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About Office Staff

The team at SWC simplifies complex tax issues, helps you build and leverage your wealth to enhance your personal and financial freedom, and offers unparalleled peace of mind at every step along the way.

How to Handle a Taxpayer Identification Verification Request from the IRS

By |2021-06-30T12:26:24-07:00June 30, 2021|Categories: Fraud Prevention|Tags: , |0 Comments

Receiving an unexpected letter from the Internal Revenue Service (IRS) is seldom a good thing, and when it’s asking you to verify your identity, your brain heats up with red flags, warning sirens, questions, and concerns. Have I fallen victim to identity theft? Is this a phishing scam? Are con artists now posing as IRS agents to get my personal information? What should I do?

First and foremost, don’t panic. Most people’s instinct when they receive such a letter is to click a link (if they received it via email) or visit the website or call the phone number provided in the letter to find out what it’s about. And if the letter is part of a phishing scam, that’s exactly what the con artist wants you to do.

Is This Letter Really From the IRS?

If you received a notice out of the blue from the IRS via email, text, or even through one of your social media accounts, it’s probably not from the IRS. That’s not how they roll. When the IRS needs to contact a taxpayer, they typically do so in the form of a printed letter delivered by the U.S. Postal Service (USPS).

If you received a printed letter in the mail, examine the envelop and letter closely for signs of fraud, including the following: Continue reading… Continue reading… Continue reading…

Making Sense of Employer-Sponsored Retirement Plan Options

By |2021-06-22T16:05:40-07:00June 22, 2021|Categories: Business Advice|Tags: , , , , , , , |0 Comments

Establishing a retirement plan for employees can pay off in big ways, and we’re not just talking about the benefits for employees. Small business owners stand to benefit as well.

Small business benefits include:

  • Retirement plans improve recruitment and retention of better employees. This is especially important now that COVID restrictions are being lifted, and employers are struggling to entice their best employees back into the office.
  • Employer contributions are tax-deductible.
  • Assets in the plan grow tax-free.
  • Plan options are flexible.
  • Tax credits and other tax relief can help offset costs.

Employee benefits include:

  • Employee contributions can reduce their taxable income, lowering their taxes.
  • Contributions and profits grow tax-free until they’re withdrawn.
  • Contributions can be automated through payroll deductions, making it easier to save for retirement.
  • Through compounding interest (earning interest on savings and interest), contributions grow faster over time.
  • Retirement accounts can be carried from one employer to another.
  • Some employees may be eligible for the saver’s credit — a federal income tax credit on top of the tax deduction already allowed for contributions to a retirement account.
  • Some plans let employees defer a portion of their compensation into the plan, which can help employees save money on taxes.
  • Employees have peace of mind knowing that they’re improving their financial security for their future and retirement.

Choosing the Right Retirement Plan to Offer Your Employees

After deciding to offer a plan, you face the challenge of choosing which plan delivers the most bang for the buck — for both you (the business owner) and your employees. Several options are available, which is great, but without knowing the differences, picking a plan can be so overwhelming that you put off the decision indefinitely.

With that in mind, in this post, we describe the most common retirement plan options — from simplest to most complex — and present the key characteristics of each. As a small business owner, you’ll want to adopt a plan that’s tailored specifically to Continue reading… Continue reading… Continue reading…

Recognizing the Tax Risks of Loan Modifications

By |2021-06-17T13:23:56-07:00June 17, 2021|Categories: Taxes|Tags: , |0 Comments

Any discussion about the tax risks of loan modifications has to start with the fact that between 2007 and 2010, the United States experienced a subprime mortgage crisis that contributed to a world-wide financial recession that threatened to collapse our economy. In response, the federal government introduced and widely publicized several federal mortgage loan modification programs — each aimed at assisting distressed homeowners by modifying or refinancing mortgage loans that became unaffordable.

