517.789.8900 fax. 517.789.6477
113 w. michigan ave, suite 301, jackson, mi 49201

HOMEBLOGSmall Business Tax Briefs: January 2020

Jan
27
2020

Small Business Tax Briefs: January 2020

Robert Smith

New law helps businesses make their employees’ retirement secure

A significant law was recently passed that adds tax breaks and makes changes to employer-provided retirement plans. If your small business has a current plan for employees or if you’re thinking about adding one, you should familiarize yourself with the new rules.

The Setting Every Community Up for Retirement Enhancement Act (SECURE Act) was signed into law on December 20, 2019 as part of a larger spending bill. Here are three provisions of interest to small businesses.

 

  1. Employers that are unrelated will be able to join together to create one retirement plan. Beginning in 2021, new rules will make it easier to create and maintain a multiple employer plan (MEP). A MEP is a single plan operated by two or more unrelated employers. But there were barriers that made it difficult to setting up and running these plans. Soon, there will be increased opportunities for small employers to join together to receive better investment results, while allowing for less expensive and more efficient management services. 
  2. There’s an increased tax credit for small employer retirement plan startup costs. If you want to set up a retirement plan, but haven’t gotten around to it yet, new rules increase the tax credit for retirement plan start-up costs to make it more affordable for small businesses to set them up. Starting in 2020, the credit is increased by changing the calculation of the flat dollar amount limit to: The greater of $500, or the lesser of: a) $250 multiplied by the number of non-highly compensated employees of the eligible employer who are eligible to participate in the plan, or b) $5,000. 
  3. There’s a new small employer automatic plan enrollment tax credit. Not surprisingly, when employers automatically enroll employees in retirement plans, there is more participation and higher retirement savings. Beginning in 2020, there’s a new tax credit of up to $500 per year to employers to defray start-up costs for new 401(k) plans and SIMPLE IRA plans that include automatic enrollment. This credit is on top of an existing plan start-up credit described above and is available for three years. It is also available to employers who convert an existing plan to a plan with automatic enrollment. 

These are only some of the retirement plan provisions in the SECURE Act. There have also been changes to the auto enrollment safe harbor cap, nondiscrimination rules, new rules that allow certain part-timers to participate in 401(k) plans, increased penalties for failing to file retirement plan returns and more. Contact us to learn more about your situation.
 

New rules will soon require employers to annually disclose retirement income to employees

As you’ve probably heard, a new law was recently passed with a wide range of retirement plan changes for employers and individuals. One of the provisions of the SECURE Act involves a new requirement for employers that sponsor tax-favored defined contribution retirement plans that are subject to ERISA.

Specifically, the law will require that the benefit statements sent to plan participants include a lifetime income disclosure at least once during any 12-month period. The disclosure will need to illustrate the monthly payments that an employee would receive if the total account balance were used to provide lifetime income streams, including a single life annuity and a qualified joint and survivor annuity for the participant and the participant’s surviving spouse.

Background information

Under ERISA, a defined contribution plan administrator is required to provide benefit statements to participants. Depending on the situation, these statements must be provided quarterly, annually or upon written request. In 2013, the U.S. Department of Labor (DOL) issued an advance notice of proposed rulemaking providing rules that would have required benefit statements provided to defined contribution plan participants to include an estimated lifetime income stream of payments based on the participant’s account balance.

Some employers began providing this information in these statements — even though it wasn’t required.

But in the near future, employers will have to begin providing information to their employees about lifetime income streams.

Effective date

Fortunately, the effective date of the requirement has been delayed until after the DOL issues guidance. It won’t go into effect until 12 months after the DOL issues a final rule. The law also directs the DOL to develop a model disclosure.

Plan fiduciaries, plan sponsors, or others won’t have liability under ERISA solely because they provided the lifetime income stream equivalents, so long as the equivalents are derived in accordance with the assumptions and guidance and that they include the explanations contained in the model disclosure.

Stay tuned

Critics of the new rules argue the required disclosures will lead to confusion among participants and they question how employers will arrive at the income projections. For now, employers have to wait for the DOL to act. We’ll update you when that happens. Contact us if you have questions about this requirement or other provisions in the SECURE Act.

 

Cents-per-mile rate for business miles decreases slightly for 2020

This year, the optional standard mileage rate used to calculate the deductible costs of operating an automobile for business decreased by one-half cent, to 57.5 cents per mile. As a result, you might claim a lower deduction for vehicle-related expense for 2020 than you can for 2019.

Calculating your deduction

Businesses can generally deduct the actual expenses attributable to business use of vehicles. This includes gas, oil, tires, insurance, repairs, licenses and vehicle registration fees. In addition, you can claim a depreciation allowance for the vehicle. However, in many cases depreciation write-offs on vehicles are subject to certain limits that don’t apply to other types of business assets.

The cents-per-mile rate comes into play if you don’t want to keep track of actual vehicle-related expenses. With this approach, you don’t have to account for all your actual expenses, although you still must record certain information, such as the mileage for each business trip, the date and the destination.

