We first want to wish all of you a very Merry Christmas Season. I for one am looking for a glimmering of great memories in such a crazy year. Hopefully all this craziness will be behind us in a few short months. In this issue of the Small Business Quick Reads please find some valuable information regarding some significant tax changes that will most likely affect your business this year and well beyond.
As we get to most business' yearend, making sure your books are "clean" becomes a much higher priority than during the rest of the year.
We specialize in getting your books "clean" and restructuring your accounts so you can get timely and valuable financial insights about your business at the end of each month . So many business owners typically wait until their CPA/Accountant does yearend tax returns to see "How they did last year". You don't need or should run any business this way!
Please keep in mind, CPAs and Accountants are focused on just your tax liabilities and not your business operations. This is where we have assisted many collision repair businesses as well as other small businesses get this under control ... the way it should be.
Let's make 2021 a GREAT YEAR !
PPP Loan Covered Expenses Only Deductible If Loan Not Forgiven!
As federal, state, and local governments pass legislation and offer guidance in response to the coronavirus pandemic, we are continuing to monitor the landscape to provide helpful information to you and your business.
The IRS and U.S. Treasury Department released guidance pertaining to the Paycheck Protection Program (PPP) on November 18, 2020, to clarify how to deal with covered expenses for a PPP loan that is not forgiven in the year it was received:
What does the PPP loan expenses are only deductible if a loan is not forgiven mean?
It means if you used the monies you received for the PPP Loan correctly, the loan will be forgiven, but those expenses you paid which would normal reduce your net profit and tax liability, are not deductible. In a year like 2020 this may cost small businesses more than expected, and simply was not the intention by Congress on how this would affect small businesses.
At this time, this is the IRS position on forgiveness, but Congress could change this through legislation. However, it does not seem likely that Congress will agree on much at this point.
There is also some confusion on when the deadline for applying for forgiveness applies. Borrowers may submit a loan forgiveness application any time before the maturity date of the loan, which is either two or five years from loan origination.
However, if a borrower does not apply for loan forgiveness within 10 months after the last day of the borrower's loan forgiveness covered period, loan payments are no longer deferred, and the borrower must begin making payments on the loan. For example, a borrower whose covered period ends on October 30, 2020, has until August 30, 2021, to apply for forgiveness before loan repayment begins.
Also the expiration date in the upper-right corner of the posted PPP loan forgiveness application forms has been providing some confusion as well. These dates are displayed for purposes of SBA's compliance with the Paperwork Reduction Act. It reflects the temporary expiration date for the approved use of the forms. This date will be extended, and when approved, the same forms with the new expiration date will be posted.
We are providing access to a tool from one of our partnering payroll providers, ADPrun, so you can estimate your PPP Loan forgiveness. To access Click Here.
Feel free to contact us if you have any questions ... We are here to help in anyway we can.
Tax Laws and Some Key Changes Affecting Your Business
The complications involving tax law are an ever changing landscape. Many may not affect your business but there are many that can cause additional tax liabilities and even audits.
Some, you may not be aware of until your CPA sends you your tax returns, but then it is too late!
These can be usually avoided with just a little tax planning and a review of how your financials are being accounted for in your accounting system such as QuickBooks. It also makes sense to do this the right way to minimize the chance of an IRS audit.
Office Compensation: One area that often can be an issue if your business is a S-Corp revolves around the Officers' Compensation and how medical and other insurances paid by the company are accounted for.
If you are an officer of the corporation, you are required to take a reasonable salary reported on a W-2. This determination of "reasonable" is where many have gone wrong. Since any distributions (draws against profits) you take are only subject to income taxes and not Social Security or Medicare Taxes, the IRS is very particular about the ratio between your distributions verses salaries.
There is no doubt it is advantageous to take distributions since it overall saves your company over 15% verses paying salaries to officers, but this is where many have failed the tests, and when an audit is triggered additional taxes, penalties, and interest may cost your business a great deal.
In addition, if you own the property and buildings "personally", and your company pays rent to you, this also can be a problem area as well. Rents too, are only subject to income taxes as distributions, but they too need to be in line with comparable property/building rent in your market.
Being a S-Corp can offer some great tax savings for you and your business, but the combination of the above three income streams must be carefully and accurately set, or they may be disallowed.
Any stockholder that owns 2% stock or more must report many benefits such as medical, dental, vision, as well as some other insurance as income directly on their W-2 forms. This is often overlooked and the IRS has begun to look at this more frequently, triggering audits.
In our November 15th, 2020 edition we covered these important considerations that you should prepare for before year end. Check it out by Clicking Here.
Meals/Entertainment Deductions Have Changed!
I have not met a small business owner that does not believe that when they drive to a parts store, business meeting, or client event that when they stop and eat or buy meals for the employees, they are a expensable business expense.
