May 4, 2021

Pandemic-Related Relief for Dependent Care Flexible Spending Accounts

The American Rescue Plan Act (ARPA) was signed into law on March 11, 2021, offering many pandemic relief benefits to individuals and businesses. One big highlight for families is around Dependent Care Flexible Spending Accounts (DC-FSA). The ARPA raised pre-tax contribution limits for DC-FSAs and increased the value of the dependent care tax credit for 2021.

What is a Dependent Care FSA?

A Dependent Care Flexible Spending Account (DC-FSA) is a benefits account that individuals can use to save pre-tax dollars for eligible dependent care expenses. Common uses for a DC-FSA are to pay for childcare such as babysitters and before/after school programs, summer camps and expenses for a spouse who is physically or mentally disabled. Annual contribution limits for DC-FSAs are set by the IRS each year.

What changed for DC-FSAs?

New Limits

The previous DC-FSA 2021 contribution limits were $5,000 for married couples filing jointly and single taxpayers, and $2,500 for married couples filing separately. With the ARPA, the limits are now $10,500 for couples filing jointly and single taxpayers and $5,250 for married filing separately.

Employer plans must be amended for employees to take advantage of the increased limits.

Interaction with Dependent Care Credit

The dependent care tax credit also has increased limits under the new law. For 2021, the maximum amount of expenses eligible for credit is $8,000 for one qualifying individual and $16,000 for two or more qualifying individuals (up from $3,000 and $6,000 in prior years).

The credit is now equal to up to 50% of expenses for taxpayers with AGI of $125,000 or less and decreases to 20% as income increases. That 20% minimum will decrease further for taxpayers with AGI over $400,000.  In prior years, the maximum was only 35% for taxpayers with AGI of $15,000 and capped out at a 20% minimum for everyone.

Employees should consider their specific circumstances to determine the combination of the DC-FSA deferral and the dependent care credit that is most advantageous.

Rollovers

The IRS and Congress also provided DC-FSA relief with the Consolidated Appropriations Act (CAA) signed into law at the end of 2020, and IRS Notice 2021-15 issued in March 2021. The CAA allows employers that offer DC-FSAs to allow participants to rollover unused funds from 2020 to 2021 and funds from 2021 to 2022. This gives participants a larger window of time to submit expenses to utilize those funds instead of losing them since COVID-19 quarantines and shutdowns may have caused a lack of childcare expenses in 2020.

Age Out Extension

IRS Notice 2021-15 allows employers to extend the DC-FSA coverage period for dependents who turn 13 years old during the COVID-19 public health emergency timeframe. These dependents would typically ‘age out’ and therefore any expenses for them would not be eligible for reimbursement through the DC-FSA. The limiting age for 2021 is now set at 14 years old, but the expenses can only be reimbursed from unspent 2020 funds.

What should employers do?

Employers must share any plan amendments created by the ARPA, CAA, and/or IRS Notice 2021-15 and communicate to participants that they can make mid-year DC-FSA contribution changes.

Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed. Visit our COVID-19 Resource Center for more resources. To discuss questions around DC-FSAs or recovery options, contact an Anders advisor below.

Erin E. Prest is a contributor to this post.

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April 27, 2021

Data Security for Banks and Financial Institutions: Top 4 Myths About Moving to the Cloud

Many small-to-midsize banks and financial institutions are still running on-premise Microsoft Exchange email servers, whether in their own walls, or in the walls of their technology service provider. Microsoft recently announced that multiple hacking groups were targeting Microsoft Exchange servers in coordinated attacks, which could cause a damaging data breach for these organizations. With all of the security threats to Microsoft Exchange servers and the amount of sensitive data that banks and financial institutions hold, why haven’t these organizations moved their workloads to Exchange Online? Here are a few common myths we hear and feedback to clear up the misconceptions.

Myth #1: “Exchange servers better protect sensitive customer data.”

Many financial institutions still have Outlook Web Access without multi-factor authentication enabled, which is an easy in for a hacker to access a mailbox and any personal or financial information found in emails. Microsoft recognizes the issue that their older platform is in use and not adequately configured to curb modern security threats on its own. The most recent vulnerabilities on Microsoft Exchange servers that are making national headlines are good evidence for organizations to migrate from an email server to a mail service like Office 365. 

