Pearson’s Posts

This year’s January issue of the Pearson Perspective alerted small business owners to be sure to find out if your business is one of millions affected by the Corporate Transparency Act (CTA). Congress enacted the CTA in 2021 to combat sources of financial criminal activity and abuse of anonymous companies. The law became effective January 1 of this year.

Legal and regulatory debates have repeatedly taken center stage at the state and federal levels, the topic … what workers may appropriately be deemed “employees” and which class of workers may be classified as “independent contractors”? A worker’s classification has real world financial consequences for both the individual worker and the company utilizing their services.

If you weren’t frustrated and inconvenienced by inefficiency in responses by the IRS, certainly you know one or more taxpayers who have … or heard of the considerable backlog in unprocessed returns and unissued refunds for the past three tax years. Erin Collins is our National Taxpayer Advocate. In her 2023 Annual Report to Congress she presented an assessment of progress in reducing known bottlenecks as well as identifying agency improvements that may take more time.

Congress identified a widespread tactic by individuals with malicious intent to affect national security and economic integrity. Specifically, the scheme is to conceal or profit from the ownership of U.S. companies to facilitate illegal operations. The Corporate Transparency Act (CTA) was enacted by Congress in 2021. The purpose of the legislation is to curb unlawful financial activity including tax fraud, money laundering, and terrorism financing. Compliance requires many companies, domestic and foreign, doing business in the United States to report information about the individuals who own or control them.

Energy improvements to your home may make you eligible to enjoy tax credits for a portion of qualifying expenses. To be eligible, it takes your investment in renewable energy for your home such as solar, wind, geothermal, fuel cells or battery storage technology. If you expect to owe federal taxes this year, it’s worth investing a few minutes now to see how you may be able to lessen or eliminate that financial burden by taking advantage of one or more Residential Clean Energy Tax Credits.

In 2020, a report by Virginia’s Legislative Information System to the General Assembly alerted lawmakers to a major employee financial shortcoming … about 45% of private-sector workers in Virginia lack access to a retirement plan through their job. That fact prompted legislative action to propose and pass a solution, HB 2174 … a remedy referred to as RetirePath. The law went into effect July 1, 2021, and employer registration opened in 2023. Eligible employers received the first registration notification prior to July 1, 2023.

Over a year ago, we reported on the Employee Retention Credit (ERC) included in the CARES Act providing $80 billion dollars to encourage employers to retain employees at the height of the COVID-19 pandemic in early 2020. The driving principle for Congressional adoption of the incentive was to help pandemic-impaired businesses and tax-exempts to retain jobs and trigger job creation.

Many employers were and are confused as to qualification requirements and application procedures. Consequently, many of those employers who may qualify ignored participation in the program … one of considerable financial significance. The 2020 credit can be as much as $5,000 per employee … the 2021 credit up to $21,000 per employee.

Six months overdue, the Virginia budget was finally approved by lawmakers on Wednesday, September 6, 2023. Included in the budget is about $1.05 Billion in tax reductions for eligible Virginians in the form of one-time tax rebates. Qualifying individual taxpayers will receive $200 … joint filers, $400. Virginia issued similar rebates for the 2022 tax year, sometimes referred to as “stimulus checks” … returning massive budget surpluses to eligible residents. 

National Taxpayer Advocate Erin M. Collins released her statutorily mandated 2024 Objectives Report to Congress. She wrote in her introduction to the report, “In submitting this report, I’m finally able to deliver some good news: The taxpayer experience vastly improved during the 2023 filing season. The difference between the 2022 and 2023 filing seasons was like night and day.”

At the height of the C-19 pandemic, the Employee Retention Credit (ERC) was introduced to help both business owners and workers maintain payrolls and income respectively. For those businesses that qualify, the ERC is a refundable tax credit intended for employers that continued paying employees … either while shut down due to the COVID-19 pandemic or that had a significant decline in gross receipts during the eligibility periods. 

The Secure 2.0 Act was signed into law in late December 2022. The legislation builds on the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 to further strengthen the retirement system—and Americans’ financial readiness for retirement.

IRS Commissioner Danny Werfel sums up the threat: “Scammers are coming up with new ways all the time to try to steal information from taxpayers. People should be wary and avoid sharing sensitive personal data over the phone, email or social media to avoid getting caught up in these scams. And people should always remember to be wary if a tax deal sounds too good to be true.” Each year, the IRS has been rolling out its list of the Dirty Dozen… a catalog of the most common tax scams, classic cons and sophisticated avoidance schemes to minimize taxes.

IRS Form 1099-K is an information form typically provided to freelancers or small business owners who receive payments of income from a client via a third-party payment system. Third-party settlement organizations generally include banks or other organizations (e.g., Venmo, PayPal, or Cash App) that process credit card transactions on behalf of a merchant and make an interbank transfer of funds to the merchant from a customer … often identified as self-employment income.

In this article, we offer a summary of the ERC requirements and benefits. Additionally, we’ll share some cautionary thoughts for those of you who are contemplating or have already enlisted the services of a third-party ERC adviser. The ERC is a refundable payroll tax credit rewarding businesses that continued to pay employees while shut down due to the COVID-19 pandemic or had significant declines in gross receipts from March 13, 2020 to Dec. 31, 2021.

If you weren’t frustrated and inconvenienced by inefficiency in responses by the IRS, certainly you know one or more taxpayers who have … or heard of the considerable backlog in unprocessed returns and unissued refunds for the past two tax years. According to the U.S. Government Accountability Office, “Partly as a result of the COVID-19 pandemic, IRS has faced significant return processing backlogs and a decline in customer service since 2020”.