What Is Cryptocurrency?

what is crypto

WHAT IS CRYPTOCURRENCY?

By now you’ve probably heard of Bitcoin or Ethereum. Either from a friend or an acquaintance. They’ve also probably urged you to get as much cryptocurrency as you can because they say that cryptocurrency is the money of the future.

But what exactly is a crypto and is it really the money of the future? A digital currency or virtual currency that is secured by cryptography is called a cryptocurrency. Cryptography is what makes cryptocurrency unique from other traditional forms of currency. Cryptography is used to ensure that the cryptocurrency is nearly impossible to counterfeit or double-spend. The majority of cryptocurrencies are networks that are decentralized by nature and are native to a new technology called blockchain – a distributed ledger managed by a dissimilar network of computers. The major feature of cryptocurrencies is that they are not issued by any central authority, making them theoretically immune to government interference or manipulation.

 

Origin of Cryptocurrency

The very first blockchain-based cryptocurrency that was developed was Bitcoin. Following the 2008 recession brought by the hyperinflated housing market in the US, an individual or group known by the pseudonym “Satoshi Nakamoto” conceptualized a form of currency that is out of the reach of governments on a global level. The key feature of Bitcoin is its scarcity, by only having a predetermined number of Bitcoins to ever exist – 21 billion to be exact – ensure that the currency is immune from inflation and manipulation.

 

Form of money?

Cryptocurrency has dubbed itself as the money of the future by being native to tech. However, the Internal Revenue Service considers cryptocurrency, not as a form of money but rather as a financial asset or property. This treatment is derived from how people use crypto. Currently, the use of cryptocurrency as a medium of exchange is not yet prevalent. Most crypto holders keep their cryptocurrency locked in a digital wallet for a long period of time and only selling when the prices are favorable. Since the IRS treats cryptocurrency as a financial asset or property, it means that whenever you’re selling or trading it, you are subject to the policies and guidelines surrounding capital gains tax.

 

Advantages and Disadvantages

 

Advantage

Since crypto is not directly regulated by any central form of government, fund transfers between two parties are made easier regardless of their geographical differences. Lower fees and near-second transaction finality are one of the advantages of cryptocurrency, as compared to wire transfers that would take days before completion due to the fact that fund has to go through third parties e.g., Banks and other financial institutions.

Disadvantage

The greatest disadvantage of having no central form of government regulating cryptocurrency is that there is a large chance of losing your cryptocurrency if you happen to use the wrong wallet address when transferring from one wallet to another. Unlike bank-regulated transactions, if you happen to make a mistake while transferring your money e.g., wrong account number, wrong swift code, wrong bank code, there is always a chance for you to get your money back when you contact the bank.

As for cryptocurrency, no one can help you recover the lost cryptocurrency, not even the developers of the cryptocurrency. The funds will be completely under the control of the receiving end. The cryptocurrency can only be returned to you if the receiving end decides to return it.  There is also the hurdle of identifying who is at the receiving end since there are no personal data tied to any digital wallet unless the wallet is custodial in nature. The risk of completely and irreversibly burning your cryptocurrency when you send it to an inactive address is huge.

How do you get Cryptocurrency?

Back then, buying crypto would require a lot of research and tech know-how. Nowadays, buying crypto is as easy as buying a cup of coffee. You also have a lot of choices when it comes to choosing where you buy your crypto.

If you’re a bit conservative when it comes to exposing your portfolio to cryptocurrency, you can acquire fractional shares of cryptocurrencies at custodial exchanges. These exchanges do not directly put cryptocurrency under your account, but it attributes fractional shares of crypto under your account. On paper, you own a certain amount of crypto, but the crypto you own is held by the custodial exchange for safekeeping. That way, you don’t have to worry about any security risk of someone getting into your digital wallet. Some custodial exchanges offer loss insurance in case something bad was to happen with the crypto that they are holding on to.

Other ways to buy?

You can also buy crypto from reputable centralized exchanges like Coinbase, Binance, and cash app. This type of exchange requires KYC processes and will technically hold your cryptocurrency under sub-addresses until you transfer your crypto out to your personal digital wallet.

