Category Archives: Tips

July 1, 2017 – New Cook County “Sweetened Beverage Tax”

Our local governments have done it again. After the headache of figuring out and implementing the bag tax earlier this year, we now have Cook County’s new Sweetened Beverage Tax. This, by the way, is in addition to the soft drink tax and fountain drink tax that exist at the city level, and a proposed tax at the state level:

“The tax levied in this Article shall be in addition to any other taxes.”

Furthermore, the FAQ states that “exempt status for sales and use tax issued by the State of Illinois is not applicable to this tax.”

I won’t go into the debate on the social merits of the tax and how successful or unsuccessful this new tax is likely to be regarding public health. And I won’t argue about what the real underlying reason behind the tax is — be it economically-, socially- or politically-motivated. I also won’t comment on how many find the tax regressive, disproportionately hurting the poor.

What I will go into are the challenges in administration, implementation and complexity that transactional taxes such as this tend to be, especially for small businesses, and I’ll try to explain as simply as possible what the requirements are for different types of businesses in meeting this new ordinance.

What is the new Cook County Sweetened Beverage Tax?

Starting July 1, 2017, a $0.01-per ounce tax is imposed on the retail sale of all “sweetened beverages” in Cook County.

How will it be imposed?

(a) Distributors of bottled/canned soda and of “syrup”/powder to make soda will charge the tax to their retail customers; and,
(b) Retailers will pass the tax along to their consumers.

So far, pretty simple. The challenges lie in the definitions, the requirements, and the implementation.

Let’s start with definitions.

We all think we know what a sweetened beverage is, and what a syrup is. We’re wrong.

A sweetened beverage 1) is non-alcoholic, 2) is either carbonated or non-carbonated, 3) is intended for human consumption, 4) contains sweetener (caloric or non-caloric), 5) is available for sale in a container or through the use of “syrup” or powder. Not too confusing.

Here’s what a sweetened beverage is NOT, however…
Obvious: 100% natural fruit or veggie juice, infant formula, beverages for medical use, meal replacement beverages.
NOT OBVIOUS:
* beverage with >50% milk or milk substitute;
* beverages to which a purchaser can add, or can request that a retailer add sweetener;
* any “syrup” or powder that the purchaser himself or herself combines with other ingredients to create a beverage.

But wait… it gets more interesting. The reason I keep putting the word “syrup” in quotes is that it has its own definition:
“a liquid mixture, containing any caloric sweetener or non-caloric sweetener as an ingredient, intended to be used, or actually used, in making, mixing or compounding a sweetened beverage by combining the syrup with one or more other ingredients using a beverage dispensing machine.”

Did you catch that last bit? If the syrup is not used or intended to be used to make a sweetened beverage “using a beverage dispensing machine“, then it’s not syrup, and therefore doesn’t make a sweetened beverage. (This does not apply to powders, which are still subject to the tax if hand-mixed.)

This means that specialty coffee and cocktails are not taxable unless they are pre-packaged in a container. The FAQ points out that “in general, the ordinance taxes ready-to-drink beverages”.

As ridiculous as these definitions are, the good news here is that businesses that hand-mix syrups for coffee, tea, soda, milkshakes, cocktails, etc… are off the hook for this tax — in potentially more ways than one.

How will the tax be administered?

  1. Distributors must register with the County by July 31st. The distributor will then receive pre-printed tax returns (there is no online option for filing this tax).
  2. Distributors will charge the tax to their retail customers starting July 1st.
  3. Distributors will file a monthly return with the County (even if no tax is due) by the 20th of each month and remit the tax (just like state sales taxes).
  4. Retailers must pay the tax charged to them by the distributor on their vendor invoices.
  5. If a retailer purchases sweetened beverages from a distributor that is not registered, they must self-register and remit the tax to the County. This is just like the bag tax situation. There is a list at the bottom of the County Sweetened Beverage Tax webpage noting registered distributors. As with bag taxes, if you are a retailer, make sure you are buying your product from a registered distributor.
  6. Similarly, if a retailer produces their own sweetened beverages, they must register and remit the tax to the County.
  7. Retailers must charge the tax to their customers — the ultimate consumers of the sweetened beverage.

That last item is especially important. This is not like the bag tax, which a retailer can choose to absorb instead of passing along to the consumer. The sweetened beverage tax must be passed along to the ultimate purchaser.

“It shall be deemed a violation of this Article for any distributor or retailer… to otherwise absorb the tax.”

