January 1, 2021 to January 31, 2021 – Monday thru Friday 9:00AM to 5:00PM
February 1, 2021 to April 14, 2021 – Monday thru Friday 9:00AM to 7:00PM
April 15, 2021 – 9:00AM to 4:30PM
April 19, 2021 to December 31, 2021 – Tuesday thru Thursday 9:00AM to 3:00PM
Denise will not be available, due to a tax conference, from July 12, 2021 to July 16, 2021.
For your health and safety, until the pandemic is under control, everyone will need an appointment to come into our office. For those who are dropping off information, if you use the secure letter slot in our storm door you will not need an appointment. For the safety of your families and our families, anyone coming into our office MUST wear a mask. We realize this might be an inconvenience for some of you. Please remember we are concerned about everyone’s health and safety.
Throughout the entire year our tax professionals are available by appointment only.
Your friends here at Main Street hope you and your families are doing well, staying safe and healthy. This has been a strange year for everyone in more ways than one. Always think positive. No matter what happens it will be fine as long as we all work together. On our website, under “What’s New”, you will find “Good Things”. When you click on “Good Things” you most likely will find a huge smile on your face. Puzzling, cooking, purchasing a new pet, silly pictures, etc., are some of things our clients have been doing to stay positive and save their sanity during the pandemic. Do the pictures of some of the yummy foods make you as hungry as they make us? Feel free to send us pictures, comments, items you want to share with others which might make them smile and feel good. Maybe you want to share a short story–please keep it positive and send it to us. We will not include any personal information about you on our website, since your information is confidential and we want to keep it that way.
We appreciate your trust, loyalty, confidence and friendship. We are here for you and your family. If you need our assistance or have any questions feel free to call us. Do something special for someone to make them smile. Be kind and considerate to others. Stay safe and healthy, most importantly enjoy each moment. We hope all of you and your families have a very prosperous and healthy New Year; wishing you joy and happiness in 2021.
Denise, Barb and Sarah
Main Street’s Support Team
Important words from our greeter:
Boy do I miss seeing everyone! Thank you to those who have been taking walks and stopping in my yard to talk to me. Mom and Dad took me camping this year to Erie, PA twice. Beautiful area! The waves coming in off the lake did scare me, so I did not go swimming. I really liked Presque Isle State Park. Great place to go for a walk, fly a kite or just sit on the beach watching the waves.
Because of the pandemic, this year Mom attended all of her tax conferences and workshops virtually. Of course, I attended them with her. It was so much fun especially when Mom sat on the floor so I could also see and hear everything she was being taught by all the awesome NATP instructors. Honestly, most of it was really boring; it was just really nice sleeping on Mom’s lap as she was enhancing her tax knowledge and learning about all the new tax updates and changes.
Hopefully this pandemic will be under control soon and we all can get our lives back to some type of normality. As Mom says, there is always something positive for all of us to look at. Look how much we learned about ourselves and others. I am like Mom, I always look at the positives of everything. Do yourself a favor and do the same; it will make you feel better and you will be much happier. Happiness and laughter is a great infectious disease; wish all diseases were like that.
Until I can see you, please take good care of yourself. As always I will keep you in my doggie dreams.
Hugs and lots of love,
DISCLAIMER: Any tax advice noted below is based on the facts provided to us and on current tax law interpretation. Tax law is subject to continual change, at times on a retroactive basis and may result in incremental taxes, interest or penalties. Should the information below be incorrect or incomplete or should the law or its interpretation change, our advice may be inappropriate. We are not responsible for updating our advice for changes in law or interpretation after the date noted above. The following cannot be used as support in any tax audit.
Please be sure to include with your tax information this year the letter you received along with the dollar amount of your stimulus payment. For those who did not receive their stimulus payment, you will be able to get the stimulus payment when you file your 2020 income tax return.
Due to the pandemic a lot of taxpayers received unemployment compensation in 2020. This is taxable income. You will receive a 1099G from the State who paid you the unemployment funds. Employers, your unemployment reserve account should not have been affected if you had any employees collecting unemployment during this time. Employers, please review the monthly charge report you receive from the Unemployment Office. If there were any employees noted on this report who worked for you prior to the pandemic you should file a letter with your State Unemployment Office requesting relief. Please contact our office if you have any questions on this.
