Employers: Beware of third parties promoting improper employee retention credit claims

Employers: beware of third parties promoting improper employee retention credit claims

Our office receives significant inquires regarding the ERTC.  Not al business may qualify.  Please beware with dealing with 3rd parties who charge large up-front fees.

Employers should be wary of third parties advising them to claim the employee retention credit when they may not qualify. Some third parties are taking improper positions related to taxpayer eligibility for and computation of the credit.

These third parties often charge large upfront fees or a fee that is contingent on the amount of the refund. They may also fail to inform taxpayers that wage deductions claimed on the business' federal income tax return must be reduced by the amount of the credit.

If the business filed an income tax return deducting qualified wages before it filed an employment tax return claiming the credit, the business should file an amended income tax return to correct any overstated wage deduction.

Businesses should be cautious of schemes and direct solicitations promising tax savings that are too good to be true. Taxpayers are always responsible for the information reported on their tax returns. Improperly claiming the ERC could result in taxpayers being required to repay the credit along with penalties and interest.

What is the employee retention credit?
The ERC is a refundable tax credit for businesses who continued paying employees while shutdown due to the COVID-19 pandemic or had significant declines in gross receipts from March 13, 2020 - December 31, 2021. Eligible taxpayers can claim the ERC on an original or amended employment tax return for a period within those dates.

To be eligible for the ERC, employers must meet one the following conditions:

• They sustained a full or partial suspension of operations due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings due to COVID-19 during 2020 or the first three quarters of 2021
• The business experienced a significant decline in gross receipts during 2020or a decline in gross receipts during the first three quarters of 2021
• The employer qualified as a recovery startup business for the third or fourth quarters of 2021.

Only recovery startup businesses are eligible for the employee retention credit in the fourth quarter of 2021.

Eligible employers cannot claim this credit on wages reported as payroll costs to get PPP loan forgiveness or that they used to claim certain other tax credits at any time.

To report tax-related illegal activities relating to ERC claims, taxpayer should submit Form 3949-A, Information Referral They should also report instances of fraud and IRS-related phishing attempts to the Treasury Inspector General for Tax Administration by calling 800-366-4484.

To requet an appoitnemnt to determine eligibility for the ERTC please contact your Staten Island CPA at 718-227-6035

Please make sure to bring all of your documents to Your CPA

 Taxpayers should be sure to have all their info before going to a CPA

Taxpayers using a professional tax preparer (CPA) should make sure they have all their information readily available before their appointment. Collecting their information and getting copies of any missing documents before taxpayers sit down to prepare their return is critical to filing an accurate tax return. Having organized records and information in hand helps prevent filing errors and will likely create a smoother filing experience.

Here’s a list of information taxpayers may need. Not all information applies to all taxpayers.

• Social Security numbers of everyone listed on the tax return.
• Bank account and routing numbers for direct deposit or information to make a tax payment.
• Forms W-2 from employer(s).
• Forms 1099 from banks, issuing agencies and other payers including unemployment compensation, dividends, distributions from a pension, annuity or retirement plan.
• Form 1099-K, 1099-MISC, W-2 or other income statement for workers in the gig economy.
• Form 1099-INT for interest received.
• Other income documents and records of virtual currency transactions.
• Form 1095-A, Health Insurance Marketplace Statement.
• Letter 6419, 2021 Total Advance Child Tax Credit Payments, to reconcile advance child tax credit payments.
• Letter 6475, Your 2021 Economic Impact Payment, to determine eligibility to claim the recovery rebate credit.
• Information to support claiming other credits or deductions, such as receipts for child or dependent care, college expenses or donations.

Taxpayers can get information about their Economic Impact Payments and advance child tax credit payments through their IRS online account.
Taxpayers who don’t have their letters about their Economic Impact Payment to claim missing stimulus payments and advance child tax credit payments to claim their full child tax credit have an online option. They can log in to their IRS online account and get the information from the Tax Records tab.

