ECONOMIC RELIEF FROM THE SMALL BUSINESS ADMINISTRATION If your business is struggling, you may be able to get some help from the federal Small Business Administration (SBA), which is authorized to provide loans to small businesses on an as-needed basis. There are two types of relief you can apply for: Economic Injury Disaster Loans Traditionally, low-interest SBA Economic Injury Disaster Loans (EIDLs) have been available to small businesses following a disaster declaration; these are authorized by Section 7(a) of the Small Business Act. EIDLs are commonly granted on a local level following a natural disaster (such as a hurricane or a tornado). But right now they are authorized for small businesses in all U.S. states and territories due to the COVID-19 pandemic. Currently, each disaster loan provides up to $2 million to pay fixed debts, payroll, accounts payable, and other bills. The interest rate is fixed at 3.75 percent for small businesses and 2.75 percent for non-profits. EIDLs can be repaid over a period of up to 30 years. Additionally, due to COVID-19, the SBA is providing advances of up to $10,000 on EIDLs for businesses experiencing a temporary loss of revenue. Funds are available within three days after applying, and the loan advance does not have to be repaid. Small business owners can apply for an EIDL and advance here: https://covid19relief.sba.gov/#/ . New Paycheck Protection Program The Paycheck Protection Program (PPP) is an expansion of the existing 7(a) loan program, authorized by the recently passed Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Who’s Eligible? Employees. According to the SBA, you are eligible if your business was in operation as of February 15, 2020, and you had employees for whom you paid salaries. (The CARES Act includes as eligible payroll your payments to 1099 independent contractors, but the SBA guidance says no—you can’t include the 1099 payments. And since this is an SBA loan, the SBA guidance likely rules for now.) No employees. You qualify the PPF loan even if the only worker is you. Thus, both the sole proprietor with no employees and the single-member LLC with no employees qualify. Small businesses that employ 500 or fewer employees are eligible for PPP relief. In this small business category, you find S and C corporations, sole proprietors, partnerships, certain non-profits, veterans’ organizations, and tribal businesses. How Much Aid Is Available? Small businesses can borrow 250 percent of their average monthly payroll expenses during the one-year period before the loan is taken, up to $10 million. For example, if your monthly payroll average is $10,000, you can borrow $25,000 ($10,000 x 250 percent). At $1 million, you can borrow $2.5 million. The law defines “payroll costs” very broadly as Employee salaries, wages, commissions, or “similar compensation,” up to a per-worker ceiling of $100,000 per year; Cash tips or the equivalent; Payment for vacations and parental, family, medical, or sick leave; Allowance for dismissal or separation; Payment for group health benefits, including insurance premiums; Payment of any retirement benefit; or State or local tax assessed on employee compensation. What’s specifically not included in payroll costs: Annual compensation over $100,000 to any individual employee Compensation for employees who live outside the U.S. Sick leave or family leave wages for which a credit is already provided by the Families First Coronavirus Response Act (P.L. 116-127) How Much of the Loan Is Forgiven? Principal amounts used for payroll, mortgage interest, rent, and utility payments during an eight-week period (starting with the loan origination date) between February 15, 2020, and June 30, 2020, will be forgiven. If the full principal is forgiven, you are not liable for the interest accrued over that eight-week period—and, as an added bonus, the canceled amounts are not considered taxable income. Warning: Payroll Cuts Affect Loan Forgiveness Because the whole point of the PPP is to help keep workers employed at their current level of pay, the loan forgiveness amount decreases if you lay folks off or reduce their wages. 1. If you keep all your workers at their current rates of pay, you are eligible for 100 percent loan forgiveness. 2. If you reduce your workforce, your loan forgiveness will be reduced by the percentage decrease in employees. Example: Last year, you had 10 workers. This year, you have eight. Your loan forgiveness will be reduced by 20 percent. You are allowed to compare your average number of full-time equivalent employees employed during the covered period (February 15, 2020, to June 30, 2020) to the number employed during your choice of 1. February 15, 2019, to June 30, 2019, or 2. January 1, 2020, to February 29, 2020. 