Here is what the CARES Act defines as Payroll Costs:

• The sum of payments of any compensation with respect to employees that is a:
  • Salary, wage, commission, or similar compensation
  • Payment of cash tip or equivalent
  • Payment for vacation, parental, family, medical, or sick leave
  • Allowance for dismissal or separation
  • Payment required for the provisions of group health care benefits, including insurance premiums
  • Payment of any retirement benefits
  • Payment of State or local tax assessed on the compensation of employees

AND

• The sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in one year, as prorated for the covered period.

 The CARES Act specifically EXCLUDES the following as Payroll Costs:

• The Compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the covered period
• Taxes imposed or withheld under chapters 21, 22, or 24 of the Internal Revenue Code of 1986 during the covered period
• Any compensation of an employee whose principal place of residence is outside of the United States
• Qualified sick leave wages for which a credit is allowed under Section 7001 of the Families First Coronavirus Response Act (Public Law 116-127)

OR

• Qualified family leave wages for which a credit is allowed under Section 7003 of the Families First Coronavirus Response Act (Public Law 116-127)

As you can see, the definition of Payroll Costs under this legislation is very ambiguous and open for interpretation.  We have found that various financial institutions are interpreting these guidelines in different ways as well.  For consultation and guidance through the entire Payroll Protection Plan application process, contact Evolve Financial directly at (847) 749-1851 or at info@evolvefinancialservices.com.

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Illinois State Tax Deadline Extension

Illinois has extended the due date for filing 2019 taxes by 90 days. The deadline is now July 15, 2020. This applies to both individuals and businesses who still need to file. The federal tax filing deadline has also been extended until July 15, 2020. Individuals and businesses have until then to file their taxes, without penalty. Individual city tax deadlines may differ.

State Help for Small Businesses in Illinois

The state has prepared a Small Business Emergency Loan Fund, which was created to help small businesses with fewer than 50 employees and total revenues for 2019 under $3 million. The fund has made $60 million available to those small businesses that qualify. Each small business can apply for up to $50,000 and can expect a low interest rate. Small businesses can apply for a loan on the Department of Commerce and Economic Opportunity’s website.

The state of Illinois has also announced a variety of other aid for residents, including an expansion for unemployment insurance, the delaying of evictions, a suspension of utility shutoffs and penalties, and more.

At Evolve, we are here for your business through all financial challenges – including economic uncertainty. We offer consultation services and are here to assist you in applying for funds and grants issued by Illinois.

Contact us by phone at (847) 749-1851 or by email at info@evolvefinancialservices.com to get started on a financial strategy for your business and for more information about government assistance for small businesses during COVID-19.

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The relief package is composed of a number of different programs to help keep the economy stimulated, and small businesses running. For small businesses currently experiencing negative effects of the pandemic, the biggest factor in the plan is the “Paycheck Protection Loans” initiative.

This $350 billion loan program is an effort to help small businesses retain their employees, while still being able to afford daily obligations. The main goal of providing these loans to small businesses is to ensure employees are continuing to receive a regular paycheck. If an employer is able to keep their employees on their payroll through June 2020, the amount loaned to them for costs that meet the set eligibility requirements would be forgiven. However, if there are layoffs or reductions in pay during this period, the total of the forgiven portion of the loan would be reduced.

A small business can apply for up to $10 million of relief through this loan, and the money can be used to cover up to two-and-a-half months of payroll, as well as other expenses that include rent, utilities, and existing debt. “Paycheck Protection Loans” will have a low interest rate of no more than 4%.

At Evolve, we are here for your business through all financial challenges. Our proven techniques help small and medium-sized businesses during every phase – including economic uncertainty. Contact us by phone at (847) 749-1851 or by email at info@evolvefinancialservices.com to get started on a financial strategy for your business and for more information about government assistance for small businesses during COVID-19.

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What is a stimulus check?

A stimulus check is money sent to a taxpayer by the government with the hope of revitalizing the economy. The money is seen as spending cash for individuals, which when consumers use, boosts the overall market.

How much money will my stimulus check be?

As a part of the plan, most individuals in the United States of America will be given a one-time stimulus check for up to $1,200. Married couples can receive up to $2,400 plus an additional $500 for each child under age 17. The exact amount you will receive is determined by your income and the size of your family.

Individuals earning up to $75,000 or couples earning up to $150,000 annually can plan to receive up to the full amounts listed. The amount of the stimulus checks decreases for those making more, up to the cutoff thresholds. Individuals making above $99,000 annually would not qualify for a payment, nor would couples making double that.

Stimulus check amounts will be decided based on either a person’s 2018 tax return records or 2019 tax return records, if they have already been filed. The due date for 2019 federal tax filing – as well as many state tax filings – has been extended to July 15, 2020.

