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Five Questions To Ask Before You Switch Payroll Services

As we prepare for the new year, many businesses are considering whether they should change their payroll services partner in 2021. Outsourcing your payroll services can offer some much-needed flexibility so you can keep the focus on your customers, while also providing the right kind of attention and care for your employees.  

Finding the right payroll services partner means finding someone who will make sure several crucial tasks will be done on time and in compliance with the appropriate state laws – ensure your employees get paid, your payroll taxes are collected and paid, and payroll tax forms are filed. 

As you conduct your search for a new payroll partner, it’s important to know the types of questions you need to be asking, such as: 

  1. How long does it take to set up my service and run the first payroll? 
  2. What do you do to ensure my information is kept safe and secure? 
  3. Are there additional fees for employee payroll when making additions or changes?  
  4. Are there any additional fees for filing taxes in multiple states?  
  5. If you make a mistake, are you liable, and how long would it take to fix that mistake?  

There are various other tasks your payroll services partner can also tend to, from handling direct deposits to tracking employee time. And the more automated these services, the more efficient and more accurate they can be as they reduce the risk of human error entering the process.  

If you’re considering changing your payroll services in 2021 or contemplating outsourcing them in the coming year, don’t hesitate to reach out to our team at PADGETT BUSINESS SERVICES®. You can trust our PADGETT PAYROLL® program to manage your payroll needs, minimizing the risk of penalties and easing the process so you can keep your focus on your customers. Reach out to our team today. 

3 Reasons To Choose A Local A Payroll Partner

“Buying local” is an important sentiment these days, for a variety of reasons. It drives our local economies, and keeps more money circulating in our communities. 

And it’s not just your favorite coffee shop or bookstore that offers that local touch, but also your accounting, tax or payroll partner. Having a local payroll service provider means trusting someone who knows your business intimately, thanks to an ongoing relationship of mutual respect and value. This is something that you don’t get with the larger payroll service providers. 

Here are three reasons why trusting a local partner is key for your business’s payroll needs: 

  1. Talk to someone who knows your business: Many payroll services often are run out of centralized processing centers in large cities, putting an unnecessary step between the client and the provider. Having a local provider means you’re working with a dedicated accounting partner and have a direct line to troubleshoot anything that looks amiss. 
  2. Understanding compliance: Taxes vary from state to state, so it’s important to find a partner who understands the nuances of compliance that are relative to your local community. By trusting a Padgett payroll partner, you’ll work with someone who’ll ensure you have accurate payroll tax payments and withholdings and knows these regulations inside and out (and can even advocate on your behalf!). 
  3. Ensuring accuracy: With some of the larger providers, running payroll can be an automated process that lacks a human touch. It’s always good to have a local provider you trust, and if you work with a Padgett payroll partner you get user-friendly reports and the various tax-planning benefits that will make sure everything is running right. 

At PADGETT BUSINESS SERVICES®, we have a network of accountants, CPAs and tax professionals who run businesses in communities across the country, doing their part to support local businesses. Our team understands the challenges that come with running a business. Let PADGETT PAYROLL® handle all your payroll needs so you can focus on serving your customers. 

If you’re looking to transition to a local payroll partner, find an office in your community and set up a consultation today. 

Six things you should know about the new stimulus deal

Some long-awaited and much-needed relief for U.S. businesses is on the way as Congress has approved — and the president has signed — legislation for a second round of stimulus to aid those impacted by the COVID-19 pandemic. The bulk of the $900 billion stimulus package is geared to support businesses, helping them weather the economic storm through a mixture of programs and tax breaks. 

Here are six things you should know about this newest deal: 

  1. Second round of PPP: The Paycheck Protection Program is back with an infusion of $284 billion to support businesses, allowing those who fit the qualifying criteria and have already received a loan to apply for a second round of funding. 
  2. A simplified forgiveness process: Per the new stimulus package, a new, simpler loan forgiveness application will be created by the SBA within the next month for loans of $150,000 or less. Businesses can have their loan forgiven by signing a one-page document that discloses the number of employees retained through the funding, the estimated amount of the loan spent on payroll costs and the total loan amount. 
  3. Additional financial aid through the SBA: There is $20 billion included for Economic Injury Disaster Loan (EIDL) grants to support businesses in low-income communities, as well as $3.5 billion for continued SBA debt-relief payments and $2 billion for enhancements to SBA lending. This deal also features $15 billion in dedicated funding for live venues, independent movie theaters and cultural institutions. 
  4. More expenses are now deductible: Reversing the IRS’s previous position, the stimulus bill offers an important fix to the existing deductibility restrictions for expenses. Now, all business expenses paid for with proceeds from PPP loans are tax-deductible.  
  5. Expansion of eligibility: Small 501(c)(6) organizations, like chambers of commerce or economic development organizations, that have fewer than 150 employees can now seek PPP funding. 
  6. Credits and deductions: Included in the bill is an expansion of the business meals deduction, enabling businesses to fully deduct meal expenses from their federal taxes. Additionally, the Employee Retention Tax Credit was extended and expanded, giving businesses an additional incentive to keep people on their payrolls. 

The plan also includes one-time direct payments for Americans who earn up to $75,000 a year ($150,000 a year for couples), offering $600 for each family member, meaning a qualifying family of four would be able to receive $2,400. It also extends existing pandemic unemployment insurance programs for 13 weeks, expanding federal benefits by an additional $300. 

Since the beginning of the COVID-19 pandemic, PADGETT BUSINESS SERVICES® and its network of accountants, CPAs and tax professionals have worked to assist businesses in navigating the changing environment of economic-assistance programs. We have worked with more than 1,000 businesses to secure more than $58 million in PPP funding, and we remain engaged in providing support to manage the loan-forgiveness process.  

Let our trusted team help your business chart a course to take advantage of the various types of assistance being offered and reach out today to an office near you. 

How to spread some cheer and save on your taxes through holiday gift-giving

Who doesn’t love opening a present this time of year? Spreading that holiday cheer through a gift to your employees and customers is a great way to get in a festive spirit and thank them for their hard work, especially during a challenging year like 2020!

