Tag: Canon Capital Accounting Services

New Form W-4 Issued by IRS for Use in 2020

The IRS has issued a new Form W-4 for 2020. All employers will be required to use this form for new employees hired as of January 1, 2020.

The 2019 Form W-4 underwent two previous updates, one in May and one in August, to incorporate the changes that came with the Tax Cuts and Jobs Act (TCJA). Those changes included suspension of personal exemptions and increasing the standard deduction, but previous versions of Form W-4 still included the withholding allowance based on the personal exemption amount. As such, some taxpayers were over-withheld and some under-withheld.

Current employees are permitted to submit a new Form W-4 after the first of the year, especially if they wish to adjust their withholding amounts. If current employees do not submit the new 2020 Form W-4, employers are required to base withholdings on the data provided on the 2019 version of the form so it would serve everyone best to make sure all employees complete a new Form W-4 in the New Year.

Learn more about the new Form W-4 in this FAQ guide provided by the IRS.

If you have questions about this topic or any of our other business service offerings, please don’t hesitate to call 215-723-4881 or contact us online.

Team Canon Capital Represents at the Indian Creek Foundation 2019 Roll, Stroll, and Run

The weather was gorgeous on Saturday, June 15, for the 2019 Indian Creek Foundation Roll, Stroll, and Run.

Team Canon Capital was represented by Sarah Hughes, one of our CPAs; Payroll processer/tax preparer Linda Covel; Linda’s sister-in-law Mary Jane Yoder; and Linda’s daughter-in-law Courtney Covel.

Sarah placed first in the Women’s Division and second overall in the 5K portion of the event, with a time of 20:56!

We were proud to be among the sponsors for this annual event, a fundraiser that benefits Indian Creek Foundation’s mission of supporting people with intellectual and developmental disabilities by providing them with opportunities to enrich their lives and the lives of those in their communities.

(Pictured L-R: Sarah Hughes, Linda Covel, Mary Jane Yoder, Courtney Covel)

Tax Cuts and Jobs Act: Changes to Business Taxes

We continue our blog series recapping our recent presentation on the new tax laws to the Indian Valley Chamber of Commerce. This blog covers changes made to business tax laws.

One of the advantageous aspects of this new tax law is that the government has provided a clear definition of what constitutes a “small business.” A “small business” is defined as a company with average gross receipts for the past three years of $25 million or less.

This means that businesses meeting the definition of a small business can now avail themselves of these aspects of the tax law:

  • Expanded ability of cash method: This means that If you have been operating on the accrual method and consistently have higher receivables than payables, you can elect to switch to the cash method, allowing for potential consistent deferment of income.
  • Inventory tracking requirements: This allows you to elect to treat your inventory as non-incidental materials and supplies (items you expense when used or consumed). However, under the non-incidental materials and supplies category there is another election called the de minimis safe harbor election, which allows you to expense, safely and without fear of audit, anything under $2500 or less. So, if you have inventory that qualifies as non-incidental materials and supplies, and the unit cost of each item is $2500 or less, you can potentially write off your entire inventory for this year, presuming the inventory is under a year old. For example, if you are the owner of a junkyard business and have $400,000 in inventory, if you did not pay over $2500 per car, you can make these elections and have a $400,000 expense.
  • Section 263A threshold raised: This was a tax requiring that you had to capitalize indirect costs, just for tax. This is gone

Other changes include:

  • C-corporate rate is a flat 21%
  • Entertainment no longer deductible: Meals, however, are another story. Technically, right now, according to the law meals are not deductible, but in October 2018 the IRS put out a guidance that they are deductible because there was a mistake in the writing of the law. This is likely one of the technical directions that will eventually be passed by Congress. Until then, we can rely on the IRS guidance.
  • Interest deductions limited: If your gross receipts are over $25 million, your interest deductions are limited to 30% of your taxable income and any unused portion will get carried forward.
  •  Business losses, no carryback and limited to 80% of income
  • Like-Kind Exchanges now only qualify on real estate
  • Technical terminations of partnerships are eliminated

