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Happy New Year everyone!

This is a message to business owners who plan to hire subcontractors for the new 2020 tax year. You as a business owner need to make sure that your subcontractors fill out a W9 form before having them complete any work in the 2020 year. A new W9 form should be filled out every year their is an information change for the subcontractor. Keeping a new W9 on file every year is important so you have up to date information on the subcontractor, such as their address. This information helps to file the required 1099 forms at the end of the tax year. In order to download or print out a W9 form please visit the IRS Website.

One of the topics that will need to be discussed when a person files a claim to begin collecting Social Security benefits is whether to have any federal income tax withheld. Depending on a person’s tax situation, they may need to have federal income tax withheld from their Social Security benefits in order to cover the amount of taxes they will owe in to the IRS at the end of the tax year.

Federal income tax withholding can be elected on the original claim form for Social Security benefits. The options on this form are percentages of 7%, 10%, 12%, or 22%, they do not accept flat dollar amounts for withholding on Social Security benefits. In order to change the amount of federal income tax withheld a form W-4V needs to be completed. Once the form is completed, it should be signed and returned to the local Social Security office by mail or in person. In order to decide the best withholding percentage for your personal tax situation, it is best to contact your accountant to assist you.

The Department of Labor has released its update to the federal overtime regulations that they are calling The Final Overtime Rule. These regulations govern which employees receive the minimum wage, and also which employees are able to receive overtime pay under federal wage law. This new set of regulations will be in effective as of January 1^st, 2020, and are making some changes that may affect small business owners.

One of the biggest updates of this regulation is the increase of the standard salary level from $455 a week to $684 a week. This level is the minimum amount that must be paid to salaried employees annually in order for an exemption from overtime pay, as long as the employees fall under the executive, administrative, professional, or outside sales category.

In order to meet the standard salary level 90% of the income needs to be paid out on a regular salary basis. While the additional 10% can be paid out by bonus, commission, or incentive payment. For further details on this change in regulation, and to make sure you are compliant for the January start date, please visit the Department of Labor Website or speak with your accountant.

Recently, there have been some clarifications made by the IRS and court systems concerning tax law, a portion of these rulings deal with individual tax returns. A few examples of these rulings include:
– Taxation of “emotional distress” settlement payments, as they are not a physical injury or sickness
– Clarification on when Self Employed Health Insurance Premiums may be deducted
– Specification on the rules used to determine if an activity is not engaged in for profit (hobby) or is a for profit business
– Determination that medical marijuana dispensaries still may not deduct any of their expenses as they are engaging in the sale of illegal drugs under federal law, expenses also cannot be deducted by additional companies selling medical marijuana on the producers behalf

For more information on these developments please visit: The Tax Adviser.

Recently there has been an increase in scams targeting those who receive Social Security benefits. These scams come in the form of an email or telephone call stating that your Social Security information needs to be updated in order to receive the most benefits possible. The caller or email message will then ask you to respond with all of your personal information. If you receive one of these calls or emails that looks like it is from the Social Security Administration DO NOT RESPOND. Instead, you can call the SSA at 1-800-772-1213 to confirm the identity of the Social Security employee who reached out to you.

The image below is a scam email that was received by one of our employees here at Parks & Company. When you click the hyperlink in the email it takes you to a fake Social Security website and asks you to enter all of your personal information in order to update your account.

 

For more information about the Social Security scams that have been occurring, or contact information for the SSA to report a scam, please use this link: Social Security Administration Scams.

The new standard mileage rate for 2019 have just been announced as 58 cents per mile. This is an increase from the 2018 rate of 54.5 cents per mile. The standard mileage rate is used to calculate the amount of deductible costs for business use of an automobile including a car, van, pickup truck, or panel truck. This deduction is typically taken on a Schedule C for business owners, Schedule F for farmers, or Schedule A as miscellaneous itemized deductions, for employees.

Due to the changes implemented for the years 2018-2025 by the Tax Cuts and Jobs Act this rate can no longer be used to calculate business automobile expenses that are considered miscellaneous itemized deductions on a Schedule A.

There is a set rate of 14 cents per mile for use of an automobile in performing a service to charity. This deduction, if taken, should be included in the charitable deductions total on Schedule A.

Another change implemented by the Tax Cuts & Jobs Act that affects automobile deductions is the termination of moving expense deductions for individuals. For the years 2018-2025 this deduction is only applicable to active duty members of the armed forces that meet specified requirements, the rate for these expenses being 20 cents per mile.

