Non Profit Tax Filing

Non Profit Tax Filing 2021 | Perry & Associates

Nonprofit Tax Filing for New Charities and Organizations

 

Non Profit Tax Filing

 

2020 was a historic year. Economies shut down and many of us changed our lifestyles to help protect loved ones. Perhaps you even decided that this was the year to start that community foundation or nonprofit organization. Now that you’ve set up your website and coordinated your services, you’re ready to change the world.

 

Now it’s been a year and it’s time to pay taxes.

 

Do nonprofits have to pay taxes? Aren’t they tax-exempt? 

 

Nonprofits – 501(c)(3) – still need to file tax forms. They aren’t taxed like traditional businesses, but they still have to file annual reports to the IRS for regulatory reasons.

 

The type of form you submit depends on your income and organization classification. This article will provide a brief overview of the nonprofit tax filing process. For other non profit-related tax issues, we recommend this section in this article: Accountants for Nonprofits.

First, Have You Filed for Tax-Exempt Status? 

If you are a new nonprofit executive, you might not have registered as a 501(c)(3), the official designation for tax-exempt entities. Simply declaring yourself a nonprofit is not enough. The IRS requires specific forms.

 

You can file as a 501(c)(3) by using the 1023-Series Application. The IRS also requires you to apply for an Employer Identification Number (EIN) even if you don’t have employees. You can learn more about the Internal Revenue Code Section 501 on the IRS website.

File the Correct 990 Form Based on Income

After you’ve been approved to be a 501(c)(3), you need to determine your nonprofit’s annual income. This number will be based on your gross receipts: donations, program fees, merchandise sales, etc. Most nonprofits fall under these two categories.

 

Less than $5000: Not required to file

 

More than $5000 and less than $50,000: File 990-N

 

Greater than $50,000: File 990 or 990-EZ

Exemptions and Exceptions

If your organization meets any of these criteria, you do not need to file a 990 or will need to file a 990 form different from the ones listed above.

 

Private Foundation: 990–PF

 

A private foundation is generally defined as a fund that comes from a single source like a family or corporation. The foundation does not engage the general public for donations or contributions. Check with the IRS or a tax professional to confirm that your entity qualifies as a private foundation.

 

Group Return Organization: Not required to file

 

Is your nonprofit part of a larger, parent organization? If so, the parent organization may file for you. If you’re unsure whether you’re part of a group return, contact the umbrella organization and ask whether or not you need to file tax returns.

 

Religious Organization: Not required to file

 

A religious organization can include churches, religious schools, missions or missionary organizations.

 

Government Programs: Not required to file

 

For a full list of exempt organizations, visit this page on IRS.gov.

When to File the IRS Form 990

For many, tax day is April 15th. This might not be true, however, for your nonprofit. Many nonprofits elect to operate on a fiscal year that’s convenient for them. Depending on the fiscal year you determine, the Form 990 is due on the 15th day of the 5th month after the end of the organization’s taxable year. This means that if your organization follows the calendar year (January 1 – December 31), your Form 990 would be due on May 15th of each year.

Penalties for Failure to File

Filing taxes can be complicated and difficult for many new nonprofit directors. For this reason, it’s important to begin filing early and consult a professional accountant if necessary. If a nonprofit does not file its 990 on time, the IRS will levy fines.

 

  • From IRS.gov: “The Internal Revenue Service will impose a penalty of $20 per day for each day the return is late. The maximum penalty is $10,000, or 5 percent of the organization’s gross receipts, whichever is less. The penalty increases to $100 per day, up to a maximum of $50,000, for an organization whose gross receipts exceed $1,000,000.” 
  • If an organization fails to submit tax forms for three consecutive years, their tax-exempt status will be revoked. 
  • The IRS publishes the list of organizations whose tax-exempt status was automatically revoked because of failure to file a required Form 990, 990-EZ, 990-PF or Form 990-N (e-Postcard) for three consecutive years.

 

Other Questions? Ask a Professional Nonprofit Accountant

 

There are other exemption status types and each has its own annual filing and Form 990 requirements. It’s important to seek help from a tax professional for your nonprofit tax filing. 

 

At Perry and Associates, we help a variety of nonprofit organizations throughout Ohio and West Virginia. We are members of the WV Nonprofit Association and partner with and sponsor various events held by Marietta College’s Nonprofits Lead

If you are a new nonprofit director needing tax advice, contact the team at Perry CPAs. We are well-versed in 501(c)(3) compliance issues and can make filing your annual taxes easy and hassle free. Click here to get in touch with one of our associates.

Tax Laws for 2020

New Tax Laws for 2020 Filings | Perry & Associates CPAs

 

Tax Laws for 2020

 

New Tax Laws for 2020 Filings: What You Need to Know

 

Last year was an uncertain year for everyone as COVID-19 paralyzed the world, including the economy and the pocketbooks of millions of Americans. The government responded with the CARES Act and Paycheck Protection Program (PPP). More recently, the government passed the American Rescue Plan Act of 2021.

