Business Taxes, Family Taxes, General Information, General Tax Topics, Small Business, Uncategorized

$5,000 Chicago Microbusiness Recovery Grant program. Lottery disbursement.

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Source: Copied & Pasted Email Received from The Chicago BACP
“The Chicago Microbusiness Recovery Grant Program will provide $5 million in grants to businesses with four or fewer employees in low- and moderate-income areas of the city. Grants of $5,000 will be disbursed via a lottery, with winners equitably distributed across eligible Community Areas based on population. Applications are available now and will be open until Monday, May 4th at 5:00 pm.
BACP will be holding a series of webinars in multiple languages this week to inform prospective applicants about the Recovery Grant program and to answer questions. To register, please visit chicago.gov/businessworkshops.
You can find details on the grant below. To apply and learn more, please visit chicago.gov/recoverygrant.
Eligibility Requirements
To be eligible for a grant, businesses must meet the following requirements:
  • Four or fewer employees
  • Less than $250,000 annual revenue
  • Located in the City of Chicago
  • In business for one year
  • 25% decrease in revenue due to COVID-19
  • Located in a low-income Community Area (view map)
  • Search for your Community Area
Required Documentation
Applicants must upload the following documents:
  • A business bank statement from 2020 that includes the business address and business name
  • A valid business license dated 05/01/19 or earlier
  • A valid identification card (driver’s license, CityKey, etc.)
  • A completed W9 form (access a fillable form here)
Grant Details
  • One-time grant of $5,000
  • Grant funds must be used for working capital (rent, payroll, utilities, taxes, insurance, operations)
Timeline
  • 04/28: Grant application is available
  • 05/04: Grant application closes at 5:00pm CDT
  • 05/11: Grant recipients are chosen via lottery and notified of their acceptance. ACH payments are initiated – funds should be received within 2 business days.
Applications are available in Spanish and questions can be submitted to the Recovery Grant Team via these webforms in English or Spanish.
Please note that funds available through the Recovery Grant Program and the Chicago Small Business Resiliency Loan Fund are intended to complement the federal financing available through the U.S. Small Business Administration (SBA). The SBA resumed accepting Paycheck Protection Program applications from participating lenders on Monday, April 27 at 9:30am CDT. Click here to find an eligible Paycheck Protection Program lender. If you need assistance navigating the funding and resource landscape during the COVID-19 outbreak, please reach out to a Small Business Resource Navigator for individualized 1:1 support.
I want to thank all of you for your persistence and dedication during this incredibly difficult time. Your City government will continue to fight for our small businesses and we will continue providing information and resources to navigate this crisis.
Sincerely,
Rosa Escareno
BACP Commissioner”

 

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Congress Reinstates Expired Tax Provisions—Some Back to 2018

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Congress let many tax provisions expire on December 31, 2017, making them dead for your already- filed 2018 tax returns.

In what has become much too common practice, Congress resurrected the dead provisions retroactively to January 1, 2018. That’s good news. The bad news is that we have to amend your tax returns in our Chicago south loop tax preparation office to make this work for you.

And you can relax when filing your 2019 and 2020 tax returns, because lawmakers extended the “extender” tax laws for both years. Thus, no worries until 2021—and even longer for a few extenders that received special treatment.

Back from the Dead

The big five tax breaks that most likely impact your Form 1040 are as follows:

  1. Exclusion from income for cancellation of acquisition debt on your principal residence (up to $2 million)
  2. Deduction for mortgage insurance premiums as residence interest
  3. 7.5 percent floor to deduct medical expenses (instead of 10 percent)
  4. Above-the-line tuition and fees deduction
  5. Nonbusiness energy property credit for energy-efficient improvements to your residence

Congress extended these five tax breaks retroactively to January 1, 2018. They now expire on December 31, 2020, so you’re good for both 2019 and 2020.
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Other Provisions Revived

Congress also extended the following tax breaks retroactively to January 1, 2018, and they now expire on December 31, 2020 (unless otherwise noted):