If you’re unfamiliar with it, loan modification is the renegotiation of the terms of an existing loan. It may involve a reduction in principal or interest rate, an extension of the length of time for repayment, or a change in loan type (from adjustable rate to a fixed rate, for instance). It can also result in a cancellation of debt (COD) — a situation in which the total amount you pay the lender is less than that required under the original agreement.

From the borrowers’ perspective, a cancellation of debt is a great deal. The only drawback is that the Internal Revenue Service (IRS) is likely to treat the COD as taxable income, which can come as a nasty surprise when tax season hits. Unfortunately, it’s likely to surprise more people this coming tax season because of the increase in loan modifications during the COVID-19 pandemic.

One of our responsibilities here at SWC is to protect our clients from nasty surprises. If you received a 1099-C from your lender or you’ve had a loan modified or are in the process of doing so, we want you to know what to expect and be prepared. One way to do that is by helping you answer common questions like the ones that appear below.

Is My Cancelled Debt Taxable? Answer These Four Questions

According to the IRS, “In general, if you have cancellation of debt income because your debt is canceled, forgiven, or discharged for less than the amount you must pay, the amount of the canceled debt is taxable, and you must report the canceled debt on your tax return for the year the cancellation occurs.”

On its surface, that seems simple enough, but when you start digging into the details, determining whether a certain loan modification generated a taxable cancellation of debt (COD) can be challenging. If you renegotiated the terms of a loan, you can determine whether it resulted in taxable COD income by answering these four questions: Continue reading… Continue reading… Continue reading…

Midyear Tax Planning Tips for Individuals and Businesses

By |2021-06-09T14:26:33-07:00June 9, 2021|Categories: Taxes|Tags: , , , , |0 Comments

If you’re waiting until around the 15th of March — or worse yet, April — to save on your taxes, you’re waiting too long. Sure, you can use certain approaches to trim your taxes when completing your annual tax returns, but the bigger savings come from what you do in the months and years prior to filing.

And with recent changes in the balance of power in Washington, D.C., a little mid-year tax planning is sure to help you avoid some nasty surprises in the Aprils to come. President Biden has released a plan that, if enacted, will result in higher tax rates for certain individual and corporate taxpayers. Only time will tell what will ultimately happen. We’re keeping an eye out for any new tax legislation and will alert you when changes occur. But now is a good time to review your finances, so that if any changes to tax laws do take effect, you’ll be better prepared to act.

In this post, we cover several tax-planning approaches you’ll want to consider now — midway in the year — whether you’re an individual taxpayer or a small-business owner.

SWC Client Reminder: It’s time to schedule your complimentary 2021 Mid-year Tax Planning and Financial Strategy Meeting. Visit www.SteesWalker.com and click on the Contact link at the top of page, followed by the “Schedule Your Appointment Online” button on the next page.

Tax-Planning Strategies for Individual Taxpayers

First, consider some tax-planning approaches for yourself as an individual taxpayer. From revisiting your tax withholding or estimated tax payments and taking advantage of lower tax rates on investment income, to timing your investment gains and losses and taking advantage of expanded credits for kids, there are several strategies you may want to consider.

First up, let’s have another look at your tax withholding and estimated tax payments: Continue reading… Continue reading… Continue reading…

How to Grow Your Business: 4 Surefire Methods

By |2021-06-03T15:26:10-07:00June 3, 2021|Categories: Business Advice|Tags: , , , , , |0 Comments

Congratulations! You have built and launched a business. You’re a member of a very select group of individuals. According to the U.S. Bureau of Labor Statistics, of the approximate 209 million working-age people in the U.S., only about 10 percent are self-employed, which includes four percent who own their own business and have employees working for them.

If your business is more than a year old, you’ve crossed a major threshold — more than a fifth of new businesses close after their first year in operation. By the fifth year, the failure rate hits 50 percent.

