Category: Tax Tips

This week, Roy Frick of the Maryland Society of Accountants Scholarship Foundation joined us to give an update on the MSA Scholarship Foundation, including how you can help the future of the profession.

Watch on YouTube.

Coming Up: On Thursday, November 4th, at 9 a.m., Walsh Trivia joins us to tell us all about our upcoming virtual trivia night!

Be sure to Like/Follow us on Facebook so you can catch MSATP TV live every week.

COVID Relief: IRS Helps Employers Wanting to Rehire or Retain Employees After Retirement Age |IR-2021-208

To help address COVID-related labor shortages, the Internal Revenue Service reminded employers that they generally will not jeopardize the tax status of their pension plans if they rehire retirees or permit distributions of retirement benefits to current employees who have reached age 59 ½ or the plan’s normal retirement age.

With the COVID-19 pandemic, many employers, including governmental employers (such as public school districts), are looking for ways to encourage retirees to return to the workforce to fill open positions and experienced employees to stay on the job.

For more information, click here.

IRS, Security Summit Partners Remind Families to Make Online Safety A Priority During National Cybersecurity Month | IR-2021-209

The Internal Revenue Service reminded families, teens and senior citizens about the continued importance of protecting personal and financial information (.pdf) online. Although the IRS and its Security Summit partners continue making strides in fighting identity theft and fraudulent tax returns, help is needed.

The Security Summit works to protect taxpayers from criminals that file fraudulent returns for refunds. The Summit coalition includes representatives of the software industry, tax preparation firms, payroll and tax financial product processors as well as state tax administrators and the IRS, which work together year-round to protect taxpayers.

For more information, click here.

Tips to Help Taxpayers Decide How and When to File an Amended Tax Return | COVID Tax Tip 2021-157

After filing their tax return, taxpayers may find they made an error or forgot to enter something on it. The IRS strongly recommends taxpayers use the Interactive Tax Assistant, Should I File an Amended Return? to help determine if they should correct an error or make other changes to the tax return they already filed.

For more information, click here.

Additional Hurricane Ida Relief From IRS; September 15th, October 15th Deadlines, Other Dates Further Extended to January 3rd For Other Parts of Mississippi; November 1st Deadline Still Applies to the Rest of the State | IR-2021-210

Victims of Hurricane Ida in parts of Mississippi now have additional time–until Jan. 3, 2022–to file various individual and business tax returns and make tax payments, the Internal Revenue Service announced today.

Following last week’s disaster declaration by the Federal Emergency Management Agency (FEMA), the IRS is offering this expanded relief to those parts of the state newly designated for either individual or public assistance. Previously, the IRS had provided special relief to the entire state of Mississippi, generally postponing various tax-filing and tax-payment deadlines until Nov. 1, 2021.

For more information, click here.

Here’s How People Can Become an IRS-Certified Volunteer | Tax Tip 2021-155

The IRS and its community partners encourage people to make a difference in communities across the country by becoming an IRS-certified volunteer. These volunteers will help taxpayers file their tax returns during the upcoming tax season.

• Volunteer Income Tax Assistance offers free tax return preparation to eligible taxpayers who generally earn $58,000 or less, people with disabilities and limited English-speaking taxpayers.
• Tax Counseling for the Elderly is mainly for people age 60 or older. Although the program focuses on tax issues unique to seniors, most taxpayers can usually get free assistance. Many sites in the TCE program are operated through AARP Foundation Tax-Aide.

For more information, click here.

MVLS Updates For Our Community Partners

Criminal Record Expungement Training
Community advocates should be aware of recent changes to expungement law and where criminal records are found. Watch this presentation by MVLS and the Human Trafficking Prevention Project to learn about what you need to know.

For more information, click here.

REAL ID News and Fact Sheet
MVLS’ October Access to Justice – A Legal Tip Column for Marylanders in The Baltimore Times focuses on what you need to know about renewing your driver’s license and REAL ID. The column question is: I received a notice that my driver’s license was expiring, but when I went to the MVA to try to renew it, they turned me away because my name didn’t match exactly on all my documents. What do I do? Read our answer and other helpful REAL ID tips here. MVLS also had a REAL ID factsheet you can access here.

