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Notice 2020-78: Work Opportunity Tax Credit (WOTC) Transition Relief

Posted by BOOSCPA Strategic Tax Services Group Posted on Jan 14 2021
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Questions Can be Very Powerful

Here's a true story about a Fresno business owner making a routine delivery. Recently, an owner of a local restaurant delivered lunch to our office and commented on how busy we looked. At that time, our firm was working on a tax credit deadline and so we asked the owner a simple question: “Have you submitted all your work opportunity tax credits (WOTC)?” To our surprise, the owner told us that they just came from their accountant and this topic had not come up in the five years they’d been a client. Saving on taxes sparked the business owner’s interest. During a meeting with the owner the next day, we discussed the WOTC Federal tax credit. Based on their previous hires, this routine lunch delivery ultimately saved their business $25,000 in Federal taxes. Don't miss out on your opportunity to benefit from these powerful tax credits and incentives. Keep reading to find out more about how they may be able to work for you.

On December 11, 2020, the Department of the Treasury and the Internal Revenue Service (IRS) issued Notice 2020-78. This notice provided transition relief to employers that otherwise would be required to submit IRS Form 8850 to a State Workforce Agency no later than 28 days after an individual begins working for the employer. As a result, under this notice, employers that hired designated community resident(s) or summer youth employee(s) between January 1, 2018, and December 31, 2020, have until January 28, 2021, to submit a completed Form 8850 to a Designated Local Agency (DLA) to request certification.

About the Work Opportunity Tax Credit (WOTC)

The WOTC is a Federal tax credit available to employers for hiring individuals from certain targeted groups who have consistently faced significant barriers to employment.

 WOTC Federal tax credits can range between $1,200 and $9,600 (or more under certain circumstances) per qualified employee and credit is available to all companies regardless of their business location.

 Extension

 Specifically, Notice 2020-78 provides transition relief by extending the 28-day deadline for employers to request certification from a DLA that an individual hired on or after January 1, 2018, and before January 1, 2021, and is a member of the designated community resident targeted group or the qualified summer youth employee targeted group.

 Designated Community Resident (DCR)

 A DCR is an individual who, on the date of hiring,

Is at least 18 years old and under 40, resides within one of the following:
• An Empowerment zone
• An Enterprise community
• A Renewal community

AND continues to reside at the locations after employment.

Summer Youth Employee

A “qualified summer youth employee” is one who:

Is at least 16 years old, but under 18 on the date of hire or on May 1, whichever is later, AND Is only employed between May 1 and September 15 (was not employed prior to May 1st) AND Resides in an Empowerment Zone (EZ), enterprise community or renewal community.


Opportunity

The IRS has given employers a unique opportunity to retroactively qualify employees that are a member of the designated community resident targeted group or the qualified summer youth employee targeted group. This opportunity ends on January 28, 2021! If your business has not taken advantage of claiming tax credits in the past, use this lifeline from the IRS to catch up and claim what your business is entitled to under the law.

Need Help?

If you think your business can benefit or is interested in claiming the WOTC Federal tax credit, BOOS & ASSOCIATES is here to help! For more information, please email us at askboos@booscpa.com.

California Small Business COVID-19 Relief Grant Program

Posted by BOOSCPA Strategic Tax Services Group Posted on Dec 29 2020

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California Small Business COVID-19 Relief Grant Program

The State of California has enacted a grant program that can provide up to $25,000 to qualifying small businesses. Applications will begin to be accepted on December 30, 2020 and as of January 4th the closing date has been extended to January 13th, 2021

Grant Amounts:

The amount of grant funding ranges from $5,000 to $25,000. The eligible amount is based on the revenue documented in your businesses most recent tax return:
 

Eligible Business Revenue

Grant Amount Available Per Business

$1,000 to $100,000

$5,000

Greater than $100,000 up to $1,000,000

$15,000

Greater than $1,000,000 up to $2,500,000

$25,000

Eligibility:
 
A small business or small nonprofit must satisfy the following criteria to be eligible to receive a grant award:
 
Must meet the definition of an “eligible small business”. An “eligible small business” means (i) a “small business” (sole proprietor, independent contractor, 1099 work, and or registered “for-profit” business entity (e.g., C-corporation, S-corporation, limited liability company, partnership) that has yearly gross revenue of $2.5 million or less (but at least $1,000 in yearly gross revenue) based on most recently filed tax return) or (ii) a “small nonprofit” (registered 501(c)(3) or 501(c)(6) nonprofit entity having yearly gross revenue of $2.5 million or less (but at least $1,000 in yearly gross revenue) based on most recently filed Form 990)
 
Active businesses or nonprofits operating since at least June 1, 2019
 
Businesses must currently be operating or have a clear plan to re-open once the State of California permits re-opening of the business
 