  • Black lung disability trust fund tax
  • Indian employment credit
  • Railroad track maintenance credit (December 31, 2022)
  • Mine rescue team training credit
  • Certain racehorses as three-year depreciable property
  • Seven-year recovery period for motorsports entertainment complexes
  • Accelerated depreciation for business property on Indian reservations
  • Expensing rules for certain film, television, and theater productions
  • Empowerment zone tax incentives
  • American Samoa economic development credit
  • Biodiesel and renewable diesel credit (December 31, 2022)
  • Second-generation biofuel producer credit
  • Qualified fuel-cell motor vehicles
  • Alternative fuel-refueling property credit
  • Two-wheeled plug-in electric vehicle credit (December 31, 2021)
  • Credit for electricity produced from specific renewable resources
  • Production credit for Indian coal facilities
  • Energy-efficient homes credit
  • Special depreciation allowance for second-generation biofuel plant property
  • Energy-efficient commercial buildings deduction

Temporary Provisions Extended

Congress originally scheduled these provisions to end in 2019 and now extended them through 2020:

  • New markets tax credit
  • Paid family and medical leave credit
  • Work opportunity credit
  • Beer, wine, and distilled spirits reductions in certain excise taxes
  • Look-through rule for certain controlled foreign corporations
  • Health insurance coverage credit

If you have questions about the extenders, please call us at 855-743-5765. Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, need help with tax debt, business tax preparation, business entity creation, business insurance, or business compliance
assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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Business Taxes, Family Taxes, General Information, General Tax Topics, Self Employed, Small Business, Tax Debt, Tax Deductions, Tax Planning, Tax Reduction, Uncategorized

Unlock Tax Deductions with a Rental Property Home Office

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With the start of a new tax year, you’re probably looking for new tax savings opportunities, like our Chicago South Loop Tax Preparation clients.

As you probably know, establishing a home office for your Schedule C or corporate business creates valuable tax deductions.

But it’s not available only for your proprietorship,partnership, or corporate business. If you have rental properties, you can establish a home office to manage your rental properties and deduct the cost on your Schedule E.
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Rentals as a Business

The first hurdle is that your rental activities have to qualify as a “trade or business” under the tax law.

Luckily for you, that’s relatively simple—you’ll need regular and continuous involvement with your rental activities to meet this requirement.

Whether or not your rental activities are a trade or business depends on the facts and circumstances of your particular situation, and tax court cases give us guidance on that.

Qualifying Area

Your second hurdle is setting aside space in your home that qualifies for the home-office deduction.

For this to work, you need to use that space in your residence regularly and exclusively as the principal place of business for your rental activities.
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This sounds hard, and it was hard—before lawmakers changed the rules to include, as a principal place of business, the space you use for administrative or management activities, provided there is no other fixed location where you conduct substantial administrative or management activities.

Home-Office Deduction

Establishing a rental property home office does two things to your household expenses:

  1. Turns non-deductible household expenses into tax deductions.
  2. Moves household expenses normally deductible on Schedule A to your rental properties on Schedule E.

The latter is especially important after passage of the Tax Cuts and Jobs Act

  • put a $10,000 limit on your Schedule A state and local tax deductions, and
  • lowered the amount of your mortgage on which you deduct mortgage interest from $1 million to $750,000.

Eliminate Commuting

Without a qualifying home office, your mileage from home to your first business stop and then from your last business stop back home is non-deductible commuting mileage.

But here is what happens with the rental property’s principal office in your home:

  1. You have no commuting mileage from your home to and from your rentals, if the rentals are in the area of your tax home (say, within 50 miles).
  2. You establish your rental property tax home, and if your rentals are outside the area of your tax home, then the mileage from your home to and from the rentals is deductible business mileage because you are traveling outside the area of your tax home.

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Real Estate Professional

If you qualify as a real estate professional under the tax law, then you can deduct 100 percent of your rental losses in the year you incur them.

But there’s a big hurdle to the tax law classification as a real estate professional. You must show that you spend

  • more than 50 percent of your personal service work time in real property trades or businesses in which you materially participate, and
  • more than 750 hours of service during the tax year in real property trades or business in which you materially participate.

Having a rental property home office that qualifies as a tax-code-defined principal place of business makes it easier to qualify as a real estate professional, because your time spent on deductible travel to and from your rental properties counts toward the time requirements.

