There’s no doubt that COVID has dealt the nation’s economy a tough blow. Case in point are the sheer number of jobless claims made nationwide since the pandemic began. Just five months ago, unemployment sat around three to four percent. According to the U.S. Bureau of Labor Statistics, in June, states’ unemployment numbers averaged more than nine percent.
If your business is hiring right now, you may very likely be hiring someone who received unemployment insurance this year. Therefore, you may qualify for the Work Opportunity Tax Credit (WOTC).
Individuals who have been unemployed at least 6 months may qualify your company for the WOTC federal tax credit. You could save as much as $2,400 for each approved new hire and in some cases, as high as $5600 for veterans who have been unemployed.
Eligibility is based on a few factors. New hire applications must be submitted within 28 days of their hire date. Additionally, applicants must work at least 120 hours throughout the twelve months following their hire date.
When the CARES Act was announced, it ignited a glimmer of hope within the small business community. Many companies were either closed or saw their revenue drop drastically as a result of the novel coronavirus.
But hope quickly disappeared as major corporations found a way to access the money that was meant for America’s small businesses. The money within the Paycheck Protection Program (PPP) quickly disappeared. Just days after the program was put into action, it ran out of money.
The federal government replenished the funds when it realized large corporations like Shake Shack ($10 million) and Ruth’s Chris ($20 million) were receiving funds while small mom and pop shops missed out. Both Shake Shack and Ruth’s Chris have since said they will not accept the money, however, the move brought attention to a large loophole in the PPP legislation. The ability of large corporations to access PPP funds.
The False Claims Act
And that leads us to the False Claims Act.
The False Claims Act, according to Cornell Law School, is “Federal statute setting criminal and civil penalties for falsely billing the government, over-representing the amount of a delivered product, or under-stating an obligation to the government. The False Claims Act may be enforced either by the Justice Department or by private individuals…”
It’s a law, that if used, would allow the federal government to pursue criminal and civil penalties against any company that misuses the PPP.
Should a Small Business Owner Be Worried?
This week, headlines like “For PPP recipients: You may be the subject to whistleblower lawsuits under false claims law” showed up in publications like the Witchita Business Journal.
The article is at least in part “clickbait” since it’s designed to get you to pay for a subscription so you can read the article. However, the crux of the argument is founded in truth.
US Secretary of the Treasury Steven Mnuchin has made multiple comments about the loans issued through the PPP and has promised that people taking advantage of the PPP will face “severe consequences”. He’s also promised that loans of $2 million or more will be audited before the government decides if it will forgive the loan amount. Mnuchin has also tossed around the words “criminal liability”.
Of course, you should be worried if you knowingly and deliberately defrauded the federal government. However, most small business owners are probably too small in the eyes of the government to warrant prosecution.
The comments from Mnuchin and the False Claims Law itself were designed for large corporations and businesses taking advantage of the federal government. Odds are, the government will not be pursuing you if you managed to secure a $10,000 PPP loan.
What if I’m Still Worried?
If you’re still worried and you want to find out more, the IRS and Small Business Administration (SBA) are trying to keep you informed. The Treasury Department has issued an entire document of FAQs to address concerns of borrowers. You can read it here.
Don’t Be Afraid to Ask for Help
We here at the Tax Credit Group have spent hours upon hours looking at, analyzing, and evaluating the CARES Act as well as all the legislation and updates that have come from the IRS, the SBA, and other government agencies. We are keeping up with the headlines and the rules and regulations behind those headlines.
If you’re a small business owner and you find yourself in doubt, please don’t hesitate to reach out to us here and ask a few questions. We would be happy to answer them or at least research until we have an answer. There’s a lot of material out there right now and a lot of changes and we want to make sure our clients, our friends, and our family stay informed.
When we talk to potential clients, sometimes they ask us why a tax credit specialist is something they need. It is a great question. After all, they are usually already paying for a CPA and this is just an added financial expense. What we tell them is that a tax credit specialist is something completely different.
