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      Biden's Covid relief means small businesses can save big on taxes in 2021 | Gene Marks

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      Thanks to the stimulus programs, there are now five ways small can save big on their taxes in 2021 … and even get money back.The signing of the American Rescue Act this week means that more than $5tn has been spent on stimulus programs in the US to fight the economic impact of the Covid pandemic. A significant amount of this money has been earmarked towards funding small businesses, such as the paycheck protection program and the economic injury disaster loan program. However, all of the stimulus programs contained generous tax incentives that can not only save business owners a significant amount on their taxes in 2021, but also provide additional funding. Here are five that every small business owner should be considering.Employee retention tax creditThe employee retention tax credit is one such tax incentive. The credit was initially part of the March 2020 Cares Act and has been extended through 31 December 2021. To be eligible for the credit for any quarter in 2021 a business must show that it has been partially or fully shut down or experienced a revenue decline of more than 20% that quarter compared with the same quarter in 2019. If eligible, then the business can take a credit of up to $7,000 per employee per quarter based on their wages against their employer payroll taxes owed.The big deal is that if the credit is larger than what’s owed, the business can get the difference back in cash. The credit is also available to businesses that participate in the paycheck protection program, although wages used for forgiveness cannot be used to calculate the credit. The criteria for claiming the credit in 2020 are different but businesses owners can still apply to do that. All of these calculations are done on a company’s quarter federal tax returns.Families First Coronavirus Response Act tax creditAnother tax benefit has to do with the Families First Coronavirus Response Act (FFCRA). This legislation predated the Cares Act in 2020 and required employers to compensate their employees if they had to take time off because they, or their family members, were affected by Covid. This includes having to stay home to supervise their children while they attended virtual classes. The act provided for a tax credit where the business owner could claim money back on their federal payroll tax returns for the wages they were required to pay.The FFCRA is now voluntary in 2021. But for those employers that do continue to offer these benefits – which now includes time off to get vaccinated or to recover from any effects of vaccinations – the credit is still available and has been extended through September.Cobra tax creditCobra – or Continuation of Health Coverage – is a federal law that requires employers to make health insurance available under their corporate health plans to employees for a certain period of time who lose their benefits because of layoffs or reduced hours of employment. The idea is that people don’t lose their health insurance if they lose their jobs, but they do have to pay.In a new provision, the American Rescue Plan now fully subsidizes for the continuation of Cobra benefits for employees from April through September and offers a tax credit for employers who continue to pay for the health insurance premiums on behalf of their laid-off employee.Carryback of lossesThere is another big benefit for companies that lost money in either 2020, 2019 or 2018.Thanks to the Cares Act – and subsequent stimulus bills which kept this rule in place – companies that lost money those years can, for one time only, carry back those losses for up to five years. Which means that if a business paid taxes in the past, those losses would reduce what was owed and therefore a company would be due the money back. Normally tax rules don’t allow this kind of carryback but this year is an exception. We’re telling our clients to amend and file their corporate returns as quickly as possible in order to start the refund process, which takes an average of six weeks.Work opportunity tax creditThe National Federation of Independent Businesses reported this past week that 40% of their surveyed members had open jobs to fill and another 56% of owners reported hiring or trying to hire in February, up five points from January. These numbers are likely to increase significantly over the next few months as the economy recovers. The good news is that a big tax credit related to hiring has been extended through 2025.It’s called the work opportunity tax credit and it provides a credit on income taxes due for any employer that hires a veteran, someone off of welfare or – more timely – a worker who has been unemployed more than six months. It could be an enormous tax benefit for those employers who take advantage. Some of my clients are calculating this credit in advance before a hire and then using it as a signing bonus to help them better compete against others seeking talent.Clearly there are significant tax benefits – many which include cash refunds – for small business owners who choose to take advantage of them. My smartest clients are already talking to their tax advisers and getting help. They know that these benefits are short-term. They also know that leveraging them could provide much needed funds to help them navigate to, and through, the post-pandemic recovery. More

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      Of course there was PPP fraud, but the program was a crucial lifeline | Gene Marks

