The world has been turned upside down in the past few weeks.  It’s really had an impact on businesses, employees, and personal finances.  Our goal during this time is to keep people up-to-date with the most recent information.  The place we are doing that most frequently on an ongoing basis is our Adam Shay CPA Facebook page.  This information is current as of March 20, 2020.

 

Income Tax Related

The personal and C corporation income tax filing deadlines are now 7/15/2020.  The IRS has also announced that they will allow the delay of payments originally due on 4/15/2020 to 7/15/2020.  Those payments include personal 2019 income tax balance due up to $1MM and C corporation income tax balance due up to $10MM.  In additional, Q1 2019 federal estimated income tax payments can be delayed until 7/15/2020.  Note that Q2 2019 federal estimated income tax payments are still due on 6/15/2020.

 

Unemployment

On March 17th, 2020 North Carolina implemented the following unemployment claim changes:

  • There is no longer a waiting period to apply for benefits.
  • There is no longer a requirement to be actively looking for a job to receive benefits. This could help in two ways:
    • Few businesses are interviewing or hiring right now.
    • A person could potentially be available for their employer when things return to normal.
  • Reduced hours can potentially result in eligibility for unemployment.
  • If employee termination is related to the Coronavirus then the employer’s unemployment account is not charged.

 

Sick Leave Requirements

A federal law was passed on March 18th, 2020 that requires employers with fewer than 500 employees to provide sick leave related to the Coronavirus.  In a nutshell, employers with less than 500 employees must provide paid sick leave related to the Coronavirus in the following manner:

    • 2 weeks paid sick leave to be diagnosed or quarantined.
    • 2 weeks paid leave to care for an ill family member.
    • 12 weeks 2/3 pay paid leave if an employee is caring for a child whose school is closed. The first two weeks can be unpaid.

The sick leave pay is capped at $511 per day and paid family or childcare leave is capped at $200 per day.  There is a potential exemption for employers with less than 50 employees if it would jeopardize the viability of the business.  It remains to be seen on how that exemption will be implemented. If you are an employer and have an employee that meets one of these conditions you should talk with an employment attorney about your specific situation.

From a tax perspective, there are a couple of relevant items.  There are quarterly payroll tax credits for the employers to help with having to offset the paid sick leave.  Self-employed individuals can apply for these sick leave benefits in the form of a credit to offset their self-employment income.

 

SBA Disaster Loans

All North Carolina counties have been declared a federal disaster area for the Coronavirus.  That means a NC business could be eligible for SBA Economic Injury Disaster Loans to help with working capital needs until normal operations resume.

Business Interruption Insurance

You should check your insurance policy or with your insurance provider to see if you may have a business interruption insurance policy that can provide some relief.

 

Things to Potentially Come

The federal government is working on additional economic stimulus that could be disbursed to families. There is the potential that NC may open up unemployment to self-employed individuals.  More details will be shared as they become available.

 

Timing

We realize that everyone wants immediate relief. While the government has moved relatively quickly on passing legislation, implementation and clearer frameworks will take time to put into place. There are a lot of moving parts with various pieces of legislation.

 

Summary

Our goal today was to provide updates for business and personal finances as it pertains to the Coronavirus crisis.  This is a very fluid and dynamic situation that is still being implemented and interpreted.  You need to talk with someone about your specific situation and current interpretations before taking action.  If you have any questions, feel free to reach out to us.

2020 Nourish NC Tax Season Food Drive

Did you know that 1 in 4 children struggle with hunger in New Hanover County? And, did you know that over 16,000 people in New Hanover County live in food deserts? Nourish NC’s research has found that food insecure children are more likely to:

  • Experience chronic illness & weakened immune systems. They are sick more often, are slower to recover from illness, and are hospitalized more often.
  • Have impaired concentration, poor academic performance and increased grade repetition.
  • Have higher school absences and late arrivals.
  • Have lower math and reading scores.
  • Have higher levels of behavioral & emotional issues.

