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Small Business Tax Filing 2020 | Coronavirus Update April 14

Small Business Tax Filing 2020 | Coronavirus Update April 14

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Posted by Ian H., CEO

April 15, 2020

Service companies are the backbone of the economy and Housecall Pro is committed to doing everything we can to help during the Coronavirus pandemic. 

I hope you find the resources below helpful. Please share this email with other home services companies. 

Sincerely,

Ian Heidt

CEO, Housecall Pro

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April 14, 2020 quick update

(Watch this section on YouTube

here

)

The

Johns Hopkins CSSE dashboard

is reporting 1,961,965 global cases and 125,476 deaths.

In the US, there are 602,989 US cases and 25,575 deaths as of 4:32 pm pacific on April 14.

The U.S. will suspend funding to the World Health Organization

while it reviews the agency’s response to the Covid-19 pandemic, President Donald Trump announced today, saying the international health agency made mistakes that “caused so much death” as the coronavirus spread across the globe. “Today I’m instructing my administration to halt funding of the World Health Organization while a review is conducted to assess the World Health Organization’s role in severely mismanaging and covering up the spread of the coronavirus,” Trump said at a White House press conference.

SOCIAL DISTANCING

Governors from several states on the east and west coasts have begun

coordinating plans to relax social distancing measures

. The states include New York, New Jersey, Connecticut, Pennsylvania, Rhode Island, Delaware, and Massachusetts on the east coast and California, Oregon, and Washington on the west coast. These efforts will aim to rely on available data and expert input in order to determine the best approach to relaxing social distancing measures. 

At the federal level, President Donald Trump is expected to announce

a council

that will advise him on planning for resuming normal business and community activity, which could include members representing a variety of perspectives, potentially including some state governors.

US CONSUMER SPENDING

 

Finally, in financial news, analysis conducted by

The New York Times

looked at changes in how Americans are spending money as a result of the COVID-19 pandemic and associated social distancing measures. 

April 14 Topic: Take care of your taxes Tuesday

(Watch this section on YouTube

here

)

Special Guest 

  • Hal Rosen from Haynie & Company. Hal is a CPA, a certified Quickbooks ProAdvisor and a tax planner for more than 27 years. In his words: To minimize your taxes, you need a plan. You need concepts and strategies that leave more on your bottom line.”

  • Now more than ever, pros need to be planning for profitability. And with all the changes in your business due to Coronavirus, your tax strategy is a critical piece of your plan for how to get through, and even thrive during this extraordinary period. Roland, a Housecall Pro co-founder, and Hal will talk taxes, take questions and help make the complex simpler. Nobody likes taxes, but you’ll be certain to like the actionable strategies from our broadcast.

Tax Filing Date Extended

  • The new filing date for taxes this year is now July 15

  • it gives us a lot of time to get stuff in without the extension

  • You should not put off doing your taxes though

  • If you file your taxes now, you do not have to pay till July 15th. It's just going to be postmarked by July 15th. 

  • This also includes the estimated payment deadlines for 2020. So the first one is typically due on April 15. That's now July 15th. The second one is due June 15th. Just two days ago, they announced that's now moved to July 15th. 

  • Some other things that you could do for example, like fund an IRA, SEF,  a fund, your HSA. Those are now July 15th.

Top Business Mistakes 

  • Failing to plan

    • “There is nothing wrong with a strategy to avoid the payment of taxes. The Internal Revenue Code doesn’t prevent that.” - William H Rehnquist

      (former Supreme Court Justice)

    • Tax planning is the key to financial defense and it guarantees results

  • Audit Paranoia

    • Entity selection is important in not only reducing your chances of being audited but can also save you money on taxes

  • Wrong Business Entity

    • Sole Proprietorship

      • Report net income on Schedule C

      • Pay income tax on net income

      • Pay SE tax up to 15.3% on income

    • S-Corporation

      • Split proceeds into salary and income

      • Pay income tax on salary and income

      • Pay FICA up to 15.3& on salary

      • Avoid FICA/SE tax on income

  • Wrong Retirement Plan

    • I see people that choose a wrong retirement plan, but more often than not, they choose no retirement plan, which I think is even worse than the wrong plan.

    • As soon as you can, you need to start doing something because the magic of compounding money really is huge. And so the longer you can be doing it, the better off you are.

  • Start with SEP IRA or SIMPLE IRA because typically no administration fees

  • When to consider a 401K? Even if it’s just you you may want a solo 401k because it allows you to put more money away than the SIMPLE or SEP IRA. 