 

But the uncertainty doesn’t end with the signing of a new stimulus bill. Headed into the end of tax season, many Americans are wondering what this legislation means for their 2020 filings. Have these new tax laws significantly affected your 2020 filing?

FAQs for Tax Laws for 2020 Filings

 

To assist, we’ve put together a list of common questions taxpayers have related to their 2020 filings. For specific questions, reach out to one of our CPAs. 

1. Will the stimulus check money I received be taxed on my 2020 filing?

No. Technically, all Economic Impact Payments, aka, “stimulus checks,” are considered refundable tax credits. The amounts are not counted toward your gross income, and therefore will not be taxed. 

2. I didn’t qualify for stimulus money based on my 2019 return, but I would qualify now given the current economic situation. Is there a way I can update my info and receive payments?

If your income now qualifies you for stimulus payments, you need to file your 2020 tax return as soon as possible. The IRS will use this information to send you the most recent round of stimulus money ($1400 based on the American Rescue Plan). Once they have your info, the IRS will then send you a direct deposit, check, or debit card.

3. If my business received a Paycheck Protection Program loan, will that be taxed?

PPP loans are also excluded from gross income on your 2020 filing. Forgiven expenses, however, are not deductible. To file for loan forgiveness, contact your lender for the required documentation.

4. I dipped into my 401(k) to cover expenses. How will that money be taxed?

The CARES Act made provisions for a “hardship withdrawal” of up to $100,000 for individuals who tapped their retirement accounts in 2020. Withdrawal penalties are waved up to that $100,000 amount.

This doesn’t mean that money goes entirely tax free. You will still pay income taxes on withdrawals from 401(k)s and IRAs. Pay attention to whether these withdrawals put you into a new tax bracket.

5. Speaking of tax brackets, did those change in 2020?

 

Tax brackets changed slightly to adjust for inflation. Reference the chart below to check your bracket and marginal tax rates for the 2020 tax year.

From the IRS:

 

2020 Marginal Tax RatesSingle Tax BracketMarried Filing Jointly Tax BracketHead of Household Tax BracketMarried Filing Separately Tax Bracket
10%$0–9,875$0–19,750$0–14,100$0–9,875
12%$9,875–40,125$19,750–80,250$14,100–53,700$9,875–40,125
22%$40,125–85,525$80,250–171,050$53,700–85,500$40,125–85,525
24%$85,525–163,300$171,050–326,600$85,500–163,300$85,525–163,300
32%$163,300–207,350$326,600–414,700$163,300–207,350$163,300–207,350
35%$207,350–518,400$414,700–622,050$207,350–518,400$207,350–311,025
37%Over $518,400Over $622,050Over $518,400Over $311,025

 

6. What is the Standard Deduction for my 2020 filing?

Like the adjusted tax brackets above, the standard deduction increased to adjust for inflation, not because of an entirely new law. Still, it’s important to be aware of standard deduction rates as you decide how to process charitable giving and other deductions. The changes this year are marginal.

 

From the IRS:

 

Filing Status20192020
Single$12,200$12,400
Married Filing Jointly$24,400$24,800
Married Filing Separately$12,200$12,400
Head of Household$18,350$18,650

 

7. I received unemployment benefits last year. How is that income taxed? 

The American Rescue Plan was a new law passed in early 2021. It has large ramifications for unemployment benefits received in 2020. Now, you can exclude the first $10,200 in benefits from federal income tax for households with incomes below $150,000 a year.

That change will either decrease how much you owe the IRS or increase your refund, with the latter being most likely.

8. How much can I contribute to my Health Savings Account (HSA)?

HSA contribution limits were raised  to $3,550 for individuals or $7,100 for families. If you did not meet those limits during the 2020 calendar year, you may add to your HSA before filing day on April 15th. 

9. I donated to charity in 2020. Have any new tax laws changed how I report that giving?

With the relatively new Standard Deduction limits, many Americans opt to take the standard deduction instead of itemizing charitable giving. In this particularly difficult year, however, the CARES Act decided to encourage extra charitable giving. You may deduct up to $300 in charitable donations on top of your Standard Deduction.

Taxes may seem overwhelming this tax season. New tax laws have added a new layer of complexity to an already complex system. To make sure you file correctly, consult with Perry & Associates. Give us a call today.

example of accountant doing an external financial audit

4 Rewards of an External Financial Audit | Perry And Associates CPAs

example of accountant doing an external financial audit

Big Rewards for Small Businesses from an External Financial Audit

 

Yes, it is true that external financial audits are only required for publicly traded companies, but that does not mean that you should skip one for your small business. Below we’ve outlined the ways that we see businesses benefit over and over again from an external audit. 

4 Rewards of External Financial Audits 

 

Unbiased Validation

External audits are required for publicly traded businesses so investors, both current and potential, can make an informed decision based upon real numbers about whether or not to continue or begin investing in the business. Because the audit is performed by an unaffiliated third party, the information can be trusted as impartial, as it truly speaks to the financial health (or lack thereof) of the organization. 

