Take Advantage of the Tennessee Sales Tax Holidays and Save Money
PHB is one of the premier CPA firms Nashville residents and business owners look to for advice about saving money on taxes. Well, there is one simple way you can save money on taxes in Tennessee. And you don’t even need an appointment with us to file any kind of tax form! But, of course, we are always here for you when you do need tax advice. PHB is well known for doing business taxes in Nashville and the surrounding areas.
Obviously, if you read the title of this blog, you know that we are talking about the Tennessee Sales Tax Holidays. There are three of them:
Clothing, School Supplies, and Computers – Starts one minute after midnight on Friday, July 30, 2021 and ends one minute before midnight on Sunday, August 1, 2021.
Food, Food Ingredients & Prepared Food – Starts one minute after midnight on Friday, July 30, 2021 and ends one minute before midnight on Monday, August 5, 2021.
Gun Safes & Safety Equipment – Started on July 1, 2021 and continues for 12 months until one minute before midnight on Thursday, June 30, 2022.
Some Restrictions Apply for the Tennessee Sales Tax Holidays
Items purchased from retailers in Tennessee or from online sources that deliver the items to Tennessee are eligible. However, they must be for personal use, not for business or trade. There is no limit to the quantity of items that may be purchased. But the purchase price of each of those items must be below the threshold provided in the law.
Items that Are Eligible for Tax-Free Purchase During the Tennessee Sales Tax Holidays
Below we list both the tax-exempt items and items that are not tax-exempt for each of the three tax holidays.
Clothing, School Supplies, and Computers – July 30 – August 1, 2021
- Exempt: General apparel that costs $100 or less per item, such as shirts, pants, socks, shoes, dresses, etc.
- Not exempt: Apparel items priced at more than $100; Items sold together, such as shoes, cannot be split up to stay beneath the $100 maximum; Items such as jewelry, handbags, or sports and recreational equipment
- Exempt: School and art supplies with a purchase price of $100 or less per item, such as binders, backpacks, crayons, paper, pens, pencils, and rulers, and art supplies such as glazes, clay, paints, drawing pads, and artist paintbrushes
- Not exempt: School and art supplies individually priced at more than $100; Items that are normally sold together cannot be split up to stay beneath the $100 maximum
- Exempt: Computers for personal use with a purchase price of $1,500 or less; Laptop computers, if priced at $1,500 or less, also qualify as well as tablet computers
- Not exempt: Storage media, like flash drives and compact discs; Individually purchased software; Printer supplies; Household appliances
Food, Food Ingredients & Prepared Food – July 30 – August 5, 2021
Food and Food Ingredients
- Exempt: Liquid, concentrated, solid, frozen, dried, or dehydrated food or beverages for human consumption
- Not exempt: Alcoholic beverages, tobacco, candy, dietary supplements
- Exempt: Food that is sold in a heated state or heated by the seller. Food that contains two or more food ingredients mixed together by the seller for sale as a single item. Food that is sold with eating utensils, such as plates, knives, forks, spoons, glasses, cups, napkins, or straws provided by the vendor.
- Not Exempt: Food that is only cut, repackaged, or pasteurized by the seller
Gun Safes and Safety Equipment – July 1, 2021 – June 30, 2022
- Exempt: A locking container or other enclosure equipped with a padlock, key lock, combination lock, or other locking device that is designed and intended for the secure storage of one or more firearms.
- Exempt: any integral device to be equipped or installed on a firearm that permits the user to program the firearm to operate only for specified persons designated by the user through computerized locking devices or other means integral to and permanently part of the firearm.
It’s Not Too Late for Tax Planning for 2021 Even Though Half the Year Is Almost Gone
Whether you are filing as a corporation, partnership, LLC, or individual, you can benefit from doing some tax planning now. You must do some tax savings strategies for businesses, like timing income and expenses, before the end of the tax year. But you can do others any time before you file your return. So, you still have time. The tax professionals at PHB CPAs can advise you on various ways to reduce your tax bill for 2021.