How is a tax credit specialist different from a CPA?
We did a whole post about the difference between a tax credit specialist and a CPA and you can read it here. The short answer is that while a CPA has a broad understanding of the tax code and knows more than enough to file your taxes with the IRS, a tax credit specialist has a very specialized understanding of the tax code.
Tax credit specialists are focused on the sections of the tax code that deal with tax credits and they understand them word for word.
Why haven’t I heard of a tax credit specialist until now?
Odds are if you are reading this article, someone mentioned that you might benefit from a tax credit specialist and you Googled it to find out more.
The truth is that not every business qualifies for tax credits, but many businesses do and do not even realize it.
Does your business employ veterans, ex-felons, or persons with disabilities? Does your business conduct research? Does your business offer a health plan or retirement plan to your employees? These are all business expenses that can qualify for tax credits, but many businesses do not know that the credits are available. Usually, it requires a tax credit specialist to fill them in on what they are missing.
What is the benefit of hiring a tax credit specialist?
Most CPA’s will be able to tell you about small savings within your taxes. However, the tax code is immense. We’re talking thousands of pages, though exactly how many thousands is up for debate. No matter the answer, it is too much for any individual to know everything about. That is why there are specialists.
Specialists are people who focus on specific parts of the tax code and become experts in those specific parts. We just happen to be specialists in the tax credits part of the tax code. That means we know the ways you can and cannot save money through the use of tax credits. Through the years, we have figured out some tricks of the trade to make sure businesses are maximizing the benefits of those tax credits.
Our goal, first and foremost, is to discover as many ways as possible for you to earn credits that will directly offset the amount you owe on your taxes.
Why can’t I figure out the tax credits myself?
Figuring out which tax credits your business qualifies for and applying for them is certainly something you can do yourself. However, be warned that there are a lot of hoops the IRS wants a company to jump through to get a tax credit.
There are forms to be filled out, information to be gathered, and separate deadlines to meet. For something like the Electric Vehicle Tax Credit, the requirements to qualify are constantly changing and you have to be updated on those changes.
In other words, there is a lot of research and a lot of time that goes into applying for tax credits and there’s always the possibility that after all of that, the IRS will reject your claim. We have seen seasoned tax professionals struggle with learning about all the tax credits available and how to apply for those credits.
What if my company already operates at a loss?
Even if your company is losing money this year, it is still important to take tax credits if possible. There are a couple of reasons for this.
First, some tax credits are what is called refundable. That means if you have a credit and you owe zero dollars in taxes, the money left over will be refunded to you.
Second, some tax credits can be carried over from one year to the next. That means that even if you are operating at a loss this year, the tax credit could be used to offset any taxes your business owes next year.
If you still are not sure if you need a tax credit specialist, contact us here at Tax Credit Group. We will take a look at your situation and tell you if there is or is not savings that you can benefit from.
As I am sure you know by now, the 2019 tax deadline has been extended to July 15, 2020. We here at Tax Credit Group get a lot of questions about what that means for our clients and their taxes. So now seems like a great time to pull some of those answers together and put them in the same place.
Does that mean I cannot file my taxes before July 15, 2020?
Absolutely not. Just like all tax deadlines, the IRS will not penalize you for filing your taxes early. The extension means that the IRS is giving you until July 15, 2020, to file and pay your taxes without penalty.
What about my state taxes?
Most states have extended their tax deadlines to July 15, 2020, to match the federal deadline, however, a small handful of states have alternate deadlines. Here’s a list according to AICPA:
May 1 to file, June 1 to pay
What if I am owed a refund?
If the federal government owes you money, then filing early is not a problem. The IRS will process your refund based upon when you file, not upon the July 15, 2020 deadline. Therefore, if you are owed money, it’s in your best interest to file early and get a refund now.
What about the deadline to contribute to my IRA?
According to the IRS, the deadline to contribute to your IRA retirement account was also extended with the tax filing deadline extension. That means you have until July 15, 2020, to make contributions to your IRA and have them count against your 2019 taxes.
