COVID-19 Alert: The Silver Linings This Tax Season

Learn about the COVID-19 precautions we’re taking and some of the latest news and tips for enduring the pandemic and saving you money on your taxes.

Right now, times are uncertain with the spread of COVID-19.  

Unpredictable emotions are running high, with massive changes forced on your everyday routines due to the Coronavirus. 

But the human race is resilient and we are in this together as a global community.  

In times like this, when things seem rather bleak, there is always a silver lining to be found.  

We look forward to doing our part at Donnelly Tax Law to help you see those good things this tax season.

We know this year will be like no other and the last thing we want to add to your worry is interruptions to completing your taxes.  

So, while we all learn to deal with this new COVID-19 pandemic together, we want to let you know you can continue to count on your tax family here at Donnelly Tax Law to get you through this trying time.

Practices That Make Us Strong During COVID-19

COVID-19 world map

We are putting your safety above all else in the upcoming weeks.

As the COVID-19 pandemic forces changes in our everyday routines, our priority at Donnelly Tax Law is to ensure the safety of our staff and to solve the tax concerns of our customers.

Donnelly Tax Law was built intentionally for a robust operation that is resilient to virus threats, both medical and electronic.

Our work will not be slowed down by the pandemic. Even in normal times, we automatically file extensions for our clients so that the April 15th deadline is extended until October 15th. Read further for more information about the filing and payment deadlines being extended by the IRS. 

Donnelly Tax Law is a team of remote workers and therefore we are not exposed to the health risks of a typical shared physical office. We will continue to work on your behalf, even with regional lockdowns.

Precautions We Are Taking During COVID-19

COVID-19 face masks

We are implementing quarantine procedures for deliveries we receive. This safety measure will add a couple of days to the paper return filing procedure, but it will keep us working happily and healthily on your returns.

  • All of our systems and data are cloud-based on highly-secure systems. 
  • All data is encrypted. 
  • All of our systems require two-factor authentication for extra security. 

We are in communication with our vendors to make sure all critical systems remain available. We do not expect any unplanned outages.

COVID-19 Resources and How to Save A Lot Of Money With Your Tax Returns

We are still working hard for you! Donnelly Tax Law has a staff of eight people. We have always worked remotely, so the pandemic has not disturbed our business processes.

We also have a staff backup strategy, so that if any team member, including myself, needs to take sick leave, we have a backup so the work can continue.

Save 20% By Paying Your Invoice With Bitcoin

Bitcoin

From now until April 15th, we are offering a 20% discount to current and future clients for any portion of your invoice that you pay or prepay with Bitcoin. 

Our team is standing by to get you more details on how to take advantage of that special pricing.  

Don’t have any Bitcoin? Start an account at Coinbase or Kraken.

Due To COVID-19, IRS Delay Filing And Paying By Three Months

anti-money laundering

To help cope with the COVID-19 Coronavirus, the IRS has delayed payments and filing by three months. July 15th is now the new due date for filing individual tax returns and making the final payment on 2019 taxes. There is no penalty for extra interest because of the three-month delay. We already automatically extend the filing deadline to October 15th for all of our customers. 

The good news is that now there is extra time to pay!

If you are a client and your tax payment is scheduled already for auto-debit and you want to delay it, you will need to cancel the debit following the instructions in this link.

READ MORE: Tax Filing Deadline Extended To July 15th Due To COVID-19

Making The Most Of The COVID-19 Isolation

don't give up sign

If you are part of our tax community, you can take advantage of the extra free time to finish gathering all your tax documents and crypto records. 

Once completed, upload them to your secure ShareFile folders and let our client manager know so we can proceed with preparing your taxes.  

You can also use this time to learn more about US expat taxes and cryptocurrency taxes with the various ebooks I’ve written about each topic. Visit our online ebook store and discover additional crypto tax tools at our site CryptoTaxAudit.com.  

Learn about other important COVID-19 news from our blog. If you haven’t already, you can subscribe to our newsletter so you get notified of our latest posts.

READ MORE: Coronavirus Relief Package Signed Into Law – More To Come

Clinton Donnelly In The News

One last note, we are excited to report that I’ve been staying at the top of crypto news this tax season. I’ve taken part in multiple interviews with several national and international crypto podcasters, such as crypto pioneer Charlie Shrem, Brad Kimes, Ivan on Tech and more.