6 Tax-Saving Tips for Businesses
The following tips are not intended to be tax advice. They are suggested topics you can discuss with your tax expert at PHB. Remember, for expert advice on business taxes Nashville turn to PHB.
- Apply for PPP forgiveness. Read more about this in our blog Applying for Forgiveness for PPP First Draw.
- Set up and fund a retirement plan. This can be for yourself or for your employees. Make sure it’s a qualified plan the IRS recognizes (IRA, 401(k), 403 (b), etc.). This will allow you to defer taxes on earnings until you withdraw the earnings.
- Take tax credits to lower income. This includes credits for hiring employees, going green, providing access for the disabled, and providing health coverage for employees.
- Take 100% Deduction for Business Meals. See our blog PHB Explains the 100% Deduction for Business Meals for details on this.
- Buy equipment/vehicles for depreciation deductions. For certain assets that you purchase, you can take an immediate deduction for the cost when you put it in service. The Tax Cuts and Jobs Act also allows for a 100% tax break for assets placed in service from September 27, 2017 through January 1, 2023.
- Time your business income and expenses: This involves prepaying some expenses to reduce your income for the year. For example, you could stock up on supplies that you know you will use in the next tax year.
Tax Deadline Extension to Aug. 2 for Victims of Tennessee Disasters
The IRS announced that victims of severe storms, straight-line winds, tornadoes and flooding that began in Tennessee March 25, 2021 now have until Aug. 2, 2021 to file various individual and business tax returns and make tax payments.
The IRS stated this week, “Those affected by severe storms, straight-line winds, tornadoes and flooding that reside or have a business in Campbell, Cannon, Cheatham, Claiborne, Clay, Davidson, Decatur, Fentress, Grainger, Hardeman, Henderson, Hickman, Jackson, Madison, Maury, McNairy, Moore, Overton, Scott, Smith, Wayne, Williamson, and Wilson counties qualify for tax relief.”
The declaration allows the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. Examples include, deadlines falling on or after March 25, 2021 and before Aug. 2, 2021 are postponed through Aug. 2, 2021. Also included is the May 17 deadline for filing 2020 individual income tax returns and paying any tax due. Taxpayers will have until Aug. 2 to make 2020 IRA contributions.
According to the IRS, “The Aug. 2, 2021 deadline applies to the first quarter estimated tax payment, normally due on April 15, and the second quarter payment normally due on June 15. It also applies to the quarterly payroll and excise tax returns normally due on April 30, 2021. In addition, it applies to tax-exempt organizations, operating on a calendar-year basis, that have a 2020 return due on May 17, 2021. Also, penalties on deposits due on or after March 25, 2021 and before April 9, 2021 will be abated as long as the tax deposits were made by April 9, 2021.”
If anyone impacted by the storms receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date that falls within the postponement period, the taxpayer is advised to call the telephone number on the notice to have the IRS abate the penalty.
The IRS will automatically identify taxpayers located in the covered disaster area and will apply filing and payment relief. Affected taxpayers who reside or have a business located outside the covered disaster area should call the IRS disaster hotline at 866-562-5227 to request this tax relief.
For more details on the tax relief, visit the IRS website.
Applying for Forgiveness for PPP First Draw
PHB CPAs is one of the best CPA firms Franklin, TN, has to offer. So, you know you can count on us for the latest information and advice concerning the SBA Paycheck Protection Program. If you have not applied for forgiveness for the first draw of the SBA Paycheck Protection Program … the clock is ticking.
Be Aware of Changes in Forgiveness Rules
Over time, the SBA has made significant changes to PPP forgiveness. One of the latest changes really simplifies applying for forgiveness if your loan is $150,000 or less. More expenses are now allowable too. These include:
- Mortgage interest and lease payments
- Utility costs
- Interest payments on any other debt obligations incurred prior to Feb. 15, 2020
- Refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020
- Operations expenses including software, cloud computing, human resources and accounting needs
- Property damage due to public disturbances during 2020 not covered by insurance
- Supplier costs pursuant to a contract, purchase order or order for goods that was in effect prior to taking the loan and was essential to operations at the time. And supplier costs for perishable goods can be made before or during the life of the loan.