The Capital One data breach of 2019 may have scared away any intentions of financial institutions moving workloads to the cloud. In reality, the cloud-based platform was not actually at fault, as it was a configuration issue on their firewall that caused the breach. That breach may have added a level of untrustworthiness to cloud servers, when the responsibility actually fell on the professionals deploying the firewall. In contrast, no one points out that mega-bank competitor, Bank of America, has never had a breach near the size of Capital One and has been using Microsoft cloud-based products for several years.

Myth #2: “Moving to the cloud is too expensive.”

Some may hear that moving to the cloud is too expensive, but in reality, it can be more cost-effective. Let’s look at the breakdown of server costs according to our Systems Engineer, Joe Szoke. A new Exchange Server might cost $10,000 just for the hardware. If you’re running on-prem Exchange, you’ll also need at least 2 Domain Controllers at another $10,000 each. You’ll need licensing for each server – that’s around $1000 for Windows Server 2019, $780 for Exchange Server, plus about $97 in CAL licensing for EVERY user who wants to access the server. Then, you’ll still need to buy Outlook for your users – Office 2019 Professional Plus is $439.00 today. Once all of that’s done, you’ll still have to pay to maintain the systems – if your server goes down, you pay to fix it.

In contrast, a Microsoft 365 Business Premium license costs just $20/user per month. The entire environment is baked into that license – the administrative dashboards, the servers, the storage space the Office Professional licensing. You don’t have to buy hardware and patching happens automatically. Administration is much less labor intensive – in fact, Anders Technology advisors can handle this for you for a small monthly fee. In this model, your 100 users would cost just $24,000 for the entire first year. Your software would remain perpetually up to date, not just for the year, but for as long as you pay for the license. And, following best practices, your user accounts and data would be secure right out of the box.

Myth #3: “Our technology vendor doesn’t believe we should move to Exchange Online.”

Sadly, most organizations we meet with that have an Exchange server have not even been approached about moving to Microsoft 365. Major technology vendors have invested a lot in providing hosted Exchange services and they are lucrative for them but might not be the best solution for your business’s needs. Make sure to work with a technology partner that has the cybersecurity expertise you need and your best interests and goals in mind.

Myth #4: “We don’t need to move to the cloud because regulatory entities aren’t enforcing it.”

It’s true that even the largest agencies, such as the Cybersecurity and Infrastructure Security Agency (CISA), cannot tell you to pick one platform over another yet, but they did recently make the statement: “Regulated entities should immediately assess the risk to their systems and consumers, and take steps necessary steps to address vulnerabilities and customer impact.” This rises above which platform you are using and focuses on the important part: protecting your data.

While there are clearly a lot of myths and misconceptions out there around if, when and why to move to the cloud, it’s important to know the facts. As a Microsoft Gold Partner, Anders Technology advisors can make the migration seamless so your business can be better protected from a costly data breach. Contact an Anders advisor below to discuss your company’s unique migration situation.

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Event Date: May 6, 2021

Microsoft Teams Customer Immersion Experience: The Power of Automation

Is your organization spending hours on manual processes? We can help — and you probably already own the solution within Microsoft 365. Beyond the email, chat, video and document storage, Microsoft 365 can efficiently take your team to the next level of automation and beyond. 

Join us on Thursday, May 6 from 11am-12:30pm for our Microsoft Teams 2.0 Customer Immersion Experience (CIE) where we will show you how to automate business processes that can improve your team’s efficiency and productivity. Being a Microsoft Gold Partner, Anders will lead you in this hands-on workshop that will demonstrate next-level adoption of the Teams platform. Come ready to learn how your team can leverage the following:

·       Chat Bots

·       Power BI

·       Power Apps

·       VOIP…and more! 

Who should attend: Users with basic Microsoft Teams knowledge who are interested in additional platform features that will simplify daily tasks and reporting.

