Nelson Bookkeeping Services

02/26/2025

stay informed:
As far back as 2023 the IRS had announced an end to revenue visits and surprise visits by collection officers to businesses and homes.

Instead, the IRS encouraged in-person meetings at its offices, where it started building more interview rooms. The IRS also started encouraging meetings at the taxpayer’s or tax pro’s office—after arranging the meeting in advance.

Rare exception: There still may be unannounced IRS visits to encourage noncompliant firms to resolve delinquent employment tax issues and similar problems.

Just in case: A legitimate IRS employee carries two official forms of identification and will not demand immediate payment—in fact, will not even personally accept payment by credit card, gift card—and never ever ask for a check made out to the so-called IRS employee who showed up.

Send a message to learn more

08/30/2023

Your company’s—or your—burden of proof does not change because documents and other records are destroyed by an outside force.

Instead, taxpayers are required to reconstruct them to meet tax obligations and claim tax benefits.

If records cannot be reconstructed, tax benefits are likely to be denied.

What to do. The IRS warns you to have an emergency preparedness plan to protect and preserve important tax and financial data.

Here are some IRS tips:
❑ Keep original documents in a waterproof container located in a safe space.

❑ Make copies of the stored documents and put the copies in a different location that is secure, such as a safe deposit box, or in the custody of a trusted entity or individual located in a different area.

❑ Scan and store on an easily portable drive, such as a flash drive, key business and personal documents such as receipts, invoices, canceled checks, tax returns, SS cards, birth certificates, deeds, and important videos and photos. Alternative: Use a cloud account.

❑ Maintain a record of high-value property in a list or even on photos or videos. Update regularly.

11/18/2022

Remember Holiday Bonuses are taxable:
Any cash bonus, regardless of how small, is wages subject to FITW, F**A, FUTA, and applicable state and local payroll taxes. If given after FIT was withheld from regular wages—or with regular wages but identified as separate—you can use the 25% supplemental withholding rate. If wages exceed $1 million for the year, withhold at 39.6%. [26 CFR 31.3402(g)-1]

There are two kinds of bonuses, as follows:

Discretionary (lump-sum) bonus. For a bonus to be discretionary (excludable from overtime calculations)—it must be the employer who decides when and how much to give. The bonus cannot be required by a contract, agreement or promise, or be given in a pattern so that it is expected. To be discretionary, the bonus must be a complete surprise to the employee.

Exception: A holiday bonus can be discretionary, even if expected each year. [29 CFR 778.211]

Nondiscretionary bonuses are those required under a contract, agreement or promise, express or implied—e.g., for higher or faster production, as
inducements to take a job or not leave—or bonuses employees have come to expect (except for holiday bonuses). Nondiscretionary bonuses for hourly employees must be added to weekly gross pay for the week in which they are earned and must be included when computing the week’s O.T. [29 CFR 7788.209]

Example: Shana earns $14/hr. One week, Shana works 42 hours and earns a $50 prorated production bonus. Shana’s normal pay: $588 for the week ($14 x 42 hrs.) + $50 bonus = $638 straight-time pay.

Overtime pay: $638 for the week (including the nondiscretionary bonus) ÷ 42 hours worked = $15.19 regular rate of pay x 50% premium rate = $7.60 (rounded) x 2 hours’ O.T. = $15.20 (rounded) premium pay.

Gross pay: $638 straight-time pay + $15.20 premium pay = $653.20 gross pay for the week.

10/19/2022

IRS WILL SCRUTINIZE YOUR RECEIPTS!!!

The case. E operated what he said was a home improvement business as a sole proprietor. On his Schedule C, he deducted significant expenses for construction materials and supplies. The IRS denied all the deductions.

Held: For the IRS. The court noted the following problems:

• The materials and supplies costs greatly exceeded the business’s revenue. The court concluded that E did not have the financial resources to make the purchases—and even if he did, he would not continue to buy supplies when they cost way more than what he was paid for the work.

• Instead of buying materials and supplies at one or two sources, E used several home improvement retailers—many receipts were from different locations of the same retailer, including at least seven Home Depots.

• The stores were near the taxpayer’s home—not near the out-of-state projects the taxpayer said he worked on.

• All receipts were for cash purchases and exceeded $5,000, which the taxpayer argued he had withdrawn in cash from his bank or ATM. But he did not submit bank statements showing the withdrawals.

• The volume of materials on the receipts vastly exceeded what would be used for his claimed home improvements.

IRS and court conclusion: The taxpayer was not the purchaser of the items on the receipts; he obtained receipts of these purchases from other people. [Eze v. Comm., T.C. Memo. 2022-83]

08/10/2022

There is a common misconception that simply having an SS card makes an individual eligible to work in the U.S. and this is not necessarily true!

The problem: At the time of hire, the person to whom the I-9 will be submitted cannot ask to see the new hire’s SS card. Someone else—say, someone from payroll or HR—can ask to see an SS card “for payroll purposes.”

Do you know about the different kinds of SS cards—and the red flags to watch for?

Different kinds of SS cards. Watch for SS cards that:
✓ say on the face “Valid for work only with DHS Authorization.” These are issued to people lawfully admitted to the United States on a temporary basis.