Business Change Highlights – Depreciation

Changes were also made on depreciation. Here are the highlights:

  • Additional first-year/bonus depreciation: 100% for property acquired after 9/27/17
  • Bonus now allowed for new and used property: it used to be allowed only for new property
  • Bonus on qualified improvement property no longer qualifies as written. This is another item needing correction, but the IRS has not provided any guidance to date.
  • Bonus phase-down schedule for years after 2022
  • Luxury auto limits (note that the additional $8k depreciation has been extended for 2017)
  • Increased to Sec. 179 ($1M and threshold $2.5M)
  • SUV limitation remains at $25,000
  • 179 limits are indexed for inflation
  • 179 expansion for certain real property (HVAC, roofs)
  • 179 allows for residential rental property improvements

New Employer Credit

There is a new employer credit for paid family and medical leave. This is a general business credit that employers can claim based on wages paid to qualified employees while on leave, subject to conditions.

Planning Opportunities

Please keep in mind, these tax changes are set to expire at the end of 2025. There are a number of potential savings opportunities within these tax law changes. We recommend that businesses evaluate their tax structure and engage in multi-year tax planning.

If you have any questions or concerns about these changes, please call us at 215-723-4881. You may also consult our free online 2018-19 Tax Planning, which can be found here.

To view the portions of his seminar that were broadcast via Facebook Live, please visit our Facebook page.

Tax Cuts and Jobs Act: What’s New and How Will It Affect Your 2018 Tax Return?

We recently had the pleasure of presenting a seminar on the effect of the Tax Cuts and Jobs Acts on businesses and individuals. This is the first in a series of blog posts highlighting the information covered.

While we were all focused on the changes that were coming courtesy of the new Tax Cuts and Jobs Act, a number of additional tax law revisions took effect. The following is a brief recap.

Partnership Audit Regime Laws – Federal Law

Starting January 1, 2018, this Federal Law allows tax to now be accessed at the partnership level. While this is an administrative win, it comes with hidden ramifications to the taxpayer:

  • Assessed at the highest individual rate of tax – which is currently 37%
  • The 20% 199A (flow-through) deduction is no longer applicable
  • Current partners can be assessed for deficiencies from the year prior.

As a result, we recommend that all partnerships evaluate your partnership agreements.

1099 Withholding and Filing Requirements – State (Pennsylvania) Law

These requirements also went into effect on January 1, 2018.

The 1099 Withholding Requirement means you must engage in withholding on Pennsylvania-sourced non-employee compensation to non-residents. This includes business income and leases of real estate. This withholding is currently on a volunteer basis if the entity receiving payment is receiving $5,000 or less per year.

The new filing requirements state that starting in 2018, 1099s and W2s are required to be filed electronically if you are filing 10 or more forms. However, the Pennsylvania Department of Revenue is granting a waiver for the 2018 filing period. Learn more about this requirement in one of our previous blog posts.

Wayfair Decision Affecting Revenue from Online Sources

The Wayfair Decision brings economic nexus to online transactions. “Physical nexus” is when the consumer is making a purchase from a store or transacting with a business with a physical location. With the growth of online shopping, many B2C and B2B transactions take place with companies who do not have a physical presence in Pennsylvania, but their product is coming into Pennsylvania. With the Wayfair Decision, if you are a Pennsylvania-based business conducting online sales with people or companies outside of Pennsylvania, you may have multi-state filing requirements. Most states have differing thresholds, so if you are selling one or two items in a year and do not reach their particular threshold, you would not be required to file.

As always, if you have any questions or concerns regarding these changes, please call us at 215-723-4881. You may also consult our free online 2018-19 Tax Planning, which can be found here.

To view the portions of his seminar that were broadcast via Facebook Live, please visit our Facebook page.

Join us January 29 for a Free Seminar – The Tax Cuts and Jobs Act: What’s New?