Including the tax in the sales price without violating city, state and federal laws

This is the part that — aside from the definitions — I am finding most challenging for my small business clients.

Initially it was easy: similar to the liquor gallonage tax (an excise tax), a distributor could just charge the tax to the retailers, who then simply adjusted their prices upwards to cover the extra cost of goods, without specifying how they were passing the cost along to their customers. In fact, the sweetened beverage tax ordinance specifically states that both the distributor and the retailer must include the tax in the sale price of the sweetened beverages, syrup or powder.

“It shall be deemed a violation of this Article for any distributor or retailer to fail to include the tax imposed in this Article in the sale price of the sweetened beverage, syrup and/or powder…”

Then the County (who some have accused of a disastrous rollout of this tax) was challenged by the City of Chicago, State of Illinois, and Federal Department of Agriculture.

1) The City of Chicago has a law that requires all taxes to be listed separately for consumers. From the County’s FAQ on the sweetened beverage tax:

“Q: The tax folded into the selling price may violate the City of Chicago’s requirements on what must be included on labels/receipts. Is the County working with the City on this? A: We have looked at the City requirements and do not believe this violates their labeling requirements. While the tax should be included within the shelf price, the tax may be separately stated on the receipt or invoice.”

Well, which is it? I don’t know a single small business that has a Point-of-Sale system advanced or complex enough to both include the tax in the sales price on labels and receipts, as well as separate the tax on receipts. This is a serious issue to which a solution has not yet been found. As a result, on June 13, 2017, the County was forced to amend one of their revenue regulations (2017-2) modifying the original ordinance (there have already been four such regs, two of which have been updated or amended).

“Understanding that distributors and/or retailers may need additional time to program their POS systems to allow for the tax to be reflected in the menu/advertised/shelf sale price, distributors and/or retailers will have an additional 6-month period, until January 1, 2018, to comply with the display requirements laid out in this regulation.”

2) The State of Illinois prohibits any tax to be levied on top of another tax. If retailers followed the County’s requirement to include this tax in the sales price of the sweetened beverage, then that would mean that the Chicago Soda Tax and the IL Sales Tax would both be charged on top of the County Sweetened Beverage Tax. Same situation as #1 in that the “solution” is to delay the requirement to reflect the tax in the sales price.

3) The initial solution to both (1) and (2) above was to make the soda tax a line-item at the point of sale, but “it ran afoul of the Department of Agriculture, which advised it was against federal law to tax transactions paid for with benefits from its Supplemental Nutritional Assistance Program (SNAP).” The Department of Agriculture stated that the soda tax “could be applied to SNAP purchases so long as it wasn’t imposed at the point of sale.” This caused the County to release Revenue Regulation 2017-3 on June 6th, which gives retailers these options:

Where a purchaser uses SNAP benefits to purchase sweetened beverages, the retailer must do one of the following:

1. If the sweetened beverage tax is separately stated on a retailer’s cash register receipts, the POS system should be programmed not to charge the tax when SNAP benefits are used.

2. If the sweetened beverage tax is included in the selling price on a retailer’s cash register receipts, the POS system should be programmed to reduce the price by the amount of tax when the beverages are purchased using SNAP benefits. If this programming is not possible, the retailer must put in place a procedure whereby a purchaser who uses SNAP benefits can receive an immediate refund at the customer service desk or other location within the retailer’s premises.

In both situations above, the retailers should be given a credit for these tax exempt purchases on the next bills from their distributors. Distributors will be permitted to claim a deduction on their monthly sweetened beverage tax return for the amount of the credits provided to retailers.

Really. That sounds convenient for everyone involved.

What is the tax charged on? Does ice count? What about free refills? What about donated and sampled beverages? What about alcohol mixers?

The tax is charged at the rate of 1-cent-per-ounce, which is easy for pre-made beverages delivered in containers (bottles, cans, etc.). This is more challenging for syrups and powders (and remember, it’s only considered a syrup — and therefore a sweetened beverage — if it’s run through a beverage machine). The tax is applied to the total amount of beverage that the product will make per the manufacturer’s directions. It doesn’t matter if you make it differently — you apply the tax based on the volume it would make if you followed the instructions. I know. Yes, really.

As for ice: “the retailer should charge tax on the ounces sold. The addition of ice is at the discretion of the retailer/customer and does not affect the amount of tax due.”