3. If you reduce by more than 25 percent (as compared to the most recent full quarter before the covered period) the pay of a worker making less than $100,000 annually, your loan forgiveness decreases by the amount in excess of 25 percent. Example: Last quarter, Jim was earning $75,000 on an annual basis. You still have Jim on the payroll but have reduced his salary to $54,750 annually. Jim’s pay has decreased by 27 percent, so the amount of your PPP loan forgiven is reduced by the excess 2 percent. The good news: If you have already laid workers off or made pay cuts, it’s not too late to set things right. If you hire back laid-off workers by June 30, 2020, or rescind pay cuts by that date, you remain eligible for full loan forgiveness. When Are Payments Due? Any non-forgiven amounts are subject to the terms negotiated by you and the lender, but the maximum terms of the loan are capped at 10 years and 4 percent interest. Also, payments are deferred for at least six months and up to one year from the loan origination date. What If You Already Applied for an EIDL for Coronavirus-Related Reasons? No problem—if you took out an EIDL on or after January 30, 2020, you can refinance the EIDL into the PPP for loan forgiveness purposes, but you can’t double-dip and use the loans for the same purposes. Any remaining EIDL funds used for reasons other than the stated reasons above are a regular (albeit low-interest) loan that needs to be repaid. How to Apply for a PPP Unlike EIDLs, which run directly through the SBA, PPP loans go through approved third-party lenders. Talk to your bank or your local SBA office (given the current demands on the SBA, your bank may be a better place to start). There’s no fee to apply, and your burden for demonstrating need is low. In addition to the appropriate documentation regarding your finances, you need only make a good-faith showing that the loan is necessary to support your ongoing business operations in the current economic climate; the funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments; and you do not have a duplicate loan already pending or completed. If You’re Going to Apply, Do It Now The law allocates $349 billion for PPP relief—a huge amount, but one that will presumably be in very high demand given the devastating effects of the COVID-19 pandemic. There’s no guarantee that more funding will be forthcoming, so act now to claim your share if you are eligible. It may be a while before the processes to grant these loans are actually up and running, but get things rolling at your end ASAP. If you are in dire straits right now, you may also want to go ahead and apply for an EIDL loan and advance, as the process is already in place to apply.

Save as PDF Read more articles Share According to the IRS' most recent Data Book, the IRS audited nearly 1.4M tax returns in 2014, approximately 0.8 percent of all individual tax returns filed in calendar year 2014 and 1.3% of corporation income tax returns filed in that same year. IRS examinations (otherwise known as audits!) are done to determine if income, expenses, and credits are being reported accurately. Of the exams that take place, the most common method is a correspondence audit (examination by mail), but the IRS also does field exams (face-to-face audits). ONE QUESTION WE HEAR ASKED QUITE OFTEN IS WHAT CAUSES THE IRS TO AUDIT A RETURN? While there is no simple answer to that question, the IRS uses several different methods to select their audits: random selection and computer screening, and related exams. RANDOM SELECTION AND COMPUTER SCREENING Sometimes returns are selected based solely on a statistical formula. They will compare your tax return against "norms" for similar returns. The IRS develops these "norms" from audits of a random sample of returns. RELATED EXAMINATIONS The IRS may also select your return when it involves issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for audit. "CAN YOU MAKE THAT A LITTLE MORE SIMPLE FOR ME???" We would break down the audit triggers into two categories: Individual 1040 Triggers and Business Triggers. ON THE INDIVIDUAL SIDE: 1) Not reporting all income 2) Making more than $200,000 a year 3) Claiming "Hobby" activities as a business activity 4) Filing a schedule C or E with your tax return 5) Excessive business deductions on your schedule C 6) Large schedule C losses ON THE CORPORATE SIDE: 1) Unusually low salary of an S-Corp Officer 2) Large meal and entertainment expenses 3) Claiming 100% business use of a vehicle We are also asked about the risk of filing an amended return. According to the IRS website: "Filing an amended return does not affect the selection process of the original return. However, amended returns also go through a screen process and the amended return may be selected for audit." ADDITIONAL AUDIT NOTES Should your account be selected for audit, the IRS will notify you by mail, they never initiate an audit by telephone. They will provide you with a written request for the specific documents they want to see. The law requires