Fortunately, you can take several measures to prevent your email from being hacked, including the following:

1. Use a password manager.

By storing your passwords in a centralized and encrypted location, the password managers can automatically log you into all your online accounts. The password you use to log onto your password manager is the only password you have to remember. According to PC Magazine, Keeper, LastPass and Dashlane are among the best password managers. Something to keep in mind as you select the software that works best for you is that all password managers use “zero knowledge” technology, which means that the company that makes the manager does not know your password.

2. Use two-factor authentication.

By requiring your password plus a second piece of identification, two-factor authentication adds an extra layer of security. Typically, you log into your account with your password and the site replies by calling or texting a one-time code. You can gain access to the account only after you enter that code. A number of two-factor authentication apps are available for businesses, including Authy and Duo.

3. Use a Virtual Private Network (VPN).

VPNs help maintain your privacy when you are using a public network, that is, a network you can use without a password such as one at a café. When you switch on a VPN, your ISP address is routed through an encrypted server. Consequently, while you are on the internet, the VPN will be visible, but your ISP will not. The average cost of a top-rated VPN service is about $10.10 per month.

4. Watch out for phishing emails.

Phishing emails have become quite sophisticated at asking for personal information, but there are some red flags to help you identify them, including the following:

• Poor spelling or grammar
• The address is not quite right — for example, “Microsft” instead of “Microsoft” or a domain suffix that is different than usual such as “.net” rather than “.com”
• Language demanding immediate response
• Requests for payments to be made to a personal bank account or a foreign bank account
• Requests to download something “important”

5. Train the entire staff.

Training is key. Hackers are finding new ways to hack systems and computers all the time. The best thing you can do for your business and personal safety is to train everyone using the system to be alert to possible attacks. Make calling the sender to verify the request a priority.

If you have more questions about staying safe and secure online, contact us today.

© 2021

The post Tips to Prevent Your Email from Being Hacked appeared first on The Accountancy.

The 2017 tax overhaul limited the business deduction as a way of helping pay for the $1.5 trillion set of tax cuts, but the $2 trillion legislative package approved by Congress in March temporarily eliminated some of the restrictions as a way to help businesses cope with the impact of the pandemic.

Under the TCJA, for tax years starting after Dec. 31, 2017, business interest expense deductions are generally limited to the sum of:

• The taxpayer’s business interest income.
• Thirty percent (or 50%, as applicable) of the taxpayer’s adjusted taxable income.
• The taxpayer’s floor plan financing interest expense.

However, the business interest expense deduction limitation won’t apply to certain small businesses, electing farming businesses and certain regulated public utilities. The $26 million gross receipts threshold applies for the 2020 tax year and will be adjusted annually for inflation.

A real property trade or business or a farming business can elect to be exempted from the business interest expense limitation. However, taxpayers can’t claim the additional first-year depreciation deduction for certain types of property held by the electing trade or business.

Taxpayers must use Form 8990, Limitation on Business Interest Expense Under Section 163(j), to calculate and report their deductions and the amount of disallowed business interest expenses to carry forward to the next tax year.

Along with the final regulations, the IRS also issued extra guidance related to the business interest expense limitation. These proposed regulations spell out additional guidance on different business interest expense deduction limitation issues not addressed in the final regulations, including more complex issues pertaining to the amendments made by the CARES Act. Subject to some restrictions, taxpayers can rely on some of the rules in the proposed regulations until final regulations implementing the proposed regulations are published in the Federal Register.

The IRS has also provided an FAQ list regarding the aggregation rules under section 448(c)(2) that apply to the section 163(j) small-business exemption.

Both the final and proposed rules are complex, and companies should get professional advice on how the rules apply to them.

The post Business Interest Expense: The New Rules appeared first on The Accountancy.

To start with, trust beneficiaries typically need to pay tax on the interest income they get from a trust, but not on any distribution from the principal. The logic is that whoever placed the principal in the trust already paid taxes on it. However, trustees cannot decide on their own which part of the trust monies is principal, thus skipping the tax for the beneficiaries. Any funds distributed in a given year are assumed to be that year’s taxable interest income. Only then are distributions considered to be principal. (However, principal may still be subject to capital gains taxes.)

Each year, the trust must send the beneficiaries an annual IRS Form K-1, which breaks down principal from interest income. The trust itself has to file Form 1041, which is similar to the Form 1040 most individuals have submit, except it’s for estates and trusts. If the trust doesn’t distribute all the interest income, then the trust itself has to pay taxes.

Getting into the details

Those are the basics, but trust taxation can get as complex as individual taxes — in fact, there are some similarities. For example, trusts can:

• Take advantage of preferential capital gains rates.
• Earn tax-exempt income.
• Be subject to the alternative minimum tax.
• Deduct certain expenses to reduce taxable income.