Business must be impacted by COVID-19 and the health and safety restrictions such as business interruptions or business closures incurred as a result of the COVID-19 pandemic
 
Business must be able to provide organizing documents including 2018 or 2019 tax returns or Form 990s, copy of official filing with the California Secretary of State, if applicable, or local municipality for the business such as one of the following: Articles of Incorporation, Certificate of Organization, Fictitious Name of Registration or Government-Issued Business License
 
Business must be able to provide acceptable form of government-issued photo ID
 
Applicants with multiple business entities, franchises, locations, etc. are not eligible for multiple grants and are only allowed to apply once using their eligible small business with the highest revenue


Required Documents:
 
Application Certification: Signed certification used to certify your business
 
Business Financial Information:
 
Most recent tax return filed (2019 or 2018) – provided in an electronic form for online upload, such as PDF/JPEG or other approved upload format.
 
Copy of official filing with the California Secretary of State, if applicable, or local municipality for the business such as one of the following: Articles of Incorporation, Certificate of Organization, Fictitious Name of Registration or Government-Issued Business License.
 
Government Issued Photo ID: Such as a Driver’s License or Passport
 

To learn more about the program: California Small Business COVID-19 Relief Grant Program (careliefgrant.com)
 

As always, our team of experts are more than happy to walk you through the application process if needed. Please email us at askoos@booscpa.com and let us know how we can help!

 

NEW STIMULUS PACKAGE SIGNED DECEMBER 27, 2020

Posted by BOOSCPA Strategic Tax Services Group Posted on Dec 29 2020
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NEW STIMULUS PACKAGE SIGNED DECEMBER 27, 2020

On Sunday December 27th, President Trump signed a $2.3 trillion-dollar COVID-19 relief and government funding bill called the Consolidated Appropriations Act, 2021. Over 5,500 pages, this massive tax, funding, and spending package contains nearly $900 billion in coronavirus aid. The emergency coronavirus relief package aims to bolster the economy, provide relief to small businesses and the unemployed, deliver checks to individuals and provide funding for COVID-19 testing and the administration of vaccines.
 
The coronavirus relief package contains another round of financial relief for individuals in the form of cash payments and enhanced federal unemployment benefits. Individuals who earn $75,000 or less annually generally will receive a direct payment of $600. Qualifying families will receive an additional $600 for each child. According to Treasury Secretary Mnuchin, these checks could be distributed before the end of 2020. To provide emergency financial assistance to the unemployed, federal unemployment insurance benefits that expire at the end of 2020 will be extended for 11 weeks through mid-March 2021, and unemployed individuals will receive a $300 weekly enhancement in unemployment benefits from the end of December 2020 through mid-March. The CARES Act measure that provided $600 in enhanced weekly unemployment benefits expired on July 31, 2020.
 
This stimulus package earmarks an additional $284 billion for a new round of forgivable small-business loans under the Paycheck Protection Program (PPP) and contains several important changes to the PPP. It expands eligibility for loans, allows certain particularly hard-hit businesses to request a second loan, and provides that PPP borrowers may deduct PPP expenses attributable to forgiven PPP loans in computing their federal income tax liability and that such borrowers need not include loan forgiveness in income.
 
This stimulus package allocates $15 billion in dedicated funding to shuttered live venues, independent movie theaters and cultural institutions, with $12 billion allocated to help business in low-income and minority communities.
 
This stimulus package also extends and expands the employee retention credit (ERC) and extends a number of tax deductions, credits and incentives that are set to expire on December 31, 2020.
 
This alert highlights the main tax provisions included in the This stimulus package.
 

Paycheck Protection Program
The PPP, one of the stimulus measures created by the CARES Act, provides for the granting of federally guaranteed loans to small businesses, nonprofit organizations, veterans organizations and tribal businesses in an effort to keep businesses operating and retain staff during the COVID-19 pandemic. (PPP loans are administered by the Small Business Administration (SBA)).
 
A recipient of a PPP loan under the CARES Act (the first round) could use the funds to meet payroll costs, certain employee healthcare costs, interest on mortgage obligations, rent and utilities. At least 60% of the loan funds were required to be spent on payroll costs for the loan to be forgiven.
 

Eligible businesses

Business are eligible for the second round of PPP loans regardless of whether a loan was received in the first round. This stimulus package changes the definition of a “small business.” Small businesses are defined as businesses with no more than 300 employees and whose revenues dropped by 25% during one of the first three quarters of 2020 (or the fourth quarter if the business is applying after January 1, 2021). The decrease is determined by comparing gross receipts in a quarter to the same in the prior year. Businesses with more than 300 employees must meet the SBA’s usual criteria to qualify as a small business.
 
Borrowers may receive a loan amount of up to 2.5 (3.5 for accommodation and food services sector businesses) times their average monthly payroll costs in 2019 or the 12 months before the loan application, capped at $2 million per borrower, reduced from a limit of $10 million in the first round of PPP loans.  
 