This is where it gets a bit tricky, decentralized exchanges are completely autonomous. In order to purchase cryptocurrency, you must first have the crypto equivalent of the US-Dollar or other fiat currency. The most used fiat equivalent crypto is the US Dollar Tether (USDT). Once you have USDT you can choose from any of the cryptos that they offer and set up your digital wallet to receive the purchased crypto. Using decentralized exchanges requires a little bit of know-how so make sure you do your research before making a purchase.

Now that you know where to buy your cryptocurrency the next hurdle you need to go through is including it in your income tax report! Knowing how convoluted taxes are, imagine the complex maze you have to solve just to declare your crypto gains. But you don’t have to go through all those troubles just to simply have an accurate income tax report. Here at FAS, we’ll do the heavy lifting for you!

 

Get in touch with us today and we’ll help you with your cryptocurrency gains reporting!

 

Operation Hidden Treasure: The IRS is out for your gains!

Cryptocurrency tax

The Crypto Rally

A few years back, cryptocurrencies and crypto trading was uncharted territory in the eyes of regulators. As people flock to cryptocurrency trading in hopes of quick and large gains; the IRS has set its eyes to lay down the law.

Early this year, Damon Rowe, director for the IRS’ Fraud Enforcement Office made an announcement at a Federal Bar Association presentation.  The announcement was about the addition of key operational functions in its fraud enforcement priorities. This announcement hinted at the addition of a dedicated team of Criminal Investigation professionals who are working on what was dubbed as “Operation Hidden Treasure”. The task force in charge of the operation is comprised of agents who are trained in cryptocurrency and virtual currency tracking. According to Damon Rowe, the team will focus on taxpayers who omit cryptocurrency income from their tax reports. Operation Hidden Treasure is a joint effort between the civil office of fraud enforcement and the criminal investigation unit, they aim to root out tax evasion from cryptocurrency owners and traders.

 

Operation Hidden Treasure

“WE SEE YOU”

That is the message that the National Fraud Counsel & Assistance Division Counsel for the Office of Chief Counsel; Carolyn Schenck, has to say for crypto traders who are would-be tax evaders. According to Schenck, the IRS is working on “how to get ahead of the game,” by looking for various “tax evasion signatures.” The signature that Schenck mentioned manifests itself in the form of transactions structured in a way that it flies under the radar of the IRS e.g., transactions in increments of $10,000 to avoid certain reporting requirements. This also includes the use of nominees, shell corporations, or getting on and off the chain, says Schenck.

 

Crypto trading gains reporting – What makes it criminal?

What makes the failure to report your cryptocurrency holding or trading gains on your tax reports a criminal act?

Criminal Tax Evasion is defined by I.R.C. section 7201 as:

“Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law.”

What does that mean? It means that tax evasion must be willful, and willfulness is defined as an intentional violation of a known legal duty. Even though the IRS decides not to pursue criminal charges, the civil consequences for fraud are not exactly a walk in the part. A penalty of 75% of the understatement of the tax is applied.

 

Coming Clean?

The tax defense bar asked the IRS to announce some type of voluntary disclosure program, similar to that of the foreign bank disclosure program that could let virtual currency holders to “come clean” for years, to no avail. However, the IRS is yet to show some inkling if they will or will not roll out such a program.

Including your crypto trading gains in your next tax report can be quite confusing. But it doesn’t have to be! Lucky for you we can help you out!

Get in touch with us today and we’ll sort things out!

 

Top 3 Bookkeeping Applications for Small Businesses

Top 3 Bookkeeping Aps

The Top 3 Bookkeeping Applications for Small Businesses

 

The benefit of on-the-shelf accounting and bookkeeping software is undeniable for small business owners. It gives them the benefit of tracking accounts receivables, accounts payables, cash flow overview, and so much more. Understanding the profitability of your small business is vital for its growth and on-the-shelf accounting software helps you with that since your small business accounting and bookkeeping needs won’t require extensive customization right off the bat. However, as your business grows, its bookkeeping and accounting needs will become more complex, and a custom Enterprise Resource Planning (ERP) system will be needed.

 

There is a plethora of different accounting and bookkeeping software out there that cater to the needs of small business owners, each has its own unique capabilities and pricing plans. Typically, the type of industry and number of employees your business has are the main two factors that can help you choose the appropriate software for your need. To visualize, a freelance photographer won’t need the same features that a hardware store owner would usually need.

