Are you prepared to file taxes in 2021? Take a look at our guide on rates, exemptions and deductions.
Download All ResourcesFebruary 21, 2021
February 21, 2021
Are you prepared to file taxes in 2021? Take a look at our guide on rates, exemptions and deductions.
Download All ResourcesJanuary 6, 2021
On December 27, 2020 President Trump signed into law a new relief bill in response to the continuing COVID-19 pandemic. The Consolidated Appropriations Act (CAA) is over 5,000 pages in length and contains provisions to fund government operations, provides economic support to individuals and businesses and includes extensive tax law changes. One significant provision focuses on the changes to the Employee Retention Tax Credit (ERTC) originally part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Below we dig into the changes and expansions to the ERTC.
Before examining the changes to the ERTC, let’s first revisit the provisions in the original CARES Act. Enacted in the spring of 2020, the Act allowed businesses to take a credit against payroll taxes in order to help offset some of the business losses due to COVID-19. The law allowed eligible employers to take a credit of 50% of qualified wages up to $10,000 paid to employees between March 12, 2020 and January 1, 2021. Consequently, the maximum credit for each employee was $5,000 ($10,000 in wages X the 50% tax credit rate).
However, not every business was eligible for this credit. Businesses must have been significantly impacted by COVID-19 either by a lockdown order or by experiencing a significant reduction in revenue. There were also restrictions on which wages were “qualified” if an employer employed more than 100 people. Businesses were also not allowed to take the credit if they used Paycheck Protection Program (PPP) loans to cover employee payroll costs. Learn more about the original ERTC under the CARES Act.
The passage of the newly signed relief bill is good news to many businesses who continue to feel the economic impacts of the pandemic as the law enhances and expands many provisions of the original ERTC. To start with, the newly enacted law extends the ERTC until June 30, 2021 and increases the tax credit to 70% of qualified wages for each of the first two quarters of 2021. As a result, the maximum credit for each employee in 2021 is $14,000 ($10,000 in wages X the 70% tax credit rate X two quarters).
More businesses will be eligible for the ERTC in 2021. 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 new law modifies this reduction in revenue by an additional 30%. For 2021, the test is satisfied for any of the first two quarters of the year if gross receipts are less than 80% of the gross receipts for same quarter in 2019.
A change in the threshold for determining which wages “qualify” for the tax credit will also benefit employers this upcoming year. Under the old law, for businesses with less than 100 employees all wages qualified for the tax credit, regardless if the employee’s role changed or not due to the pandemic. Whereas businesses with over 100 employees could not claim the credit for employees that were still performing services for the business, even at a reduced capacity. The new law effective January 1, 2021 raises the threshold number to 500 employees. As a result, more wages will become eligible for the tax credit during the first two quarters of 2021.
Initially, the CARES Act prohibited employers who had received a PPP loan from also utilizing the ERTC. The new law allows an employer to claim the credit for any wages paid beyond the proceeds of the PPP loan that have been forgiven. This change is retroactive to the effective date under the original law: March 12, 2020. A company that received a PPP loan in 2020 but paid qualified wages beyond the amount of the loan would benefit by filing an amended Form 941 and claiming the credit.
While many provisions of the CAA enhanced previous law, it also includes some brand new provisions as well. Businesses will now be able to take an advanced payment on their credit even if those wages have not yet been paid. Additionally, some government entities not previously allowed to take the credit are eligible, such as public universities, hospitals, federal credit unions, etc. Another important change is that wages that have been increased due to hazard pay are also now eligible for the ERTC.
While the above highlights how changes in the recent COVID-19 relief bill have affected the ERTC, 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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December 29, 2020
The Historic Preservation Tax Incentives Program works to revitalize communities across the country by offering a tax incentive for the rehabilitation of historic buildings. The program offers a 20% Federal tax credit to private investors who undertake substantial rehabilitation of a historic building that will be used for a business or other income-producing purpose while maintaining the historic character of the property. The 20% rehabilitation credit equals 20% of qualified expenses spent on the approved rehabilitation of a certified historic structure.
Only certified historic structures qualify for Historic Preservation Tax Credits. The National Park Service maintains a list of buildings that are certified as historic. The rehabilitation work must meet the Secretary of the Interior’s standards for rehabilitation, which aim to ensure the historic integrity of the building remains intact.
Taxpayers must complete a three-part application to qualify for the 20% tax credit:
Many states also offer Historic Preservation Tax Credits. An application and approval process is required at the state level, as well. Missouri offers tax credits equal to 25% of qualified expenses of the rehabilitation to approved historic buildings. The Missouri Historic Tax Credits can be carried back 3 years or carried forward 10 years.
Find out how Anders can help with Missouri Historic Tax Credits.
Yes, Historic Preservation Tax Credits are a great way for historic real estate owners to lessen their tax burden for rehabilitating or restoring their historic property. If you are considering purchasing or have already purchased a historic building for commercial use, contact an Anders advisor below to take the next steps for qualifying for these tax credits.