This stimulus package also expands the types of organizations that may request a PPP loan. Eligibility for a PPP loan is extended to:
 
Tax-exempt organizations described in Internal Revenue Code (IRC) Section 501(c)(6) that have no more than 300 employees and whose lobbying activities do not comprise more than 15% of the organization’s total activities (but the loan proceeds may not be used for lobbying activities)
 
“Destination marketing organizations” that do not have more than 300 employees
 
Housing cooperatives that do not have more than 300 employees
 
Stations, newspapers, and public broadcasting organizations that do not have more than 500 employees


 
The following businesses, inter alia, are not eligible for a PPP loan:
 
 
Publicly-traded businesses and entities created or organized under the laws of the People’s Republic of China or the Special Administrative Region of Hong Kong that hold directly or indirectly at least 20% of the economic interest of the business or entity, including as equity shares or a capital or profit interest in a limited liability company or partnership, or that retain as a member of the entity’s board of directors a China-resident person
 
Persons required to submit a registration statement under the Foreign Agents Registration Act
 
Persons that receive a grant under the Economic Aid to Hard Hit Small Businesses, Nonprofits and Venues Act


 

Uses of loan proceeds

This stimulus package adds four types of non-payroll expenses that can be paid from and submitted for forgiveness, for both round 1 and round 2 PPP loans, but it is unclear whether borrowers that have already been approved for partial forgiveness can resubmit an application to add these new expenses:
 
Covered operational expenditures, i.e., payments for software or cloud computing services that facilitate business operations, product or service delivery, the processing, payment or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses
 
Covered property damage, i.e., costs related to property damage and vandalism or looting due to public disturbances that took place in 2020, which were not covered by insurance or other compensation
 
Covered supplier costs, i.e., expenses incurred by a borrower under a contract or order in effect before the date the PPP loan proceeds were disbursed for the supply of goods that are essential to the borrower’s business operations
 
Covered worker protection equipment, i.e., costs of personal protective equipment incurred by a borrower to comply with rules or guidance issued by the Department of Health & Human Services, the Occupational Safety and Health Administration or the Centers for Disease Control, or a state or local government


 
To qualify for full forgiveness of a PPP loan, the borrower must use at least 60% of the funds for payroll-related expenses over the relevant covered period (eight or 24 weeks).
 

Increase in loan amount

This stimulus package contains a provision that allows an eligible recipient of a PPP loan to request an increased amount, even if the initial loan proceeds were returned in part or in full, and even if the lender of the original loan has submitted a Form 1502 to the SBA (the form sets out the identity of the borrower and the loan amount).
 

Expense deductions

This stimulus package confirms that business expenses (that normally would be deductible for federal income tax purposes) paid out of PPP loans may be deducted for federal income tax purposes and that the borrower’s tax basis and other attributes of the borrower’s assets will not be reduced as a result of the loan forgiveness. This has been an area of uncertainty because, while the CARES Act provides that any amount of PPP loan forgiveness that normally would be includible in gross income will be excluded from gross income, it is silent on whether eligible business expenses attributable to PPP loan forgiveness are deductible for tax purposes. The IRS took the position in guidance that because the proceeds of a forgiven PPP loan are not considered taxable income, expenses paid with forgiven PPP loan proceeds may not be deducted. This stimulus package clarifies that such expenses are fully deductible—welcome news for struggling businesses. Importantly, the effective date of this provision applies to taxable years ending after the date of the enactment of the CARES Act. Thus, taxpayers that filed tax returns without deducting PPP-eligible deductions should consider amending such returns to claim the expenses.
 

Loan forgiveness covered period

This stimulus package clarifies the rules relating to the selection of a PPP loan forgiveness covered period. Under the current rules, only borrowers that received PPP proceeds before June 5, 2020 could elect an eight-week covered period. This stimulus package provides that the covered period begins on the loan origination date but allows all loan recipients to choose the ending date that is eight or 24 weeks later.
 

Loan forgiveness

PPP loan recipients generally are eligible for loan forgiveness if they apply at least 60% of the loan proceeds to payroll costs (subject to the newly added eligible expenditures, as described above), with partial forgiveness available where this threshold is not met. Loans that are not forgiven must be repaid.
 
Currently, PPP loan recipients apply for loan forgiveness on either SBA Form 3508, Form 3508 EZ or Form 3508S, all of which required documentation that demonstrates that the claimed amounts were paid during the applicable covered period, subject to reduction for not maintaining the workforce or wages at pre-COVID levels.
 