    • Defer up to 100% of income up to $17,500

    • Over age 50 add $5,500 “catch up”

    • Employer contributes up to 25%

    • Max contribution is $52,000

  • Defined Benefit Plans are an option too

    • Required contributions based on age and salary

  • Missing Family Employment

    • Children age 7 and up

    • First $12,200 is tax free under current tax law

    • They can do an IRA too

    • “Reasonable” wages

    • Written job description, timesheet, check

    • Account in child’s name

    • FICA/FUTA savings 

    • Not applicable to S-Corps but works if you are a sole proprietor or partnership

  • Missing Home Office

    • Determine the “BUP” or business use of personal home but it needs to be a space used exclusively for business

      (think spare bedroom not the den or family room)

    • What is square footage of the office and what is total square footage of entire home. Determine the percentage 

    • Deduct “BUP” of expenses: mortgage, property taxes, utilities, security, cleaning, office furniture (depreciates over 39 years)

Tax Strategies that are relevant to Pros right now

  • EIDL and PPP 

    • Apply for them and especially for the EIDL use this as an opportunity to restructure your business

  • Smaller banks and credit unions seem to be more agile with these programs so far

  • If you are having financial trouble, communicate with your landlord and vendors, and your lender. 

Q&A 

(Watch this section on YouTube

here

)

  • I made the mistake of filing my federal tax payments monthly so I got stuck making a big old EFT P S payment the other day. It's my understanding that I can't switch that schedule now and honestly business is down more than 50% so I think I shouldn't have to pay much next month.

    • Well, if you're paying payroll taxes monthly, that's because your payroll from July 1st of 2018 to June 30 2019 your payroll tax is paid, but your nine 41 exceeded $50,000 and there's really nothing you can do about that. They haven't delayed that out. There is something we didn't mention where there is a plan where you can set aside the company portion of social security, not Medicare, just social security and pay that in actually half of it at the end of this year, half the end the next year you can even put it off for two years. So there is a plan for that that we didn't get him to. And that may be something you want to elect to do. You really need to talk to your payroll provider because they've got ways of setting that up.

  • Is it better to have a self directed IRA Roth?

    • So a self directed Roth can be great. It's not giving you any tax advantage now. So it goes in as after tax money. You know, the advantages if you have it for five years, uh, you know, when you go to pull money out, when you qualify at the right age, it's all tax-free.

    • if you're in a, if you're in a 12% tax bracket, the Roth makes a lot more sense. You're not saving that much in taxes. If you're in a 24 or 32% tax bracket plus your state, then that makes a lot more sense to use the traditional one.

  • I can't pay my kids if I'm an S Corp?

    • You can pay them but you can’t take advantage of not paying FICA taxes. You would need to treat them just like a normal W2 employee. Only sole proprietorship or partnership will let you avoid FICA. 

  • Can you add the garage to the BUP?

    • You can calculate the garage square footage separately and add that to the square footage of the office in your house since that is where you store your vehicle and do repairs. 

  • Is the home office calculation different if it is a separate building on your property?

    • If the space has its own meter for utilities then yes you can count it very easily. If you don’t have separate meters it becomes tricky. If you are able to add a meter and then keep everything separate that is the best thing to do and then you can write the whole thing off. 

  • What happens to self-employment tax if I only pay half as a C Corp?

    • If you're a C Corp, the employee pays half as a payroll withholding and then the company matches the other half. So the S the 15.3% still being collected, it's just the company pays half and the employee pays half

Don’t Forget to Join Us Online

Don’t forget to join your regional meetup and learn more about how to navigate this crazy time, with marketing, sales and operations tips. 

Network with other professionals in your area and receive a $15 Grub Hub gift card, just for participating. Register today! 

Keep Your Industry an Essential Service

We’re making it easy to write to your government representatives and send them a letter urging them to classify your industry as an essential service during this time of uncertainty.

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Legal disclaimer

Housecall Pro is offering the Coronavirus Evening Update for Home Service Businesses for informational purposes only and to foster thoughtful communication and discussion regarding the COVID-19 pandemic; Housecall Pro is not offering advisory services or otherwise advising or representing any members of the group invited to participate.  Housecall Pro is not offering legal, medical or other professional advice in the Coronavirus Evening Update and makes no representations or warranties regarding the content of the Coronavirus Evening Update. Participants should obtain independent advice relating to their businesses and their particular circumstances.

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