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There’s no easy answer to this question, and it varies depending on the type of product or service you sell and where you’re located. Here’s what you should know about sales tax and how it might impact your business.

Does your business owe sales tax?

Businesses are typically responsible for collecting the required sales tax on the items or services that they sell. However, some types of products and services are exempt. Here are two questions to help determine whether your business owes sales tax:

1. Do you have tax nexus?

A tax nexus is a connection a business has with the state in which it is located. Typically, when you sell products in a particular state, you must charge sales tax for that state. However, every state has different requirements, which consider physical presence, economic nexus, transactional thresholds, and other business activities.

2. Are your products or services taxable?

Whether or not your products and services are taxable depends entirely on the type of product you’re selling and where you’re selling it. For example, certain states don’t charge a sales tax on food items, while others do. Some states will collect tax based on the origin of the product whereas others tax based upon where you’re selling that product to. If your business is national, you must also understand the tax requirements for each state you are selling in.

When you’re starting a small business, it’s essential to research and review not only the requirements of the state you’re based out of but also the ones you may be selling to.

Businesses exempt from paying sales tax

There are certain types of businesses that are exempt from paying sales taxes. Examples of these businesses include:

• Charities
• Educational organizations, such as schools
• Scientific organizations
• Literary organizations
• Religious organizations
• Medical organizations
• Government organizations
• Businesses that are purchasing goods for resale

These are typically nonprofit corporations that have earned a federal non-profit status through the IRS. In order to be exempt from charging sales tax on their products, businesses must obtain federal tax exemption status from the IRS. This process requires an attorney to handle the application and documentation in order to administer the exemption.

It should also be noted that some tax-exempt organizations may still have to charge sales tax. This is because certain items or products that are sold may not apply under the tax exemptions. As a small business owner, it is important to review both state and federal guidelines on tax exemptions before you start to sell products.

Get help understanding your sales tax obligations

As a small business owner, your tax obligations can be complicated. If you’re unsure whether your business should be collecting sales tax or what the tax requirements are in your state, contact the tax experts at Miller & Company today. Schedule a consultation to start the conversation about your business’s tax obligations.

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While many people deposit their check into their savings account or indulge in a shopping spree or night out, others may choose to donate theirs to those in need. If you’ve received a stimulus check but don’t need it, donating the money is a great way to give back — and you can get a tax break if done properly. Here’s what you need to know.

How to donate your stimulus check

Spend it on local small businesses in your community

Many local small businesses have been affected by the pandemic. Limited in-person traffic, changing customer needs, and overall fewer resources have made it difficult for smaller shops to stay open. By putting your stimulus check toward a local small business, you can directly impact your local economy and make a significant impact on companies that may be struggling right now.

Donate to those in need who don’t qualify for stimulus checks

Eligibility for stimulus checks is largely determined by income. However, not everyone who falls under a certain income threshold will qualify. Some people, including immigrants and those claimed as dependents, may face financial hardship but not qualify for a stimulus check. If you aren’t using your funds, donating them to those in need can directly improve their financial situation.

Look up credible charities

Charities rely largely on the generosity of donors to support their mission. By making a charitable donation to an organization whose cause matters to you, you can ensure that your funds are going toward the greater good. Before making any payments, do your research to ensure that the charity is credible.

How to get a tax break by donating your stimulus check

Donating your stimulus check is not only a great way to give back to those in need, but you can also get a tax deduction in the process. Here’s how to do it:

Donate to qualified/eligible charities 

For your donation to qualify for a tax break, it must go toward an organization that is eligible to receive tax-deductible charitable contributions. You can look up qualifying charities on the IRS’s Tax Exempt Organization Search. Donating money to a family or individual does not qualify for a tax deduction.

Itemize deduction on your return

Generally speaking, you will need to itemize your donation as a deduction on your return to receive a tax break. However, the Coronavirus Aid, Relief, and Economic Security (CARES) Act has established new provisions on charitable giving. Under the CARES Act, you can claim an above-the-line deduction of up to $300 on your tax return for any qualifying organization. These provisions do not apply to contributions to supporting organizations or donor-advised funds.

