Hello –
We hope this message finds you healthy and safe this holiday season. There is still time for year-end planning and to maximize your tax savings.
In this newsletter we will quickly touch on planning ideas for S Corporation owners as well as developments relating to the PPP Loan.
IRS Payroll Requirements – Pay Yourself Reasonable Compensation
We would like to remind you of the importance of implementing payroll and filing the quarterly payroll reports with the IRS, form 941, 940, W2, and W3.
Hughes Szuberla CPAs is now offering payroll preparation services to existing customers to help make those decision. Our fee is $500 per year for a sole owner operator with no employees. Please contact us for more information on pricing and timing of implementation.
Remember, the IRS is very interested during audits of S Corporations to make sure that the S Corporation is paying each shareholder-employee a REASONABLE compensation for the services provided to the business.
Every line of business is different and therefore there is no one-size-fits-all answer to what constitutes reasonable compensation. We can help you determine compensation that is reasonable, maximize the new 20% qualified business income deduction, and plan for retirement.
401(k) or Self Employed Pension
For those S Corporation shareholders who are the only employee of the business, a Solo 401(k) or a self employed pension (“SEP”). Both are incredibly powerful tools with the ability to put away up to $57,000 of tax deferred cash.
Solo 401(k) and SEP plan profit sharing contributions do not have to be invested until the due date of the return, including extensions (9/15/2021). Keep in mind that these are based on the amount of compensation paid though so to maximize the amount you can contribute we suggest to contact us to discuss further.
Hughes Szuberla CPAs works closely with financial advisors and 401(k) plan administrators who can assist with not only setting up a Solo 401(k) plan, but creating the appropriate documentation for your contribution. Please contact us for more information before the end of the year.
Paycheck Protection Program Loans
One of the most impactful parts of The CARES Act stimulus package released earlier in 2020 were the Paycheck Protection Program (PPP) loans. These PPP loans may be eligible for loan forgiveness if the funds were used for eligible payroll costs, payments on business mortgage interest payments, rent, or utilities during either the 8- or 24-week period after disbursement.
Borrowers can apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10months after the last day of the covered period, then PPP loan payments are no longer deferred and borrowers will begin making loan payments to their PPP lender.
Businesses that received funds from the PPP loan program can apply for forgiveness through their lender using either SBA Form 3508, SBA Form 3508EZ, SBA Form3508S, or a lender equivalent. Please let us know if you have any questions about what documentation should be retained for your records or about filling out these forms.
It is unclear at this point whether the business expenses paid for using PPP loan funds will be eligible for deduction on the 2020 income tax return. The governing board for Certified Public Accountants in the United States, the AICPA and its members have urged Congress to support PPP loan fund deductibility. As the situation develops, we will continue to provide updates.
Schedule an Appointment Now!
If you have any questions about any of the items we covered in this newsletter, please let us know. In addition, if you would like to put together a yearend projection please reach out! There is still time to take action on the tax savings ideas before the year ends so please do not hesitate to reach out. Please copy our Assistant Ashleigh on your email so she can assist with scheduling, records@hstaxcpas.com
As always, we would like to thank all of you that have shared our name with colleagues, friends, or family. We thank you for your continued support and we hope that each of you have a happy and healthy holiday season!