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San Jose tax attorney for COVID-19 small business reliefThe COVID-19 pandemic has led to struggles for many people and businesses. While the rollout of vaccines in 2021 will eventually allow for a return to normal activities, many businesses will continue to experience a loss of revenue due to requirements to close, scale back operations, or lay off employees. Fortunately, the federal government has implemented programs meant to provide relief to businesses and taxpayers who have been affected by the pandemic. The Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (CRRSAA), which was signed into law on December 27, 2020, made a number of changes that may benefit both small businesses and individual taxpayers. These include:

  • Additional PPP loans - The Paycheck Protection Program, which was implemented as part of the CARES Act of 2020, provided loans for businesses, and these loans were forgivable so long as a business could show that a certain percentage of the loan was used for payroll purposes. Under the CRRSAA, businesses that had previously received a PPP loan will be able to receive an additional loan, although to qualify, a business must not be publicly owned, it must employ fewer than 300 people, and it must be able to show that its gross receipts in any quarter of 2020 were 25% less than in the same quarter in 2019. First-time loans will also be available to businesses that had not previously taken a PPP loan, and eligible businesses include self-employed individuals, independent contractors, and sole proprietors.
  • PPP loan forgiveness - Loans of $150,000 or less may be forgiven if a business used at least 60% of the loan for payroll expenses, including wages and benefits. The remaining 40% can be used for operational costs. In addition to rent, utilities, and mortgage interests, operational costs have been expanded to include software, personal protective equipment for employees, and modifications necessary to meet health guidelines.
  • Tax deductions for business expenses - PPP loans are treated as tax-free if they are forgiven. In addition, businesses may claim tax deductions for payroll and operating expenses, even if a PPP loan was used to pay these expenses.
  • EIDL Grants - Businesses in low-income communities may be able to receive up to $10,000 in Economic Injury Disaster Loan grants. Businesses that receive both grants and PPP loans will no longer be required to deduct an EIDL advance from the amount received in a PPP loan.
  • Employer tax credits - If a business were required to close due to government orders or experienced a decrease in gross receipts of 50% in 2020 compared to the same period in 2019, it will be eligible for a 50% payroll tax credit, which will apply to wages of up to $10,000 per employee. This employee retention credit is not available for those who have received a PPP loan.

Contact Our San Jose, CA Small Business Tax Attorney

If you have questions about what forms of COVID-19 relief you may qualify for or how this will affect your taxes, John D. Teter Law Offices can provide the legal help you need. We will work with you to make sure you can make use of the tax benefits available to you, and we will help you determine the best strategies to minimize your tax burden and address any taxes that you owe. To learn more about how we can help, contact our San Jose tax lawyer at 408-866-1810.

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: San Jose tax deduction attorney TCJA SALT

The Tax Cuts and Jobs Act of 2017 (TCJA) implemented many changes that have affected taxpayers, including the deductions that are allowed on federal tax returns. Tax deductions can be used to lower the amount of a person’s income that is subject to taxes, and when used correctly, they can help minimize one’s tax obligations. One area that was affected by the TCJA is the deduction for state and local taxes, which is commonly known as the SALT deduction.

New Limits on SALT Deductions

The TCJA has put a new limit in place for the SALT deduction, and it applies to all homeowners. Previously, SALT deduction limits only applied to those filing as single with a gross income of more than $150,000 or $300,000 to those filing as married filing jointly. Now, the itemized deduction is limited to $10,000 for all taxpayers. According to the White House Office of Management and Budget, this new tax deduction limit will result in $57 billion more in taxes received by the federal government.

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San Jose tax law attorney tax returnsIncome Tax Day--April 15, 2019--is just around the corner. This year, your taxes may be different from years past, thanks to the tax reform passed by the U.S. government. The Tax Cuts and Jobs Act (TCJA) has changed a wide variety of tax laws, and the IRS has stated that nearly every taxpayer will be impacted. 

These are some important ways taxes have changed that should be kept in mind when filing your 2018 taxes:

  • Tax rates changed. Taxes will be levied against taxpayers according to seven income tax brackets. These brackets range from 10 percent to 37 percent.
  • Higher standard deduction. The standard deduction has almost doubled. For 2018, it is $12,000 for singles, $18,000 for heads of household, and $24,000 for married couples filing together. There is a higher deduction available to the blind and those who are 65 and older. This means that many people will opt to take the standard deduction instead of itemizing deductions.
  • Certain deductions are limited or eliminated. One of the most common deductions that has been reduced is that for state and local tax. For 2018, the deduction is limited to $10,000 and to $5,000 for couples who are married and filing separate tax returns.
  • Child Tax Credit increased and expanded. The credit tops out at $2,000 for each qualifying child age 17 years old and under. Also, the income restriction for receiving full credit has been bumped up to $400,000 for joint filers and $200,000 for other taxpayers.

tFinally, it should be noted that the deadline by which you must file your tax return along with payment of any taxes owed has not been changed. While you can file for an extension, you must do so before Tax Day. Note: As in prior years, although an extension to file may be obtained, there is no extension to pay taxes due. Failure to timely file (in April or on extension) can mean an assessment of penalties and interest. Failure to timely pay (in April) can also mean an assessment of penalties and interest.

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San Jose tax deduction lawyer real estateUnder the Tax Cuts and Jobs Acts of 2017, certain owners of rental properties may be eligible for a significant tax deduction. The law allows for a 20 percent deduction against “qualified” business income for pass-through businesses. In determining whether someone qualifies for this deduction, a key consideration is whether the taxpayer engages in a “qualified trade or business” for purposes of Section 199A of the Internal Revenue Code. In some cases, it can be difficult to determine whether a business meets these qualifications, and the IRS has issued additional guidance about safe harbor for rental real estate businesses.

Qualifying for Safe Harbor

According to the IRS, the 20% qualified business income (QBI) deduction can only be taken against business income, rather than real estate investments. To achieve the required classification as a qualified trade or business, the IRS has set forth two major requirements for owners of rental real estate.

First, real estate property must be directly owned by an individual taxpayer or by an eligible pass-through entity. Second, the taxpayer must document 250 hours of rental services each year. Rental services encompass numerous activities, such as arranging advertising, collecting rent, supervising employees, and performing maintenance. Such activities that are performed directly by the owner or by an employee, agent, or independent contractor on behalf of the business will count toward the 250-hour requirement.  

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San Jose tax planning attorneyIf you are one of the millions of Americans who is saving for retirement, the IRS recently announced some good news for you. Starting in 2019, you can contribute more money to certain retirement accounts, including IRAs, 401(k)s, 403(b)s, most 457 plans, and the Thrift Savings Plan for federal workers. These changes will allow many people to save more money for retirement, and more tax deductions will be available.

Changes to Contribution Limits and Deductions

With this change, the IRS has increased the annual IRA contribution limit for the first time since 2013. The IRS also announced rules that make it easier to qualify for a Roth IRA as well as to deduct contributions to a traditional IRA. The changes include:

  • With respect to the contribution limits to IRAs and Roth IRAs, the limit in 2019 is $6,000. That is a $500 increase from years prior.
  • An extra $500 can be contributed to 401(k)s, 403(b)s, most 457 plans, and Thrift Savings Plans. The new limit is $19,000 in 2019.

Starting in 2019, more people will be eligible for Roth IRAs. These IRAs have the distinct advantage of tax-free distributions during retirement. Only those under certain income levels qualify for a Roth IRA.

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