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August 13, 2020
As the pandemic continues, employers are asking a lot of questions around what they need to do when an employee tests positive or is unable to work due to COVID-19. Is the employer required to pay the employee? Is there assistance available to businesses paying for sick leave when an employee tests positive? While some of the nuances should be advised by a lawyer or HR representative, below we dive into what types of relief are available for employers from an accounting perspective.
The answer is yes. The Families First Coronavirus Response Act (FFCRA) requires certain employers to provide employees with paid sick leave or expanded family and medical leave for specified reasons related to COVID-19. Learn more about employee paid leave rights.
Yes. To help employers pay employees who are unable to work due to COVID-19, the FFCRA tax credit and disaster relief payments are available.
When an employee is unable to work (including telework) due to COVID-19, the FFCRA provides a 100% credit against the company’s payroll tax liability. Companies and not-for-profits with less than 500 employees are eligible for FFCRA.
The credit is limited to the maximum amount that needs to be paid based on the sick leave cap of $511 per day for up to 10 days, or $5,110 per employee.
Employers pay the employee up front and take a dollar-for-dollar tax credit by reporting their total qualified leave wages and the related credits for each quarter on their federal employment tax returns.
The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.
An eligible employer paid $5,000 in sick leave for a quarantined employee and is otherwise required to deposit $8,000 in payroll taxes. The employer would only be required to deposit $3,000 on its next regular deposit date.
For more information about the FFCRA, refer to the U.S. Department of Labor or IRS.
With COVID-19 being declared a national emergency by President Trump, employers can now take advantage of the Robert T. Stafford Disaster Relief and Emergency Assistance Act. The Act, also known as Section 139 of the Internal Revenue Code, allows employers to provide tax-free payments or reimbursements to affected employees as “qualified disaster payments”.
Disaster relief payments must be to pay or reimburse an employee for reasonable and necessary personal, family, living or funeral expenses. This does NOT include payments that would be covered by insurance or other reimbursements and income replacement payments. Since this assistance Act has never been used during a global pandemic, it’s still open to interpretation on what expenses are qualified, but Section 139 “reasonably suggests” these expenses would qualify:
Payments are tax-free to employees, but fully deductible to the employer. Employers may provide assistance directly to the employee or through a non-exempt fund established to receive contributions from the employer as well as employees.
Documentation for payment is not required as long as it’s considered “reasonable and necessary”, but Section 139 recommends employers document:
Learn more about Section 139.
Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed about potential impacts and benefits. Visit our COVID-19 Resource Center for more resources. To discuss your situation and recovery options, contact an Anders advisor below.
Agnes M. Rybak, Associate + Outsourced Accounting and Ryan T. Knudsen, Senior Accountant + Outsourced Accounting were contributors to this post.
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July 27, 2020
While “going back to school” may look different this year, the Missouri Back to School Sales Tax Holiday is a great time to stock up on supplies needed for remote or in-school learning. In Missouri, the tax-free holiday starts at 12:01 a.m. on Friday, August 7th and lasts through 11:59 p.m. on Sunday, August 9th. During this period, qualified purchases are exempt from sales tax. Be aware not all cities and counties in Missouri observe this holiday.
In Missouri, items such as clothing, personal computers and school supplies are exempt from sales tax. Below is a list of popular items that normally qualify as fitting into one of these categories.
Clothing – any article having a taxable value of $100 or less:
Personal Computers – not to exceed $1,500:
School Supplies – not to exceed $50 per purchase:
This holiday is recognized in Missouri, Arkansas, Florida, Iowa, New Mexico, Ohio, Oklahoma, South Carolina, Virginia and Wisconsin. However, you do not have to be a resident of one of these states to benefit from the sales tax holiday. Other states listed above may be on different dates and may include other items and not include some items listed above for Missouri. Be sure to check each state’s date and qualifications.
Yes, if the purchase is made of the qualifying items during the holiday then online purchases qualify. Delivery can occur after the holiday if the purchaser pays in full during the sales tax holiday.
The Back to School Sales Tax Holiday is a great way for people to stock up on school supplies while avoiding to pay sales tax. For more information on this holiday visit the DOR’s website.
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June 25, 2020
Qualified businesses can now take advantage of the employee retention tax credit as a COVID-19 relief option. For business operations that have been impacted by the pandemic, or simply experienced a significant decline in gross receipts compared to prior year, this credit is a great option. Below is a summary of the legislation updated June 15th, 2020.
Qualified employers are allowed a credit against employment taxes equal to 50% of qualified wages (up to $10,000 in wages) for each employee.
Qualified employers can claim this refundable payroll tax credit for qualified wages paid to employees after March 12, 2020, and before Jan. 1, 2021.
This is a brief summary of the employee retention credit. Contact an Anders advisor for more details on how to claim the credit. Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed about potential business impacts and benefits. Visit our COVID-19 Resource Center for more news, tools and insights you need to know in these uncertain times.
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March 5, 2020
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March 5, 2020
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March 5, 2020
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March 5, 2020
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