However, the organization of each trust makes a difference in how the taxes are handled. For example, with revocable grantor trusts, the grantors pay any taxable income on their returns. It’s the same with an irrevocable grantor trust: The IRS considers trust income as earned by the grantor, even if it is distributed to a beneficiary. Such trusts may give a break on estate and gift taxes, however, which is a boon for the very wealthy. An irrevocable trust that is not a grantor trust, however, is considered a separate entity. In this situation, the beneficiary must pay the taxes.

Charitable remainder trusts are tax-exempt — for the most part. There’s no tax on any income the trust retains. However, any noncharitable beneficiary is still subject to tax.

This is just the beginning; other factors can affect the tax situation. For example, a trust can be the beneficiary of an IRA, but this technique can restrict management of the IRA and requires special trust language.

The bottom line? Families setting up trusts should work with professionals who understand the tax implications of each trust decision — when they’re first set up, and as they start paying out to beneficiaries.

© 2020

The post How Are Trusts Taxed? appeared first on The Accountancy.

Professional organizers are providing organizational advice and instructions based on photos of customers’ spaces. Real estate agents offer video tours of homes for clients who don’t want to visit in person.

A.J. Hastings, a 106-year-old college gear and office supply store in Amherst, Massachusetts, serves three area universities but saw foot traffic down by at least half as colleges restricted the number of students on campus and there was reluctance to shop in person.

So co-owners took action: For five months, they didn’t allow customers inside, using the time to reconfigure the store, widening aisles to make it more conducive to social distancing; ditching a card rack, a magazine display, a counter and a soft-drink refrigerator; and separating two checkout registers so customers waiting to pay wouldn’t come in contact.

Feedback? Customers say it’s a better, safer shopping experience. Among other business owners’ actions:

• A designer who didn’t head to New York Fashion Week noted that his collection would be heavy on sweatsuits and quarantine-friendly leisure wear. With no runway show, he created an online version, filming videos of looks and explaining each one.
• A designer shop for street wear in Los Angeles is also an art gallery. The modus operandi here is to produce a clothing line featuring muted colors to match the somber mood. Monthly art shows — festive events that used to draw crowds — have been canceled as owners put together shows held during the day without alcohol and with a limited number of people in the store. Gradually, the owners are moving to an online model, at least for now, focusing more on their video work, creating art tutorials and filming street artists.
• To eliminate crowded waiting rooms, some veterinarians offer curbside appointments, checking dogs or cats in the backseat without close contact with their humans.
• Ice cream and coffee shops similarly went curbside, allowing customers to text or call in orders for drive-up or walk-up service.

And when companies see that customers don’t need their regular products or services, they’ve pivoted operations to deliver things that are needed. A number of craft beer distilleries across the country produced hand sanitizer when it was in short supply globally. Clothing manufacturers and other textile companies produced face masks and other personal protective equipment for health care workers and the rest of us.

It’s been a good opportunity for firms to use this time to develop new products and service lines that they may have been postponing when they were busier.

Small businesses have been continuing to pay for masks, sanitizers and new HVAC filters, raising their costs at the same time that sales are down. Companies have been retrofitting their game plans, figuring out how to relax fixed costs using creativity and flexibility.

© 2020

The post How To Retool: An Overview appeared first on The Accountancy.

• Services performed by someone who is not your employee (including parts and materials) (box 1).
• Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish (box 1).
• Payments to an attorney (box 1).

The IRS has provided additional guidance about what exactly is nonemployee compensation. If the situation meets all four of the following cases, it’s an NEC situation:

• You made the payment to someone who is not your employee.
• You made the payment for services in the course of your trade or business (including government agencies and nonprofit organizations).
• You made the payment to an individual, partnership, estate or, in some cases, a corporation.
• You made payments to the payee of at least $600 during the year.

A partial list of payments that belong on a Form 1099-NEC includes the following:

• Professional service fees, such as fees to attorneys (including corporations), accountants, architects, contractors, engineers, etc.
• Fees paid by one professional to another, such as fee-splitting or referral fees.
• Commissions paid to nonemployee salespersons that are subject to repayment but are not repaid during the calendar year.
• A fee paid to a nonemployee, including an independent contractor, or travel reimbursement for which the nonemployee did not account to the payer if the fee and reimbursement total at least $600. (To help you determine whether someone is an independent contractor or an employee, see Pub. 15-A.)

This is not a complete list, and the choice between the NEC and MISC forms can be confusing. Be sure to keep clear, comprehensive records so your tax professional can help you decide how various payments should be reported. Form 1099-NEC is due on Jan. 31 or the next business day if that date falls on a weekend or holiday.