Remember that only certain types of gifts are deductible, so make sure you follow the rules to avoid a Grinch-like spoiler come tax filing season. Here’s a quick overview of some holiday gift options for your employees and customers:

  • Employee Gifts: The IRS doesn’t recognize the traditional ham, turkey, or other item of nominal value given at the holidays as taxable income, but rather as a de minimis fringe benefit (one in which the value and number of times it is given is so small, accounting for it isn’t practical). But if an employer gives cash or a cash equivalent — like gift certificates, gift cards, prepaid cards and the like — the gift is taxable regardless of the amount and must be included in the employee’s wages.
  • Customer Gifts: Deductible business gifts are limited to $25 per recipient per year. Remember there isn’t a limit on the number of people you can share a gift with, nor the amount you can spend, just the amount you’re able to deduct. The $25 limitation doesn’t include incidentals like gift wrapping since it doesn’t add value to the gift and therefore wouldn’t be deductible. And don’t forget that married couples and partners of a partnership are each considered one recipient.
  • Holiday Parties: Social distancing and restrictions around gathering size probably mean office holiday parties may or may not happen this year. Remember, though, that a holiday party is fully deductible only if it’s thrown for the benefit of employees and their families. If clients or customers attend the holiday soirée, then entertainment rules apply and only 50 percent of the cost associated with these partygoers is deductible (and this applies even if the party was done virtually). Also, don’t get too lavish. The IRS always keeps an eye on business deductions and the costs associated with an extravagant event.

Thinking of spreading holiday goodwill this year? Reach out to our trusted network of accountants, tax experts and business advisors at PADGETT BUSINESS SERVICES® so we can make sure your employees and customers can benefit from a gift and you don’t get stuck with a lump of coal in return. Contact your Padgett office today and let us help you reach your business goals.

Ways you can help your employees without getting hit by the IRS

It’s in our nature to want to lend a hand and help those who have fallen on hard times, and during the COVID-19 pandemic there are plenty of people who could use a bit of grace and compassion. The challenge as a business owner is finding a way to ensure the help you want to offer to your employees can truly benefit them to the fullest. 

Fortunately, there are various tax provisions and programs businesses can rely on to help their employees in need, as well as make sure both sides aren’t hit with any unexpected tax penalties. 

Section 139 can aid employees impacted by the pandemic 

Passed in 2001 following the 9/11 terror attacks, Section 139 allows employers to offer tax-advantaged assistance to the employees who are impacted by a qualified disaster. This allows businesses to give additional payments to help if those payments aren’t included in the employee’s gross income. 

A qualified disaster-relief payment is a payment to someone to either pay or reimburse expenses that result from disaster, such as the ongoing COVID-19 pandemic. They can include living expenses to support the individual’s family or the cost of a funeral. They also don’t come with a tax hit for the employee either, as support through a qualified disaster-relief payment is not subject to income tax or payroll tax. 

Section 127 can ease the burden of paying off student loans 

Like Section 139, this provision is set up so employers can offer aid for employees who are pursuing additional educational avenues. The CARES Act, passed earlier this year, expanded the definition of “educational assistance” to include any payments made after March 27 to assist with paying back things like a student loan in 2020. 

Now, when employers make payments through an employee educational-assistance program, the employee can claim an exclusion of up to $5,250 to avoid any tax penalties for this year. It’s also not considered wages, so it’s not subject to employment tax, which saves money for both the business and the employee. 

These are just two tax provisions that can enable businesses to lend a helping hand to employees in need, particularly during such a challenging year. If you’re interested in seeing how these provisions may work for your business, don’t hesitate to reach out to our trusted team of accountants, CPAs and tax professionals at PADGETT BUSINESS SERVICES®. Set up a consultation today, and we’ll make a plan that can truly help your employees. 

Don’t Make A Charitable Contribution Before Reading These 8 Tax Tips!

The holidays are a time for being thankful, and that often means giving back to organizations and causes that are important to you and your family. These charitable gifts might be able to earn you a tax deduction, so it’s important to understand all of the nuances that surround charitable giving and what it means for your tax bill.

Here are a few things to keep in mind as you make your end-of-the year gifts:

  • It must be a qualified organization. Remember, in order to be deductible, the gifts must go to charitable groups that are approved by the IRS. You aren’t allowed to deduct donations to specific individuals or to political organizations.
  • Deduct only what you gave. Only contributions actually made during the tax year are deductible. For example, if you pledged $500 in May but paid the charity only $200 by the end of the year, you can only deduct $200. Be sure to include credit card charges and payments by check in the year you donate to the charity, even if you don’t pay the credit card bill or draft from your bank account until next year.
  • Here’s something new. Thanks to a change put in place by the CARES Act, taxpayers who don’t itemize their gifts may take a charitable deduction of up to $300 for cash contributions made to a qualified organization.
  • Know what you can deduct. You can deduct cash contributions, and in most cases, the fair market value of most property you donate. Clothing and household items must be in “good used condition or better” to be deductible.
  • Keep good records. Whether it’s a credit card statement or bank statement, be sure to keep a record of your contribution. If you made a donation through a text messaging campaign, keep your phone bill that includes the organization, date and donation amount.
  • Speaking of good records. For contributions of $250 or more, you’ll need more than a bank record. You’ll have to have a dated and written receipt from the charity listing the dollar amount donated and whether the organization provided goods or services in exchange for the gift. If you donated large items, the receipt must include a description of the items and a good-faith estimate of value.
  • Split the difference. If your contribution entitles you to receive merchandise, goods, or services, you can deduct the contribution amount that exceeds the fair market value of the benefit received.

At PADGETT BUSINESS SERVICES®, we have a trusted network of accountants, tax experts and business advisors that can help you navigate everything from end-of-the-year giving to putting together a tax plan that works for you. Contact your Padgett office today and let us help you reach your business goals.

Padgett CEO named to Accounting Today’s Top 100 Most Influential People list

Honoring his visionary approach to and respected leadership for the accounting industry, Jeff Phillips, the CEO of PADGETT BUSINESS SERVICES®, has been named to the exclusive Top 100 Most Influential People in Accounting list compiled by Accounting Today.