Claiming Your Deduction

The Schedule E instructions not only fail to provide any explanation about where to put your home-office deduction, but they also do not even mention a home office.

But the instructions do say that you can deduct ordinary and necessary business expenses, and the home office meets that rule. Also, as established in Curphey (a precedent-setting case), the home office is allowable as an expense against income from a rental business.

If you would like to discuss your rental properties with me, please call us directly at 855-743-5765. Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, need help with tax debt, business tax preparation, business entity creation, business insurance, or business compliance
assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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Business Taxes, Family Taxes, General Information, General Tax Topics, retirement planning, Self Employed, Small Business, Tax Debt, Tax Deductions, Tax Planning, Tax Reduction, Uncategorized

401k For The Self Employed

solo 401k

You Don’t Have To Work For Others To Have A 401k Plan

In our Chicago South Loop tax preparation office, we often meet people that are ready to leave their jobs & start a new business.  If you’re new to entrepreneurship, or even a veteran (seasoned) business owner, you may not realize that you can start an IRS qualified retirement plan for your business. The best thing about a small business owners solo 401k is that if you’re leaving your old an employer, you can transfer your current 401k plan to your own company’s 401k!

Transferring your 401k to a traditional solo 401k will help you avoid LOSING YOUR INVESTMENT TO TAXES & PENALTIES! Don’t want to leave your employer? No problem! You can still have a traditional or roth 401k plan with your own company, as long as you don’t defer more than the IRS yearly contribution limit.

WHAT DOES IT DO? A traditional solo 401k allows you to exclude income from currents years’ taxes, and defer the income for taxation at a later time. Build your retirement income, and maintain access of up to 50% of the funds’ assets through loans.

WHAT WILL IT SAVE ME?  With the traditional solo 401k, you will be able to defer up to $56,000 of taxable income in 2019, and $57,000 in 2020. For example, if you generate $100,000 in business revenue, expenses, you would be taxed on the remaining $60,000. With a solo 401k, you can defer $19,000 as an employee of your company, and $15,000 for the employer contributions giving you a total deduction of $34,00 (leaving you with a taxable income of $26,000). By using this method you would remove yourself from the 22% tax bracket, and place yourself into the 12% tax bracket giving yourself a tax bill (including self employment taxes) of $4,650 instead of a $13,509 tax bill!

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WHAT CAN I INVEST IN? If you choose the traditional 401k plan, you will be able to invest in securities such as stocks, bonds, ETFs, commodities, and more. Should you choose a self directed Solo 401k, you can invest in things such as real estate, businesses, antiques, and more.

WHAT IF I HAVE OTHER RETIREMENT PLANS? Any contributions you make to other types of retirement accounts, such as IRAs, do not affect your 401(k) contribution limit.

WHY DO I NEED IT? Retirement plans are an important element of a tax reduction plan. While an IRA is a good plan, if you need to access your money, you will have to pay a penalty. Those that can, should have a mix of 401k and traditional and Roth IRA’s.

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Solo 401k Contribution Calculator: What is the maximum amount you can contribute?

The Solo 401k Contribution Calculator allows you to calculate the maximum amount you can contribute to your plan. Click on the link below, enter requested info below and click the “Submit” button to see your results. A PDF document will be generated with the option for you to save or print it. It is very important that you select the correct business type; please note that Sole-Proprietor is selected by default (if your business is a single member LLC, select the Sole-Proprietor type). For an alternative calculator click HERE.

Although we’ve given you the basics, this is not an all-inclusive article. Should you have tax debt help questions, need Chicago business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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5 LAST MINUTE YEAR END TAX SAVINGS TRICKS TO INCREASE YOUR BUSINESS DEDUCTIONS

tax planning
In our South Loop of Chicago tax preparation office, we often have small business owners looking to reduce their taxable income. In the spirit of the holiday’s we’ve written this article for small business owners with the purpose of you the reader getting the IRS to owe you money.

Of course, the IRS is not likely to cut you a check for this money (although in the right circumstances, that will happen), but you’ll realize the cash when you pay less in taxes.