- Worker protection expenses like PPE and other adaptive costs to help comply with federal or state health and safety guidelines for COVID-19.
Know the Deadline for Applying for Forgiveness
Everyone’s deadline is different, and the disbursement date determines the deadline for the loan. However, before the borrower can even apply, all loan proceeds for which the borrower is requesting forgiveness must have been used. Borrowers can apply for forgiveness any time up to the maturity date of the loan, however, if borrowers do not apply for forgiveness within 10 months after the last day of the covered period, then PPP loan payments are no longer deferred and borrowers will begin making loan payments to their PPP lender.
Compute Your Deadline
Here is an example of how to compute the deadline date for a loan that had a disbursement date of 04/21/2020. If the client applies for a 24-week covered period, the covered period ends on 10/05/2020. Then the borrower has 10 months after the covered period ends to apply for forgiveness. If the borrower does not submit a loan forgiveness application to its lender by 08/05/2021, the borrower must begin making payments on or after 08/05/2021.
Instructions for Applying
Your lender should have instructions and videos to help you apply for forgiveness. You have probably already received several emails from your lender about this already. So, revisit the most current emails (older emails may not reflect the current changes), and see what the process is with your lender.
PHB Explains the 100% Deduction for Business Meals
The Consolidated Appropriations Act-2021 signed into law on Dec. 27, 2020, creates a temporary 100% deduction for business meals provided by a restaurant. The 100% deduction can include food, beverages, taxes, and tips. It also covers delivered or carryout meals. The purpose of this provision in the Act is to spur businesses to buy meals in order to help the restaurant industry.
You can claim the deduction from January 1, 2021 through December 31, 2022, when it will expire. This is a welcome tax deduction for businesses that have typically only been able to deduct 50% of meals.
What Qualifies for a 100% Deduction for Business Meals?
The criteria for whether a meal is a deductible business expense still apply. These include:
- The taxpayer must be present at the meal.
- The meal must be provided to someone you would normally do business with.
(E.g., employees, prospective or current customers or supplier, etc.)
- “Business” must be conducted during the meal.
- The expense must be ordinary and necessary.
- Expenses must not be lavish or extravagant. (This criterion is based on the facts and circumstances not a dollar amount.)
Tracking Your Expenses Correctly
As you take advantage of this deduction, it will be important to keep track of your expenses correctly. You should separate meals from any entertainment costs. Entertainment costs are still non-deductible during this time period.
Our Experienced Accountants Provide the Business Tax Services You Need
Whether it’s federal or state, the tax laws are always changing. Our experienced business tax professionals stay on top of all the changes to keep our clients in compliance and maximize deductions. PHB CPAs is one of the most experienced accounting firms in Franklin, TN.
We provide a full range of business tax services, planning, and preparation for a variety of businesses in Franklin and Greater Nashville. Give us a call today at 615-750-5537.
As one of the top CPA Firms in Nashville we offer accounting services to individuals, businesses, and non-profits in Nashville, Franklin, Brentwood, Spring Hill, Murfreesboro and throughout cities in Middle Tennessee.
Use Form 1099-NEC to Report Non-employee Compensation in 2020
If you’ve been in business more than 38 years, you may remember form 1099-NEC. Prior to 1982, this was the form you used to report non-employee compensation. Now the IRS is re-introducing this form to replace Box 7* on Form 1099-MISC. So, starting with 2020, you must file Form 1099-NEC if you have paid more than $600 to an independent contractor.