Are you a business owner curious about what the new developments will mean for your 2018 return? Then join us Tuesday, January 29 as we, along with QNB Bank and the Indian Valley Chamber of Commerce, share the latest updates, including:

  • NEW Section 199A 20% Passthrough Deduction for S Corps, Partnerships, LLC’s and sole proprietors
  • NEW Partnerships Audit Examination Rules and How to Protect Yourself
  • NEW Bonus Depreciation and Section 179 Limits
  • NEW Pennsylvania 1099 Withholding Requirements
  • NEW Changes in Capital Gains, Mortgage Interest, State and Local Tax Deductions and More

Register with the Indian Valley Chamber of Commerce online or via phone at 215-723-9472 by January 22, 2019.

(Download the event flyer.)

We’ll Soon be One Source, Many Services, the Right Decision — All Under One Roof at our New Harleysville Location

We are excited to inform you that later this year, we are looking forward to moving from our Souderton and Hatfield offices to combine under one roof at our newly-acquired Harleysville location.

We’ll keep you posted on our progress with the building renovations as we work to make it our own before settling in. Until then, we are happy to continue to serve you at our Souderton and Hatfield locations.

One Source. Many Services. The Right Decision. This is our motto, which we strive to embody each and every day as our four business units work to serve your Accounting, Computer Solutions, Payroll, and Wealth Management needs.

Time for a “Paycheck Check-up” – IRS Issues New W-4 Form and Updated Withholding Calculator

With the passage of the Tax Cuts and Jobs Act, you might be receiving a higher net amount of money in your paycheck. To ensure you’re having the right amount of funds withheld in order to avoid a surprise during next year’s tax season, please follow the recommended steps in this message from the IRS:

“The Tax Cuts and Jobs Act made changes to the tax law, including increasing the standard deduction, removing personal exemptions, increasing the child tax credit, limiting or discontinuing certain deductions and changing the tax rates and brackets.

If changes to withholding should be made, the Withholding Calculator gives employees the information they need to fill out a new Form W-4, Employee’s Withholding Allowance Certificate. Employees will submit the completed W-4 to their employer.

The withholding changes do not affect 2017 tax returns due this April. However, having a completed 2017 tax return can help taxpayers work with the Withholding Calculator to determine their proper withholding for 2018 and avoid issues when they file next year.

Steps to Help Taxpayers: Do a ‘Paycheck Checkup’ 

The IRS encourages employees to use the Withholding Calculator to perform a quick ‘paycheck checkup.’  An employee checking their withholding can help protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time in 2019. It can also prevent employees from having too much tax withheld; with the average refund topping $2,800, some taxpayers might prefer to have less tax withheld up front and receive more in their paychecks.

The Withholding Calculator can be used by taxpayers who want to update their withholding in response to the new law or who start a new job or have other changes in their personal circumstances in 2018.

As a first step to reflect the tax law changes, the IRS released new withholding tables in January. These tables were designed to produce the correct amount of tax withholding — avoiding under- and over-withholding of tax — for those with simple tax situations. This means that people with simple situations might not need to make any changes. Simple situations include singles and married couples with only one job, who have no dependents, and who have not claimed itemized deductions, adjustments to income or tax credits.

People with more complicated financial situations might need to revise their W-4.  With the new tax law changes, it’s especially important for these people to use the Withholding Calculator on IRS.gov to make sure they have the right amount of withholding.

Among the groups who should check their withholding are:

  • Two-income families.
  • People with two or more jobs at the same time or who only work for part of the year.
  • People with children who claim credits such as the Child Tax Credit.
  • People who itemized deductions in 2017.
  • People with high incomes and more complex tax returns.

Taxpayers with more complex situations might need to use Publication 505, Tax Withholding and Estimated Tax, expected to be available on IRS.gov in early spring, instead of the Withholding Calculator.  This includes those who owe self-employment tax, the alternative minimum tax, or tax on unearned income from dependents, and people who have capital gains and dividends.

