My goal today is to simplify your options.
There is so much noise, and so many conflicting voices about all of this, that I wanted to give you an authoritative, basic rundown of what’s being made available to you and other Indianapolis small business owners by the federal government.
These kinds of programs are very rare opportunities — which makes sense, given that this has been a very rare kind of year, yes?
But as we saw with the first round of the PPP, and the EIDL … there is a window during which a Indianapolis business owner should ACT in order to get what is on offer. The first iteration of the first round of the PPP got snapped up VERY fast, after all, as did the “emergency grant” component of the EIDL.
The second round of the PPP, the expanded and more profitable “Employee Retention Credit” and various other options are all getting debated within business social groups, and that’s fine.
This is why it makes sense to have someone in your corner who can just do this stuff for you. (Ahem.)
But today is about simplifying, and clearing up the confusion — hopefully helping YOU to act quickly, and wisely with what is available to you by way of small business aid and tax savings options.
NOTE: This list does NOT include the PPP and other such options from the SBA. This is just the goodies within the tax code, which is why I put it together.
Six Options For Indianapolis Small Business Aid And Tax Savings
“15 years ago, the internet was an escape from the real world. Now, the real world is an escape from the internet.” -Noah Smith
Depending on how your business entity is structured, you could be paying anywhere from 15-25% (or more!) of your business revenue into the coffers of the IRS and various state departments of revenue.
Which, of course, is what we’re here to help you minimize.
That’s why the “second stimulus bill” signed into law in late December 2020 was a welcomed one for us here at J.R. Helms & Associates, P.C. — simply because it means we can do MORE for our Indianapolis business owner clients during a very tumultuous year for many. Using the various tax savings and small business aid options is something we’d be happy to go over with you to see what is appropriate for your unique situation.
So, because we’ve been getting so many questions about these, I’d like to run them down as simply as possible so you can make the right choice of action. Because action will be necessary in some cases.
1) Revamped and expanded Employee Retention Tax Credit
In order 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 this year. But be warned: this is NOT a credit or a 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. Which is why we are here, and why you should let us help you.
I’m grateful for our partnership, and for your referrals.
John R. “Rusty” Helms, C.P.A., CGMA
J.R. Helms & Associates, P.C.
Feel free to share this article with a Indianapolis area (or beyond!) business associate or client you know who could benefit from our assistance. While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for families and business owners.