“MVLS Has Been a Godsend to Me” Video
MVLS recently recorded a video highlighting the importance of volunteering and the big difference it can make in the life of an individual with a legal issue. Sometimes it can be hard to identify a legal issue or where to turn for help. This 5-minute video shows the good that can come of reaching out for legal help. The video is available here.

National Estate Planning Awareness Week
This week just passed but it’s not too late to share with your community members and colleagues that everyone should do their estate planning regardless of income. For those that income-qualify, free legal assistance is available through MVLS. You can also share a talk from John Kern, MVLS Advance Planning Project Coordinator, that breaks down what estate planning is and why every family should do it. Every year the University of Maryland hosts a Wills Week and John is one of their featured speakers. His presentation is available here.

Baltimore City Launches Security Deposit Assistance
The grant program, which launched earlier this month, will provide up to $2,000 toward a renter’s security deposit based on their income. The grants, which are administered by the Mayor’s Office of Children and Family Success, are available only to low-income residents on a one-time basis. To apply visit www.bmorechildren.com.

Spanish Language Community Resource Guide
The Office of People’s Counsel has released its Spanish language community resource guide. This guide includes information about your rights as a residential utility consumer, information on how to get help with your utility bill, telephone discount programs, answers to frequently asked questions about utility issues, and more. The guide can be found here.

Medicaid Open Enrollment
Medicare open enrollment ends December 7, with plans going into effect January 1, 2022. During this period, older adults can purchase, change, or drop their Medicare Advantage and Part D prescription drug programs, or switch to Original Medicare. Insurers and scammers take advantage of this period to market their services. Keep yourself safe by following these tips:

• Insurance agents are NOT ALLOWED to contact you unless you request an appointment first.
• There is no incentive, gift, or benefit if you sign up before December 7. Agents cannot pressure you into enrolling today.
• Agents cannot claim that Medicare endorses their plan.
• You can’t keep a Medigap policy and a Medicare Advantage plan at the same time – beware anyone who claims that you can.
• Scammers can “spoof” numbers and make it look like Social Security is calling. Do not trust the caller ID. Do not give your Medicare or Social Security number over the phone, or your bank or credit card information.
• Do your research – read the 2022 Medicare & You handbook or an insurer’s Annual Notice of Change and Explanation of Benefits to verify your coverage, benefits, and pricing.
• Report Medicare fraud at 1-800-MEDICARE.
• Speak to unbiased insurance counselors in your Maryland county. Click here to see a list of counselors.

Employee Retention Credit

The IRS has released Notice 2021-49 regarding the application of the rules for the Employee Retention Credit under the American Rescue Plan which extended the credit for wages paid before January 1, 2022, and answering some questions that practitioners have asked with regard to the application of the credit. However, the ERC does not have a large utilization, so Congress is looking at ending the credit as of September 30, 2021, as part of the infrastructure legislation for all employers other than Recovery Startup businesses.

Eligible Employers:

All employers, including tax-exempt employers, are eligible to take the credit as long as the employer meets the qualifications. There are limits as to which wages will be qualifying depending on the number of full-time employees, however.

Qualifications:

In order for a business to be qualified to take the credit, the business must meet one of the two following rules:

1. Fully or partially suspended due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19. Only wages paid during from the date the restrictions are put into place until the date the restrictions are lifted are qualified wages.

1. Substantial decrease in gross receipts – Notice 2021-23

1. • 2020 – 1^st of the quarter where gross receipts are less than 50% from same quarter of 2019 to last day of quarter where sales are more than 80% of the same quarter of 2019

1. • 2021 – any quarter where gross receipts are less than 80% of same quarter of 2019 or using the alternative method, if the prior quarter’s gross receipts were less than 80% of the comparative quarter of 2019, then the quarter will count. Using the alternative method, if a quarter in 2021 is qualified, the next quarter is automatically qualified. The Notice affirms that using the alternative method election is on a quarter-to-quarter basis. For 2021, if the employer was not in business in same quarter of 2019, then they would compare to 2020.

