It is not too late to claim ERC for your business

IRS definition: A start-up recovery business is a business that started on or after Feb. 15, 2020.

Those businesses may still be eligible for employee retention credit (ERC) during the fourth quarter of 2021, whereas businesses that started prior to Feb. 15, 2020, cannot. Your ERC eligibility ends with the third quarter of 2021.

For most reading this, your company was in business before Feb. 15, 2020, and therefore, you may still be able to review 2020 and the first three quarters of 2021 for potential payroll tax credits. If you have not investigated your business’s potential eligibility or calculated the potentially available credit, I recommend you do. Seek the advice of your tax preparer. The amount of tax credit can be substantial.

If you do still want to pursue these or already have, there is new IRS guidance to consider.

In late 2021, the IRS issued guidance on when and how to include the employee retention credit claimed on the income tax return of the business claiming it. Therefore, amended business income tax returns may be necessary.

Details on guidance

Let us start with how to report the claimed amounts. The ERC amounts claimed should be reported as a reduction of the salaries and wages paid for the income tax year. This means that the wages and salaries reported on the return will be less than the gross amount paid.

The biggest impact of the new guidance is when the claimed amounts should be reported. According to the IRS, the amounts should be reported for the period in which the related salaries and wages were paid.

Perhaps an example will better illustrate what this may mean to your business. For this example, I assume the following:

  • Business is a calendar-year income tax reporter.
  • In this example three quarterly claims were filed.
  • ERC claimed for the second quarter of 2020 on form 941-X (Adjusted Employer’s QUARTERLY Federal Tax Return or Claim for Refund) in the amount of $10,000.
  • ERC claimed for the third quarter of 2020 on form 941-X (Adjusted Employer’s QUARTERLY Federal Tax Return or Claim for Refund) in the amount of $15,000.
  • ERC claimed for the fourth quarter of 2020 on form 941-X (Adjusted Employer’s QUARTERLY Federal Tax Return or Claim for Refund) in the amount of $35,000.
  • Forms 941-X filed April 2022.
  • ERC refund not yet received.

In this example, the 2020 business income tax return should be amended to reduce the reported salaries and wage expense by $60,000, regardless of whether the refund was received or remains due. This is the proper reporting regardless of the method of accounting chosen by the business for income tax reporting.

Please check with your tax preparer to see how this might affect your business and personal income tax returns.

Let BUSBooks put your accounting in order! Together we can make YOUR accounting MORE meaningful. 

Written by Tracy Fickett, CPA and Peter Shelbo, Veteran Bus Operator, and published in Bus and Motorcoach News on March 20, 2022.

BUSBooks is a unique CPA accounting firm dedicated to the motorcoach transportation industry.

This information is general in nature and is not intended as legal, accounting, or tax advice provided by BUSBooks LLC to the reader. This material may not apply to the reader’s specific circumstances and may require consideration of additional factors. BUSBooks LLC recommends that the reader contact a tax professional before taking any action based on this information. BUSBooks assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect this information.

Reporting PPP Forgiveness for Income Taxes Copy

 

Reporting PPP forgiveness for income taxes

With all this talk about forgiveness, you would think we all did something wrong. That is certainly not the case! Thankfully, most of you who are reading this have survived this unprecedented upheaval and are now planning a bright future. Therefore, we are pleased to share this information.

The IRS has finally issued guidance on when and how to recognize the tax-exempt income related to PPP loan forgiveness. Revenue Procedures 2021-48, 2021-49, and 2021-50 were issued in the latter part of 2021. In this guidance, the IRS discusses three acceptable periods for recognizing the exempt forgiveness income.

Period One

The earliest period for recognizing and reporting the exempt income is when the PPP funds are used toward eligible expenses. This means as they are spent. For most PPP loan recipients, this would be the calendar year 2020 for the first draw and calendar year 2021 for the second draw. If your first draw was received later in 2020 or 2021, or the business is a fiscal or non-calendar year reporter, then this period may cover two different tax reporting periods.

Period Two

The next possible time for reporting the tax-exempt forgiveness income would be the period in which the forgiveness application was submitted. For example, if you requested forgiveness in November 2020, using this approach, the business would report the tax-exempt income on the tax return including November 2020. This would be tax year 2020 for calendar year reporters.

Period Three

The last possible time for reporting the tax-exempt forgiveness income is the period in which the forgiveness was granted.

