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Managing tax time in 2020 Critical tips for CPAs

Managing tax time in 2020 Critical tips for CPAs

Tax agents have begun scheduling their meetings with the client and discussing income generated from stimulus measures. During Covid-19, the economic stimulus support given to the businesses has proved to be a great support to numerous companies. Many clients have rearranged their business affairs to avail of the benefits of Covid-19 stimulus measures. We bring some critical tips for CPAs in case you come across such a client.

With the execution of economic stimulus measures by the Government of Australia, the ATO has tightened its seat belt to review claims and check the eligibility criteria to ensure the integrity of the superannuation system and tax. As expected, many businesses are reported for their flawed payment to Jobkeepers, and many have been warned for filing early superannuation without being eligible.

With the tax time on the edge, tax agents are on the job of computing income from stimulus measures under income tax return 2020. In many cases, tax agents may detect intentional fraud, concealment of information, or any action hampering the rule’s uprightness.

In some instances, tax agents may come across information that suggests potential fraud or behaviors of concern or the client may disclose actions that contradict the integrity of rules. For instance-

  • Creating unnatural restructure or fraudulent arrangement in the business to fulfill eligibility standards
  • Making false enhancement in wages of any month to maximize amounts
  • Changes in the classification of payments
  • Reschedule supplies
  • Releasing untrue statements or deceptive effort to establish a claim

Taxpayers are found guilty of repayments, interest charges, penalties, and conviction for breach of law under the Taxation Administration Act 1953 and the Criminal Code Act 1995 along with sanctions under the Tax Agent Services Act 2009. Job keeper legislation has also levied many joint liabilities for members of staff and company for the repayment of Jobkeeper amounts.

Outcomes of non-compliance

In the case of non-compliance, tax agents should make sure to acquaint the clients with all certain and possible entitlements and the penalty for the fraudulent act. On suspecting fraud, it is wise to investigate the matter from distinct aspects for better opinions of the case.

Members of CPA, Australia, will run in the need to follow the APES110 Code of Ethics for Professional Accountant (Code of Ethics) having regulations regarding the liabilities according to Non-Compliance with Laws and Regulations. It caters structure for the members to execute NOCLAR having laws regarding the financial statement of a business to its ability to continue its business or to avoid penalties.

It is highly significant for the members to remain versed with the fact that informing authority under NOCLAR is suitable only in a few cases and is applied only after unsuccessful attempts to correct the NIOCLAR charged with Governance. NOCLAR doesn’t lay any compulsion over its members to reveal any non-compliance or doubtful non-compliance when there is no responsibility to do so. Members must fulfill the applicable NOCLAR requirements and regard it as mandatory under the circumstances. It varies from case to case.

A tax agent may communicate with the clients to minimize the warnings of NOCLAR to a bearable level.

 Operation of Tax whistleblower protections

The tax whistleblower protections came into effect From 1 July 2019. It permits whistleblowers, like a tax agent, to reveal secluded disclosures to the ATO.

These disclosures are made where-

  •  There are rational reasons to believe the information implying misconduct or inappropriate affairs or situation concerning an entity or individual’s tax affairs.
  • The details may aid the entitled recipient in carrying out duties linked to those tax affairs.
  • When a whistleblower declares any form of logically supposed indecency, like making untrue statements or misrepresenting business documents to procure tax benefit via massive tax fraud, they are potentially entitled to guard.

Qualified whistleblowers enjoy protection from civil, criminal, and governmental responsibility.  Few clearly stated protections, too, are offered against contractual actions taken in answer to the revelation. The tax whistleblower laws give a tax agent a choice to disclose or not subject to their liability as per Code of Ethics. As the revelation in front of legal practitioners for lawful advice is protected, a tax agent may consider a legal professional’s disclosure as communication with the legal expert to find a suitable plan of action.

Tax Time! Be Ready To Claim Income Offset

Tax offset, by the federal government in the previous year, created lots of confusion for Aussies, and this year too, in the wake of coronavirus, lots of questions are bursting out in people’s minds.

Coronavirus crisis has shaken up the Australian economy; hence millions of workers are becoming victims of this hard time. That’s why things that could provide them relief from tax have become essential to introduce.

And keeping the current situation in mind, ATO has also decided to help people with income offset claims.