you to keep all records you used to prepare your tax return for at least three years; so be sure to keep all records for three years from the date the tax return was filed. Generally, the IRS will not go back more than three years. The IRS tries to audit tax returns as soon as possible after they are filed. Accordingly most audits will be of returns filed within the last two years. An audit can be concluded in three ways: NO CHANGE: an audit in which you have substantiated all of the items being reviewed and results in no changes. AGREED: an audit where the IRS proposed changes and you understand and agree with the changes. DISAGREED: an audit where the IRS has proposed changes and you understand but disagree with the changes. If you agree with the audit findings, you will be asked to sign the examination report or a similar form depending upon the type of audit conducted. If you owe money, there are several payment options available. If you disagree with the audit findings you can request a conference with an IRS manager. The IRS also offers mediation or you can file an appeal if there is enough time remaining on the statute of limitations. WHY AM I BEING SELECTED FOR AN AUDIT? Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

THE TAX IMPLICATIONS OF YOUR SIDE HUSTLE Many taxpayers have side gigs that have a significant impact on their taxable income. From Uber drivers, to carpenter contractors, to horse racing, to manufacturer reps, to part-time real estate agents, to organic beef farms… you name it, and we’ve probably seen it. And from a tax-compliance standpoint, there is an important distinction between hobbies and businesses that are operated with the intention of earning a profit. Understanding this distinction could save you thousands of dollars come April 15th. Hobby Loss Rules: If an activity is not intended to earn a profit, losses from that activity may not be used to offset other income. The ability to deduct losses on your tax return will ultimately be determined by the Internal Revenue Service. If the IRS determines that the taxpayer did not enter into the business activity with a profit motive or that the taxpayer continued losing money in an activity with no intention of ultimately making a profit, the taxpayer will lose the ability to deduct those losses. These rules apply to individuals, partnerships, estates, trusts, and S corporations. Hobby or For-Profit Business? When determining the real intent of the taxpayer’s activity, the Internal Revenue Services will look at a number of factors in assessing whether or not the activity is motivated by profit: whether the activity is conducted in a professional, businesslike manner the qualifications of the taxpayer or the taxpayer’s advisors the amount of time and effort spent by the taxpayer or the competency of the taxpayer’s agents and employees the potential for appreciation of the venture’s assets the taxpayer’s history in operating other businesses the taxpayer’s success or failure with the particular activity the ratio of profits to losses and how that compares to the taxpayer’s investment in the enterprise the financial status of the taxpayer, the economic benefit of the losses, and the taxpayer’s primary source of income the personal pleasure or recreation the taxpayer derives from the activity While the taxpayer must engage in the activity with a genuine profit motive, a “reasonable” expectation of profit is not required if the probability of loss is much higher than the probability of gain. The IRS will likely view all the facts and circumstances to make their decision, but more weight is given to objective facts than taxpayer statements. One simple way to get off the radar screen of the IRS is to show a profit. If the gross income from the activity exceeds deductions for three out of 5 years, the activity is presumed to be conducted for profit. Read more articles Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

Register for Our Retirement Readiness Series

Details Five Planning Steps To Improve Your Retirement Years Join us as we share five simple steps you can take to reduce your tax bill and improve your retirement years: Address these critical items in your IRAs, 401(k)s and other retirement accounts Three ways to maximize your 2020 deductions and reduce your tax bill One easy step to reduce taxable income in 2020 How to take advantage of today's historically low tax rates How to proactively address the potential reduction in social security benefits in 2033 When January 25, 11:30 AM - 12:30 PM Where Prairie Lodge Cedar Room 12880 Del Webb Blvd Huntley, IL 60142 Details

