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Deadline Extensions

Last fall, Governor DeSantis signed Executive Order 22-242 on October 20, 2022, extending ad valorem property tax filing deadlines for Floridians affected by Hurricane Ian and called for a special session to address further relief. The special session concluded toward the end of the December and Governor DeSantis signed Senate Bill 4-A, which codified the extended deadlines in section 197.3182 of the Florida Statutes. The deadlines are exactly the same as the ones in the Executive Order; the details about those deadlines may be found here.

This was not all the Governor was able to offer Hurricane Ian victims, that same bill provided for ad valorem property tax refunds and how to qualify.

Property Tax Refunds

Continue Reading Ad Valorem Property Tax Refunds Available for Those Affected by Hurricane Ian

tax cut The short answer is “yes.” On October 18, 2022, the Internal Revenue Service (the “IRS”) issued Revenue Procedure 2022-38 (the “Procedure”). This Procedure adjusted certain dollar amounts related to tax items due to inflation. What you may not know is that certain dollar amounts contained in the tax code are subject to inflation. This means the IRS will adjust these items on a yearly basis to take into account inflation.

As we all know, inflation has hit an all-time high this year, and costs continue to rise with no end in sight. However, one piece of good news is that the Procedure adjusts the individual tax brackets and many more items for the 2023 tax year to take into account this inflation. This means there is a possibility that you may see a slightly larger refund or slightly less amount due when you file your 2023 tax return.

The Standard Deduction

The standard deduction for a married couple filing jointly increased to $27,000, which is up $1,800 from the previous year.

For single taxpayers and married individuals filing separately, the standard deduction increased to $13,850, which is up $900.00.

For head of households, the standard deduction will be $20,800, which is up $1,400 from last year.

The Individual Tax Brackets

Continue Reading Did inflation just save me money on my taxes?

IRSAs you may recall from our previous post, Hurricane Ian extended certain due dates with respect to tax returns for those affected. There is also relief for certain taxpayers who have an ongoing Section 1031 Exchange. Under the Revenue Procedure 2018-58 (“Rev. Proc. 2018-58”), two sections grant relief to taxpayers involved in a Section 1031 Exchange and who are Affected Taxpayers.

Section 6 Relief

Section 6 of Rev. Proc. 2018-58 (“Section 6 Relief”) states that if a taxpayer has a deadline (the 45-day or 180-day deadline) that falls between the Relief Period prescribed by the Internal Revenue Service (the “IRS”), the taxpayer may extend that deadline date to the end of the Relief Period.

Calculating the Relief Period

Let’s unpack this; the Relief Period is September 23, 2022 through February 15, 2023 as stated in the IRS’s notice FL-2022-19, dated September 29, 2022 and updated on October 5, 2022. Therefore, if the 45-day or 180-day deadlines fall between the Relief Period, the taxpayer may extend such deadline to February 15, 2023. An Affected Taxpayer includes individuals who live, and businesses (including tax-exempt organizations) whose principal place of business is located, in the state of Florida.

For example:

Facts: Taxpayer has its principal place of business in Lee County, Florida and is therefore classified as an Affected Taxpayer. Taxpayer relinquished their property on June 15, 2022, the 45-day deadline ends July 30, 2022 and the 180-day deadline ends December 12, 2022.

Analysis: The 45-day deadline does not fall between the Relief Period and, therefore, cannot be extended. However, the 180-day deadline does fall between the Relief Period and can be extended until February 15, 2023.

Section 17 Relief

The other section that provides relief in Rev. Proc 2018-58 is Section 17. Section 17 states that if the relinquished property was transferred or parked on or before the date of the disaster, the 45-day and 180-day deadlines that have not yet lapsed, may be extended 120-days from the last day of such deadline or to the last day of the Relief Period, whichever is later (“Section 17 Relief”).Continue Reading Did Hurricane Ian extend deadlines with my Section 1031 Exchange?

If you have not yet filed your 2021 tax return, the Internal Revenue Service provides a plethora of guidance. Below is a summary of few of the items taxpayers should know before filing:

Cryptocurrency

Did you receive, sell, exchange or buy any virtual currency? All taxpayers filing Form 1040, Form 1040-SR or Form 1040-NR must check one box answering either “Yes” or “No” to the virtual currency question. The question must be answered by all taxpayers, not just taxpayers who engaged in a transaction involving virtual currency in 2021. Click here for more information.