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      Now that the paycheck protection program (PPP) has ended, there’s a new story evolving. It seems like millions of dollars meant to prop up small businesses were fraudulently received by a bunch of bad people. Surprised? Not if you run a small business.In a press conference this week, acting assistant attorney general Brian Rabbitt announced that the Department of Justice has already charged 57 people who were trying to steal approximately $175m from the program. “The money these defendants stole was taxpayer money,” Rabbitt said. “Every dollar received was a dollar drawn from the American people’s account. Even worse, every dollar they took was a dollar we had set aside to help our fellow Americans weather one of the worst national crises in recent history. As we allege, these defendants tried to steal these funds for themselves.”The cases are something out of The Wolf of Wall Street. There’s money stolen to pay for Rolls-Royces, luxury yachts, homes and visits to strip clubs. A group in South Carolina is accused of laundering PPP money through casinos and probably using some of it to pay for heroin and methamphetamines. The Washington Post reports that an NFL player was charged with fraudulently using PPP funds to pay for Gucci and Dior items. Politico says that Rolex watches, Lamborghinis and a $3,750 diamond pinky ring were among the items confiscated from alleged abusers of the program.My goodness, who knew? Oh, that’s right. I knew. You knew. We all knew.Of course there was fraud. Anyone who applied for a PPP or an economic injury disaster loan knew this was going to happen. I have countless clients who mentioned to me just how easy it was to get approved for these grants and loans. Any business owner who claimed they were “affected” by Covid-19 could get relief, regardless of whether they were truly affected now or just worried about the future. “I could’ve told the bank anything,” one client said to me. “They didn’t care. My banker just told me to get the paperwork in and I’ll get my money.”Waiting around for government bureaucrats to come up with detailed rules and procedures would have cost much, much moreBut despite these very real scandals these government programs worked. Millions of loans were extended to small businesses that really needed them. Billions of dollars were made available – quickly – to keep many companies afloat, or at the very least provide them with a cushion to operate through these very unprecedented times.The fraud – hundreds of millions – sounds like a lot. But as a percentage of the overall program it’s probably no more or less than what my allowance is for overdue invoices that will likely not be paid. Could the fraud have been less with better policies? Sure. But waiting around for government bureaucrats – secure in their jobs – to come up with detailed rules and procedures would have cost much, much more.Of course, the political show will continue. Democrats will accuse Republicans of wasting taxpayers’ money. Republicans will argue that their actions saved the economy. Investigators will root out more celebrities and one-percenters who took advantage and present them on a platter to a hungry media looking for a tasty story.But there are bigger fish to fry … like propping up a very damaged economy. And let’s also hope that this finger-pointing circus doesn’t stop Congress from doing another round of PPP or some other type of stimulus for those businesses that really need it. Because many businesses really, really do need it. More

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      Yes, some US small business owners actually support the $600 weekly benefit | Gene Marks

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      About 30 million unemployed Americans are now on tenterhooks waiting to see if the $600-a-week federal unemployment benefit created by the Cares Act will be renewed. As the political row over its efficacy and necessity continues, the House and the Senate remain far apart on a compromise.What shouldn’t be left out of the discussion is an unlikely, yet numerous, group of people who do support the added benefit: small business owners.The issue is complicated.Many I know in the business community have taken issue with the additional $600 federal payment. They complain that a great number of their workers – particularly hourly and part-timers – have avoided returning to the workplace because the benefit provides them with more compensation then they were getting at their job and merely incentivizes them to stop working.But some studies – like this one from a group of Yale University researchers – have found the opposite to be true. The study found “no evidence” that workers receiving the added federal unemployment benefit were disincentivized to work and that “people with more generously expanded benefits also resumed working at a similar or slightly quicker rate than others did”.However, as the Wall Street Journal points out, the study excluded part-time workers and other “short-termers” who make up the vast majority of employees that benefited the most from the federal bump. “A worker in Louisiana who made $2,400 from part-time jobs all of last year would collect $2,516 a month in jobless benefits today – $29 a week from the state plus the $600. An average worker who had made $17 per hour ($680 a week) in Ohio has been able to collect $940 each week with the federal boost.”The debate will continue.But many small business owners remain convinced the payments should continue. Why? Because it has provided a safety net for their employees during a time when their companies couldn’t pay wages due to the country’s self-inflicted economic collapse.“We want them to succeed, and we want to help them grow their careers, and we hope to continue to employ them well into the future,” Mark Frier, a restaurant owner in Vermont told NPR’s Marketplace. “Initially [the federal benefit] was a lifesaver.” Frier is just one of many business owners who have been unable to sustain employee wages – even with help from the paycheck protection program – and who are grateful that there’s an added federal benefit available to help them through these times.Julie Wineinger, the owner of Lulabelle’s Sweet Shop in Washington DC, has gone out of her way to assist her employees in applying for unemployment benefits. She has also run fundraisers – selling ice cream and other products – specifically to raise additional cash in order to help her staff through these difficult times. “Some of my employees are very young, some have to support families,” she told me in a podcast interview. “They didn’t ask for this and I’m going to do my best to do what I can for them.”One of the many benefits of working for a small business is that employees oftentimes develop close relationships with their employers. When bad things happen – a family illness, a financial problem, a global pandemic that causes an unprecedented economic downturn – many small business owners are as much concerned with their employees’ welfare as their own families. Because they are like family.But these same employees are also assets, which is why many small business owners I know are in favor of the additional federal unemployment benefit. Knowing that the benefit is there, they could furlough their staff and not terminate them. Without these checks, those employees who have worked for them for years and gained experience and knowledge of their businesses may be forced to move elsewhere or take other jobs in order to make ends meet. When that happens, small business owners like Wineinger and others lose good people and have to search and train replacements. That creates disruption and added costs.Maybe the added federal benefit does discourage some from going back to work, particularly part-timers and hourly workers. And it is true that many small businesses are finding this situation a frustrating obstacle towards rehiring and getting back to normal. But for many other small business owners, that additional $600 check every week has helped them retain and sustain their employees during an unprecedented national emergency until times – hopefully – get back to normal. More

