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When Employees Cross State Lines

June 16, 2020 by Dana Lee CPA LLC Team

Even small companies can find themselves with employees who have to commute across state borders to work. This can make payroll difficult. Click through for an introduction to the complex tax rules.

Do you have employees who live in one state and work in another?

You may run into this if:

  • Your company is located near a state border.
  • Your employees travel to job sites in other states.
  • You have employees who work remotely.
  • You business is expanding into new states.

Having some basic understanding of what happens will help you make the right decisions about classifying wages and avoiding penalties or amended filings later.

Both state unemployment and withholding taxes should generally be paid to the employee’s work state, but there are exceptions; the twist is that state laws are quite literally all over the map. You may want to be familiar with the state legislation that applies to your team. Here are the basics.

Reciprocity agreements

Some states that border each other have entered into agreements related to allowing employees who live in one state but work in another, to have their withholding tax paid to the work state.

For example, an employee who lives in Maryland but commutes to northern Virginia or D.C. for a job can have withholding tax paid to Maryland rather than the work state. This is also known as courtesy withholding, and it means the employee can file one tax return each year, which helps simplify things. Have your employee complete a nonresidency certificate to excuse him/her from tax withholding in the work state. Let your payroll provider know that your employee has an agreement in place.

If there’s no reciprocal agreement, your employee will most likely have to pay both nonresident and resident state income tax. But luckily, most states grant a tax credit to cover the cost of being taxed twice.

Each state may have its own twist on taxation, so it’s best to check the local situation and not make any assumptions.

The unemployment tax situation is usually straightforward. When an employee is working in multiple states or working remotely for a company based in another state, you withhold state unemployment tax only in the state in which the employee is working.

When it gets complicated

Today’s remote-work world means situations that were rare or unheard of a generation ago are now commonplace. That means more tax complexity.

For example, consider an employee who works from his log cabin in upstate New York, but your company is located in Atlanta — you’ll have to pay all state taxes to New York because that’s where the work is actually being completed.

Or at that same Atlanta company, you have an employee who needs to work in Maine temporarily for three months. For nine months, you pay taxes in Georgia, and for three months, you pay taxes in the Pine Tree State.

Most of this information is general. It can get complicated, and there are exceptions and special circumstances. Be sure to let us know if you have a cross-border workforce, and we’ll help you organize your tax system accordingly.

Filed Under: Tax Regulations

Electronic Filing of Amended Individual Tax Returns

June 6, 2020 by Dana Lee CPA LLC Team

On May 28th 2020 the IRS announced that later this summer for the first-time taxpayers will be able to electronically file amended individual income tax returns.
This new process is a major milestone for the IRS. Although businesses had the option to file amended tax returns electronically, up until now, individual taxpayers could only file the amended individual income tax returns in paper format only, leading sometimes to errors, delays and frustration. Starting late this summer, you will have the option to file the amended return form 1040X electronically.
This new service is available starting only for tax year 2019 for the amendment of Form 1040 (US Individual Income tax Return) and form 1040SR (US Individual income tax return for senior citizens). The IRS has plans to have additional enhancements in future.
Electronic filing of amended individual income tax returns will not only eliminate errors associated with manual data entry, but will also help the IRS in receiving the returns faster, enabling the IRS to process the
refunds faster.
You can continue to use the online tool “Where’s My Amended Return” available on the IRS website to check the status of the amended return form 1040X, irrespective of paper or electronic filing.

If you need help with amending a prior year tax return, give us a call.

Filed Under: Tax Regulations

Paycheck Protection Program Loan

May 25, 2020 by Dana Lee CPA LLC Team

On May 15th the SBA released the Paycheck Protection Program Loan Forgiveness Application  along with some key clarifications in completing the application process. The Forgiveness application is intended for small business owners whom received a PPP loan as part of the CARES Act.

The PPP Forgiveness application is comprised of 11 lines used to calculate the amount of forgiveness a small business owner is eligible for.  All or part of the PPP loan may be forgiven as long as the small business used the funds for payroll, business mortgage interest, rent or utilities.

The newly-released application essentially asks for the payroll and qualifying non-payroll costs that the business spent over the eight-week period since receiving PPP funds. The amount of forgiveness may be reduced depending on whether a business reduced pay for their employees greater than 25 percent, or if the business owner failed to bring back the same number of full-time employees.

The final step in the application process is verification that the business owner allocated at least 75 percent of the PPP funds for payroll costs, and the remaining 25 percent for mortgage interest, rent or utilities. 