Provide a record of the donation

Your donation can be made through any means of payment (cash, check, or credit card). However you contribute, you must get a record of the donation. You can ask the organization to provide a receipt, email, or letter that includes the amount and date of your contribution.

Need tax help? Call Miller & Company.

If you’ve donated your stimulus check and aren’t sure how to report it on your taxes, you don’t have to go it alone. Miller & Company’s experienced CPAs can help you file your 2020 tax return and ensure you get the appropriate tax deductions for charitable contributions. Contact us today for a consultation.

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During the first round of Paycheck Protection Program loans issued in 2020, some small businesses missed out on funding, or the funds they received didn’t quite stretch far enough. Now, there’s another opportunity to receive this much-needed forgivable loan and boost your business in 2021.

Now that the U.S. Small Business Administration is accepting applications for the second round of PPP loans, you may be wondering if you’re eligible to apply. Here’s what you need to know about applying and receiving a loan under the new stimulus bill.

Who is eligible for a PPP loan?

In case you were wondering, the answer is yes — you can in fact apply for another PPP loan if you received one last year.

Any small business (300 employees or less) that was opened before February 15, 2020, remained open and operational throughout the pandemic, and lost 25% or more in quarterly sales (compared to the same quarter in 2019) is eligible to apply for a PPP loan under the new stimulus bill.

There’s a catch, though: You can only apply for a second PPP loan if you have used or will use all of your original loan and had it forgiven under the original CARES Act.

Should my business apply?

Congress’s bill designated $137 billion for “second draw” PPP loans, so if your business is eligible, it’s strongly advised to take advantage of this second chance at much-needed financial relief. We believe the SBA will provide further guidance throughout the application period and help businesses overcome any major hurdles to receive the money they need to stay afloat in early 2021.

When applying for your second PPP loan, we recommend returning to your original lending institution. Because you already have an existing lending relationship, you’ll improve your chances at approval.

Is there anything different about a second draw PPP loan?

If you received an initial PPP loan, then you already know the drill: Second draw loans will have the same terms as the original PPP loan.

This means that minimally 60% of the funds you receive must be spent on payroll to qualify for loan forgiveness. The rest must go toward other eligible expenses such as rent, utilities, and other operating costs.

Most eligible second-draw borrowers can apply for a loan of up to 2.5 times their average monthly payroll costs, with exceptions for seasonal businesses (2.5 times their average monthly payroll for any 12-week period between February 15, 2019 and February 15, 2020) and food and accommodation businesses, which can borrow up to 3.5 times their average monthly payroll for their second PPP loan.

How will this impact my taxes?

If you’re unsure of how a second (or first) PPP loan might impact your taxes next year, it’s a good idea to speak with a trusted financial advisor to help you properly plan out your finances. The experts at Miller and Company are here and ready to help. Schedule your consultation today.

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As you close out your business books for the year and begin planning for the upcoming tax season, here are some year-end tax prep tips to help you. 

1. Plan your billing cycle carefully.

As a self-employed business owner, freelancer, or consultant, you can reduce your overall 2020 taxable income by billing clients in late December or early January for services rendered in the last month of the year. Payments you receive on January 1st or later won’t be taxed until 2021, so if you’re expecting a large influx from your December accounts receivables, deferring your billing and payment cycle can help reduce your immediate tax burden.

On the flip side, if you’re expecting business to pick up significantly in 2021, you may wish to accelerate the payment timeline for your December invoices so you can stay in a lower tax bracket and take care of your tax liability sooner.

2. Make as many tax-deductible purchases as possible before December 31.

If you’re planning to make any major business purchases like office equipment, hardware, or machinery, do it before the end of the year and, of course, hang on to your receipts. Many of these expenses can be deducted from your 2020 taxable income and reduce your overall tax bill. You may also wish to take advantage of charitable donation deductions if there’s a cause your business supports. Your CPA or financial advisor can help you determine the best strategic purchases and donations to make to maximize your tax savings.