The main cause of new business failures? Cash flow — more cash flowing out than flowing in. Some of that is due to poor money management, but part is also due to slow or non-existent growth, or even a decline in sales and revenue. Strong growth can drive success even when a business isn’t careful about spending.

The problem is that while entrepreneurs are often superstars when it comes to starting a business, they’re often lousy at managing and growing a business. They may not even be aware of the four ways to grow a business and increase its value.

The 4 Ways to Grow a Business

You can find all sorts of ways to grow a business, but they all boil down to the following four:

  1. Increase your number of good customers.
  2. Increase repeat sales.
  3. Increase average sales value.
  4. Make each business process more effective.

Yes, that’s it. Four ways to grow your business.

If you’re thinking we missed one — cutting costs — technically speaking, that won’t grow your business. Cutting costs increases profitability, but not revenue. It improves the value of your business only if you reinvest the savings toward growing your business in one of the four ways mentioned above. Instead, if you look at costs through the lens of making your business processes more effective, your focus will be to make sure that every dollar of cost becomes an investment. And investments, not costs, generate returns!

In this post, we bring you up to speed on these four fundamental ways to grow your business and introduce you to a few common approaches for each. We don’t go into detail because every business and business owner/manager is different. We can take a deeper dive and explore specific techniques when we meet with you personally to discuss your business.

Method 1: Increase Your Number of Good Customers

Customer acquisition is where most business owners initially focus on growth. It’s known as the “front end” of marketing because it’s about identifying and connecting directly with prospective customers.

While your business has many techniques available for winning new customers, here we focus on the five biggies: Continue reading… Continue reading… Continue reading…

Working “On” Your Business Rather Than “In” Your Business

By |2021-06-25T15:07:18-07:00May 12, 2021|Categories: Business Advice|Tags: , , , , |0 Comments

If you’re a business owner, chances are good that you are your hardest-working employee. You may even be your only employee. You answer the phones, respond to incoming email messages, and perform all business functions.

It’s probably you who handles the marketing, business development and sales, bookkeeping, customer service, shipping, receiving, inventory management — in addition to developing and offering products or services of value to your customers.

That’s what we refer to as working in your business. Without you, the business would fold, and if you ever wanted to sell your business, you’d find yourself in an acqui-hire scenario, which is a common way of saying that the business is being bought primarily for your skills and expertise, because you are the business.

Imagine This, Instead

You’ve built a business that practically runs itself. You have systems, procedures, and policies in place that provide clear guidance on nearly every aspect of your business. You have a well-trained staff that’s capable of running the business even when you’re not there. You’ve managed to delegate nearly every essential task. You’ve essentially promoted yourself from employee to CEO.

Your focus now is on improving and growing the business — analyzing data, learning more about the sectors and verticals you serve, identifying new opportunities, coming up with new ideas, and developing your overall approach to business. You know, the fun stuff! You meet with your business manager once a week to answer questions, address any problems, and discuss ideas and plans.

You have more flexibility in your schedule and more free time to enjoy life and pursue other interests, more time to spend with family, fewer worries so you can be more present for your loved ones. Your business continues to operate smoothly whether you’re there or not.

You’ve created a self-sustaining business entity. You can sell the business whenever you want for a great price (assuming it’s profitable or has unique assets) and walk away without diminishing its value in any way.

That’s what you get when you work on your business instead of in it.

Beginning with the End in Mind

Most business owners start with little or no forethought or planning. They don’t think ahead about what Continue reading… Continue reading… Continue reading…

AB 80: Another Much-Needed Tax Break for California’s Small Businesses

By |2021-05-05T13:32:16-07:00May 5, 2021|Categories: COVID-19|Tags: , , |0 Comments

California business owners received additional tax relief on Friday, April 30, when Governor Gavin Newsom signed Assembly Bill (AB) 80 — a COVID-19 economic recovery package that provides up to $6.8 billion in state tax breaks for California businesses.

