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Archives for March 2022

The Effects of Inflation on Business & Tax Trends

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Tax brackets for 2022 will likely be adjusted for inflation. Inflation Effects & Causes Inflation raises prices across all industries, businesses, and everyday purchases. But not all assets and tax classes are affected by inflation equally. According to Investopedia, inflation: Erodes purchasing power Encourages spending and investing Can cause more inflation Raises borrowing costs in the United States Can reduce unemployment Can also cause other complex effects Much of the current inflation problem has been caused by government regulations as well as spending and borrowing trends within big business and federal channels. Because the COVID-19 mandates were unprecedented, it disrupted global supply chains. These disruptions then caused the cost of living expenses to increase drastically and slowed economic growth. Inflation & Business Taxes What does that mean for businesses? You’re likely experiencing lower profits, higher supply costs, and reduced purchasing power. Each dollar you spent on your business has less impact overall when inflation is this high. And that puts a huge strain on operations, especially for smaller businesses. The increase in supply cost and decrease in business revenue will likely mean that your 2021 and 2022 business taxes look a little different than in past years. While your revenue and expenses fluctuate every year, inflation makes those fluctuations more drastic. Not having enough supplies to complete your products or services may mean adjusting business or shop hours, changing your inventory and supply buying processes, and more. If you are a business that regularly uses freelancers or independent contractors, these supply shortages may mean restructuring who you work with and how often. That affects your 1099 form filing, among other things. Inflation is addressed in certain parts of the tax code but ignored in others. For example, tax brackets only increase based on the change …

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IRS Warns about 2022 Tax Scams

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Since the beginning of the pandemic, scammers have only gotten more creative. Let’s discuss some of the tax scams the IRS has recently warned taxpayers about. 2022 Tax Scams At the beginning of February 2022, the IRS published a news release urging taxpayers to stay vigilant and to watch out for these recent tax scams. Some of the big areas of interest this year include text message, email, and phone scams. There’s also been increasing unemployment fraud attempts. Here are some of the tax scams to look out for, and some tips and tricks for determining if a message is legitimate or fraudulent. Phone and Text Tax Scams If you receive a call from the IRS, you probably didn’t receive a call from the real IRS. The IRS doesn’t ever leave intimidating, urgent, or aggressive voicemails for taxpayers. One of the most common tax scams includes a phone call in which the recipient is told that if they don’t act immediately, they will be arrested. Many times, these calls are looking to instill fear and coerce individuals into giving them a credit card number or other information to settle debt quickly so they can avoid court or jail time. Many of the text message scams stemmed from phony requests for the sake of helping the recipient gain access to or confirm a stimulus payment. COVID pushed a lot of normally “unplugged” products, services, and processes into the online sector. That created more opportunities for fraudsters to take advantage of people who are unfamiliar with the latest technology-based updates that have been put in place for tax filing, direct deposits, and so much more. Unemployment Fraud The IRS also warned of unemployment fraud schemes that stemmed from organized crime circles. The victims of this tax scam would receive unemployment or other benefit payment notices sent from the IRS. These forms are filled out on the taxpayer’s behalf by a criminal looking to collect on benefits you never applied for or reported. If you receive …

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Business IRS Payment Plans: What Are They?

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Here’s what you need to know about the Business IRS Payment Plans. Notice of Deficiency Before you start down the path to choosing and applying for a business IRS payment plan, the agency will send you a notice of deficiency. If you don’t think the IRS has determined your tax responsibility correctly, you can petition the US Tax Court within 9- days of the notice’s original date to dispute the charges. There are several different types of notices of deficiency, all of which denote a discrepancy in what you think your business owes in taxes (reported on your tax returns) versus what the IRS has calculated as your tax responsibility. Once you’ve determined the notice of deficiency is legitimate and accurate, it might be time to set up a payment plan in order to divvy out what you owe without having to pay it all in one lump sum. What is an IRS Payment Plan? The Business IRS Payment Plans are tax payment plans that help businesses pay their back taxes. It doesn’t stop penalties and interest charges, but you can qualify to apply online if you are looking for a long-term payment plan. You just need to have filed all your required returns and owe $25,000 or less in combined taxes, penalties, and interest, according to the IRS. The only difference would be if your business is a sole proprietorship or you are an independent contractor, in which case you will need to apply for the tax payment plan as an individual. What Does It Cost? If you choose the long-term payment plan, most often called an “installment agreement,” there is a $31 online setup fee (set up via phone or other methods may have higher associated fees and then you will pay monthly via DDIA (Direct Debit Installment Agreement) automatic withdrawals from the business checking account that you provide. You can also go the non-direct debit route. It costs $130 to set up and then you can pay your monthly bill through a variety of means, including paying electronically (online), by phone, …

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How to Handle Remote Work & Taxes

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Have you hired or transitioned employees to a remote or hybrid work model recently? Here’s how that could affect your business taxes. State Laws and Taxes More than ever before, people are working from home offices. And that means you and your payroll department must be on top of the laws and taxes that not only govern the state your business is based in, but also the states where your employees live and work. If your remote employees are based in the same state as your business, you can use your state’s employment and tax laws for everything. But if you have remote workers who live in other states – or even countries – it is still your responsibility to withhold and file the necessary paycheck percentages and tax files that apply to their state of origin as well. This remote employee and their work may also mean that you have to pay different amounts in income tax and even possibly minimum wage if each state involved has differing policies. For example, if your business is located in Michigan – where the minimum wage is $9.87 an hour – but your employee is working from Illinois, you’ll have to make sure your payroll employees or third-party service accounts for the $12.00 minimum wage in place there. These differences also often exist at the local level as well, and can also affect Social Security and Medicare withholding, too. When it comes to remote employees, the more variables you contend with, the more difficult it will be to accurately calculate and file the applicable taxes per each employee, state, and situation. Remote Work & Taxes: Credits, Incentives According to the Tax Adviser, there are tons of tax incentives and credits that are specifically tied to geographic areas. And when your employees reside outside those areas, you potentially lose out on some of those perks. The evolving remote work environment is creating a lot of buzz around the effectiveness and application of these location-based incentives. It also calls into …

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