Adam Shay CPA, PLLC wants to help combat hunger by teaming up with Nourish NC to feed hungry children in our area. We will host a food drive during our 2018 tax season, which runs from January 1, 2020 through April 30, 2020.

In the busy world we live in, it is so easy to forget how lucky we truly are to be able to run out for lunch or grab dinner with a loved one. We also take for granted the social aspect that comes with sitting down to eat with someone. We don’t even think twice about doing this, while others right here in our community may not know when or where their next meal will come from.

There are specific items that Nourish NC needs any given week. Please do not donate expired or junk food—Nourish NC will not provide expired or junk food to their kids. The most wanted list for Nourish NC can be found here: Most Wanted List.

If you are interested in donating, please bring your food items to our office! You can also learn more about Nourish NC by visiting their website, Nourish NC , or by contacting Caroline Montgomery, [email protected] . We look forward to seeing you and teaming up with you to help end hunger in New Hanover County!

On December 21, 2019 President Trump signed into law a spending bill that included good news for taxpayers in Southeastern NC. The spending bill included retroactive major disaster related tax relief that we know will put more money back into taxpayers’ pockets. The legislation also included some retroactive implementations of previous expired tax deductions and credits as well as changes to retirement plans. With retroactive tax changes on income tax years already filed, amended returns will be required.

We are going to walk through some of the changes, starting with those we think will have the biggest dollar impact on our client base. This is an early analysis and as the dust settles some of the specific details may change, but the legislation looks favorable for taxpayers.

There are several Disaster Tax Relief retroactive changes passed that will lead to large refunds, especially for business owners.

Business Owners – Disaster Relief
This one is HUGE. There is a credit for employers for retaining employees in an area impacted by major federal disasters, such as Hurricane Florence in 2018 or even Hurricane Dorian in 2019. We expect that this will bring significant refunds for businesses with employees.

Here is how the credit generally works: it is a credit of 40% of wages from the first day inoperable to the date at which the trade or business resumed significant operations. The wages for the credit are capped at $6,000 per employee. This credit will be significant for many companies with employees.

Individuals – Disaster Relief
There are also some retroactive individual changes that will result in found money. They have made it easier to deduct casualty theft and losses from 2018 and 2019 federally declared major disasters. Since they’ve made it easier, taxpayers will typically receive more money back than they would have without this change. This is one of the big ones that taxpayers were waiting on prior to filing their 2018 income tax returns.

Tax Extenders
There were several retroactive tax changes which are known as tax extenders. These portions of the tax code are typically extended at the last minute, hence the name. However, they were not extended for 2018 but now have been done so retroactively beginning with 2018. Here is a list of them:

  • Ability to exclude from income the forgiveness of debt related to primary residence.
  • Mortgage Interest Insurance is deductible again (assuming that you itemize deductions).
  • Qualified tuition deduction is allowed in lieu of education tax credits.
  • Several credits related to energy efficiency, renewable energy, and alternative fuel (think electric cars).

Retirement Plan Rule Changes
There are some changes to retirement plan rules for 2020 and beyond that taxpayers need to be aware of:

  • Starting for individuals who turn 70 ½ in 2020 or later, the mandatory Required Minimum Distributions (RMD) age will be 72 years old. This is the age when you are required to start taking money out of retirement accounts unless you want to be penalized for not doing so.
  • Inherited retirement plans will no longer have as much flexibility on how long you have to withdraw funds (unless a surviving spouse). It will now generally be limited to 10 years.
  • The age cap on contributions to IRAs for someone over 70 ½ has been removed (assuming they are still working).
  • You will able to withdraw penalty free up to $5,000 within a year of the birth or adoption of a child.

Our goal today was to highlight to you the retroactive federal income tax benefits from disaster relief and tax extenders.  With the amount of retroactive changes and the size of the impacts, we expect there will be a lot of 2018 amendments filed in 2020.

A CPA’s Advice to Business Owners in the Hemp Industry

There are endless things that you should be considering for your hemp business from a financial/accounting/tax standpoint, which is why it is so important that your CPA is knowledgeable in hemp. For starters, here is a very basic list of topics you should be thinking about, and some questions you should be asking yourself and discussing with your CPA.