Let’s put light on a few things you must know-

The Offset

As per ATO guidelines, on their official website, a person with income less than $126,000 can get low or middle-income Offset. Bear in mind; the minimum Offset is approx. $255 per annum while the maximum is $1080 per year.

However, the Offset amount is influenced by various contexts, like income level and tax paid by you throughout the year. Also, you can’t expect any offset if your earnings are high.

You can’t anticipate a $1080 direct cheque by the government. Indeed it’s a tax offset that may trim down your tension over the overall tax bill.  However, it’s a bit complex thing, but you can outline it as a massive refund.

According to H&R Block’s director of tax communications, Mark Chapman, since people’s household budget has stretched than ever before. Hence most people are looking ahead for a refund.  As a result, many Australians are standing in the queue to file tax before time with the anticipation of getting income offset.

On the other hand, many employees who lost their job after the hard-hitting of coronavirus are in the lurch. They are facing-off with financial stress, and such a scenario of expecting a refund is a usual thing, and that’s why these people can expect a high refund.

How to claim Offset?

You might be assuming it a head-scratching process. Indeed, it’s much easier to understand. According to ATO’s official website, ATO will automatically include the claim entitled to you in your tax return, and you don’t have any need to care about income offset.

To discover the Offset entitled to you, check out (non-refundable tax offsets) section that you can find in your notice of assessment.

Tax Deadline for $850

If you want to take particular advantage of “Concessional Extended Deadlines,” then you must hire an agent as they are able to introduce you with a loophole. October 31 is the final deadline for tax return lodging. But hiring an agent raises an opportunity to lodge form up to May 15 without any penalty.

People are confused with the ongoing events; they are still unaware of the due date of lodging, filing last year’s tax return, and paying business activity statements”.

Further delays are coming because of unforeseen workload on agents that have triggered after the global pandemic outbreak. Hence, both personal and professional pressure are the leading reasons why meeting the deadlines most of the time becomes difficult for them.

How to handle your tax returns efficiently this year?

With the advent of the global pandemic, COVID-19’s impact, each country’s economy is going through loads of ups and downs. Each person is facing drawbacks of recession differently. Hence, this tax season, because of COVID-19, Australians are advised not to accept the increased Flat Rates.

Already, the Australian Tax Office (ATO) has simplified the claim process for mass forces due to lockdown. The step has been taken to encourage people to ‘work from home.’ Therefore, the standard hourly rate has been increased from 52 cents per hour to 80 cents per hour.

But Spokesperson Andrew Gardiner from the national Tax and Accountant’s association expresses it with a distinct viewpoint. According to him, it will be unfair with taxpayers who have already paid the tax.

Even though concession covers off electricity, cooling, heading, and incurred expenses on printers, cartridge, papers, and computers; but people still need to be very careful. For instance, the concession includes only 80 cents per hour, which is over a typical 40-hour-week if you factor it.

Similarly, it’s not a massive claim for sure. Hence, you must be acquainted, that by simplifying the affairs, you aren’t going to get more significant claims.

However, choosing the flat rate by the taxpayer will result in losing the right to claim for new computers, chairs, and desk they have already purchased. Because during the pandemic, no one was working in the office.

Adopting ATO 80 cents rate makes you eligible to forfeit your right; thus, you can claim expenses, like electricity, internet, and phone bills, while working from home.

Confusion! What to claim?

It’s a usual question the answer to which is essential to know. After all, the global pandemic has brought a unique working environment across each sector worldwide. But it’s necessary to know that not all expenses are claimable. Only those expenses incurred during working hours or a part of your work are claimable.

What can I do for the claim?

Just reveal the working hours, and pattern of expenses you have incurred during ‘work-from-home’ to the ATO. The taxpayers, who remain well-prepared with entire records, can reap the benefits of claim with ease. But don’t forget to keep receipts of each claim you obtain.

Changes To Tax Refunds And Deductions By Australian Tax Office Because Of COVID-19

Before the end of the financial year on June 30, the ATO has decided to introduce several changes in the tax return rules. The changes have done intending to bring easiness in the filing of a tax return, especially for Australians who are confronting major issues just because of Coronavirus, said ATO Assistant Commissioner Karen Foat.

According to Foat, the ATO acknowledges that amid this tax period, loads of people (working from home) are likely going to seek claim deduction. Besides, they have also paid attention to protective items.

