Understanding the New 1099 Rules

In 2020, the new IRS tax law will take effect and will affect the way businesses report their income on Form 1099-K. It will change the reporting rules for payment processors and third-party settlement organizations (PSOs). Most businesses that accept credit cards or online payments will have to report this information in the form. If you’re not already doing this, now is a good time to start.

Starting in 2022, the new 1099-K reporting threshold will reduce to $400. However, it will still apply to transactions between businesses and part-time sellers. The amount of income you’ll need to report is also lower than it was previously. That means that if you sell goods and services, you’ll need to submit a 1099-K. If you’re a small business owner, this new threshold is important to note.

Before the new rules for IRS Form, 1099-K were implemented, businesses had to file them on time if they received over $20k in gross payments or 200 transactions. This requirement has been reduced to $600. That means anyone who earns over that amount will be taxed on the transaction. This means that many businesses should expect to see a spike in the number of 1099-Ks they need to file for the year 2022.

1099 Rules for Business Owners in 2022

The IRS has made a change that will affect millions of small businesses in the coming years. A little change in the American Rescue Plan Act of 2021 (ARPA) will change the way 1099s are calculated. This bill, which was designed to help the US recover from the recent economic crisis, contains many provisions that will require small business owners to be extra organized. The new rule will go into effect on January 31, 2022.

The deadline for submitting Forms 1099 to the IRS has been extended to January 31. In addition, businesses must file 1096, formerly known as a Form 10, with the IRS. Depending on the type of business, a business may also be required to file a 1099-NEC with the state as well. The IRS will require businesses to file 1099-NECs electronically, while states will require businesses to file paper copies with their tax offices.

The proposed regulations call for businesses to reduce paper filing from 300 information returns per year to 100 information reports per year by 2022. This amount doesn’t include specific types of reports, such as Schedule C. The new rules also require businesses to e-file all forms by the end of 2022. Those who have a business that uses Venmo and PayPal will be required to file Form 1099-NECs with the IRS, regardless of how the payments are made.

Advertisement

The Basics of Financing a Business

Buying a business is an investment that takes time, money, and research. There are many different financing options available to purchase a business, but these can have profound tax implications for you, unlike personal investment decisions.

What is Business Financing?

When you buy a business, you can choose from several different forms of financing. Call it cash, call it debt, call it equity. “financing” covers everything from a handshake agreement to a mortgage.

Debt Financing.

It is called debt financing because it does the businesses you buy or sell indebted to you. It is a contractual agreement outlining whom, when, and how much of the loan must be repaid. In other words, it’s a financial liability. There are many types of debt financing available to businesses

Equity Financing.

This is also called capital investment or risk capital because it involves an exchange of cash for ownership in a business. In other words, it is an investment or a personal liability. You become a part-owner of the business.

Numerous tax concerns must be analyzed when you plan to buy or sell a business. These considerations should be examined before you make your decision for one form of financing over another.

Income Tax Concerns.

There are two taxes to consider for debt financing. First, you must consider the tax ramifications of payments made on loan. The payments can be interest, salaries, or other sums of money owed to you by the business. The second tax concern is that of accrual income and deductions. Your accountant should provide you with detailed financial records and explanations of these concerns before your financing decision is made.

Like most business transactions, debt financing will increase taxable income. This is often described as an increase in “gross income.” Your accountant can calculate your gross income for you.

When you buy a business, you will usually have to pay for some purchase price with cash. The remaining portion of the purchase price will be financed by the seller (or lender) through a loan or line of credit. The loan payments are deductible for tax purposes. The expenses associated with the loan will be added to the business’s expense base, increasing the business’s cash flow.

Mezzanine Capital.

Mezzanine capital financing is a popular form of debt financing used to buy a business. Mezzanine financing is also commonly referred to as “working capital” and “small business loan.” The term mezzanine is borrowed from the world of high finance.

It refers to the middle tier or level in a three-tiered capital structure. Mezzanine financing sits between equity investments and first-tier debt in the capital structure.