Under AB 80, forgiven PPP loans that businesses received from the federal government during the pandemic will not be counted as taxable income, which means businesses that received those loans — and meet certain requirements — can deduct the costs of expenses for those loans. AB 80 also applies to Economic Injury Disaster Loans (EIDL) targeted and advance grants.

According to state officials, the tax breaks will apply to 85 percent of the more than 1 million California businesses that received a combined $97 billion in federal loans. That’s about $96,700 for each business.

Does Your Business Qualify?

To deduct expenses paid with PPP loan forgiven amounts, your business must have Continue reading… Continue reading… Continue reading…

Understanding the American Rescue Plan Act of 2021

By |2021-04-29T15:44:47-07:00April 29, 2021|Categories: COVID-19|Tags: , , , , , |0 Comments

On March 11, 2021, the President signed into law the American Rescue Plan Act of 2021 (ARPA) — a $1.9 trillion stimulus package aimed at helping the nation rebound from the economic impact of the COVID-19 pandemic. The Act itself contains more than 600 pages and includes provisions addressing stimulus payments, unemployment benefits, healthcare, state and local funding, along with several tax law changes.

Most of the tax changes are geared toward individual taxpayers, but some affect businesses. In this post, we cover some of the highlights to help you gain a better understanding of the major tax provisions and answer questions you may have.

Getting the Maximum Qualified Stimulus Payment

The big news is the third round of stimulus payments — tax-free money from the federal government. Eligible taxpayers and their qualifying dependents may receive up to $1,400 each. Married couples could receive up to $2,800.

Fewer of us are likely to qualify for the stimulus payment this time around. That’s because the adjusted gross income (AGI) thresholds start at the same amounts, but the phase-out range is much narrower than with prior stimulus payments:

  • $150,000 to $160,000 AGI for joint filers, meaning stimulus payments are gradually reduced for joint filers earning a combined $150,000 AGI or more and are not granted to those earning more than $160,000.
  • $112,500 to $120,000 AGI for head of household.
  • $75,000 to $80,000 AGI for everyone else.

Unlike the prior two stimulus payments, eligible recipients may receive up to $1,400 for all qualifying dependents, including those age 17 and older at year-end.

Tip: The IRS will use the most recently filed tax return to determine these amounts, so do the following to increase your odds of getting a stimulus payment:

  • If your 2020 income decreased (from 2019) and is below or within one of the ranges above, file your 2020 return as soon as possible, so that your lower 2020 income will be used to determine whether you get a stimulus payment and how much it will be.
  • If your 2020 income increased (from 2019) to a point that disqualifies you from receiving a stimulus check or reduces the amount, consider waiting to file your 2020 tax return until you receive your stimulus payment.

Taking Advantage of the Extension to Unemployment Insurance

The American Rescue Plan Act of 2021 extends federal supplemental unemployment benefits that were set to expire on March 14, 2021. The new law extends the period eligible individuals may receive an additional Continue reading… Continue reading… Continue reading…

Getting Up to Speed on CalSavers: California’s State-administered Retirement Plan

By |2021-04-21T13:06:54-07:00April 21, 2021|Categories: Retirement Planning|Tags: , |0 Comments

Good news for those of our clients who are employers: California’s new retirement savings plan, CalSavers, may be able to offer your employees the opportunity to save for the future without much effort — and at no cost to you or your business.

CalSavers is available to California workers whose employers don’t offer a workplace retirement plan, along with self-employed individuals and others who want to save extra toward retirement. Savers contribute to a Roth IRA (individual retirement account) that belongs to them but is administered by the state. Employers that don’t offer their own plan simply register with CalSavers by the specified deadline and facilitate their employee’s access to the program.

The program benefits both employers and savers:

Benefits for Employers

  • Quick and easy registration
  • Limited responsibilities
  • No administration
  • No employer fees
  • No fiduciary responsibility
 Benefits for Savers

  • Automatic or personalized investment options
  • Freedom to opt in and opt out and change the contribution percentage at any time
  • Simple, low-fee investments
  • Portability — the account remains with the employee through any job changes

 

Navigating CalSavers for Employers

All California employers with more than five (5) employees must register for CalSavers by the specified deadline regardless of whether they are exempt from the program. (See below for all associated deadlines.)