 

We’ve scoured the market and identified five of the best bang for your buck accounting and bookkeeping software.

 

At Numberwe have the ubiquitous

QuickBooks Online

 

QuickBooks Online has positioned itself as the best accounting software for small businesses across the globe. This is widely used by accounting and bookkeeping professionals due to its scalability, integration, with third-party applications, and user interface friendliness. Since it is widely used, there is an endless amount of online training resources and support forums to be found all over the internet when you need it most. All relevant accounting and bookkeeping features can be conveniently accessed on its main dashboard, making your bookkeeping easy and efficient.

The great thing about this software is that it offers a free 30-day trial so that you can test if the shoe fits. Once the trial ends and you find that its features fit your needs, it offers various subscription plans that would vary depending on the main needs of your business. Each plan offers advanced features like inventory management, time tracking, additional users, and budgeting.

All of their plans allow the integration with third-party applications such as Stripe, Paypal, and others. If your business is looking for payroll service software, QuickBooks Payroll also fully integrates with QuickBooks Online.

 

Number 2:

Xero

 

Xero is the new kid on the block that aims to dethrone the ubiquitous QuickBooks Online. The company was founded in New Zealand and is quite popular in its home turf, Australia, and the United Kingdom.

This is the best for micro-businesses that are eyeing a very simple accounting software. The Xero software has a minimalist clean interface and Xero also integrates with a third-party payroll service, mainly Gusto. It also features integration with payment service providers like Stripe and GoCardless.

Xero has three levels for its pricing plan and a full-service payroll addon; Early at $11 per month, Growing at $32 per month, and Established at $62 per month. The full-service payroll option is offered through Gusto and it would cost you an additional $39per month, plus $6 per employee.

So, if you’re business sees high-ticket transactions, but only a few per month. In the likes of a consulting or small service provider, then Xero would be the best fit for you.

 

Last but not the Least:

FreshBooks

 

Yes, it sounds a lot like QuickBooks, but trust me they are completely different. FreshBooks was founded in 2003 in Toronto, Canada. It first started simply as an invoicing software. Over time, more and more features were added to the version of the FreshBooks we know now.

FreshBooks is perfect for most service-based businesses since it specializes in invoicing. The software’s forte is to send, receive, print, and pay invoices. But that’s not all, it’s robust enough to handle your business’ basic bookkeeping needs.

 

FreshBooks offers four pricing plans namely; Lite at $6 per month, Plus at $10 per month, Premium at $20 per month, and Select, which is a custom service with custom pricing. The primary difference between the plans is the number of different clients that can be billed per month.

  • Lite Plan – 5 Clients can be billed per month
  • Plus Plan – 50 Clients can be billed per month
  • Premium Plan – Unlimited clients can be billed per month.

It also features a lot of third-party application integrations, such as Shopify, Gusto, Stripe, G Suite, and more. What makes FreshBooks unique is that it gives you the ability to stylize and customize invoices to your liking.

Before you go down the road looking for an accounting and bookkeeping application; ask yourself first if you have the time and energy after a long day of work if you can still spare an hour or two doing your books and taxes daily. If not, then don’t worry! We are here to help you.

 

Get in touch with us today and we’ll do the after-hours heavy lifting while you relax with your family and loved ones!

FBAR Explained for Canadians working in the US

FBAR Explained

FBAR stands for “Report of Foreign Bank and Financial Accounts.”

The US gave its Department of Treasury the authority to establish record-keeping and financial reporting policies for Citizens and Residents situated in the US for a certain amount of time. The purpose of the FBAR is to provide investigators with a crumb trail to make it easier to track down and prosecute criminal activity relating to finances. The FBAR has been proven valuable in providing intelligence and counterintelligence information to protect the US against economic sabotage and international terrorism.

Record Keeping

FBAR records must be kept for five years from the due date of the report (June 30 of the following year). Failure to keep the following records can result in the application of penalties by the IRS.

  • Name maintained on each account.
  • Number or other designation of the account.
  • Name and address of the foreign bank or another person with whom the account is maintained.
  • Type of account.
  • The maximum value of each account during the reporting period.

 

Who must file the FBAR?

FBAR Explained

If you are a Canadian citizen residing in the US for work then you are obligated to file an FBAR.