Free refills are even more fun. The retailer must determine how much of the tax amount should be added to the sale price of the original beverage. So if you offer one free refill, you have to charge twice the tax on the original beverage sale, assuming the person will get a refill. Not fair, but easy. However, if you offer unlimited refills, how in the world do you estimate how many they will drink? The County says estimates are not acceptable. Good luck.

As for donated and sampled beverages — “the business that opens the beverages for self-use or samples or donates the beverages is the end user”. This means that if the product qualifies as a sweetened beverage, and the distributor or retailer donates or opens the beverage for floor samples or samples to potential customers… then that distributor or retailer is responsible for paying the tax on it.

If alcohol mixers themselves meet the definition of sweetened beverages (usually this would mean a canned, bottled, or fountain soda pop of some sort), then that portion of the drink — that many ounces — should have the tax charged on it. But not syrups added to a drink, since those would be hand-mixed. This should be fun!

Floor Tax Return – What is it and when is it due?

From the Sweetened Beverage Tax FAQ: “All businesses must begin collecting the tax on July 1, 2017. Because retailers may have inventory on that date that they obtained before the tax was in effect, they must remit the tax before collecting it from their customers. Accordingly, retailers must take inventory of bottled sweetened beverages, syrup and powder in their possession on June 30, 2017 and remit tax on those items directly to the Department by August 20, 2017 along with a floor tax return (will be posted on the DOR website). After July 1, 2017, retailers will submit the tax to registered distributors.”

A copy of the Floor Tax Return can be found in the “Downloads” section on on the right-side of the County webpage on the new tax.

It’s actually really easy to fill out — the difficulty is in figuring out how many ounces of product you need to declare (if you’re using syrup or powder, that is).

Refunds, Spillage, Product Preparation

A reduction of 5% of the calculated tax will be applied by distributors of syrups and powders to the vendor invoices sent to retailers, to account for spillage and product preparation. I am unable to tell from the County’s information whether distributors will do this automatically or if the retailer has to request it.

Retailers can request refunds from their distributors resulting from the return of product by a retailer (as well as breakage and spoilage), or due to tax-exempt sales to SNAP recipients, or sales outside of the county, etc. The distributor must refund the tax amount to the retailer before applying for a refund from the County — potentially putting them into a challenging cash flow situation.

Any claim for a credit or refund must be filed on forms provided by the County — but no more than four years after the situation which caused it to happen.

Timeline

March 1, 2017 – “Sweetened Beverage Tax ordinance goes into effect; distributors will receive information beforehand about registering with the Cook County Department of Revenue.” Supposedly. If they don’t know you’re a distributor, you won’t get anything. Or you may receive something because they think you’re a distributor, but you’re not. If you don’t get what you need, or if you get something and it doesn’t apply, immediately contact the County at revenuecompliance@cookcountyil.gov.

June 30, 2017 – “Sweetened Beverage Floor Tax inventory date; retailers must take inventory subject to sweetened beverage tax in which tax was not previously collected.”

July 1, 2017 – “Sweetened Beverage Tax goes into effect; retailers and distributors must begin collecting tax.”

August 20, 2017 – “Retailers must remit to the Department its floor tax return and payment.” (This refers to the inventory taken June 30th, on which tax to a distributor was not paid.)

August 20, 2017 – “Distributors must remit to the Department its tax payment and monthly return reflecting July 2017 activity.”

Main Sources: Sweetened Beverage Tax | CookCountyIL.gov and Sweetened Beverage Tax FAQ | CookCountyIL.gov — On these sites you can download the original ordinance, all related revenue regulations, all forms, and you can view the lists of registered distributors and products qualified as medical beverages.

Please remember that I’m not an attorney, I don’t work for the County, and I’m just doing my best to read, understand, and interpret the ordinance and related websites and resources for my own clients. None of this should be considered legal advice. If you have any questions, I encourage you to email revenuecompliance@cookcountyil.gov.

2017 Scaling New Heights Conference

A year ago, I attended my first Woodard Scaling New Heights conference. This is one of the three conferences that accounting technology geeks like me get really excited about — the other two being Accountex (formerly Sleeter Technology) and QB Connect (which I’ll be attending later this year for my first time). I absolutely loved it. I’d been to Sleeter for two years in a row, and as much as I enjoyed attending, one of their successes was helping me realize that I really want to be a QuickBooks-centric practice… I’m not interested in branching out into non-QB accounting options such as Xero, Wave, Zoho, etc. I only know this because of excellent presentations such as Greg Lam and Michelle Long‘s overviews — so I’m indebted to them — but colleagues there suggested that maybe SNH was a better choice for me, since it’s more QB-centric. (They were right.)