What about the deadline to contribute to my Health Savings Account (HSA)?
The same goes for the HSA.
What about tax estimates for next year?
If you are one of those people that owe taxes every year and pay estimates to off-set what you owe, then you need to be aware of the new deadlines for 2020 tax estimates. According to the IRS, “…first quarter 2020 estimated income tax payments due April 15, 2020, and second quarter 2020 estimated income tax payments due June 15, 2020, have both been postponed to July 15, 2020. Make a single payment in an amount sufficient to cover both your first and second quarter estimated tax payments on or before July 15, 2020.”
The tax deadline was extended to help alleviate some of the pressure taxpayers were feeling because of the novel coronavirus and the business shutdowns that followed. If you have other questions or concerns, you can find more answers to your questions on the IRS website. And if you still need help, you can always contact us here at Tax Credit Group.
Businesses around the world are hurting right now and many business owners are struggling with the dilemma of whether to layoff employees now or try to ride things out with the hope that they’ll get better. It’s an unenviable decision. For most employers, these people are like a second family and it’s not easy to let go of them. Which is why you sometimes need to think outside the box to get things done.
None of the solutions below are ideal, but if you’re looking for an alternative to layoffs, one of them might be your best option.
Freeze hiring, raises, and bonuses
If you have not already, make sure that you halt all payroll increases. That means freezing all hiring and raises and cutting out bonuses. You’re trying to maintain or decrease the amount you spend each week on payroll, not increase it.
Cut part-time staff and contractors
One way to make cuts to payroll without losing core team members is to eliminate part-time staff and contractors. Cutting hours or letting go of either can help lower your payroll. Just remember that these staff members and contractors may not be available again if you want to hire them back in the future.
Create a virtual office
For some businesses, the physical location is closed, and employees are working from home. If this is your situation, consider whether it’s working and working well. Can your business successfully operate in the long-term with a virtual office and online meetings? If the answer is yes, then you might be able to cut rent out of your expenses and funnel that rent into other expenses like payroll.
Pay cuts are a way to lower your payroll while still keeping part or all of your staff. However, pay cuts may foster dissatisfaction among your employees, especially if those cuts remain in place well after the business recovers.
Your ability to issue pay cuts to full-time employees will depend on the employment laws within your state as well as the contract you have in place with that employee. Be sure to contact your human resources specialist before you issue something like pay cuts across the board.
Similar to pay cuts, furloughs are also something you’ll need to contact your human resources specialist about before you institute them.
Furloughs are kind of like a temporary layoff. You’re giving an employee unpaid leave for an undetermined amount of time, but you’re planning on reinstating their pay when things get better. According to SHRM, the benefit of furloughs over layoffs is, “employers do not have to pay for recruiting, selecting, socializing and training new employees because the furloughed workers can pick up where they left off.”
What if I have to layoff employees?
If there’s no way around it and you have to layoff your employees, then there are ways to make it easier on the employee.
Be polite and empathetic. Make sure you state upfront that this has to do with the health of the business and that the employee did nothing wrong. Offer to be a reference for the employee during his or her future job search.
Have a list of resources available for them including where to apply for unemployment and other services.
These are difficult times and if you have a good relationship with your employees, they will understand that you’re trying to do your best by them.
Note: The above are options that you should explore, but please remember that they are general insights and not advice for your specific company. If you’re looking for advice that would directly relate to your business, please feel free to contact us here at Tax Credit Group or contact your financial adviser.
With shutdowns across the country, America has entered unchartered waters, and everyone is trying to figure out what it means for them. Lawmakers are doing what they can to help, but what ends up coming out of Washington, DC are massive pieces of legislation that cover millions of people but are difficult to understand.
The latest legislation, the Coronavirus Aid, Relief and Economic Security Act (CARES Act), is huge. 335 pages to be exact. It’s aimed at helping almost every American that’s suffering because of the COVID-19 outbreak and that means there’s a lot to dig in to. For a small business, it’s tough to know what’s for you and what’s not.