This annual, prestigious report includes several prominent leaders in the accounting industry and tax policy, including U.S. President-Elect Joe Biden; Tracey Golden, chair of the American Institute of CPAs; Sasan Goodarzi, the CEO of Intuit; Sen. Mitch McConnell, Majority Leader of the U.S. Senate; and outgoing U.S. Treasury Secretary, Steven Mnuchin.

“It’s an honor to be featured again as one of the Most Influential leaders on Accounting Today’s annual list, particularly given the brilliant minds and respected leaders that were included,” Phillips said. “I’m inspired by the passion of Padgett’s local accountants, CPAs and tax professionals for helping us grow into a thriving modern firm and their willingness to innovate so that Padgett can deliver new services to our thousands of clients.”

Phillips was selected because of his leadership on how remote work can transform the industry, particularly given the disruptions posed by the COVID-19 pandemic. Through his prior work as founder of Accountingfly, he has long been an advocate for hiring and training remote workers to attract the best talent and drive future business growth.

At Padgett, he has helped guide the company’s transition to accommodate increased remote work opportunities given the safety concerns stemming from the pandemic. As a result, the company has been able to provide a unique level of expertise and unrivaled support for its network of more than 300 offices across the U.S. and Canada. Additionally, Padgett shifted several of its conferences, events and trainings to virtual platforms, including a recent tax seminar in November that drew greater attendance and participation than previous in-person ones.

Phillips, who previously was included on the list during his tenure as CEO of Accountingfly, joins Roger Harris, Dan Sautner and Les Shapiro as representatives from the company who have been featured on Accounting Today’s Most Influential list.

Six Things Your Business Should Consider For Year-End Tax Planning

There’s no doubt that 2020 has delivered its share of twists and turns, and that businesses are ready to hop off this roller coaster as soon as possible. It’s understandable many are unsure about what’s to come, including future shutdowns, the fate of the Paycheck Protection Program and the possibility of another round of stimulus.

In a world where we feel like we have less and less control, here’s a checklist of some things you can do to get ready for 2021:

  • Thanks to recent clarity from the IRS, it’s a good idea to go ahead and get started on the PPP loan forgiveness process
  • Maximize the 20 percent Qualified Business Income (QBI) deduction
  • Consider switching to a cash method of accounting which more quickly recognizes your business’s revenue and expenses, which can make it easier to do accurate planning for 2021
  • Use the Section 179 deduction to buy new equipment and then deduct the full purchase price from your business’s gross income
  • If you’re a C-corporation, you can potentially lower your tax obligations for 2021 by accelerating next year’s income or deferring some deductions from this year
  • Consider deferring a debt-cancellation event until 2021 and disposing of a passive activity in 2020

Everyone’s circumstances are different so not all these suggestions might fit your business’s needs. This also isn’t an exhaustive list, so your business might need to take a look at a few other things that might provide some benefit.

At PADGETT BUSINESS SERVICES®, we have a trusted team of tax experts, accountants and business advisors that can help your business make a plan that suits your needs. Get in touch with one of our offices today, and let us help you tailor a plan to move your business forward.

Is it time to take action on PPP loan forgiveness?

Earlier this month, our trusted team of accountants, CPAs and tax professionals advised business owners to exercise just a bit of patience as we all waited for additional guidance on the loan forgiveness portion of the Paycheck Protection Program (PPP).

Now, thanks to a recent statement from the IRS, we have some much-needed clarity.

The IRS has determined businesses that either already have received loan forgiveness or have a reasonable expectation they will have their loans forgiven won’t be able to deduct business expenses paid for by the loan. However, the IRS did say businesses which are unable to have their debts forgiven — whether it’s because their loan forgiveness request is denied or if they simply decide not to seek it — can still claim those tax breaks for things like payroll, mortgage payments and utility costs.

If you’re a business owner, what does this mean?

  • No reason to wait anymore. Thanks to this clarity, it’s now possible to craft a tax plan that operates under the rules everyone has to play by. Should you want to seek loan forgiveness, there’s no reason to wait any longer to get the process started based on this new guidance.
  • Plan to be pleasantly surprised. Even though members of both parties in Congress have said they’re interested in addressing this down the road, make your plan today based on the information we have — that you won’t be able to take the deductions. Doing so means that should Congress change that, it will positively impact your tax plan by identifying future tax savings.
  • Each choice depends on the business. For the vast majority of businesses, it will make more financial sense to seek the forgiveness of your loan, however it will be up to each business to decide what is best for them. Working with a tax professional can help you evaluate all the possible scenarios and craft a forward-thinking plan of action.

PADGETT BUSINESS SERVICES® has worked with more than 1,000 businesses to secure more than $58 million in PPP funding, and we’re actively working with our clients to help them manage the loan forgiveness process. It’s our job to help you see the whole picture and build a tax plan that enables your business to be successful.

We have long enjoyed strong relationships with leaders from both political parties at various levels of government, and that allows us to keep a close eye on what’s going on. If anything changes or new legislation is passed, our trusted team of accountants, CPAs and tax professionals will keep you informed.

If we can help your business navigate these challenging times, don’t hesitate to find an office near you.

Your one-stop tax planning checklist

The holidays are right around the corner, though many of the family traditions we’ve come to treasure may look different this year. However, during this pandemic we’ve discovered new and innovative ways to remain connected.

This year also has brought with it a myriad of new tax rules designed to help people weather the financial impact of COVID-19. As you start to make a plan to handle 2021, it’ll be important to know how those tweaks and changes fit in.