One problem remains. I’m not one for motivational speeches. I run my own CPA firm, so if I’m going to take time off work and pay for conference fees, travel & lodging, I’d better be spending that time and money learning something that will help me when I get back to the office — measurable results, real-life advice, tips & tricks that I can put into action to improve my clients’ lives and make me more efficient. Motivational speeches and entertainment just aren’t “worth” my time — I sit through them wishing I’d spent the time doing almost anything else. While we’re at it: I also can’t stand sales pitches. Nor information that is so general, I feel I’ve heard it all before. Finding the right conferences can be a bit of a challenge.

I was a little disappointed in the last Sleeter Technology Conference (now Accountex) I attended. In my opinion, there are too many “keynote” sessions… ones that are meant to “fire up” the audience and get us excited, or big names that we can brag about having seen in-person. These sessions are the only ones that are not concurrent with other learning sessions, meaning that 1) there’s nothing else to do during these sessions, and yet 2) there are so many concurrent sessions that I can’t attend because — well, they’re simultaneous. I wish they’d offer some of those during the keynotes so that I don’t miss the chance to go to more of them.

Yes, I know I can play “hooky” during these sessions — as my colleagues regularly remind me — but honestly, come on: I’m paying to be there. Ideally, the entire conference would be so amazing that I never want to skip out on it (though it is challenging, since they’re always held in interesting places). It might be different if my boss paid my way, but I am the boss! I can’t do billable work while I’m in sessions, so I’m effectively giving up my salary for the entire trip; plus, all of the costs are coming out of my own pocket. I’m not inclined to cheat myself out of much-valued education.

Furthermore, the breakout sessions offered by vendor-partners (presenters that are also at the conference expo, hawking their wares to us) are too often — as mentioned above — 1) either a sales pitch, which is no fun at all and just fosters resentment, or 2) more likely, the vendor has been threatened so hard NOT to make it a sales pitch, that they only offer extremely general “insights” into the industry that motivated them to create a solution. Except… see, we’re already aware of these “insights” — that’s why we attended the session in the first place: to find solutions to the problems we’re already aware exist. What we want when we attend these vendor-presented sessions is in-between these angles: a brief description of the industry issues, and then a specific explanation of how they attempted to solve these issues, and a demo of how it works. That’s not sales — that’s education on a particular piece of software, which allows us to evaluate programs based on how they work, not based on a marketing team’s list of bullet points. (I especially love vendor sessions that are on one particular topic and invite more than one vendor to illustrate their solution to it. That way we get a side-by-side, and can ask questions candidly.)

But the best sessions of all are offered by independent practitioners showing us how they use these various products to solve real-life problems that they’ve come across in their own practices. And that is what I got at last year’s Woodard “Scaling New Heights” conference.

Yes, as with their big competing conference, there were too many keynote “general sessions”. In fact, Joe Woodard’s initial presentation about how Poseidon was going to flood the room (but it’s okay… because he had a “magical force field around us” ???) — was so bad that I was terrified I’d made a serious mistake in attending. (To reiterate: I desperately wish they’d offer an alternative to the general sessions for those of us who prefer to focus on specific learning.)

But — WOW — did they make up for these with some of the best breakout sessions I’ve ever attended. Hector Garcia’s Quickbooks sessions were all incredible, with real-life tips and best practices. I passed the QBO certification with flying colors, no doubt in part to his training. Will English, who I initially met at Sleeter (and who writes for Intuitive Accountant), gave an insightful session on POS solutions — specifically ones that work for retail inventory maanagement. Norman Axelman did a couple great sessions on Excel tricks — he was very generous with his time and eager to solve everyone’s issues. Stacy Kildal was one of my favorite presenters, as she nailed the two-prong approach that most appeals to me: 1) new technologies 2) applied in real-life situations. Her session on QBO apps was insightful and inspiring, and I wish there were a three-hour-long session where I could just watch her work. David Leary from Intuit was one of the most sincere “big-deal” presenters I’ve ever seen; to some extent he restored some of my trust in QB. His eagerness to answer questions and explain the “why” behind big-company decisions was refreshing.