COVID has caused some financial difficulties for many taxpayers. An individual who received a coronavirus-related distribution, not more than $100,000.00 may recontribute the amount of those distributions to an eligible retirement plan within three years of receiving the distribution. An election will have to be made on your 2020 income tax return. If you find you had to pull monies out of your retirement, take out loans to live on, etc., ask Denise if there is any tax tactics you can use to save tax dollars on these monies.
New Exception to 10% Early Withdrawal Penalty – Starting in 2020 a new exception to the 10% early withdrawal penalty applies for distributions, up to $5000.00, made from qualified plans for a qualified birth or adoption. An eligible retirement plan includes plans other than defined benefit plans. A qualified birth or adoption distribution must be made during the one-year period beginning on the date the child is born or the legal adoption is finalized. Please talk to Denise on this before withdrawing any funds from your qualified plans.
REQUIRED MINIMUM DISTRIBUTIONS (RMD)
change starting 01/01/2020
The Secure Act increased the age for required minimum distributions to age 72. This legislation does not affect the rules for 2019. If you were 70 ½ or older on December 31, 2019 you will be required to continue to pull your RMD and follow the old rules. This legislation change only effects individuals who were not 70 ½ on December 31, 2019.
Beginning in 2020 those taxpayers who do not qualify to itemize their deductions will be able to take an above-the-line deduction for charitable contributions up to $300.00. As always, you will need receipts for your deduction.
NEW VIRTUAL CURRENCY GUIDANCE
The IRS has issued new guidance to help taxpayers better understand their reporting obligations for specific transactions involving virtual currency. The new guidance includes Revenue Ruling 2019-24 and frequently asked questions. Please call our office if you are dealing with virtual currency so we can assist you in your required recordkeeping.
TUITION (FORM 1098-T) AND BILLING STATEMENTS
If you have a child attending college we will need the 1098T from the college (this will be in your child’s name). We will also need the tuition and fees billing statements from the college for the full calendar year. We want to be sure we are not missing any qualified expenses. You may have to go on the school’s web site to retrieve the billing statements. The information will most likely be in the student’s name. The student most likely will have access to this information. Tax preparers are mandated by IRS to verify the numbers we enter on your return. The only way for us to verify this information is to review the billing account statement for the calendar and Form 1098T.
What is sharing economy? Sharing economy is a term for a new way of distributing goods and services – a way that differs from the traditional model of corporations hiring employees and selling products to consumers. An economic system in which assets or services are shared between private individuals, either free or for a fee, typically by means of the Internet. Thanks to the sharing economy you can easily rent out your car, your house, your apartment, your bike, even your Wi-Fi network when you do not need it. Sharing economy activity is generally taxable even when:
- The activity is only part time
- The activity is something you do on the side
- Payments are in cash
- You receive a 1099 form or W-2 form for your service
You will want to call Denise if you are participating in sharing economy. We will review the items you will want to track and receipts you will want to save in order to take a deduction for these expenses to offset the income.
MARKETPLACE SALES or commonly known purchasing items online (PA Rules)
PA has issued guidance on its website related to the Marketplace Sales legislation that was passed by the General Assembly in 2017. The legislation required certain remote sellers and referrers facilitation, making or referring sales to PA customers to make an election to either
- Register to collect and remit sales tax or
- Comply with tax notification and reporting requirements
Beginning April 1, 2018 PA customers will begin receiving information notices from businesses who have elected not to collect sales tax. The information notice will list the purchases and the purchase price of the products for which sales tax was not collected by the seller.
It is important you bring to me these notices which will give me the proper information I need to file your PA use tax when we file your PA income tax return. Please remember PA Dept of Revenue is receiving copies of these notices and will be looking for this information on your PA-40.
CHANGES FOR THE BUSINESS COMMUNITY
Qualified Improvements on Nonresidential Real Property
Qualified Improvements on nonresidential real property is now 15 year property qualifying for a 100% deduction. Examples of such qualifying improvements include installation or replacement of drywall, ceilings, interior doors, fire protection, mechanical, electrical and plumbing. Excluded from the definition are improvements attributable to internal structural framework, enlargements to the building, and elevators or escalators.
