New Scam – Self Employment Tax Credit
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By Steven Brewer, CPA
Another tax scam has hit the market and social media. It is called the “Self-Employment Tax Credit”. The scam is marketed to self employed individuals and gig economy workers. The scam claims you can get up to $32,000 in a refundable credit for working during the COVID-19 pandemic period.
Social media seems to be the biggest media used to reach out to the unsuspecting people. This is causing them to file false amended returns. The promoters are charging hundreds, if not thousands, of dollars to prepare and help file these false returns. When the IRS denies the return and the taxpayer goes back to find the promoter who filed the return, they will be gone.
The closest tax credits that are available are the Credits for Sick and Family Leave for 2020 and 2021. What is happening is that taxpayers are claiming this credit when they are employees of a company and not self-employed person. These credits are only for self employed individuals who were not allowed to work (including caring for an individual subject to quarantine or isolation order) along with other technical requirements.
The marketing being used by the promoters is very similar to that seen for promotion of the Employee Retention Credit scams. As always, if you have any questions about a tax credit or other tax items, seek out the expertise of a professional tax preparer.
Also, there are other tax scams showing up for Fuel Tax Credit and household employee taxes. If you suspect something is a scam, it probably is.
How to maximize your relationship with your CPA!
Filing your taxes for 2024 can be made easier by getting ready now. Another year winds down and another tax return needs to be filed. So, as we move toward the end of the year, we would like to offer a few reminders to individuals that have business operations. First, make sure you have filed the newly required Beneficial Ownership Interest (BOI) form by December 31, 2024. With the growth of sales over the internet, you may need to track out of state sales totals for reporting.
Secondly, as year-end payroll reporting nears, don’t forget the following annual payroll reporting requirements. These include: Employee personal use of company vehicles, Employer paid health insurance for employees for W-2 purposes, Employer paid health savings account deposits for W-2 purposes Employer paid childcare expenses for W-2 purposes, Employer paid education plans and term life insurance for W-2 purposes, Employer contributions to employee pension plans. As we go into 2025, we are all uncertain of what new tax rules will apply in 2025. So you may want to consider deferring major equipment purchases and building repairs or improvements until next year unless you are able to specifically discuss how this may affect your business. In addition, you may want to consider postponing new tax elections or setting up new entities until, with your CPA, have a better understanding of what new tax laws will be introduced in 2025.
Next are a few year-end tax credits that might be valuable: 1. There is a new credit for smaller businesses who set up their first pension plan in 2024. This credit can, in many instances, completely offset the costs of setting up the plan as well as offset some or all of the employer’s plan contributions. 2. Some businesses may greatly benefit from the fuel tax credit. The Fuel Tax Credit is allowed for Federal highway tax paid for fuel used off-highway in a business such as pumps, generators, compressors, tractors, trucks used in lots, landscapers, farmers, grass cutters, tree trimmers, helicopters, crop-dusting and many more business applications. At over 18 cents per gallon this can be a huge credit! Start a Special File that updates your information to have ready: This includes: 1. Has there been a change in ownership this year? If so, provide new owner identification information, dates and percentages. 2. Have you opened or closed any locations this year-if so, please provide that information with the physical address. 3. Provide a list of information about your owners email addresses and cell phone numbers. Finally, do you have a website? If so, what is your website address: ___________________. Additionally, make sure you have considered sales and income tax registration, collection and filing requirements in other states. Last thing for filing normal year end information needed for filing 2024: 1. __ Copies of any new bank loans obtained during the year 2. __ Copies of any new leases signed during the year 3. __ List by date, amount and individual of any new investments made into the company this year by the owners 4. __ Copies of any federal or state tax correspondence received during the year 5. __ Copies of any equipment purchase invoices over $1,000 6. __ Loan payoffs, by loan number, of all business loans at December 31 7. __ Copies of your year-end bank reconciliation(s) and bank statements 8. __ 12/31/24 Year End Balances of: Accounts Receivable $___________ Cost of Inventory on Hand $________ Accounts Payable $ ______________ Unpaid 941 Deposit for December $__________ Unpaid State(s) Withholding deposits for December $_______________ Unpaid Sales tax for December $_____________ Unpaid wages earned through 12/31/23 $__________ 9. __ The enclosed engagement letter needs to be signed and returned 10. __ Year-end summary of business activity-back up, online access or hard copy (Accounting software back-up, trial balance, etc.) 11. __ Sales breakdown by state and city if applicable (Call us to determine) 12. __ Copies of all 4 quarters Form 941, and 2023 W-2’s issued to employees 13. __ All Forms 1099-K, 1099-NEC and 1099-Misc received Filling in the amounts above represents your company’s amounts as requested and should be compiled prior to your first meeting with your CPA.
Have questions? Make your 2024 tax filings easier this year. Simply fill out the information above and have it ready. Have any questions? Give us a call at 812-883-6938 to set an appointment and bring in this information and start 2025 off ahead.