One recommendation to organizers (and DIY attendees) — I always go through the directory of exhibitors and sort them by type of solution: financial analysis, business management/workflow, inventory, publications, POS systems, payroll, 1099/W-2 prep, etc. So it certainly would be helpful if the exhibitors were color-coded by industry, to help us decide who to visit in our limited time away from sessions.

I’m headed back there this week, eager to soak up as much information as I can, and to avoid as many references to the “Yeti” of our practice challenges that we all have to face. (I’m not kidding; that’s the theme.) And if that turns you off as much as it does me, please reconsider, because there are 98 pages of training session information — and I’m just talking about the summaries of the sessions, not the handouts. Plenty of non-Yeti material for us all.

Stacey Byrne will be offering Restaurant Industry Tips & Tricks; MB Raimondi will be teaching the QB Desktop Advanced ProAdvisor Certification Exam Prep; Michelle Long is teaching Apps 101; and Stacy Kildal and Ingrid Edstrom are teaching the session that most interests me: a People’s Choice Peer-Led Apps Training that compares Fathom and LivePlan.

I hope to see you at Scaling New Heights!

Source: 2017 Scaling New Heights Schedule – Woodard

Tips from ‘Accounting Today’ on Securing Client Data

The Security Summit, a partnership between the IRS, state tax agencies and the private sector tax industry, is sharing information and tips aimed at tax professionals that help them protect their clients’ data from those who would try to hack into the data they use to file their clients’ taxes.

In addition to this advice from the IRS, Accounting Today offers seven specific things you can start doing now to help you protect client data:

1. Audit your data protection practices
2. Make sure your clients know about email security
3. Don’t ignore physical security
4. Is your WiFi secure?
5. Are your files regularly backed up?
6. Prohibit employees from accessing client data on their personal computers
7. Encourage your clients to take an active role in monitoring their data security

See the full article for more info: 7 tips for keeping client data secure | Accounting Today.

By taking a proactive approach to protect your clients’ data, rather than waiting for a successful attack on your accounting practice, you can potentially avoid the financial harm your clients could experience should their data be stolen.

Best Small Business Blogs of 2017

I’m proud to announce that once again this blog was chosen as one of FitSmallBusiness.com‘s Best Accounting Blogs of 2017.  This year, they took all their “best of” blogs for small businesses and sub-divided them into fields, such as accounting, retail, finance, marketing, e-commerce, tech, insurance, real estate, legal, etc.  It’s solid one-stop shopping for the entrepreneur wanting to research topics that affect them.

As was the case last year, I’m especially pleased to be included in such impressive company, such as The Accountex Report (formerly the Sleeter Technology blog) and StacyK Academy (a favorite resource and speaker).

I started this blog as a space to store and index my research on various client accounting and tax issues somewhere within reach and easy-to-find, where others in my situation might also benefit from it.  I had no idea it would develop such a following.  The best part about the information age is being able to share our knowledge and experiences with each other — thanks for contributing!

Source: The Best Small Business Blogs of 2017

Coordinating 529/ESA Plan Withdrawals With Education Expense Benefits

I’m seeing some confusion about this from tax clients this season, so I realized it’s worth explaining a few of the basics regarding education expenses, 529 college savings plan/ Coverdell ESA distributions, and tax credits and deductions.

There are five main tax benefits used to defray the cost of education:

  1. American Opportunity Tax Credit
  2. Lifetime Learning Credit
  3. Deduction for Qualified Education Expenses
  4. Student Loan Interest Deduction
  5. 529 or Coverdell Plan Contributions and Distributions

The American Opportunity Tax Credit reduces your federal tax bill by up to $2,500 per year for each eligible college student for whom you pay qualified tuition expenses. It can be claimed on behalf of an undergraduate for four years. And if you have more than one child in college at the same time, you can claim for each eligible child. The amount of the credit is calculated as 100% of the first $2,000 in qualified tuition and fees costs paid, plus 25% of the next $2,000 paid for such fees. For lower income taxpayers who don’t owe $2,500 in tax, up to $1,000 of the credit is refundable. Source: Coordinating 529 Plan Withdrawals With The American Opportunity Tax Credit

But there are limitations here: The credit phases out if you make too much money, you can’t claim any portion that was already paid with Pell Grant money, and you cannot claim the AOTC (or any of the education benefits) based on expenses that were also used to calculate the tax-free portion of a distribution from a 529 college savings or prepaid plan, or a Coverdell Education Savings Account (ESA).