This stimulus package provides a new simplified forgiveness procedure for loans of $150,000 or less. Instead of the documentation summarized above, these borrowers cannot be required to submit to the lender any documents other than a one-page signed certification that sets out the number of employees the borrower was able to retain because of the PPP loan, an estimate of the amounts spent on payroll-related costs, the total loan value and that the borrower has accurately provided all information required and retains all relevant documents. The SBA will be required to develop the simplified loan forgiveness application form within 24 days of the enactment of this stimulus package and generally may not require additional documentation. Lenders will need to modify their systems used for applications to make an electronic version of the new forgiveness application available to eligible borrowers.
 

Employment Retention Credit and Families First Coronavirus Response Credit

This stimulus package extends and expands the ERC and the paid leave credit under the Families First Coronavirus Response Act (FFCRA).
 

ERC

The ERC, introduced under the CARES Act, is a refundable tax credit equal to 50% of up to $10,000 in qualified wages (i.e., a total of $5,000 per employee) paid by an eligible employer whose operations were suspended due to a COVID-19-related governmental order or whose gross receipts for any 2020 calendar quarter were less than 50% of its gross receipts for the same quarter in 2019.
 
This stimulus package makes the following changes to the ERC, which will apply from January 1 to June 30, 2021:
 
 
The credit rate is increased from 50% to 70% of qualified wages and the limit on per-employee wages is increased from $10,000 for the year to $10,000 per quarter.
 
The gross receipts eligibility threshold for employers is reduced from a 50% decline to a 20% decline in gross receipts for the same calendar quarter in 2019, a safe harbor is provided allowing employers to use prior quarter gross receipts to determine eligibility and the ERC is available to employers that were not in existence during any quarter in 2019. The 100-employee threshold for determining “qualified wages” based on all wages is increased to 500 or fewer employees.
 
The credit is available to certain government instrumentalities.
 
This stimulus package clarifies the determination of gross receipts for certain tax-exempt organizations and that group health plan expenses can be considered qualified wages even when no wages are paid to the employee.
 
New, expansive provisions regarding advance payments of the ERC to small employers are included, such as special rules for seasonal employees and employers that were not in existence in 2019. This stimulus package also provides reconciliation rules and provides that excess advance payments of the credit during a calendar quarter will be subject to tax that is the amount of the excess.
 
Treasury and the SBA will issue guidance providing that payroll costs paid during the PPP covered period can be treated as qualified wages to the extent that such wages were not paid from the proceeds of a forgiven PPP loan. Further, this stimulus package strikes the limitation that qualified wages paid or incurred by an eligible employer with respect to an employee may not exceed the amount that employee would have been paid for working during the 30 days immediately preceding that period (which, for example, allows employers to take the ERC for bonuses paid to essential workers).


 
This stimulus package makes three retroactive changes that are effective as if they were included the CARES Act. Employers that received PPP loans may still qualify for the ERC with respect to wages that are not paid for with proceeds from a forgiven PPP loan. This stimulus package also clarifies how tax-exempt organizations determine “gross receipts” and that group health care expenses can be considered “qualified wages” even when no other wages are paid to the employee.
 

FFCRA

The FFCRA paid emergency sick and child-care leave and related tax credits are extended through March 31, 2021 on a voluntary basis. In other words, FFCRA leave is no longer mandatory, but employers that provide FFCRA leave from January 1 to March 31, 2021 may take a federal tax credit for providing such leave. Some clarifications have been made for self-employed individuals as if they were included in the FFCRA.
 

Other Tax Provisions in the CAA

This stimulus package includes changes to some provisions in the IRC:
 
Charitable donation deduction: For taxable years beginning in 2021, taxpayers who do not itemize deductions may take a deduction for cash donations of up to $300 made to qualifying organizations. The CARES Act revised the charitable donation deduction rules to encourage donations following a decline after the enactment of the Tax Cuts and Jobs Act in 2017.
 
Medical expense deduction: The income threshold for unreimbursed medical expense deductions is permanently reduced from 10% to 7.5% so that more expenses may be deducted.
 
Business meal deduction: Businesses may deduct 100% of business-related restaurant meals during 2021 and 2022 (the deduction currently is available only for 50% of those expenses).
 
Extenders: This stimulus package provides for a five-year extension of the following tax provisions that are scheduled to sunset on December 31, 2020:
 
The look-through rule for certain payments from related controlled foreign corporations in IRC Section 954(c)(6), which was extended to apply to taxable years of foreign corporations beginning before January 1, 2026 and to taxable years of U.S. shareholders with or within which such taxable years of foreign corporations end
 
New Markets Tax Credit
 
Work Opportunity Tax Credit
 
Health Coverage Tax Credit
 
Carbon Oxide Sequestration Credit
 
Employer credit for paid family and medical leave
 
Empowerment zone tax incentives
 
Exclusion from gross income of discharge of qualified principal residence indebtedness
 
Seven-year recovery period for motorsports entertainment complexes
 
Expensing rules for certain productions
 
Oil spill liability trust fund rate
 
Incentive for certain employer payments of student loans (notably, this stimulus package does not include other student loan relief so that borrowers will need to resume payments on such loans and interest will begin to accrue).
 