The list of Foreign financial accounts that must be reported are the following:

  • Bank accounts such as savings accounts, checking accounts, and time deposits.
  • Securities accounts such as mutual funds, brokerage accounts, and securities derivatives, or other financial instruments accounts.
  • Accounts where the assets are held in a commingled fund that is a mutual fund.
  • Any other account/s maintained in a foreign financial institution or with a person doing business as a financial institution.

If you are not quite sure if you need to file an FBAR, contact us today!

What is the US-Canada Tax Treaty?

What is the US Canada Tax Treaty

What is the US-CANADA Tax Treaty?

The current Canada-United States Income Tax Agreement was first established in 1980 and had five major amendments or “agreements” that have been passed on different occasions. The latest one being the Fifth Protocol contains important changes that may change the way Canada & the United States interpret tax laws.

In summary, the US Canada Tax Treaty was established to prevent tax issues from springing up for American Citizens and Residents living in Canada and vice versa. Since the US is one of the very few countries in the world that imposes taxes based on citizenship, double taxation is seen as a problem that happens a lot.

US-Canada Tax Treaty

The US already has certain policies set in place to prevent double taxation from happening to its citizens living abroad like the Foreign Earned Income Exclusion & the Foreign Tax Credit. However, the policies set in place are not enough to cover specific problems that arise for Americans living and working in Canada hence the birth of the US – Canada Tax Treaty.

 

Since its inception in 1980, plenty of protocol changes were made to keep it updated with the changing times.

 

Here are some of the latest notable changes that were made in the Treaty:

 

  • Withholding tax on interest payments removed. – The 10% withholding tax rate that previously applied to interest payments between unrelated parties has been removed.

 

  • “Mandatory” arbitration. – Currently, countries are not obligated to participate in an arbitration in instances where there is a possibility of double taxation. Under the new rules, if an agreement can’t be reached, concerned countries must conduct an arbitration.

 

  • Departure Tax” – The departure tax eliminates the possibility of capital gains double taxation. Based on the current rules, persons leaving Canada must report capital gains and losses arising from their “deemed disposition” when leaving the country. Based on the new regulations, taxpayers can choose to realize their gains before becoming a US resident so the US will only tax the change in value from the date of entry.

 

  • RRSP & IRA – In this change, cross-border workers can deduct contributions to pension plans conducted abroad in their country of residence. This means that if you’re a Canadian working in the US that contributes to the US retirement plan, then the RRSP contribution can be deducted within the space limit when you return to Canada.

 

The field of taxes has a steep learning curve, doing it across the border is a whole other level of difficulty! But you don’t need to worry, our team of expert and experienced Cross Border Tax Specialists can help you!

 

Send us a message today and we’ll help you find a tax solution that works for you.

Hurricane Season tips for Tax Records Safekeeping

Hurricane season document sakekeeping

With hurricane season in full swing, now is a good time to create or review emergency preparedness plans for surviving natural disasters, which include more than just hurricanes. For example, in the last year, the Federal Emergency Management Agency (FEMA) declared major disasters following hurricanes, tropical storms, tornadoes, severe storms, flooding, wildfires, and an earthquake. Individuals, organizations, and businesses should take time now to make or update their emergency plans.

Here are five steps taxpayers can take to safeguard their tax records before disaster strikes:

1. Secure key documents and make copies. Taxpayers should place original documents such as tax returns, birth certificates, deeds, titles, and insurance policies inside waterproof containers in a secure space. Duplicates of these documents should be kept with a trusted person outside the area of the taxpayer. Scanning them for backup storage on electronic media such as a flash drive is another option that provides security and portability.

2. Document valuables and equipment. Current photos or videos of a home or business’s contents can help support claims for insurance or tax benefits after a disaster. All property, especially expensive and high-value items, should be recorded. The IRS disaster-loss workbooks in Publication 584-B, Business Casualty, Disaster, and Theft Loss Workbook, can help individuals and businesses compile lists of belongings or business equipment.

3. Employers should check fiduciary bonds. Employers who use payroll service providers should ask the provider if it has a fiduciary bond in place. The bond could protect the employer in the event of default by the payroll service provider. As such, employers should carefully choose a payroll service provider.

4. Rebuilding documents. Reconstructing records after a disaster may be required for tax purposes, getting federal assistance, or insurance reimbursement.

