Pub. 3 2021 Issue 1

13 nebraska society of cpas W W W . N E S C P A . O R G employee, The Families First Coronavirus Response Act required the employer to pay the affected employee their regular rate of pay for 10 days of sick leave (limited to $511 per day) or pay them two-thirds of their regular pay rate for 10 weeks of family leave (limited to a maximum of $200 per day). The government reimbursed the employer through payroll tax credits the amount paid to the employee. The self-employed individual (or a partner in a partnership) is entitled to the same sick and family credits on their individual tax return. The credit is calculated on the new Form 7202. The rules are strict, but the resulting credit can be as much as $15,000. It is worth checking IRS FAQs 60 to 68 at https://www.irs.gov/ newsroom/special-issues-for-employees#specific-provisions- related-self-employed-individuals titled “Specific Provisions Related to Self-Employed Individuals” for the rules. 3. Earned Income Tax Credit (EITC). The Consolidated Appropriations Act, 2021 lets taxpayers use their 2019 earned income if that results in a larger EITC. Watch for input changes in your computer software. Remind clients that refunds for taxpayers claiming the earned income tax credit or additional child tax credit can’t be issued before mid-February. This applies to the entire refund, not just the portion associated with this credit. 4. Form 1099-NEC. Beginning in 2020, individuals may receive Form 1099-NEC, Nonemployee Compensation, rather than Form 1099-MISC, Miscellaneous Income, if they performed certain services for and received payments from a business. Please refer to the instructions for Form 1099-MISC and Form 1099-NEC to ensure business clients are filing the appropriate form and are aware of this change. Go to https://www.irs.gov/forms-pubs/about-form-1099-nec. State reporting issue. The IRS has delayed including the Form 1099-NEC in its Combined Federal/State Filing (CF/ SF) Program. If you prepare 1099s for your client, check to see if you must separately supply the Form 1099-NEC to the state, especially considering that source-based reporting may require (1) identifying where services were performed by the vendor, and (2) reporting the amounts paid for such services in the state boxes of Form 1099-NEC. Example. ANebraska business pays a California individual $2,000 to perform IT services for its website. The Nebraska business must file a Form 1099-NEC to report the $2,000 payment for federal purposes. Because services were performed in California, the state boxes should report the $2,000 as California income, and the 1099-NECmust be filed with California. A state payor number may be required. t Sharon Kreider, CPA has helped more than 15,000 California tax preparers annually get ready for tax season for the past 19 years. With a keen ability to demystify complex individual and business tax legislation, Kreider instructs Western CPE tax seminars and presents regularly for the AICPA, the California Society of Enrolled Agents, and A.G. Edwards. She gained her detailed, hands-on tax knowledge through her extremely busy, high-income tax practice in Silicon Valley. For more information, contact Western CPE’s customer service center at (800) 822-4194 or wcpe@westerncpe.com . ©2021 SharonKreider 800-397-0249 www.APS.net Trent Holmes Trent@APS.net IF YOU ARE READInG THIS... So Is Your Buyer! CONNECTING MORE SELLERS AND BUYERS