Permanent changes: This stimulus package makes several tax provisions permanent that were scheduled to expire in the future, in addition to the medical expense deduction threshold mentioned above:
 
The deduction of the costs of energy-efficient commercial building property (now subject to inflation adjustments)
 
The gross income deduction provided to volunteer firefighters and emergency medical responders for state and local tax benefits and certain qualified payments
 
The transition from a deduction for qualified tuition and related expenses to an increased income limitation on the lifetime learning credit
 
The railroad track maintenance credit
 
Certain provisions, refunds and reduced rates related to beer, wine, and distilled spirits, as well as minimum processing requirements for certain craft beverages produced outside the U.S.

Need Help?

If you think you can benefit or are interested in any of the above items within the new stimulus package, BOOS & ASSOCIATES is here to help! To inquire more information please email us at askboos@booscpa.com.

 

2020 Year-End Tax Planning for Individuals

Posted by BOOSCPA Strategic Tax Services Group Posted on Dec 11 2020
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2020 Year-End Tax Planning for Individuals

As the year-end approaches, individuals, business owners and family offices should be reviewing their situations to identify any opportunities for reducing, deferring, or accelerating tax obligations. Areas that should be looked at include tax reform provisions that remain in play, as well as new opportunities and relief granted earlier in 2020 under the CARES and SECURE Acts.

Individual’s Tax Planning Highlights

Long-Term Capital Gains
 
The brackets for long-term capital gains for 2020 and the projected 2021 rates are shown below. Long-term capital gains are subject to a lower tax rate, so investors may wish to consider holding on to assets for over a year to qualify for those rates. 
 
 
Long-Term Capital Gains Tax Rate

Single

Joint
 
Head of Household
 
2020
 
Projected 2021
 
2020
 
Projected 2021
 
2020
 
Projected 2021
 
0%
 
$0 - $40,000
 
$0 - $40,400
 
$0 - $80,000
 
$0 - $80,800
 
$0 - $53,600
 
$0 - $54,100
 
15% minimum income

$40,001 - $441,450
 
$40,401 - $445,850

$80,001 - $496,600
 
$80,801 - $501,600
 
$53,601 - $469,050
 
$54,101 - $473,750
 
20% minimum income
 
Over $441,450
 
Over $445,850
 
Over $496,600
 
Over $501,600
 
Over $469,050
 
Over $473,750

 

Social Security Tax (click for more information)

 

Long-Term Care Insurance and Services
 
Premiums an individual pays on a qualified long-term care insurance policy are deductible as a medical expense. The maximum amount of a deduction is determined by an individual’s age. The following table sets forth the deductible limits for 2020 and 2021:
 
 
Age
 
Deduction Limitation 2020

Projected Deduction Limitation 2021
 
40 or under

$430
 
$450
 
Over 40 but not over 50
 
$810
 
$850
 
Over 50 but not over 60
 
$1,630

$1,690

Over 60 but not over 70

$4,350

$4,520

Over 70

$5,430

$5,650

 
These limitations are per person, not per return. Thus, a married couple, both spouses over 70 years old, has a combined maximum deduction of $10,860 ($11,300 projected for 2021), subject to the applicable AGI limit.


Retirement Plan Contributions (Click for more information)

Foreign Earned Income Exclusion
 
The foreign earned income exclusion is $107,600 in 2020, projected to increase to $108,700 in 2021.

 

Alternative Minimum Tax
 
A taxpayer must pay either the regular income tax or the alternative minimum tax, whichever is higher. The established exemption amounts for 2020 are $72,900 for unmarried individuals and individuals claiming head of household status, $113,400 for married individuals filing jointly and surviving spouses, and $56,700 for married individuals filing separately. For 2021, those amounts are projected to increase to $73,600 for unmarried individuals and individuals claiming the head of household status, $114,600 for married individuals filing jointly and surviving spouses, and $57,300 for married individuals filing separately.
 
 
Kiddie Tax
 
The SECURE Act reinstates the kiddie tax previously suspended by the Tax Cuts and Jobs Act (TCJA). For tax years beginning after December 31, 2019, the unearned income of a child is no longer taxed at the same rates as estates and trusts. Instead, the unearned income of a child will be taxed at the parents’ tax rates if those rates are higher than the child’s tax rate. Taxpayers can elect to apply this provision retroactively to tax years that begin in 2018 or 2019 by filing an amended return.
 
 
Charitable Contributions
 
Currently, individuals who make cash contributions to publicly supported charities are permitted a charitable contribution deduction of up to 60% of their AGI. Contributions in excess of the 60% AGI limitation may be carried forward in each of the succeeding five years. The CARES Act suspends the AGI limitation for qualifying cash contributions and instead permits individual taxpayers to take a charitable contribution deduction for qualifying cash contributions made in 2020 to the extent such contributions do not exceed the taxpayer’s AGI. Any excess carries forward as a charitable contribution that is usable in the succeeding five years. Contributions to non-operating private foundations or donor-advised funds are not eligible for the 100% AGI limitation.
 