Mezzanine financing is a hybrid form of financing that benefits debt and equity capital. Interest paid on mezzanine loans is tax-deductible, similar to the interest payments on traditional debt. The Internal Revenue Service (IRS) is likely to look closely at the loan arrangements between you and your buying or selling business.

Funding From Family and Friends.

Often the best financing option available to you will be from family or friends. This option, however, may come with some significant tax concerns of its own. While the amount of interest paid on loan may be deductible, interest paid on a personal loan is not deductible at all. In addition, the tax rules regarding loans to yourself also apply to loans made by family and friends (unless otherwise exempt). For more information on basics of financing a business visit investopedia.

In conclusion, before deciding on a form of financing, you should weigh the risks involved with each type of financing. There are many ways to finance a business, and you should carefully research your options to make an informed choice.

Tips for First Time Entrepreneurs

Starting a business can be an incredibly rewarding experience, but it can also be quite challenging. If you are new to entrepreneurship, there are some things that you need to know to be successful. In this blog post, we will provide you with some tips for first-time entrepreneurs. Follow these tips, and you will be on your way to success!

Keep An Emergency Fund

It is a good idea for first-time entrepreneurs to keep an emergency fund. Although you may want to be a big spender and buy everything that you need, a big purchase will not help your business get off the ground. Instead, put some money aside in an emergency fund so that you have it when it comes time to face unplanned expenses.

Know When To Take A Break

When you first start a business, it is easy to become overwhelmed. It is easy to get carried away and work more than you should. Although it can be difficult, remember that your health and happiness are important for the long-term success of your company. If you need a break, then take one.

Focus On Customer Acquisition

If you are looking for business ideas, think about businesses that focus on customer acquisition. A business like this will grow by finding new customers and keeping them happy. If your product or service solves a problem or is otherwise valuable, people will be willing to pay money to get it.

Enhance Marketing Practices

To attract customers, a business must market itself. This is especially true for technology companies. In the past, a business could rely on word of mouth and simple marketing techniques, but this is not the case in the age of social media and smartphones.

Business Finance Is Not Rocket Science

If you are a first-time entrepreneur, then the chances are that you have been an employee for most of your career. Unfortunately, business finance is different from personal finance, and it can be confusing for those who do not know all of the terms. To succeed as an entrepreneur, you must learn about business finance and ensure that all of your numbers are in order.

Learn Basic Skills To Make Your Product Better

When starting a business, you are essentially creating something from scratch. Even if your product or service already exists, you will likely have to make some changes to ensure success. Do not be afraid of learning the basics of design, engineering, writing, and marketing.

Safest Investments For 2022

Investing is not a straightforward process. It’s hard to know how to make the right decisions when you don’t know the difference between one asset class and another. There are so many factors that need to be considered when investing to do it well, factors such as risk-taking, diversification, market volatility, and economic trends.

Investing in Cryptocurrency

In 2021, the financial world changed dramatically, Cryptocurrency was hailed as the new way to build wealth. It is now used in a growing number of financial transactions. For instance, it’s even possible to buy a Tesla car using Bitcoin.

Cryptocurrency is a type of digital currency that uses encryption to regulate its creation and transactions. It’s a decentralized, peer-to-peer system that allows for transferring assets securely without an intermediary. It’s become increasingly common for people to use cryptocurrency to invest, trade or even pay for goods and services online.

Unfortunately, cryptocurrency may not be a safe investment. The IRS is expecting to seize cryptocurrency in 2022, billions of dollars’ worth of it. This is because the anonymous nature of cryptocurrency transactions makes it useful for criminals to commit various financial crimes, from money laundering to tax fraud.

Stay Safe with Traditional Investments in 2022

Treasuries are one of the most stable investments available. They are also the safest option because of government backing. Since they are supported by the money of U.S. taxpayers, people feel more confident with Treasuries than any other type of investment.

Bonds are another safe investment. They provide a predictable income stream. They are usually issued by governments, corporations, municipalities, and other entities that are looking for an alternative to bank loans. Investing in bonds is a safer bet most other financial markets because the issuer is responsible for the interest payments.