Here are a few of the things to keep in mind as you begin your year-end tax planning:

  • Realize losses to offset gains recognized on investments during the year: If you have sold stock at a capital gain during the year, you can reduce that gain by selling stocks that show losses.
  • Arrange with your employer to defer your bonus until 2021 and/or adjust your withholdings: Shifting income to next year will reduce your taxable income for this year and, if you take a bonus at year end, be sure to adjust your tax withholdings to cover the increase in income.
  • Increase basis in an S corporation or partnership to make possible a 2020 loss deduction: Shareholders and partners are able to take losses from their investment only if they have sufficient basis. One way you can increase basis is by making a capital contribution!
  • Explore strategies such as funding retirement plans or consider the timing of required minimum distributions from a retirement plan: When you make retirement plan contributions you not only plan for the future, but you may even get a tax break in the current year! Depending on your age, required minimum distributions from a retirement plan may affect your taxable income and should be appropriately taken to avoid penalty.
  • Settle an insurance or damage claim only if it will maximize a casualty-loss deduction attributable to a federally declared disaster: Finalizing such claims before the end of the year could allow for a casualty loss deduction which reduces taxable income.
  • Apply a bunching strategy to increase deductible amounts: Paying for two years worth of itemized deductions in a single year, such as real-estate taxes or medical expenses, may put you over the standard deduction threshold and allow you to itemize.
  • Make qualified cash donations by year-end to claim up to a $300 above-the-line deduction on top of the standard deduction: This is an opportunity for those who don’t qualify to itemize and get the tax benefit of making charitable donations.
  • Make gifts to take advantage of the gift-tax exclusion for 2020: That’s right, you can give someone up to $15,000 tax-free money and not have to report the transaction.
  • Consider deferring a debt-cancellation event until 2021: Forgiven debt is taxable income and shifting that income to the following year allows for you to keep your taxable income lower and provides you time to cover the related taxes.

It’s a lengthy list, but keep in mind it isn’t an exhaustive list. it’s likely all of these strategies won’t apply in your situation, but it’s a good starting point as you start to think about how to put together a plan of action. At PADGETT BUSINESS SERVICES®, we have a network of trusted accountants and tax experts who can create a customized plan that best suits your needs. Find an office near you today, and let our team get to work.

Three things to know about managing your cash flow

As a small business owner, have you ever taken a closer look at your cash flow situation?

If not, it’s something you might want to consider doing on a regular basis. For starters, understanding your cash flow can give you the information you need to make smart choices for your business.

That’s because taking closer looks at your finances, such as accounts payable and accounts receivable, inventory and credit, can give you a clear picture of the health of your business. This takes a bit of foresight and planning, meaning you’ll need a good bookkeeping system and accurate records.

Here are three reasons why you should do a regular cash flow analysis:

  • It offers needed clarity: Having an accurate picture of cash flow lets you know where money is coming from, where it’s going and how much is available at any given time. This type of bookkeeping gives businesses the power to meet the demands of today and plan tomorrow.
  • It’s highly accurate and trusted: Cash flow analysis is the best way to get a fair, reliable picture of your business’s value. Unlike trying to estimate the value of property — both material and intellectual — a real-time picture of cash on hand is a dependable, trusted assessment of worth.
  • It can pinpoint potential problems: Knowing what’s coming in and what’s going out helps you to see any troubles on the horizon. For instance, if your revenue is lower than it should be, a regular analysis will help you make changes. Likewise, if you have expenses that are higher, you’re able to change course and save money.

Remember, businesses don’t fail because they don’t show a profit, they fail because they run out of cash. That’s why cash flow analysis is so important, but it’s also just one piece of a bigger puzzle. If you find any weaknesses or concerns will looking at your bookkeeping, it’s important to be ready to take the appropriate action to address them.

At PADGETT BUSINESS SERVICES®, our network of trusted accountants, tax professionals and small business advisors know how important it is for you to have an accurate, trusted picture of your finances. Don’t hesitate to reach out to one of our offices if we can be of assistance.

Making a plan for PPP loan forgiveness

It’s safe to say most of us are ready for this unprecedented year to come to an end! Before it does, however, there is one more thing many small business owners need to be mindful of, and that’s crafting a sound plan to navigate the loan forgiveness process of the Payroll Protection Program (PPP).

If you’ve already used all of your loan funds, you’re probably ready to get this whole thing behind you, particularly if your covered period is over. However, there are some important things to keep in mind that could change your plans on when to submit your application, including the potential for significant tax savings if you’re willing to wait just a little longer.

Should you wait? Well, a tiny bit of patience and some smart planning can go a long way, so here are a few things to keep in mind when you talk to your accountant or tax professional:

  • If you’re ready to turn in your application, know that your lender may not be ready for it. There is still a lot of gray area here, so many lenders are waiting on additional guidance from the Small Business Administration (SBA) and U.S. Department of the Treasury before finalizing their forgiveness processes.
  • Congress is considering legislation that would simplify the application process for small businesses who have a PPP loan of $150,000 or less. Should it pass, many small businesses would have an easier pathway to getting their loans forgiven.
  • There’s some uncertainty around whether or not Congress would pass anything that would override the IRS’s position that a deduction is not allowed for an expense if the payment of the expense results in forgiveness of a PPP loan. As such, use this as an opportunity to implement some tax planning strategies before the end of the year.
  • Waiting allows you to get past any learning curves and system kinks, while also giving you the chance to see if any new guidance is issued.
  • However, if you’re planning on doing any changes to your business structure or ownership in the near future, it might be better to file now rather than to wait.
  • There’s a lot to do in the meantime! Documentation is critical – for both the items that have to be submitted, and those required to be maintained. Use this waiting time to get ready to file your application.

Through it all, PADGETT BUSINESS SERVICES® is here to support you with whatever you might need during this process. As trusted tax professionals and small business advisors, we pledge to give you the best recommendation to fit your needs, and then help you craft a tax plan that suits you. If you need help with the PPP loan forgiveness process, don’t hesitate to reach out to one of our offices today.

Commuting Expenses For Taxpayers With A Home Office

Now, more than ever, we’re all working from home. While Zoom meeting after Zoom meeting can start to wear thin, removing the daily commute from one’s schedule is a huge bonus afforded to those working remotely these days. For many businesses, this is becoming the new normal with several transitioning from a central, physical location to a permanent work-from-home setup.

Did know that if you maintain a home office, you may be entitled to a special tax break on your commuting costs?

For most people, the cost of daily travel between home and a regular work location is a non-deductible commuting expense. However, taxpayers who have established their home office as their principal place of business can deduct travel between home and another work location in the same business, regardless of distance and regardless of whether the other location is regular or temporary. An example would be something like driving from the home office to a second business location to pick up mail or supplies or traveling from the home office to a temporary site, like a construction site.

However, there are certain criteria that you must meet.

For instance, you must be able to substantiate the auto expenses that you claim through adequate records, such as a log or record-keeping app through your smart phone. You can either use the standard mileage rate or deduct your actual expenses.