 
Estate and Gift Taxes
 
The unified estate and gift tax exclusion and generation-skipping transfer tax exemption is $11,580,000 per person in 2020. For 2021, the exemption is projected to increase to $11,700,000.
All outright gifts to a spouse who is a U.S. citizen are free of federal gift tax. However, for 2020 and 2021, only the first $157,000 and $159,000 (projected), respectively, of gifts to a non-U.S. citizen spouse are excluded from the total amount of taxable gifts for the year.
 
Simplified Employment Pension Plans
 
Small businesses can contribute up to 25% of employees’ salaries (up to an annual maximum set by the IRS each year) to a Simplified Employee Pension (SEP) plan. The SEP contribution must be made by the extended due date of the employer’s federal income tax return for the year that the contribution is made. The maximum SEP contribution for 2020 was $57,000. The maximum SEP contribution for 2021 is projected to be $58,000.
The calculation of the 25% limit for self-employed individuals is based on net self-employment income, which is calculated after the reduction in income from the SEP contribution (as well as for other things, such as self-employment taxes).
 
 
Net Operating Losses
 
Under the TCJA, net operating losses generated beginning in 2018 were limited to 80% of taxable income and could not be carried back but could be carried forward indefinitely. The CARES Act permits individuals with net operating losses generated in taxable years beginning after December 31, 2017, and before January 1, 2021, to carry those losses back five taxable years. The CARES Act also eliminates the 80% limitation on such losses.
 
 
Excess Business Loss Limitation
 
Under Section 461(l), a taxpayer will only be able to deduct net business losses of up to $262,000 (projected) in 2021 (joint filers can deduct $524,000 (projected) in 2021) for taxable years beginning after December 31, 2020, and before January 1, 2026. Excess business losses are normally disallowed and added to the taxpayer’s net operating loss carryforward, but the CARES Act suspends the application of this excess business loss rule for 2020, and retroactively suspends the excess business loss limitation rule for 2018 and 2019.

2020 Year-End Tax Planning for Businesses

Posted by BOOSCPA Strategic Tax Services Group Posted on Dec 11 2020
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2020 Year-End Tax Planning for Businesses
 
Tax Relief Strategies for Resilience

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As the world continues to contend with the COVID-19 pandemic and its economic fallout, businesses are doing all they can to mitigate risks and plan for a recovery that’s anything but certain.

The path forward will likely not be linear. Different regions, industries and business segments may be in different stages of recovery simultaneously.

The tax function plays a critical role in navigating recovery and positioning businesses to emerge from this crisis more resilient than before. Effective tax strategy can preserve liquidity, lower costs and work in tandem with overall business strategy.

Read on to explore the tax relief tactics that can help take your business from reacting to the day-to-day challenges to preparing for the future.

 

Finding Relief: Tax Strategies to Generate Immediate Cash Flow

During these challenging times, companies must have access to cash to help offset unforeseen costs, whether for buying personal protective equipment (PPE) for on-site employees or investing in the technology needed to keep a remote workforce safely and efficiently connected. Click here to find out more information about finding relief and different tax strategies to generate immediate cash flow!


Optimizing Operations: Uncover Tax Relief Opportunities

Despite the uncertainty, savvy companies can position themselves to outperform their competitors by capitalizing on market shifts and strengthening their core business models. To do so, liquidity will continue to be at a premium, but many companies at this stage should be able to spend a bit in order to reap considerable returns. The tax function is poised to help them do just that.

After taking advantage of tax solutions that are within reach, it’s time to consider low-risk strategies that will plant the seed for future growth. Click here to find out more information about optimizing operations to uncover tax relief opportunities!


Moving Forward: New Tax Strategies to Reimagine the Future

Plans made prior to spring 2020 may no longer make sense in a post-COVID world. To stand apart from competitors, companies need to not only recover from COVID-19, but also integrate the lasting forces of change brought on by the pandemic to emerge more resilient and agile than before.

It’s time to reset vision and strategy—and tax needs to be an integral part of that process. Click here to find out more information about moving forward and setting new tax strategies to reimagine the future!


Planning for What’s Next: Be Prepared to Seize Opportunities

The reality for many is that it may take years to get the phase when a business is meeting or even exceeding market growth. During this stage, a company has fully recovered from the business challenges of the pandemic-recession and is experiencing significant growth. It’s a time when many businesses will be executing the long-term plans they’ve crafted throughout their recovery journey. But companies should consider the tax effects of acting on these plans.  

Key Tax Strategies

 
Use tax transformation to maintain a broad view of your total tax liability.
 