For this very same reason, it is ideal for privately owned businesses to seek an external audit as well. Though a local restaurant, non profit organization, or other small business may not be seeking investors in the traditional sense, it is likely that continued growth may dictate financial support from a bank, sponsor, partner, government, or grant source at some point. 

Having a professionally conducted external financial audit for those entities to review will set you apart from other similar organizations.  In fact, many grantors and lenders have begun requiring an audit as a part of the application process for funding. This provides a trustworthy and unbiased report as opposed to simply internal accounting records.

 

Compliance Check

Especially in today’s ever-changing tax compliance climate, it can never hurt to have a second set of eyes ensuring that your business accounting methods comply with current tax regulations. 

This is also an issue that often surfaces as your organization grows. One avenue may have been acceptable in the past because your company was not netting enough profit to need to report in a certain category, or you may have branched into a new sector of business, or a new state or city. All of these may require different regulation compliance, and it’s important you stay current on these issues.

 

Improving Efficiency

We know that as small business owners, managing your financial reports and bookkeeping can get pushed to the side as other pressing issues demand your immediate attention. Professional CPAs may be able to offer game-changing advice after analyzing your books for how to streamline or automate some of your financial processes. This is guaranteed to make life easier for your operations, your tax-time preparation, and the creation of your financial reports in the future. 

Finding where time and resources are being wasted is invaluable. As part of the external financial audit, the auditor will provide a report of all the necessary changes. An outside perspective and professional opinion can bring much-needed improvements. Business owners are often too far “in the weeds” to see where financial mistakes that are wasting both time and resources are being made.

 

Fraud Prevention

No one likes to dwell on the possibility of fraudulent behavior within your business, especially if your small business is operated by family and close friends. Unfortunately, fraud is a real possibility and can be even more prevalent in small organizations where fraud is unassumed. 

Businesses see great success by scheduling an external financial audit yearly. This not only keeps financial records in good order, but this audit can help to keep potential fraud at bay, simply by employees and partners knowing that it will be happening. 

If you do suspect possible fraud in your organization, an external auditor provides a buffer that makes it look less like you are targeting a specific person’s behavior by having someone look at the overall picture. Even if there is never any fraud in your business, an external auditor’s involvement in your business is invaluable.

Professional External Auditor Near You

At Perry & Associates, our forensic account team is directed by president, Jodey Altier. Our team holds the “Credited in Financial Forensics” (CFF) credential, signifying high expertise and knowledge in forensic accounting. We have had decades of experience in financial fraud investigations, prevention, detection, and deterrence that allow us to quickly and efficiently identify any red flags. Contact us to discuss your company’s external financial audit needs today.

picture of ppp loan tax implications documents

PPP Loan Tax Implication Questions Answered | Perry And Associates CPAs

PPP Loan Tax Implication

2020 PPP Loan Tax Implications

 

How will CARES Act Funding impact your 2020 Taxes?

 

2020 was a year for the books, so it probably comes as no surprise to you that last year may have a unique impact on your books. If your business received a slice of the $5 billion+ pie that was the Paycheck Protection Plan in 2020, you’ll want to know about the PPP loan tax implications that will apply for 2020 filing. Will you be taxed on this income? Are you allowed to deduct expenses paid for with PPP? We’ve outlined a few of the common questions we have been receiving in hopes to help you gain a foundational understanding. As always, see your CPA for legal tax advice regarding your specific situation. 

 

Will my business be taxed on PPP income?

In December of 2020, the Coronavirus Response and Relief Supplemental Appropriations Act clarified that a forgiven PPP loan is entirely tax-exempt and is classified as non-taxable income. Your PPP loan is forgivable as long as the money was spent on payroll expenses, mortgage interest, utility payments, rent, operational expenses, property damage costs, (due to public disturbances in 2020), supplier costs, and/or worker protection expenditures.

 

Can my business deduct traditionally deductible expenses paid for with PPP Loan Income?

Yes. The Coronavirus Response and Relief Supplemental Appropriations Act passed in December 2020 reversed the original decision not to allow deduction of expenses paid for with PPP income. The decision was reversed due to the fact that some businesses may have had higher taxable revenue in 2020 than in previous years without being able to write off as many expenses. 

 

Can payroll taxes be deferred if my business received a PPP loan?

Yes, payroll taxes from March 27th, 2020, through December 31st, 2020. Even if your PPP loan is forgiven, you may still defer the payroll taxes. Fifty percent of the deferred taxes accumulated in 2020 must be paid by December 31st, 2021, and 50% of the deferred amount must be paid by December 31st, 2022.

 

Can my business use PPP funds to pay for 2020 taxes?

No. PPP loans can only be used to pay for specific outlined expenses outlined in the answer to question number one above, so taxes cannot be paid with PPP funds.