Research and Development Tax Credits.

Are you involved in any type of developmental or experimental research related to hemp?

Could the words develop, experiment, create, research, test, or design be used to describe what you do? If so, it is very likely you are involved in an activity that may qualify for the research and development tax credit. Some examples of activities that may qualify include:

  • Designing, developing, or testing cultivation or extraction techniques.
  • Designing new or improved processes and systems for testing potency or related indicators of a particular strain.
  • Developing or experimenting with new technology, equipment, or processes that could increase yield or production.
  • Discovering or designing new uses for any part of the plant.

Chances are you are involved in research and development activities in some capacity in the hemp industry. Though, just being involved in an activity does not guarantee that it will be considered a “qualifying activity.” The activity must satisfy a four part test to be considered a “qualifying activity” eligible for the lucrative R&D tax credit:

  1. Technological in Nature
  2. Permitted Purpose
  3. Elimination of Uncertainty
  4. Process of Experimentation

Whether you are experimenting and improving processes for growing, cultivating, or processing the plant, or researching and designing new uses for the plant, you may be eligible for this tax credit and you should have this conversation with your tax professional. Qualifying could benefit you by an offset to income tax or even payroll tax.

Sales Tax: exemptions, filings, compliance, collecting & remitting, and more.

Are you eligible for any sales tax exemptions? Are you collecting and remitting sales tax?

Are you eligible to receive a refund for sales tax paid before being granted an exemption? What do your state laws require regarding sales tax?

Do you or should you have an established sales tax policy that is available to customers or buyers?

Whether you are a farmer, processor, wholesaler, or retailer, sales tax compliance should be at the front of your mind when you consider compliance for your hemp business.

It is highly likely that you are either eligible for a sales tax exemption, should be collecting and remitting sales tax, are required to file sales tax returns (quarterly or even monthly), or are not completely compliant with your state laws regarding sales tax.

When you consider the recent influx of sales tax legislation in combination with an industry experiencing both exponential growth and increasing regulation, you have a combination of red flags that greatly increases the importance of having tip-top compliance. Ensuring compliance in this aspect early on will likely set your business apart from many others in the future.

Accounting records should be: accurate, timely, and compliant.

Do you have separate bank accounts and credit or debit cards for your business? Are you using a formal accounting software?

Do you have a bookkeeper or are you keeping track of this on your own? Are your business bank accounts and credit cards reconciled every month?

One of the biggest mistakes a business owner can make in any industry, but especially an industry that is experiencing such rapid growth, is not investing in the resources that will help determine the future of your business.

The hemp industry is still very new to many which poses a higher likelihood for audits and inquiries. Ensuring accurate and compliant accounting records is imperative to success in this market.

Consider the future of your business… What does that look like to you? Will you pass down the business to future generations? Will you build an empire that you will later sell? Or maybe you plan to franchise? Regardless of what your business plan is, creating a solid accounting framework is key.

 

For more information or to schedule a free consultation with a CPA knowledgeable in the hemp industry, contact [email protected] or call (910) 256-3456.

As a proud and active member of the North Carolina Industrial Hemp Association (NCIHA), we have a strong network of professionals occupying all verticals of the hemp industry. If we cannot assist your current hemp-related needs, we are confident that we can connect you to someone that can.

You’ve Received an Incorrect Business Property Tax Listing Assessment- Now What?

In October, North Carolina county property tax offices send out business property tax assessments for property tax on items like computers, desks, etc.  Those assessments are based upon property tax listings that must be submitted to the county by January 31st.

What if your county doesn’t have a property tax listing submission from you?  In New Hanover County, if they do not have a property tax listing for the current year and you didn’t have a listing in the prior year, they will assess you a value based upon some unknown formula.  It usually seems to be somewhere in the range of $40,000-$60,000 worth of equipment.