3. Understand the impact of any COVID-related tax provisions that apply to your business.

Many businesses will have to take their pandemic-related tax situations into account when filing their 2020 return. For instance, if you took out a Paycheck Protection Program (PPP) loan, if your employees opted to defer payroll taxes through the end of 2020, or if you received unemployment compensation at any point this year, you will need to figure out how to account for those situations before you file.

Review your specific circumstances with an experienced financial professional to understand what you might owe, especially if you’re a PPP borrower who has until December 31 to use their funds. 

4. Max out your retirement contributions for the year.

If you have an individual retirement account (IRA), now is the time to maximize your deductible contributions. For 2020, individuals under 50 can contribute a maximum of $6,000 to an IRA (or $7,000 if you’re 50 or older), so set up a one-time contribution to ensure you’re hitting that limit if you can afford to do so. While you can technically make 2020 contributions to your IRA until the April 15, 2021 filing deadline, getting the money into your account sooner means more time to take advantage of compound interest.

5. Prepare a list of questions to review with your CPA.

Every business owner knows that a trusted CPA can help them maximize their deductions and tax savings and make the most of their unique financial situation. Before you schedule your year-end review with your accounting professional, take the time to outline any questions or concerns you may have about your taxes this year so you can get your CPA’s advice and start taking action right away.

Looking for a new CPA firm? Schedule your consultation with Miller & Company to find out if we’re the right fit for your business.

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Tax considerations for out-of-state remote employees

Employing remote workers allows you to build a diverse team of capable individuals who work well together and bring different strengths to the table. However, with this arrangement comes various tax implications that can be particularly burdensome to a business owner.

If you’re thinking about employing such workers, or you already do, here are some possible tax issues to consider.

You are subject to the tax laws of the employee’s home state.

Not only must you understand the tax laws of your own state where you do business, you’ll also have to consider tax laws of your remote employees’ home states as well. This creates extra work for you in terms of preparing and filing paperwork and withholding employee taxes, especially if you have employees in multiple states.

There’s the potential for double taxation.

Double taxation is another concern for out-of-state workers. Depending on the specific state laws that apply to you and your workers, remote employees may have to pay state income taxes in both their home state and the state where your business operates (for instance, this is true for out-of-state employees who work for New York-based businesses). This is something you’ll want to warn your employees about so they’re aware of what’s coming out of their paycheck.

You will need to stay current with your own state’s laws and your employee’s home state’s laws.

State tax laws are ever changing, and keeping up with even just your own can be difficult. But if you plan on employing remote workers, you must stay current with their home state’s laws as well. 

While it’s best to consult a tax professional with knowledge of out-of-state labor laws, you can check this list of state and local tax authority positions on tax matters related to telecommuting, as well as the websites for state and selected local tax authorities to begin your initial research.

Other remote employee considerations

While it’s important to consider the state and local taxes, employers of out-of-state workers should be aware of these other important items to consider:

• Insurance: You’ll want to familiarize yourself with state and local rules applying to issues like workers compensation, unemployment, and disability insurance. Generally, employers must register for and obtain workers’ compensation insurance in the employee’s home state, and register and pay unemployment in their home state as well. Otherwise, you can face liabilities and penalties. 
• Compliance with local labor laws: Labor laws also tend to vary from state to state, so make sure you understand which ones you must adhere to as an employer. Areas to research include rules about wages and hours, employment termination, non-compete rules, trade secrets, laws regarding sick and family leave, and more.

If you’re concerned about tax and labor law compliance for new remote employees, you could always hire 1099 contractors and avoid the headache. However, you will need to make absolutely certain that the worker you hire is properly classified and treated as a contractor and not an employee.

Have questions? Get help from a trusted CPA firm.

Working with experts is always a good idea when it comes to complying with state and local laws. If your business is concerned about its tax obligations for out-of-state remote employees, contact the experts at Miller & Company LLP for help. During your consultation, we’ll discuss your current situation and help you determine the best course of action for your business.

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One roadblock that many entrepreneurs face is how to handle their business taxes. If you started a new business this year, here are some key tax tasks to put on your to-do list.