If you’re an employee and your employer reimburses your travel expenses, you need not report the reimbursements as income if they are made under an accountable plan. An accountable plan reimburses you for deductible business expenses and requires you to substantiate your expenses and return any amounts greater than your substantiated expenses.

Remember, business expenses reimbursed by your employer are not deductible. If the plan is not an accountable plan, you have to report the reimbursement as income and your deductible expenses are considered miscellaneous itemized deductions and are disallowed through tax year 2025.

If your home office is not your principal place of business, the costs of travel between your house and the first and last business stops of the day are nondeductible commuting expenses. However, if you have a regular work location away from home, the costs of going back and forth between your home and a temporary work location are deductible. Employment at a work location is considered temporary if it is realistically expected to last for no more than a year.

If you are working out of home, reach out to us at PADGETT BUSINESS SERVICES® where our network of trusted small business advisors and tax professionals that can help you determine if you are entitled to this deduction to maximize your tax savings.

Navigating The ‘Nanny Tax’ In The Times Of Covid

The ongoing COVID-19 pandemic has changed the way many families live and how they school their children. Given the current environment, many families have found themselves in need of childcare to allow them to work or to assist in homeschooling their children.

In today’s world, this type of help is an absolute necessity for some, but many people have not thought through what it means for tax purposes. Don’t forget that if you employ any household employees, you ultimately are responsible for what is called the “Nanny Tax.”

Depending on the amount of wages paid, you may be required to withhold taxes for Social Security and Medicare (FICA), and be sure to do that from the start if you expect to meet the annual threshold of $2,200 for FICA. Doing so will protect your nanny and other household workers from getting hit with a large, unexpected withholding in their paychecks later on.

And remember that you also have an obligation to pay federal unemployment tax (FUTA) if you pay them a total of $1,000 or more in wages in any quarter of the current or previous calendar year. FUTA is paid only by the employer, so be sure to not withhold it from the nanny’s wages.

Don’t forget to provide a W-2 to any of your household employees. If the nanny’s yearly wages are subject to FICA or income tax withholding, the W-2 is due by Jan. 31 of the following calendar year. It’s important to include your employer identification number (EIN) when you report the employment taxes for your nanny.

As an employer, you also must satisfy your “Nanny Tax” obligations by either increasing your quarterly estimated tax payments or increasing the withholding from your wages in order to avoid a potential underpayment penalty. However, employment tax returns are not required, as you can just report the employment taxes on your personal tax return.

This is a lot to keep tabs on, particularly on top of everything else people are dealing with during the pandemic. At PADGETT BUSINESS SERVICES, we have a network of trusted small business advisors and tax professionals that can help you understand the ins and outs of how to manage the “Nanny Tax” to set you up for success.

Know The Risks Of ROBS

Starting up a new business requires a mixture of capital and courage, and it’s important for entrepreneurs to understand the right balance to make it work.

One tactic that some start-ups take advantage of is Rollovers as Business Start-Ups (ROBS), which allows prospective owners to use their retirement funds to pay for any new business costs. While this can provide easy access to needed capital, it’s also fraught with perils and possible downfalls.

The Rollovers As Business Start-Ups Compliance Project conducted by the IRS showed that there were few success stories, noting that “most ROBS businesses either failed or were on the road to failure with high rates of bankruptcy (business and personal), liens (business and personal), and corporate dissolutions by individual Secretaries of State.”

There’s risk associated with starting up any business, but that risk is magnified when it comes at the expense of one’s hard-earned retirement savings. Should the business fail, not only will the individual have to deal with those ramifications, but it’s also highly likely they have lost their retirement savings.

Even those that are able to get the business off the ground often find their assets are drained even before they open the doors to the public.

Compounding this obvious risk is the fact that the study determined that many ROBS promoters are providing misleading and inaccurate counsel. For instance, many who relied on ROBS were told they would not have an annual filing requirement, setting them up for a host of inadvertent penalties.

Additionally, operating a business started by ROBS doesn’t mean you own it. In fact, you are merely a manager of the business which is owned by a third party — the retirement account — and that can expose you to a variety of unpleasant situations which can trigger non-compliance of the rules for retirement accounts.

And these are just a few of the concerns associated with relying on ROBS as a means to access funding for a new business, meaning it may not be the right fit for you.

At PADGETT BUSINESS SERVICES®, our network of offices has ample experience in advising, serving and supporting small businesses at various stages of their journey, from budding entrepreneur to established owner. Before you make a plan to launch your business, reach out to one of our trusted small business advisors to make a game plan and help get your dream off the ground.

Preparing For The Worst To Perform Your Best

Have you ever wondered if your business could make it without you?

As a small business owner, your primary focus is making sure your business is running smoothly and efficiently. However, it’s also important to consider the factors that might disrupt it because if there is one thing that 2020 has taught us, it’s to prepare for the unexpected!

As such, it’s important to consider developing a smart, sound contingency plan in the event something was to happen to you or one of your key employees. Here are some important things to consider as you begin:

  1. Develop a plan: Regardless of the size of your business, you need a system in place and people you trust to make sure things will run smoothly without you. Failure to plan will put unnecessary angst on everyone. In the plan, be sure to identify your replacement – someone who can step into your shoes to deal with employees and clients.
  2. Foster a “we culture instead of I” culture: You know the important tasks that must be done to keep your business thriving, but does anyone else? Share those duties with your staff by delegating more, involving staff in client and vendor relations, and cross training. Invest time to mentor your replacement to make certain he or she is ready.
  3. Document your operations: Be sure to analyze the key elements of your business – things like product and service offerings, how and where services are rendered, and relevant client information – and, based on that analysis, create a guide to help others know what to do, how to do it, when to do it, and who does it. Don’t forget to include those important administrative details such as bill pay, contract renewals, and accounts receivable. Make sure it’s secure, but also accessible to those in your organization through a document management software or file cabinet.
  4. Provide access: In this digital age, you might have give trusted colleagues access to your computer or laptop, email accounts, bank and credit card account, and even your cell phone so they can continue to run the business. Rely on added protections, like multifactor authentication, for security. Make sure all your login information is up-to-date and use a password vault to manage and secure all your passwords.
  5. Develop employee hiring and exit plans: If an employee leaves your business or is out temporarily, you need to be ready to hire! Have position statements ready to go, as well as documented procedures for hiring and training new employees. The development of these types of procedures may seem daunting, so task your employees with writing their own position statements. Also, consider employee exit checklist.
  6. Financial and legal considerations: Consider having a secondary signature authority on your bank account, like a family member. Be aware of the difference between a joint and authorized user on a credit card and make changes accordingly. It also might be wise to grant someone Power of Attorney in case you are unable to make decisions on your own. If you do not have a will, get one! It is one of the most important things you can do to protect your family and business and be sure to designate an executor who is familiar with you and your business.