Investing in stocks or mutual funds can be a risky venture if you are not prepared. However, if you know how to invest and what you are investing in, the risk is manageable. The advantage of stocks is that you can get a good return on your investment.

When Investing Avoid Market Hype

Market hype can lead to making all the wrong investments for all the right reasons. To avoid getting hoodwinked by clever marketing promotions, there are a few basic rules for investing that you should learn. They can help you avoid investing when it is not worth it. You can discover these rules by educating yourself on how to make sound investment decisions.

A Beginner’s Guide to Mutual Funds

Mutual funds are types of investments that can be very useful for investors. If you’re already investing in things like the stock market and real estate, then you might be looking for something a bit different. There are many reasons why mutual funds might be the perfect next investment choice for you. Read this short beginner’s guide to mutual funds so that you can get the information that you need. 

There Are Usually Minimum Investment Requirements

Typically, mutual funds are going to have minimum investment requirements that you will need to meet. For instance, a mutual fund might have a $4,000 minimum investment, but some might have lower minimum requirements like $2,500. The amount that you will be required to invest at minimum to get started will differ depending on the mutual fund that you’re looking into. It’s always worth considering the terms of the mutual fund before moving forward. 

Mutual Funds Can Be Very Hands-Off

One great thing about mutual funds is that they can be very hands-off investments. You can set it up so that investments will be made automatically. This allows you to just sit back and watch your investment fund work to grow your wealth over time. If you’re looking for an easy type of investment that won’t take up a lot of your time, then mutual funds will be very appealing to you. 

There Are Different Types of Mutual Funds

The first thing that you should know is that there are different types of mutual funds out there that you can choose to invest in. Many of the most popular mutual funds are known as bond funds, and these funds are mostly invested in stocks. Bond funds are also widely utilized, and they are focused primarily on bond investments. Money market funds are also available as a low-risk investment in short-term securities. 

Mutual Funds Work Well with Your IRA

Of course, you need to consider the taxes on your earnings from the mutual fund investment. Knowing this, it’s good to consider using an IRA along with your mutual fund since you can enjoy certain tax advantages. If you wish to keep as much of your profits as possible, then it’s worth setting up an IRA before you go through with mutual fund investment. If you’re serious about investing, then you likely already have an IRA.

IRS Sees Billions in Crypto Seizures

One of the major issues that have been plaguing cryptocurrency traders and holders is the ever-growing number of government seizures. From Japan to the United States, there have been many instances where law enforcement agencies have seized cryptocurrency holdings – whether it be from individuals or businesses. One agency in particular that has seen a significant amount of success in these endeavors is IRS agents who have made billions by seizing crypto assets. In this post, we will outline 5 potential reasons why IRS sees billions in crypto seizures.

Cracking Down on Illegal Transactions and Money Laundering

One of the main reasons why the IRS is cracking down on what it sees as illegal transactions and money laundering is because most cryptocurrencies were designed to bypass third-party influence, thus making them ideal for criminal activities such as tax evasion and money laundering. When we look at Bitcoin in particular – the most popular cryptocurrency today – it was created in 2008 in order to eliminate the need for any bank or government involvement during transactions.

Lack of Paper Trails

Another motivator behind IRS seizing cryptocurrencies is the absence of a paper trail. Unlike when dealing with fiat currencies (dollars, euros, pounds, etc.), there is no physical proof of your ownership of the cryptocurrency. This means that when you sell or trade your digital currency, there is no seller or buyer information to prove that the transaction actually happened. Essentially, this provides an opportunity for anyone to sell their coins without it being associated with them.

Lack of Transparency

There’s also a lack of transparency involved in Bitcoin transactions. Since Bitcoin was designed for anonymity, it’s virtually impossible to determine the identity of the sender and receiver just by looking at wallets. This makes it extremely tough to prove that cryptocurrency was received illegally or involved in criminal activity.

