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2020 Business Tax Issues to Consider With the Latest Tax Laws
SmallBizLady: Can you tell me some of the high points of the new tax law that just got passed in December 2019?
Eva Rosenberg: It was a great big law, covering many issues. The overall law (715 pages) is The Further Consolidated Appropriations Act, 2020 (FCAA) – and here’s a link.
Two parts of the law affected taxes:
- The Setting Every Community Up for Retirement Enhancement Act (SECURE Act) and
- The Taxpayer Certainty and Disaster Tax Relief Act (TCDTRA)
The SECURE Act, improved IRA and retirement plan provisions. We can make contributions for a longer time, we don’t have to take mandatory distributions as early, companies are getting extra tax credits for offering retirement plans, with bonus credits for making the enrollment automatic for new hires, and they have to allow part-time employees to participate in 401ks. Plans are more portable and employers can participate in group plans to get better benefits for their employees. So, lots of good things in the SECURE Act.
The TCDTRA (we’ll call it the Extender Act) There were many provisions that extended a variety of deductions into 2018, 2019 and 2020. These tax breaks expired in 2017 and now, WHAM they are back! Some people will want to return to their 2018 tax returns to file amendments. Things affected include tuition and fees deductions, the mortgage insurance deduction, various energy credits, and non-taxable cancellation of debt when personal residences are foreclosed. Another thing extended into 2020 is the Paid Family Leave credit for employers. It was going to expire on 12/31/19. Also for employers, Work Opportunity Credits are restored.
SmallBizLady: With all the last-minute changes from Congress this year, is it a good idea to put my 2019 tax return on extension – or will it attract an audit?
Eva Rosenberg: Definitely put your tax return on extension. Don’t worry about getting audited. Why is an extension such a good idea, especially this year?
a) Many tax forms haven’t been updated by the IRS (and therefore, not by the software companies)
b) Some of the changes in the SECURE Act and the Extender Act may be used in 2018 or 2019. You may want time to see the effect in 2019 before filing.
c) The IRS will need to issue explanations (Revenue Procedures) to clarify some of the new laws.
d) There are a whole lot of tax planning opportunities for last year and THIS year to consider.
e) Including some new considerations on setting up and funding retirement plans.
SmallBizLady: Everyone is talking about the new 20% Qualified Business Income Deduction. Is that a great deal for businesses? Will using it generate audits? Are there any drawbacks?
Eva Rosenberg: It’s an interesting and confusing law. The IRS has written about 300 pages of explanations just on how this law affects rental income, alone. But we’re starting to understand it better. And the IRS has posted FAQs here.
Most important is the new term SSTB – specified service trades or businesses (SSTBs). An SSTB is a trade or business involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, investing and investment management, trading, dealing in certain assets or any trade or business where the principal asset is the reputation or skill of one or more of its employees or owners.
The IRS was kind enough to clarify this – The principal asset of a trade or business is the reputation or skill of its employees or owners if the trade or business consists of the receipt of income from endorsing products or services, the use of an individual’s image, likeness, voice, or other symbols associated with the individual’s identity, or appearances at events or on radio, television, or other media formats.
The reason this definition is important – folks whose businesses fit these categories can only use the 20% QBI if their income is lower than certain thresholds.
For 2018, the threshold amount was $315,000 ($321,400 -2019) for a married couple filing a joint return, or $157,500 (160,700 – 2019) for all other taxpayers.
It has increased for 2019 and 2020 since the amount is tied to inflation. Now that the IRS has issued a form for this, it’s easier to understand – Form 8995.
How to get MORE of life with Michelle Washington
SmallBizLady: How can you get past regrets in life?
Michelle Washington: A life of regrets sometimes comes from holding on to the regrets or failures of our past. Of course, we all have regrets and failures but those that make a conscious decision to address, resolve and commit to living forward will live a happier life full of MORE.
SmallBizLady: How can you have a life full of more?
Michelle Washington: Life becomes short when we refuse to deal with the things that stagnate us from living a life of more. At times we’re looking at the things that are outside of us as the things that prevent a life of MORE but the truth is we lack the willingness to look within. The questions you must ask yourself is 1. Why am I allowing this to happen? 2. What is causing me to not live?
SmallBizLady: How does personal accountability have a role in living a life of more?
Michelle Washington: Often times when we need to deal with something concerning us we look for an accountability partner to help us keep our word to ourselves. But this will require accountability from within a sense of determination to move forward. When you identify the what and why that’s blocking you from living than it will be easier for you to move to a place of forgiveness to yourself and others. If you don’t take action and be the discipline you will continue the cycles of living life from a place of deficiency and not from a position of the fullness of life.
If we can attempt to improve ourselves even 1% each day, at the end of a year we will be 37x better than when we started. Accountability improvement requires consistent learning, feedback, and reflection.
How to Run A Successful Affiliate Business
SmallBizLady: How to do you launch your online product business?
Griffin Stewart: For us, we launched an online bundle product business.
My wife and I had savings in our bank account so I took three months off from my freelance graphic and web design work to focus on building 5DayDeal.com to see if it would work. We recruited partners to join us while also building out the website with full e-commerce and affiliate tracking system. I also worked on custom graphics, sales page design and layout, customer account layout and affiliate portal design. In January 2014, we launched our first bundle to the world along with our amazing partners. Our goal was to maybe raise $25,000 or charity. In five short day later we closed our cart having raised almost $50,000 for charity and being able to pay some partner out more than they made in the previous 12 months of business! In October 2014 we launched our second bundle and it raised more than $240,000 for charity. I found new graphic and web design contractors for my clients and 5DayDeal has been my full-time job ever since!
SmallBizLady: Your business gives 10% of gross revenue to charity. Has this helped your business and do you think it is a sustainable business model for digital businesses?
Griffin Stewart: Yes. We wanted this business to be about more than just money and profit for us and partners and more than just amazingly priced, high-quality educational tools and resources for customers. We wanted our business to help and be generous to those around the world who are struggling with issues we cannot even begin to imagine. I cannot even tell you how many partners and customers have reached out over the years to let us know that they were interested in the bundle, but what really got their attention and pushed them over the edge was the impact it has had around the world via our charity partners. People love to be apart of something bigger than themselves and to help others in massive ways. This includes me and my wife who initially had a dream of donating maybe $25,000 – $50,000 per year to charity and have been blown out of the water at what has been possible instead – we dreamed too small. In the first 5 years in business, 5DayDeal has been able to donate an average of $360,000+ per year to charity! That is almost $1,000 per day donated!
Griffin Stewart: What I recommend is a cultivated approach. At 5DayDeal our sales are only 5 days, but we spend the rest of the year looking for high impact partners and affiliates that align with our brand, core values, and mission as a company. This is a lot of work and a lot harder than the previously mentioned method, but we have found the results to be well worth it. Which would you rather have – 75 affiliate partners earning and an average of $30,000 each per year or 30,000 affiliate partner-earning and an average of $75 each per year? Which one do you think would result in more repeat and motivated partners?
SmallBizLady: If someone’s wanted to start an affiliate program for their products what do they need to know?
We have seen some competitors onboard multiple thousands of affiliates only to have sales that don’t even sell 1/4 of our sales. Some of our affiliate partners sell more than 1,000 bundles in just 5 days and every year we pay top partner more than 6 figures in commissions for 5 days of promotion. Because of this, our partners have become like a close-knit family and we look forward to working with them, talking with them and growing our businesses alongside each other year after year. This is the affiliate strategy I would recommend as I have personally seen it produce amazing results and the community aspect of it is priceless in my mind.
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