None of us like to think of the worst-case scenario but following these tried-and-true tips can help you begin the outline of a plan to protect your business. At PADGETT BUSINESS SERVICES®, we have extensive experience serving small businesses and being a trusted advisor in good times and in bad. If we can ever be of assistance, please don’t hesitate to reach out to an office near you.

How Covid-19 Impacted The IRS, And What That Means For You

There’s no mistake that the COVID-19 pandemic has impacted every facet of our lives these past few months. From something as routine now as wearing a mask to go to the grocery store to the more profound economic impact that has rippled across the country, we’re all adjusting to this new normal.

What you may not know is that the Internal Revenue Service isn’t immune from the effects of the pandemic. It too has faced the challenges of remote work and shutdowns. Here are four things you should keep in mind about the IRS in a COVID world as you start to do your planning for the upcoming year:

  • Like the majority of businesses across the country, the onset of the pandemic sent the employees of the IRS home to work remotely. Many of these employees are just now starting to return to the office, though it varies from location to location. It’s important to remember that the IRS is not in one central location, but rather scattered in offices across the country. That means some IRS employees in Georgia might be getting acclimated to being back in the office, but there could be those in California or New York who are still dealing with various restrictions.
  • The IRS gets a lot of mail every day, and without people in the office to process it, it’s likely many offices are backlogged to the tune of millions of pieces of mail. There’s going to be a period of time where they have to catch up, so please keep this in mind in case you’ve sent something in or are waiting on a response. As such, e-Filing a tax return likely is something everyone should consider.
  • This slowdown also meant the IRS briefly halted sending notices out to individuals and businesses, but that doesn’t mean you won’t get one. As offices come back online and workers catch up on backlogged tasks, notices will start going out again.
  • Audits are slated to return, just not face to face. The IRS stopped conducting audits out of safety concerns once the pandemic arrived, but they are in the process of restarting them virtually.

The key thing you need to remember here is to stay patient. The IRS, like businesses across the country, is playing catch-up and trying to find the best way to navigate a world impacted by COVID-19. Keep in mind that since the reopening rules will vary from location to location, it’s likely best to simply pick up the phone if you want to connect with a representative because even if you’re waiting on hold for 30 minutes or longer, you’re probably going to get a faster response than if you rely on the mail.

As many small businesses begin to plan for the upcoming year, it’s always good to have a trusted adviser by your side to navigate your tax preparation and planning. Don’t hesitate to reach out to one of PADGETT BUSINESS SERVICE®’s offices and find out how we can help your small business reach its goals.

Understanding Advisory Services: Finding The Right Talent

Finding the right talent that fits your small business is a critical task.

As an owner or manager, you’re often confronted with making important hiring decisions to cover everything from the seasonal demand for new workers to making sure you have the help needed to support an upcoming business expansion.

Being able to maximize your time and resources when seeking and evaluating potential new employees is more important than ever, particularly given the economic challenges of the ongoing COVID-19 pandemic. By relying on a trusted small business advisor, you can get the support and counsel needed to develop the necessary framework to determine the best places to find your next crop of employees.

Small businesses can seek out new talent in several different ways, including:

Embrace remote workers — Of all the challenges posed by the pandemic, one of the lessons learned for many small businesses is the potential of utilizing remote workers to support what they do. It has deepened the potential hiring pool by enabling companies to target, recruit and hire workers who can live – and work – anywhere in the U.S., offering flexibility in seeking talent and determining wages.

Utilize online recruiting — There are ample platforms that can connect small businesses with a deep pool of capable candidates, ranging from websites like Indeed to reliable social media networks like LinkedIn. These sites allow companies to effectively and efficiently collect resumes, sift through the best candidates and set up various forms of screenings and tests online to determine whether they’re a right fit for the job.

Consider the gig economy — Given some of the ongoing economic uncertainties, as well as the ebbs and flows of seasonal demand, it might be beneficial for some small businesses to hire workers for specific, short-term projects or “gigs.” These employees are typically classified as independent contractors, which can be good for many small businesses since it exempts them from various wage and hour stipulations.

All of these techniques can help you identify and attract the workers you need, and each of them comes with assorted pros and cons. It’s important to find a trusted small business advisor like PADGETT BUSINESS SERVICES® to help determine how to best address your needs.

Ready to build a hiring plan to guide your small business this fall? At Padgett, our offices advise thousands of small business clients across the country, regularly helping them work through the myriad of challenges associated with identifying talented, dependable employees and understanding the nuances of the tax implications of these decisions.

If you’re wondering “is there a small business advisor near me who could help with these important hiring decisions,” then reach out today and let Padgett help you craft a way forward.

Building a culture of integrity

At the most basic level, integrity is doing the right thing solely because it’s the right thing to do.

What do you do when no one else is watching? How do you behave when it matters the most?

Crafting a strong culture of integrity in your business is important, enabling you to build trust with your customers, develop reliable and genuine employees, and chart a course for growth and success. Businesses which are viewed as having high integrity are considered to be honest and morally upright, which is something that resonates with your customers, your community and your employees.

It’s not an easy task, however. It requires time, patience and commitment to doing right by all involved. Here are a few simple steps to keep in mind as you think through what you want the culture of your small business to be.

Formulate a plan

You first have to know where you’re going, so start by implementing policies and procedures that outline your company’s goals. Equip your employees with the necessary training and resources, including specialized employee guides that outline expectations. Continue this growth by providing support to your employees and be aware that this is an ongoing mission which never ends and evolves over time.