Other notable parts of the plan include the waiving of the 10% early withdrawal penalty for retirement fund distributions up to $100,000 retroactive to January 1, 2020, an unemployment program expansion that offers eligible workers an additional $600 per week, a suspension of student loan payments without penalty until September 30, 2020, and more. All of these initiatives were created to help individuals during the uncertainty of the COVID-19 outbreak, while encouraging an active and healthy economy.

At Evolve, we help your business face all financial challenges with proven techniques that provide you with valuable advantages you can use each day. Contact us by phone at (847) 749-1851 or by email at info@evolvefinancialservices.com to get started on a financial strategy for your business and for more information about upcoming individual stimulus checks.

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Due to the COVID-19 pandemic and surrounding current events, the IRS has extended the deadline for filing 2019 taxes by an extra 90 days. Tax filings for 2019 will now be due on July 15, 2020. This change is effective only for individuals’ personal 2019 federal income tax returns.  The due dates for personal state and local income tax returns vary by state and locality – Illinois has currently extended their due date to be in-line with the new federal due date of July 15, 2020.

There will be no penalties or interest charged individuals who file after April 15, 2020, but before the new deadline of July 15, 2020. This extension grants individuals a grace period for filing during the ongoing COVID-19 outbreak. The 90-day extension was put into place in an effort to help citizens being affected by the virus and the closures, social distancing, and quarantining that is now widespread across the country. 

Individuals must comply with the new tax filing deadline of July 15, 2020, or else be subject to applicable penalties and interest. If you are unable to file by this new date, you must take the appropriate steps to contact the IRS and show reasonable cause for the inability to file by the new deadline.

While this time extension only to individual tax returns, if you have not yet filed your 2019 federal and state corporate or partnership income tax returns, Evolve Financial can work with you to get those tax returns filed, and we will work directly with the IRS and state agencies on your behalf to see if any assessed penalties and/or interest can be abated.

If you have not already filed your 2019 personal and/or business income tax returns for 2019, or have questions about how this extension may directly affect you, Evolve Financial Services is here to help. At Evolve, we use proven solutions to help companies and individuals navigate all of the financial challenges they may face, while setting you up with the advantages you and your business need to succeed.

Contact us today by phone at (847) 749-1851 or by email at info@evolvefinancialservices.com to get started on a strategy for your business.

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While an IRA is a great way to prepare for the future, the rules and regulations differ based on many factors, such as the type of IRA account you set up (Traditional and ROTH), your age, filing status, income levels, and other retirement investment holdings.

Traditional IRA’s
With a Traditional IRA, the 2016 maximum contribution for someone younger than 50 is $5,500 while that amount raises to $6,500 per account for those 50 and older. Traditional IRAs are tax-deferred accounts, meaning you don’t pay taxes on the money contributed until you withdraw it during retirement. This money is then taxed as normal income based on your taxable income rate at the time of distribution, and you are required to start deducting from the account once you turn 70 ½ years old. Distributions are allowed for those between the ages of 59 ½ and 70 ½ without being subject to a penalty, however, these distributions are subject to federal and state income taxes.

While the ability to contribute to a traditional IRA is not restricted by income (you can contribute up to the previously mentioned annual limits), the ability to deduct the contributions on your tax return is restricted by income, and there is a phase-out of the tax deductibility of contributions based on your Adjusted Gross Income (AGI) AND whether or not you or your spouse is covered by an employer’s retirement plan.

Traditional IRA income limits for the tax deductibility of contributions are the following in 2016 if you ARE covered by an employer’s retirement plan:

• Single or Head of Household Individuals – all contributions are tax deductible for those with AGI
  < $61,000, a phase-out (partial tax deductibility) is allowed for those with AGI from $61,000 – $71,000, and those with AGI > $71,000 are not allowed any tax deduction on their
  contributions.
• Married Filing Jointly – all contributions are tax deductible for those with AGI < $98,000, a phase- out (partial tax deductibility) is allowed for those with AGI from $98,000 – $118,000, and those with AGI > $118,000 are not allowed any tax deduction on their contributions.
• Married Filing Separately – Individual is not able to take advantage of the full tax deductibility
  limit. Partial tax deductibility is allowed for an individual with AGI < $10,000, and individuals with AGI > $10,000 are not eligible to deduct their contributions on their income tax return.

Traditional IRA income limits for the tax deductibility of contributions are the following in 2016 if you ARE NOT covered by an employer’s retirement plan:

• Single or Head of Household Individuals – there are no income limit
•  Married Filing Jointly – there is no income limit
• Married Filing Jointly (Your spouse has a retirement plan) – all contributions are tax deductible
  for those with AGI < $184,000, a phase-out (partial tax deductibility) is allowed for those with AGI from $184,000 – $194,000, and those with AGI > $194,000 are not allowed any tax
  deduction on their contributions.
• Married Filing Separately (if your spouse is covered at work) – Individual is not able to take advantage of the full tax deductibility limit. Partial tax deductibility is allowed for an individual with AGI < $10,000, and individuals with AGI > $10,000 are not eligible to deduct their contributions on their income tax return.