Many public sector workers do not pay into Social Security because they pay into a separate state or local pension fund. Since Social Security benefits are based on the Social Security wages earned during working years, public-sector workers who do not pay into Social Security will not be eligible for Social Security benefits at retirement. There are other public sector workers however, who have paid into the Social Security pool because they work second jobs or began working in the public sector later in life or retired and began a second career. Public sector workers who have paid into Social Security can qualify for benefits on top of their pension, but those benefits may be reduced based on the number of years they paid into Social Security. How Are Social Security Benefits Calculated? Social Security benefits are based on your average wages for your 35 highest earning years. If you pay into Social Security for 29 years, your benefits will be calculated using the 29 working years plus 6 years of zero wages. Your annual wages are also adjusted for inflation to prevent your early earning years from hurting your benefits. After adjusting for inflation and averaging your 35 highest years, your annual wages are divided by 12 to produce your Average Indexed Monthly Earnings (AIME). Your monthly benefits are calculated using 3 percentage brackets of your AIME: 90% of the first $926 of AIME, 32% of the next $4,657 of AIME and 15% of AIME after that. Example: If you work for 35 years and have average adjusted wages of $72,000 per year, your Social Security benefit calculation will use $6,000 for your Average Indexed Monthly Earnings and calculate your benefits as follows: THE IMPACT OF YOUR PENSION On Your Social Security Benefits $926 x 90% = $833.40 + $4,657 x 32% = $1,490.24 + $417 x 15% = $62.55_____ $6,000 = $2,386.19 monthly benefits How Your Pension May Limit Your Social Security Benefits If you receive a pension from an employer that does not withhold Social Security taxes, your benefits may be reduced by the Windfall Elimination Provision (WEP). This provision reduces monthly benefits by reducing the first bracket benefits from 90% down to 40% in 5% increments depending on the number of years worked. If you paid into Social Security for at least 30 years with "substantial earnings," then the WEP limitation will not apply. But if you paid in for less than 30 years of substantial earnings the first bracket percentage will be reduced by 5% for each year under 30 until it bottoms out at 40% for 20 years of contributions . This limitation can reduce your base Social Security benefits by as much as $5,500 per year. Example: To demonstrate how this limitation reduces your benefits we have calculated the monthly benefits you would receive if your AIME was $6,000 under two scenarios: 1) where you have 30 years of substantial Social Security wages and 2) where you only have 20 years of substantial Social Security wages: The lower percentage applied to the first $926 of wages when the WEP limitation applies reduces your benefits by $463 per month or $5,556 per year. What Can You Do to Eliminate the Pension Penalty? The Equal Treatment of Public Servants Act of 2019 was recently introduced in congress to repeal the WEP limitations by replacing them with a new formula that treats public servants more favorably. With the bill’s future uncertain, we want to focus on steps you can take right now. The first step in the process is to determine your Social Security benefits by creating an account at www.ssa.gov . This account will allow you to view your estimated benefits based on your prior work history. Be aware that the estimates provided by the Social Security Administration will not account for any WEP limitation that may apply to you. After you find your estimated benefits you will need to subtract $46.30 per month for every year short of the 30-year window of substantial earnings. If you are more than 10 years short of the 30 year mark, only subtract amounts for the first 10 years that you are short. If you are short of the 30-year threshold, you may want to consider working a few extra years at a part-time job or starting a new career at retirement. These additional years of contributions will not only increase your potential Social Security benefit, they will also decrease the limitation put on those benefits by the Windfall Elimination Provision. What Constitutes "Substantial Earnings"? Substantial Earnings are a separate calculation from the calculation of year paid into Social Security. To qualify for a year’s worth of Social Security earnings, you only need to earn $5,880 of wages. To qualify for substantial earnings, you need a total of 26,550 of wages subject to Social Security. The table below will show the substantial earnings test. To discuss this further, please reach out to one of our team members at (847) 923-9015. Read more articles Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