Deciding whether you must register

Employers that have at least five (5) employees and don’t already offer a workplace retirement plan can register for CalSavers. Employers that have five or more (5-plus) employees must register, regardless of whether or not they offer their own retirement plan:

  • If you already offer a retirement plan, you’re not required to participate in the program, but you must register as “exempt.”
  • If your business is a nonprofit, you must register like other businesses, unless it is a religious organization, in which case registration is not required.
  • Even if all your employees choose to opt out of CalSavers, you must register if you have at least five employees.

Note: If you’re not required to register and you receive a notice from the state informing you of the need to register, you must respond to the notification to avoid any penalty.

Meeting the registration deadline

If you’re required to register, you must do so by Continue reading… Continue reading… Continue reading…

Maximizing Your PPP Benefits and Employer Tax Credits

By |2021-03-04T11:04:33-08:00March 4, 2021|Categories: Business Taxes, COVID-19|Tags: , , , , , , |0 Comments

In 2020, Congress passed a flurry of COVID-19 related legislation designed to help employers retain and pay their employees and stay in business. This relief has been offered primarily in two forms:

  • Paycheck Protection Program (PPP): PPP loans have been made available to qualifying small businesses to help them stay afloat and retain and pay as many of their employees as possible. A business receiving a PPP loan can then apply to have the loan forgiven; that is, whatever portion of the loan was used for qualifying payroll and expenses.
  • Employer tax credits: Additional employer tax credits have been made available to help employers cover the cost of sick and family leave for employees, employees who need to care for someone with coronavirus (including a child whose school or daycare is closed due to the coronavirus), and retaining employees when operations have been partially or fully suspended due to government orders during the pandemic.

Understanding and taking full advantage of these benefits within the parameters stipulated in the legislation can be challenging for small-business owners. At SWC, we’re here to help.

In this post, we provide an overview of the COVID-19 pandemic relief programs for which your business may be eligible. When preparing your business tax returns this year, your accountant or CPA should be asking you for copies of payroll tax returns and should be initiating additional consultations with you to see if you are eligible for any of the new employer tax credits. We say should because that’s how we handle this at SWC.

Wait! Before You File Your 2020 Tax Return, Read This

Don’t rush to file your 2020 tax returns. Consult with us first for three important reasons:

  1. Both the PPP and the new employer tax credits provide potentially significant benefits for your business, and we want to make sure you reap the maximum benefit.
  2. The new employer tax credits cannot be claimed on the same payroll being used for the PPP loan forgiveness. When completing your tax return and submitting documents for PPP loan forgiveness, you need to be sure you’re not confusing the two benefits.
  3. Your state may not follow all the federal guidelines. We can help ensure that your state taxes account for any differences.

If you feel pressured to file your 2020 tax returns and are uncertain about any of the details related to the PPP or new employer tax credits, we strongly encourage you to file for an extension. With that recommendation in mind, it’s important that you take the time to consult with your tax advisor.

Sorting Out PPP Rounds 1 and 2

Congress provided two rounds of PPP loans — one in the spring of 2020 and another near the end of 2020. If you have taken advantage of the PPP, you should understand the rules and the differences between the two rounds (or “draws.”)

Important: The Coronavirus Aid, Relief and Economic Security (CARES) Act, enacted in March 2020, was silent on whether expenses paid with the proceeds of first draw PPP loans could be deducted. The IRS took the position that these expenses were nondeductible. However, the Consolidated Appropriations Act, 2021 (CAA, 2021), enacted at the end of 2020, provides that expenses paid from the proceeds of both first and second draw PPP loans are Continue reading… Continue reading… Continue reading…

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