For taxpayers who are married filing jointly, each spouse will need to have their own Economic Impact Payment and advance child tax credit information.

What taxpayers should do if they’re missing other documents
Taxpayers who didn’t receive a W-2 or Form 1099 should contact the employer, payer or issuing agency and request the missing documents. This also applies for those who received an incorrect W-2 or Form 1099.

If they still can't get the forms, they can use Form 4852, Substitute for Form W-2, Wage and Tax Statement or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. If a taxpayer doesn't receive the missing or corrected form in time to file their tax return, they can estimate the wages or payments made to them, as well as any taxes withheld. They can use Form 4852 to report this information on their federal tax return.

Call today to schedule a appointment. 718-227-6035. 

Self Employed List of Available Business Deduction

 It costs money to make money, and much of what business owners spend on their companies — their business expenses — can be deducted from their gross income to reduce their taxes. The list of deductible business expenses includes obvious ones like office rent, salaries and computers, but might also include water bills and window cleaning.

Read on to find information about deductions that can help your business save on taxes.

List of Business Expense Categories

The IRS says a business expense must be ordinary, necessary and directly related to running a company to be deductible. Most business expenses fall into specific categories. Schedule C, the IRS form which sole proprietors use to report their income, lists 20 broad business expense categories that include:

• Advertising
• Car and truck expenses
• Commissions and fees, contract labor
• Depletion
• Depreciation and section 179 expense deduction
• Employee benefit programs
• Insurance, interest
• Legal and professional services
• Office expense
• Pension and profit-sharing plans
• Rent or lease
• Repairs and maintenance
• Supplies
• Taxes and licenses
• Travel and meals
• Utilities
• Wages

Categorizing expenses is an important part of keeping good business records. The IRS wants business expenses accounted for and reported in the correct categories so it can determine if the deductions are legitimate. Categorizing expenses correctly will also mean a smaller bill from your accountant at tax time.

Time to Gather Your Tax Documents - 2021

 Tax filing step 1: Gather all year-end income documents

Tax Season 2021 is upon us.  Now is the time to start gathering your tax documents.

As taxpayers are getting ready to file their taxes, the first thing they should do is gather their records. To avoid processing delays that may slow their refund, taxpayers should gather all year-end income documents before filing a 2021 tax return.

It's important for people to have all the necessary documents before starting to prepare their return. This helps them file a complete and accurate tax return. Here are some things taxpayers need to have before they begin doing their taxes.

• Social Security numbers of everyone listed on the tax return. Many taxpayers have these numbers memorized. Still, it's a good idea to have them on hand to double check that the numbers on the tax return are correct. An SSN with one number wrong or two numbers switched will cause processing delays.
 
• Bank account and routing numbers. People will need these for direct deposit refunds. Direct Deposit is the fastest way for taxpayers to get their money and avoids a check getting lost, stolen or returned to IRS as undeliverable.

• Don't have a bank account? Learn how to open an account at an FDIC - Insured Bank or through the National Credit Union. Veterans can access the Veterans Benefits Banking Program.

• Forms W-2 from employer(s).

• Forms 1099 from banks, issuing agencies and other payers including unemployment compensation, dividends, distributions from a pension, annuity or retirement plan.

• Form 1099-K, 1099-MISC, W-2 or other income statement for workers in the gig economy.

• Form 1099-INT for interest received.

• Other income documents and records of virtual currency transactions.

• Forms 1095-A, Health Insurance Marketplace Statement. Taxpayers will need this form to reconcile advance payments or claim the premium tax credit.

• Letter 6419, 2021 Total Advance Child Tax Credit Payments, to reconcile advance child tax credit payments.

• Letter 6475, Your 2021 Economic Impact Payment, to determine eligibility to claim the recovery rebate credit.

Forms usually start arriving by mail or are available online from employers and financial institutions in January. Taxpayers should review them carefully. If any information shown on the forms is inaccurate, the taxpayer should contact the payer ASAP for a correction.

For more on this, please contact your accountant.