© 2020

The post IRS Introduces the New Form 1099-NEC appeared first on The Accountancy.

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The Internal Revenue Code (IRC) allows taxpayers to claim a business deduction for expenses arising from the qualified use of all or part of a residence, as long as certain conditions are met. This deduction can be a particularly attractive tax planning tool for those who meet one of the following requirements:

• The home office is taxpayer’s principal place of business. A home office must be used regularly and exclusively to conduct business. Consequently, working on the kitchen table (which is also used for purposes other than work) doesn’t qualify, but a desk set up in a bedroom might.
• The home office is where the taxpayer meets patients, clients, or customers in the regular course of business. This can be difficult to assess if the taxpayer operates out of different locations. In such cases, the IRS will look at things like the amount of time spent at the location. To assess where the principal place of business is, if a taxpayer has multiple work locations, consider the relative importance of the activities conducted in each location, the amount of time spent there, and whether another fixed location might compete as the
•  principal place where work is done.
• A separate structure not attached to the dwelling and used in connection with the business may qualify.
• If the dwelling is the only fixed location of the taxpayer’s business, a space within it that is used regularly to store the business’s inventory or product samples may qualify as a home office.

These considerations generally apply to the self-employed, because employees who work from home are not entitled to claim a home office deduction even if the employer requires the employee to maintain a home office. (The 2017 Tax Cuts and Jobs Act eliminated employees’ ability to deduct unreimbursed job-related expenses paid with personal funds as miscellaneous itemized deductions.)

The following is something of an exception to this rule: if the employer sets up an “accountable plan,” which reimburses workers for business expenses, that reimbursement is not counted as income, and it is not subject to withholding or reported on the employee’s W-2. When setting up the plan, the employer must (1) ensure that reimbursed expenses are business-related, (2) substantiate the expenses within a reasonable period and (3) make sure that any unspent funds are returned to the employer within a reasonable period.

This means that to avoid raising red flags for the IRS that can result in the plan being treated as a non-accountable plan, the business owner must set up the plan carefully, fully document all associated expenses and comply with any limitations or restrictions associated with deductible expenses.

Ultimately, the point is that an accountable plan is a simple way to shift deductibility of business expenses from the employee to the employer and offers the ability to mitigate tax liability by allowing business owners to choose which expenses are reimbursable and which employees will be eligible to submit reimbursements. These rules can get complicated, so be sure to work with a professional on these, and all home office tax issues. Call us today.

©2020

The post Home Office Deductions: A Refresher appeared first on The Accountancy.

COVID-19 has triggered many brick-and-mortar entities to to either strengthen or create their online presence. This, in turn, has forced them to address sales tax complexities they didn’t have to contend with when all sales were local.

Understanding Sale Tax Thresholds

The internet sales tax requirement is the direct result of the Supreme Court’s ruling in South Dakota v. Wayfair Inc. (138 S. Ct. 2080 (2018)). Wayfair overturned prior rulings and stipulated that even businesses without a physical presence in a state had to collect sales tax on transactions in any state in which it has (1) more than 200 transactions or (2) $100,000 in in-state sales.

The thresholds set in Wayfair were based on South Dakota law. In practice, however, these thresholds aren’t clear-cut. Every taxing jurisdiction, including states, counties and municipalities, can require sales tax to be collected and remitted. These thresholds for requiring sales tax to be paid vary with each jurisdiction. This means that the amount of sales revenue, number of sales and which goods and services are taxable differ in each jurisdiction. So, one state may impose a 5% sales tax on a particular good or service and the local municipality may impose an additional 1%, while a neighboring state has no sales tax on that particular good or service, but the local municipality imposes a 2% tax. In the former example, the business would be responsible for collecting and remitting a 6% sales tax, and in the latter, they would be responsible only for 2%.

Conducting a Jurisdictional Analysis

These tax requirements can get complicated. The only way for businesses to be compliant and avoid owing large amounts in back taxes or penalties is to do a jurisdiction-by-jurisdiction analysis.

Among other things, online sellers need to an answer the following questions:

• Can you identify every state and jurisdiction in which you operate? This category includes not only where you ship to but also things like where your inventory is stored.
• Can you easily separate your sales by product or service and jurisdiction? Keep in mind that each jurisdiction can have different thresholds for collecting sales tax.
• Can you monitor for changes in the sales tax laws and regulations in every jurisdiction in which you do business? This process includes monitoring for the effective dates of any changes.
• Are you eligible for a sales tax exemption in any of the jurisdictions in which you operate?
• Do you need to register for other state taxes?

Companies need to decide how to manage sales tax compliance and how to monitor for changes in rates and goods and services that are newly taxed. For most companies, this means choosing the right software for their needs, and perhaps working with a consulting company that specializes in sales tax.