Leverage automated solutions for manual and error-prone areas, including state and local sales and use taxation, value added tax, etc. as your business executes on tax transformation plans.
 
Consider the tax benefits of outsourcing non-essential functions to third parties to lower your company’s total tax liability.

 
Review federal Work Opportunity Credit criteria for eligible new hires.
 
Consider eligibility for paid family and medical leave. Under the new law, an eligible employer is allowed the paid family and medical leave credit, which is an amount equal to a percentage of wages paid (up to 25%) to qualifying employees during any period in which those employees are on family and medical leave due to a critical illness or the birth (or adoption or foster care) of a child.
 
The applicable percentage is 12.5%, increased (but not above 25%) by 0.25 percentage points for each percentage point by which the rate of payment exceeds 50%.
 
Consider alternative legal entity structures to minimize total tax liability and enterprise risk.
 
 
Regularly monitor and assess potential regulatory and legislative changes at the federal, state and local levels, as well as in other countries, if applicable.
 
Continually iterate and adjust tax strategies to align with overall business strategies.
 
Evaluate global supply chain and cross-border transactions to minimize global tax liability.

Most importantly, companies need to continue to plan for what’s next. While the immediate threat of the pandemic has abated in this stage, new threats are inevitable. But alongside those threats come new opportunities for those businesses poised to seize them.

 

Need Help?

If you think your business can benefit or is interested in any of the above Year-End Planning for Businesses opportunities, BOOS & ASSOCIATES is here to help! To inquire more information please email us at askboos@booscpa.com.




 

 

Tax Credits

Posted by BOOSCPA Strategic Tax Services Group Posted on Dec 03 2020



As an employer, you give many the opportunity to work. These opportunities created allows you to take advantage of many Federal, State, & Local tax incentives offered. At BOOS & ASSOCIATES, we have a dedicated tax credit team with decades of experience in assisting clients to help maximize these benefits. Due to COVID-19, the IRS and the State of California has offered two new tax credits.

New Credits Available


Employee Retention Credit

Allows for a refundable payroll tax credit for eligible employers harmed by COVID-19. The credit is equal to 50% of up to $10,000 in qualified wages per employee (i.e., a total of $5,000 per employee). Employers generally are not eligible for the Employee Retention Credit if any member of their controlled or affiliated service group obtained a PPP loan.

New Hiring Credit for Small Businesses

The Governor signed bill SB 1447 which allows Businesses to receive a $1,000 credit (up to a $100,000 maximum) for every net increase in full-time equivalent employees. The credit can only be claimed by businesses that reserve the credit and that:

Employed 100 or fewer employees as of December 31, 2019; and

Experienced a 50% decrease in gross receipts when comparing their 2020 second calendar quarter gross receipts with 2019 second calendar quarter gross receipts.

On top of the two new credits available to businesses, our team also offers the following services.

Other Tax Credit Services Offered

California New Employment Credit (“NEC”)

Federal Hiring Tax Credits

Work Opportunity Tax Credit ("WOTC")

Research & Development Tax Credits


Need Help?

If you think your business can benefit or is interested in any of the above tax credits, BOOS & ASSOCIATES is here to help! To inquire more information please email us at askboos@booscpa.com.

 

California Rebuilding Fund

Posted by BOOSCPA Strategic Tax Services Group Posted on Dec 02 2020



California Rebuilding Fund

Small businesses are the backbones of their communities. They create millions of jobs annually while catering specifically to the communities surrounding them. Many small businesses still need funding to help them weather today’s environment and ensure they can retain their employees, pay their rent, and survive. Due to this, the state of California has created the California Rebuilding Fund to support California’s small businesses. The experts at Boos can guide you through this process.

The California Rebuilding Fund is a loan program to support California’s small businesses—especially those located in economically disadvantaged and historically under-banked areas of the state. Businesses who employed 50 or less full-time equivalent employees (FTEs) and had gross revenues of less than $2.5 million or below in 2019 are eligible to apply.

The loans are flexible, transparent and are designed to help businesses access the capital and advisory services they need to get through these challenging economic times.

Loan Terms:

LOAN AMOUNT: The maximum available loan amount is $100,000 or up to 100% of your business’ average monthly revenues for three months prior to the COVID pandemic outbreak (in 2019 or early 2020), whichever is less. The maximum loan amount available under this program is $100,000.