To learn more about completing the Paycheck Protection Program Loan Forgiveness application and other information about the Paycheck Protection Program Loan go to the SBA website.

If you need help with your small business accounting and tax reporting, please give us a call.

Filed Under: Business

IRS Extends More Tax Deadlines from April 1st to July 15th

April 10, 2020 by Dana Lee CPA LLC Team

On March 21st, 2020 the IRS announced an extension of the April 15th deadline. The IRS announced that individual taxpayers have until July 15, 2020, to file and pay federal income taxes originally due on April 15 without any late penalties or interest.

Today, April 9th, 2020, the IRS announced in its IR-2020-66 notice that it expands this relief and now this extension applies to all taxpayers that have a filing or payment deadline falling on or after April 1, 2020, and before July 15, 2020. Individuals, including the ones living abroad, trusts, estates, corporations and other non-corporate tax filers qualify for the extra time.

If you have payments that are due within this time frame, like the June 15th second estimated tax payment, they also benefit from this extension and you can make them by July 15th without incurring any penalties or interest. The IRS also applies this extension to the claim for refund period for the 2016 returns. You now have until July 15th to file or amend your 2016 return to claim a refund.

You can find more information about the Coronavirus tax relief and economic impact payments by clicking here.

If you need help with your taxes, schedule an online appointment by going on our website.

Filed Under: Tax Regulations

Gig Work Economy

February 5, 2020 by Dana Lee CPA LLC Team

IRS announced in IR-2020-4 that it launched the Gig Economy Tax Center on its website. The Center provides guidance for the people who earn income providing on-demand work, services or goods, often times though an app or website or other type of digital platform.

Example Of Gig Work

The most popular gig economy businesses are home rentals and ride-sharing, but there are many other types and the IRS website gives several examples (this list is not all inclusive):

  • Drive a car for booked rides or deliveries
  • Rent out property or part of it
  • Run errands or complete tasks
  • Sell goods online
  • Rent equipment
  • Provide creative or professional services
  • Provide other temporary, on-demand or freelance work


What are Digital Platforms?

IRS defines digital platforms as “businesses that match workers’ services or goods with customers via apps or websites. This includes businesses that provide access to:

  • Ridesharing services
  • Delivery services
  • Crafts and handmade item marketplaces
  • On-demand labor and repair services
  • Property and space rentals

with a note that the above list does not include all types of digital platforms. “

Taxes on Gig Work Income

You must pay taxes on the income you earn from your gig work, even if you don’t receive a 1099 form. You must maintain records and receipts during the year for the income and expenses you incur and pay estimated tax quarterly.

If you are self-employed and your earnings are over $400, you must file a tax return. You can reduce your taxes by claiming business expenses, like: supplies, office expenses, mileage, home office deduction, etc.
If you do gig work as an employee, your employer should withhold tax from your paycheck.

Other Considerations

If you sell goods or provide taxable services, you might be subject to state sales tax and you are required to get a sales tax permit and collect, pay and report sales tax.

In case you use subcontractors that you pay $600 or more during the year you need to file forms 1099-NEC.

And if you have employees you need to file payroll reports.

Let us help you with your tax needs. Give us a call or schedule an appointment online.

Filed Under: Tax Regulations

2019 Tax Filing Season Open Date

January 6, 2020 by Dana Lee CPA LLC Team

Today IRS announced that the 2019 tax filing season will start on January 27, 2020. On that date the IRS will begin accepting 2019 tax returns. In the meantime you can prepare the returns or employ the help of a tax professional to do that for you, but the returns won’t be able to be e-filed until January 27th.

As a reminder, the deadline to file the 2019 individual tax returns and corporation tax returns is April 15, 2020. For partnership and S corporation returns the due date is March 16, 2020. In addition, on January 15th is the due date for the fourth estimated tax payment for tax year 2019 and on April 15, 2020 is the due date for the first estimated tax payment for tax year 2020.

If you have a business you need to account for some additional deadlines:

  • January 31, 2020, the due date for filing forms 1099-MISC for non-employee compensation;
  • January 31,2020, the due date for payroll tax forms;
  • March 31, 2020, the due date for filing forms 1099;
  • April 1, 2020, the due date for the property rendition with Montgomery County.

We are here to help you with this incoming 2019 tax filing season. Give us a call or schedule a free 30 minutes consultation!

Filed Under: Tax Regulations

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