From simple processes to Artificial Intelligence (AI), Microsoft Teams can be your all-in-one application to unlock the full power of automation. You will leave this workshop feeling empowered to take back time in your day and confident leveraging technology to move your business forward. 

This CIE is limited to 20 attendees. Register below:

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April 20, 2021

RECORDED WEBINAR – A Positive Shift in the Economic Outlook: What’s Next?

As the world begins to recover from 2020 and the economic detriment, what is next on the horizon? Download our recorded webinar discussing the current economic state and the positive uptick in the market. You’ll learn about:

  • Economic impact on business post-pandemic
  • Best practices for moving your business forward
  • How to plan for the remaining fiscal year

Special guest Dr. Christopher Kuehl, Managing Director of Armada Corporate Intelligence, returns to partner with Anders for an insightful discussion on the matter. Chris is a frequent speaker and educator for the Missouri Society of Certified Public Accountants (MOCPA).

Download the webinar recording below:

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April 20, 2021

Restaurant Revitalization Fund Offers Grants for Food and Beverage Industry

In an effort to help restaurants and bars recover from the financial impacts of COVID-19, $28.6 billion of the American Rescue Plan is allocated for a Restaurant Revitalization Fund (RRF). Below we cover the basics of the RRF as outlined by the SBA, including eligibility requirements, covered expenses and how to apply for RRF grant funding.

Who is eligible for Restaurant Revitalization Funding?

The American Rescue Plan outlines that businesses in which the public assemble for the primary purpose of being served food and drink are eligible. The Plan indicates that the following food and beverage establishments are eligible:

  • Restaurants
  • Bars
  • Food stands
  • Food trucks and carts
  • Caterers
  • Saloons
  • Inns
  • Taverns
  • Lounges
  • Brewpubs, tasting rooms and taprooms
  • Other similar places of business in which the public or patrons assemble for the primary purpose of being served food or drink

Businesses that are state or local government-operated, publicly traded or have 20 locations or more are not eligible. Those who have already applied for the Shuttered Venue Operators Grant are also ineligible for RRF funding.

How much can I apply for out of the Restaurant Revitalization Fund?

Through the RRF, eligible establishments will be able to apply for a grant equal to their pandemic-related revenue loss, up to $10 million per entity or $5 million per location, limited to 20 locations. Grants will be calculated by subtracting 2020 revenue from 2019 revenue.

Those businesses that have received PPP (round 1 or 2) funding will be eligible for an RRF grant, but the RRF grant total will be reduced by the amount of the PPP loan(s). EIDL loans and Employee Retention Tax Credit funding does not impact RRF funding.

For those establishments not operating for all of 2019, the maximum grant is the average monthly gross receipts in 2020 minus the average monthly gross receipts in 2019. Similar to PPP loan forgiveness, the RRF grant will not be taxable income and all associated expenses will be tax-deductible.

What can an RRF grant be used for?

According to the SBA, grant funding does not have to be paid back if it is used for eligible expenses from February 15, 2020 until March 11, 2023, including:

  • Business payroll costs, including sick leave and costs related to the continuation of group health care, life, disability, vision, or dental benefits during periods of paid sick, medical, or family leave, and group health care, life, disability, vision, or dental insurance premiums
  • Payments on any business mortgage obligation, both principal and interest. Note: this does not include any prepayment of principal on a mortgage obligation
  • Business rent payments, including rent under a lease agreement. Note: this does not include any prepayment of rent
  • Business debt service, both principal and interest. Note: this does not include any prepayment of principal or interest
  • Business utility payments for the distribution of electricity, gas, water, telephone, or internet access, or any other utility that is used in the ordinary course of business for which service began before March 11, 2021.
  • Business maintenance expenses including maintenance on walls, floors, deck surfaces, furniture, fixtures, and equipment
  • Construction of outdoor seating
  • Business supplies, including protective equipment and cleaning materials
  • Business food and beverage expenses, including raw materials for beer, wine, or spirits
  • Covered supplier costs, which is an expenditure made by the eligible entity to a supplier of goods for the supply of goods that:
    • Are essential to the operations of the entity at the time at which the expenditure is made; and
    • Is made pursuant to a contract, order, or purchase order in effect at any time before the receipt of Restaurant Revitalization funds; or
    • With respect to perishable goods, a contract, order, or purchase order in effect before or at any time during the covered period
  • Business operating expenses, which is defined as business expenses incurred through normal business operations that are necessary and mandatory for the business (e.g. rent, equipment, supplies, inventory, accounting, training, legal, marketing, insurance, licenses, fees). Business operating expenses do not include expenses that occur outside of a company’s day-to-day activities.