 

A note on other CARES ACT income:

 

PUA- Pandemic Unemployment Assistance

It often comes as a surprise to many, but unemployment benefits are considered taxable income. You will still owe state and federal taxes on any unemployment compensation that you have received. However, you will not owe any medicare or social security taxes. Some people opt to have the taxes automatically withheld from their benefits by filing a W-4V, but if you do not remember specifically requesting to have taxes automatically withheld, then you will still owe them when reporting the income you received on your 2020 tax return. You should have received a 1099-G from your state labor office stating how much PUA compensation you received and if any taxes were already withheld.

 

EIDL- Economic Injury Disaster Loan (and Grants)

EID Loans will be treated as any other loan when it comes to tax time, but EID grants have been declared tax-free and it is, therefore, unnecessary to include that grant amount in your taxable income total for 2020.

 

Still have questions?

The U.S. Chamber has released an updated guide to Small Business COVID-19 Emergency Loans that further explains the substantial changes passed into law in December 2020.

Looking for Professional Help Sorting Out PPP Loan Tax Implications?

Contact us for service you can trust! Perry & Associates CPAs has multiple offices throughout the Mid-Ohio Valley. 

Tax Advisor Near Me – Always Here | Perry And Associates CPAs

tax advisor near me

Tax Advisor Near Me in Ohio and West Virginia

Every business and individual should have access to a local tax advisor. Not only are annual tax returns required by law, a qualified tax advisor can potentially save you thousands of dollars in deductions and rebates. An added benefit is that a tax advisor can keep your documents organized throughout the year. While other people struggle to find receipts and sales documents, you’ll breeze through tax season stress-free. 

If you’re searching for a “tax advisor near me” for any of your business or individual tax needs, take a look at all we have to offer. 

Perry & Associates serves corporations, small businesses, and individuals through our Ohio and West Virginia offices. We pride ourselves on providing personalized, quality service. With Perry & Associates, you will have convenient access to tax advisors near you. Our tax advisors understand your local economy and regulations and can help you succeed financially.

Below we’ve included an overview of our tax advisor services. 

TAX SERVICES

Receive the largest deductions and rebates on your tax returns with our year-round tax services. Perry & Associates tax advisors will work closely with you to catch tax issues early. Our comprehensive tax preparation ensures a no-stress filing process. With offices near you in Ohio and West Virginia, expert tax advice is just a quick drive, call, or email away.

FORENSIC AUDITING

Have you noticed some indescrepencies with your taxes or finances? You may need a tax advisor for forensic auditing.

Unfortunately, many financial crimes are committed by people closest to you. Our corporate clients use our firm to investigate suspicions of fraud and laundering. Individual clients often need help discovering a spouse’s hidden assets and income during divorce settlements.

Perry & Associates full forensic auditing services include Money Laundering, Terrorist Financing, Financial Crimes, Banking Operations (banking products, services, and customer behavior), Compliance Program Weaknesses, Financial Crimes, Divorce Hidden Income and Assets, and Lawsuits.

Read how our team uncovered one of the largest cases of fraud in Washington County.

ACCOUNTING SERVICES

Every successful tax return begins with professional accounting services. Because our team keeps your documents ordered throughout the year, filing your tax statement is a breeze.

Perry & Associates works with long-standing companies as well as brand new startups. If you are near the launch date of your business, our team of tax advisors can help set up your accounting system so that your financial reporting is accurate from the get-go. 

CONSULTING SERVICES

It’s important to consult a tax advisor before you make a major financial decision. Our team of tax advisors can guide you through the entire business lifecycle. We often give entrepreneurs advice on business entity selection and what each classification will mean for your tax burden. Later, we can consult you on mergers and acquisitions. Tax considerations are major components to these events.

Consulting isn’t just for businesses. We work closely with individuals to plan estates and manage debt. Call one of our tax advisors and we can make sure those near and dear to you are provided for. Because Perry & Associates is a regional firm with local offices, you can rest assured that you’ll receive the same amount of attention we give our business clients.

In addition to our traditional consulting services, we also consult on COVID-19 tax breaks and reporting requirements.

Tax Advisor Near Me in Ohio and West Virginia

Perry & Associates has convenient locations along the Ohio-West Virginia border. Find the office nearest to you and give us a call using the information below. If you’d like to send us an email, click here.

Marietta, OH

313 Second St

Marietta, OH 45750

Office: (740) 373-0056

Email: perrymta@perrycpas.net

 

Cambridge, OH

749 Wheeling Ave, Suite 300

Cambridge, OH 43725

Office: (740) 435-3417

Email: perrycam@perrycpas.net

 

St. Clairsville, OH

150 W Main St, Suite A

St. Clairsville, OH 43950

Office: (740) 695-1569

Email: perrystc@perrycpas.net

 

Vienna, WV

1907 Grand Central Avenue

Vienna, WV 26105

Office: (304) 422-2203

Email: perrypkg@perrycpas.net

 

Wheeling, WV

1310 Market St. Suite 300

Wheeling, WV 26003

Office: (304) 232-1358

Email: perrypkg@perrycpas.net

tax cpa

Tax CPA Explains 1099 Changes for 2020 | Perry And Associates CPAs

tax cpa

 

Tax CPA Explains 1099 Changes for 2020. Don’t Miss Them.