INTEREST RATE: 4.25%

REPAYMENT: 36 months or 60 months (first year interest only)

Example:

An example of how your maximum loan amount is calculated:
To determine your business’s average monthly revenue for an estimate of potential loan size, the lender may use the following:

September 2019 Revenues: $10,000

October 2019 Revenues: $15,000

November 2019 Revenues: $20,000

Based on the above-referenced example, the average revenues for the period is $15,000 so 3-months of average revenues would be $45,000. In this example, the maximum loan size would be $45,000

Business Requirements:

The business must have employed 50 or fewer full-time equivalent (FTE) employees prior to March 2020; please note: any and all affiliates are counted in this total, including businesses with shared ownership;

The business must have had gross revenues of less than $2.5 million in 2019;

The business must have suffered a direct economic hardship as a result of COVID-19 which has materially impacted operations (as evidenced by at least a significant reduction in revenues since January 2020);

The business must have returned to or sustained, for at least one-month, at least 30% of pre-COVID revenues relative to a similar period in 2019

The business must have demonstrated positive net income in 2019 (not including depreciation and amortization expenses);

The business must have been in operation since at least June 30, 2019 and be operating at the time of application;

The main office or headquarters for the business must be in California. The loan must be used to support only a business’s California operations

 

Apply > https://www.connect2capital.com/p/californiarebuildingfund/

 

 

Need Help?

If your business is interested in applying for the California Rebuilding Fund loan program, BOOS & ASSOCIATES is here to help! To inquire more information or if you would like assistance with an application please email us at askboos@booscpa.com.

SBA Disaster Loan

Posted by BOOSCPA Strategic Tax Services Group Posted on Nov 30 2020
How To Qualify For SBA Loans In A Strong Economy

Philanthropy Delaware - SBA Economic Injury Disaster Loan


As communities continue recovering from the devastating effects of the wildfires, BOOS & ASSOCIATES has established a team to work with impacted businesses and individuals to be able to help provide them with support and make available important resources.

We are here to help – Our staff is prepared to streamline recovery efforts when businesses and individuals are ready to re-establish themselves.

One of the ways BOOS & ASSOCIATES can help individuals and businesses is by assisting them in acquiring a disaster loan from the U.S. Small Business Administration. Individuals and businesses may qualify for a loan up to 2 million dollars! If this interest you, keep reading to find out more.

U.S. SBA – Disaster loans Overview

Businesses, Private Nonprofits, Homeowners, and Renters that are located in the California wildfire disaster area may be eligible for financial assistance from the U.S. Small Business Administration (SBA). This is available for California wildfires occurring from:

August 14 through September 26, 2020 - Counties of: Butte, Lake, Lassen, Mendocino, Monterey, Napa, San Mateo, Santa Clara, Santa Cruz, Solano, Stanislaus, Sonoma, Trinity, Tulare & Yolo


September 4, 2020 and continuing - Counties of: Fresno, Los Angeles, Madera, Mendocino, Napa, San Bernardino, San Diego, Shasta, Siskiyou & Sonoma

Details

What Types of Disaster Loans are Available?

Business Physical Disaster Loans – Loans to businesses and non-profit organizations to repair or replace disaster-damaged property, including real estate, inventories, supplies, machinery, and equipment. The law limits business loans to $2,000,000.

Economic Injury Disaster Loans (EIDL) – Working capital loans available. The law limits EIDLs to $2,000,000 for alleviating economic injury caused by the disaster.

Wildfires occurring August 14 through September 26, 2020 - Economic injury only in the contiguous California counties of: Alameda, Calaveras, Colusa, Contra Costa, Fresno, Glenn, Humboldt, Inyo, Kern, Kings, Marin, Mariposa, Merced, Modoc, Plumas, Sacramento, San Benito, San Francisco, San Joaquin, San Luis Obispo, Shasta, Sierra, Siskiyou, Sutter, Tehama, Tuolumne & Yuba.

Wildfires occurring September 4, 2020 and November 17, 2020 - Economic injury only in the contiguous California counties of: Del Norte, Glenn, Humboldt, Imperial, Inyo, Kern, Kings, Lake, Lassen, Marin, Mariposa, Merced, Modoc, Mono, Monterey, Orange, Plumas, Riverside, San Benito, Solano, Tehama, Trinity, Tulare, Tuolumne, Ventura & Yolo.

Home Disaster Loans – Loans to homeowners or renters to repair or replace disaster-damaged real estate and personal property, including automobiles. Limits to $200,000 for the repair or replacement of real estate and $40,000 to repair or replace personal property.

Additional Assistance:

Additional funds are available to cover the cost of improvements that will protect your property against future damage.

Refinancing prior mortgages available for business and homeowners up to the amount of the loan for the repair or replacement.

You may use your SBA disaster loan to relocate. The amount of the relocation loan depends on whether you relocate voluntarily or involuntarily.

Application Deadline for wildfires occurring:

August 14 through September 26, 2020


Physical Damage: November 23, 2020

Economic Injury: May 24, 2021


September 4, 2020 and continuing


Physical Damage: December 15, 2020
Economic Injury: July 16, 2021

Need Help?

If you or your business has been impacted by the wildfires and are in need of a loan from the U.S. Small Business Administration, BOOS & ASSOCIATES is here to help! To inquire more information or if you would like assistance with an application please email us at askboos@booscpa.com .