Roth IRA’s
Unlike Traditional IRAs, for ROTH IRA’s an individual (or married couple) pays taxes on the contributions made rather when distributions are taken. Any gains and distributions on qualified distributions of ROTH IRA’s are tax free.

With a Roth IRA, the maximum contribution amounts are the same as with a Traditional IRA, however, your overall eligibility to contribute to this type of IRA depends on your income. You MUST have earned income of at least your contribution amount to be allowed to contribute to a ROTH IRA.

Roth IRA’s contribution limits are based on the following Modified Adjusted Gross Income (MAGI) levels:

• Single or Head of Household Individuals – full contribution amounts are allowed for those with
  MAGI < $117,000, a phase-out (partial contribution) is allowed for those with MAGI from $117,000 – $132,000, and those with MAGI > $132,000 are not eligible to make contributions.
• Married Filing Jointly – full contribution amounts are allowed for couples with MAGI < $184,000, a phase-out (partial contribution) is allowed for couples with MAGI from $184,000 – $194,000, and couples with MAGI > $194,000 are not eligible to make contributions.
• Married Filing Separately – Individual is not able to take advantage of the full contribution limit. A partial contribution is allowed for an individual with MAGI < $10,000, and individuals with MAGI > $10,000 are not eligible to make contributions.

As previously stated, a qualified distribution from a ROTH IRA is tax and penalty free, provided that the individual has held the ROTH IRA for a minimum of 5 years, and one of the following conditions is met:

• The individual is over the age of 59 ½
• Death or disability
• Qualified first-time home purchase

A non-qualified distribution is subject to taxation of the gains on the original contributions, plus an additional 10% penalties unless exception rules apply. You can always remove post-tax contributions (known as “basis”) from your ROTH IRA without penalty. Unlike traditional IRA’s, there are no required withdrawals during the lifetime of the original owner.

Spousal IRA
A Spousal IRA is simply a regular IRA (Traditional or ROTH) setup for a non-working spouse, and allows each person to contribute to their retirement when there is only one person with earned income. Once this IRA is established, it belongs to that individual exclusively (even after a divorce), and that individual has sole authority over investing and withdrawal decisions.

A spousal IRA can be either a traditional or a Roth IRA, with the differences in tax treatment applying in the same manner that they would for someone who had earned income. The same income limits on deductibility of Traditional IRA contributions apply, and the same income-based restrictions on making Roth IRA contributions apply for a spousal IRA.

The eligibility requirements for the spousal IRA are as follows:

• The couple must be married with a filing status of Married Filing Jointly
• Contributing spouse must have earned income for the tax year of at least the amount contributed to both individual’s IRA’s for that tax year.
• The non-working spouse must be under 70 ½ at the end of the tax year of the contribution for a Traditional IRA. There are no age restrictions on contributions made to a ROTH IRA for a non-working spouse.

Contribution Deadline
With any IRA account, you can make your contributions either during the tax year or by the filing dead-line for that year’s taxes (for 2016, this is April 17, 2017) to have the amount counted toward the tax year in which you are filing. IRA’s are a great way to boost household retirement savings, and to create a stable financial future for you and your loved ones. Do your research to find the type that is right for you, and start contributing today.

As you can see, there are many age, income, contribution, and distribution rules and limitations associated with both Traditional and ROTH IRA’s. For more information and assistance with tax planning for the present and future, visit Evolve Financial today.

The post IRA Rules and Regulations Overview for 2016 appeared first on Evolve Financial Services.

The tangible property de minimis safety harbor that was finalized and issued in 2013 provided a regulation that allows qualifying businesses to deduct purchases of tangible property immediately that were below a certain dollar amount. If you were a taxpayer that did not have an AFS (audited financial statement), that dollar amount must be under was $500.

However, in the recent years, many businesses and taxpayers have made comment that the $500 threshold was too low of a monetary number to sustainably and effectively reduce administrative burdens that come from running a small business. While the original threshold amount was helpful, it was not making a very big difference in the financial health of small businesses all across the country.

A taxpayer without an applicable financial statement (“AFS), as defined in Reg. Section 1.263(a)-1(f)(4), may elect to apply the de minimis safe harbor if, in addition to other requirements, the amount paid for the property subject to the de minimis safe harbor does not exceed $500 per invoice (or per item as substan-tiated by the invoice).