Big Beautiful Bill Webinar Segments Click on the topic you want to learn more about based on our webinar. How the OBBBA has changed exit strategies for business owners Overtime Pay Child Tax Credit SALT Cap No Tax on Tips Senior Deduction Check out our articles on the Big Beautiful Bill Understanding the New Tax Relief for Seniors and Hourly Workers: Tips, Overtime, and Social Security Explained Jim Richter 25 Takeaways From the Big Beautiful Bill Michael Baumeister Three Sweeping Tax Reforms That Could Impact Your Paycheck Jim Richter

2023-2024 Tax Brackets and Federal Income Tax Rates There are seven federal income tax brackets. Here's what they are, how they work and how they affect you. There are seven federal tax brackets for the 2023 tax year: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Your bracket depends on your taxable income and filing status. These are the rates for taxes due in April 2023. Tax brackets and rates for the 2023 tax year, as well as for 2022 and previous years, are elsewhere on this page. 2023 Federal Income Tax Brackets (for taxes due in April 2022 or in October 2022 with an extension ) Single filers Married, filing jointly Married, filing separately Head of household 2022 Federal Income Tax Brackets (for taxes due in April 2023) Single filers Married, filing jointly Married, filing separately Head of household How tax brackets work The United States has a progressive tax system, meaning people with higher taxable incomes pay higher federal income tax rates. Being "in" a tax bracket doesn't mean you pay that federal income tax rate on everything you make. The progressive tax system means that people with higher taxable incomes are subject to higher federal income tax rates, and people with lower taxable incomes are subject to lower federal income tax rates. The government decides how much tax you owe by dividing your taxable income into chunks — also known as tax brackets — and each chunk gets taxed at the corresponding tax rate. The beauty of this is that no matter which bracket you’re in, you won’t pay that tax rate on your entire income. The percentage of your taxable income that you pay in taxes is called your effective tax rate. To determine effective tax rate, divide your total tax owed (line 16) on Form 1040 by your total taxable income (line 15). Example #1: Let’s say you’re a single filer with $32,000 in taxable income. That puts you in the 12% tax bracket in 2021. But do you pay 12% on all $32,000? No. Actually, you pay only 10% on the first $9,950; you pay 12% on the rest. (Look at the tax brackets above to see the breakout.) Example #2: If you had $50,000 of taxable income, you’d pay 10% on that first $9,950 and 12% on the chunk of income between $9,951 and $40,525. And then you’d pay 22% on the rest because some of your $50,000 of taxable income falls into the 22% tax bracket. The total bill would be about $6,800 — about 14% of your taxable income, even though you're in the 22% bracket. That 14% is your effective tax rate. That's the deal only for federal income taxes. Your state might have different brackets, a flat income tax or no income tax at all. What is a marginal tax rate? The term "marginal tax rate" refers to the tax rate paid on your last dollar of taxable income. This typically equates to your highest tax bracket. For example, if you're a single filer with $30,000 of taxable income, you would be in the 12% tax bracket. If your taxable income went up by $1, you would pay 12% on that extra dollar too. If you had $41,000 of taxable income, however, most of it would still fall within the 12% bracket, but the last few hundred dollars would land in the 22% tax bracket. Your marginal tax rate would then be 22%. How to get into a lower tax bracket and pay a lower federal income tax rate Two common ways of reducing your tax bill are credits and deductions. Tax credits can reduce your tax bill on a dollar-for-dollar basis; they don't affect what bracket you're in. Tax deductions, on the other hand, reduce how much of your income is subject to taxes. Generally, deductions lower your taxable income by the percentage of your highest federal income tax bracket. So if you fall into the 22% tax bracket, a $1,000 deduction could save you $220. In other words: Take all the tax deductions you can claim — they can reduce your taxable income and could kick you to a lower bracket, which means you pay a lower tax rate. Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