Here’s a look at the revamped form:
Distributing Copies of the Form
The form has 5 parts. Distribute them as follows:
- Copy A: The IRS
- Copy 1: State tax department, if applicable
- Copy B: Independent contractor
- Copy 2: Independent contractor
- Copy C: Keep in your business records
When to File the Form
Starting in 2021, you must distribute forms to workers and file Copy A of the form with the IRS by February 1.
When to Use Form 1099-MISC
Form 1099-MISC is still in use. Beginning with tax year 2020, you should file Form 1099-MISC for each person to whom you have paid the following in the course of your business during the year:
- At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest.
- At least $600 in the following:
- Prizes and awards.
- Other income payments.
- Generally, cash from a notional principal contract to an individual, a partnership or an estate.
- Any fishing boat proceeds.
- Medical and health care payments.
- Crop insurance proceeds.
- Payments to an attorney.
- Section 409A deferrals.
- Nonqualified deferred compensation.
Let the Professionals Do It
PHB is one of the best Nashville CPA firms for business accounting and tax preparation. Give us a call today at 615-750-5537.
*In 2020, Box 7 on Form 1099-MISC is “Payer made direct sales of $5,000 or more of consumer products to a buyer (recipient) for resale.”
Tax Implications of the CARES Act
This year, more than ever, you may need professional tax preparation to take advantage of the new tax ramafications of the CARES Act. Our experienced business tax professionals stay on top of the changes in tax laws to maximize our clients’ deductions. So give us a call today. We offer tax preparation for business taxes Nashville companies can depend on. We also offer tax preparation for individuals.
Four benefits of the CARES Act that apply to companies:
- PPP Forgivable Loans Are Tax-Free at the Federal Level. Although these loans are tax-free at federal level, typically, the state see a forgiven loan as taxable income. Keep in mind, the expenses that you paid with the PPP funds are not deductible.
- Corporations Can Carry Back Losses for Five Years. You can carry back losses incurred during 2018-2020 for five years. Amended returns can reduce profits for pre-2018 years, when corporations paid a 14% higher income tax
- Companies Can Donate More to Charity. The CARES Act raises the deduction for charitable deductions from 10% to 25% of taxable income. If taxable income is zero in 2020, you can carry the deduction forward for five years.
- Companies Can Receive a Tax Deduction for Donating Food. Restaurants and companies that carry food as inventory can donate to organizations helping the needy, the ill and infants. The CARES Act caps the deduction at the lower of these two:
- twice the cost of the food
- cost plus 50% of the normal profit
Two benefits of the Act that apply to individuals:
- The Act Suspends Business Loss Deduction Caps. The CARES Act suspends the $250,000 cap on the deduction for business losses on individual returns and the $500,000 cap on returns for couples.
- Early Distribution Penalties Are Waived for 2020. Individuals can withdraw up to $100,000 from their IRA, pension plan, or 401(k) plan, in 2020, without incurring the 10% early distribution penalty. But they must meet one of these conditions:
- they or a spouse or dependent test positive for COVID-19
- a quarantine, business closure, layoff, or reduced hours cause ecumenic harm
Tennessee Business Relief Program to Help Small Businesses
Help for Tennessee small businesses is on the way. The Tennessee Business Relief Program has over $200,000,000 in federal Coronavirus relief funds to distribute. So how will the state determine the relief amount to distribute? The state will base the amount a business is eligible to receive on the annual gross sales of the business.
Who Is Eligible for the Tennessee Business Relief Program?
At this point, about 28,000 Tennessee businesses may qualify for the relief funds. But to be eligible, the business must be registered with the Tennessee Department of Revenue. Currently, the following categories of business are eligible:
- Barber shops, beauty shops, and nail salons
- Tattoo parlors, spas, gyms, and fitness centers
- Restaurants and bars
- Hotels and other travel accommodations
- Theaters, auditoriums, performing arts centers and similar facilities
- Museums, zoos, and amusement parks
- Bowling centers and arcades
- Marinas, amusement, sports and recreational industries
- Promoters and agents of performing arts and sports
- Independent artists, writers, and performers
Additionally, some other businesses are eligible. They must be able to demonstrate a 25% reduction in sales as shown on their April sales tax returns. So businesses that do not have a sales tax number would not be eligible. At this time, eligible businesses include stores that sell such things as furniture, clothing, sporting goods, and office supplies. But state legislators are hopeful the program will soon expand to include other organizations. These may include non-profits, trade groups and chambers of commerce.
