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IRS

Dec 17, 2021 by DianeN

STANDARD MILEAGE RATES FOR 2022 & OTHER MILEAGE TAX INFO

The Internal Revenue Service today issued the 2022 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2022, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 58.5 cents per mile driven for business use, up 2.5 cents from the rate for 2021,
• 18 cents per mile driven for medical, or moving purposes for qualified active-duty members of the Armed Forces, up 2 cents from the rate for 2021 and
• 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2021.

The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details see Moving Expenses for Members of the Armed Forces.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Taxpayers can use the standard mileage rate but must opt to use it in the first year the car is available for business use. Then, in later years, they can choose either the standard mileage rate or actual expenses. Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.

Notice 22-03, contains the optional 2022 standard mileage rates, as well as the maximum automobile cost used to calculate the allowance under a fixed and variable rate (FAVR) plan. In addition, the notice provides the maximum fair market value of employer-provided automobiles first made available to employees for personal use in calendar year 2022 for which employers may use the fleet-average valuation rule in or the vehicle cents-per-mile valuation rule.

Filed Under: Back To Work 2020, Chamber News, IRS Tips Tagged With: employees, IRS, mileage, rates, taxes

Dec 17, 2021 by DianeN

DID YOU KEEP ANY OF YOUR EMPLOYEES THROUGHOUT THE PANDEMIC? YOU NEED TO READ THIS!

We have been speaking to a lot of businesses in the past several months because there are so many new laws, because they can’t find good employees, etc.  BUT one thing we are finding that hardly anyone knows about (even though we have written stories on this) is the

EMPLOYEE RETENTION TAX CREDIT

Let us get your attention.  We worked with a business who was unaware of this tax credit and after filing they received a $150,000 refund from the government.  Another business received $50,000.  This is some SERIOUS money!  If you kept employees during the pandemic you need to ask your CPA or tax expert about this credit.  Or if you like reading government documents, you can read the bulletin from the IRS (there are support groups for this kind of desire)…… GO HERE.

The Employee Retention Credit is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer pays to employees.  This credit was extended so it is still in effect.

Eligible employers can now claim a refundable tax credit against the employer share of Social Security tax equal to 70% of the qualified wages they pay to employees after December 31, 2020, through June 30, 2021. Qualified wages are limited to $10,000 per employee per calendar quarter in 2021. Thus, the maximum ERC amount available is $7,000 per employee per calendar quarter, for a total of $14,000 in 2021.

Employers can access the ERC for the 1st and 2nd quarters of 2021 prior to filing their employment tax returns by reducing employment tax deposits. Small employers (i.e., employers with an average of 500 or fewer full-time employees in 2019) may request advance payment of the credit (subject to certain limits) on Form 7200, Advance of Employer Credits Due to Covid-19, after reducing deposits. In 2021, advances are not available for employers larger than this.

Effective January 1, 2021, employers are eligible if they operate a trade or business during January 1, 2021, through June 30, 2021, and experience either:

  1. A full or partial suspension of the operation of their trade or business during this period because of governmental orders limiting commerce, travel or group meetings due to COVID-19, or
  2. A decline in gross receipts in a calendar quarter in 2021 where the gross receipts of that calendar quarter are less than 80% of the gross receipts in the same calendar quarter in 2019 (to be eligible based on a decline in gross receipts in 2020 the gross receipts were required to be less than 50%).

Employers that did not exist in 2019 can use the corresponding quarter in 2020 to measure the decline in their gross receipts. In addition, for the first and second calendar quarters in 2021, employers may elect in a manner provided in future IRS guidance to measure the decline in their gross receipts using the immediately preceding calendar quarter (i.e., the fourth calendar quarter of 2020 and first calendar quarter of 2021, respectively) compared to the same calendar quarter in 2019.

In addition, effective January 1, 2021, the definition of qualified wages was changed to provide:

  • For an employer that averaged more than 500 full-time employees in 2019, qualified wages are generally those wages paid to employees that are not providing services because operations were fully or partially suspended or due to the decline in gross receipts.
  • For an employer that averaged 500 or fewer full-time employees in 2019, qualified wages are generally those wages paid to all employees during a period that operations were fully or partially suspended or during the quarter that the employer had a decline in gross receipts regardless of whether the employees are providing services.