WATCH NOW: Crypto Tax Amnesty? CPA Clinton Donnelly Shares Critical Insights on How to Talk to the IRS and File

Coronavirus Relief Package Signed Into Law – More to Come

The Families First Coronavirus Response Act (H.R. 6201) has been signed into law to provide Coronavirus relief to many. Read more to learn the latest.

The Families First Coronavirus Response Act (H.R. 6201) is now law, and attorneys, accountants, and other professionals are poring over it. What are its main provisions, and how might this coronavirus relief affect you?

The Society for Human Resource Management and other outlets have highlighted the following provisions:

Paid Family Leave From Coronavirus Relief

The law provides 12 weeks of qualifying family and medical leave at two-thirds of their salary when employees can’t work because their minor child’s school or child care service is closed due to a public health emergency.

Those on the payroll for at least 30 calendar days are eligible. Benefits are capped at $200 a day (or $10,000 total) and expire at the end of the year.

Paid Sick Leave From Coronavirus Relief

sick leave

Employers have to provide 80 hours of paid-sick-leave benefits in various scenarios, including a situation in which an employee has been ordered by the government to quarantine or isolate or has been advised by a health care provider to self-quarantine. The payment is capped at $511 a day and expires at year-end.

Covered employers that are required to offer emergency FMLA or paid sick leave are eligible for refundable tax credits. Employers with fewer than 50 workers can apply for an exemption from providing paid family and medical leave and paid sick leave if it “would jeopardize the viability of the business.” According to the SHRM, “Gig-workers and other self-employed workers will be eligible for a tax credit to cover the benefits.”

A notable exemption is companies with more than 500 employees. The thinking on Capitol Hill was that such companies are capable of providing benefits without direct government help.

Part-Time Workers

Uber driver

They are also covered. According to the New York Times, such employees will receive the amount they typically earn in a two-week period. The self-employed — from freelance writers to Uber drivers — “should calculate their average daily self-employment income for the year, then claim the amount they take as a tax credit (they can reduce their estimated quarterly tax payments in the meantime).

LEARN MORE: The Families First Coronavirus Response Act (H.R. 6201)

Is everyone getting a check?

tax evading

There are a lot of rumors floating around about everyone getting a relief check. The government is still working on who gets a check and how much — and how to get the money to everyone who is eligible. As these proposals take a more solid form, we’ll have more details.

For now, keep in mind that the legal situation can change as quickly as the health situation, and ruling and reinterpretations of laws can change suddenly, modifying the advice in this article. We’ll be keeping an eye on authoritative sources in the coming days.

© 2020

READ MORE: Tax Filing Deadline Extended to July 15 Due to COVID-19

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Telecommuting, Coronavirus and You

We provide some helpful tips regarding telecommuting, coronavirus, and your business. If you have employees or are now working from home, learn these tips.

Usually, when companies begin moving from an office-based to a virtual model, they do it gradually, with plenty of planning and training. However, because of the COVID-19, many businesses are seeing the need to quickly empty out offices and send everyone home to keep the virus from spreading. No one knows how long the emergency will last, but you want to make sure the telecommuting system you hurried to implement keeps your business running until the coronavirus pandemic passes.

To make telecommuting work, even temporarily, you must keep in mind the needs of both your customers and your employees, all of whom have to get used to the new system on short notice. Every company will have different needs, but here are some general guidelines.

Make Sure Everyone Has The Technology

telecommuting

You may assume that today everyone has a late-model computer at home, with a high-speed connection. But not everyone does, or if they do, they have to share their resources with other family members. So be prepared to rent or purchase laptops for your staff and help them set up an internet connection.

Take Charge of Security

telecommuting

This will vary widely from business to business, and from employee to employee. In the office, you may have a highly secure intranet that encompasses your files, customer accounts, financial records and more. It will have to be extended so everyone has access from remote locations. You can simplify the task by giving employees access to only the information they need.

Your HR director needs access to employee files but probably not to sales figures, for example. Each remote computer needs its own security software to ensure no single machine becomes the weak link in the chain.

Rethink Your Meetings

telecommuting

You won’t be able to casually meet with staff the way you did in the office. Even formal meetings will be different. You’ll need to rethink the way you interact with your staff, and the way they interact with each other. Skype and other messaging software can be used for quick notes or video calls. Zoom is good for conferences. Evernote allows employees to share and collaborate on various projects — it’s easy to use and inexpensive. There are other choices as well, depending on your needs.

Some companies like visual conferences, and there are economical choices. But keep in mind that each employee’s background may be a messy living room rather than a well-ordered office.

