Helpful Information

These emails have subject lines such as "Automatic Income Tax Reminder" or "Electronic Tax Return Reminder".

The emails purport to be from the IRS and encourage you to click links that take you to a fake website that resembles the IRS site.  The emails also contain a "temporary password" or "one-time password" and tell you that clicking the link and entering the password will allow you to access information and files regarding your refund, electronically filed return, or tax account.

Result: If you click the link or enter the password, you will put a malicious file on your or your user's computer that lets the impostors either gain control of your computer or secretly download keystroke-tracking software on it.  Either way, they gain access to your financial accounts and other sensitive information.

AIPB reminder: The IRS does not send unsolicited emails and never emails taxpayers about the status of refunds or returns.  Never engage with emails purporting to be from the IRS, and do not click a link in an email unless you know the sender and were expecting the email.

[Information provided by the American Institute of Professional Bookkeepers]

By Dec. 1, 2019

• Remind employees on or before this date that if there has been a change in their filing status due to marriage, divorce, or dependents (birth, adoption, child turning 21), they may want to complete a revised W-4 for 2020 before the new W-4 must be used. (You may want to suggest that they use the new IRS FITW Estimator).
• Make sure employee paycheck names and SSNs match their SS cards and W-4 data.  Consider using the SSA's SSN Verification Service.
• Employers can elect to use the Special Accounting Rule and treat employee personal use of a company-provided vehicle in Nov. and Dec. as "paid" in 2020. 

Will your state follow California?

California employers who want to treat a worker as an IC must meet a three-part "ABC test" which requires employers to prove that - (A) the worker is independent and free to perform services without the company's control; (B) the services are outside the company's usual course of business; and (C) the IC is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

And there is one additional requirement: the IC must be in business for him or herself.  The law is directed at Uber and Lyft to change the way they treat people who perform driving services using those apps.  Legislators wanted the companies to provided drivers with benefits, minimum wages, wage-hour rules, and other protections for employees under state and federal law.

Uber says the law does not automatically reclassify its ride-share drivers, so it has no intention of reclassifying them and plans to respond to individual claims separately in arbitration and court (The Wall Street Journal).

AIPB tip: Although this law is aimed at Uber and Lyft, it applies to all California employers.  If your state enacts a similar law, rule, or regulation, would your ICs meet this standard?

 [Information provided by the American Institute of Professional Bookkeepers] 

BC, a professional corporation (C Corp.), was an accounting firm.  In addition to cash payments from clients, BC received what it called "trades" - clients' goods or services.  These goods or services were credited against the clients' accounts receivable, but not recorded as revenue in BC's general ledger or on its tax returns.

Although these payments in goods or services were never recorded as income for book or tax purposes, they were used by BC's owner or staff.

Upon audit, the IRS discovered the trades and recomputed BC's gross income to include them, then assessed BC's owner constructive dividends for the value of what he used.

Goods or services received as payment must be included in gross income.  The trade or barter of regular inventory or services between businesses does not qualify as a like-kind exchange.  (In like-kind exchanges, taxes can be deferred).

The taxpayer argued the amount should not be included in gross income.  Had it been included in gross income in the year of receipt, he claimed that it would have been paid as income to the owner - so the C Corp. still would not have had added taxable income.

Because the taxpayer chose not to report the income and include it as compensation in the taxable year, the trades would be included in the C Corp. taxable income.  The extent of the C Corp. owner's use of the trades would therefore be treated as distributions to him.  For technical reasons, the income was treated as dividends to the owner rather than as salary. (Benavides & Co. PC v. Comm., T.C. Memo. 2019-115)

 [Information provided by the American Institute of Professional Bookkeepers] 

Tool lets Taxpayers check status of their refund -

The best way for taxpayers to check the status of their refund is to use the Where's My Refund? tool on IRS.gov. This tool gives taxpayers access to their tax return and refund status anytime.  All they need is internet access and three pieces of information:

-Their Social Security number
-Their filing status
-The exact whole dollar amount of their refund

Taxpayers can start checking on the status of their return within 24 hours after the IRS received their e-filed return, or four weeks after they mail a paper return. Where’s My Refund? includes a tracker that displays progress through three stages: the IRS receives the tax return, then approves the refund, and sends the refund.

Where’s My Refund? updates once a day, so taxpayers don’t need to check more often.

Taxpayers on the go can track their return and refund status on their mobile devices using the free IRS2Go app . Those who file an amended return should check out the Where’s My Amended Return? tool.

Generally, the IRS issues most refunds in less than 21 days, but some may take longer. IRS phone and walk-in representatives can research the status of refunds only if it's been 21 days or more since a taxpayer filed electronically, or more than six weeks since they mailed a paper return. Taxpayers can also contact the IRS if Where's My Refund? directs them to do so.

An income statement and a balance sheet will tell me the same thing, right? The answer to that is both no and yes. While it is true that both financial statements will provide insight into your company’s finances, each statement has its own set of variables. To start, your income statement reports the income and expenses for a specific period of time (i.e. a month, a quarter, or a year), whereas the balance sheet lists your company’s assets and liabilities at a specific date. Besides time parameters, here are a few differences between an income statement and a balance sheet.

Income Statement - An income statement can also be referred to as a profit and loss (P&L) statement. The income statement shows how much revenue your company has earned over a specific time period (i.e. a quarter or a year) and includes the costs and expenses that are associated with earning this revenue. Typical expenses include the costs of the goods sold, operating expenses (such as marketing, business development, and administrative expenses), and taxes.

Once you factor all of these variables in, you’re left with what your company has earned or lost during the specific period. This is known as the “bottom line.” What the bottom line shows is if your company has earned money or lost money during this period. In essence, the income statement tries to measure if the products and/or services your company offers are profitable, once you factor out all of the expenses associated with running the business.

Balance Sheet - While an income statement looks at data for a specific period such as a month or a year, the balance sheet is a snapshot of financial data at a specific point in time. Your company’s balance sheet provides a look at your business assets and liabilities at the time of reporting. So, how do assets and liabilities differ from the variables in an income statement such as income and expenses? Here’s how:

Assets are what your company owns. Any physical property such as machinery, cars, trucks, and inventory, are all considered assets. Cash is also considered an asset as are any investments made by your company.

Assets are usually listed on the balance sheet in order of how quickly they can be converted into cash. Inventory tops the list as it can be quickly turned into cash; then it is followed by non-current assets and fixed assets such as office furniture, electronic equipment, and other items that aren’t expected to be converted into cash (but could be if needed).

Liabilities are amounts of money your company owes to others. Included under the liability category are loans (money borrowed from a bank), money owed to suppliers, and even taxes.

Liabilities differ from expenses in that they also factor in future money owed. So for example, rent can be considered both an expense and a liability. Rent is calculated as an expense on the income statement for rent already paid in that period. On the balance sheet, rent can be considered a liability in that according to the lease, you owe “x” amount of dollars each month for rent – future money owed to another party.

This is just a brief overview of the differences between income statements and balance sheets.