1. Determine your business structure.

When you register your business with your state, you’ll need to determine your legal business structure. Each structure has its own positives and negatives, depending on your business and how it’s run, and the one you choose will directly determine how the government taxes you. For instance, as a sole proprietor, your business assets and debts are tied to your personal assets and debts, while a corporation (C corp, S corp, B corp, etc.) is considered a separate business entity for which the owners are not personally liable.

Structures like limited liability companies and limited liability partnerships offer a “hybrid” model, where business finances still pass through to the owner, but provide greater protection from business debt liability. The right model for you depends on your desired business ownership structure and tax situation.

2. Obtain your federal Employee Identification Number (EIN).

Most business types will need to register with the federal government to obtain an Employer Identification Number (EIN). Think of this number as a Social Security number for your business. Even if you are a sole proprietor and don’t plan on hiring any employees, it’s still a good idea to have an EIN so you can identify your company on your first business tax return and on any official business applications, such as a loan or line of credit.

3. Choose between calendar year or fiscal year.

When you file your personal tax return, it is typically based on the calendar year. Businesses have the option of choosing to operate on their own fiscal year, which may change their federal tax deadlines.

At present, the IRS is set to resume the normal tax filing deadline of April 15, 2021 for 2020 calendar year taxes. However, with many tax regulations changing due to COVID-19, be sure to stay updated on your tax deadline.

3. Hire people to help you and choose the right tax classification.

When you hire an employee, you’ll have to determine what tax classification they’ll be hired under. W2 employees are dedicated workers employed by your organization. You are required to withhold and pay certain taxes on their wages earned, and depending on your company size, you may also be required to offer employer benefits like health insurance.

1099 workers, on the other hand, are independent contractors to whom you have no tax or benefit obligation. These contractors are responsible for covering their own self-employment taxes, and because of that, businesses that hire them must be sure their working relationship is actually that of a contractor and client, and not an employer and employee. The IRS has a checklist to help you determine the nature of your relationship with your hired workers.

5. Determine your business tax obligations with the help of a trusted CPA.

Once you choose your business structure, tax year, and employee type, you’ll determine what your tax obligations are and how frequently you need to pay them.

You’ll likely need to file estimated tax payments every quarter, on top of your federal and state payroll taxes if you’ve hired W2 employees. A trusted CPA firm can help you understand what you owe and when, and how to properly budget for those payments throughout the year.

If you’re a new business owner who is unsure on how to approach their 2020 taxes, contact Miller and Company to schedule a consultation before the end of the year.

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The U.S. government has responded to these economic hardships with policies designed to help American workers, including a temporary “payroll tax holiday” for certain employees beginning September 1, 2020.

If you or your employees are taking advantage of this policy, you may be wondering how it will impact your 2020 payroll taxes. Here’s what you need to know.

How does President Trump’s ‘payroll tax holiday’ work?

On August 8, 2020, President Trump used executive action to institute a temporary cut of the 6.2% Social Security payroll tax for qualifying employees from September 1 through December 31, 2020.

This “cut” is not an elimination of said payroll taxes, but a deferral — employees will be responsible for meeting their tax obligations during the first four months of 2021, unless Congress passes legislation to permanently forgive the payroll tax cut. In essence, employees who take this “payroll tax holiday” should plan to receive a higher paycheck for the remainder of 2020, but see a significant cut to their pay between January and April of next year.

For employees, the temporary increase in pay could help cover some much-needed expenses in the short-term, especially if a spouse or family member is currently unemployed. However, they will need to plan ahead to ensure they are able to pay back their obligation in early 2021, in case Congress does not forgive the tax cut.

What does this mean for employers?

It’s important to note that employers must opt in to this payroll tax holiday, and the government has not made it mandatory. Keeping track of everyone’s deferred payroll taxes and holding those payments in escrow until early next year is complicated, and it could prove to be a logistical nightmare.

It’s a difficult choice, especially since, if Congress doesn’t forgive the tax cut, an employer is on the hook for the employee’s tax obligation if they leave the company or otherwise don’t pay it back by the end of April. However, it may be in an employer’s best interest to extend the option to their employees.

With everything going on in the world, it’s the right time to give more money to an employee, and if your company has the resources to shoulder the bookkeeping burden and risk, it could go a long way in building employee loyalty and satisfaction.