For more information on the new standard mileage rates for 2019 please visit the IRS website.

The first day to file tax returns with IRS is January 29th, 2018. This is a week later than the prior filing season.

With the passing of the new tax reform act, it makes sense to prepay 2018 property taxes as well as state and local income taxes by 12/31/17. This would allow the tax deduction to be taken on the 2017 tax return, as compared to the chance of not benefiting from the deduction on the 2018 return. The tax bill puts a $10,000 cap on the amount of property taxes and state and local income taxes that can be deducted on the return.

The Senate version of the 2017 Tax Cuts and Jobs Act appears to be very small business friendly. We support the passage of the bill as it is presented today.

With the approach of the holidays and the 2018 filing season, the IRS, state tax agencies and the nation’s tax industry are urging Americans to be on the lookout for new, sophisticated email phishing scams that could endanger their personal information and next year’s tax refund.

The most common way for cybercriminals to steal bank account information, passwords, credit cards or Social Security numbers is to simply ask for them. Every day, people fall victim to phishing scams that cost them their time and their money.

Those emails urgently warning users to update their online financial accounts – they’re fake. That email directing users to download a document from a cloud-storage provider? Fake. Those other emails suggesting the recipients have a $64 tax refund waiting at the IRS or that the IRS needs information about insurance policies – also fake. So are many new and evolving variations of these schemes.

The Internal Revenue Service, state tax agencies and the tax community — partners in the Security Summit — are marking “National Tax Security Awareness Week” with a series of reminders to taxpayers and tax professionals. In part two, the topic is avoiding phishing scams.

Phishing attacks use email or malicious websites to solicit personal, tax or financial information by posing as a trustworthy organization. Often, recipients are fooled into believing the phishing communication is from someone they trust. A scam artist may take advantage of knowledge gained from online research and earlier attempts to masquerade as a legitimate source, including presenting the look and feel of authentic communications, such as using an official logo. These targeted messages can trick even the most cautious person into taking action that may compromise sensitive data. The scams may contain emails with hyperlinks that take users to a fake site. Other versions contain PDF attachments that may download malware or viruses.

Some phishing emails will appear to come from a business colleague, friend or relative. These emails might be an email account compromise. Criminals may have compromised your friend’s email account and begin using their email contacts to send phishing emails.

Not all phishing attempts are emails – some are phone scams. One of the most common phone scams is the caller pretending to be from the IRS and threatening the taxpayer with a lawsuit or with arrest if payment is not made immediately, usually through a debit card.

Phishing attacks, especially online phishing scams, are popular with criminals because there is no fool-proof technology to defend against them. Users are the main defense. When users see a phishing scam, they should ensure they don’t take the bait.

Here are a few steps to take:

• Be vigilant; be skeptical. Never open a link or attachment from an unknown or suspicious source. Even if the email is from a known source, approach with caution. Cybercrooks are adept at mimicking trusted businesses, friends and family. Thieves may have compromised a friend’s email address or they may be spoofing the address with a slight change in text, such as name@example.com vs narne@example.com. In the latter, merely changing the “m” to an “r” and “n” can trick people.
• Remember, the IRS doesn’t initiate spontaneous contact with taxpayers by email to request personal or financial information. This includes text messages and social media channels. The IRS does not call taxpayers with threats of lawsuits or arrests. No legitimate business or organization will ask for sensitive financial information via email. When in doubt, don’t use hyperlinks and go directly to the source’s main web page.
• Use security software to protect against malware and viruses. Some security software can help identity suspicious websites that are used by cybercriminals.
• Use strong passwords to protect online accounts. Each account should have a unique password. Use a password manager if necessary. Criminals count on people using the same password repeatedly, giving crooks access to multiple accounts if they steal a password. Experts recommend a password have a minimum of 10 digits, including letters, numbers and special characters. Longer is better.
• Use multi-factor authentication when offered. Some online financial institutions, email providers and social media sites offer multi-factor protection for customers. Two-factor authentication means that in addition to entering your username and password, you must enter a security code generally sent as a text to your mobile phone. Even if a thief manages to steal usernames and passwords, it’s unlikely the crook would also have a victim’s phone.

The IRS, state tax agencies and the tax industry are working together to fight against tax-related identity theft and to protect taxpayers. Everyone can help. Visit the “Taxes. Security. Together.” awareness campaign or review IRS Publication 4524, Security Awareness for Taxpayers