Tax Breaks for Teachers

Teachers or other educators can deduct the unreimbursed cost of books, supplies, computer equipment, software and COVID-19 protective items used in the classroom. For 2022, they will be able to deduct up to $300 of out-of-pocket classroom expenses when they file their federal income tax return next year. If they are married and file a joint return with another eligible educator, the limit rises to $600. Click here for more information. For those teachers and educators filing their 2021 tax returns due in April, the deduction is limited to $250. The limit will rise in $50 increments in future years based on inflation adjustments.

Need more time to file?Continue Reading Important Reminders as 2022 “Tax Day” Approaches

Tax TimeWelcome to 2022 tax season! As the vast majority of businesses, small and large, were affected by the COVID-19 pandemic, many companies received support through the Paycheck Protection Program. However, there were many question marks with the Paycheck Protection Program, such as the timing of forgiveness and if eligible expenses are deductible for federal income tax purposes.

Timing of PPP loan forgiveness

As we all know, the Paycheck Protection Program (“PPP”) was created to assist businesses in paying their employees’ paychecks. If the funds received from PPP were used for qualified expenses, the amount of the loan was forgiven. Recently, the IRS released guidance on the timing of PPP Loan forgiveness. With some business owners not receiving their forgiveness letter in 2021, the question arose when the PPP loan will be forgiven for tax-exempt income purposes.

The IRS stated that taxpayers may treat such income as received or accrued when either:

  • expenses eligible for forgiveness are paid or incurred;
  • an application for PPP loan forgiveness is filed; or
  • PPP loan forgiveness is granted.

Thus, a taxpayer who submitted their application for forgiveness in 2021, but has not been granted forgiveness in the 2021 tax year, may choose the date of the forgiveness application, the date the forgiveness is granted, or the when eligible expenses are paid or incurred.

Expenses paid with 2020 PPP loans

Continue Reading How does receiving a PPP Loan impact filing my company’s taxes?

new businessWhat if I were to tell you, you could be both an LLC and an S-corporation and still be considered one single business entity?

An S-corporation is not a state law entity designation, similar to a Florida corporation or a Florida limited liability company. However, an S-corporation is merely a federal income tax classification made on a specific Internal Revenue Service form (Form 2553). Thus, one can form a Florida limited liability company (“LLC”) and elect to be an S-corporation for federal income tax purposes with the Internal Revenue Service (“IRS”).

Who is eligible to make the election?

Generally, the entity wishing to make the election needs to be a domestic corporation or an LLC. However, certain types of businesses are ineligible to make the election, such as insurance companies or financial institutions. In addition, the entity must have eligible shareholders, meaning the owners of the entity must meet specific requirements of the Tax Code.

Who can be an eligible shareholder?

shareholderAn eligible shareholder can be an individual (other than non-resident alien), estates, certain trusts, certain qualified retirement trusts, or charitable organizations. More specifically:

  • So long as the individual is not a non-resident alien, individuals are eligible S-corporation shareholders. Individuals may co-own an S-corporation with other individuals, such as husband and wife, as joint tenants by the entirety.
  • If an individual shareholder declares bankruptcy, the bankruptcy estate is a permissible S-corporation shareholder. If an individual shareholder passes away, their estate is an eligible S-corporation shareholder, as well.
  • Testamentary Trusts. These trusts become effective upon the death of a shareholder and hence become eligible to be an S-corporation shareholder.
  • Voting Trusts. Shareholders may create these trusts to temporarily transfer their shares to the trustee to combine their voting power. Voting trusts are eligible to be S-corporation shareholders.
  • Qualified Subchapter S Trust (“QSST”). A QSST is an eligible S-Corporation shareholder if it meets specific rigid requirements.
  • Small Business Trust (“ESBT”). An ESBT is a trust for beneficiaries that are all eligible s-corporation shareholders that acquired their trust interest by lifetime gifts or upon the death of an owner. These are more flexible trusts than the QSST described above.

Coming back to the opening question of an LLC or an S-corporation, so long as the individuals forming the LLC are eligible shareholders described above, the LLC can make the election treated as an S-corporation.

When to make the election?

Continue Reading Should I start my new business as an LLC or S-Corporation?