In contrast, a taxpayer with an AFS may elect to apply the de minimis safe harbor if, in addition to other requirements, the amount paid for the property does not exceed $5,000 and the taxpayer treats the amount paid as an expense on its AFS in accordance with its written accounting procedures.

A larger safe harbor limitation is reasonable for a taxpayer with an AFS because an AFS provides independent assurance that the taxpayer’s de minimis policies are consistent with the requirements of generally accepted accounting principles (“GAAP”) and do not materially distort the taxpayer’s financial statement income.

Taking these concerns into consideration, the IRS announced that they would increase the de minimis safe harbor threshold to $2500 starting with the 2016 tax year.

The increasing of the de minimis safe harbor threshold by the IRS will help many small businesses thrive financially in the upcoming years. While $2500 still may not cover a large chunk of all small business administrative burdens, this ruling that increased the threshold by five times its original amount will greatly lessen costs associated with the implementation of business for a wide percentage of taxpayers.

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A big part of understanding best tax practices is knowing how to pay them, and how to use them to your advantage. With current headlines claiming that certain tax policies like the Net Operating Loss Carryback and Carryforward Provisions are either a genius move or a cowardly loophole, the fact of the matter is that the Net Operating Loss Provision is a legal tax practice that is used by many businesses each year.

First created with the Revenue Act of 1918, the Net Operating Loss was established as a provision to allow corporations to, quite literally, carryback and carryforward any expenses that exceeded their revenue yearly when filing taxes. Established at the end of World War I with the expectation of loss in business, this provision was created to help alleviate corporations of a tax burden on funds they lost while operating.

Still in practice today, the Net Operating Loss Provision allows for companies who have lost money to offset their taxable income, which reduces the tax liability of the reporting entity. With the provision, companies have the option of carrying the amount back over the preceding two tax years and applying it against any taxable income – often resulting in an immediate tax rebate, or carrying the amount forward for the next 20 years and applying it against any future taxable income, reducing tax liability over the course of those years. However, the Net Operating Loss does expire after a 20 year time period.

The Net Operating Loss Carryback and Carryforward Provisions may be making headlines today, but they have been a major factor in tax policy for nearly a century, and will continue to be for many years to come. Tax policies and provisions are established to protect individuals and businesses within the United States, and can be a very powerful tool when utilized. While controversial, the Net Operating Loss Provision is a completely legal way for businesses to operate under the United States governing tax policy.

For more information on tax policies and provisions, visit Evolve Financial today.

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Having a foreign student work for you as a nanny can be a great experience for both the student and your family, but you may be asking yourself, how do taxes factor in with workers like this?

As long as certain requirements are met, you as the employer are not required to withhold or pay-in FICA or other federal income taxes for the student’s services. Keep in mind, the student must be a nonresidential alien, and not make above the applicable threshold during their time of employment. Students cannot work more than 10 hours per day or 45 hours per week, and must be enrolled in no less than 6 semester hours of classes at a post-secondary educational institution. As long as all requirements are met, then you as an employer do not have to pay-in or withhold income taxes for the student’s domestic style work.

However, even though you do not have to pay income taxes for this work, the student you employ is required to claim the wages he or she made, and file an income tax return. As a nonresidential alien, the student must report all au pair wages unless those wages, in addition with any other U.S. source income, does not exceed the personal exemption amount.

Hosting a foreign student can be an incredible lesson in differing cultures for both you and the au pair you employ. While you do not have to pay-in or withhold taxes for the student you host, be sure that they are made aware of their responsibilities to report their individual income. After all, there is no better lesson in a foreign culture than learning about its finances.

For more information on tax guidelines, visit Evolve Financial today.

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However, mistakes happen, and you may end up filing your taxes late, or maybe even not at all. While it is not by any means encouraged to put your taxes on the back burner, the IRS can be understanding of individuals who have made a one-time mistake such as this. That is why the First Time Penalty Abatement exists.

If you or any individual you know accidentally files your taxes late, or mistakenly does not file them at all, the IRS allows for the one-time abatement of any late or non-filing fee you may receive. Meaning, as long as you have filed your taxes correctly and on time for the past three years, the IRS will, just this once, let your penalty slide.

The First Time Penalty Abatement can be extremely helpful for individuals who have made a one-time mistake, and can result in quite a bit of money being saved in fees. However, it is important to note that this abatement does not keep you from incurring other consequences for not filing your taxes correctly. To avoid any other penalties or fees, speak with a trusted expert, like Evolve Financial, to make sure you are correctly filing all past mistakes, and all future claims moving forward.

The First Time Penalty Abatement can be a live-saver, but do not rely on it as an excuse to ignore your taxes. While it is a wonderful safety net that should be taken advantage of if needed, the best way to avoid any penalties from the IRS is to always file your taxes correctly, and on time.

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