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Empowered Planning in Times of Uncertainty

To ensure you and your business are positioned in the best ways possible for whatever comes our way in 2021, we can help you adjust, adapt, focus, and take the long view in achieving your personal and professional goals. You’ll be empowered to pursue your purpose.

From tax strategies and estate planning and valuation to charitable giving guidance, PPP loan forgiveness application insight and assistance, and human resources and technology solutions, our team has you covered.

 

 

 


Key Questions We Get  


We are once again facing uncertain times when it comes to estate planning. Under current law, the federal estate tax exemption of $11.58 million in 2020 will be reduced to approximately $6 million per person, indexed for inflation, in 2026. The federal estate tax laws (exemption amount, tax rates, etc.) may also be changed at any time by new legislation.

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In many scenarios, both business and personal, prompt business owners to ponder the question of selling, which leads to the question what is my business worth? This is where an objective, independent business valuation comes into play.

 

Quantifying the value of a business, business ownership interest, or intangible asset can be a complex analytical process. A business valuation helps ensure the best outcome – the sale makes sense financially and the timing is right for the business and for you as the business owner.

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Employee Retention Credit

The Employee Retention Credit (ERC) was established under the CARES ACT in March of 2020 to assist employers in retaining and compensating employees during the Covid-19 pandemic. The credit was expanded under the Consolidated Appropriations Act, 2021 (CAA) making more employers eligible for the credit and allowing for a larger benefit.

Key Areas

Last Updated on January 28, 2021


For employers that originally did not qualify for the credit in 2020 because of a PPP loan – now is the time to revisit the credit. Under the CAA, employers who received a PPP loan are no longer precluded from taking the ERC – as long as wages used for the ERC are not also used for PPP loan forgiveness.


Eligible wages are expanded to include wages paid thru December 31, 2021. For 2021, the per employee cap on the benefit is increased, the definition of a small employer is expanded, and the gross receipts reduction threshold is reduced.


Employers that are carrying on a trade or business and meet the business suspension condition or the gross receipts condition qualify for the credit. An employer meets the business suspension condition if the business was fully or partially suspended due to a governmental order issued in response to the coronavirus outbreak and limited commerce, travel or the size of a group meetings. The gross receipts condition is based on a significant decline in gross receipts over the same quarter in 2019.

Gross receipts condition - 2020
Eligibility begins with the quarter in which the employer experienced a significant decline in gross receipts (gross receipts less than 50% of gross receipts for the same calendar quarter in 2019). Eligibility ends on the first day of the first calendar quarter following the calendar quarter in which the employer’s gross receipts were more than 80% of its gross receipts for the same calendar quarter in 2019.

Gross receipts condition - 2021
The employer is eligible for a quarter if the employer’s gross receipts for that quarter are less than 80% of its gross receipts for the same relative quarter in 2019.


Qualified wages are those wages paid while the employer satisfies either the business suspension condition or the gross receipts condition. Certain health insurance benefits are also deemed to be qualified wages. For small employers (100 or fewer employees in 2020; 500 or fewer employees in 2021), qualified wages include wages paid to employees whether or not those employees provided services. For large employers (greater than 100 employees in 2020; greater than 500 employees in 2021) qualified wages include only those amounts paid to employees who did not provide services during the qualifying period.


The 2020 credit is calculated as 50% of qualified wages applied to a maximum of $10,000 in wages for the year (from March 13th – Dec 31st), for a total maximum benefit for each employee of $5,000 for the year.

The 2021 credit is calculated as 70% of qualified wages applied to a maximum of $10,000 in wages per quarter for a total maximum benefit for each employee of $7,000 per quarter or $28,000 for the year.


The ERTC is claimed on the Employer’s Quarterly Federal Tax Return (IRS form 941 or 941X). The employer has the option of retaining employment tax deposits up to the value of the credit. If the payroll deposits are not enough to cover the credit, the employer may file Form 7200 to request an advance payment on the credit (not available to large employers in 2021). The credit is then reconciled on Form 941.


The IRS continues to issue guidance regarding the nuances around calculating and claiming the credit. Rehmann continually monitors the situation and is prepared to help you with the process to maximize your benefit.