Preparing your W-2s and/or 1099s, like most things about the year 2020, will be slightly different. Below, we’ve outlined a brief overview of the changes; but as always, feel free to contact a tax CPA here at Perry & Associates if you have further questions after reviewing.

 

Preparing 1099s

More 1099s may be filed this year than any other year. Because of the many jobs lost to the COVID-19 pandemic, a great number of people took up contract work in order to help pay the bills. 

If your business hired anyone – or any non-incorporated partnerships or LLCs – to conduct contract work for you last year, you may need to prepare a 1099 form. This would apply to any hired work that received a cash or check compensation of $600 or more. 

Unlike previous reporting years, you will need to prepare a 1099-NEC (Non-Employee Compensation). This is different from the 1099-MISC you would have filed for contract work in the past. Notice that this excludes contract work payments made via credit card. All business credit card payments will be reported in 1099-Ks, which crediting merchant and third-party payment processors are responsible for generating. Do not generate 1099-NECs for contractors paid via credit card, only those paid with cash and/or check. 

 

Types of payments that warrant the filing of a 1099-NEC for reporting year 2020:

  • Contract Labor, Commissions, Directors Fees, and any other like services provided to your business of $600 or more.
  • Dividends, Interest, and Royalties of $10 or more.
  • Professional Fees of $600 or more.
  • Rents (other than to real-estate agents) of $600 or more.
  • Attorney fees for legal services over $600.
  • ALL payments to attorneys for settlements.

The deadline for submission of all 1099 forms to the IRS for reporting year 2020 is February 1, 2021. Your copies of these 1099s should also be distributed to their recipients on or before February 1, 2021.

 

If you have over 250 returns (W2s AND/OR 1099s) to file, it is required that you file all federal forms electronically. A tax CPA can quickly and efficiently assist you in your 1099 preparation.

 

Preparing W2s

The following wages must be included in Gross Wages on all employee W2s if applicable:

  • Wages
  • Bonuses
  • Tips
  • Any other compensation
  • Business expenses paid in excess of allowed amounts
  • Sick pay
  • Automobiles
  • Club dues
  • Event tickets
  • Plane flights
  • Discounts on property or services
  • Legal and educational services
  • Value of life insurance group policy in excess of $50,000
  • In some cases, moving expenses, educational assistance payments, and scholarships paid to an employee must be reported. Please contact us if you are unsure whether or not this applies to you.
  • As always, employers’ contributions (matches) to retirement plans are not to be reported and are not taxable.

When to call a Tax CPA Instead of Using Software

There are many different online software options for preparing these forms; however, when it comes to all the unprecedented situations 2020 brought, a tax professional may be a wise choice for this year’s tax and employee form preparation. 

Non-compliance fees and late fees can pile up fast for innocent mistakes small business owners make when attempting to prepare their own W2s and 1099s. It will not only be costly to you if you miss something, but it can also affect your employee and contractor returns as well. It is undoubtedly worth paying a far less cumbersome amount to a Tax CPA than it is to be indebted to the IRS.

Looking for a Tax CPA Near You?

Contact us for service you can trust! Perry & Associates CPAs has multiple offices throughout the Mid-Ohio Valley. 

Marietta, OH

313 Second St

Marietta, OH 45750

Office: (740) 373-0056

Email: perrymta@perrycpas.net

 

Cambridge, OH

749 Wheeling Ave, Suite 300

Cambridge, OH 43725

Office: (740) 435-3417

Email: perrycam@perrycpas.net

 

St. Clairsville, OH

150 W Main St, Suite A

St. Clairsville, OH 43950

Office: (740) 695-1569

Email: perrystc@perrycpas.net

 

Vienna, WV

1907 Grand Central Avenue

Vienna, WV 26105

Office: (304) 422-2203

Email: perrypkg@perrycpas.net

 

Wheeling, WV

1310 Market St. Suite 300

Wheeling, WV

Office: (304) 232-1358
Email: perrywhg@perrycpas.net

man overwhelmed with business bookkeeping after procrastinating too long

Top 5 Reasons NOT to Procrastinate Your Business Bookkeeping| Perry And Associates CPAs

man overwhelmed with business bookkeeping after procrastinating too long

Looking for the Easy Way Out of Business Bookkeeping ?

Procrastination Isn’t It.

Whether you dread your business bookkeeping or you simply cannot find enough time to get it done, putting off your accounting duties never ends well for you or your business. We understand that as a small business owner, you are being pulled in numerous different directions at once and it can be complicated to accomplish the mundane task of keeping up with the books. It is easy to write it off as non-urgent, vowing to catch up later.

But inevitably, later becomes next week, which becomes next month, which becomes 2 weeks before taxes are due. So why is this important? What does it matter if you wait until April to start actually doing your “business bookkeeping” for the previous year?