Using the mileage rate is also popular with businesses that reimburse employees for business use of their personal vehicles. Such reimbursements can help attract and retain employees who drive their personal vehicles extensively for business purposes. Why? Under the Tax Cuts and Jobs Act, employees can no longer deduct unreimbursed employee business expenses, such as business mileage, on their own income tax returns.

If you do use the cents-per-mile rate, be aware that you must comply with various rules. If you don’t, the reimbursements could be considered taxable wages to the employees.

The rate for 2020

Beginning on January 1, 2020, the standard mileage rate for the business use of a car (van, pickup or panel truck) is 57.5 cents per mile. It was 58 cents for 2019 and 54.5 cents for 2018.

The business cents-per-mile rate is adjusted annually. It’s based on an annual study commissioned by the IRS about the fixed and variable costs of operating a vehicle, such as gas, maintenance, repair and depreciation. Occasionally, if there’s a substantial change in average gas prices, the IRS will change the mileage rate midyear.

Factors to consider

There are some situations when you can’t use the cents-per-mile rate. In some cases, it partly depends on how you’ve claimed deductions for the same vehicle in the past. In other cases, it depends on if the vehicle is new to your business this year or whether you want to take advantage of certain first-year depreciation tax breaks on it.

As you can see, there are many factors to consider in deciding whether to use the mileage rate to deduct vehicle expenses. We can help if you have questions about tracking and claiming such expenses in 2020 — or claiming them on your 2019 income tax return.

 

Numerous tax limits affecting businesses have increased for 2020

An array of tax-related limits that affect businesses are annually indexed for inflation, and many have increased for 2020. Here are some that may be important to you and your business.

Social Security tax

The amount of employees’ earnings that are subject to Social Security tax is capped for 2020 at $137,700 (up from $132,900 for 2019).

Deductions

  • Section 179 expensing: 
    • Limit: $1.04 million (up from $1.02 million for 2019) 
    • Phaseout: $2.59 million (up from $2.55 million) 
  • Income-based phase-out for certain limits on the Sec. 199A qualified business income deduction begins at: 
    • Married filing jointly: $326,600 (up from $321,400) 
    • Married filing separately: $163,300 (up from $160,725) 
    • Other filers: $163,300 (up from $160,700) 

Retirement plans

  • Employee contributions to 401(k) plans: $19,500 (up from $19,000) 
  • Catch-up contributions to 401(k) plans: $6,500 (up from $6,000) 
  • Employee contributions to SIMPLEs: $13,500 (up from $13,000) 
  • Catch-up contributions to SIMPLEs: $3,000 (no change) 
  • Combined employer/employee contributions to defined contribution plans (not including catch-ups): $57,000 (up from $56,000) 
  • Maximum compensation used to determine contributions: $285,000 (up from $280,000) 
  • Annual benefit for defined benefit plans: $230,000 (up from $225,000) 
  • Compensation defining a highly compensated employee: $130,000 (up from $125,000) 
  • Compensation defining a “key” employee: $185,000 (up from $180,000) 

Other employee benefits

  • Qualified transportation fringe-benefits employee income exclusion: $270 per month (up from $265) 
  • Health Savings Account contributions: 
    • Individual coverage: $3,550 (up from $3,500) 
    • Family coverage: $7,100 (up from $7,000) 
    • Catch-up contribution: $1,000 (no change) 
  • Flexible Spending Account contributions: 
    • Health care: $2,750 (up from $2,700) 
    • Dependent care: $5,000 (no change) 

These are only some of the tax limits that may affect your business and additional rules may apply. If you have questions, please contact us.
 

Leave A Comment



Comments

MocHeato
02 May, 2020

Acheter Viagra Sans Ordonnance Au Canada <a >Cialis</a> Viagra 100 Mg Wirkungsdauer <a >Cialis</a> Zithromax With Alcohol Consumption


affeniego
12 June, 2020

Ivermectin 90 Pills <a >Cialis</a> Fincar Finasteride Online Canada <a >Cialis</a> Levitra 20 Mg


Ediligell
06 July, 2020

Mode D’Action Du Viagra erelon https://acialisd.com/# - safe cialis online illela Original Viagra Online Kaufen Famsvaft <a >Cialis</a> DadaBlammarp Giardiasis Amoxicillin


yeezy boost 350 v2
09 August, 2020

The subsequent time I read a weblog, I hope that it doesnt disappoint me as much as this one. I mean, I know it was my option to learn, however I truly thought youd have something fascinating to say. All I hear is a bunch of whining about one thing that you may fix if you werent too busy looking for attention.
yeezy boost 350 v2


christian louboutin outlet
11 August, 2020

I must express my appreciation to the writer for rescuing me from such a instance. Just after looking out through the online world and finding ideas that were not powerful, I figured my life was done. Living without the answers to the issues you have sorted out by means of the guideline is a crucial case, and the ones that would have adversely damaged my career if I had not noticed your website. Your actual ability and kindness in taking care of a lot of stuff was very useful. I am not sure what I would have done if I hadn’t encountered such a solution like this. I’m able to at this time look ahead to my future. Thanks for your time very much for the specialized and result oriented help. I will not hesitate to suggest your blog to anyone who needs and wants care on this subject.
christian louboutin outlet