Retroactive to the March 27, 2020, enactment of the CARES Act, the law now allows employers who received Paycheck Protection Program (PPP) loans to claim the ERC for qualified wages that are not treated as payroll costs in obtaining forgiveness of the PPP loan.

For more information, see COVID-19-Related Employee Retention Credits: How to Claim the Employee Retention Credit FAQs​​​​​​.

If you would like to speak to someone to explain how this works, you can contact Bill Correll at 860-428-9541 or bill@pds2k.com.

Filed Under: Chamber News Tagged With: COVID, employee retention, IRS, tax break, tax credit

Dec 17, 2021 by DianeN

DO YOU OWE ANY CT TAXES FROM 2020 OR BEFORE? THERE IS HELP

The pandemic has been tough on us all, but now’s the time to get right. If you owe back taxes for periods up to and including 2020, the State of CT Department of Revenue Services is offering a limited window of opportunity to pay up at reduced interest with no penalties and no criminal prosecution.

The Connecticut tax amnesty program begins Monday, November 1, 2021, and ends Monday, January 31, 2022.

Benefits of enrolling in this program include:

  • Reduction of the interest by 75%.
  • Elimination of all penalties associated with liabilities satisfied under the Connecticut tax amnesty program.
  • Avoidance of criminal prosecution.

Any tax period ending on or before December 31, 2020 is eligible for this assistance. There is no limit on how far back an applicant may go in reporting back taxes.

The following are eligible:

  • Individuals or businesses that owe taxes and are required by law to file a tax return with DRS – within an eligible tax period – but have not filed. Individuals or businesses that previously filed a tax return with DRS – for an eligible tax period – but did not report all the tax that was due.
  • Individuals or businesses that currently have an unpaid tax liability with DRS that includes tax and penalty and/or interest.
  • Individuals or businesses currently under audit by DRS for periods ending on or before December 31, 2020.
  • Any individual or business with a protest pending before DRS’s Appellate Division.
  • Any individual taxpayer or business currently pursuing civil litigation with DRS.

The following taxpayers are not eligible to participate:

  • Anyone currently under criminal investigation by DRS.
  • Anyone who is party to any criminal litigation pending as of November 1, 2021.
  • Anyone who is party to a closing agreement with DRS.
  • Anyone who has made an Offer of Compromise that has been accepted by DRS.
  • Anyone who is party to a managed audit agreement.

As a general rule, most taxes administered by DRS are eligible for amnesty. Examples of taxes administered by DRS that are eligible:

  • Business use tax
  • Cigarette tax
  • Corporation business tax
  • Gift tax
  • Income tax (individuals, estates, and trusts)
  • Individual use tax
  • Motor vehicle fuels tax
  • Sales and use tax
  • Withholding tax
  • Pass-through entity tax

Connecticut motor carrier road tax (IFTA) is not eligible.

For more information or to enroll in the program GO HERE.

Filed Under: IRS Tips Tagged With: ct drs, IRS, owed taxes, TAX, tax amnesty

Aug 16, 2021 by DianeN

WHAT IS A FRINGE BENEFIT AND ARE THEY TAXABLE?


The subject of taxation of employee benefits made rare headlines earlier this month when a New York grand jury indicted the Trump Organization and its chief financial officer, Allen Weisselberg, for tax crimes relating to unreported fringe benefits.

The indictment alleges that Weisselberg intentionally failed to report and pay taxes on over $1.75 million of indirect employee compensation. Such indirect compensation is alleged to include lease payments for Weisselberg and his spouse’s apartment and their personal cars, utility bills, garage expenses, and private school tuition for members of Weisselberg’s family.

In support of the criminal charges in this case, the indictment describes concerted, years-long efforts by Weisselberg and the organization to conceal these payments, while at the same time internally tracking them as part of Weisselberg’s employee compensation.

But in less nefarious-seeming instances, employer-provided benefits for housing, automobile use, and tuition are actually pretty common, and sometimes non-taxable.

So how do you know when such an item is taxable employee compensation and must be reflected in employee pay, and when it isn’t?

What Are Fringe Benefits?

According to the IRS, a fringe benefit is a form of pay for the performance of services. This is naturally a broad category.

For example, an employee receives a fringe benefit when an employer allows the employee to use a business vehicle to commute to and from work.