Fear of Losing Out

Another important aspect is that Bitcoin has become incredibly popular recently, which means there is more and more competition among traders and investors to sell their Bitcoins. This has led some people to avoid reporting their cryptocurrency activity, while others have even resorted to illegal measures in order to avoid losing out on huge profits.

Fear of Doing the Wrong Thing

Finally, another reason why IRS is seeing so much success with seizing cryptocurrencies is that most people don’t know whether they should report their cryptocurrency transactions to the IRS or not. This is one of the main reasons why we’ve seen a significant increase in tax evasion and money laundering recently.

The Future of Cryptocurrency

Even with all these obstacles, there’s no doubt that cryptocurrencies like Bitcoin and Ripple will continue to grow and even replace fiat currencies in the near future. Many European countries such as Sweden and Russia have started embracing digital currency payments, which shows that many governments are willing to explore new technologies like cryptocurrency.

Post-PPP Taxes to Understand

The Paycheck Protection Program loans were a top priority for most struggling businesses due to the COVID 19 pandemic. Although these loans were beneficial to small businesses, most business owners find it hard to understand the tax implications. Below is a comprehensive description of the Post-PPP tax obligations.

Paycheck Protection Program Loans

PPP loans were awarded to small business owners to prevent them from going out of business and to retain their employees. Under the PPP program, small and medium business owners received a loan of up to two-and-a-half times the average monthly payroll. This loan had a cup of about $10 million.

The PPP loan intent was to cover the payroll and other business expenses during the COVID 19 pandemic. If properly appropriated on the approved expenditure, these loans are forgivable. However, if not, repayment of the funds will attract low interest and extended repayment periods. Although these funds have been beneficial to most small businesses and their employees, confusion about the tax implications has arisen.

Tax Implications of The PPP loans

Will the businesses that received the Paycheck Protection Program loan have a different tax situation than the previous years? This question was the concern of most business owners. The possibility that the loans would get considered as the taxable expense was another confusing aspect of these funds.

Although the Paycheck Protection Program (PPP) was seen by many as a lifeline, experts warned that the legislation could become a tax-laden time bomb. In May 2020, the IRS issued Notice 2020-32. This notice declared that if PPP loans were not taxable. However, the expenses usually not considered as tax-deductible wouldn’t be deductible. These expenses include utilities and rent.

This declaration threatened to kneecap the most attractive part of the PPP loans. However, Congress came to the rescue when they passed the recent PPP funding through the (C.R.R.S.A.A) Coronavirus Response and Relief Supplemental Appropriation Act. This act reversed the decision of the IRS made on the Notice 2020-32.

The Congress act declared that any forgiven PPP loan would be tax-exempted income. Thanks to this clarification, business owners can now take a Paycheck Protection Program loan and still get the (ERTC) employee retention tax.

This article was originally published on JBowmanAccountant.net

How to Plan Your Income for Retirement

Planning for retirement is important if you want to cope with life after your days in the office. According to the Employee Benefit Research Institute, 4 out of 10 American workers are saving money for their retirement. Do you want to be part of these smart employees or the lost majority? Here are some of the things you need to know about preparing for retirement.

Setting Financial Goals
Saving is a process that demands commitment. Since retirement is definitely not your only saving goal, you should try striking a balance or prioritizing what is necessary and weighty. For instance, you could comfortably do away with lingering debts and saving for vacations, cars, homes, and lattes.

Saving for Retirement
Retirement involves more than just assessing the amount of saving you need. When planning for retirement, it’s is also important that you pay attention to where you save your money. Find the best investment or saving account. Take time to calculate how much you need to save for retirement as well.

Investing
While saving is simply amassing wealth, investing is the process of multiplying the wealth. Cash is not a great way to store your wealth, and there are thousands of reasons why. Before investing your money in any project, assess the reward-to-risk ratio and the return on investment. Which investments are more diversified, and when do you get in for maximum gains.

What Do You Invest In?
Are you ready to have your retirement saving work for you? Well, if that’s the case, setting up an investment portfolio should not be complicated. Acquaint yourself with principal retirement investment rules. Are you a DIY person, or will you need to hire the services of a financial adviser? If you want to manage your retirement saving yourself, it is recommended that you gather sufficient knowledge on investment strategies. If you will choose to work with a professional, get to know about the related costs.