Shortcut For People – Working From Home

ATO has simplified the process of claiming. For instance, now workers can easily calculate work-from-home-expenses with the help of shortcut by ATO.

Moreover, this shortcut also comes under some rules and regulations. Accordingly, expenses between March 1, 2020, and June 20, 2020, have been covered here. However, all family members who work from the same home are eligible to use this shortcut.

Therefore, if you also work from your home, then simply add incurred expenses by you while working from home in the other expenses related to work. Now add the ‘COVID-19 hourly rate’ in the following numbers.

According to Foat– if you want to claim the deductions, keep the record of your working hours (while-working-from home) and use the shortcut method. On the other hand, you can’t claim for those expenses that aren’t the part of “working from home expenses”.

For claiming- “work from home expenses,” you can also use old methods.

Claim for Protective clothing

You can also claim for the deduction if during Coronavirus you have incurred expenditure on the purchasing of protective items. Such as, you can claim on your tax return if you have purchased protective equipment like masks, gloves, spray, antibacterial, and sanitizers.

Also, taxpayers who are operational during Coronavirus and require to maintain contact or proximity with clients can also claim a deduction for protective items.

Travel expenses and laundry expenses

Since workplaces were “off” amid pandemic, ATO expects a decline in the claims for “Travel and Laundry expenses.” For instance- no claim for travel expenses if there’s no travel history. No laundry expenses if uniforms have not been worn – said, Foat.

Even though, during the period of working from home, if you have to go to the office once in a week, then still you aren’t eligible to claim travel expenses because it will be considered a private trip.

Redundancy and stand down payments

It’s essential to include stand down payments in your income payments, as these payments are taxable. However, these payments also include sickness payments, protection payments, or accident payments. All these payments must be mentioned by the workers while filing the returns.

Early super access

Foat also mentioned that you don’t have a need to declare the amount withdrawn from super in your tax return. The withdrawn amount is tax-free under the program. Therefore, if you have already obtained the early access to super due to COVID-19, then undoubtedly it’s a point of relief for you.

Top 5 Mistakes That People Make On Tax Returns- You Should Avoid

The end of the financial year is on the way! Hence loads of questions might be thriving inside you. Especially, after COVID-19 restrictions, what changes have been made in tax, is undoubtedly a critical point to note.

Already, the Australian Tax Office has brought loads of changes to make things easier. But that doesn’t mean that people forget the essential rules that apply to each taxpayer. Often, people make these five silly mistakes while filing the tax return. So, what are these? Let’s have a look at the points stated below.

Unclear Income

Most of the time, people never declare their entire income. According to the Australian Tax Office, it’s the most common mistake that people make. ATO wants that a taxpayer must declare every income from a regular job to temporary job during tax return. Even cash-in-hand, money earned from Cryptocurrency like Bitcoin, capital gains, etc. should be mentioned.

Claiming a deduction for things while being ineligible

ATO has three golden rules and wants people to follow the same while claiming the deduction.

  1. The things you want a claim on must be a part of the income generation process.
  2. Similarly, it should not be reimbursed instead of bought by the worker.
  3. A well-maintained record of the things on which you’re aspiring claim deduction

It’s essential to clear because most of the people also include the personal cost that isn’t a part of operational cost. In short, if traveling in your own car during working hours is a part of your job, then you can claim the deduction. Besides, most of the people also include laundry expenses for deduction without knowing the policy behind it.

Forgetting to keep receipts

It’s one of the essential things that every taxpayer must bear in mind. For instance,-most of the time, people either throw the receipts elsewhere or forget to take. Hence, the best practice that you must employ is getting both soft copy and hard copy for the receipt. For instance- you can ask authorities to send an email receipt and printed receipt for better assurance. However, you can also take the help of ATO’s My deduction app.

Claiming for non-paid deductions

If you haven’t paid money for work-related expenses from your own, then you can’t claim for deduction. Therefore, if it is reimbursed, then you aren’t eligible for claiming.

Rental properties

If you don’t want a red flag from the tax office to raise in your record, never put additional effort to claim for non-rented property expenses. Moreover, you can only claim the deduction if, during the pandemic, your property was genuinely available for rent or rented.

For every taxpayer, it’s essential to follow the guidelines. Otherwise breaking the rules of ATO is undoubtedly going to put you into big trouble.

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