Unless specifically excluded by the tax code, any fringe benefit provided by an employer to an employee is taxable.

Unless specifically excluded by the tax code, any fringe benefit provided by an employer to an employee is taxable, and must be included in the employee’s pay and reported on their annual Form W-2.

Luckily, there are a number of such exclusions. The most common tax-free fringe benefits include group health insurance, and contributions to qualified retirement plans (e.g., 401(k) plans), Health Savings Accounts, and flexible spending arrangements.

But what about the other fringe benefits mentioned above that employers may provide?

Rent/Lodging Expenses    

The Internal Revenue Code provides a very narrow set of circumstances in which an employer’s payment or reimbursement of an employee’s regular housing expenses could be excluded from an employee’s pay.

To qualify for the lodging exclusion under Section 119 of the code, the lodging must be provided: (1) for the employer’s convenience; (2) on the employer’s business premises; and (3) as a condition of the employee’s employment (i.e., the employee is required to accept the lodging).

The tax code provides a very narrow set of circumstances in which reimbursement of regular housing expenses is non-taxable.

If these conditions are met, the value of lodging provided to the employee, as well as the employee’s spouse and dependents, may be excluded from the employee’s pay.

In contrast to housing expenses that mostly benefit an employee personally, employer reimbursement of substantiated hotel and other travel expenses incurred by employees on bona fide business trips for employers are commonly excludible from an employee’s pay.

Auto Allowances/Company Vehicles

An employee’s personal use of an employer-provided automobile any more than a minimal amount is generally considered compensation that must be included in an employee’s gross income.

There are a variety of ways that the income tax regulations permit employers and employees to account for the taxable portion of an employee’s use of an employer-provided automobile.

One of the more common methods used by employers for calculating employee compensation is the cents-per-mile rate set annually by the IRS.

There are a variety of permissible ways to account for the taxable portion of an employee’s use of an employer-provided automobile.

Another common, transportation-related fringe benefit is parking and/or transit passes.

For 2021, benefits up to $270 per month can be excluded from employee income for both qualified parking and/or for combined commuter highway vehicle transportation and transit passes.

Any benefit provided in excess of these annual limits must be included in employee pay.

Tuition

Section 127 of the tax code allows a special exclusion from employee pay for up to $5,250 per calendar year in expenses paid toward qualified educational assistance programs.

For purposes of this exclusion, “educational assistance” means payment by an employer, of expenses incurred by or on behalf of an employee, for education of the employee (including, but not limited to, tuition, fees, and similar payments, books, supplies, and equipment).

An employer may also generally provide courses of instruction for an employee (including related books, supplies and equipment— but not lodging, transportation or meals) on a tax-free basis.

An employer may generally provide courses of instruction for an employee on a tax-free basis.

In addition, under the 2017 Tax Cuts and Jobs Act, employer payments toward qualified student loans (including principal or interest), as either payments to employees or direct payments to lenders, are excludible from an employee’s pay through Dec. 31, 2025.

In summary, it is important for employers to be aware when they provide employees with fringe benefits, at the time the benefits are provided, to ensure that such benefits receive proper tax and accounting treatment.

If an employer is unsure whether—and to what extent—a particular fringe benefit should be included in an employee’s pay, it is always prudent to seek advice from a competent professional.

This article was first posted on the Carmody Torrance Sandak & Hennessy LLP website and is reposted here with permission.

Filed Under: Chamber News Tagged With: EMPLOYEE TAXES, FRINGE BENEFIT, IRS

Feb 18, 2021 by DianeN

GIG PERFORMERS-MUST REPORT INCOME

In 2020, many people joined the gig economy to help make ends meet during the pandemic. Whether it’s a side business or a primary source of income, all taxpayers need to understand how their gig work affects their taxes. The bottom line is taxpayers must report gig economy income on their tax return.

Here’s a quick overview of the gig economy:

The gig economy is also referred to as the on-demand, sharing or access economy. People involved in the gig economy earn income as a freelancer, independent worker or employee. They use technology known as online platforms to connect them with customers to provide goods or services. This includes things like renting out a home or spare bedroom and providing delivery services.

