Category: Business Taxes

2021 Tax Changes For Businesses

Filing taxes for your small business is likely one of your least favorite things about being your own boss. Tax season might be months away, but now is the time to determine if you will need any extensions. Plus, waiting until the week before the deadline might increase your risk of making a mistake and getting unwanted attention from the IRS!

Work-From-Home Related Deductions

Were you working from home for a majority of 2021 due to the pandemic? If so, you might have loved the quick commute from your bedroom to the home office and being able to spend more time in comfortable clothes.

You may be eligible for a home office deduction, adding extra money to your pocket. A home office deduction is usually reserved for those who are not employed by a company that provides a W2, but if you’re self-employed or an independent contractor, it might be worth looking into, as it could save you hundreds of dollars.

Paycheck Protection Program Loans

In 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act helped small business owners keep their heads above water during shutdowns, layoffs, and COVID surges by offering Paycheck Protection Program (PPP) loans.

These loans were used on business expenses like payroll, mortgages, utilities, rent, but became effectively exhausted in May 2021. Were you one of the business owners who were eligible and received loans in the first part of 2021? If you’re looking into having your loans forgiven, you must submit a loan forgiveness application and have it approved by the Small Business Administration.

Charitable Donation Deductions

2021 has been a hard year for us all as we worked to recover as a nation in the midst of a pandemic. Many non-profits and shelters found themselves in dire need of supplies to help feed and clothe those who were laid off or struggling to make ends meet.

Did your restaurant or food-related business donate to food banks or shelters during 2021 to help feed others in need? If so, you may qualify for an increased deduction limit on your 2021 taxes if you meet certain requirements outlined by the IRS.

Donohoo Can Handle Your Taxes

Donohoo Accounting Services is here to help make tax season easy for your small business by finding every tax deduction you are entitled to, saving you time that can be spent focusing on keeping your business running.

We have been filing tax returns for small businesses in the Greater Cincinnati area and beyond for more than 20 years, and our team is well versed in tax laws and rules, saving you time and money. Contact us today to schedule your free consultation! For more tips and our latest updates, check us out on Facebook, Twitter or LinkedIn!

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How Employers Should Handle Repayment of Deferred Payroll Taxes

For businesses large and small, staying in the black during the COVID-19 pandemic required an immense amount of skill, strategy and cost-cutting measures. The Coronavirus Aid, Relief and Economic Security (CARES) Act, passed in March 2020, provided relief measures to help businesses and individuals survive their economic challenges.

One of these relief measures, the Deferred Payroll Tax, gave employers the option to defer their portion of Social Security taxes while business remained slow or stopped. This option was different from the additional executive order signed by President Donald Trump in August 2020 which allowed employees to defer their Social Security taxes.

Normally, employees and employers pay a combined 12.4 percent of each paycheck to the federal government for Social Security, with 6.2 percent by employers and 6.2 percent by employees. For employees, this is usually labeled FICA tax on pay stubs (FICA stands for Federal Insurance Contributions Act).

With businesses being hit hard by the pandemic, the federal government offered the option for employers to suspend payment of their half of these taxes, which many businesses decided to do to stay afloat.

For employers who opted in: it is now time to pay back the money owed. Repayment for these deferred loans began January 1, 2021, and these taxes need to be repaid by the end of this year (technically January 3, 2022, as December 31, 2021 is a holiday) to avoid any penalties from the federal government.

The IRS has made it clear that penalties and interest will apply to any unpaid balance of the deferred portion not paid on time, and that for employees who no longer work at the company or organization, the employer is entirely responsible for the deferred amount, both for their portion and the employees’ portion.

If you’re an employer who opted to defer your taxes, planning your repayment schedule needs to start now. Calculate the amount that you have due and set aside a portion of revenue to help fulfill this need during the next few months. More information about specific deadlines, and where to send your payments, is available on the IRS website. Your tax professional can also answer your specific questions, and help you make a plan.

With all the stress of the pandemic, accounting for your deferred payments doesn’t have to be challenging. Donohoo Accounting Services has more than 20 years of experience helping clients resolve their tax and financial issues. Contact us today or call 513-528-3982 for more information about repaying deferred payroll taxes, or to schedule a free consultation. We’re excited to serve you! For more tips and our latest updates, check us out on Facebook, Twitter or LinkedIn!

