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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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There are many benefits of getting a head start on your taxes, but there are also some downfalls to consider before jumping in too soon. Here’s a brief overview of the pros and cons of filing your taxes early.

Pros of filing taxes early

Like to get ahead? Consider filing your taxes early to enjoy these benefits:

1. You’ll eliminate your tax deadline stress.

If you’re the kind of person who hates looming deadlines, filing early is a good way to go. Planning to file your taxes in late January or February means you can take your time and do a thorough double- and triple-check on your tax return, without worrying about cutting it too close to the April 15 filing deadline. Filing early also means that if you spot an error on your return or need to make an amendment after filing, you’ll have plenty of time to address it.

2. You’ll get your refund sooner (and protect it from would-be identity thieves).

If the IRS owes you money, you’ll probably want it in your bank account as soon as possible. Since the IRS typically issues refunds in less than 21 calendar days after processing a tax return, it makes sense to file as early as you can to get your refund faster.

The other advantage of filing early is that you reduce the likelihood of someone successfully filing a fraudulent return using your name and Social Security number and claiming your refund. Once the IRS receives and processes a taxpayer’s return, they’ll reject any additional returns using the same Social Security number — which means if someone filed a false return in your name while you procrastinated, it could take months to resolve the fraud and get your refund from the IRS. 

3. You’ll have more time to prepare for your tax bill.

If you think (or know) you’ll owe the IRS money, filing early means you’ll have some extra time to save up and make a plan for paying off your tax bill. This can be especially helpful if your tax bill comes as a surprise and you weren’t expecting to owe the IRS.

4.  Tax professionals may be more available to work with you.

During the first quarter of the year, tax professionals and accounting firms get busier and busier the closer it gets to April 15. Working with a professional to file your taxes early means it’s more likely that they’ll be available on your schedule, instead of trying to slot you in between other clients who waited until the last minute.

Cons of filing taxes early

Of course, rushing the tax filing process can be just as detrimental as procrastinating until the last minute. Here are a few reasons to consider waiting a few weeks (or a month or two) before filing your return:

1. You might be filing before receiving all proper forms.

If you’re a corporate employee, your employer is legally required to send you a W-3 tax form summarizing your earned wages and taxes withheld. If you’re self-employed or have interest-bearing accounts, you’ll also likely be receiving a handful of 1099 tax forms from your clients or financial institutions. 

The deadline for issuers to file and send out your copy of these tax forms is January 31, which means you should not file your tax return until you’ve received all of them. Even if you’re certain of the amounts you earned, it’s best to double-check your numbers against the official forms that were filed with the government.

2. There’s an increased likelihood of making mistakes when in a hurry.

Your tax return isn’t something you should rush through just to get your refund, no matter how much you might need the money. If you’re filing early for the sake of an early refund, you’re more likely to miss some of the smaller details when you file, especially if you’re using a DIY tax return software instead of working with a professional.

3. You may increase your audit risk if you have to amend your return.

Mistakes happen, and the IRS understands that you might need to make a correction or two after you’ve officially filed your return. You can amend yours to fix any errors, but keep in mind that amended returns are more likely to be audited.

4. You might owe more interest and penalties.

If you do amend your tax return and end up owing more to the IRS than you originally paid when you filed, you’ll be subject to additional interest on the balance and may even have to pay a penalty.

Need tax help? Call Miller and Company

If you’re not sure how to approach your taxes this year, don’t try to go it alone. The trusted CPAs at Miller and Company LLP can help you figure out the best strategy and timing for filing your 2020 tax return and making the most of your potential deductions. Contact us today for a consultation.

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Individuals in this age range can practice some smart habits and strategies to maximize their savings and plan for their future retirement. Here are some retirement preparation tips to follow in your 40s.

1. Set a clear retirement savings target.

At age 40, you’re about halfway through your overall career, which means you have two to three decades left to maximize your savings. Knowing how much you’ll need upon retirement depends on a multitude of factors, including your desired lifestyle during retirement, when you plan to stop working, and projected growth on investments.

However, if you don’t have a goal in mind, it could keep you from having a solid plan to reach your desired nest egg. Additionally, if you just make a guess about how big your nest egg should be, you may end up falling short of what you actually need.

A financial advisor can help you plot out the actual number and online retirement calculators are there to assist you when choosing the best amount for you and your family.