Top 5 Reasons Procrastination Can Kill Your Business

     1.)Poor Bookkeeping Leads to Poor Financial Decisions

The list of decisions a business owner must make every day often seems endless – how much inventory should be purchased, how much to invest in marketing, is it time to open a new line of credit, can you afford to hire a new employee, which bill should you pay first, should you get this new software, can you afford hardware updates, and on and on.

It can be difficult enough to make intelligent and informed decisions even with all of the data in front of you, but when you have no idea what the numbers are to back up these decisions, you will be driving blindfolded through your decisions. You are far more likely to crash when drawing upon ‘gut feelings’ for choices rather than your up-to-date cash flow, account balances, Accounts Payable and Accounts Receivable totals.

     2.)Audits…Need We Say More?

Handing your CPA a total mess of papers come tax season will not end pretty for either party. You will end up paying a much larger bill for the time they are going to have to spend on your filing, and while CPAs can work some magic, they are still human. Improper account management will likely leave you open for an audit.

If you are not carefully and accurately reporting what is going on in your business, you’re a much more likely target for the IRS. This can result in large late fees and expensive penalties if mistakes were made when you were rushing to reconcile the books.

     3.)You Could be Giving Away Free Money

Let’s face it, most businesses don’t have customers reminding them that they owe money. Getting behind on bookkeeping for your business means falling behind on your accounts receivable and invoice cycling as well.

If you simply try to make mental notes or “jot down” who owes you what, you will likely forget and lose money somewhere. Not collecting on accounts receivable is like giving away free money. Cash flow is the #1 reason that businesses fail, and much of that success or failure can be tied to tracking and updating your accounts receivable.

     4.)You Won’t Keep Good Employees Around

Your employees are the frontline of your business, and what you do is not possible without them. It is critical that your employees are paid on time and correctly on the regularly agreed upon schedule.

If you are slacking on the books, you may end up with an issue where you sacrifice your own paycheck so that all others are able to be paid. This is not unheard of for small businesses.

You may also end up with employees who do not report if you are over paying them, but who certainly would if you were underpaying them. Overpaying and underpaying employees will show on W-2 forms and can cause serious tax and legal issues for both you and the employee.

If employees cannot expect a reliable and regular paycheck, they will begin to look for work elsewhere, and it will be difficult to find new hires as word spreads.

     5.)You Will be Denied Financing

When it comes time to ask your bank for a loan or other line of credit, they will check your records in order to approve or deny your application. If the bank sees that you have poorly updated records and your bookkeeping is a mess, they may be unable to reach a decision or even deny your request.

Additionally, investors or donors will also want to see your most recent records and financial statements in order to confirm the security of investing in your business. When these are unprofessionally done, or not done at all, you have lost the ability to increase your company’s growth through business lending or investing.

Overwhelmed? Don’t procrastinate your bookkeeping…outsource it!

Outsourcing Business Bookkeeping

Most firms that provide business bookkeeping services actually end up costing far less than the amount of time it would take you to properly manage it. Do you know your ideal hourly wage for your own time (i.e. what are you worth in your business)? Multiply that hourly by the amount of time it would take you to keep your books in order each month. Chances are, it’s much less than the amount you would pay a business bookkeeper to do it for you. And you’ll have the added peace of mind that your business bookkeeping is being done properly and orderly.

If you need help with your bookkeeping, call Perry & Associates today. We have 5 different offices throughout the Mid-Ohio Valley as well as online portals for handling accounting virtually.

 

 

telecommuting employee at home working in different state

How Does State Taxation of Telecommuters Apply with Covid? | Perry And Associates CPAs

telecommuting employee at home working in different state

COVID Brings Spotlight on State Taxation of Telecommuters

With the onset and persistence of the COVID-19 pandemic, more and more employers have had to promote or, at the very least, permit telecommuting (teleworking). Some experts are predicting that the teleworking trend will be here to stay for many, regardless of the pandemic resolution. 6 out of 10 employees have reported greater satisfaction with their work/life balance since beginning work from home, and many businesses have actually reported greater employee productivity and retention.

However, for many companies, this may mean that they now have employees working in states other than those that their business currently has an established taxable presence within. So what does the ‘work from home’ wave mean for your small business tax filing and preparation for 2020? How does state taxation of telecommuters affect your new operations model?

Employees Living and Working in Neighboring States

Fifteen states have reciprocal tax agreements with neighboring states where an employee resides in one state and is employed in the other. The State of West Virginia has reciprocal income tax agreements with Kentucky, Maryland, Virginia, Ohio and Pennsylvania. Reciprocal tax agreements mean that the employee is only responsible for filing taxes in their state of residence, not the state in which their employer is located.

For business owners, a reciprocal tax agreement means that it is not necessary to withhold taxes in the state of residence for their employee. However, if your state, or the state in which your employee lives or is temporarily working from, is not one of the 15 states that have agreements with some of their adjacent states (Illinois, Indiana, Iowa, Kentucky, Maryland, Michigan, Minnesota, Montana, New Jersey, North Dakota, Ohio, Pennsylvania, Virginia, West Virginia, Wisconsin) then there is a tax base nexus on both the state of residence for the employee and the state from which the income is earned.