✓ say “Not Valid For Employment,” indicating that the individual:

• was lawfully admitted to the U.S. and has a valid nonwork reason for needing an SSN but is not eligible to work in the U.S.

• needed a number under some federal law, or needed an SSN to get some benefit or service.

✓ have an SSN that begins with 9, which allows the holder to file an income tax return with the IRS—but does not authorize them to work as an employee.

✓ have an SSN that begins with 000—this is not a valid SSN.

✓ have an SSN that begins with 666—this is not a valid SSN.

✓ have an SSN with the middle digits 00—this is not a valid SSN.

✓ have an SSN that end in 0000—this is not a valid SSN.

Caution on SSN verification. Simply verifying an SSN with the Social Security Administration (SSA) only assures than an SSN is valid—it does not verify eligibility to work in the U.S.

What to do: To make sure an SSN is both valid and authorizes the holder to work in the U.S., use E-Verify. Several states now have E-Verify laws—statutes that require businesses to confirm the eligibility of new hires.

IRS penalties. W-2s with name/SSN mismatches not only incur penalties of $100 per incorrect form, they are also subject to sanctions by the U.S. Citizenship and Immigration Services (USCIS, formerly Immigration and Naturalization Service [INS]) for hiring someone without authorization to work in the U.S.

USCIS sanctions. $275 to $2,000 per unauthorized hire for the first offense, $2,200 to $4,400 per unauthorized hire for a second offense, and still higher penalties after that.

06/16/2022

Finally settled in my new office space in AZ and getting back into a routine again. Nice safe building just a couple of blocks away from the RV park we are living in while we build our new home. Have made friends with a few of the other tenants in the building too...very welcoming.
I am so grateful to every one of my existing clients...not one wanted to 'get a new bookkeeper' when I announced I was moving out of the area and out of the state! Truly blessed!!
(Still need to get your paperwork to me timely though LOL!!)💖
P.S. my desk is not as cluttered now...this was a picture from a month ago, the first week I was in my new office😊

05/16/2022

Effective today my new mailing address is:
Nelson Bookkeeping
3880 Stockton Hill Road, Suite 103-445
Kingman, AZ 86409

A new adventure awaits!

12/01/2021

Bookkeeping reminder: Repayment of pandemic tax relief. If your company or client deferred the employer share of SS tax due between Mar. 27-Dec. 31, 2020, the first installment of the repayment is due by Dec. 31, 2021; the second installment by Dec. 31, 2022.
Employers that deferred these SS taxes in 2020 should have received a reminder of the Dec. 31, 2021, due date in October.
If any portion of the deferred amounts is not repaid by these dates, “the deferral is completely invalid.”
This means that if repayment is not made by the due date, your firm must pay penalties and interest as of the date it deferred the 2020 employer share of SS tax.
The penalty: 10% of the unpaid amount. IRS Memo 3-32-007 spells out the penalties for failure to repay temporary pandemic tax relief—or for repaying owed amounts late.
The IRS Memo says that if repayment is late, the IRS will notify your company, at which point your company has 10 days to make the repayment or the penalty rises to 15% of the amount due.
Effect on second installment
A late first installment does not accelerate payment of the second installment—this will still be due by Dec. 31, 2022.
Could you be held personally liable?
Any “responsible person” may be held personally liable for 100% of the repayment. A “responsible person” is anyone who has the authority to direct the collection, accounting and paying of SS trust fund taxes—e.g., an officer, employee, board member, etc.
What to do
Remit repayment amounts in time to allow for unforeseen problems or delays. Consult your firm’s lawyer or tax advisor for guidance if you have questions.

For information, search “IRS 2020 deferred taxes” or call the IRS employer tax phone number: 800-829-4933.

07/21/2021

Don't rely on just your bank statements...save receipts also and do your mileage log!!!

Lack of bookkeeping records loses deductions on tax returns:

The case: A father and son co-owned a home-remodeling and construction business as an S corp. On their S corp tax return, they claimed substantial deductions for fuel, repair and maintenance expenses for their construction equipment, and for business use of their personal cars. The IRS denied all the deductions.

Held: For the IRS. The only bookkeeping records the taxpayers provided were company bank statements and QuickBooks records to substantiate the construction equipment expenses, and business use of their personal cars.

The business use of their personal cars was for driving to the office—commuting—and driving to worksites and between worksites. But the QuickBooks and bank records established only the amounts of each expense and the date it was paid—not the business purpose and mileage of each business trip in each car.

Since commuting is not a deductible expense, their personal cars could not have been used 100% for business. And the company's books did not include a travel log or other records to document the percentage of business use.

The court said it believed the vehicles were used for trips to and among worksites, but without a travel log or other records to show the percentage of business use these trips represented, none of the passenger vehicle expenses were deductible,

The court would have been willing to estimate reasonable fuel costs for the S corp construction equipment, but there were no records of what equipment the business owned during the tax year or how much fuel the equipment might have used as a basis for estimating fuel expenses. [Berry v. Commissioner, T.C. Memo. 2021-42]

01/29/2021

The recently passed Consolidated Appropriations Act has several tax benefits for small businesses who take the time to take advantage. Here are the six biggest.