Here are five powerful business tax deduction strategies that you can easily understand and implement before the end of 2019.

1. Prepay Expenses Using the IRS Safe Harbor

You just have to thank the IRS for its tax-deduction safe harbors.

IRS regulations contain a safe-harbor rule that allows cash-basis taxpayers to prepay and deduct qualifying expenses up to 12 months in advance without challenge, adjustment, or change by the IRS.

Under this safe harbor, your 2019 prepayments cannot go into 2021. This makes sense, because you can prepay only 12 months of qualifying expenses under the safe-harbor rule.

For a cash-basis taxpayer, qualifying expenses include lease payments on business vehicles, rent payments on offices and machinery, and business and malpractice insurance premiums.

Example. You pay $3,000 a month in rent and would like a $36,000 deduction this year. So on Tuesday, December 31, 2019, you mail a rent check for $36,000 to cover all of your 2020 rent. Your landlord does not receive the payment in the mail until Thursday, January 2, 2020. Here are the results:

• You deduct $36,000 in 2019 (the year you paid the money).
• The landlord reports $36,000 in 2020 (the year he received the money).
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You get what you want—the deduction this year. The landlord gets what he wants—next year’s entire rent in advance, eliminating any collection problems while keeping the rent taxable in the year he expects it to be taxable.

Don’t surprise your landlord: if he had received the $36,000 of rent paid in advance in 2019, he would have had to pay taxes on the rent money in tax year 2019.

2. Stop Billing Customers, Clients, and Patients

Here is one rock-solid, time-tested, easy strategy to reduce your taxable income for this year: stop billing your customers, clients, and patients until after December 31, 2019. (We assume here that you or your corporation is on a cash basis and operates on the calendar year.)
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Customers, clients, patients, and insurance companies generally don’t pay until billed. Not billing customers and patients is a time-tested tax-planning strategy that business owners have used successfully for years.

Example. Jim Schafback, a dentist, usually bills his patients and the insurance companies at the end of each week; however, in December, he sends no bills. Instead, he gathers up those bills and mails them the first week of January. Presto! He just postponed paying taxes on his December 2019 income by moving that income to 2020.

3. Buy Office Equipment

With bonus depreciation now at 100 percent along with increased limits for Section 179 expensing, buy your equipment or machinery and place it in service before December 31, and get a deduction for 100 percent of the cost in 2019.

Qualifying bonus depreciation and Section 179 purchases include new and used personal property such as machinery, equipment, computers, desks, chairs, and other furniture (and certain qualifying vehicles).

4. Use Your Credit Cards

If you are a single-member LLC or sole proprietor filing Schedule C for your business, the day you charge a purchase to your business or personal credit card is the day you deduct the expense. Therefore, as a Schedule C taxpayer, you should consider using your credit card for last-minute purchases of office supplies and other business necessities.
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If you operate your business as a corporation, and if the corporation has a credit card in the corporate name, the same rule applies: the date of charge is the date of deduction for the corporation.

But if you operate your business as a corporation and you are the personal owner of the credit card, the corporation must reimburse you if you want the corporation to realize the tax deduction, and that happens on the date of reimbursement. Thus, submit your expense report and have your corporation make its reimbursements to you before midnight on December 31.
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5. Don’t Assume You Are Taking Too Many Deductions

If your business deductions exceed your business income, you have a tax loss for the year. With a few modifications to the loss, tax law calls this a “net operating loss,” or NOL.

If you are just starting your business, you could very possibly have an NOL. You could have a loss year even with an ongoing, successful business.

You used to be able to carry back your NOL two years and get immediate tax refunds from prior years; however, the Tax Cuts and Jobs Act eliminated this provision. Now, you can only carry your NOL forward, and it can only offset up to 80 percent of your taxable income in any one future year.

What does this all mean? You should never stop documenting your deductions, and you should always claim all your rightful deductions. We have spoken with far too many business owners, especially new owners, who don’t claim all their deductions when those deductions would produce a tax loss.

I trust that you found the five ideas above worthwhile. Although we’ve given you the basics, this is not an all-inclusive article. Should you have questions, or need business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office at 855-743-5765. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.

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