Get your employees engaged

Studies have shown that workplaces with a culture of integrity often have higher levels of employee engagement. This is beneficial to a business in several aspects because it leads to lower rates of employee absenteeism, a reduction of accidents and decreases in employee errors. Additionally, a business viewed to have high integrity typically experiences less workplace stress and less voluntary turnover than those perceived to lack it.

Know industry ethical standards

Your state or industry probably has rules and guidelines regarding ethical standards for businesses, and they may also have legal resources which can be helpful for you to use when crafting your own policies. Since the development of a culture of integrity is a fluid event which evolves during the life of a business, be sure to regularly audit your employee manuals and handbooks to verify they are aligned with your company’s goals.

Set the tone

Make sure your business’s leadership sets the proper example for your employees, knowing that it’s equally as important to walk the walk as it is to talk the talk. It’s important that employees know that management is working with them in the pursuit of a culture of integrity. In some companies, depending on size, it can be beneficial to form a team from management which oversees the company’s culture of integrity. The team can direct training and encourage dialogue with employees which can foster growth and to help confront issues which may arise.

At PADGETT BUSINESS SERVICES®, we’re proud of the culture of success and trust we’ve cultivated among our offices. We value being trusted advisors to our small business clients, and we’d love to learn more about your business and its goals. Find an office near you to see how we can help your business.

‘Locking’ taxpayer accounts could bolster cybersecurity

With more and more resources shifting to online and cloud-based resources – particularly in an environment that is embracing remote work options – minimizing fraud and enhancing cybersecurity standards are imperative. This includes taxpayers as they begin to eye the preparation and filing of their returns next year.

One simple fix has the potential to not only offer more protection from potential cybercrimes like identity theft, but also spur greater adoption of online services, such as new digital taxpayer accounts unveiled by the IRS.

Consider that there is increasing evidence suggesting a portion of taxpayers who are eligible for a refund have little to no interest in receiving that refund in a rapid fashion. Because of this, one interesting move for the IRS to consider would be giving taxpayers the ability to “lock” themselves out of getting a potential refund and, instead, apply any refund toward the next year’s estimated tax payment.

This proposal initially was designed to be a tool in the broader cybersecurity toolbox for the IRS. Cyberthieves regularly mine the internet hoping to access Social Security numbers and other personal information, using this data to either hack accounts directly or sell this information on the dark web to individuals who could, in turn, file fraudulent tax returns seeking large refunds.

Accounting practitioners and financial advisory services are especially at-risk for this type of crime given that they often have large databases full of confidential information. If hackers could access those databases, they’d have potentially hundreds of Social Security numbers to exploit.

Taxpayers with their information stolen would attempt to file their own returns, only to find out their refunds already have been claimed by a cyberthief. By giving taxpayers the power to lock his or her account, the potential cyberthieves are cut off from the ability to collect any money from their fraudulent claim.

This benefits those taxpayers who aren’t getting a refund anyway, and it also incentivizes practitioners to encourage their customer bases to lock their accounts as well. This, in turn, protects the federal government from issuing fraudulent refunds they can’t get back.

However, this level of protection and taxpayer control also might help spur the adoption of these taxpayer accounts which were recently rolled out by the IRS. If taxpayers know they’re able to lock their accounts and minimize the impact of identity theft, they’ll be more likely to explore setting one up.

This is just one small step that can be taken to stem the tide of cybercrime. PADGETT BUSINESS SERVICES® has long been engaged with elected representatives and government officials, working to advocate on behalf of small businesses and taxpayers. If you’d like to learn more about how we could support the work of your small business, don’t hesitate to reach out to one of our offices.

PPP Loan Forgiveness Offers Opportunity For Pause & Planning

The Paycheck Protection Program has offered a much-needed lift for small businesses across the country, enabling them to keep their heads above water throughout the storm of the COVID-19 pandemic and the resulting economic downturn.

If you’re a small business owner who benefited from PPP support, you’re probably wondering what your next steps should be, including how you should approach the loan forgiveness process. There are lots of questions around the best way to manage it, as well as a bit of murkiness in terms of what will and won’t impact your ability to have the loan forgiven.

Given all of this uncertainty, the best thing you can do at this point is exercise a bit of patience.

For starters, businesses have 24 weeks before they’re required to complete the loan forgiveness process. Given the ups and downs that are rippling through the economy – as well as the ongoing tweaks and adjustments to the PPP itself – it’s important to take a breath and remember there’s plenty of time to determine how your small business will manage this process.

Additionally, there still is a bit of confusion around whether or not the deduction of expenses by PPP fund recipients will impact their ability to have the loan forgiven. Guidelines can feel like they’re changing on a week-to-week basis and sorting through what the new recommendations are can be challenging on your own.

As you attempt to sift through the various options in front of you, it’s important to know that having a trusted advisor in your corner can help streamline the clutter and craft a workable plan to support your small business.

To date, Padgett has seen firsthand the struggles and challenges small businesses like yours have faced during the past few months, as well as how the PPP has given many of them a lifeline. We’ve helped more than 1,000 small businesses secure more than $58 million in PPP funding, and we’re actively working with our small business clients to see how we can help them navigate what is no doubt a confusing process of loan forgiveness.

Now, it’s important to understand this is a fluid situation, as well as one that requires the preparation of a thoughtful, intentional tax plan. That’s why we feel it’s most important to engage with a trusted small business advisor to craft a smart, prudent strategy to manage your tax planning efforts for the upcoming year.

Reach out today and let us help you prepare a plan to guide your small business.

Understanding Advisory Services: The Realities of COVID-19

The difficulties small businesses face from COVID are unprecedented and immense, and there is no doubt the small businesses that embrace flexibility are more likely to survive.

Already, many business owners have been innovative in how they can respond to shutdowns and lower customer counts, with some restaurants pivoting to more delivery service options and retail stores offering online ordering with curbside pick-up. Other common operational tweaks have included staggering shifts for employees or carrying lower amounts of inventory to be more aligned with the current market realities.

Small changes like these enable small businesses to continue to be able to serve their customers, while also ensuring these modifications don’t negatively impact day-to-day operations. At PADGETT BUSINESS SERVICES®, we’ve worked with countless small businesses to help craft realistic, workable strategies so they can adapt to the current situation.