What if full forgiveness was reported, but actual forgiveness was limited to a lesser amount?

If you originally reported the full amount of the PPP loan as exempt income and it was only partially forgiven, the IRS requires an amended return to correct the reporting. If the entity amending the return is a flow-through entity such as a partnership or S corporation, the business should issue amended forms K-1 and the recipients should amend their returns as well.

For 2021 business returns, there are also additional reporting requirements for how to report and disclose the exempt income from PPP loan forgiveness.

Check with your tax preparer to see how this might affect your business and personal income tax returns.

Let BUSBooks put your accounting in order! Together we can make YOUR accounting MORE meaningful. 

Written by Tracy Fickett, CPA and Peter Shelbo, Veteran Bus Operator, and published in Bus and Motorcoach News on March 11, 2022.

BUSBooks is a unique CPA accounting firm dedicated to the motorcoach transportation industry.

This information is general in nature and is not intended as legal, accounting, or tax advice provided by BUSBooks LLC to the reader. This material may not apply to the reader’s specific circumstances and may require consideration of additional factors. BUSBooks LLC recommends that the reader contact a tax professional before taking any action based on this information. BUSBooks assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect this information.

Annual Information Reporting for Quarter 1

The New Year brings your business fresh opportunities. It also demands annual compliance and information reporting. January requires your accounting department to prepare a handful of reports that affect your employees, vendors, and your friends at the IRS.

Here is a recap of the 2021 calendar year information reporting that you may be responsible for issuing soon.

Forms W-2 to Employees

Employers need to issue Forms W-2 to all employees receiving wages during the tax year. In addition, the fourth quarter and annual payroll tax returns are due. These are prepared by the person or company who processes your payroll during the year. The recipients must receive their W-2’s by January 31. The IRS requires filing by Jan 31 as well.

Forms 1099 to Vendors and Independent Contractors

Forms 1099-MISC or forms 1099-NEC are required for certain payments made to other individuals or companies in connection with a trade or business.

Payments made directly by credit card, through payment service providers such as Venmo, or a credit card processor such as Square, are not to be included.

Forms 1099-MISC are issued for certain payments and/or bartering transactions of at least $600.

  1. Paid to individuals or entities not taxed as corporations, including:
  • Rents
  • Prizes and awards
  • Other income
  1. Paid to individuals or any entities including those taxed as corporations, including:
  • Medical and healthcare payments (NOT health insurance premiums)
  • Payments to an attorney
  1. Direct sales of at least $5,000 of consumer products for resale

Due dates:

  • The recipients must receive the Form 1099-MISC by February 15.
  • The IRS requires filing by March 1 if filed by mail, March 31 if filed electronically.

Forms 1099-NEC are issued for certain payments and/or bartering transactions of at least $600, paid to individuals or entities not taxed as corporations, for services performed by non-employees with no exclusion for parts and materials.

Due dates:

  • The recipients must receive the Form 1099-NEC February 1.
  • The IRS requires filing by February 1 regardless of how delivered.

Forms 1099K are issued by credit card processors and payment service providers, such as Square and Venmo. These credit card processors and service providers are responsible for the reporting compliance. Do not report these payments on forms 1099-MISC or 1099-NEC.

Planning Opportunity: Consider paying vendors and Independent contractor by credit card or through payment service providers to reduce your business’s Form 1099 filing requirements.

Note: The IRS General Instructions for Forms 1099 compliance is thirty-one pages. What we have presented here is the most common uses that effect the Motorcoach Operator. We recommend that you clear the final preparation with your CPA before submitting your Forms 1099.

BUSBooks wishes you the best in 2022. 

Let BUSBooks put your accounting in order! Together we can make YOUR accounting MORE meaningful. 

Written by Tracy Fickett, CPA and Peter Shelbo, Veteran Bus Operator

BUSBooks is a unique CPA accounting firm dedicated to the ground transportation industry.

The information contained in this communication is general in nature and is not intended, and should not be considered, as legal, accounting, or tax advice provided by BUSBooks, LLC to the reader. The reader is also notified that this material may not apply to or be suitable for the reader’s specific circumstances or needs, and may require consideration of additional factors including other tax and non-tax facts and circumstances. BUSBooks, LLC recommends that the reader should contact his/her tax professional before taking any action based on this information. BUSBooks, LLC assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.