Also, no matter how sophisticated your software, you cannot perfectly replicate the in-office experience. Each employee will have to work more independently. Of course, you can — and should — ask for progress reports and encourage regular communication.

Be Flexible and Understanding

telecommuting

Finally, be flexible and understanding. Many employees may not have a dedicated home office, so the voices of spouses — also working from home — and children may become part of any meeting, despite everyone’s best efforts. You will need to be understanding. But if everyone remains open to experimenting with ways to make telecommuting work, there’s a very good chance your company can weather this enforced situation.

Indeed, you may find that many, even most, of your employees adapt so well that this can become a permanent arrangement for them. This will not only improve employee morale and give you a recruiting edge, but reduce your real estate costs. Good luck with the transition!

© 2020

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IRS Offers Identity Protection PIN

The IRS is gradually rolling out a new identity protection program that prevents anyone who has stolen your Social Security from misusing it. Learn more.

Identity protection is of even more concern these days when it comes to taxes. The IRS can now give eligible taxpayers an “IP PIN,” a six-digit code to help prevent the misuse of Social Security numbers on fraudulent federal income tax returns. As the IRS explains, this PIN helps the agency verify a taxpayer’s identity and accept his or her electronic or paper tax return.

Who's Eligible For The Identity Protection PIN

telecommuting

Photo by Icons8 Team on Unsplash

Not everyone can get one yet. If you are a confirmed victim of identity theft and the IRS has resolved your tax account issues, the agency will mail you a CP01A Notice with your IP PIN.

Also, to be eligible for 2020, you must have filed a federal return last year as a resident of Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Illinois, Maryland, Michigan, Nevada, New Jersey, New Mexico, New York, North Carolina, Pennsylvania, Rhode Island, Texas or Washington. This is as of February; the list will grow in the future.

Taxpayers eligible for the IP PIN Opt-In Program must use the online Get an IP PIN tool, explains the IRS. If you do not already have an account on irs.gov, you must register to validate your identity. Before attempting to register, read about the secure access identity authentication process. Taxpayers cannot obtain an IP PIN by calling the IRS.

How Do You Use An IP PIN?

identity protection

Photo by Kaitlyn Baker on Unsplash

Enter the six-digit IP PIN when prompted by your tax software product or provide it to your trusted tax professional preparing your tax return. An incorrect or missing IP PIN will result in the rejection of your e-filed return or a delay of your paper return until it can be verified.

Do not reveal your IP PIN to anyone. It should be disclosed only to your tax professional and only when you are ready to sign and submit your return. The IRS will never ask for your IP PIN. Avoid phone, email or text scams trying to trick you into revealing your IP PIN.

For more details on using the IP PIN and the latest updates, go to the IRS IP PIN page. It also contains a FAQ that answers the most common questions.

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Rental Real Estate Safe Harbor Under Section 199A

Understand the aspects of the rental real estate safe harbor and which expenses meet the standard for qualified business income for rental properties.

When the Tax Cuts and Jobs Act of 2017 added the qualified business income (QBI) deduction (also called the Section 199A deduction), it didn’t clarify when a rental activity rises to the level of a qualified trade or business. On September 24, 2019, the Internal Revenue Service (IRS) finalized a limited safe harbor for taxpayers who are direct and indirect owners in rental real estate enterprises (Rev. Proc. 2019-38).

Who Qualifies?

rental real estate

Photo by Ryoji Iwata on Unsplash

Subject to certain limitations, taxpayers who qualify for the safe harbor are eligible for the 20% QBI deduction. If your enterprise is profitable, taking this deduction may be a good tax strategy — at least through 2025 when it is set to expire if Congress does not extend it.

The enterprise can include multiple properties in the same general category, either commercial or residential. To be eligible under the safe harbor rules, the rental real estate enterprise must meet the following requirements:

  • Perform 250 or more hours of rental services each year. Enterprises that have been in existence for more than four years, must meet this requirement in three of the last five years. Owners, employees, agents or independent contractors can perform these hours.
  • Maintain separate books and records for each rental real estate enterprise. These records should document the hours and dates of all services performed, provide a description of all services performed and include a list of who performed the services. (Beginning in 2020, these records will have to be maintained contemporaneously.)
  • Submit a signed statement stating that all of the tests have been satisfied for each year this deduction is claimed.

Which Services Can Be Included?

tax planning

Photo by Helloquence on Unsplash

For purposes of the safe harbor rule, rental services include the following: daily operations, maintenance, repairs, rent collection, payment of expenses, provision of services to tenants and efforts to rent the property (such as advertising). They do not, however, include financial or investment management services, arranging financing, procuring property, reviewing financial statements or operating reports or time spent traveling to and from the rental property.