How can I apply for the RRF?

The SBA offers three ways to apply for the RRF funding:

  1. Through a recognized SBA Restaurant Partner
  2. Through SBA directly at restaurants.sba.gov
  3. By calling (844) 279-8898

Download the latest SBA Restaurant Revitalization Funding Program Guide for more information on the RRF and documentation requirements. The application process is expected to open soon, with the first 21 days being prioritized for women-owned, minority-owned and veteran-owned businesses.

Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed. Visit our COVID-19 Resource Center for more resources. To discuss your situation and recovery options, contact an Anders advisor below.

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April 20, 2021

Buying or Selling a Company: Stock or Asset Deal?

Whether you’re looking to sell your business, or buy an existing company, there are many factors that go into the deal. Agreeing on a purchase price isn’t the only negotiated outcome of a business transaction. In fact, it’s usually not the first or last item of agreement. When a buyer is purchasing 100% of a target company, they can either purchase (1) the assets of the target or (2) the equity of the target. The deal structure can influence the eventual agreed-upon purchase price. Both scenarios have their advantages and disadvantages.

What Goes into a Stock Deal?

The purchase of a company’s equity is usually the most efficient deal structure for both parties. In these deals, the buyer is assigned the stock of the target in exchange for cash or future payments of cash. By purchasing the equity of a company, the buyer is purchasing all of the target company’s recorded and unrecorded assets as well as any liabilities, including contingent liabilities. In essence, the buyer may be buying assets they’re not aware of, or assuming liabilities they didn’t know were in existence. This is one of the reasons sellers generally desire the structure of a stock deal; they don’t walk away with unwanted assets or liabilities. Obviously, the legal language within a stock purchase agreement could influence some of these items, but in general these are the advantages and disadvantages.

What Goes into an Asset Deal?

Buying a company’s assets can be advantageous because they can target only desired assets and assume only certain liabilities of their choosing. These assets could encompass all of the company’s known assets, including the fixed assets and real estate, or they could include only certain intangible assets such as company name, trademarks, trade names and/or customer lists or contracts. In essence, the buyer can choose what they want to purchase from the seller. The buyer would need to be sure that any contracts and/or agreements are assignable since it is likely the target company was the one that originally executed them.

The buyer and seller also have to agree on who will “assume” or pay for the company’s liabilities after the deal is final. By assuming the seller’s liabilities, the buyer is essentially paying the seller additional consideration since they will be paying the future obligations of the loans assumed. If no liabilities are assumed, the buyer simply pays an agreed-upon price for the desired assets.

Stock vs. Asset Deal Example

As an example, assume the target company has appraised assets worth $3,000,000, including working capital, inventory, real estate and intangible assets, and $2,000,000 in recorded liabilities. The equity of the company would be worth $1,000,000. A buyer could pay $3,000,000 if they desire to own all of these identified assets, or less if they want to exclude some assets. If a stock deal is preferred, then the value would be closer to the $1,000,000 figure. The final agreed-upon price may be somewhere in between depending on the individual motivations and desires of the buyer and the seller.

Bridging the gap between an asset purchase price ($3,000,000) and a stock purchase price ($1,000,000) may sometimes be necessary. This is especially true if there has been an appraisal of target’s stockholders’ equity, but an asset deal was eventually consummated. This may not always be a clean exercise. The eventual deal price may have been influenced by motivations for each party that were not quantified in the valuation of the equity of the target company. However, if properly done with knowledge of each party’s relevant motivations, this exercise can be accomplished.