 

PPP 2.0

The second round of PPP loans is similar to the first, with several important differences. Highlights include:

  • A total of $284 billion is available to first- and second-time eligible borrowers, through March 21, 2021.
  • Eligible first-time borrowers include: businesses with 500 or fewer employees that are eligible for other U.S. Small Business Administration (SBA) 7(a) loans; sole proprietors, independent contractors, and eligible self-employed individuals; not-for-profits, including churches; accommodation and food services operations with fewer than 300 employees per physical location.
  • Loan amounts: 2.5 times monthly payroll costs (3.5 times for accommodation and food service employers classified in North American Industry Classification System Code 72), with a maximum amount of $2 million.
  • Payroll costs include group life, disability, vision, and dental insurance costs.
  • Organizations drawing a second PPP loan must have fewer than 300 employees (or less than 500 for accommodation and food service employers classified in NAICS Code 72), must have used or will use the full amount of their first PPP loan, and have experienced a 25% decrease in gross revenue in any 2020 quarter compared to the same quarter in 2019. The loan coverage period is flexible – recipients may choose any timeframe between 8 and 24 weeks.
  • Forgivable costs have expanded to include certain operating expenses, property damages from public disturbances, supplier costs, and worker protection (PPE).
  • Shuttered Venue Operator Grants, totaling $15 billion, are available to live venues, independent movie theaters, and cultural institutions. These funds, however, can’t be used in conjunction with PPP funding.
  • Economic Injury Disaster (EIDL) loan advances are no longer deducted from PPP loan forgiveness. In addition, $20 million is allocated for EIDL advances through Dec. 31, 2021.
  • Business expenses paid with forgiven PPP loans are tax-deductible, superseding disputed IRS guidance that such expenses could not be deducted.
  • Forgiveness applications for loans under $150,000 will be simplified to a one-page certification, similar to the EZ forgiveness application previously provided. While it’s unclear when exactly banks will begin accepting PPP2 loan applications, it’s expected to start in early February after the SBA releases guidance to banks. In the meantime, it’s a good idea to talk with your financial advisor, assess your financial situation to determine whether applying for a first or second PPP loan is the right choice, and prepare the necessary documentation if you’re going that route.

On-demand webinar

This webinar features a panel of Rehmann advisors addressing the greatest tax impacts and other relief aid provisions affecting both businesses and individuals. WATCH NOW. 

Biden Tax Plan

With President Biden officially taking office on January 20, 2021 and Democrats holding slim majorities in both the House and Senate, many individuals and businesses are wondering what this means for tax policy over the next few years.

Although it is too early to make predictions on when and in what form new tax legislation will come, it is important to consider how potential changes may impact you and your business. Here is a summary of noteworthy individual and business proposals included in the Biden tax plan.

Individual tax proposals

Although the Biden individual tax plan would undoubtedly raise taxes for specific groups of taxpayers, it is centered on the idea of not raising taxes for those making under $400,000 a year. It is unclear how the threshold would be implemented (namely, would the $400,000 limit apply equally to a single individual versus a married couple), but it is a promise Biden reiterated numerous times throughout his campaign.

With that in mind, the individual proposals include:

  • Raising the top individual tax rate from 37% to 39.6%
  • Taxing qualified dividends and capital gains at ordinary income rates (presumably 39.6%) for taxpayers earning more than $1 million
  • Phasing out the 20% qualified business income deduction for partnership and S-corporation income for taxpayers earning over $400,000
  • Limiting the value of itemized deductions for taxpayers in income tax brackets above 28% and reinstating itemized deductions limitations that were eliminated as part the 2017 Tax Cuts and Jobs Act
  • Subjecting all wages or self-employed income over $400,000 to the 6.2% social security payroll tax for both the employee and the employer
  • Eliminating the step-up in basis for inherited assets
  • Reestablishing the first-time homebuyers’ tax credit for up to $15,000
  • Expanding certain residential and vehicle energy credits

Business tax proposals

The Biden business tax plan is centered on three main ideas: rolling back corporate tax cuts from the 2017 Tax Cuts and Jobs Act; using the tax code to incentivize domestic manufacturing; and promoting renewable energy.

The business proposals include:

  • Raising the corporate tax rate from 21% to 28%
  • Creating a new 15% minimum tax based on book income for corporations with $100 million or more in net income Increasing the global intangible low tax income (GILTI) rate on foreign subsidiaries owned by U.S. companies
  • Limiting like-kind (1031) exchanges used by the real estate industry
  • Creating a new 10% surtax on corporations that offshore manufacturing to foreign countries in order to sell goods or provide services back to the United States
  • Creating a new 10% “Made in America” tax credit for companies that create jobs for American workers
  • Eliminating certain tax preference items for the oil and gas industry Expanding several current energy investment and renewable energy tax credits

While it certainly is not clear how many of the above proposals will find their way into law, and it remains uncertain when exactly any tax changes would go into effect, it is still important to consider these items during year-end tax planning. We’re here to help make sense of these uncertainties and your specific tax position. To discuss further how these potential changes could impact you and your business, contact Rehmann today. 

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