One step away to save on your taxes. Schedule a quick 10-minute, no-obligation consultation. INTRODUCTION Realtor Sam, while a real person, is not the actual name of this real estate agent. We have changed the name to protect the innocent! The Realtor Sam case is a case we examined in 2015, which had similarities to cases that had come across our desk in the past. Realtor Sam had been in the real estate business for nearly twenty years. He was not only selling real estate, he also owned several residential properties that were generating significant cash flow and taxable income. Realtor Sam had incorporated his commission-based business as a C-Corp ten years prior to our interaction with him. Apart from a bad year in 2013, his gross commissions were generally around ninety-five thousand dollars per year and his commission-based business was generating around forty-thousand per year in free cash flow after all his expenses were paid. What made Realtor Sam’s case unique was the fact that his investment properties were generating significantly more income than his commission-based business. THE CHALLENGE By incorporating his commission-based business, Realtor Sam had taken the first step towards a tax-efficient business structure. However, there were additional steps he should have taken when he first set up his business ten years earlier. Because of the way Realtor Sam had structured his compensation from his C-Corporation for his commission-based income, he was regularly generating losses on his corporate tax returns. Worse, because he was set up as a C-Corporation, those losses could not be used to offset the income he was generating from his rental properties. These issues were causing Realtor Sam to significantly overpay on his tax returns every year. THE SOLUTION Fortunately, we were able to put a plan together for Realtor Sam to help get him back on track. Our first goal was to take advantage of the accumulated losses on his corporate tax return. To accomplish this, we made some adjustments to how he was compensating himself through the business. Our second goal was to help him efficiently pull profits out of his business by taking advantage of some provisions in the Internal Revenue Code that were available to him as an officer of a corporation. These changes reduced his tax bill in the first year by $9,000 and by $5,500 in each of the subsequent years. These results were beyond what we had expected, and beyond what we generally see for someone with Realtor Sam’s taxable income, but they do demonstrate what can happen when we apply a deep understanding of the tax code as it relates to real-estate centered businesses. At Monotelo our focus is more than tax preparation, it is to make a difference with actionable and meaningful financial solutions that positively impact our clients’ lives. Save as PDF

Schedule a meeting, to learn more about us. Schedule Meeting Choose Your Meeting Type Below Tax Preparation Meeting - Elgin Office Book Meeting Tax Preparation Meeting - St. Charles Office Book Meeting Tax Preparation Meeting - Virtual or Phone Book Meeting Tax Planning Meeting Book Meeting Integrated Wealth Management Discovery Call Book Meeting

Monotelo Advisors Privacy Policy Introduction At Monotelo Advisors, we respect your privacy and are committed to protecting your personal information. This Privacy Policy outlines our practices regarding the collection and use of your data. Information Collection We may collect personal information from you in various ways, including when you visit our website, subscribe to our newsletter, fill out a form, or interact with our services. The types of personal information we collect may include: - Contact information (name, email address, phone number) - Demographic information (age, gender, location) Use of Information We use the information we collect for various purposes, including: - To provide and improve our services - To communicate with you, including sending newsletters and updates - To personalize your experience on our website - To analyze and understand how our services are used No Sale of Personal Data At Monotelo Advisors, we prioritize the confidentiality and security of your personal information. We want to assure you that we do not sell or share your personal data to any third parties. Your trust is of utmost importance to us, and we are committed to protecting your privacy. Data Security We implement a variety of security measures to maintain the safety of your personal information when you enter, submit, or access your personal information. We do not share personal data (phone numbers) with third parties, affiliates or partners Your Rights Depending on your location, you may have certain rights regarding your personal information, including: - The right to access your personal data - The right to correct any inaccuracies - The right to request deletion of your data - The right to restrict processing of your data - The right to data portability - The right to object to the processing of your data If you wish to exercise any of these rights, please contact us using the information provided below. Changes to This Policy We may update our Privacy Policy from time to time. We will notify you of any changes by posting the new policy on our website. You are advised to review this policy periodically for any changes. No mobile information will be shared with third parties/affiliates for marketing/promotional purposes. All other categories exclude text messaging originator opt-in data and consent; this information will not be shared with any third parties