After FEMA issues a disaster declaration, the IRS may postpone certain tax filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. The IRS automatically identifies taxpayers located in the covered disaster area and applies for filing and payment relief.

5. Get assistance from a tax professional. Taxpayers who do not live in a covered disaster area but suffered impact from a disaster may qualify for disaster tax relief and other available options.

 

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10 Tips to Help You Start Saving for Retirement

Avoiding Tax Surprises When Retiring Overseas

It’s never too late to start, but the sooner you begin saving, the more time your money has to grow. Gains each year build on the prior year’s gains – that’s the power of compounding – and the best way to accumulate wealth. These ten tips will help you get started:

  1. Set Realistic Goals. Project your retirement expenses based on your needs, not rules of thumb. Be honest about how you want to live in retirement and how much it will cost. Then calculate how much you must save to supplement Social Security and other sources of retirement income.
  2. A 401(k) Is One Of The Easiest And Best Ways To Save For Retirement. Contributing money to a 401(k) gives you an immediate tax deduction, tax-deferred growth on your savings, and – usually – a matching contribution from your company.
  3. An IRA Can Also Give Your Savings A Tax-Advantaged Boost. Like a 401(k), IRAs offer huge tax breaks. There are two types of IRAs. The first is a traditional IRA offers tax-deferred growth, meaning you pay taxes on your investment gains only when you make withdrawals. If you qualify, your contributions may be deductible. The second is a Roth IRA. By contrast, it doesn’t allow for deductible contributions but offers tax-free growth, meaning you owe no tax when you make withdrawals, but contributions are not deductible.
  4. Focus On Your Asset Allocation More Than On Individual Picks. How you divide your portfolio between stocks and bonds will have a big impact on your long-term returns.
  5. Stocks Are Best For Long-Term Growth. Stocks have the best chance of achieving high returns over long periods. A healthy dose will help ensure that your savings grow faster than inflation, increasing the purchasing power of your nest egg.
  6. Don’t Move Too Heavily Into Bonds, Even In Retirement. Many retirees stash most of their portfolios in bonds for income. Unfortunately, over 10 to 15 years, inflation can easily erode the purchasing power of bonds’ interest payments.
  7. Making Tax-Efficient Withdrawals Can Stretch The Life Of Your Nest Egg. Once you’re retired, your assets can last several more years if you draw on money from taxable accounts first and let tax-advantaged accounts compound for as long as possible.
  8. Working Part-Time In Retirement Can Help In More Ways Than One. Working keeps you socially engaged and reduces the amount of your nest egg you must withdraw on an annual basis once you retire.
  9. Other Creative Ways To Get More Mileage Out Of Retirement Assets.
    You might consider relocating to an area with lower living expenses or transforming the equity in your home into income by taking out a reverse mortgage.
  10. Consult a Tax Professional. A tax and accounting professional will evaluate your financial situation (i.e., income and expenses), evaluate your tax situation, and help you figure out how much you can put towards your retirement savings.

 

Understanding Payroll Expenses for Small Businesses

Federal law requires most employers to withhold federal taxes from their employees’ wages. Whether you’re a small business owner who is just starting or one who has been in business for a while – ready to hire an employee or two – here is what you should know about withholding, reporting, and paying employment taxes.

Federal Income Tax

Small businesses first need to figure out how much tax to withhold. Small business employers can better understand the process by starting with an employee’s Form W-4 and the withholding tables described in Publication 15, Employer’s Tax Guide. Please call if you need additional help understanding withholding tables.

Social Security and Medicare Taxes

Most employers also withhold social security and Medicare taxes from employees’ wages and deposit them along with the employers’ matching share. In 2013, employers became responsible for withholding the Additional Medicare Tax on wages that exceed a threshold amount. There is no employer match for the Additional Medicare Tax, and certain types of wages and compensation are not subject to withholding.

Federal Unemployment (FUTA) Tax

Employers report and pay FUTA tax separately from other taxes. Employees do not pay this tax or have it withheld from their pay. Businesses pay FUTA taxes from their own funds.

Depositing Employment Taxes.

Generally, employers pay employment taxes by making federal tax deposits through the Electronic Federal Tax Payment System (EFTPS). The amount of taxes withheld during a prior one-year period determines when to make the deposits. Publication 3151-A, The ABCs of FTDs: Resource Guide for Understanding Federal Tax Deposits, and the IRS Tax Calendar for Businesses and Self-Employed are helpful tools.