Building Wealth
Retirement investing is not a phenomenon that occurs in one sitting. It is a process that will change with the dynamics of your employment as you move from one job to another or up the promotion ladder. You will also have to endure changes in the stock markets and meet family obligations. However, that does not necessarily mean that you will have to babysit your retirement investment. There are numerous ways to protect and manage your wealth and savings in the long haul.

This article was originally published on JBowmanAccountant.net

Winter Home Maintenance Tips

With colder weather on the way, it’s imperative for homeowners to ensure their homes are in tip-top shape before the worst of winter hits. Here are some of the top 3 winter home maintenance tips.

1. Clean Up Your Foliage

The number one issues with having trees or shrubbery growing on a property are their potential for damage during harsh weather or if they become weighed down by things like snow. To mitigate the damage to a home or property, it’s a good idea to trim back the dead or overgrown trees and shrubs. Making these things more manageable will clean up the area around a home that could pose a danger.

Additionally, cleaning up the fallen leaves or branches from a home’s gutters or downspouts is equally as essential as trimming the source of the cloggers.

2. Check Your Home for Weatherproofing

Performing a routine check on a home’s roof or windows could end up saving a homeowner some of the cost of keeping a house warm. Whether a homeowner employs the help of a roofing company to do an inspection or they climb up a ladder to do it themselves, checking a home’s roof for broken or missing shingles could mean the difference between a frozen puddle in the kitchen and a warm household.

In addition to the roof, checking or re-sealing the windows will assist in keeping the cold out and the heat in once those frozen winter months settle in.

3. Pumps & Pipes

Testing and unclogging a sump pump if a home has one could prevent a flooding disaster before it happens. Every homeowner with a sump pump would be wise to check it before the frozen months set in.

Additionally, freeze-proofing pipes could mean the difference between burst pipes and warm running water during the coldest weather. Whether a homeowner treats this by running a trickle of water overnight or installing insulation around the pipes is largely subjective but highly recommended.

Keeping a Home Safe

Winter is coming, and with it, homeowners need to gear up to maintain their homes and ensure the safety of everything inside. Some of the best winter home maintenance tips are everyday things that make a big difference.

The Intersection Between Personal Finance and Technology

Technology and personal finance have gone hand in hand for years. From the ATM to mobile banking, there are many ways that technology has helped people manage their finances more efficiently. They can use their smartphone to track expenses, compare prices at different stores, and even deposit checks from the comfort of their home. With so much information and services available online these days, it’s never been easier for people to keep on top of their money. Here are ways in which technology has allowed access, portability, and flexibility in personal finance.

Accessing money

Technology has made it easier than ever to access money. People can get cash from ATMs anywhere, use mobile banking to check account balances and transfer funds, and even deposit checks with a smartphone app. There are also so many websites helping people manage their money online by tracking expenses or finding the best deals on products at different stores.

Automated withdrawal for savings

It can be tough to put some extra money away every month when there are so many other expenses competing for attention. With an automated savings plan, someone can set up automatic withdrawals from your checking account into a separate one where they save money regularly without having to think about it.

Automated bills payments

There are plenty of services that help people pay their bills. They schedule payments to ensure all their bills get paid automatically and on time, without hassle. Services like Venmo and PayPal also allow people to send money over the internet faster than mailing a check or setting up an online bank transfer.

Using a budget to manage spending

People can use a budgeting application to track all of their monthly expenses and income, which will help them get a clear picture of where their money is going. It’s also easier than ever before to automate saving for certain things like vacations or home improvements so that they’re never forgotten about. With these tools at people’s disposal, it is easy enough to keep on top of their finances without having too much stress from looking at the numbers every day.

Technology is all about simplifying life. With technology being incorporated into banking more and more, people can get a lot done from the comfort of their couch. Besides helping people adopt better spending habits, technology is also helping them save money that they would otherwise spend without the help of money management apps and sites.