Have questions? Ask a trusted CPA.

The top-rated CPAs at Miller and Company LLP are here to answer all your questions about 2020 payroll taxes and how the current administration’s policies might impact your tax return for the year. Contact us to schedule a consultation with one of our trusted accounting professionals.

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Understanding what you might owe and when, as well as keeping meticulous financial records, is the best way for self-employed professionals to stay on top of their tax obligations. To help keep your finances in check, here are some tax tips for freelancers and self-employed individuals to follow.

1. Understand which taxes you are responsible for paying.

Freelancers and self-employed professionals are responsible for paying self-employment and income taxes. The federal self-employment tax rate is 15.3% for the 2020 tax year. Each state has its own rules about income tax, so be sure to check with your accountant if you’re not sure what you might owe your home state.

2. Make your estimated quarterly payments.

After you’ve made a certain amount of money, you are required to pay estimated quarterly taxes . Estimated taxes can be tricky for people who are new in business and don’t have a history of projections, but if you don’t pay enough throughout the year, you may be subject to a penalty fee.

To help avoid incorrectly estimating your taxes, always let your accountant know when your revenue exceeds your estimates. Providing your accountant with your estimates as each quarter approaches its end can help you adjust your payments to more closely reflect your owed estimated taxes.

3. Keep track of your income and expenses.

Excellent bookkeeping that includes keeping track of your income can be essential during tax season. Your accountant will need to know how much money you made so they can advise you on your future tax payments accordingly.

4. Understand which credits and deductions you’re eligible for.

As a freelancer or self-employed professional, you’ll be able to deduct certain business expenses from your taxable income. Keep track of all your ongoing expenses and as often as possible, including keeping your receipts and credit card statements as forms of proof.

Depending on the type of business you run, the activities you’re involved in, and whether you have employees, you may also be eligible for certain tax credits at the end of the year. This is especially true for the 2020 tax year, as many businesses will be able to take advantage of certain provisions in the CARES Act. A financial professional can help you understand what you’re eligible for and what proof/records you’ll need to provide to take advantage of these credits and deductions.

5. Organize your records, receipts, and business paperwork.

Keep all your business paperwork organized in a safe place, as you’ll likely need it to file your taxes. As noted above, you will want to have copies of receipts and client invoices, as well as any tax forms that you provide to your employees and/or contractors.

6. Consult with a trusted tax professional.

When it comes to your taxes, hiring a qualified CPA firm like Miller and Company LLP can help save you time and money. While it’s helpful to know what taxes you’re responsible for paying among other things concerning your finances, you are busy running your business and staying on top of the latest tax laws can be time consuming.

Contact us today to schedule your consultation with one of our experienced tax professionals.

Read more tax tips for freelancers from Paul Miller, CPA, on Business Insider.

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If you’re a small business owner, freelancer, or otherwise self-employed, you might wonder whether you need to file and pay quarterly estimated taxes for your business. Here’s a basic overview of what you need to know.

Who is required to pay quarterly taxes?

Generally speaking, anyone who is self-employed will owe the Internal Revenue Service money throughout the fiscal year. For most businesses, these payments are made in the form of quarterly estimated taxes.

Corporations have to make estimated tax payments if they expect to owe $500 or greater when their return is filed. If you have employees, as an employer, you have certain tax responsibilities that you must pay, which are Social Security and Medicare taxes, Federal income tax withholding, and the Federal unemployment (FUTA) tax.

But what about individuals who earn non-W2 income? The IRS states that “individuals, including sole proprietors, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed.” In short, all self-employed workers are subject to this rule. Even independent freelancers who haven’t formally incorporated or registered a business with the government are automatically and legally considered a sole proprietor for tax purposes.

You are not required to pay quarterly taxes if your employer withholds taxes from your earnings. You also do not need to file quarterly taxes if you expect to owe less than $1,000 on your annual self employment income and plan to pay everything at once when you file your yearly tax return.

What taxes do self-employed individuals pay?