Businesses are expected to withhold taxes for the employee in the state in which the work was performed, which can be a costly compliance for businesses that are not used to having their net income subject to taxation from multiple states. The employee will have to file taxes in both states, but will receive credits to avoid double taxation.

Both businesses and employees in this situation would benefit from the help of a professional CPA to help prepare and file their taxes appropriately to avoid the expensive consequences of confusion further down the road.

Employees Living and Working in States with No Reciprocal Agreement

As an employer, when you think of having a taxable presence in another state, you probably think that it warrants a physical branch or location. After all, sales alone in another state are not enough for that state to lay claim to any of your business income.

However, having just one employee in another state could be enough for that state to claim that you have an established workforce presence there. If your business makes considerable sales in outside states in which 1) you have no office or sales force located, 2) you do not service your goods there and use a common carrier to ship your goods there, or 3) have them come to your location for pick-up, then you have no tax base nexus there.

If, however, you now suddenly have even just one employee working in that state, then you may have established a taxable workforce presence there, and all of those sales could come into consideration when determining what percentage of your net income that state is allowed to tax.

This is where “nexus” and “apportionment” come into play. Tax base nexus determines whether or not a business’s presence within a state is sufficient enough for the state to tax any of the business’s activity.  Apportionment determines how much of the business income is appropriate for the outside state to tax.

This can become even more complex if you have an employee that is teleworking from a state that is not their state of residence or a state that your business has established presence within. This has become more common with the COVID-19 pandemic as several individuals may have moved temporarily to other states to be with family, or to simply flee a ‘hot spot’ area of concern and wait it out. Some states begin to require those employees to file a non-resident return there the moment they begin working from that location. This means that you, as employer, would also need to withhold for that employee in that state during that time, which can be costly and confusing to navigate without CPA guidance.

Different states have vastly varying regulations with situations like these, so it is important for your employees to check how long their state of temporary residence allows them to work there without having to file and withhold taxes in that state.

Get Help from a CPA Near You for Telecommuting Taxation

Perry & Associates CPAs has multiple offices throughout the Mid- Ohio Valley, where many of these state working lines are crossed. Contact us for expert advice from an accountant that knows the intricacies of each state’s law.

TBD

How a Tax Accountant in Wheeling, WV Can Save You Money | Perry And Associates CPAs

 

TBD

5 Ways a Wheeling, WV Tax Accountant Will Help Your Small Business Flourish

A recent study performed by Intuit shows that 89% of small businesses report that they saw more success once they hired an accountant or financial advisor. But why is this? You know your business best, why can’t you just go it alone? Read on for 5 surprising ways that a tax accountant Wheeling, WV businesses lean on can help set you up for more success. 

Businesses in Wheeling, WV Succeed with Professional Tax Service Help 

First, we’d be remiss if we didn’t mention the distinct difference between an accountant and a CPA. A CPA makes all the difference. Not all Wheeling, WV tax accountants you might hire are Certified Public Accountants. CPAs have passed a rigorous, multi-day, state-specific examination on financial and tax expertise. A CPA will know how to best help your business comply with the exact laws and code of your state, where a general accountant may not be able to do so. Also, a CPA will be able to fully represent your business before the IRS in an audit, where an enrolled agent, who is not a CPA, will be very limited in how they can represent you.

So, how does a CPA help businesses profit more?

  • Assist with Tax Advice and Planning

A good CPA will know State and Federal Tax Codes inside and out. This means that they will often have far more knowledge of different tax cuts and credits that could save your business thousands of dollars. They can also provide monthly accounting services by managing all the required documentation and record keeping that you will need come tax season. Think of how nice it would be to eliminate the night-before-the-deadline-scramble that inevitably happens every tax season despite best intentions.

  • Representation During Audit

As mentioned before, one of the greatest benefits of using a professional CPA for your tax preparation is that they will be able to represent you fully in an IRS audit. Equally as important, CPAs will also be able to audit you themselves as they work with you to catch any red flags or possible mistakes before the IRS does. 

  • Protecting Your Finances 

In recent years, small and large businesses alike have begun to recognize the benefit of forensic accounting. Unfortunately, even small businesses can be the victims of embezzlement, fraud, and other financial crimes that a CPA can help catch and resolve. CPAs certified to perform forensic accounting can also help you establish effective preventative measures for guarding against internal financial fraud.

  • Managing and Consulting Aid

Not all entrepreneurs are good with numbers. Likewise, not all CEOs have natural accounting skills. Good leadership doesn’t mean you must have proficiency in business financials. And many that have cursory knowledge may not know the depth of what other avenues are available for their business bookkeeping and financial health.  Do you understand accounting methods and terms such as LIFO and FIFO? Do you know the pros and cons of various bookkeeping methods like single entry versus double entry? What about financial statements? Do you know how to properly prepare and interpret Income Statements, Balance Sheets, Statements of Cash Flow etc.?

