My goal today is to list new tax provisions from the CAA to be aware of as we move into tax season.
1) Revamped and expanded Employee Retention Tax Credit
To get this credit, you must have fewer than 500 employees (previously 100). You also must have been forced to at least partially suspend business operations in 2020 or had a 20% revenue decline in any quarter compared with the same quarter of 2019.
If you pass these requirements, you can get a tax credit equal to 70% of each employee’s wages (which now includes health insurance payments), up to $10k per worker per quarter (for Q1 and Q2 of 2021). And there are some retroactive things we can do for 2020 as well, in some cases.
2) Families First virus-related Tax Credit
This has been extended through March 31, 2021. Many employers had been required to keep paying employees forced to miss work due to health restrictions (e.g. staying home with children while schools were closed) but offered a tax credit to help cover the cost. Employers no longer must pay such workers. But the new bill extends the refundable tax credit through the first quarter for those bosses who are still doing so.
3) The Work Opportunity Tax Credit
This is a nice bonus, depending on your hiring practices and the state of your business. This is a credit for hiring a person from certain categories (veterans, ex-felons, welfare recipients) but, more pertinent for many: people who have been jobless for more than six months. The credit, which is calculated per employee, ranges from $1,200 to $9,600, and we would take this on your BUSINESS tax return. This is also available for pass-throughs (i.e. S-Corps, Partnerships).
4) Deferring Employer SS taxes (FICA)
This is a dicey one because it’s essentially a loan. Regardless of whether your company has been affected by the pandemic, you can defer your employer’s Social Security (FICA) taxes for the first quarter of this year. But be warned: this is NOT a credit or forgiveness. It’s merely a deferring of the inevitable — and you will still be required to pay up. Half will be due by the end of 2021, the rest at the end of 2022. But, in certain circumstances, it can function like an interest-free loan from Uncle Sam.
5) Help for non-profits
Essentially, the $300 ($600 for joint returns) above-the-line deduction for all taxpayers, whether they itemize or not, has been extended through the end of 2021. Corporations will also be allowed to deduct up to 25% of their taxable income for charitable contributions, which is an increase from the normal 10% allowed.
6) New Loss “CarryBack” options
This is not often discussed but can be very powerful for the right business, and this came to us in the original CARES Act. For one time only, companies that lost money in 2020 (2019 and 2018 tax years are also eligible) can carry back that loss for up to five years against their prior tax returns.
So, what this means is that if you paid taxes for any of those years … but LOST money recently, we can go back and attach that to previous years, and you get a retroactive refund.
But this doesn’t happen automatically.
None of this does, actually. So be sure to act quickly, and wisely with what is available to you.
Luis Serrano’s
“Real World” Business Strategy
S.E.E. – Speed, Efficiency, Execution.
“15 years ago, the internet was an escape from the real world. Now, the real world is an escape from the internet.” -Noah Smith
Last week we touched on Speed. Adding Quality to our Speed leads to Efficiency and drives Costs down. A trifecta win!
Last week’s challenge was to speed up one or two processes in your business. A couple of the processes we’ve sped up and brought efficiency to recently are:
- Virtual Assistant. While the mantra ‘Do the Work that Only You Can Do’ feels like a never achievable goal, it’s a principle to strive for. Many tasks are not the best use of my time and resources. I use AskSunday.com monthly subscription for 10 hours a month. It’s $130 and well worth my time savings.
- ‘To-Do List’. – I would constantly be creating new ‘To-Do’ lists. Not just daily, but several times a day. This would be done on paper and Post-Its mostly. I found a free app that frees me from my post-it pile and helps me prioritize my list. I like that I can also add ‘to-do’ items that I’m not in a rush to do, but can get them down on my list so I free my mind from having to remember them. (App I’m using is “ToDoIst”)
- Calendly – Speeding up the coordinating of a variety of calls and meetings. There are other options for the same service, chose which works best for you.
- Monday.com – Again there are options available for similar services that can bring Speed & Efficiency to managing client projects and coordinating them with your team.
If you have apps, software, or processes that you’ve found to increase efficiency, please share.
Again, set a goal to increase Speed & Efficiency in one or two ways in your business this week.
I’m grateful for our partnership, and your referrals,
Luis Serrano
(619) 997-4185
Serrano Bookkeeping
Feel free to share this article with a San Diego area (or beyond!) business associate or client you know who could benefit from our assistance.