2. Create a plan for meeting your target.

Saving is key to meeting your desired retirement number. Making a plan to reach your desired goal looks like making wise investment decisions, such as choosing whether to buy something to fit your lifestyle or putting that money away for retirement. Creating a plan to meet your target will involve certain prioritizations and putting contributions toward your nest egg above other expenses that pull your money in another direction.

3. Work on paying off high-interest debt.

If you have high-interest credit cards or loans, the amount you owe in interest each month could keep you from retirement savings. While many believe they can allocate appropriate funds while saving towards retirement, if they have large balances on high interest cards, they’re paying more annually in debt interest than earning on investments.

However, you don’t want to throw all your money at debts. Put enough in your retirement that you can match your employer’s contribution and then some (if applicable), then use what’s left to chip away at high-interest balances.

4. Spread out your investment to minimize tax liability during retirement.

Rather than keeping all your retirement savings in one 401(k), it may be helpful to spread your savings among different tax-deferred accounts. Roth IRAs and taxable investment accounts will allow you to control the amount of taxes you’ll end up paying when you start withdrawing from your retirement savings.

5. Balance your investment risk.

Investing in higher-risk stocks can be a great way to position yourself for huge earnings, but there’s no guarantee on your return at the end of every year. While investing can be intimidating, it’s important to weigh the risks and rewards of your chosen assets. There are natural ups and downs in the investment market, especially in times of economic uncertainty. Therefore, investing is about taking just the right amount of risk while not playing it too safe to maintain a solid enough return to work with future investments.

Work with a CPA

A certified public accountant can help you sort through your current assets, liabilities and future projections. Contact Miller & Company today for a consultation.

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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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To protect your assets and a legacy you may want to leave for your family when you pass away, it’s important to start ramping up your retirement savings before you reach age 40. With more than 30 years to go before retirement, this is the best time to start building your nest egg and earning interest on your investments.

Here are a few tips to help you get ahead on your retirement plans in your 30s.

1. Increase your retirement account contributions.

It’s important to increase your retirement savings by contributing the maximum amount allowed if you can afford to do so. As noted by the IRS, the contribution limit for employees who participate in a 401(k) has increased to $19,500 this year. If you have an individual retirement account (IRA), the max amount you’re allowed to contribute each year is $6,000.

If you can’t afford to contribute the maximum, at least try to double the amount you’ve been contributing. Employers often match up to 3 or 4% of 401(k) contributions, which is what you may have been contributing in your 20s. If you can bring that contribution up to at least 8%, you will get that much closer, that much faster, to reaching your retirement savings goals.

2. Protect your assets with proper insurance.

Now that you have more assets, you have more to lose. It’s important to continually save for retirement despite whatever life events may happen. For example, in the event you get hurt at work and are not able to perform your job duties, your retirement savings will be set back. Disability insurance can replace a percentage of lost wages for a certain period of time. Life insurance is another type of insurance to look into as it could protect your assets when you pass away.

3. Get out of student loan debt.

There are various programs available that you may qualify for that can help you get out of student loan debt. If you don’t qualify for them, make a plan to start doubling your student loan payments and talk to a private lender about student loan refinancing. A few of those programs include:

• Teacher loan forgiveness. Teachers who work for low-income schools or educational agencies may qualify for this program.
• Public service loan forgiveness. This program is for select people who have worked in a public sector job for a certain period of time.
• Income-driven payment plans. If you’ve recently lost your job or had a reduction in income, find out if your lender will allow you to move to a modified payment plan based on your current salary.

4. Roll over retirement accounts from past employers.

Now that you may have worked for a few different companies, it’s likely you have more than one retirement savings account. It’s easy to forget about old accounts along with the amount of money you have in them and what fees you are being charged to keep them open.

To help keep track of your retirement accounts, speak with each financial institution to see if rolling them over into one account would make financial sense. If so, they will be easier to track all from one location.

5. Get help from a financial professional.

A financial professional can work with you to explore additional ways that you can prepare for retirement while you’re in your 30s. For further assistance, schedule a consultation with the top-rated accountants at Miller & Company.

The short answer is yes — but only if you also use that home office for self-employed business activities. Here’s what you need to know if you’re a remote worker with a home office.

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What is the home office deduction?

The home office deduction is for people who use part of their home as their primary workplace. You can deduct certain business expenses for your home office, regardless of whether you rent or own your home.