Even if you do understand these things well and know how to manage them, most likely you don’t have the time. A CPA can act as your CFO assisting with budgeting, risk management, financial statements and more, leaving you free to focus on your operations, goals and growth.

  • Bookkeeping and Payroll Administration

A CPA can also help you with day-to-day financial tasks such as payroll, payroll taxes and general bookkeeping. A professional tax accountant in Wheeling, WV can assist invoicing, accounts payable and receivable, vendors, timely rent and more. These time saving and stress saving duties could be worth the fee all on their own!

Need a Tax Accountant near Wheeling, WV?

Perry & Associates CPAs has offices in Ohio and West Virginia. Contact us at our Wheeling, WV office for service you can trust!

closeup of bottles being manufactured

Tax Accountant in Cambridge, Ohio | Perry & Associates, CPAs

closeup of bottles being manufactured

Find the Right Tax Accountant in Cambridge, Ohio

Perry CPAs is proud to serve businesses large and small throughout the Ohio River Valley. In this article, we want to highlight opportunities for businesses to partner with a professional tax accountant in Cambridge, OH. We understand that each city is unique with its own industries, challenges, and complexities. From 1806 until now, Cambridge, Ohio has adapted and grown alongside the wider Ohio economy. 

There are important tax considerations for any-sized business operating in the Cambridge area. A Cambridge tax professional from Perry CPAs will be able to give in-depth insight into each of these issues.

Large Manufacturing

Ohio is home to a deep and storied manufacturing base. Cambridge is no exception. Located at the intersection of I-70 and I-77, the city is one day’s drive from half of the nation’s consumers and manufacturers. Cambridge is home to over 49 manufacturing facilities that make paints, electronics, glass products, plastics, machine mine tools, ceramics, wood products, electric motors, tools, and metal alloys.

When it comes to state and regional taxes, the Ohio sales tax rate is currently 5.75%. The Guernsey County sales tax rate is 1.5%. The Cambridge sales tax rate is 0%.

Use Tax

As a manufacturer, you likely use equipment and services that were not sold or produced in Ohio. These items come from other states, which means you don’t pay taxes the same way you would if these items were sold in Ohio itself. For example, your office computers likely qualify for use tax since they were sold by a company outside of Ohio. Storage containers for fuel or solvents also qualify. You can read this guide from the Ohio government for more information on what equipment qualifies for use tax. A professional tax accountant in Cambridge, OH can help you determine what machinery falls under the use tax category.

Tax Exemptions

Because Ohio has traditionally been a hub for manufacturing enterprises, the state government provides many tax exemptions for manufacturing equipment. Most of these exemptions apply to sales tax. You’ll likely be exempt from sales tax if you purchase manufacturing machinery, warehouse machinery, or equipment related to research and development. Tax exemptions are determined by The Ohio Tax Credit Authority. 

Small “Mom and Pop” Businesses

Not all businesses in Cambridge, Ohio are based on manufacturing. As a small town, Cambridge relies on its local businesses for its charm and attraction. Running a small town business can be very challenging. You’re competing with big box stores on price. You’re likely figuring out how to engage worldwide customers on the internet. But knowing what tax benefits you qualify for can give your business a competitive edge.

Qualifying for the Healthcare Tax Credit

The IRS allows small businesses to write off up to 50% of employee healthcare premiums paid by employers. To qualify, your business must:

  • Have fewer than 25 full-time equivalent employees
  • Pay average wages of less than $50,000 a year per full-time equivalent (indexed annually for inflation beginning in 2014)

According to recent census data, the average worker in Cambridge, Ohio makes about $20,000 a year, which means many businesses would qualify for the healthcare tax credit.

Hiring Freelancers and Contractors

More and more skilled professionals are moving their services online due to COVID-19 and broader economic trends. This means that even a small business in Cambridge, Ohio can have a world-class designer build a new website or create promotional videos. However, contractors are not taxed the same as traditional employees. Depending on how much you pay your contractors, you might need to fill out and send 1099 forms. 

Contact one of our tax accountants for a full explanation on how hiring a contractor and freelancer will affect your 2020 tax return. 

Deducting Transportation Costs

Depending on your business, you may need to travel quite often to major cities in Ohio and surrounding states. Thankfully, you’re close to both I-70 and I-77. If you do a lot of driving for work, you can write off your miles as an expense. 

Quickbooks reminds business owners, “You also have to choose between two methods: actual expense method or standard mileage method. The standard mileage rate for 2019 is 58 cents per mile. This figure is meant to reflect each of the following expenses: gasoline, lease payments, insurance, maintenance and repairs, vehicle registration, and depreciation. On the other hand, the actual cost method entails deducting each business-related car expense by itself. This includes gasoline, insurance, maintenance, depreciation and lease payments.”

Partnering with a Tax Accountant in Cambridge, OH

Whether you run a large manufacturing facility or a small corner store, you’ll want to hire a Cambridge, OH tax professional to advise your business. Perry CPAs has the professional and regional expertise to set your business up for financial success. Contact one of our representatives today and learn how our team can support you.