PA Withholding Might Be Required For Payments To Contractors
Payments you make to out of state subcontractor doing work here in PA might need to have PA income tax withheld before you submit your payments to the subcontractor. The moment you hire someone to do work on your PA property and their business is NOT located in the State of PA please call Denise before hiring the contractor or submitting any payments to the contractor. Denise will help you decide if PA tax must be withheld.
MEALS AND ENTERTAINMENT CHANGES
Effective 01/01/18 entertainment expenses are non-deductible no matter what. Your business can still pay for the cost of the entertainment; the expense will be non-deductible on the tax return.
Meals (Deductible 50% or non-deductible)
What is considered a meal versus entertainment is the big issue. Clarity has been added and it seems the rules are a little more lenient than what was noted in the initial tax bill.
As of now we can rely on the following guidance for expenses of business meals. Taxpayers may deduct business meal expenses if:
- The expense is an ordinary and necessary expense paid or incurred during the taxable year in carrying on any trade or business
- The expense is not lavish or extravagant under the circumstances
- The taxpayer, or an employee of the taxpayer, is present at the furnishing of the food or beverage.
- The food and beverages are provided to a current or potential business customer, client, consultant, or similar business contact; and
- In the case of food and beverages provided during or at an entertainment activity, the food and beverages are purchased separately from the entertainment, or the cost of the food and beverages is stated separately from the cost of the entertainment on one or more bills, invoice, or receipts. The entertainment disallowance rule may not be circumvented through inflating the amount charged for food and beverages.
Please remember if you are traveling on business and away from your office the meals you purchase for yourself, while you are away will be deductible. Always remember to document.
Example – You take a client to a baseball game. The tickets for the game will not be deductible. If you buy hot dogs and drinks at the game for you and your client; those expenses will be deductible, since the food is separately billed from the baseball tickets. Using the same example; after the game you take your client out for dinner to a restaurant, which is not extravagant, and discuss business while enjoying your dinner, the dinner will be a business deduction.
Example – You have a meeting with a client and after the meeting you take the client for dinner. The cost of the dinner, as long as the dinner is not considered lavish or extravagant, will be a business deduction.
Documentation – you will still need all the documentation you needed in the past.
You are allowed to deduct ordinary and necessary expenses paid or incurred during the tax year in carrying on your trade or business. As long as the food and beverage is not considered lavish or extravagant and you have the documentation to back up the necessary expense your meals should be deductible. You will still need to discuss business and document the cost with a receipt. Briefly noting what was discussed will help you back up the cost; verifying it is an ordinary and necessary business expense for you to carry out your trade or business.
HOTEL AND TRAVEL
As of the writing of this document there has not been any change as to the deductibility of hotel and travel expenses for business purposes. You need to note the business purpose and of course who, what, when, where and why for the expense to be deductible to the entity.
If you are giving a client hockey or baseball tickets: This could be classified a gift. The tax laws state you can deduct business gifts given to your clients up to $25.00 per recipient; this is per year per recipient. You cannot give a client 2 deductible gifts in one year. Your business can pay for the expense. If the cost is above $25.00, the difference will be non-deductible. Be sure to note on your receipt the client’s name and business.
RENTAL PROFITS SECTION 199A RENTAL REAL ESTATE TRADE OR BUSINESS ACTIVITY Federal update 01/18/2019
The following is not a summary of the entire law related to rental activities or 199A. The following is related to the revenue procedure for treating a rental activity as a trade or business for purposes of 199A.
Safe Harbor Test
- Separate books and records are maintained which reflects income and expenses for each rental activity
- For taxable years beginning prior to January 1, 2023, taxpayers must perform 250 or more hours of rental services per year for each rental activity. For taxable years beginning after December 31, 2022, taxpayers must perform 250 or more hours of rental services per year for each rental activity in any three of the five consecutive years that end with the taxable year (every year if the activity was held for less than five years).
- The taxpayer must maintain contemporaneous records, including time reports, logs or similar documents:
- Hours of all services performed
- Description of all services performed
- Dates the services were performed
- Who performed the services
May be performed by owners or by employees, agents, and/or independent contractors of the owners. They include:
- Advertising to rent or lease the property
- Negotiating and executing leases
- Verifying information on prospective tenant applications
- Collection of rent
- Daily operation, maintenance and repair of the property
- Management of the real estate
- Purchase of materials
- Supervision of employees and independent contractors
Rental Services DO NOT include financial or investment management activities such as:
- Arranging financing
- Procuring property
- Studying and reviewing financial statements on operations
- Planning, managing or construction long-term capital improvements
- Hours spent traveling to and from the rental property
There are other rules and issues which might have you excluded from using the safe harbor method. Please be sure to review this entire law with your tax professional.