If you’re new to self-employment, you may be surprised to see that you’re paying more in taxes than you did as a W2 employee. This is because you are now carrying the full burden of your Social Security and Medicare taxes. Eemployers cover half of this tax burden for you when you’re on their payroll, but as a business owner, you’re obligated to cover it in full in the form of a self-employment tax (SE tax), on top of your regular federal income tax.

How do I calculate my self-employment tax obligation?

The IRS offers Form 1040-ES to help you calculate your quarterly estimated payments. You’ll first need to calculate your taxable self-employment income by taking your annual gross income (the total amount of revenue you received) and deducting any eligible expenses. Then, you’ll use that number to go through the 1040-ES worksheet to determine your tax obligation, which is based on your income bracket.

This worksheet can be complicated if you’re unfamiliar with it, so it’s wise to speak with a trusted CPA firm to help you make these calculations and understand what you owe the IRS.

Estimated tax payment deadlines for Tax Year 2020

If you’re a business owner or self-employed, it’s important to know when to file your taxes and how much to pay in order to avoid an Underpayment of Estimated Tax penalty.

In 2020, the coronavirus pandemic shifted the federal quarterly tax payment deadlines for Q1 and Q2 to July 15. However, the payment deadlines for Q3 (September 15, 2020) and Q4 (January 15, 2021) are still in effect. You may also pay your Q4 estimated taxes when you file your annual business tax return.

If you’re unsure whether you need to file quarterly taxes or how to calculate what you owe, contact  the top-rated CPAs at Miller and Company for a consultation.

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The bigger your business gets, the more complicated your finances become. Large businesses have higher earnings, more vendors and clients, and in many cases, more employees with larger salaries and benefits packages compared to a small startup. They may also qualify for more tax credits and deductions as their business expense list grows.

The quality of your accounting and bookkeeping can make all the difference in your business’s bottom line, especially come tax season. That’s why it’s critical for any large business to invest in good financial professionals to stay on top of ever-changing regulations and help you manage your cash flow.

Here are a few key reasons why proper accounting for your large business is non-negotiable.

1. You’ll know where you can benefit from deductions.

A good business accountant will be able to find tax deductions for you that you may not have known about, or maximize the ones you did know about. Even small deductions can add up for big savings at the end of the year.

2. Good accounting can reduce your risk of an audit.

The thought of a tax audit by the Internal Revenue Service can cause even the most organized business owner a lot of stress. Audits can be expensive and overwhelming, but an accountant can help ensure your finances are on track to help you avoid an audit or, in the event you do get audited, help ensure a smooth process with the IRS.

3. It will help you maintain a realistic budget.

If you want to avoid overspending on your business, you’ll need to start with a realistic budget. An accountant can help you pare down your business expenses and set a budget that reflects your current and projected revenue.

4. You’ll remain compliant with changing tax laws.

Every U.S. business is required to follow certain federal and state regulations regarding their tax obligations. With insights from a trusted accountant, you’ll always be on top of your tax liabilities and understand what you owe.

5. It can make payroll easier.

A good accountant can help ease the burden of payroll. In addition to ensuring employees get paid on time and in the correct amounts, payroll assistance can include:

• Monitoring employee paid time off
• Managing payroll audits
• Ensuring payroll adheres to all local and state level laws such as overtime payments
• Resolving any payroll issues that may arise

6. You’ll be better able to manage and monitor cash flow.

Cash flow is an incredibly important part of any business’s financial health. The more efficient and accurate your accounting processes are, the better picture you will have of your company’s cash flow.

Formal cash flow statements include information on changes pertaining to all cash and cash flow equivalents of business. It also notates business cash flows through all financing, investing, and operating transactions. The accountant who helps you prepare these statements can help you interpret and analyze them to make better business decisions.

7. You can evaluate and improve business performance on an ongoing basis.

When you regularly evaluate business performance, you can understand how to improve it. A good accountant can provide insights on:

• Opportunities for your company to grow.
• Better business planning to help you meet your financial goals.
• Where to cut expenses and where to invest more.

Looking for a top-rated CPA firm to help with your large business accounting needs? Contact Miller & Company today to schedule your consultation.