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      The Senate's stimulus proposal looks good for small businesses | Gene Marks

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      The Republican-controlled Senate released its proposal for further aiding small businesses during this unprecedented downturn caused by the coronavirus pandemic. Of course, the seven-page detailed outline released by Senator Marco Rubio’s office will probably be different in the bill’s final form. But let’s hope not too different. That’s because it offers up at least three big things that will significantly help many struggling small businesses. Here they are:Loans under $2m would basically be forgiven, with some caveatsIf your business received a PPP loan for less than $150,000 you would no longer be required to go through the forgiveness process. You would have to represent that you made a “good faith” effort to comply with the loan requirements and you would be required to retain the relevant records needed for at least three years, as well as being asked to complete and submit certain demographic information. If your business received a loan for less than $2m you would still have to complete the application along with maintaining records for three years and submitting demographic information. But you won’t be required to submit the documentation. The government will retain its right to audit you.For countless small businesses that means a significant amount of effort (and professional fees) saved filling out applications. For small business owners like me – many of us who would have been eligible for full forgiveness – this would mean spending much less time doing bureaucratic administrative work and more time that we can devote to running our businesses.More expenses would be eligible for forgivenessJust because the loans, in my estimation, are “basically” forgiven that doesn’t mean that you’re still not responsible for certifying that you’ve met the forgiveness requirements and are keeping the necessary documentation just in case you’re reviewed. Even so, the forgiveness rules have been made easier because, although it’s still required that 60% of the costs eligible for forgiveness are payroll-related, more non-payroll expenses are considered eligible to be included in the other 40%.In addition to rents, mortgage interest and utilities, these eligible expenses now include payment for any software, cloud computing, and other human resources and accounting needs, costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance, expenditures to a supplier pursuant to a contract for goods in effect before 15 February 2020 that are essential to the recipient’s current operations and the cost of personal protective equipment and adaptive investments to help you comply with federal health and safety guidelines related to Covid-19 during the period between 1 March and 31 December this year.All of this expands the definition of forgivable expenses and I would be hard pressed to find a small business that, given these new rules, wouldn’t be eligible for full forgiveness.There will be more PPP loans availableThe government would put aside another $190bn for this round of PPP loans and even if you received one before you may still be eligible to receive a second loan. However, you would have to meet new requirements. For starters, your business would only be allowed to have fewer than 300 employees (not 500 as was previously required). More importantly, you would also have to demonstrate that your gross receipts in the first or second quarter of 2020 was at least 50% less than the same quarters in 2019. Publicly held companies, some financial services firms and Chinese-affiliated companies would be excluded and total loans, including the first round of PPP, would be capped at $10m.Some industry groups are arguing that the 50% revenue decline benchmark is too high. But for many business owners – particularly in the restaurant and retail industries – meeting that requirement would (unfortunately) not be a problem. There are a few other goodies too. For example, small businesses who believe they are eligible for higher loans than what was initially approved would be allowed to work with their lenders to alter their original loan value regardless of whether the loan had been fully disbursed. Requirements for smaller lenders and farm credit system institutions have been eased. Chambers of commerce, lobbying and other quasi-government organizations may now be eligible for funds and the rules for seasonal and businesses in low income areas have been clarified and, in some cases, relaxed.The PPP program has never, and never will be, perfect. Not everyone will be satisfied. But since the very beginning of the pandemic, Congress has taken significant actions to provide aid to the many struggling small businesses across the country and these latest changes are a continuation of those efforts. Yes, I’m concerned about the impact these multitrillion-dollar stimulus programs will have on our future fiscal growth. But for now, these actions are critical to sustain the small businesses that are the backbone of this country’s economy. More

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      The venture capitalist with a Silicon Valley solution for minority-owned businesses

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      The venture capitalist with a Silicon Valley solution for minority-owned businesses Gene Marks A new kind of venture capital fund would use money from the US government to invest in companies that most need it A new type of venture capital fund would use government money to invest in minority and women-owned businesses. Photograph: Octavio […] More