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Four Important Tax Tips for Nonprofits

As the close of the calendar year approaches, it may seem to be too early to start thinking about tax season. On the other hand, now may be the best time for nonprofit leaders to begin gathering the advice – and the documents – that they’ll need to maintain their organization’s tax-exempt status for 2021. These four important tips will help to get you on the right track:

Know Your Forms

Even though tax-exempt organizations don’t file taxes, most (except religious and political nonprofits) are required to annually file what’s known as a 990. However, there are four different IRS Form 990s. Which form your organization completes depends on its size in terms of its assets, gross receipts and funding sources.

  • Form 990-N (now only filed electronically) is for nonprofits that take in less than $50,000 from public sources over the course of the year. The form’s eight questions make it quick and easy to file.
  • Your nonprofit will file Form 990EZ only if it had less than $200,000 in gross receipts from public sources or it has a total of less than $500,000 in assets.
  • If your nonprofit is a non-public tax-exempt organization, such as a private foundation that uses the resources of an endowment or other privately-funded sources, then 990-PF is the required IRS filing.
  • Finally, IRS Form 990 is the form for large, established nonprofits that had $200,000 or more in gross receipts throughout the year, or if its assets total $500,000 or more.

Maintain Good Records

Having accurate records of your nonprofit’s finances are, of course, important to have throughout the year, as well as at tax time. But they aren’t the only records necessary for filing your 990. It’s also important to maintain detailed records of the organization’s structure, its board members, salaries paid, and its departmental and programming budgets.

Depending on the organization’s make-up, you may be required to file additional schedules with your 990. In addition to having this information accessible at tax time, prospective donors will appreciate your nonprofit’s transparency if it’s also available when they’re researching organizations worthy of their contributions.

Do a Double-Take

Because your annual 990 tax filing is essentially an application to retain your organization’s tax-exempt status, submitting an incomplete or incorrectly completed form may result in penalties, rejection or denial of its nonprofit standing. That’s why having someone check your work – and especially, to verify the accuracy of your records – is so vitally important.

Trust a Professional

Although software, websites and well-meaning individuals may be available to walk you through the process of completing your nonprofit’s Form 990, consider hiring a tax professional to do the job. Working with a tax professional not only saves time, but it also may save you the headache of re-filing in the new year. Donohoo Accounting Service is prepared to answer your questions before, during and after the tax-filing season. Talk with one of our accountants or schedule an appointment today by calling 513-528-3982 or contacting us via our website. Check us out on Facebook, Twitter or LinkedIn for our latest updates!

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6 Common Mistakes Business Owners Make on Their Taxes

Filing your small business’s tax return may be a dreaded task you’re tempted to put off until April 14, but we advise that you don’t. That’s because mistakes are made when you’re in a rush, resulting in interest charges, penalties or unwanted attention from the IRS. Mistakes can be avoided by being prepared and planning ahead. Here are the 6 most common tax mistakes business owners make:

Mistake #1: Filing late

It’s important to file your taxes on time to avoid a 5 percent per month penalty by the IRS (that increases until the return is filed), a 6 percent interest penalty and a late payment penalty. You can request a filing extension, but you will still need to pay a portion by the original due date. It’s better to avoid the headache, be organized and file on time.

Mistake #2: Not paying estimated taxes during the year

If you are a sole proprietor, S corporation, are self-employed or a partner and you expect to owe $1,000 or more when you file a return, you are required to make estimated tax payments throughout the year. The same is true if you are a corporation expecting to owe $500 or more in taxes.

Mistake #3: Not having organized, visible financials

Using Excel to track your income, expenses and receipts might suffice when you are first starting out, but once you get bigger you will need a program that is more robust. Your financials need to be up-to-date, accurate and all in one place so you can make good tax and cash decisions.

Mistake #4: Intermingling personal and business expenses

It’s important to keep your business expenses separate from your personal ones. You can do this by having a separate bank account and credit card for your business, and always use your business credit card for business expenses. Even if you purchase both personal and business items at an office supply store, use different credit cards to pay for them so you can keep those expenses separate.

Mistake #5: Not tracking expenses

Throughout the year you need to save receipts, log the business miles you put on your car and track your expense categories. Did you know that only 50 percent of certain business meals are deductible? Platforms like QuickBooks and Freshbooks can help you keep track of expenses, and apps like MileIQ can track your business mileage.

Mistake #6: Not getting professional help

It may be tempting to save money and do everything yourself, but unless you know what you are doing, it could cost you time, money and headaches in the end. Consider consulting with a bookkeeper or accountant throughout the year to make sure you have good processes in place come tax season.

Donohoo Accounting Services has more than 20 years of experience helping clients with their tax and financial issues. Advising small businesses on their taxes is what we do best. If you have any questions about preparing your taxes or would like to know more about the services we provide, please call us at 513-528-3982 for a free consultation.

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