2022 Inflation Reduction Act - Summary

Following is some important information regarding the filing of annual 1099's.

IRS Scrutiny of 1099 Filing Requirements

We urge all of our clients with Modified Adjusted Gross Incomes that are or may be over $250,000 Married Filing Joint ($200,000 Single) to read this article and call us with any questions or concerns.

Planning for the New 3.8% Medicare Tax on Unearned Income.pdf

Following is an excerpt from the approval letters the IRS sends to taxpayers that apply for Federal Identification Numbers. These are issues that we feel IRS will be targeting during its audits of S Corporations. We will be sure to contact you if any of these items pertain to you in order to correct these issues and keep you and your Company in compliance. If you have any questions, please feel free to contact us at 706-692-6536.

“The Internal Revenue Service has identified several mistakes commonly made by S corporations and their shareholders.
 

• Losses in Excess of Basis – Pursuant to Internal Revenue Code (IRC) section 1366, a shareholder in an S corporation may not deduct S corporation losses in excess of their basis in stock and/or debt.  Each shareholder’s stock basis and debt (loans from shareholders) basis should be computed annually.
• Taxable Distributions – Pursuant to IRC section 1368, distribution to shareholders in excess of stock basis are generally taxable.
• Gain on Repayment of Loans from Shareholders – where the shareholder previously used debt basis to absorb S corporation losses, subsequent repayments on the loans are generally taxable.
• Compensation to Shareholder – If the shareholders performing services for the S corporation, be careful not to improperly classify the compensation as payments other than salary (examples; excessive rent, or distributions) in order to avoid employment taxes.
• Fringe Benefits – Certain fringe benefits paid on behalf of a shareholder who owns more than 2% of the stock (or shareholder’s family) are taxable.  Examples include certain accident, health, and life insurance premiums, meals and lodging, and certain cafeteria plan benefits.
• Accrual of Expenses Due to Shareholders – Pursuant to IRC section 267, an accrual basis corporation may not accrue and deduct expenses (such as rent) due to a cash basis shareholder until the amount is includible in the income of the shareholder (when paid).”

Following is an IRS checklist to help you to determine if you have an employee or independent contractor relationship.

20 Common Law Factor Checklist

Following are some preventive measures to help keep your identity safe:

Individual Preventive Measures

• Truncate Social Security numbers (SSNs) where possible or mask them on insurance cards.
• Monitor credit reports at least annually.
  Contact details for the fraud departments of the three major credit bureaus are:
  Equifax-Equifax.com, 1-800-525-62851-800-680-7289
  Experian- Experian.com, 1-888-397-3742
  TransUnion – Transunion.com, 1-800-680-7289
• Forward any IRS notices immediately to your CPA immediately.
• Keep Social Security cards and financial information in a secure location and properly dispose of documents with SSNs or account numbers.
• Give out an SSN, birthdate, or address only if required.
• Buy and use a shredder.
• Protect personal computers with firewalls, anti-spam, or anti-virus software; regularly change passwords; and password-secure wireless connections.
• Be mindful of the personal information divulged on social media, as hackers are getting increasingly sophisticated.

Business Preventive Measures

• Use anti-virus and other security software on all office computers and update data-security policies.
• Educate employees about phishing (attempts by fraudsters to acquire information via electronic communications by posing as a legitimate entity).
• Remind employees not to open links or attachments from emails they were not expecting to receive.
• Update business filings with the IRS and with state business registries as soon as any contact information changes.
• Monitor the business’s credit profile at least annually.
• If possible, consider filing business tax returns earlier in tax season.
• Forward phishing emails purported to be from the IRS per the forwarding instructions on the IRS website.