Here are some things taxpayers should know about the gig economy and taxes:

• Money earned through this work is usually taxable.
• There are tax implications for both the company providing the platform and the individual performing the services.
• This income is usually taxable even if the:

– Taxpayer providing the service doesn’t receive an information return, like a Form 1099-NEC, Form 1099-MISC, Form 1099-K, or Form W-2.
– Activity is only part-time or side work.
– Taxpayer is paid in cash.

• People working in the gig economy are generally required to pay:

– Income taxes.
– Federal Insurance Contribution Act or Self-Employment Contribution Act tax.
– Additional Medicare taxes.

• Independent contractors may be able to deduct business expenses. These taxpayers should double check the rules around deducting expenses related to use of things like their car or house. They should remember to keep records of their business expenses.
• Special rules usually apply to rental property also used as a residence during the tax year. Taxpayers should remember that rental income is generally fully taxable.
• Workers who do not have taxes withheld from their pay have two ways to pay their taxes in advance. Here are these two options:

– Gig economy workers who have another job where their employer withholds taxes from their paycheck can fill out and submit a new Form W-4. The employee does this to request that the other employer withholds additional taxes from their paycheck. This additional withholding can help cover the taxes owed from their gig economy work.
– The gig economy worker can make quarterly estimated tax payments. They do this to pay their taxes and any self-employment taxes owed throughout the year.

For more information on the gig economy, taxpayers can visit the Gig Economy Tax Center.

Filed Under: IRS Tips Tagged With: gig performers, income, IRS, taxes

Feb 8, 2021 by DianeN

BEWARE OF “GHOST” TAX PREPARERS

“Ghost” tax preparers are a problem and the Chamber receives several complaints every year of this fraud.  Unfortunately we cannot help except to give them information of the process of making a complaint to the IRS.  We do have several members that are reputable and we recommend:  H&R Block (several locations throughout our region-just tell them where you live) 860-423-1076 and Padgett Business Services-Jeff Kreyssig 401-783-4500.  Both companies are wonderful and can meet with you for both your personal or business taxes.  Please read the rest of this story so you are NOT A VICTIM OF GHOSTS!

The Internal Revenue Service reminds taxpayers to avoid “ghost” tax return preparers whose refusal to sign returns can cause a frightening array of problems. It is important to file a valid, accurate tax return because the taxpayer is ultimately responsible for it.

Ghost preparers get their scary name because they don’t sign tax returns they prepare. Like a ghost, they try to be invisible to the fact they’ve prepared the return and will print the return and get the taxpayer to sign and mail it. For e-filed returns, the ghost preparer will prepare but refuse to digitally sign it as the paid preparer.

By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a valid Preparer Tax Identification Number, or PTIN. Paid preparers must sign and include their PTIN on the return. Not signing a return is a red flag that the paid preparer may be looking to make a fast buck by promising a big refund or charging fees based on the size of the refund.

Unscrupulous tax return preparers may also:

  • Require payment in cash only and not provide a receipt.
  • Invent income to qualify their clients for tax credits.
  • Claim fake deductions to boost the size of the refund.
  • Direct refunds into their bank account, not the taxpayer’s account.

The IRS urges taxpayers to choose a tax return preparer wisely. The Choosing a Tax Professional page on IRS.gov has information about tax preparer credentials and qualifications. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help identify many preparers by type of credential or qualification.

No matter who prepares the return, the IRS urges taxpayers to review it carefully and ask questions about anything not clear before signing. Taxpayers should verify both their routing and bank account number on the completed tax return for any direct deposit refund. And taxpayers should watch out for preparers putting their bank account information onto the returns.

Taxpayers can report preparer misconduct to the IRS using IRS Form 14157, Complaint: Tax Return Preparer. If a taxpayer suspects a tax preparer filed or changed their tax return without their consent, they should file Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit.

Filed Under: IRS Tips Tagged With: ghost preparers, IRS, preparers, scam, taxes

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Willimantic CT 06226
Phone: (860) 428-7739

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  • STANDARD MILEAGE RATES FOR 2022 & OTHER MILEAGE TAX INFO
  • DID YOU KEEP ANY OF YOUR EMPLOYEES THROUGHOUT THE PANDEMIC? YOU NEED TO READ THIS!
  • DO YOU OWE ANY CT TAXES FROM 2020 OR BEFORE? THERE IS HELP

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