What should small business owners look at in the CARES Act?
If you’re a small business owner that’s struggling to do right by your employees whether the doors remain open or not, then the Employee Retention Credit within the CARES Act is what you want to be focusing on first.
As the IRS website states, the credit “…is designed to encourage Eligible Employers to keep employees on their payroll, despite experiencing economic hardship related to COVID-19…” In other words, don’t fire them, the IRS will try to help you keep them.
What do I need to know about the Employee Retention Credit?
There are three keys to the Employee Retention Credit:
The credit is 50 percent of the qualified wages and that includes qualified health plan expenses.
It applies to qualified wages paid after March 12, 2020, and before January 1, 2021.
The maximum amount you can claim for each employee is $10,000 which means $5,000 in credit.
How do you know if your business is eligible for the Employee Retention Credit?
To be an eligible employer, you need to conduct business in 2020 and face one of two hardships.
One, you’re forced to fully or partially suspend your business operations because a government authority told you to. That means the mayor of your city or your state’s governor issued a stay at home order that affected your business.
Or two, you see a significant decline in gross receipts during a calendar quarter. The decline must be 50% or greater to be considered significant. So, if the gross receipts from Q1, Q2, and Q3 of 2019 significantly better than those in Q1, Q2, and Q3 of 2020 then you would be considered an eligible business.
The self-employed are not eligible for this credit.
What else should I know about the Employee Retention Credit?
The cool thing about the Employee Retention Credit is that it’s a tax credit, which means it’s fully refundable. A fully refundable credit is awesome because it means if your credit exceeds the amount that you owe in taxes, then you get that money back.
The credit is applied to the employer owed portion of social security taxes, in other words, the social security taxes that are paid by the employer on behalf of the employees.
The federal government has worked out a system of allowing employers to divert funds currently owed to the federal government in taxes to employee wages. But doing that is a lot more complex than it sounds. If you need to use taxes you currently owe to pay your employees, I suggest that you talk to your tax adviser or contact us here at Tax Credit Group before you start. There may be some ins and outs of the system that you may not understand, and it would be good to talk them through with someone who does understand.
Tax Credit Group has tried to follow all of the things happening on Capitol Hill during this crisis and we’ve tried to share with you as much as we can. If you’re looking for details on the other small business help that’s coming out of Congress, then take a look at the blog post we did on the Families First Coronavirus Act in March.
We also gathered together some of the key federal sites to look at for COVID-19 updates as they come out of Congress. You can find that here.
And if you’re one of the lucky businesses that are growing during this time and looking to hire new employees, I strongly urge you to consider hiring people that qualify for the Work Opportunity Tax Credit. It’s a credit that a lot of employers are missing out on because they simply don’t know about it.
While most businesses across the country have come to a grinding halt as “stay at home” orders are put into place, there are some essential businesses that are desperate for employees. Grocery stores, delivery businesses and the like are searching for employees and can’t seem to find enough to fill the need.
If you’re one of them, now is the best time to take a look at the Work Opportunity Tax Credit (WOTC). It could open up a whole new pool of potential employees to your business.
What is the Work Opportunity Tax Credit (WOTC)?
As we’ve talked about in previous posts, the Work Opportunity Tax Credit (WOTC) is a credit that’s given to employers who hire employees from certain groups. Groups like veterans, ex-felons, the long-term unemployed and people on food stamps.
One of the best things to know about the WOTC is that it is unlimited. Whether you hire ten workers or one hundred that fall into these specific groups, you’re allowed to take a tax credit for the first year of that person’s employment as long as that person meets the IRS requirements. You can find out more about those exact requirements here.
For people not so savvy about taxes, that’s even better than a tax deduction. A tax credit is a dollar for dollar match. In simple math terms, if you owe $10,000 in taxes and you have $10,000 worth of tax credits, you’re net zero in what you owe.
Why is the WOTC even more beneficial now?