Failure to make a timely deposit can mean being subject to a failure-to-deposit penalty of up to 15 percent. But the penalty can be waived if an employer has a history of filing required returns and making tax payments on time. Penalty relief is available, however. For more information, please call the office.

Reporting Employment Taxes

Generally, employers report wages and compensation paid to an employee by filing the required forms with the IRS. E-filing Forms 940, 941, 943, 944, and 945 is an easy, secure, and accurate way to file employment tax forms. Employers filing quarterly tax returns with an estimated total of $1,000 or less for the calendar year may now request to file Form 944, Employer’s ANNUAL Federal Tax Return once a year instead. At the end of the year, the employer must provide employees with Form W-2, Wage and Tax Statement, to report wages, tips, and other compensation. Small businesses file Forms W-2 and Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration and, if required, state or local tax departments.

Save Time – File Payroll Taxes Electronically

Running a business with employees can be hard work. Business owners can make things a little easier on themselves by filing payroll and employment taxes electronically. Not only does it save time, but it is also secure and accurate, and the filer receives an email to confirm the IRS received the form within 24 hours.

While the easiest way to file payroll and employment taxes is to have your tax professional file the forms for you, some employers prefer to do it themselves. Employers submitting the forms themselves will need to purchase IRS-approved software. There may be a fee to file electronically. The software will require a signature in one of two ways. The first way is by scanning and attaching Form 8453-EMP, Employment Tax Declaration for an IRS e-file Return. The second is to apply for an online signature PIN. Taxpayers should allow at least 45 days to receive their PIN. The software will prompt the user on the steps needed to request the PIN.

Some of the forms employers can e-file include:

  • Form 940, Employer’s Annual Federal Unemployment Tax Return – Employers use this form to report the annual Federal Unemployment Tax Act tax.
  • Form 941, Employer’s Quarterly Federal Tax Return – Employers use this form to report income taxes, social security tax, or Medicare tax withheld from employees’ paychecks. They also use it to pay their portion of Social Security or Medicare tax.
  • Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees – Employers file this form if they paid wages to one or more farmworkers and the wages were subject to social security and Medicare taxes or federal income tax withholding.
  • Form 944, Employer’s Annual Federal Tax Return – Small employers use this form. These are employers whose annual liability for social security, Medicare, and withheld federal income taxes is $1,000 or less. These employers use this form to file and pay these taxes only once a year instead of every quarter.
  • Form 945, Annual Return of Withheld Federal Income Tax – Employers use this form to report federal income tax withheld from nonpayroll payments.

Questions about payroll taxes?

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Last-Minute Filers Tax Return Tips

Last-Minute Filers Tax Return Tips

When it comes to working on your taxes, earlier is better, but many people find preparing their tax return to be stressful and frustrating and wait until the last minute. Complicating matters this year is tax reform and the newly redesigned Form 1040. If you’ve been procrastinating on filing your tax return this year, here are eight tips that might help.

Don’t Delay

Resist the temptation to put off your taxes until the very last minute. Your haste to meet the filing deadline may cause you to overlook potential sources of tax savings and will likely increase your risk of making an error. Getting a head start – even if it is a week or two) will not only keep the process calm but also mean you get your return faster by avoiding the last-minute rush.

Gather Tax Documents in Advance

Make sure you have all the records you need, including W-2s and 1099s. Don’t forget to save a copy for your files.

Double-check Math and Verify Social Security Numbers

These are among the most common errors found on tax returns. Taking care will reduce your chance of hearing from the IRS. Submitting an error-free return will also speed up your tax refund.

E-file for a Faster Tax Refund

Taxpayers who e-file and choose direct deposit for their refunds, for example, will get their refunds in as few as ten days. That compares to approximately six weeks for people who file a paper return and get a traditional paper check.

Don’t Panic if You Can’t Pay

If you can’t immediately pay the taxes you owe, consider some stress-reducing alternatives. You can apply for an IRS installment agreement, suggesting your monthly payment amount and due date and getting a reduced late payment penalty rate. You also have various options for charging your balance on a credit card. There is no IRS fee for credit card payments, but the processing companies charge a convenience fee. Electronic filers with a balance due can file early and authorize the government’s financial agent to take the money directly from their checking or savings account on the April due date, with no fee.