I have heard many times; business owners say that making contributions to charitable organizations gets them a tax deduction. They can save more money in their business by doing this. Well, the true answer is not what they want to hear. For most of the businesses in the US, the answer is NO. Why not, you say? I gave money for business purposes to a charity. It should count for the same deduction as office supplies or wages. It does not. There are three main business entities in the US. Sole proprietorships (single owner), partnerships (two or more owners) and corporations (small and large). Of course, you have the LLC (limited liability company) which can be any of those three. The issue is that under sole proprietorships, partnerships and s-corporations (one of the two types of corporations), charitable contributions are considered pass-through items. Pass through items is not deducted to arrive at the net income or loss of the business. They are passed through or down from the business to its owners. The owners then take the deduction on their personal return just like if they had made the contribution themselves. For a c-corporation (the other type of corporation), the charitable contribution is deductible to a point but that is because a c-corporation is a standalone, tax paying business. Ok, so I will take the pass-through contribution off my personal taxes then, you say. Well maybe and maybe not. In 2018 we had a major tax change which doubled the standard deduction and eliminated personal deductions. When doing a tax return, you reach a certain point in preparation where you can deduct the HIGHER of your standard deduction or the total itemized deductions you have. Itemized deductions include out of pocket medical expenses above certain amounts, personal taxes paid, mortgage interest and charitable contributions. The problem is the standard deductions more than doubled in 2018 to almost $25,000 for a family ($12,500 for single) and have been going up each year since. Most people who did have higher itemized deductions under the prior to 2018 rules found out they did not itemize in 2018 and after. With the low interest rates, it is very hard for taxpayers to qualify for itemized deductions. So those pass through charitable contributions do not effect your return if you do not itemize. What can you do? First off, pick one or two organizations to support locally. Talk to them about sponsorships of programs, events, etc. and what “advertising” opportunities your business can have. I am not talking about your company name on a giving board in the lobby. Here is an example from me. I buy a sponsorship package each year for an organization for a large dinner and auction fundraiser. In return I do receive a dinner ticket and merchandise, which I reduce my cost by. What I get is that the organization places my company name in the program brochure, with my logo. They also have a continuous, rolling slide presentation of all sponsors going all night for the businesses who bought sponsorships. Now do I take 100% of the remaining cost as advertising? No, more like 80% which I classify as Advertising! The remaining 20% goes to charitable contributions. So that 80% of the remaining cost is advertising, which is now deducted as a business expense to determine net income or loss. So, I went from a nondeductible charity expense to a partially deductible business expense. As always you need to discuss things like this with your tax advisor or preparer. If you do not have one, please call our office for an in-office, ZOOM or phone meeting to discuss your entire tax situation.
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How to maximize your relationship with your CPA!
Filing your taxes for 2024 can be made easier by getting ready now. Another year winds down and another tax return needs to be filed. So, as we move toward the end of the year, we would like to offer a few reminders to individuals that have business operations. First, make sure you have filed the newly required Beneficial Ownership Interest (BOI) form by December 31, 2024. With the growth of sales over the internet, you may need to track out of state sales totals for reporting.
Secondly, as year-end payroll reporting nears, don’t forget the following annual payroll reporting requirements. These include: Employee personal use of company vehicles, Employer paid health insurance for employees for W-2 purposes, Employer paid health savings account deposits for W-2 purposes Employer paid childcare expenses for W-2 purposes, Employer paid education plans and term life insurance for W-2 purposes, Employer contributions to employee pension plans. As we go into 2025, we are all uncertain of what new tax rules will apply in 2025. So you may want to consider deferring major equipment purchases and building repairs or improvements until next year unless you are able to specifically discuss how this may affect your business. In addition, you may want to consider postponing new tax elections or setting up new entities until, with your CPA, have a better understanding of what new tax laws will be introduced in 2025.
Next are a few year-end tax credits that might be valuable: 1. There is a new credit for smaller businesses who set up their first pension plan in 2024. This credit can, in many instances, completely offset the costs of setting up the plan as well as offset some or all of the employer’s plan contributions. 2. Some businesses may greatly benefit from the fuel tax credit. The Fuel Tax Credit is allowed for Federal highway tax paid for fuel used off-highway in a business such as pumps, generators, compressors, tractors, trucks used in lots, landscapers, farmers, grass cutters, tree trimmers, helicopters, crop-dusting and many more business applications. At over 18 cents per gallon this can be a huge credit! Start a Special File that updates your information to have ready: This includes: 1. Has there been a change in ownership this year? If so, provide new owner identification information, dates and percentages. 2. Have you opened or closed any locations this year-if so, please provide that information with the physical address. 3. Provide a list of information about your owners email addresses and cell phone numbers. Finally, do you have a website? If so, what is your website address: ___________________. Additionally, make sure you have considered sales and income tax registration, collection and filing requirements in other states. Last thing for filing normal year end information needed for filing 2024: 1. __ Copies of any new bank loans obtained during the year 2. __ Copies of any new leases signed during the year 3. __ List by date, amount and individual of any new investments made into the company this year by the owners 4. __ Copies of any federal or state tax correspondence received during the year 5. __ Copies of any equipment purchase invoices over $1,000 6. __ Loan payoffs, by loan number, of all business loans at December 31 7. __ Copies of your year-end bank reconciliation(s) and bank statements 8. __ 12/31/24 Year End Balances of: Accounts Receivable $___________ Cost of Inventory on Hand $________ Accounts Payable $ ______________ Unpaid 941 Deposit for December $__________ Unpaid State(s) Withholding deposits for December $_______________ Unpaid Sales tax for December $_____________ Unpaid wages earned through 12/31/23 $__________ 9. __ The enclosed engagement letter needs to be signed and returned 10. __ Year-end summary of business activity-back up, online access or hard copy (Accounting software back-up, trial balance, etc.) 11. __ Sales breakdown by state and city if applicable (Call us to determine) 12. __ Copies of all 4 quarters Form 941, and 2023 W-2’s issued to employees 13. __ All Forms 1099-K, 1099-NEC and 1099-Misc received Filling in the amounts above represents your company’s amounts as requested and should be compiled prior to your first meeting with your CPA.
Have questions? Make your 2024 tax filings easier this year. Simply fill out the information above and have it ready. Have any questions? Give us a call at 812-883-6938 to set an appointment and bring in this information and start 2025 off ahead.