?
• Tired of every company saying they can "beat" the rates?
• Thousands of dollars each year off your bottom line?

We have found two simple solutions:

1. A Standard processing program guaranteed to reduce your processing costs, and has the best integrations available for QuickBooks and other accounting software.
2. A customizable program which can totally eliminate all your processing, equipment,
   PCI, and monthly fees to ZERO !

We have reviewed 20 - 30 offerings over the recent years, and found a company that has exceeded our expectations, and will provide the best program. Their system has so many well thought out options on how to get paid, and integrates nicely into almost all accounting systems including QuickBooks.

We encourage our clients to check them out and just allow them to show you the savings they offer and their knowledge level without the pushy salesmen attitude.

This program is a best standard Merchant Services we have found ... Click Here for more information.

The Edge program is an innovative new offering made possible by the recent Supreme Court ruling that allows you to share or transfer the costs of processing back to the customer. This wasn't possible a few years ago since it was against your merchant services agreement. Edge offers a customizable program that will allow you to encourage payment by check or cash, and reduce, or even stop these unnecessary costs to your business. This program also allows for zero equipment fees, transaction fees, and all the hidden costs to you, or share the costs based on charge levels. You can decide to take all credit cards for deductibles or sales up to $500.00 at no sharing costs to the Customer, but for charges above this amount you can even set a sliding scale. As an example; $501.00 - $1000.00 the customer shares half the costs, and over $1000.00 they pay the whole costs. Believe it or not, customers will still use their rewards card even if a non-cash fee is added, just to get their points, but it will then not cost you anything! You can also individually decide when processing to override the fee as well for your "best" customers. It is all very easy to setup, automated, and easy to use.

EPX Edge

This new program is a game changer ... Click Here for more information.

How much money can this save you on your bottom line ?

You can also contact us directly and we can explain both of these programs and connect you to the right person to get an analysis of your savings.

Our company AEII, QuickBooks R Us, is always here to assist any small business with a full range of services, and provide the training and support needed to achieve excellent results. We have assisted businesses worldwide ... And we specialize in the collision repair and service industry

Schedule a free session to discuss any QuickBooks or small business needs you may have below:

We have a large library of helpful QuickBooks Tips & Tricks, you can catch up on past issues by Clicking Here.

We also have a free self-help site with helpful procedures and videos at: QbHelp.us

Thank You and I look forward in sharing small business and QuickBooks Tips and Tricks with in the future ...