Why would they not have a property tax listing for you?  There are a couple of reasons:

-You did not submit a listing.  This rarely happens with our clients as we have a process for businesses that includes this.

-They lost or did not process your submission.

-You did not know that you needed to submit one.  This most often happens with a new entity that is not active.  If you have an LLC or Inc you are not using you would not consider it an active business, while New Hanover County combs the Secretary of State business registrations to look for entities without business listings.

What do you do if you received a notice?  We can help you navigate that process- whether it is submitting a listing or corresponding with the county property tax office to let them know that the business is not active and does not have any business assets.

Are you:

-Tired of having no books (accounting records).

-Tired of doing it yourself?

-Tired of having messy books or a problem you can’t solve?

We can help- we now offer bookkeeping services.  Reachout to us @ [email protected] to find out how we can help.

NC Hemp Industry: Massive Opportunity, Minimize Your Risk

The momentum driving the hemp industry has continuously increased in recent years, but with the passage of the Agriculture Improvement Act of 2018 effective last December, the industry’s momentum has reached an all-time high both locally here in North Carolina and nationwide.

The Agriculture Improvement Act of 2018, commonly known as the “2018 Farm Bill”, decriminalized hemp and hemp-derived compounds (or hemp-derived CBD), which initiated massive opportunity and growth in the industry both commercially and economically.

There are many reasons why this industry is thriving – consumer awareness, deregulation, availability but perhaps the dominating factor is the usefulness of all parts of the plant including the seed, stem, fiber, and flower.

The hemp plant is used across countless markets, both commercial and industrial. Uses of hemp include, but are certainly not limited to: textiles including clothing, shoes, and fabrics; industrial textiles including ropes, canvas, carpeting, and netting; paper including packaging, print, and cardboard; body care products including soap, shampoo, lotion, and cosmetics; building materials including fuel, solvents, coatings, and fiberboard; food including protein powder, seed oil, and supplements.

The opportunity for growth in this market is endless, but that does not come without a great amount of uncertainty and subsequent risk, which further increases the importance of having knowledgeable professionals in your corner.

The hemp industry occupies a very unique environment from an accounting perspective. By not having an accounting professional knowledgeable in this market, you not only risk violating compliance laws, but you also risk missing out on various deductions and credits. One of which is the valuable Research and Development tax credit.

If you are in this industry, especially in North Carolina (or really anywhere on the East Coast), you know how difficult it can be to find the professional accounting guidance that is necessary for your business to prosper in this market. The shortage of accounting professionals and CPAs servicing this industry locally is largely due to the amount of time and research that is necessary in such a unique niche.

Whether you are in involved in farming, cultivation, production, distribution, retail, processing, or any other segment of the hemp industry, we are here to help. We offer a broad spectrum of accounting and consulting services that are tailored specifically to meet each clients individual needs. Our services include providing guidance related to income tax and sales tax compliance, cultivating tax planning strategies to maximize credits and minimize tax liability, bookkeeping, advisory services, and much more.

As a proud member of the North Carolina Industrial Hemp Association, we are committed to the success of the hemp industry and are excited to partner with clients in this market.

Want to know more? Schedule a free hemp accounting consultation today.

Eliminating Affordable Care Act (ACA) Penalties

We have implemented a legal but little known strategy to help our clients prevent income tax return penalties for not having health insurance. It saves the average person in that situation thousands of dollars. We can apply this strategy to both current year income tax returns as well as previously filed returns for the prior 2-3 years. Let us know if you want to discuss!

Does Your Business Need a Checkup?

If I asked you how much cash flow your business generated last month, would you know? How about for last year? If you constantly feel like you are working for nothing, or if you have no idea what your business is really making for you, it’s time to make some changes. Let’s discuss some ways you can start being more proactive and ways you can start improving.

First and foremost, there are some ground rules that every business owner needs to abide by:

1. Your books have to be reconciled monthly on a timely basis. Set a closing date to have the prior month’s activity input and reconciled. The sooner you can have the books closed the better.