It’s crazy to think, but the WOTC may be even more beneficial to businesses now than it was at the start of 2020. That’s because there are some very interesting things happening on Capitol Hill and it could mean double the benefits for employers.
While the actual wording from the IRS is still being worked out, the WOTC may be able to work in conjunction with the Employee Retention Credit under the CARES Act. The CAREs Act is the $2 trillion bill that was signed into law by the President on March 27, 2020. If the employer can claim both the WOTC and the Employee Retention Credit at the same time, that employer would have multiple tax credits for the same employee.
It’s something we’re keeping a close eye on here at Tax Credit Group.
Why should I hire WOTC employees?
Which leads to the question that many employers ask: if it’s so great, why aren’t more companies taking advantage of the WOTC?
The answer is they don’t know about it.
Major corporations like Boeing and Lockheed Martin are taking advantage of the WOTC. They are two of the leading employers of military veterans (CNBC) and also employ many people with disabilities (Monster.com). Companies like these are making the most of the tax credits because they employ people who understand the intricacies of taxes and tax credits.
It’s the smaller businesses that miss out on tax credits and they shouldn’t be because they need the savings more. Businesses like these need a company like us to help them see the tax credits they’re missing, including the WOTC.
Aside from the tax credit, what’s the benefit of hiring WOTC employees?
Tax credit aside, WOTC employees bring with them other benefits.
We’ve written about the benefits of hiring ex-felons and military veterans in the past. Those are two good reference articles as you look to hire from these key groups. If you’re an employer that’s simply trying to figure out how a role in the military would translate into something beneficial to your company, check out our post on translating military service to the civilian job market.
We here at Tax Credit Group understand that the novel coronavirus has brought about new and frightening situations for small businesses. For some, it means explosive growth as an essential business. For others, it means shutdown and uncertainty.
In both cases, there are bills at the federal and state levels that are designed to help. We’ve created a couple of resources for you as your business moves forward including how to prepare your business for the possibility of coronavirus. There’s also a post that gathers all the key resources for small businesses in one place.
Tax Credit Group is monitoring everything that’s happening at the federal level very closely. As of April 1, 2020, the Families First Coronavirus Response Act and CAREs Act are both up and operating. Reach out to us and we’d be happy to look at what that means for your business. We’ll also look for any state and local help that may be available to you.
About a week ago, President Trump signed the Families First Coronavirus Response Act. The bipartisan legislation was designed to make sure that households don’t fall apart in these uncertain times. If you want full details on what the Act means to small and medium-sized businesses, you can see our post from last week.
The government’s response to what’s happening with COVID-19 (a.k.a. novel coronavirus) is constantly changing and so there is a lot to read if you want the latest and most accurate news. If it seems like it’s overwhelming at times, we here at Tax Credit Group understand.
To help, we gathered together some links that you want to keep an eye on. These are links that will be updated by their respective agencies as the situation on Capitol Hill changes. That means you don’t have to worry about seeking out the updates through news feeds because these agencies will be updating directly.
The Centers for Disease Control (CDC)
The CDC’s Guidance Business Response link (here) will help businesses understand the best way to plan, prepare and respond to the novel coronavirus. The link includes updated cleaning and disinfection guidelines for businesses as well as the best practices for social distancing in the workplace and strategies and recommendations for how businesses can respond to COVID-19.
The CDC has additional resources for businesses here.
The Internal Revenue Service (IRS)
The IRS recently extended the federal tax filing deadline to July 15 to give businesses and individuals more time to pay and file their taxes.
The IRS Coronavirus page, found here, gives you a general overview of all of the actions taken by the IRS during the COVID-19 outbreak.
For details on what the IRS is doing for businesses as of March 24, 2020, check out the letter that the IRS posted on its website addressing the changes. You can find it here.
Small Business Administration (SBA)
The SBA is a federal agency designed to give advice and guidance to small businesses.
The SBA has a page dedicated to guidance on loan resources for businesses that are suffering during the COVID-19 response, here.