The catch? This deduction is only available to those who are self-employed. In other words, if you’re a W2 employee who is working remotely, you are not eligible for this deduction unless you have additional self-employment income.

If you meet the self-employment requirement, there are two basic criteria that would qualify your space for a home office deduction. They are:

1.     Regular and exclusive use

To qualify for the deduction, you must regularly and exclusively use a space in your home for work. If you have a designated room or area in your home that is solely used for business, you are eligible to take the home office deduction. If you work at the kitchen table or on the couch, this does not qualify as “exclusive space,” as these areas are used for everyday living.

2.     Principal place of your business

Your home must be the principal place that you conduct business in. As an example, you can meet with clients at other locations, so long as your home is the principal setting for your business. Freestanding structures that are on your property, such as a studio or garage, that are used as your primary place of business are also eligible.

Employees versus self-employed individuals: Who’s eligible?

Now that the vast majority of people are working from home due to the coronavirus pandemic, you might think you’re entitled to some tax deductions as your home now doubles as your office.  Previously if you were a W2 employee who worked from home all or most of the time, you were able to deduct your home office expenses through line 21 of Schedule A. This changed with the Tax Cuts and Jobs Act of 2017 (TCJA).

Once TCJA was passed, W2 employees could no longer deduct home office expenses. Now these deductions only apply to self-employed individuals and independent contractors. During their annual tax filing, these taxpayers can file their home deduction on IRS Form 8829, which is filed under their Schedule C on their 1040.

Get help with your home office deduction from a trusted CPA.

If you’re a self-employed person who works out of their home this year and needs insight as to how you can deduct expenses, contact the experts at Miller and Company. We can connect you with one of our expert CPAs for a consultation to see what you’re entitled to and how you can qualify for the home office deduction.

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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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However, it’s important to start saving for retirement as early as possible so you can take advantage of compound interest and grow your “nest egg” decades before you need it.

Here are six ways you can prepare for retirement when you’re in your 20s.

1. Open an IRA or 401(K) and take advantage of employer contribution matching, if available.

If your employer offers any kind of retirement savings account, such as an IRA or 401(k), sign up for it right away. At minimum, start by contributing what your employer will match, if applicable. Your employer’s contribution is essentially free money that you are leaving on the table if you don’t take the offer. Should your employer not offer a retirement savings plan, contact a trusted financial institution to open up your own IRA. In either case, the more you can afford to contribute early on, the better. 

2. Don’t be too conservative with your investments.

The younger you, the more aggressively you’ll want to invest with your retirement portfolios. In your 20s, you’ll have plenty of time to ride out any downturns in the market. As you get older, you can adopt a more conservative investing strategy to protect what you have saved. 

3. Focus on paying down credit card debt.

Paying down debt can seem like an impossible task when you don’t make a lot of money. Ideally, you should try to avoid using credit cards in the first place unless you’re able to pay off the balance in full to avoid accruing interest. If you do, however, find yourself in credit card debt, do the following:

• Speak to your credit card providers about consolidating debt.
• Consider setting a tight budget and getting an additional job on the side until the debt is significantly paid down.
• Don’t just pay the minimum balance due. Instead, pay down the card that has the smallest debt first and work your way up.
• Close each card account as debt is paid off. While this may impact your credit score negatively in the short term, having fewer open debts can increase your score in the long run. 

4. Build an emergency fund.

Having three to six months worth of expenses set aside in an emergency is ideal, but having even more can better secure your financial future in the event an emergency arises. Depending on your salary and monthly expenses, building an emergency fund can take a few months or a couple years.

When building your emergency funds, contribute as much money as you can each month. You may even consider opening a separate emergency funds savings account and having a portion of your paycheck go directly to that account every payday.

5. Increase your retirement savings contributions each year.

A helpful time to increase your contribution is when you get a raise or a bonus. Increasing your monthly contribution based on the percent or dollar amount your salary changed is a sound strategy to regularly increase your contribution. If you are on a tight budget and can only increase the contribution temporarily, doing so for a limited amount of time is better than not increasing it at all. 

6. Get help from a financial professional.

Once you have decided to save for retirement, you may have questions or run into unexpected problems. A trusted CPA firm can help answer any retirement questions you have as well as ensure you are maximizing your retirement savings potential.

For further assistance with retirement planning at any age, schedule a consultation with the top-rated accountants at Miller & Company.