Does Your PPE Spending Qualify For Medical Deduction? by Rebekah Hodges

According to the IRS, amounts paid for personal protective equipment (PPE) used primarily to prevent the spread of COVID-19, including things like masks, hand sanitizer, sanitizing wipes, and other things, can be treated as medical care costs under Sec. 213(d). Because of this, if a taxpayer is not reimbursed by their insurance or a separate party for costs spent on COVID-19 PPE used by the taxpayer, the taxpayers spouse, or the taxpayers dependents, those costs are deductible under Sec. 213(a) if the taxpayer’s total medical expenses exceed 7.5% of adjusted gross income. 

Another option for taxpayers is to have PPE costs reimbursed under health flexible spending arrangements (health FSAs), Archer medical savings accounts (Archer MSAs), health reimbursement arrangements (HRAs), or health savings accounts (HSAs). But if an amount is covered in any way by a health FSA, Archer MSA, HRA, HSA, or any other health plan, it is no longer deductible under Sec. 213.

If the terms of a group health plan such as FSAs or HRAs do not allow for COVID-19 PPE reimbursements, they may be amended under this announcement to provide for reimbursements of expenses for COVID-19 PPE incurred for any period beginning on or after Jan. 1, 2020, and that amendment will not be treated as causing a failure of any reimbursement to be excludable from income under Sec. 105(b) or as causing a Sec. 125 cafeteria plan to fail to meet the Sec. 125 requirements.

However, a group health plan may only make an amendment under the announcement if the amendment is adopted before the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective, no amendment with retroactive effect is adopted after Dec. 31, 2022, and the plan is operated consistent with the terms of the amendment, including during the period beginning on the effective date of the amendment through the date the amendment is adopted.

As always if you have any questions about your deductions or whether or not something counts, make sure to reach out to us at 540-250-3198 or visit us online at www.swvatax.com.

Avoid Financial Mistakes In Business

FinancialMistakes

You started a business that has been a dream of yours for years. You did your homework and what you sell is in demand. Fast forward fifteen months, things aren’t good. You haven’t turned a profit yet since opening the business. You can’t afford to pay taxes due. The phone never stops ringing from creditors who want payment. Your stress and anxiety are at an all-time high. How did this happen? First-time business owners can make devastating financial mistakes. Here are a few things you can do to help your business.

  1. Be Realistic About Profits 

Steady money doesn’t happen within a short amount of time when you open a business. It takes time to build a stable income much, less a profit. Be aware of this as you plan to pay your bills. Conduct a break-even analysis so you will have a good idea when you will start making a profit.

  1. Keep Your Personal and Business Funds Separate

Don’t mix your personal and business funds. The best practice is to keep these two funds separate for tax purposes. Mixing the two won’t give you a real idea of how your business is doing financially. If you seek out a business loan, it will be nearly impossible to show what your business is doing.

  1. Not Keeping Up With Bookkeeping

Bookkeeping isn’t fun but, you have to do it. Make sure you carve out time each week to update your bookkeeping. Use tools like QuickBooks to set yourself up for success. Don’t know how to use QuickBooks? Don’t worry SWVA Tax & Accounting can help you.

  1. Plan Your Taxes

You have to pay taxes as a business owner there, is no escaping it. Put funds aside to pay taxes to local, state, and federal governments. SWVA Tax & Accounting can help you develop a plan for tax payments.

  1. Get An Accountant

A good accountant will save you time and money. Working with one can help with payroll, preparing financial statements, and understanding the latest tax laws. Look no further than SWVA Tax & Accounting for all your business tax needs!

  1. Hire A Lawyer

A lawyer can help you get your business registered and structured that benefits you. They can review any contracts and other business documents you have.

  1. Have A Business Emergency Fund

Having a liquid source of cash can help cover business expenses for three to six months. This emergency fund can help keep your business stay afloat during difficult times.

  1. Business Insurance Is A Must

Business insurance helps fill the gap of things you didn’t see as accidents or theft. This is especially important if you are a sole prop since you will be 100% responsible for what happened. Get it and have peace of mind.

  1. Handling Business Debt

Business owners often go into debt operating a business, such as credit cards or business loans. Have a financial plan to pay debts off so you don’t drown in debt.

Mistakes cost business owners time and money, two things there is never enough of. Working with an accountant can make your business stronger. SWVA Tax & Accounting is a full-serve accounting firm specializing in the needs of small businesses. Call us today at 540-250-3198 or book an appointment today. We’ll run the numbers, while you run the business.

Manage Your Money Better With A Budget

money

Do you have financial goals in life? Maybe you want to buy a house or get out of debt. If you need to achieve any financial goals, you’ll need a budget to get you there. A personal or business budget is a way to track your expenses and income for a set period, monthly is the most common. Don’t view budgeting as negative but as a means to achieve financial goals. Bear in mind there are multiple ways to make and keep a budget. Here are a few steps to get started.

Step 1. Find and Gather all Your Financial Paperwork

You will need:

  • Bank statements
  • 1099s
  • Recent utility bills (electricity, water, gas, etc.)
  • Monthly bills (mortgage, car, Netflix, student loan, etc.)
  • Any receipts for the last three months
  • Paystubs

The more information you have the better so you know where your money is spent. This gives you a monthly average and a starting point.

  1. Add Up Your Income

How much is your monthly take-home pay on average? If you have income such as Social Security, stocks, pension, etc. that’s income. The best rule to follow is to use your net income when finding your average monthly income. You may have to go back three months to get an average.

  1. List Your Monthly Expenses

These are all the expenses you have each month. For example:

  • Mortgage or rent
  • Savings
  • Insurance
  • Car Payment
  • Utilities
  • Groceries
  • Childcare
  • Gas
  • Credit Card Payment
  • Dining Out

If you spent money, then it’s an expense. Use online banking, bank statements, and receipts to track your spending.

  1. Find Your Fixed and Variable Expenses  

These two types of expenses are easy to determine. A fixed expense is something you pay the same amount each month. The best example is your monthly car or rent payment. A variable expense will change monthly as gas, groceries, eating out, utilities, etc. It’s best to find an average for each variable cost so you can know how much to estimate for each cost.

  1. Add Up Your Monthly Income and Expenses

This is usually the shocking part of making a budget for people. Don’t be surprised if your expenses are more than your monthly income. If your expenses are more than your income, you are likely overspending and will need to adjust your spending habits.

  1. Adjust Your Expenses

Now, you know what your average expenses are you can start looking for areas to trim or cut out completely. You can pack your lunch instead of eating out at work. Hit the sales rack instead of paying full price. You will be surprised where you can trim or cut expenses. It takes discipline and time to change how you spend money.

  1. Set Up Fun Money

Give yourself a little fun money to spend without feeling guilty about it. You could use it on dinner out or that watch you’ve been wanting. Keep this part of your budget reasonable, don’t overspend.

  1. Pay yourself First

When you get paid put money in a saving or rainy-day account. You want to build a nest egg so you can build wealth over time.

Setting up and sticking to a budget is will take time, effort, and energy. It could take anywhere from two to five months to get a budget working for you. You will need to track and keep up with what you spend your money on. A budget is a living document that will need adjustment each month. Take the time to make your budget now so you can achieve your financial goals. SWVA Tax & Accounting is here to help with all your financial needs. SWVA Tax & Accounting is a full-serve accounting firm that specializes in the needs of small businesses. Call us at 540-250-3198 or book online to get started today. We’ll run the numbers, while you run the business.