1. • Recovery startup businesses, under Notice 2021-20 are only qualified under these rules for the 3^rd and 4^th quarter of 2021. The business must have started operations after 2/15/2020 and their average gross receipts must be less than $1,000,000. These employers cannot exceed $50,000 in total credit per quarter if qualifying under these rules. There is no limit to the credit if the business qualifies under the full or partial suspension of operations or decline in gross receipts. In addition, a Recovery Startup business is allowed to use all qualified wages without the limitation on the number of Full Time Employees. Recovery startup businesses are subject to the aggregation rules under Notice 2021-20.

Eligible Wages:

Employers with over 100 Full Time Employees (employees who work on average 30 hours per week or more) in 2020 (500 Full Time Employees in 2021) only have qualified wages for the Employee Retention Credit to the extent that the wages are paid to employees not to work. (Health care costs are still qualified.)

Employers with less than 100 Full Time Employees (500 in 2021), Recovery Startup Businesses, or Severely Financially Distressed Employers are allowed to use all wages as qualified wages.

Severely financially distressed employers are those businesses whose decline in gross receipts are less than 10% of those in 2019. These employers are not subject to the qualified wage limitation imposed on large employers.

No wages are allowed if they were used for PPP forgiveness, the Work Opportunity Credit, or Paid Sick and Family Leave credits. For the 3^rd and 4^th quarter only, wages used for the Shuttered Venue Operators Grant, Restaurant Revitalization Grant).

Qualified Wages include cash tips reported by employees when the tips exceed $20 in a month. However, IRS says there is no prohibition against taking the ERC and the credit under 45B for cash tips.

Maximum credit:

• 2020 – 50% of eligible wages and qualified health care costs up to $10,000 for the year, maximum credit $5,000 per employee per year – wages paid between March 13 and December 31, 2020, inclusive.

• 2021 – 70% of eligible wages and qualified health care costs up to $10,000 per quarter, maximum credit of $7,000 per employee per quarter

Owners, Spouses and Related Individuals

The wages paid to individuals who are related parties under Code Section 51 are not qualified for the Employee Retention Credit whose wages do not qualify for ERC include:  majority owners, family members who are employed, and most spouses.

The IRS is using Code Section 267 attribution to disqualify wages paid to spouses if the owner and/or spouse have any living close relatives, whether the relatives work for the business or not. The only exception to allowing a spouse’s wages to be qualified is where neither the owner nor the spouse have any close living relatives. This prohibition is for majority owners (more than 50%) of corporations and other entities.

Minority Owners can potentially have their wages qualify for the ERC, but again, if they are related to any of the other owners by marriage or blood, then they could be deemed to be more than 50% owners.
IRS Notice 2021-49 Owner/family wages and ERC Qualification

**Assumes no other owners are related which would cause attribution of > 50% ownership.

Income Tax Reporting of Employee Retention Credit

The IRS holds that the reduction of expense for wages and qualified health costs occurs in the tax year the wages were paid or incurred, as opposed to the year that the credit was obtained. Employers who did not reduce wages or health care costs in the year attributable will need to amend their tax returns.

For example, a company who amends 2020 payroll tax returns to claim the Employee Retention Credit will report the credit as a reduction of wages and health care costs to the extent of the credit on their 2020 income tax return, even if the payroll tax return was filed or amended in 2021.

Other Changes Under the American Rescue Plan

The statute of limitations has been extended to 5 years for 3^rd and 4^th quarters of 2021 only for returns that are filed claiming the Employee Retention Credit.

If an employer receives the credit, then amends the payroll tax return to repay the credit, the repayment is determined to be an additional tax, but penalties for failure to timely pay or deposit tax will not apply if the taxpayer can show reasonable cause and not willful neglect.