2. You have to review your financials at least monthly, once the books are closed. If you wait to review everything when you are having your tax return prepared, you’ve already missed an entire year that you could have fixed any issues! If you don’t have time to devote, hire us as your Virtual CFO!

3. You must have internal controls established. They help mitigate the risk of fraud, and are a core foundation to your business.

Once you can start operating under these guidelines you can implement your plan to start having a better understanding of how your business is performing. Now that you have your current up-to-date books, you can take a look at your current figures and determine your cash flow. If your cash flow is weak, you need to review where the money is going each month. Are you highly leveraged with debt? Are you spending money on unnecessary items? Are you using credit cards that carry high balances? If all of those check out, are you in a good location? Is your marketing strategy working? Are your employees being productive? Are your employees being utilized to their maximum extent? There are lots of areas that can impact your ultimate cash flow, and sometimes you have to look beyond just what the actual financials show.

Once you determine what your areas of focus need to be, you pick 3-5 metrics, or Key Performance Indicators (KPIs), that will help you track your progress towards the goals. KPIs can be ratios such as office supplies as a percentage of revenue, salaries as a percentage of employee production or debt to equity ratio (there are endless possibilities). You then track your actual ratios compared against your target/goal ratio (which is often based on industry ratios). Of course, you have to have a game plan in place of how you will improve these ratios and you have to be accountable for what you should be doing. Sometimes you have to implement something new, sometimes you have to change habits, and sometimes you have to change processes.

If you are curious whether or not your cash flow could improve, please reach out to us at [email protected] We will do a complimentary evaluation for you.

Important 1099 Information

As we embark on the start of 2019, tax preparers are preparing for the start of busy season.  With January comes due dates for 1099s and W-2s.  Most of the time, taxpayers do not realize that they need to prepare any 1099s.  Within the last few years we have seen the following questions appear on Schedule Cs, Schedule Es, and business tax returns:

1.)        Did you make any payments in 20XX that would require you to file Form(s) 1099?

2.)         If “Yes,” did you or will you file required Forms 1099?

As paid preparers, we have to make sure that we answer these questions correctly, which means verifying with you, the taxpayer, whether or not you had any required 1099s to be filed.  The penalty for not filing a 1099 ranges from $50 per 1099 to $100 per 1099, depending on when the forms are filed.

 

Do You Need to Prepare 1099s?

If you have paid someone over $600 for services (including subcontractors, repairs, computer service and any other service someone provided you) or for rent, then you most likely need to send them a 1099.  However, if you paid a corporation or paid them via credit card, debit card, Paypal or Stripe, then you are not required to send a 1099.  Some corporations are still required to receive a 1099, such as attorneys.  We advise all clients to have people who are providing services for them to fill out a W-9.  This helps us determine if they need to receive a 1099 because they have to tell us what type of entity they are by checking a box.  The following payments would require issuance of a 1099:

-Rent over $600 – reported on 1099-Misc

-Royalties over $10 – reported on 1099-Misc

-Other Income over $600 – reported on 1099-Misc

-Nonemployee Compensation over $600 (Independent Contractors) – reported on 1099-Misc

-Gross Proceeds Paid to an Attorney over $600 (this is reported in Box 14 of 1099-Misc  it typically applies if you paid out a settlement, any other legal services would be reported in Box 7 on 1099-Misc)

-Interest on Business Debt to Someone over $10 (excluding interest on an obligation issued by an individual) – reported on 1099-Int

-Dividends or other distributions to a company shareholder over $10 (most applicable to C Corporations) – reported on 1099-Div

 

What Do We Need to Prepare a 1099?

As mentioned previously, you should have anyone fill out a W-9 who will be receiving payment for any of the items listed above.  On the W-9, they list their legal name, federal ID or social security number, address and type of entity.  I cant stress the importance of having the W-9 before you pay the person.  If you pay somebody one time for $2,000 and do not have any of their information, and then in January you are not able to reach the person to get their information, youre in trouble and potentially could face penalties from the IRS for not submitting a complete 1099.

Please feel free to reach out to us if you have any questions regarding 1099s.