Even with some of these tactics, it might be necessary for some small businesses to evaluate supplemental sources of funding or investigate other policy initiatives being explored by the federal and state government. A strong small business advisor can help you navigate that environment. At Padgett, we helped nearly 1,000 businesses secure nearly $58 million in PPP funding, and we’re currently working to help those businesses manage the loan forgiveness portion of the program.

Additionally, our team is actively engaged in the process of evaluating tax policy, staying in-touch with officials and legislators and, when appropriate, offering recommendations that are in the best interests of small businesses. There are several pieces of legislation being discussed and debated that could impact small businesses, such as liability shields for employers, as well as the recent payroll tax deferral.

Finally, it’s also important to know how to determine when it’s time to consider an exit strategy for your small business. It’s a difficult decision to make, but the economic fallout from the pandemic has threatened the livelihood of countless businesses, and it is vital that small business owners know when to say when.

This can mean a variety of things, ranging from exploring options for restructuring your business, filing for bankruptcy, selling a business or seeking an early retirement. There are pros and cons associated with each of these options, and they are not choices small business owners should make alone.

Our team has ample experience in advising small business on tough decisions just like these, and we are able to let you evaluate all the options – from remaining open to moving on – so you can make an informed, responsible decision.

We would love to be a trusted advisor for your small business. PADGETT BUSINESS SERVICES® has assisted nearly 1,000 small business owners obtain more than $58 million in PPP funds, and we are now working to support small business owners in navigating the ins-and-outs of the loan forgiveness process. Find your partner by visiting our office locator page.

Planning, Evaluation Needed for Businesses Considering Payroll Tax Deferral

If you’re a small business owner, there’s no doubt you might have a few questions related to the recent announcement from the federal government granting employers the ability to stop withholding a portion of the employee’s responsibility of the payroll tax beginning on Sept. 1, 2020.

And the top question on your mind is probably “do we have to offer this deferral?”

The answer is no.

Each small business will have to determine for itself whether the benefits outweigh the risks when it comes to deferring a portion of their employee’s payroll tax obligation. As we shared in our earlier blog on this topic, it’s important to remember this is simply a temporary delay of the individual’s obligations to pay that tax on wages paid from Sept. 1, 2020 through the end of the calendar year.

New guidelines provided by the federal government outline how those deferred tax payments will be paid during the first four months of 2021, with employees ultimately responsible for making those necessary payments. However, should an employee not be able to pay, the burden could fall on the employer.

As such, if you’re a small business owner, it might not be advantageous for you to provide this deferral given the uncertainty — and potential liability — around this memorandum.

For instance, consider that some employees simply may not be able to make the payment, possibly passing on the responsibility to you, the employer. Likewise, if you’re a small business owner who relies on seasonal workers or operates in an industry with a higher churn on employment, you could get saddled with those payment obligations if some of your workers have moved on.

Given this, offering the payroll tax deferral might not be in your small business’s best interest, and we would advise small business owners to approach this decision with caution, weighing all the pros and cons at work here.

At PADGETT BUSINESS SERVICES®, we specialize in providing advisory services to small businesses, knowing that it’s important to have a trusted advisor you can count on when making these tough choices. Find an office near you today, and learn how one of our experienced small business advisors can equip you with the knowledge needed to navigate challenges like this one.

Understanding Advisory Services: How Can They Help?

If there’s one thing to be certain of during these days, it’s uncertainty.

The COVID-19 pandemic and the resulting economic crisis has introduced plenty of it into our daily lives. A once thriving economy has pivoted to a potential recession practically overnight. Like a suspenseful movie where you’re unsure what may jump out at you from scene to scene, small businesses across the U.S. aren’t sure what the future holds in store. While needed lifelines like the Paycheck Protection Program have funneled funds to keep businesses afloat, there’s ample uncertainty of what comes next.

  • Will requirements for loan forgiveness for PPP change (again)?
  • Will the CARES Act offer any complications for tax planning?
  • What could additional legislation aimed at supporting the financial health of small businesses look like, and when will it arrive?

Furthermore, it’s difficult to predict what may happen with rules and regulations governing the opening and reopening of businesses. These decisions are being made on a state-by-state, community-by-community basis, which is breeding confusion for many small businesses. What may be deemed safe to reopen for a small town in North Carolina may vary widely from what’s being mandated in a large city in Nevada.

This uncertainty, however, doesn’t mean small businesses need to operate out of fear.

Rather, now is the time to embrace the challenges posed by this lack of clarity and use it to implement purposeful planning and better define a vision of the future that offers empowerment, safety, growth and possibility.

A trusted advisor for your small business can provide ongoing, sound counsel and help your business establish goal-oriented tasks to move forward. It’s more than having someone who can fill out a tax return for you. It’s a true partnership that is built to survive the short-term ups and downs – no matter how steep they may be – and keep your small business driving ahead to new goals.

Remember, not all advisors are the same. As a small business owner, what should you be looking for, particularly in the era of COVID-19?

  • A partner who has extensive experience and an intense focus on serving and supporting small business
  • A partner that can provide the advice, counsel and stability needed to navigate short-term challenges associated with PPP loan forgiveness and the pressures of reopening
  • A partner who is proactive and looks beyond your tax returns, helping to craft and implement a future-focused, goal-oriented plan
  • A partner that provides inherent, lasting value that enables you to do more than survive this turbulent time, but also empower your business to thrive long-term

None of us knows what the future holds in store, but small businesses can begin the work of laying a foundation of preparation, ensuring they are as ready as possible for the twists and turns of the journey ahead. During the next few weeks, we’ll take a closer look at how Padgett’s advisory services can not only help your small business weather this ongoing storm of uncertainty, but better equip you for long-term success through a clear, goal-oriented vision of prosperity.

We would love to be a trusted advisor for your small business. PADGETT BUSINESS SERVICES® has assisted nearly 1,000 small business owners obtain more than $58 million in PPP funds, and we are now working to support small business owners in navigating the ins-and-outs of the loan forgiveness process. Find your partner by visiting our office locator page.

We encourage you to contact us with any questions.

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