Well that changed in 2017 with tax reform changes in the Tax Cut and Jobs Act (TCJA).
Basically, the 2017 TCJA eliminated the deduction for any expenses related to activities generally considered entertainment, amusement or recreation. It also limited the deduction for expenses related to food and beverages provided by employers to their employees.
Also check out a great tax law chart showing the common areas that you will need to be aware. This chart is provided by CBiz and this TCJA Chart can be viewed by Clicking Here.
This as usual is somewhat a complex change that with careful changes in your accounting processes will not cause your business greater tax liability or audits.
Contact us for additional information and support.
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Use Early Bird by January 1st to receive $100 Discount !
Business Value Spotlight
If you are a QuickBooks user, I am sure either you have thought about moving to QuickBooks Online for the key reason of easy remote access.
If you have already switched to QuickBooks Online, it still is not too late to change to a much better solution with better pricing.
The solution is what is referred to as Cloud Hosting and has been around for many years, but simply either was not price competitive for small business, or the internet was just not very reliable.
Today the very best solution to gain secure remote access to QuickBooks Desktop as well as many management systems including CCCone, Microsoft Office, and One Drive is Cloud Hosting.
What is Cloud Hosting?
Simply put ... it is having your workstation on the internet in a very secure environment.
In the collision industry we have set up and tested the inclusion of CCCone Management integrated into QuickBooks Desktop seamlessly.
We have also set up Microsoft Office integration and One Drive to share vehicle images for jobs in a well structured system.
The cloud hosting solution is basically the installation of the purchased software with the license key on the network server which is hosted over the internet allowing access through the internet using a web browser from any corner of the world.
In layman language, the data and the software are stored on the cloud platform just like your photos are stored on the Google or One Drive and the user with authentic login credentials can easily access the software by using any device which has internet access.
You can consider the cloud hosting as a mix of the desktop version integrated with the power of the cloud, while giving you all the benefits of the online edition. So this cloud solution has all benefits, but not the clunky process that QuickBooks Online has..
Earlier most programs were available to be used only on the desktop but with the cloud advancement, the developers made many programs compatible for the cloud as well. With so many benefits internet remote access, most of the people that started migrating to replacement online versions such as QuickBooks Online (QBO) from the QuickBooks Desktop have regretted it. This is due to how the workflow is so much different and the feature differences.
How does Hosted QuickBooks Desktop functions on the cloud platform?
First of all, you will have to provide the license copy of your QuickBooks Desktop software, so it can be installed on their server.
After that, the user is given access to that particular server with certain configurations. The server being used by the user is protected with several security measures so that it becomes a fully secured platform for the user. In order to connect the end user and the server, the Remote Desktop Protocol (RDP) is used which is later configured to log in as per the desired user.
The particular server is also customized so that the user can access QuickBooks, along with several other programs, and its data through various devices and operating systems. After all the configuration setup, the user can easily access the software from the cloud by using any device which has internet access.
The changes made in the software hosted appears in real-time basis and all such changes are automatically saved with nightly backup services.
Which versions of QB can you host on the cloud?
The cloud platform is not restricted to hosting of any particular version or edition of the most software as it is a flexible and scalable solution which allows you to choose almost any version and edition of QuickBooks Desktop for hosting.
What advantages can I expect after choosing Cloud hosting?
Cloud hosting has a wide range of advantages to offer you and all these advantages comes at a very economical price. Here is the list of benefits which you can avail from the cloud hosting:
- Anywhere, anytime access
- High uptime
- Bank-level security
- Add-on integration
- Scalable solution
- Pocket-friendly pricing (Typically Less than QBO)
- Backup and Recovery Solution
- Additional Installs including Management Systems, Microsoft Office, and One Drive
- Real-time updates
- Multi-user collaboration
- Automatic update
- Competitive edge over your competitors
What are the characteristics of a good cloud hosting provider?
Most of the leading cloud hosting providers have QuickBooks hosting as a part of their service, but in order to make the most from your cloud accounting decision and the software, you should always choose those cloud providers who have partnered with QuickBooks Experts. This way, you will have a better expert by your side that will have the required knowledge about the software as well.
The cloud hosted QuickBooks defines the modern day accounting as it has got all the tools which can be developed by bundling the latest technology with the process of accounting. So in order to use the evolving technology, it is very much necessary for you as a business to shift to the cloud accounting solution and take advantage of its benefits.
Before you think about QuickBooks Online ... QuickBooks Desktop Cloud Hosting is a much better option for over 99% of collision repair businesses ... Contact us for more information.
This is a real game changer ...
How much money can this save you on your bottom line?
Please contact us directly and we can explain these programs and connect you to the right provider to get you setup.
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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: