Florida expands new-hire reporting requirements—including independent contractors—for all employers

If you’re not even sure what an independent contractor is, you’re not alone! The IRS has a longstanding tradition of sending confusing messages to taxpayers. This is especially true when it comes to determining exactly what constitutes an independent contractor as well as the respective reporting requirements. Now it seems that Florida has joined their cause.

If you really don’t care about the gory details included below, here’s what you really need to know. Beginning October 1st, 2021, if you hire anyone, employee or contractor alike, you should register and file a new-hire report with the state of Florida using this site. You should also be in the habit of collecting W-4’s (for employees) or W-9’s (for contractors) for everyone you employ or engage.

Governor Ron DeSantis recently signed legislation that amends and expands Fla. Stat. § 409.2576, which sets forth requirements for employers to report new hires and rehires to the State Directory of New Hires of the Florida Department of Revenue.

State and federal laws have historically required new-hire reporting for organizations with 250 or more employees. Smaller businesses used to be exempt from this requirement and the reporting of independent contractors used to be optional. The new Florida amendments now require all employers to report new-hires, and they also include independent contractors in that requirement.

These changes were purportedly enacted to help with child support collections and enforcement—online filing occurs on the state’s Child Support Services website. There’s always the chance that they will share info with other agencies, so it’s a good idea to use this opportunity to revisit your vendor approval process and hiring guidelines to ensure compliance with state and federal hiring laws.

The law only requires reporting independent contractors who are paid—or will be paid—more than $600 during the calendar year. Because the report is due within 20 days from the start of the contractual relationship or the first payment—whichever is earlier—we recommend filing a report for all newly-hired contractors unless you are certain it will not exceed the dollar threshold in any calendar year.

Fortunately, the form is fairly simple and straightforward, and all the information that you will need to provide is already included on the IRS Form W-9. The W-9 is the form that you already gather from all of your independent contractors before issuing a payment. (You do that, right??) Not coincidentally, 1099s are required for non-incorporated contractors if you pay them more than $600 in a calendar year. This emphasizes the need to collect W-9’s s part of your vendor approval process, as a W-9 is the required “proof” that you issued a Form 1099 to the appropriate SS# or EIN, and now serves the dual purpose of gathering the information needed to fulfill this new Florida requirement. (You can read more about 1099 filing requirements here.)

If you need any assistance in understanding or complying with this new requirement, please feel free to contact us. We are happy to help!

Federal Tax Withholding–Refund Zero!

We have a fun game we like to play with our own personal tax returns. It’s called Refund Zero! The idea is to try to set our federal tax withholding so accurately that when we file our personal tax return, we end up with a refund as close to $0 as possible. To date, no one has done it–although we know one person whose refund this year was less than $5!

Most employees withhold federal income tax from every paycheck. Some even withhold extra because 1) they don’t like owing tax at the end of the year, or 2) they like getting a big fat refund to splurge with.

It’s an unfortunate misconception that tax refunds are the IRS’s way of giving away free money. While that can be true in certain circumstances (refundable tax credits, for example), it’s generally more accurate to say that the IRS is simply returning our money to us. It’s therefore important to note that most refunds are simply getting back money that was originally withheld from your hard-earned wages rather than a windfall of unearned revenue. It’s like a forced savings account, but without the interest!

In either case, though, it’s important to try to accurately predict how much you should withhold. And the IRS offers a tool to help.

We strongly encourage you to check the accuracy of your withholding amounts by using the Tax Withholding Estimator on IRS.gov. The magnitude of the changes to reported income resulting from recent tax law changes may surprise you. Don’t be caught unaware! You can then use the results to help you complete a new Form W-4 and adjust your income tax withholding with your employer. This will help you make sure your employer is withholding the right amount of tax from your paychecks. (You can read the IRS’s “Tax Tip” on adjusting your W-4 here.)

Aiming for Refund Zero can help prevent under-withholding and avoid a large and unexpected payment due (as well as possible penalties) when you file your taxes next year. It can also help prevent over-withholding and giving Uncle Sam a large interest-free loan of your hard-earned wages.

By the way, if you are getting a refund this year and want to know the status of your refund, you can find a tool for that here!

For next year’s refund, try out this new withholding estimator. Let us know next year how it worked! If you manage to get your refund (or tax due) to less than $100 next year, let us know! There might even be a special Refund Zero prize!

Happy calculating!

 

Show me the money!

“Where’s my refund?” 

We get this question a lot, and rightfully so. After giving the IRS an interest-free loan by over-withholding federal tax, it’s not unexpected that taxpayers want to know the status of their refunds.

Fortunately, taxpayers can now check on their refund using the Where’s My Refund? tool. It is available on IRS.gov and the IRS2Go app.

To use this tool, all you need is your Social Security number, tax filing status, and the exact amount of the refund claimed on your tax return. The IRS only updates the information once per day, so there’s no need to check more often.

Please note, according to the IRS website, refunds should be issued within 21 days of the received date. They also provide the caveat that processing may take longer under certain circumstances.

Here’s hoping for a quick turnaround! And as Mom used to say, don’t spend it all in one place!

Breaking News-IRS Extends Tax Filing Deadline for Individuals

The IRS recently announced that it has extended the tax filing deadline for individuals from April 15, 2021 to May 17, 2021. In the welcomed apparent waning of the COVID-19 pandemic, this allows taxpayers a little additional time to gather the necessary materials to prepare a complete and accurate return.

You do not need to file any forms or call the IRS to qualify for this automatic federal tax filing and payment relief. If you need additional time to file beyond the May 17 deadline, we can still request a filing extension until Oct. 15 by filing Form 4868. Filing Form 4868 gives taxpayers until Oct. 15 to file their 2020 tax return but does not grant an extension of time to pay taxes due. Taxpayers should pay their federal income tax due by May 17, 2021, to avoid interest and penalties.

Please note that this extension does not apply to entities with a 4/15 deadline, but for personal returns only. It also does not apply to quarterly estimated tax payments which should still be paid by 4/15.

Even with the extended deadline, we encourage you to go ahead and file sooner rather than later, especially if you are anticipating a refund. Our professionals stand ready to assist you with any of your current needs, from tax filing and compliance to tax planning and more. We can also provide guidance on PPP forgiveness applications or Second Round PPP funding applications.

We welcome the extended deadline and hope this provides a much-needed reprieve for anyone who is still struggling.

Why is my paycheck different?

Why is my paycheck different?

Let’s see if we have this correct: ever since the first of the year, your paychecks have been a little bit different. You didn’t receive a raise and nothing else has really changed with your job, but it’s just not the exact same as 2017. And, if we can really be forthcoming (we’re friends, right?), you’ve noticed it’s a few dollars more than it used to be, but didn’t want to tell anyone in case it was a mistake and they came back looking for the money.

Here’s what’s really going on: subsequent to the new tax laws that passed in December, the Internal Revenue Service also updated the Withholding Calculator. They have suggested, and we concur, that it is a wise idea for everyone to follow that secure link and perform a quick check of your withholding. It’s a very user friendly form and shouldn’t take more than 10 minutes to complete.

Why should you check your withholding? The two most obvious answers are to make sure you don’t have too much or too little withholding.

  • Too much withholding will result in you receiving a refund next year when taxes are due on April 15, 2019. While you might like the idea of a refund, also keep in mind your sweet Uncle Sam is holding your money all year. If that’s okay with you, it’s certainly okay with him!
  • Too little withholding will result in a larger paycheck for you each time you get paid. However, it can also create an unexpected (and unwanted) tax bill on April 15th as well as potentially penalties from the IRS.

Okay, so now you understand why your check might be different and how to run a checkup to see if your withholding is where it should be. If it is accurate, you’re all set and there’s no action required on your part. What do you do if it’s not the right amount? It’s as simple as requesting that your employer change your withholding. That can be done very easily by filling out a new W-4 form. Please notice – this form was revised for 2018. If you have a previous version, please be sure to update your records.

Product to Market

How Can I Compare My Product to the Market?

The market is saturated. It hardly matters anymore what industry you’re in, consumers have more choices for products and services than ever before. It used to be that once you got your product on the shelves the hard work was done. But while barriers of entry have gone down, consumer awareness is heightened. Even shopping for school supplies takes a turn when a simple number 2 pencil can have 1600+ reviews!

To survive in such cutthroat competition your product or service must meet market demands and the best way to know it will is through product comparisons.

The need of product comparison to the market is an ongoing process and should be done quickly and regularly. Gone are the days when you only had to study the market while choosing the business sector and launching the product. To keep up with the pace, you must keep an eye on the market day and night—one missed opportunity can hit your accounts hard!

Let’s discuss how to keep an eye on your products and services relating to the market:

  1. Identify your target audience.

    Each product and service is designed to cater to a particular segment of people. It is suicidal if you don’t understand YOUR target customers and their demographics. If you’re not aware of what portion of the population your product will sell to, then it will be difficult to succeed. You cannot use trial and error just hoping to stumble on the right answer and survive in the market.

  2. Identify your competitors.

    The market will always be stuffed with companies that sell the same product or service as yours. Knowing those companies is not a difficult task, but your focus should be to identify those companies which target the SAME customer base as yours. Always choose the right competitors otherwise it may mislead you. For example, Levis cannot consider Armani or Gucci as their competitors as they both target different segments and there is no space for comparison.

  3. Create a competitive market analysis.

    This can be conducted in a few ways:

    • Visit competitor stores and look at their product ranges, prices, specifications and so on.
    • Check their online presence and gain knowledge that way.
    • Hit up social media, forums, etc. to discover the buzz around your competitors.

    It is important to be impartial while conducting this study and see each competitor through the customer’s view. This way you will have a true idea of the positive and negative points of your product and you will be able to make your product more competitive.

  4. Analyze the transactional and historical sales data of your product or service.

    This data speaks a lot about how your product is performing in the market. You can also do a region-wide analysis to know the trend and potential growth areas.

  5. Conduct a study of consumer behavior.

    This can be conducted through small surveys—a quick set questions when they are purchasing your product or may be an online feedback form. The most important thing to remember is to formulate appropriate questions—they should be brief and should provide you insight into the consumer behavior.

Make your product comparison work for you:

These key areas of analysis will help you formulate a strong comparison of your product to the market. However like most data it’s only really useful if you put it to work. Make sure you get the most out of your efforts by tailoring your product or service to what the market really wants. Then repeat the process regularly to keep your business in top shape!

What’s the best lesson you learned from comparing your product or service to the market? If you’ve never done a product comparison what would you like to learn? Let us know in the comments below!

The new tax law... And why you should care.

The “New Tax Law…” And Why You Care

We expect you’ve heard by now there’s a new tax law that went into effect on January 1, 2018. The law is commonly known as H.R. 1 Tax Cuts and Jobs Act of 2017. If you’d like to read it in its entirety (or are having issues with insomnia), it is available at https://www.congress.gov/bill/115th-congress/house-bill/1.

Today, we’d like to draw your attention specifically to the section that affects the deductibility of meals and entertainment expenses. (Spoiler alert: You are NOT likely to appreciate these changes.)

Prior to 2018, a taxpayer could deduct 50 percent of business meals and entertainment expenses. If meals were provided through an in-house cafeteria or for the convenience of the employer they were 100% deductible. Effective January 1, 2018, entertainment is no longer deductible. This includes taking a client to a sporting event, concert, and also tickets to charitable benefits or galas. Meals provided through an in-house cafeteria and meals provided for the convenience of the employer are now only 50% deductible. (This changes again in the future, but let’s just talk about 2018 today.)

As of the date of this writing, the IRS has not published specific guidance on this part of the new law. We, and many other experts, interpret the law to indicate that no changes were made to the rule allowing a 50 percent deduction for business meals. Likewise, no changes have been made to the 100 percent deduction for expenses incurred for recreational, social, or similar activities primarily for the benefit of employees (other than employees who are highly compensated employees).  HOWEVER, some experts are of the opinion that meals purchased while hosting a customer or prospective customer are no longer deductible.

What does all that mean? What do we recommend?

  1. Keep copies of all receipts related to meals purchased for business purposes and make notes related to who was present at the meal and the topics discussed. This is best practice for ALL business receipts. Keep detailed notes regarding the purpose.
  1. Track your expenses carefully. Our recommendation is that you create separate categories for each “type” of meal. Yes, it will require a bit more bookkeeping and tracking now, but by the end of the year when full guidance is available and you’re thinking about your 2018 tax filings you’ll have all the information you need organized and ready. (And, if you’re like me and can’t remember what you had for lunch last Wednesday let alone who it was with and the purpose, you won’t be searching your calendar and emails trying to recall the purpose of a meal.)
    Recommended general ledger accounts (categories) for tracking expenses:

    • Meals while meeting with clients or prospective clients
    • Meals between employees of the company for business purposes
    • Meals purchased while on business travel (more than 50 miles from home)
    • Meals purchased while attending business related groups (Chamber of Commerce, professional associations, etc.)
    • Entertainment (nondeductible)
    • Recreational/social employee expenses (includes holiday parties)

Lest you think the 2018 tax law contains only bad news, there are highlights. The standard mileage rate, for instance, has been increased. Business use of a van, pickup track, panel truck, or car is now 54.5 cents per mile as opposed to the 53.5 cents per mile that was allowed in 2017. When they say “every penny counts,” this is when! Be sure you are documenting your business mileage as well as tracking your expenses. Every 19 miles driven for business is over a $10 deduction.

Hurricane Irma Tax Relief

Hurricane Tax Relief for Florida Business Owners

If your business experienced a loss of revenue as a result of business interruption after Hurricane Irma, you may qualify for special relief—and we’re ready to help

As we get ready to celebrate the Holiday Season, many business owners, particularly in South and Central Florida, are still recovering from Hurricane Irma—one of the strongest hurricanes to hit the United States since Hurricane Andrew.

Hurricanes cause anxiety to both homeowners and business owners before a storm hits, particularly as a result of last-minute preparations, storm-related expenses, evacuations, and the anticipation of potential damage and casualty loss to residences and commercial property.

However, a more pervasive reason for distress is the aftermath of landfall. Hurricane Irma made landfall on September 10, 2017 and this unusual weather event interrupted the lives of millions of Florida residents who either evacuated or hunkered down before coming ashore.

Businesses suffered widespread losses as a result of Hurricane Irma and its damaging path. A total of 48 out of Florida’s 67 counties were affected by the storm, resulting in more than $25 billion in losses—according to the Florida Office of Insurance Regulation (OIR).

On September 29, 2017, the President signed the Disaster Tax Relief and Airport and Airway Extension Act of 2017, which effectively provides tax relief to individuals and businesses impacted by not just Hurricane Irma, but also Hurricane Harvey in Texas and Hurricane Maria, which massively affected the U.S. Commonwealth of Puerto Rico.

The following are items that Kuberneo CPA feels are applicable to our clients, friends, and family who were located in Disaster Areas affected by all three major hurricanes of 2017. If you meet the criteria of this new tax relief extension, you could qualify for substantial tax relief.

Making sense out of the New Tax Act

The Disaster Tax Relief and Airport and Airway Extension Act of 2017 provides assistance by:

  1. Eliminating the current requirement that uncompensated personal casualty losses that exceed 10 percent of adjusted gross income to qualify for deduction and eliminated the current requirement that taxpayers itemize deductions to access this tax relief.
  2. Providing an exception to the 10-percent early retirement plan withdrawal penalty for qualified hurricane relief distributions.
  3. Temporarily suspending limitations on charitable contribution deductions associated with qualified hurricane relief made before December 31, 2017.
  4. Providing a tax credit for 40 percent of wages (up to $6,000 per employee), or a $2,400 Tax Credit per employee, if you own a business and have employees affected by hurricane-related business interruption.
  5. Allowing taxpayers to use earned income from 2016 to determine the Earned Income Tax Credit and Child Tax Credit for the 2017 tax year.

The above new laws are only a small portion of the New Disaster Tax Act provisions. There may be additional benefits or advantages that only a tax professional can identify through a private consultation.

A beneficial outcome can be a welcomed opportunity to offset the losses and remunerate your business—and the accounting staff at Kuberneo CPA is ready to help you evaluate your unique situation.

The only way to find out is by allowing us to calculate losses and weigh them against the New Tax Act provisions for hurricane relief—which can result in substantial tax savings for 2017 tax filing year.

Ready to find out if your business qualifies for Hurricane Irma tax relief? Send us a message today or call our office at (407) 582-0703 to schedule a private consultation with one of our Accountants.

W-4 IRS Form

What to Know B-4 Filling out a W-4

When I got my first job at sixteen my new boss handed me a form that asked me how many allowances I wanted to take. “Allowances?! Mom told me in no uncertain terms I had to take this job because I WASN’T getting an allowance anymore.”  

So just what was this allowance thing anyway? Essentially, withholding allowances are different life circumstances that directly affect how much money is withheld from your pay. (i.e. Are you single or married? Can anyone else claim you as a dependent? Do you have children or dependents? Do you work more than one job? etc.)

I give you the mystical, magical, famous Form W-4 (*tada*). The IRS requires new employees to fill this out for their employers….looks like this (click to enlarge):

This worksheet is to help your employer know how much to withhold from your paycheck. The top part of page one, as well as page two, are for your use only. These parts are to help you figure out how many allowances you are entitled to take. Page two gets into more specifics for example, if you and your spouse both work, you’re single and work more than one job, or if you plan to itemize.

So what’s it all mean?

More allowances…Mo’ Money

The more allowances you claim, the less income tax will be withheld from your paycheck- aka mo’ money. However, this mean, yes you get more money in your paycheck and less tax taken out in that moment, but in the future this could mean you’ll owe the IRS mo’ money, which could translate to mo’ problems…depending on how you feel about making a payment to the IRS.

Less allowances…Mo’ Refund

The alternative to this is you claim less allowances, so taking more tax from your paycheck up front, meaning in the short term your paycheck will be a little less, but come April, you are more likely to get a refund from the IRS than owe them money.

An additional option…Withhold Additional Money

You can also choose to have additional money withheld from each paycheck if you’d rather pay the IRS upfront and not chance owning come April (this is where a conversation with your CPA could be helpful…have them do an estimate to ensure you’re withholding the correct amount).

Bottom line- The total number of allowances you claim impacts the size of your paycheck and whether you will get a refund or owe money come April.

The key to this, as in anything in life really, is finding balance and what works for you. Would you rather have a little less in your paycheck now and not owe much or maybe even anything in April? Or do you prefer to have more of your money now and plan on paying later? As always, if you’re unsure about how something may affect you financially, you should reach out to your friendly CPA to have the conversation about what may be best for your given situation.