Tax Update 6.3.2020
Many people started fundraisers to support non-501©(3) COVID causes such as paying out of work independent contractors, people in need, etc. Sites like Fundme.com will send you a 1099-K for the income received and you must declare it. You cannot deduct the payments as charity because people are not qualified charities and these “donations” are not tax-deductible. If you paid people, you can deduct those expenses on Schedule C but remember that these people must declare the income and pay taxes on it. Also, anyone who received $600+ must be issued a 1099-MISC.
Seven states are finding work arounds to help people with the $10,000 limit on state/local/property tax deductions (“SALT CAP”). These states are allowing S corps and LLCs to pay ENTITY level taxes instead of the owners paying personal taxes. S corps and LLCs are allowed unlimited deductions for taxes – unlike individuals. These states are CT, LA, MD, NJ, OK, RI and WI.
For those of you who did not receive an economic stimulus check or believe it is incorrect – calling the IRS will not help. The IRS will refer you to the Economic Stimulus website for answers. If you believe the payments are incorrect, you’ll have a chance to correct them NEXT year when you file 2020 taxes.
Reminder to file your FinCen forms annually and in a timely manner – willful failure to do so will cost you 50% of the account balance. A recent case resulted in a $13 million penalty and payment to the IRS for undisclosed bank accounts between 2007-2009.
Recent changes to installment agreements. First of all, people have seven years (versus five) to pay off their debts. Second of all, two years must pass before the IRS can refer the debt to a private collection agency (versus one year).