There are many factors that go into structuring a business deal, and Anders has Forensic and Litigation advisors to help understand the true value of the business and Business Transition Planning advisors to help maximize value and exit your business. Contact an Anders advisor below to learn more.

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April 13, 2021

How to Report PPP Loans on Financial Statements

A key part of the Coronavirus Aid Relief and Economic Security (CARES) Act, the Paycheck Protection Program (PPP) authorized banks to provide low interest rate loans to businesses with a guarantee from the Small Business Administration. Best of all, PPP loans may be eligible for tax-free forgiveness if the proceeds are used for certain approved expenditures. This raises questions about how to present PPP loans in year-end financial statements and how to treat a loan that was forgiven. While U.S. GAAP does not provide specific guidance for PPP loans, there are a couple of options available for reporting the PPP loan on financial statements.

Option 1: FASB ASC 470: Debt

Under this option, entities record the loan as a liability on the balance sheet and interest is recorded as it would be with any other financing arrangement. After the company has applied for loan forgiveness and has been legally released from the debt, the company will record a gain on extinguishment of debt. This gain should be recorded as an extraordinary item and excluded from operating income.

Option 2: FASB ASC 450-30: Gain Contingency

Under ASC 450-30, the earnings impact is recognized when all contingencies have been met and the gain related to the forgiveness of the PPP loan is realized or realizable for nongovernmental entities. The proceeds from the loan are initially recorded as a liability until the proceeds are realized or realizable. Once they are realized or realizable, the earnings impact is recorded. There is less specific on guidance on this method than ASC 470, and it is generally not preferred.

Financial Statement Disclosures

Disclosures under ASC 470 will be similar to traditional debt disclosures. Under ASC 450-30, there are no specific disclosure requirements. It’s important to note that material PPP loans should adequately disclose all key terms of the loan in the notes to the financial statements.

Which guidance to follow on presentation of the loan is ultimately up to management of the company. The PPP loan should be presented on the company’s balance sheet and after it is forgiven, it will need to be recognized outside of operations as other income or as a gain on loan forgiveness. Contact an Anders advisor below to discuss financial statement presentation or recovery options,

Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed on our COVID-19 Resource Center. Tune in to our video series PPP with Paul and Dan to learn more about the Paycheck Protection Program.

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April 6, 2021

Employee Retention Tax Credit Offers Huge Relief Opportunities for the Construction Industry

The Employee Retention Tax Credit (ERTC) has been a valuable COVID-19 relief option for businesses who faced revenue losses due to ongoing impacts of the pandemic. While some industries were impacted more than others, certain sectors of the construction industry actually expanded in 2020, including homebuilders and industrial contractors. Even if your company performed well overall last year, there could still be an opportunity to claim the ERTC.

Who Qualifies for the ERTC?

Originally part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the ERTC allows businesses to take a credit against payroll taxes in order to help offset some of the business losses due to COVID-19. The original ERTC was only available for businesses who were forced to shut down or whose gross receipts in 2020 were 50% less than the same quarter in 2019. The ERTC has since been expanded, modifying the reduction in revenue by an additional 30%. For 2021, businesses are eligible if gross receipts are less than 80% of the gross receipts for same quarter in the prior year.

Businesses that averaged no more than 100 full-time employees in 2019 qualify for the ERTC in 2020 on wages paid to all employees. For the ERTC in 2021, this employee threshold increases to no more than 500 full-time 2019 employees. Full-time employees are those that work at least 30 hours per week. Union employees are included in the employee count for the credit, but those working part-time (less than 30 hours/week) are not.

How Much Can Businesses Qualify for?

For 2020, eligible employers can take a credit of 50% on qualified wages up to $10,000 paid to employees between March 12, 2020 and January 1, 2021. In 2021, the tax credit is increased to 70% of qualified wages, which are limited to $10,000 per employee per quarter. With the 70%, the maximum ERTC amount available is $7,000 per employee per quarter, for a potential total of $28,000 per employee in 2021. We have seen clients qualify for anywhere from $5,000 to $2.5 million through the ERTC.

How Could My Company Qualify for the ERTC After a Good Revenue Year?