The Lifetime Learning Credit is nonrefundable but can reduce the amount of tax you owe by up to $2,000. There is no limit to the number of years this credit can be claimed, but eligible expenses are only those charged by the school for attendance that were not paid for with the Pell Grant or 529 college savings or Coverdell ESAs.  Source: http://finance.zacks.com/can-claim-education-tax-deduction-used-pell-grant-pay-5114.html

The Tuition and Fees Tax Deduction is not allowable if you take one of the educational credits — and it’s usually not as good a deal. But if you don’t qualify for one of the credits (which frequently happens, if your income is too high or you’re not able to take your dependent as an exemption), this deduction can be used to lower your taxable income by up to $4,000. You do not have to itemize deductions to get this deduction; instead, it adjusts your reported income.  Obviously, lowering your income is not as good as reducing your tax with a credit, but it’s still a nice benefit.  As with the others, the deduction is limited to the portion of expenses not paid for with the Pell Grant or 529 college savings or Coverdell ESAs.  Source: http://finance.zacks.com/can-claim-education-tax-deduction-used-pell-grant-pay-5114.html

The Student Loan Interest Deduction is something that may be a benefit in future years — but be careful: predatory for-profit colleges and universities are constantly touting this benefit as a reason to take out large loans, but the benefits often do not come to fruition.  For one, there’s a pretty low limit as to how much you can deduct each year — only $2,500 — and if you exceed that limit, the balance does not carry forward.  That college probably also promised you that getting a degree would make you much more valuable to society, and your income would skyrocket — but the loan interest deduction phases out pretty quickly as your income rises, so chances are, if they’re right… most of this interest will not end up being deductible.  Source: https://www.irs.gov/taxtopics/tc456.html

529 College Savings Plans and Coverdell Educational Savings Accounts are both great vehicles to saving for college.  Similar to a Roth IRA, these contributions are not deductible at the federal level, but all of the principal, as well as the interest, dividends and capital gains — all growth — is non-taxable upon distribution if used for qualified education expenses.  (This is pretty fantastic.)  Add to it that most states will allow a deduction for contributions, and you’ve got a no-brainer for college savings.  The important bits to remember here are: each state has pretty strict rules about what qualifies as a plan; each state decides whether the withdrawal is free of income tax or simply deductible from income; and — here’s the theme of my post — if you take a distribution to pay for educational expenses, you may not also take one of the other educational tax benefits above.  529 plans and ESAs are pretty complicated; make sure to compare and contrast, and understand the potential penalties, before signing up.  Source: http://www.360financialliteracy.org/Topics/Paying-for-Education/College-Savings-Options/529-Plans-vs.-Coverdell-Education-Savings-Accounts

I want to recommend two websites with excellent examples of how to combine these plans to get the best overall tax benefits.  Scroll part-way through to see the “example” sections, and see if any of these scenarios come close to matching your own situation.  Have fun!

Winter Storm Extension: IRS Gives Affected Businesses Extra Time to Request 6-Month Extension

S-Corporations and Partnerships had a deadline of March 15th this year to file their returns or request an extension.  However, because of Winter Storm Stella, which hit portions of the Northeast and Mid-Atlantic, the IRS granted affected businesses an additional 5 days to do so.

Business taxpayers who were victims of the storm, and unable to file their tax return by the due date of March 15, can request an automatic extension (by filing the usual Form 7004) on or before March 20, 2017.  Important tip if filing Form 7004 by paper: eligible taxpayers taking advantage of this relief should write “Winter Storm Stella” on their Form 7004 extension request.  However, the fastest and easiest way to get an extension is still to file this form electronically.

Source: Winter Storm Extension: Many Businesses Have Extra Time to Request A Six-Month Extension

IRS Data Retrieval Tool for FAFSA Will Be Unavailable For “Several Weeks” — What Are The Alternatives?

Important news from the IRS and the U.S. Department of Education Office of Federal Student Aid:

The IRS Data Retrieval Tool on fafsa.gov and StudentLoans.gov is currently unavailable. We are working to resolve the issue as quickly as possible. However, at this time, the IRS anticipates the online data tool will be unavailable for several weeks.

The online FAFSA and IDR application tool itself remains operational — it’s just the IRS’s DRT portion, which provides tax data that automatically fills in some of the financial information on the application.  The income information needed to complete the FAFSA form and apply for an IDR plan can be found on your tax return.  If you didn’t keep a copy of your tax return, you may be able to access the tax software you used to prepare your return or contact your tax preparer to obtain a copy (please note that many preparers charge a small fee for a copy, since you should be saving the pdf they send you in a safe, easily retrievable place).