Becoming Compliant

Once all of this is accomplished, companies need to determine how and when to become compliant. This can be achieved in several ways, including registering through the state’s voluntary compliance program. This decision is complicated because the wrong choice can result in higher penalties.

The concept of a sales tax nexus is especially challenging for businesses new to this arena as well as those beefing up their online operations. Nevertheless, predictions are that the trend in online sales will get only stronger, so it makes sense to understand all the rules. For help ensuring that your online business is complying with sales tax requirements, contact us today.

©2020

The post A Sales-Tax Primer for Pandemic-Affected Businesses appeared first on The Accountancy.

Offices are busy places, and that’s true whether we’re talking about a one-person home office or rows and rows of cubicles in an office building. Everyone has deadlines to meet and projects to finish. The easiest way to make sure these things happen is to skip your lunch hour or eat your lunch at your desk. Thousands — maybe millions — of U.S. workers are making this choice, and it could be one of the most detrimental habits we have a hard time breaking. Here are some reasons why you shouldn’t be skipping your lunch hour:

• Skipping a meal is bad for your health. Sometimes we think we’re too busy to eat or maybe we simply forget. Other times we might think we are helping our weight-loss goals by reducing calories, but there are better methods. Skipping your lunch causes your blood sugar to plummet, which is why you start to feel sluggish around 3 p.m.
• You’re less productive for the rest of the day. To that purpose, you’re not actually gaining productive time. You’re more likely to hit a slump in the afternoon, which affects your ability to think and perform your job. We sometimes take this productivity dip for granted and assume it just comes with the territory, but it can be avoided.
• It makes your brain work slower. Your brain needs fuel to keep performing at optimum levels. When you don’t feed it regularly you start to lose cognitive function, memory and concentration. You may lose the entire afternoon of work and find yourself needing to do critical pieces over again when you return to work in the morning refreshed.
• You’re setting a bad precedent. Of course, your weight and brain health aren’t the only things that you damage by skipping lunch. You also set a precedent that this is something you always do, which will cause your managers to expect it. You will find that it will become impossible to take lunch hours in the future because you never have in the past.

Do you need to get out of the office for your lunch break?

©2020

The post Lunch Breaks: Be kind to yourself and take them! appeared first on The Accountancy.

The IRS is urging everyone to take extra care, especially regarding the $1,200 checks that are on their way:

• The IRS isn’t going to call you asking to verify or provide your financial information so you can get your economic impact payment or your refund faster. No one at the IRS will contact you by phone, email, mail or in person asking for any kind of information to complete your economic impact payment, which also has been referred to as your rebate or stimulus payment.
• Nor is the IRS going to send you a special application email. Don’t open the email; don’t click on attachments or links. Always go straight to the source, IRS.gov, which will have the most up-to-date data.

Below are some general tips to keep safe from scammers:

• Watch out for emails, text messages, websites and social media attempts that request money or personal information. Criminals take every opportunity to perpetrate fraud on unsuspecting victims — especially when a group of people is vulnerable or in a state of need — hoping to trick people so they can get their hands on our payments.
• If you haven’t provided direct deposit information to the IRS, there will be a newly designed secure portal on IRS.gov in mid-April. Do not provide your direct deposit or any other banking information to anyone who says they’ll input your information on any portals.
• Retirees beware: No one from the IRS will be reaching out to you by phone, email, mail or in person asking for any kind of information to complete your economic impact payment. The IRS is sending these $1,200 payments automatically to retirees — no additional action or information is needed on your part to receive this.
• Watch out for scammers who use the words “Stimulus Check” or “Stimulus Payment.” You work directly with the government on these — you don’t need any “help” from third parties.
• Don’t sign over your economic impact payment check to anyone.
• Don’t give in to anyone — whether on the phone, through email, by text messages or on social media — who is pressuring you for verification of personal and/or banking information. Scammers will promise that this will speed up your payment. Don’t believe anyone who says that they’ll get you your payment faster.
• Watch out for bogus checks in an odd amount. Scammers will tell you that you need to call a number to verify information to be able to cash it. Don’t fall for it!

How you can report coronavirus-related and other phishing attempts:

• Forward any unsolicited emails, text messages or social media attempts to phishing@irs.gov.
• Learn more about suspected scams by going to the Report Phishing and Online Scams page on IRS.gov.
• Official IRS information about the COVID-19 pandemic and economic impact payments can be found on the Coronavirus Tax Relief page on IRS.gov.

Don’t get swindled out of $1,200! Anyone who asks you for personal or financial information to get your $1,200 federal payment is not legit.

The post Avoid These Financial Hoaxes appeared first on The Accountancy.