supreme hoodie
13 August, 2020

I wish to express appreciation to the writer for rescuing me from this type of circumstance. Right after looking out throughout the the net and obtaining principles which are not powerful, I figured my entire life was over. Existing without the presence of solutions to the difficulties you’ve solved by means of the post is a serious case, as well as ones which may have in a wrong way damaged my entire career if I had not encountered the blog. Your own personal talents and kindness in controlling the whole lot was crucial. I don’t know what I would have done if I had not encountered such a subject like this. I can also now look ahead to my future. Thanks so much for this expert and result oriented guide. I will not think twice to refer the website to any person who will need care on this issue.
supreme hoodie


kobe sneakers
16 August, 2020

I wish to show my thanks to the writer for bailing me out of such a setting. Because of searching through the world wide web and meeting tips that were not beneficial, I believed my entire life was over. Existing minus the approaches to the problems you’ve solved through this report is a critical case, and the kind which might have negatively damaged my entire career if I hadn’t come across your web page. Your actual ability and kindness in maneuvering the whole thing was crucial. I’m not sure what I would have done if I had not encountered such a step like this. I can also at this moment relish my future. Thanks for your time so much for this expert and results-oriented help. I won’t hesitate to recommend your blog post to anybody who requires support about this topic.
kobe sneakers


golden goose
21 August, 2020

I wish to show my appreciation to this writer just for rescuing me from this particular scenario. As a result of searching through the the net and coming across thoughts that were not powerful, I figured my life was over. Living without the presence of answers to the problems you have solved all through your entire review is a crucial case, and the ones that would have negatively affected my career if I hadn’t come across your web blog. Your main skills and kindness in maneuvering almost everything was valuable. I don’t know what I would’ve done if I had not discovered such a subject like this. I am able to at this time relish my future. Thanks for your time very much for the professional and sensible guide. I won’t hesitate to recommend your site to any individual who requires guide about this problem.
golden goose


balenciaga sneakers
23 August, 2020

I wanted to write down a simple word to express gratitude to you for all the fabulous guides you are posting at this website. My particularly long internet research has now been paid with reputable content to share with my guests. I would express that many of us visitors are very endowed to live in a good network with so many special individuals with very helpful secrets. I feel somewhat lucky to have seen your webpage and look forward to some more amazing minutes reading here. Thanks once more for a lot of things.
balenciaga sneakers


yeezy shoes
25 August, 2020

Needed to send you the very small remark to say thanks a lot as before just for the fantastic views you have shown on this website. It was certainly tremendously generous of people like you to make publicly just what a few individuals might have offered for an e book to generate some profit on their own, precisely since you could have tried it if you decided. These tricks as well served like the great way to know that other people online have the same fervor similar to my very own to grasp more with regards to this condition. I’m sure there are millions of more fun situations in the future for many who read your site.
yeezy shoes


yeezy boost
28 August, 2020

I as well as my buddies happened to be checking the excellent points located on the website and suddenly I got a horrible suspicion I never thanked you for those tips. These men came consequently excited to read them and already have absolutely been tapping into them. I appreciate you for turning out to be very considerate and also for making a choice on such impressive ideas millions of individuals are really desirous to understand about. Our honest apologies for not expressing appreciation to you earlier.
yeezy boost


kyrie irving shoes
01 September, 2020

I not to mention my buddies were reading through the nice procedures found on your website and so suddenly developed a terrible feeling I had not expressed respect to you for those tips. Most of the people were definitely consequently excited to learn them and have now very much been making the most of those things. Appreciate your truly being well thoughtful as well as for pick out certain wonderful areas millions of individuals are really wanting to be informed on. Our honest regret for not saying thanks to you sooner.
kyrie irving shoes


balenciaga
02 September, 2020

Thank you for each of your effort on this web site. My mother delights in managing investigations and it’s obvious why. My partner and i know all concerning the dynamic mode you create very important guidelines by means of this website and therefore cause contribution from visitors on this concept while our child is certainly studying a lot of things. Enjoy the remaining portion of the year. Your doing a terrific job.
balenciaga


supreme
04 September, 2020

very good submit, i actually love this web site, keep on it
supreme


kd shoes
06 September, 2020

very nice submit, i certainly love this web site, carry on it
kd shoes


yeezy boost
08 September, 2020

After I originally commented I clicked the -Notify me when new feedback are added- checkbox and now each time a comment is added I get four emails with the identical comment. Is there any approach you may take away me from that service? Thanks!
yeezy boost


supreme outlet
10 September, 2020

WONDERFUL Post.thanks for share..more wait .. ?
supreme outlet


curry shoes
15 September, 2020

This website online is mostly a walk-via for all the information you wanted about this and didn抰 know who to ask. Glimpse right here, and also you抣l definitely uncover it.
curry shoes


cheap jordans
17 September, 2020

very nice put up, i actually love this web site, carry on it
cheap jordans


Yeezy
18 September, 2020
Next Page
Bond & Company Accepts These Credit Cards