The following types of rental properties are specifically excluded from claiming the QBI deduction:

  • Property used as residence for any part of the year, such as a vacation home.
  • Property subject to a triple net lease.
  • Property rented to a business with common ownership.
  • Property where a part is treated as a specified service business excluded from claiming the QBI deduction.

How Do Losses Affect The Reduction?

Remember that if your rental property generates losses, the QBI deduction may not be the best tax strategy for your enterprise to pursue. Those losses would reduce the 20% deduction. For some rental real estate enterprises with losses, claiming the QBI deduction can cost thousands. It may make more sense to simply deduct your losses against your ordinary income. As with any tax planning strategy, you need to evaluate the pros and cons in your specific situation.

To verify your situation with a qualified professional, contact us today.

© 2020

Featured image by Bernadette Gatsby on Unsplash

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Yet Another ‘Real Housewives’ Star in Tax Trouble

Anyone can find themselves in tax trouble, even ‘Real Housewives of Orange County’ star Kelly Dodd who owes more than $23,000 to IRS.

One of the stars of the Bravo reality TV series Real Housewives of Orange County is in debt to the IRS.

Kelly Dodd and her ex-husband Michael Dodd owe $23,386.62 for unpaid taxes for the years 2015 and 2016, according to documents obtained by The Blast.

Tax Trouble Can Happen To Anyone

Kelly and Michael Dodd were married for 11 years, until their divorce in 2018.

Dodd joined the cast of Real Housewives of Orange County during the show’s 11th season.

Her fiery Latin lineage and unfiltered opinions have been bringing the heat ever since she joined the cast,” Bravo’s website says.

Dodd is not the first cast member from the Real Housewives series to get in tax trouble. In the last year, four other cast members have faced IRS liens.

Feature image by Jp Valery on Unsplash

IRS Publishes Inflation Adjustments for 2020

The IRS has announced the tax year 2020 annual inflation adjustments, including the tax rate schedules and other tax items. Learn how it may affect you.

As it typically does, the IRS has made inflation adjustments for various tax items for the coming year — 2020. More details can be found in Rev. Proc. 2019-44. Below are the adjustments that apply to a wide range of taxpayers.

Inflation Adjustments

The standard deduction for married filing jointly rises to $24,800 for tax year 2020, up $400 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,400 for 2020, up $200, and for heads of households, the standard deduction will be $18,650 for tax year 2020, up $300.

The personal exemption for tax year 2020 remains at 0, as it was for 2019. This elimination of the personal exemption was a provision of the Tax Cuts and Jobs Act.

Marginal rates: For tax year 2020, the top tax rate remains 37% for individual single taxpayers with incomes higher than $518,400 ($622,050 for married couples filing jointly). The other rates are:

  • 35% for incomes over $207,350 ($414,700 for married couples filing jointly).
  • 32% for incomes over $163,300 ($326,600 for married couples filing jointly).
  • 24% for incomes over $85,525 ($171,050 for married couples filing jointly).
  • 22% for incomes over $40,125 ($80,250 for married couples filing jointly).
  • 12% for incomes over $9,875 ($19,750 for married couples filing jointly).
  • The lowest rate is 10% for single individuals with incomes of $9,875 or less ($19,750 for married couples filing jointly).

For 2020, as in 2019 and 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act.

inflation adjustments

Additional Inflation Adjustments

The alternative minimum tax exemption amount for tax year 2020 is $72,900, and it begins to phase out at $518,400 ($113,400 for married couples filing jointly, for whom the exemption begins to phase out at $1,036,800). The 2019 exemption amount was $71,700, and began to phase out at $510,300 ($111,700, for married couples filing jointly, for whom the exemption began to phase out at $1,020,600).

The new maximum earned income credit amount is $6,660 for qualifying taxpayers who have three or more qualifying children, up from a total of $6,557 for tax year 2019.

The qualified transportation fringe benefit now has a monthly limitation of $270. The monthly limitation for qualified parking is the same, up from $265 for tax year 2019.

The dollar limitation for employee salary reductions for contributions to health flexible spending arrangements is $2,750, up $50 from the limit for 2019.

The annual exclusion for gifts is $15,000 for calendar year 2020, as it was for calendar year 2019.

This is not a comprehensive list, and there are subtleties that you should discuss with a professional in the new year.

© 2019

Feature image by Olga DeLawrence on Unsplash

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