Happy New Year and Welcome to 2020!
Year 2019 flew by and we are certain that it must have had something to do with the changes and challenges of learning the ins and outs of the Tax Cuts and Jobs Act (TCJA) of 2017. It has been an interesting year for our firm, and we hope that it has been a happy and prosperous year for you too.
Please review the important information below that will assist you in getting organized and prepared for the upcoming Tax Season.
Engagement Letters:
We now use just one Engagement Letter (EL) for all individuals and businesses. Taxpayers must complete just one EL for all tax filings each year that we prepare your return. Our EL includes a 'Payment Authorization' page, which states that your accounting fees are due and payable upon completion of your tax return. Please note that work will not be started on your tax return until your completed and signed EL has been received by our office.
The 2019 Engagement Letter can be found on either one of our websites and signed and submitted electronically: CLICK HERE
Tax Preparation Fees:
This year expect a minimum increase of 5% for all our services, including but not limited to: tax preparation, accounting services, and business filings. In addition, starting in Year 2020, our offices will be charging a 3% processing fee for all credit card payments. There are no additional charges for payments made via an electronic bank draft (EFT).
ShareFile:
Our offices use ShareFile to securely transfer and store files. If you have not set up your ShareFile account, then please follow this invitation link: CLICK HERE
Use your specific email address listed on your tax return. If you file a joint return, then both taxpayer and spouse are linked to the same ShareFile account.
Scheduling your Tax Appointment – New: Online Scheduling:
To increase efficiency and make it easier for clients to book appointments, we are implementing a new online scheduling program. When you call the office or email us, then we will direct you to our new online scheduling program. You will then be able to view all our open appointment times and schedule a time that works for you.
Tax Return Due Dates for Year 2019 returns:
Individual Tax Returns: April 15, 2020
Partnerships: March 15th for calendar-year filers (fiscal year; due by the 15th day of the third month following the close of the taxable year)
C corporations: April 15th for calendar-year filers (fiscal year; due by the 15th day of the fourth month following the close of the taxable year)
S corporations: March 15th for calendar-year filers (fiscal year; due by the 15th day of the third month of the taxable year)
W-2s and 1099s: Due no later than January 31, 2020
City of LA Business License Renewal: Due no later than Friday, February 28, 2020
Identity theft:
Starting in 2019, the IRS permits residents of some states, including California, to obtain an Identity Protection Personal Identification Number (IP PIN) upon request. Taxpayers who are part of the IRS’s IP PIN program receive a letter from the IRS every January containing a special PIN number that prevents their income tax return from being filed without that taxpayer’s unique IP PIN.
Taxpayers must create an IRS account and request their own IP PIN. If you are interested in obtaining your own IP PIN, then you can do so at: www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin
Virtual currencies:
The IRS has ramped up its enforcement of virtual currencies, such as Bitcoin. Most taxpayers who own virtual currencies fail to report their taxable transactions when filing their income tax returns. In 2019, the IRS started sending letters to taxpayers with known virtual currency accounts and now requires taxpayers (on their 2019 income tax return) to affirmatively declare whether they engaged in any virtual currency transactions during the year. Intentionally failing to report taxable income can have severe consequences.
For more information please click here:
https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions
California Health Insurance Mandate:
The federal government repealed the penalty for failure to maintain health insurance (referred to as the “individual mandate”) starting with the 2019 tax year. In response to the federal government’s repeal, as of January 1, 2020, the State of California will charge an individual who fails to secure ACA-qualified health insurance coverage an annual penalty of $695 (or more) when they file their 2020 California tax return.
For more information please click here:
https://www.ftb.ca.gov/about-ftb/newsroom/health-care-mandate/index.html?WT.ac=Healthcare
Foreign accounts:
We must report overseas assets owned by businesses as well as individuals. The reporting requirements are increasing and the penalties for failure to report continue to be harsh. Not all foreign holdings must be reported. If, for example, you hold stock in a foreign company through a U.S. broker, those holdings do not have to be separately reported. However, if you hold any other types of foreign assets, including bank accounts and securities accounts, then please let us know.
For more information please click here:
Gig Economy:
According to a Gallup poll, 35% of U.S. workers participate in the ‘Gig Economy’. When we think of the gig economy, we think of rideshare drivers or using Airbnb to rent out a room. There has been much debate and controversy as to whether payors in the gig economy must treat their workers as employees rather than as independent contractors. If you are receiving a 1099 for the first time, then please reference the information below to help you prepare for your tax filing.
For more information please click here:
https://www.irs.gov/businesses/gig-economy-tax-center
California adopts ABC test for classifying workers:
AB 5 codifies and expands upon the CA Supreme Court’s Dynamex ruling, in which the court adopted the ABC test for determining whether a worker is an employee or an independent contractor for purposes of CA wages.
Under AB 5, most workers are presumed to be an employee. Under the ABC Test, all three conditions of the test must be met in order to treat the worker as an independent contractor.
The ramifications of misclassification are severe.
The EDD is aggressive when it comes to payroll tax audits and California does not offer relief from penalties or have a voluntary classification settlement program. If the EDD finds the workers are employees, the business will be assessed significant tax, penalties, interest and any unpaid withholding and/or payroll tax.
In addition, California law allows the Labor Commissioner or a court to assess a civil penalty for “willful misclassification” of employees as independent contractors. The penalty, which is in addition to other assessments, penalties, or fines, is
$5,000 to $15,000 for each violation (a single misclassified individual); and
$10,000 to $25,000 for each violation if the Labor Commissioner, or a court, determines there is a “pattern and practice” of these violations.
For more information please click here:
https://www.edd.ca.gov/Payroll_Taxes/ab-5.htm