Request an Extension of Time to File

If the clock runs out, you can get an automatic six-month extension bringing the filing date to October 15, 2021 – but make sure you pay by the May 17 due date. However, the extension itself does not give you more time to pay any taxes due. You will owe interest on any amount not paid by the April deadline, plus a late payment penalty if you have not paid at least 90 percent of your total tax by that date.

Taxpayers Outside the United States File June 15

U.S. citizens and resident aliens who live and work outside the U.S. and Puerto Rico have until June 15, 2021, to file their 2020 tax returns and pay any tax due. The special June 15 deadline also applies to military members on duty outside the U.S. and Puerto Rico who do not qualify for the longer combat zone extension. Affected taxpayers should attach a statement to their return explaining which of these situations apply. Although taxpayers abroad get more time to pay, interest – currently at the rate of 3% per year, compounded daily – applies to any payment received after this year’s May 17 deadline.

Military Service Members Serving in a Combat Zone

Combat zone taxpayers (including eligible support personnel) have at least 180 days after they leave the combat zone to file their tax returns and pay any tax due – including those serving in Iraq, Afghanistan, and other combat zones. A complete list of designated combat zone localities is available on the IRS website. Combat zone extensions also give affected taxpayers more time for a variety of other tax-related actions, including contributing to an IRA. Various circumstances affect the exact length of the extension available to taxpayers.

Help is Just a Phone Call Away

If you run into any problems, have any questions, or need to file an extension, contact us today!

Last-Minute Filers Tax Return Tips

PPP Loan Deadline Extended Through May 31 2021

PPP Loan Deadline Extended Through May 31 2021

The Paycheck Protection Program Extension Act of 2021 was signed into law on March 31, 2021, extending the deadline to apply for a loan by an extra 60 days, from March 31 to May 31, 2021. The law also gives the Small Business Administration (SBA) an additional 30 days after the May 31 deadline to review and process loan applications.

The passage of the PPP Extension Act does not provide additional funding; however, as part of the American Rescue Plan Act, an additional $7.25 billion was earmarked for the Paycheck Protection Program to expand eligibility to additional nonprofits and digital news services.

In February 2021, SBA also made four additional changes to open the PPP to more underserved small businesses, generally small and low- and moderate-income (LMI) businesses who have not received the needed relief a forgivable PPP loan provides. Congress set a $15 billion set-aside for small and LMI First Draw borrowers. To advance these goals, SBA has:

  • Allowed sole proprietors, independent contractors, and self-employed individuals to receive more financial support by revising the PPP’s funding formula for these categories of applicants
  • Eliminated an exclusionary restriction on PPP access for small business owners with prior non-fraud felony convictions, consistent with a bipartisan congressional proposal
  • Eliminated PPP access restrictions on small business owners who have struggled to make student loan payments by eliminating student loan debt delinquency as a disqualifier to participating in the PPP
  • Ensured access for non-citizen small business owners who are lawful U.S. residents by clarifying that they may use Individual Taxpayer Identification Number (ITIN) to apply for the PPP

Prior to addressing these inequities, the current 2021 round of PPP loans had only deployed $2.4 billion to small LMI borrowers, in part because a disproportionate amount of funding in both wealthy and LMI areas is going to firms with more than 20 employees. As a result, in February 2021, SBA established a 14-day, exclusive PPP loan application period for businesses and nonprofits with fewer than 20 employees. The program opened to all borrowers on March 10, 2021, and, as mentioned, has been extended through May 31, 2021.

Business owners who have not received a PPP loan previously can apply for a First Draw Loan. Certain businesses that have already received a PPP loan are eligible for a Second Draw PPP loan.

Finally, borrowers may be eligible for PPP loan forgiveness. First Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if during the 8 to 24-week covered period following loan disbursement:

  • Employee and compensation levels are maintained
  • The loan proceeds are spent on payroll costs and other eligible expenses; and
  • At least 60 percent of the proceeds are spent on payroll costs

Second Draw PPP loans made to eligible borrowers qualify for full loan forgiveness under the same requirements as First Draw PPP loans provided employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan.

Need help with bookkeeping, individual and/or cross-border tax preparation, contact us today!