There is a stimulus package working its way through Congress. Once it passes and is signed into law, the agencies involved will start interpreting those new laws.  I recommend keeping an eye on the FEMA website and IRS.gov. 
It will take about ten days after the new law is signed before we have any guidance.  At that point, I’ll be posting a highlight hit-list to our web site.

Many news organizations are reporting on pieces of the bill as if they were law. They are not. Like any new legislation, there’s lots of give and take to get to a final product.

Also look at SBA.gov. The SBA already has low interest loans available with an application link on their site. HOWEVER, the stimulus package is promising a new form of small business assistance with loan forgiveness through a new agency yet to be named. You may want to wait to see how this develops prior to working with SBA.

The CA Government has exempted licensed CPA firms from the stay-at-home order. We are fully staffed and can work on your returns and accounting needs:

1. Meet in our offices: Reconfigured with ten feet of space between the interview desk and your seating.
2. By mail: Send your materials by FedEx, UPS or other secure means.
3. By email: Scan your documents and email to Laura.dmdcpas@gmail.com.
4. By fax: 24/7 to 818-701-0367.

We’re here for you to process your returns as soon as possible and assuming a refund… get it to you as soon as possible. Call 818-701-1040 ext 12 for more details.

Source: Various

Here’s some selected 2020 changes as of December 10, 2019:

1. FICA: Social Security maximum wages will be $137,300. Above that amount, you will have only Medicare withheld.
2. CA SDI: Rate is 1% on the first $122,909.
3. CA minimum wage (some cities differ): $12.00 for employers with 25 or fewer employees; $13.00 for other employers.
4. Los Angeles City minimum wage: $13.25 for employers with 25 or fewer employees; $14.25 for other employers. Effective July 1, 2020: $14.25 for small employers and $15.00 for other employers.

Standard mileage rate: For 2020: 57.5 cents per mile.

Ref: AB 5 & Dynamex V. Superior Court of Los Angeles

Effective January 1, 2020, Assembly Bill 5 takes effect. Most of the media coverage on this bill has centered on Uber, Lyft and other “gig economy” jobs. However, it’s likely to impact many small businesses.

Employee versus independent contractor classification is at the heart of the new law. This is a legal determination. As we are not a law firm, it is outside of the scope of our licenses to help you with this study. However, IF you hire non-licensed individuals as independent contractors within your business, we encourage you to have to those relationships reviewed by an attorney trained in this area. We can provide referrals on request.

Other helps: The Employment Development Department will soon release the 2020 version of the California Employers Guide (DE 44) on their web site www.edd.ca.gov. You’ll want to read the section, “Who Is An Employee.”

As the ability to use individuals as independent contractors is more narrowly defined, and the penalties for mis-classification greater, you’ll want to pay attention to this new law.

The IRS released the following on 10/24, “In the latest twist on a scam related to Social Security numbers, scammers claim to be able to suspend or cancel the victim’s SSN. It’s yet another attempt by con artists to frighten people into returning ‘robocall’ voicemails. Scammers may mention overdue taxes in addition to threatening to cancel the person’s SSN. If taxpayers receive a call threatening to suspend their SSN for an unpaid tax bill, they should just hang up. Make no mistake… it’s a scam.”

Ref: Notice 2019-55

Many businesses use the meals and incidentals (M&IE) rate to substantiate out-of-town expenses without specific receipt reimbursement. The new rate is $66 per day in the US and $71 per day outside the US.

To use the per diem method, the business needs to establish that the person (owner or employee) was traveling away from home on business through a calendar or other documentation (e.g., airline tickets).

Under current federal tax law, employees are not allowed a deduction for non-reimbursed employee expenses. Therefore, the above would apply at the business level and the employee should seek reimbursement from the employer under either the per diem or actual receipt methods.

Ref: Proposed Reg Sec 1.168(k)

In September 2019, the IRS issued proposed regulations for bonus depreciation under Section 168(k). Under the proposed regulation, a contract to acquire all or substantially all of the assets of a business will allow for bonus depreciation of those assets. Additionally, the presence of a condition outside of the control of the parties, including, for example, regulatory agency approval will not prevent the contract from being a binding contract.

Furthermore, the rule applies to the sale of stock of a corporation if that sale is treated as a deemed asset sale under Code Section 338.

Ref: IRS IR-2019-145

The IRS has warned of a new email scam. Often the subject line is “Automatic Income Tax Reminder” or “Electronic Tax Return Reminder.”

Once you open the email, you are asked to click on a temporary password or “one-time password.” When you do this, it places a malicious file on your computer.

The IRS stated, “The IRS does not send emails about your tax refund or sensitive financial information.”

If you get such an email, don’t open it and report it as spam to your email provider.

Ref: Internal Revenue Code Sec 1231; TC Memo 2019-95 (Ashkouri v. Commissioner); Long v. Commissioner (772 F.3d670 (2014))

Tax on disposition of real estate can vary widely depending on the intent of the developer/investor and the facts/circumstances behind the project. The two cases, from 2019 and 2014, respectively reflect how the Courts now view such transactions.

The IRS’ default when there is not clear intent through actions and documentation is to treat a disposition as inventory and the taxation as ordinary income.

IRC Section 1231 provides an exception IF the property is used in a trade/business OR held for investment. The most common trade/business real estate is that actively rented to a third party and held for more than one year (in order to qualify for long-term treatment of capital gains).

Investment: An example of investment property would be a run-down vacant building purchased over one year ago, remodeled and sold at a profit.

Inventory: A common example of inventory would be ten acres of land subdivided upon which was built twenty new homes and sold to individual owners.

Long case, cited above: The Court looked not only at the intent of the taxpayer but also at holding period, and evidence supporting both in determining that the income was long-term capital gain.

Ashkouri case, cited above: Although the taxpayer took a position that the income was long-term capital gain, the Tax Court determined that the “… sole purpose and function was to acquire, hold, develop, operate, and sell the condominium complex of which Unit B was a part.” As such, the Court changed the classification to the sale of inventory taxed as ordinary income and not long-term capital gain rate.

As it is possible for one entity to hold property falling into both classifications, inventory and capital/investment, documentation of intent starting at the beginning of each project is substantial evidence of the type of development being undertaken.