For the 2^nd through 4^th quarters of 2021, the Employer’s share of Medicare taxes is now determined to be the non-refundable portion of the credit, where the Employer’s share of Social Security tax was the non-refundable portion of the credit in prior quarters. This particular change will affect the worksheets for the Form 941, but the ability to use the remaining credit against employee withholdings and as a potential credit will not change.

Courtesy of TaxSpeaker. Link TaxSpeaker to our aff link http://www.taxspeaker.com/aff/?maryland

Ellen Silverstein and Bob Medbery join Bill Feehley to discuss the Mid-Summer Wine Tasting and Mt. Vernon Tour taking place on July 17th and Mt. Vernon Tour which will be on October 20th. We look forward to seeing you there!

Watch on YouTube.

Coming Up: On Wednesday, July 14th at 10 a.m., Jim Dawson of Miles & Stockbridge will join us to discuss SDAT’s elimination of fees related to filing the articles of dissolution of a business, how it affects reinstating businesses and what effect it will have on forfeitures.

Be sure to Like/Follow us on Facebook so you can catch MSATP TV live every week!

How Self-Employed Individuals and Household Emplloyers Repay Deferred Social Security Tax | COVID Tax Tip 2021-96

The Coronavirus Aid, Relief, and Economic Security Act allowed self-employed individuals and household employers to defer the payment of certain Social Security taxes on their Form 1040 for tax year 2020 over the next two years. Half of the deferred Social Security tax is due by December 31, 2021, and the remainder is due by December 31, 2022.

For more information, click here.

IRS Provides Answers for Certain Transportation Companies Eligible for Treasury Grants | IR-2021-145

The Internal Revenue Service posted answers to questions that certain transportation companies may have regarding Treasury grants and related taxes.

The Coronavirus Economic Relief for Transportation Services (CERTS) Act of the Consolidated Appropriations Act of 2021 authorizes the Department of the Treasury to provide grants to  transportation service providers–including eligible motorcoach companies, school bus companies, and passenger vessel companies– that experienced annual revenue losses of 25 percent or more as a result of COVID-19.

For more information, click here.

What Organizations Should Understand About Applying for Tax-Exempt Status | Tax Tip 2021-97

Organizations that want to apply for recognition of tax-exempt status under Section 501(c)(3) of the tax code use a Form 1023-series application. Here are some tips to help them understand the process.

• The application process on IRS.gov includes a step-by-step guide explaining how to apply for tax exempt status.
• Form 1023-series applications for recognition of exemption must be submitted electronically online at www.pay.gov. The application must be complete and include the user fee.
• Some types of organizations don’t need to apply for Section 501(c)(3) status to be tax-exempt. These include churches and their integrated auxiliaries, and public charities with annual gross receipts normally no more than $5,000.

For more information, please click here.

Franchot Continues Countdown to July 15 State Tax Filing Deadline| Comptroller of Maryland

Comptroller Peter Franchot encourages taxpayers with last-minute questions about their state income tax returns before the July 15 filing deadline to seek assistance from agency staff, either in person or virtually.

The Comptroller extended the deadline by three months due to the economic impacts of the COVID-19 pandemic, as well as state and federal legislation that required extensive changes to 2020 tax forms in the middle of the tax filing season.

No interest or penalties will be assessed if returns are filed and taxes owed are paid by July 15. The extended deadline applies to 2020 individual, fiduciary and corporate income tax returns, as well as 2021 first and second quarter estimated payments.

For more information, please click here.

IRS Holds Special Weekend Events to Help People Who Don’t Normally File Taxes Get Child Tax Credit Payments and Economic Impact Payments | IR-2021-146

The Internal Revenue Service and partners in non-profit organizations, churches, community groups and others will host events in 12 cities this weekend to help people who don’t normally file a federal tax return to register for the monthly Advance Child Tax Credit (AdvCTC) payments.

The special events by IRS and partner groups to help people quickly file income tax returns and register for the advance payments will take place July 9-10, 2021. Events will be held in Atlanta, New York, Detroit, Houston, Los Angeles, Las Vegas, Miami, Milwaukee, Philadelphia, Phoenix, St. Louis and Washington, DC/Maryland.

For more information, please click here.