By Abe Livchitz, CPA, Senior Tax Manager
Action Is Required
The state run CalSavers program was enacted in 2016 to provide employees an opportunity to build retirement savings and let employers avoid administrative fees and fiduciary responsibilities. An email outreach program was launched towards the end of 2020, so you may have received a communication similar to the one below stating that you are required to register for the CalSavers retirement plan program. Currently, this requirement only applies to California employers with more than 100 employees, therefore registration may not be required at this time. (more…)
The Employee Retention Credit was enacted in March 2020 as part of the CARES Act. It was enhanced and expanded when business relief legislation passed in December 2020 making it a more valuable option to generate cash flow. The amount of the credit was significantly increased, employers are now allowed to claim the credit until June 30, 2021, and the restriction that prevented employers with PPP loans from claiming this credit was repealed retroactively to March 2020. This repeal offers a significant opportunity for PPP loan borrowers to now benefit from this credit.
For employers eligible in 2020, the credit can be claimed on amended payroll tax returns and offset the employer portion of Social Security tax, but any excess credit is fully refundable. For 2021, employers can reduce their current federal payroll tax deposits and even request an advanced refund from the IRS. (more…)
As this very unusual year comes to a close, we can look forward to the prospects and challenges waiting for us next year. Until then, there are many tax planning opportunities available to individuals and business entities that can be implemented before December 31, 2020.
Congress is currently working on another stimulus package with provisions that will provide assistance to business entities and no significant tax changes for individuals. It is uncertain if this legislation will be enacted before the end of the year. Watch our website for further details.
Please contact us to discuss any of the ideas discussed below. (more…)
With the end of 2020 approaching, it is time to prepare for what promises to be an unprecedented tax season. Here are some of the key issues that business owners, financial officers, and tax executives should consider now.
Note: This is by no means a complete list, and the tax consequences of some pandemic relief programs might change. (more…)
Action Required On December 1, 2020
In September 2020, California enacted Senate Bill 1447, the Small Business Hiring Tax Credit (SBHTC) to provide financial relief to qualified businesses and encourage hiring and retaining employees. The tax credit is $1,000 per increase in full-time equivalent (FTE) employee up to a maximum credit of $100,000 per employer. Unlike most tax credits, this credit can benefit unprofitable businesses that do not have an income tax liability as the credit can also be applied to offset the payment of sales and use tax deposits. The credit will be administered by the California Department of Tax and Fee Administration (CDTFA) which is requiring employers to reserve an allocation of the credit beginning December 1, 2020. (more…)
We all have heard and know of people becoming millionaires overnight with “stock option” money, especially in Silicon Valley. Stock options are an important part of the compensation package for many employees in the technology sector. For companies, it is a tool to retain employees and motivate them to perform better as the company’s growth and success translates to their success.
The most common types of stock options are Incentive Stock Options (ISO’s) and Non-Qualified Stock Options (NQSO’s). The tax consequences to employees are as follows:
Incentive Stock Options (ISO) (more…)
Beginning next year several tax filing due dates will be changing. The existing filing schedule has been in place since I manually prepared tax returns with pencil and paper before the computer age began so these changes are significant. The new filing dates were established under the Protecting Americans from Tax Hikes (PATH) Act of 2015 without much publicity outside of the tax practitioner community. The new filing dates are effective for tax years beginning January 1, 2016, so taxpayers unaware of the new dates may have an unexpected surprise next year.
Fortunately, the traditional April 15th due date for individual tax returns has not changed but the due dates of business returns have been modified. The changes were implemented to help smooth the tax filing process for taxpayers owning interests in pass-through entities such as partnerships and S-Corporations. (more…)
I have previously discussed tax opportunities for selling the business by a C corporation. I would like now to switch our focus to options available to S corporations.
One of the options for an S corporation to sell its business is to sell its underlying assets. This is often a preferred option by a potential buyer as it provides a step up in acquired assets. Unlike a C corporation, the S corporation is a pass-through entity and its federal taxable income is only taxed at a shareholder level. Thus, double taxation is usually avoided with some limited exceptions. (more…)
Selling your business may seem like a natural progression for your company and the possibility of early retirement may look closer than ever, but without careful planning and execution and thorough consideration of the tax impact of sale, eventual financial outcome may end up being much smaller than anticipated.
You can structure sale of your business in two primary ways: 1) sale of the stock or interest in the company or 2) sale of underlying assets. Depending on the structure chosen, special elections made and type of underlying assets, composition of gain as ordinary vs capital may differ significantly and so may the tax liability.
Now let’s consider tax consequences of selling your business under two different scenarios. Under the first scenario, you are the owner of a closely held C corporation. Under the second scenario, you are the owner of a pass-through entity, an S corporation or a partnership. (more…)