PPP adjusted to prioritize very small businesses
The Small Business Administration, in cooperation with the Biden administration, recently announced adjustments to the Paycheck Protection Program (PPP). The revisions seek to better reach very small businesses, as well as low- and moderate-income companies. Among the changes are an exclusive 2-week application period for businesses with fewer than 20 employees, which began on February 24. The changes also include a revision of the loan calculation formula to focus on gross (rather than net) profits, elimination of the non-fraud felony exclusion, eventual removal of the student loan exclusion and more. We can explain further and keep you updated on the PPP as the year goes along.
Retiring soon? Recent law changes may have an impact on your retirement savings
If you’re approaching retirement, you probably want to ensure the money you’ve saved in retirement plans lasts as long as possible. If so, be aware that a law was enacted in late 2019 that made significant changes to retirement accounts. For example, the SECURE Act repealed the maximum age for making traditional IRA contributions. Before 2020, traditional IRA contributions weren’t allowed once you reached age 70 1/2. An individual of any age can now make contributions, as long as he or she has compensation and is otherwise eligible. The required minimum distribution age was also raised from 70 1/2 to 72. These are only some of the changes. Feel free to contact us with any questions.
Work Opportunity Tax Credit extended through 2025
Are you a business owner thinking about hiring? Be aware that a recent law extended a credit for hiring individuals from one or more targeted groups. Employers can qualify for the Work Opportunity Tax Credit (WOTC), which is worth as much as $2,400 for each eligible employee, including ex-felons and from other groups. The maximum credit amounts are different for some employees ($4,800, $5,600 and $9,600 for certain veterans; $9,000 for long-term family assistance recipients; and $1,200 for summer youth employees). The WOTC was set to expire on Dec. 31, 2020. But a law passed late last year extends it through Dec. 31, 2025. Contact us with questions or information about your situation.
Should your business add Roth contributions to its 401(k)?
Many businesses consider adding designated Roth contributions to their 401(k) plans. Roth contributions differ from other elective deferrals in that: 1) they’re irrevocably designated to be made on an after-tax basis, rather than pretax, and 2) the earnings won’t be subject to federal income tax when distributed as long as the rules are followed. Dollar limits for Roth 401(k) contributions are much more generous than those for Roth IRAs, but participants will face risks related to post-retirement tax rates and needing a distribution before qualifying for tax-free treatment. Your business will also face more complex plan administration and communication. Contact us for more info.
Didn’t contribute to an IRA last year? There still may be time
If you’re getting ready to file your 2020 tax return, and your tax bill is higher than you’d like, there might still be an opportunity to lower it. If you qualify, you can make a deductible contribution to a traditional IRA right up until the April 15, 2021 filing date and benefit from the tax savings on your 2020 return. For 2020 if you’re qualified, you can make a deductible traditional IRA contribution of up to $6,000 ($7,000 if you’re 50 or over). To be qualified, you must meet rules involving your income and whether you (or your spouse) are an active participant in an employer retirement plan. Contact us if you want more information or ask us about it when you prepare your tax return.
If you run a business from home, you could qualify for home office deductions
During the pandemic, many people are working from home. If you’re self-employed and run your business from home or perform certain functions there, you may be able to claim deductions for home office expenses against your business income. There are two methods for claiming deductions. With the actual expenses method, you claim direct expenses, such as the cost of carpeting and a proportionate share of indirect expenses, such as utilities, insurance and depreciation. With the simplified method, you deduct $5 for each square foot of home office space, up to $1,500. Unfortunately, employees aren’t eligible for home office deductions. We can help you determine if you qualify and how to proceed.
Notice 2021-15: Relief for health FSAs and dependent care assistance programs under “cafeteria plans” (COVID-19)
The IRS today released an advance version of Notice 2021-15 to clarify application of provisions of the “Taxpayer Certainty and Disaster Tax Relief Act of 2020” (enacted as part of the “Consolidated Appropriations Act, 2021” (Pub. L. No. 116-260)) which provides temporary special rules for health flexible spending arrangements (health FSAs) and dependent care assistance […]
Building customers’ trust in your website
The COVID-19 pandemic has likely accelerated the growth of e-commerce by years. As a result, building customers’ trust in your website is more important than ever. First, ensure visitors can tell that you’re a bona fide business staffed by actual human beings. Include an “About Us” page with names, photos and short bios of owners and key staff. Clearly provide contact info throughout the site. Strengthen your use of “trust elements,” such as icons of widely used payment security providers, a variety of payment methods and shipping deals, and professional-looking design. Also, watch out for spelling/grammar mistakes and regularly ensure all links are active. Contact us for more information.
Did you make donations in 2020? There’s still time to get substantiation
To claim a deduction for a donation of $250 or more, you generally need a contemporaneous written acknowledgment from the charity. “Contemporaneous” means the earlier of the date you file your income tax return, or the extended due date of your return. If you made a donation in 2020 but don’t have a written acknowledgment, you can request it from the charity and wait to file your 2020 return until you receive it. Additional rules apply to certain types of donations. Keep in mind that under a 2020 law, taxpayers who don’t itemize deductions can claim a federal income tax write-off for up to $300 of cash contributions to IRS-approved charities for the 2020 tax year.
What are the tax implications of buying or selling a business?
Merger and acquisition activity in many sectors slowed during 2020 due to COVID-19. But analysts expect it to improve in 2021 as the country comes out of the pandemic. If you’re considering buying or selling another business, it’s important to understand the tax implications. For tax purposes, a transaction can basically be structured in two ways: stock (or ownership interest) or assets. For tax and nontax reasons, buyers usually prefer to purchase assets, while sellers generally prefer stock sales. Buying or selling a business may be the largest transaction you’ll ever make, so seek professional tax advice. After a deal is done, it may be too late to get the best tax results. Contact us.