Unlike other industries, construction revenue typically isn’t cyclical, and contractors can have revenue fluctuations that vary from month to month or quarter to quarter depending on projects. To qualify for the ERTC, the business only needs to have a quarter-by-quarter drop in revenue of 50% when comparing a 2020 quarter to 2019, and 20% when comparing a quarter in 2021 to 2019. You can also look back a quarter for the ERTC, so if your company was down 20% in Q4 of 2020 compared to 2019, you would qualify for Q1 of 2021.

ERTC Case Study

In one unique scenario, a taxpayer with a 40% increase in revenue in 2020 vs 2019 overall assumed they would not qualify for the ERTC. When taking a closer look, we discovered their revenue dropped 50% in Q4 of 2020 compared to 2019, making them eligible for the ERTC in Q4 of 2020 and Q1 of 2021. Projected total benefit for this taxpayer exceeds $200,000.

How Can I Take Advantage of the ERTC?

Initially, the CARES Act prohibited employers who had received a PPP loan from also utilizing the ERTC. New laws allow an employer to claim the credit for any wages paid beyond the proceeds of the PPP loan that have been forgiven. Taking advantage of both PPP loan funding and the ERTC is a great way to maximize COVID-19 relief opportunities.

If you discover you qualified for the ERTC in 2020, you can amend your quarterly payroll returns to claim the credit. If you identify that you qualify in advance, you can reduce payroll deposits for 2021 to take advantage of the credit.

Find out if your business is eligible for the Employee Retention Tax Credit in 2020 or 2021.

While the above highlights the opportunity for eligible businesses, please contact an Anders advisor below to discuss your situation and recovery options. Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed. Visit our COVID-19 Resource Center for more resources.

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April 2, 2021

Ubiquiti Data Breach: How to Protect Your Business

It’s hard to go a week, or even a day sometimes, without hearing news of a data breach. In January, I received a notification from Ubiquiti that there may have been unauthorized access to their customer data. I didn’t think much of it and followed their instructions for addressing the issue. Fast forward to March 31, the problems were compounding for Ubiquiti. Ubiquiti stock is down 10% and there is currently an investigation into securities fraud.

What You Should Do

If you have a Ubiquiti account, your data may have been accessed. If you have not done so already, you should change your password and enable two-factor authentication. We also recommend considering secure alternatives to keep your data protected.

Background on Ubiquiti

Over the years, Ubiquiti has had a peculiar place in the networking market. They have wireless routers, access points, security gateways, security camera systems and more. Then, they have some really neat equipment, such as Nanobeam. Nanobeams have the ability to transmit network connectivity points over long distances wirelessly. This is especially useful for some smaller internet service providers that don’t have AT&T, Charter or Comcast in their name or have cable running underground from place to place.  

Consider Secure Alternatives

When the networking market meets business needs, the choice becomes less clear about use cases and if Ubiquity is an option. Most often, Ubiquiti is going to be less expensive to implement because the hardware costs less and they do not have support contracts to maintain. However, the decision is not that simple. Focusing in on support, there isn’t a streamlined support system like other networking vendors. There is email and chat support but there is not accountability on if or when you will receive a response.

But not every business has mission-critical network deployment where Ubiquiti equipment might fit nicely. Think guest networks, free wi-fi, stadiums, restaurants, etc. Ubiquiti is significantly less likely to be the strategy at a hospital, major financial institution, or anywhere with a major dependency on networking functions in reference to the need for support alone.

The performance of the equipment in comparison to cost is always going to be arguable. For example, in a new wireless deployment that requires 20 Ubiquiti access points, may only require 16 Cisco Meraki access points based off a heat mapping software. But the Meraki strategy is still more expensive even after running cable to four fewer locations where access points are needed. Then the fact that there will be a renewal for the Cisco equipment in a few years makes the cost gap even wider. However, Cisco is a recognized vendor and one of the most used, most stable networking platforms.

If you have any security concerns around your network or technology platforms, Anders Technology advisors are here to help. We can work with you to evaluate options and determine the best fit for your security needs and business goals. Contact an Anders advisor below to discuss your situation.

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