Plan Ahead: Tips for Using the Withholding Calculator

The Withholding Calculator asks taxpayers to estimate their 2018 income and other items that affect their taxes, including the number of children claimed for the Child Tax Credit, Earned Income Tax Credit and other items.

Take a few minutes and plan ahead to make using the calculator on IRS.gov as easy as possible. Here are some tips:

  • Gather your most recent pay stub from work. Check to make sure it reflects the amount of Federal income tax that you have had withheld so far in 2018.
  • Have a completed copy of your 2017 (or possibly 2016) tax return handy. Information on that return can help you estimate income and other items for 2018.  However, note that the new tax law made significant changes to itemized deductions.
  • Keep in mind the Withholding Calculator results are only as accurate as the information entered. If your circumstances change during the year, come back to the calculator to make sure your withholding is still correct.
  • The Withholding Calculator does not request personally-identifiable information such as name, Social Security number, address or bank account numbers. The IRS does not save or record the information entered on the calculator. As always, watch out for tax scams, especially via email or phone calls and be especially alert to cybercriminals impersonating the IRS. The IRS does not send emails related to the calculator or the information entered.
  • Use the results from the Withholding Calculator to determine if you should complete a new Form W-4 and, if so, what information to put on a new Form W-4. There is no need to complete the worksheets that accompany Form W-4 if the calculator is used.
  • As a general rule, the fewer withholding allowances you enter on the Form W-4 the higher your tax withholding will be. Entering “0” or “1” on line 5 of the W-4 means more tax will be withheld. Entering a bigger number means less tax withholding, resulting in a smaller tax refund or potentially a tax bill or penalty.
  • If you complete a new Form W-4, you should submit it to your employer as soon as possible. With withholding occurring throughout the year, it’s better to take this step early on.”

If you have any questions about your specific situation, please consult with your tax advisor. If you do not currently have a tax advisor, we welcome the opportunity to serve you. Please call 215-723-4881 or contact us online.

Beware a New Kind of Tax Scam

Cybercriminals are stepping up their game this tax season. The IRS is reporting a new kind of tax scam that began only a few days into this year’s filing season. It involves stealing data from the computers of tax preparers and using the data to file fraudulent returns.

“In a new twist, the fraudulent returns in a few cases used the taxpayers’ real bank accounts for the deposit. A woman posing as a debt collection agency official then contacted the taxpayers to say a refund was deposited in error and asked the taxpayers to forward the money to her.”

Here at Canon Capital, we take every possible precaution to ensure that your data remains safe and secure. Steps that you can take to protect your personal data include these steps:

  • Use strong, unique passwords. Better yet, use a phrase instead of a word. Use different passwords for each account. Use a mix of letters, numbers and special characters.
  • If an email contains a link, hover your cursor over the link to see the web address (URL) destination. If it is not a URL you recognize or if it is an abbreviated URL, don’t open it.
  • Use security software to help defend against malware, viruses and known phishing sites and update the software automatically.
  • Send suspicious tax-related phishing emails to phishing@irs.gov.
  • Do not return or click on emails or return a phone call from someone saying they are from the IRS. They simply do not work that way.

If you have any questions about this or any other topic related to your tax planning, we are happy to help. Call 215-723-4881 or contact us online.

IRS Standard Mileage Rates Increase for 2018

The IRS has announced standard mileage rates for 2018. As of January 1, 2018, the standard mileage rates for the use of a vehicle (car, van, pick-up truck, or panel truck) for business, charitable, medical, or moving purposes are:

  • 54.5 cents for every mile of business travel driven (an increase of 1 cent from the 2017 rate)
  • 18 cents per mile driven for medical or moving purposes (an increase of 1 cent from the 2017 rate)
  • 14 cents per mile driven in service of charitable organizations

We’ve touched on the importance of keeping good mileage logs and recommend using a mobile app such as TripLog or MileIQ. It’ll save you a lot of time and stress as you gather your financial data for tax preparation.

We’re happy to answer any questions you might have about this or any of your financial service needs. Call 215-723-4881 or contact us online.