For a list of all current and proposed businesses categories, click this link.
PHB Serves Small Businesses
PHB is one of the best CPA firms Franklin has to offer. It is our obligation and privilege to inform our small business clients about this program. And it is our wish to help them avail themselves of the benefits of Tennessee Business Relief Program.
Tax Relief for Tornado Victims in Tennessee
Tax relief for tornado victims in Tennessee is here. As one of the most trusted accounting firms in Nashville, PHB wants to alert recent tornado victims of good news. On March 17, 2020, the IRS announced it will give tax relief to the tornado victims.
So who qualifies for this tax relief in the Nashville area? The answer is – residents and people who have a business in Davidson county. Affected residents and business owners in Putnam and Wilson counties are also eligible. Additionally, relief workers are eligible for the tax relief. (Workers must be affiliated with a recognized government or philanthropic organization.)
IRS Postpones Deadlines to Give Tax Relief for Tennessee Tornado Victims
The relief takes the form of deadline delays for filing and payments. The IRS is giving eligible taxpayers until July 15, 2020 to file most tax returns. This includes:
- individual and corporate returns
- estate and trust income returns
- partnership returns
- S corporation returns
- trust returns
- estate and gift returns
- employment returns
- certain excise tax returns
Note: These returns have due dates occurring between March 2, 2020 and July 15, 2020.
Claiming Losses on Federal Income Tax
Additionally, there is Federal tax relief for tornado victims. Eligible tornado victims may claim casualty losses on federal income tax. Secondly, individuals may also deduct personal property losses that insurance does not cover. Thirdly, if you are involved in a tax collection or examination, you may be eligible for special consideration by the IRS.
The tax professionals at PHB know the guidelines for this tax relief eligibility. So we stand ready to help tornado victims with their tax preparation for 2019. Please call us at 615-750-5537 to make an appointment if you need help with your tax return. PHB offers experienced bookkeeping Franklin TN residents can trust. We provide support and assistance in all your tax, financial, and business affairs.
Challenges of the New Form W-4 for 2020
Whenever you start a new job, or if you want to adjust the amount of income tax withheld from your paycheck, you have to fill out a W-4 Form. For 2020, the IRS is using a new, updated form. According to the I.R.S. the update “reduces the form’s complexity and increases the transparency and accuracy.”
Lisa Patterson, President of PHB confirms, “The updated form looks different now. Workers are being asked to be more specific about their withholdings to prevent owing taxes at the end of the year. Since it is not what everyone is used to, it has and will spark questions from employees as they are filling it out.”
As an employer, if you need guidance in helping new or existing employees fill out the new Form W-4, give us a call at PHB CPAs. We are an experienced and trusted CPA firm in greater Nashville that handles a variety of accounting services for businesses. Learn more about our business tax services here.
Old Form W-4 vs. New Form W-4
The previous W-4 form allowed you to list the number of exemptions that you wanted to claim. The more exemptions you claimed, the less taxes the employer withheld from your paycheck. And vice versa.
The new form requires you to determine the correct withholding amount by performing a calculation of all income sources— including second jobs, a spouse’s job, self-employment income, and income from dividends and interest.
Five Steps on the New Form
Step 1 and step 5 are mandatory. You must complete those two steps. Step 1 is for your personal information and step 5 is simply where you sign the form. Steps 2, 3, and 4 are optional, but completing them ensures that the amount of your withholding will more accurately match your tax liability.
If, as an employee, you have difficulty filling out steps 2, 3, and 4, PHB can also assist you. Learn more about our tax services for individuals here.