The tax law is constantly changing, calling on the need for strong bookkeeping policies to be in place. Tax deductions rely on accurate data derived from bookkeeping. Consider hiring a professional, like Bookeeps, to help you keep track of the following tax law changes.
Temporary 100% Meals Deduction
In light of the pandemic, the IRS passed a temporary allowance to deduct 100% of the cost of qualifying meals at restaurants. The goal of this special regulation was to help the restaurant industry recover, but there are also benefits for your business. Businesses can enjoy business meals knowing that they are fully deductible. However, only meals at restaurants qualify, making accurate bookkeeping surrounding this new regulation essential. You will need to clearly record which meals are 100% deductible and which meals are still only 50% deductible. The IRS closely monitors the meals deduction, so ask for help from a qualified professional, like Bookeeps, to ensure you are following all rules and regulations.
Another new reporting change for 2021 occurred on the Form 1099-K. A 1099-K reports all the income processed through third-party payment settlement companies. The previous reporting threshold was $20,000, but new regulations dropped this threshold down to $600. This means that more small businesses will be receiving a 1099-K and will need to report all of the income accurately. The IRS can easily check the 1099-Ks filed through third-party settlement companies with what is filed on the business return, leaving no room for error. If the IRS finds discrepancies, they can audit your business and charge stiff fines and penalties. With monthly bookkeeping and a year-end reconciliation, Bookeeps can help your business stay up to date with income recording and reporting. Avoid the headache of an IRS audit and stress surrounding regular bookkeeping with the assistance of Bookeeps.
Just like the 1099-K changed, so did the 1099-NEC. Previously all contractor income was reported on the 1099-MISC. The IRS changed this and added a new form, the 1099-NEC. Going forward, the 1099-NEC will be used to report all contractor income over $600. Businesses can incur stiff fines and penalties for failing to file the required 1099-NECs. If you utilize an accounting software, like QuickBooks, you can easily setup the classification of contractors to include them in a 1099 report. This will ensure that no contractor is missed. If you don’t know how to do this or are confused on who to issue a 1099 to, consider reaching out to Bookeeps. Bookeeps can help you understand the required information that needs to be filed to ensure a timely and accurate filing.
Fringe Benefits Changes
Reporting fringe benefits correctly can be a tedious and time-consuming process. Luckily, the experts at Bookeeps can help you work through this issue. The IRS has changed some of the fringe benefit rules. The first change occurs in the transportation fringe benefit. The new law disallows deductions for expenses for transportation fringe benefits. However, the IRS now allows employers to deduct bicycle commuting reimbursements through 2025. Reimbursing employees correctly for these changes is critical. Not only will inaccurate reporting affect the company’s tax return, but it will also affect your employee’s tax filing. Be sure you are reporting these payroll reimbursements correctly to avoid correspondence with the IRS.
With new tax laws being signed into effect every month, your bookkeeping needs to remain accurate. One way to ensure accurate bookkeeping is to hire a professional, like Bookeeps. Not only will hiring a professional reduce your workload and stress levels, but you can also rest assured knowing that your books are in compliance with new regulations. Reach out to Bookeeps today for more information. Bookeeps has been recognized as one of the Top 30 Accounting Firms in New York in 2022 by DesignRush.