If you are a real estate investor, or even if your business owns its own real estate, providing your partnership tax return to your banker to satisfy reporting requirements may not be enough anymore. Partnership tax returns (Form 1065) for the 2020 tax year are in the midst of a reporting change that may leave taxpayers and lenders who use tax return information scratching their heads. Prior to 2020, partners’ capital accounts could be reported based on several accounting methods, such as tax basis and Generally Accepted Accounting Principles (GAAP). This generally meant that the amounts for partners’ capital accounts on the “Balance Sheets per Books” on Schedule L, the “Analysis of Partners’ Capital Accounts” on Schedule M-2, and each partner’s capital account analysis on their respective Schedule K-1 would all equal and were typically in-sync with the business’ books and records. New for 2020, the IRS took away the taxpayer’s choice in reporting partners’ capital accounts. The balance sheet… read more →
The Employee Retention Tax Credit is another tax credit opportunity under recently passed Coronavirus-related relief legislation. As a business owner, you should review these rules to determine if you can receive credit dollars from the Employee Retention Tax Credit. Background: The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law on March 27, 2020 and provides qualifying employers new opportunities with the Employee Retention Tax Credit (“ERTC” or “ERC”). For 2020: The ERC permits qualifying employers to claim a payroll tax credit of 50% of qualifying wages (up to $10k wages) per employee. The total credit amount is limited to $5k per employee for the entire year of 2020. But you must meet certain qualifiers. Under the CARES Act, a small employer with significant decline in gross receipts may qualify for the ERC. An employer qualifies for a significant decline in gross receipts for the period beginning with the first calendar quarter in 2020 for which its… read more →
The restaurant industry has been one of the industries most impacted by the coronavirus pandemic. In an effort to stimulate restaurants, and businesses in general, the Consolidated Appropriations Act signed December 27, 2020 attempts to provide much-needed assistance to some of the industries most affected. Among its provisions, the Act provides a temporary 100% deduction for tax years 2021 and 2022 for business meals provided by a restaurant. This change in percentage is a temporary reprieve from the statutory 50% limitation on the business deduction. The language of the Act – “by a restaurant” rather than “in” – makes clear that the deduction isn’t limited to meals eaten on-site – takeout and delivery also qualify. The current rules and regulations that otherwise govern the deductibility of business meals are set forth in the 2017 Tax Cuts and Jobs Act (TCJA). (Here’s a link to our TCJA article based on law before the recent 2020 changes.) What is and isn’t allowed… read more →
As a result of many individuals working from home due to the current pandemic, an internal audit function may be the solution to help the company’s management feel more at ease that the company is operating effectively, efficiently, and as intended by its stakeholders. Monitoring the operation and control environment may be a difficult task for the company’s management. How do you know if your team is producing the same types of results or using the same protocols from home as if COVID-19 never happened? Having an efficient and effective internal audit performed is key in providing a continuous review of the effectiveness of risk management, internal control, and the governance process. Implementing or outsourcing an internal audit function may assist in accomplishing that goal. Some advantages and limitations of an internal audit function include: Advantages: Helps identify errors before an external audit or review May help reduce chances of fraud, as there is continuous monitoring Independent review of business… read more →