If you are unable to get a copy of your tax return, visit www.irs.gov/transcript to view and download a summary of your tax return, called a tax transcript, at Get Transcript Online.  You must verify your identity to use this tool — review the rigorous identity authentication requirements for Secure Access before attempting to register.  You also may use Get Transcript by Mail or call 1-800-908-9946, and a transcript will be delivered to your address of record within five to 10 days.

While the Data Retrieval Tool is offline, the IRS offers other ways for students and families to find the tax information they need to complete student financial aid applications.

As part of a wider, ongoing effort at the IRS to protect the security of data, the IRS decided to temporarily suspend the Data Retrieval Tool (DRT) as a precautionary step following concerns that information from the tool could potentially be misused by identity thieves.

Source: Internal Revenue Service (IRS) and U.S. Department of Education Office of Federal Student Aid (FSA) Statement‎ about the IRS Data Retrieval Tool (DRT)

Webinar: Organizing & Operating a 501(c)(3) Non-Profit

CPA Academy is one of my favorite sources for topic-specific accounting education, and even better — their webinars are free.  Here’s one on a topic I’ve been asked about frequently: how to organize and operate a non-profit.  Jairo Cano, a tax attorney with Agostino Law, will be teaching this 1.5-hour webinar on Monday, March 13 and again on Monday, May 1.  Here’s a summary of the course:

In 2013, the IRS reported that tax exempt organizations held over $3.5 trillion in assets and received more than $1.8 trillion in gross receipts. Given the amount of money that passes through nonprofit organizations, it is not surprising that the IRS has increased its focus on these organizations. This webinar, offered by a leading tax controversy attorney will introduce attendees to:

  • The procedures to request and receive Section 501(c)(3) tax exempt status.
  • The requirement that the organization be organized for an exempt purpose and that it operate exclusively for exempt purposes. This discussion will include an analysis of the restrictions related to the organization’s ability to engage in for-profit activities.
  • The requirement that the organization not operate in a manner that results in providing private inurement to shareholders or a prohibited private benefit. This discussion will include an analysis on how the IRS evaluates compensation and payments for goods and services.
  • The Unrelated Business Income Tax, when it is required and how it is calculated.
  • The procedures to challenge a denial or revocation of exempt status at the administrative level as well as in Tax Court​.

This short, valuable webinar is appropriate for bookkeepers, accountants, controllers, and other non-profit professionals — as well as those looking to enter the industry or volunteer as a board member.

Source: CPA Academy

Chicago Bag Tax “Floor Tax Return” Due March 3rd

Just a reminder that the “floor tax return” for the Chicago Bag Tax is due this Friday.  Don’t risk a $100 fine — take a look at my comprehensive guide to the bag tax and get this off your “to-do” list asap.  Please share far and wide with other small business retailers in Chicago; I’ve found very few how-to resources, and none that break it down step-by-step, and I’d love for my research for my own clients to be of use to other small business owners.

For Tax Preparers: Forms 1095-B and 1095-C Not Required For Filing — Alternatives Are Acceptable

I had a tough time getting 1095-B & 1095-C forms from clients last year in time for filing, as many of their health insurance providers were delayed in sending them out.  Unfortunately, late last year, the IRS decided to allow providers to file extensions again, and I was dreading the same experience.

So you can imagine that I was pretty pleased to read, in today’s National Association of Tax Professionals e-newsletter:

According to Question 14 on the IRS Health Care Information Forms FAQ, you do not have to wait for either Form 1095-B or 1095-C from your client’s coverage provider or employer to file the individual income tax return. You can use other forms of documentation in lieu of the Form 1095 information returns to prepare the tax return. Other forms of documentation that would provide proof of a taxpayer’s insurance coverage include:

  • Insurance cards.
  • Explanation of benefits statements from the insurer.
  • W-2 or payroll statements reflecting health insurance deductions.
  • Records of advance payments of the premium tax credit.
  • Other statements indicating that the family had health care coverage.

Of course, many of these documents will not confirm that insurance was for the entire year, or all members of the family, so it is still best practice to get the 1095-B or 1095-C.  But when it’s unobtainable, it shouldn’t delay your client’s filing — just make sure they provide it to you once they are able.

Source: Questions and Answers about Health Care Information Forms for Individuals (Forms 1095-A, 1095-B, and 1095-C)