The taxpayer must include a statement attached to the return claiming or passing through the 199A deduction information that the requirements in Section 3.03 of this revenue procedure have been satisfied. The statement must be signed by the taxpayer, or an authorized representative of an eligible taxpayer which states:
“Under penalties of perjury, I (we) declare that I (we) have examined the statement, and, to the best of my (our) knowledge and belief, the statement contains all the relevant facts relating to the revenue procedure, and such facts are true, correct, and complete.”
TAX PLANNING WHY OR WHY NOT?
If you are planning on improving your home how are you going to pay for the cost? Pulling the money from your Retirement Savings might cost you way too much in income tax. Using a home equity loan might be a good idea; the problem might be your home equity loan you had for the past 10 years may not be set-up properly. Here is where tax planning might be helpful. I will give you ideas on how to fund the improvements and at the same time review the tax advantages or disadvantages with each scenario.
Do you want to buy a vacation property or rental property? Again proper planning may just save you income taxes. You have a child or grandchild attending college and you would like to gift them some money towards their college tuition. Call Denise so she can tell you the best way you can assist your child or grandchild.
Remember prior to refinancing, purchasing or taking out a home equity loan please call Denise for proper guidance.
Since the standard deduction is so much higher a lot of our clients will not qualify for itemizing. Those clients who fall under Required Minimum Distribution requirements can make special contributions to their favorite charities, when pulling their required minimum distributions from their IRA accounts. This is part of tax planning and might save you quite a few tax dollars. Let Denise know your plans when donating to your favorite 501C3 organization.
Some of you might be able to just call Denise, ask the question and she will give you a pretty quick answer. Others, additional time might be needed depending on the complexity of the question.
Most important to remember is Denise is here to save you time and tax dollars. Please call her anytime.
BEFORE BAD WEATHER AND DISASTER STRIKES – BE PREPARED!
Being prepared for the worst is always a good idea. Your plan shouldn’t only include bottled water, batteries, candles and an evacuation plan — but also your financial and family documents. While putting together your emergency kit, don’t neglect your financial kit:
- Update emergency plans. Taxpayers should review and update their emergency plans annually because personal and business situations are constantly evolving.
- Create electronic copies of documents. Documents should be kept in a secure place. Secure places include a password-protected WiFi, encryption of the documents and/or perhaps an external drive or flash drive that is disconnected to your computer after loading documents. Documents include, but are not limited to, bank statements, tax returns and insurance policies. Saving electronic copies is much easier right now since most institutions provide you with electronic statements. If you only have access to paper copies, you should scan them to a flash drive or CD or in the cloud.
- Document valuables. Taking pictures or videos of valuables before disaster strikes helps with your insurance claim and tax benefits, if necessary. gov has a disaster loss workbook to help taxpayers document room-to-room items of their belongings.
- Know what tax relief is available in disaster situations. Information on disaster assistance and emergency relief for individuals and businesses is available at IRS.gov. Also review the itemized deduction for casualty and theft losses. Net personal casualty and theft losses are deductible only to the extent they are attributable to a federally declared disaster. Claims must include the FEMA code assigned to the disaster.
- Remember, the IRS is ready to help. In the case of a federally declared disaster, people can visit Around the Nation on IRS.gov and click on their state to review the available disaster tax relief. Taxpayers who live in a county qualifying for tax relief receive automatic filing and payment extensions for many different tax forms do not need to contact the agency to get relief. Any disaster-related questions, call the IRS at 866-562-5227 to speak to an individual trained to answer disaster-related questions.
DISCLAIMER: Any tax advice noted above is based on the facts provided to us and on current tax law interpretation. Tax law is subject to continual change, at times on a retroactive basis and may result in incremental taxes, interest or penalties. Should the information below be incorrect or incomplete or should the law or its interpretation change, our advice may be inappropriate. We are not responsible for updating our advice for changes in law or interpretation after the date noted above. The above information cannot be used as support in any tax audit.