As we happily turn the calendar to January 2021, many start gathering receipts and documents to prepare for tax season. If you serve or have been recently appointed as a Personal Representative, Executor or Administrator, there are some important income tax issues you should be aware of to avoid legal action from the Internal Revenue Service (“IRS”), or lawsuits from the decedent’s beneficiaries. Below are some answers to a few frequently asked questions concerning estate tax filings:

Q: When is a decedent’s final tax return due?

When someone dies, their tax year ends as of the date of death. The Personal Representative (Executor or Administrator) is responsible for filing the final federal and state returns and ensuring that any tax due is paid. These returns are due April 15 of the year after the date of death. If someone dies before filing a return for the prior year, the Personal Representative must make sure that the return is filed and any taxes paid. The IRS is one creditor you don’t want to mess with, as they can hold a Personal Representative personally liable for unpaid taxes.

Q: What is a “Step-Up in Basis”?

Continue Reading 5 tax tips for those dealing with estates

Many employers are all too familiar with the experience of having to refund contributions made to the organization’s 401(k) plan by highly compensated employees to remedy the previous year’s failed actual deferral percentage (“ADP”) test. The ADP test is designed to ensure that the average deferral rates for highly and non-highly compensated employees are roughly equal. Thanks to the Setting Every Community Up for Retirement Enhancement Act (“SECURE Act”), the experience of refunding highly compensated employees’ deferrals in order to satisfy the ADP test will in many cases be consigned to history. The below addresses how the SECURE Act relaxes some of the rules affecting 401(k) plan testing.

Q: Can a 401(k) plan retroactively avoid ADP testing?

The year 2021 presents for the first time the opportunity to retroactively escape the prior year’s ADP test without regard to the extent by which contributions from highly compensated employees exceeded the average deferral percentage contributed by the organization’s non-highly compensated employees. Under the SECURE Act, it is now possible to adopt a safe harbor nonelective 401(k) feature that will exempt the plan from ADP testing with respect to the previous year. Unlike in the past, a notice to participants before the beginning of the year in which the safe harbor nonelective contribution applies is no longer required. As such, employers can now wait until the end of the year, or even longer, before deciding whether to make a safe harbor nonelective contribution for the year.

Q: How are safe harbor nonelective contributions similar to, or different from, safe harbor matching contributions?

Continue Reading New 401k rules could end “refunded contributions”

Taxpayers have until today (July 15) to request an extension to file their 2019 federal tax return. If an extension is approved, taxpayers could have until October 15 to file, but any taxes owed are due by July 15.

Common Tax Return Errors

The IRS has noted the following common tax return errors:

  • Missing or inaccurate Social Security numbers
  • Math errors
  • Inaccurate filing status
  • Incorrect calculation of credits or deductions
  • Unsigned returns
  • Filing with an expired individual taxpayer identification number

The IRS highly encourages taxpayers to use the e-file or IRS Free File system. The IRS software will formulate calculations, flag common errors, and prompt taxpayers for missing information, all of which ultimately reduces tax return errors. A tax return containing errors can delay refunds.

What if I can’t pay my tax bill?

Continue Reading IRS Provides Tips for Last-Minute Tax Filers

Two Fort Myers tax lawyers will once again host a complimentary webinar to help the Southwest Florida community understand the tax law changes in light of the COVID-19 crisis. On Friday, May 1, 2020, from 12:00 to 1:00 pm, Lindsay Sablan, a journalist and WINK News morning anchor, will serve as moderator, with speakers attorney Shanthy Bala, the Tax Clinic Director and Supervising Associate at Florida Rural Legal Services, Inc., and Sara Qureshi, a business and tax attorney at Henderson, Franklin, Starnes & Holt, P.A., will present “Tax Law Changes Amidst COVID-19: Further Guidance Providing Relief to Individuals and Small Businesses” in association with the Lee County Bar Association and its Pro Bono Committee.

This one-hour session will go over recent updates and frequently asked questions regarding federal tax relief available for individuals and businesses during COVID-19, including questions that were submitted to the clinic after the last webinar on April 3rd. Questions may be submitted in advance by email to Shanthy.Bala@FRLS.org.

Continuing EducationContinue Reading May 1 Webinar to Provide Guidance on COVID-19 Tax Relief for Individuals and Small Businesses