America’s Small Business Development Center works in conjunction with the SBA. It has its own list of resources to help small businesses through these tough times here.
The Consumer Finance Protection Bureau has an entire site dedicated to protecting your money during coronavirus. You can find it here.
State and Local Help
When it comes to state and local help, it’s going to vary depending on where you live.
Major cities like New York City and San Francisco are creating specific sites to help small businesses and employees understand what’s happening within their city and how they can get help. Many major cities and counties are creating sites like these to deal with all the issues that small and medium-sized business owners are facing and it’s important to know if your local government has one.
Your state government may have a separate site designed to help as well.
Other Financial Help
If you want to know how the latest changes in the federal government affect your taxes, you can also check out publications like Accounting Today, which just ran an article about the federal government allowing you to use your payroll tax credits to help pay for paid leave during coronavirus (here).
The Tax Foundation also has articles that look at what’s happening in Washington, D.C. and what it means for your taxes both in the U.S. and abroad. You can see a great overview of it all here.
A word of warning…
These articles are very informative, but they are also very dense looks at accounting and taxes. They can be difficult for the average small business owner to understand without a background in accounting. That’s why Tax Credit Group is here to help. If you ever have questions about how the current situation on Capitol Hill or how your state is going to affect you and your business, please reach out to us and we’ll be happy to help.
Note: This article was written on Thursday, March 19, 2020, less than 24 hours after President Trump signed the bill into law. It covers what’s happening on Capitol Hill at this time, but does by no means represent what could happen in the future. This is a fluid situation. Information is constantly changing. Because this affects so many of our clients, friends, and family, we here at Tax Credit Group felt like it was something that needed to be addressed.
The coronavirus (a.k.a. COVID-19) is hurting small businesses and families across the United States and now the federal government is stepping in to try and alleviate some of the pain. On Wednesday evening, President Trump signed the Families First Coronavirus Response Act. It’s an act designed to help small businesses and wage workers deal with the impact of the coronavirus.
Here’s what we know now and what it means to you, your family, and your business.
What is the Families First Coronavirus Response Act?
The bill was created in the House of Representatives after extensive meetings between House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin. It is designed to provide paid leave for workers who have been affected by the coronavirus, including those who fall ill themselves and those that have to stay at home to care for a child whose school has closed because of the coronavirus.
Small and medium-sized businesses have approximately 15 days to comply with the act.
There are a couple of important components of this bill that you need to know. First, the relief will not last forever. These are short term solutions aimed at making it possible for America’s workforce to survive a three- or four-week shutdown.
Second, it doesn’t cover ALL wage workers in the United States.
Why the Families First Coronavirus Response Act May Not Help Millions of American Workers
The Washington Post points out that one large group of the American workforce is not mentioned in this bill, employees who work for major corporations with 500 or more employees. Lawmakers are relying on major corporations to “do the right thing” and offer sick leave and paid family leave to their employees during this crisis, but there’s no federal mandate behind it.
Corporations like Walmart, Chipotle, and Starbucks are offering varied leave programs for employees. Because there are no federal standards, these policies are not the same for everyone. While one corporation may offer two weeks of sick pay, another may only offer one week.
The result, while some hourly employees are taken care of, others are left trying to figure out how to earn enough money to care for their families.
Why the Families First Coronavirus Response Act could hurt small businesses
While the Families First Coronavirus Response Act takes great efforts to help the employees of small and midsized companies, it causes problems for those midsized and small businesses. According to The Washington Post, these companies will be required to offer two weeks of paid sick leave and up to 12 weeks of paid family and medical leave for employees affected by the coronavirus who have worked for the company for at least a month.
The businesses will get the money back eventually, but they’ll have to foot the bill until then.
The idea is that the businesses will pay their employees and then receive the money back in the form of a tax credit. So, if a business pays out $10,000 in employee sick and family leave during this time, it will see a dollar for dollar match the next time it files taxes. That means it could be as much as a year if not more before some of these businesses recoup all of their money.
Small Window of Relief for Small Businesses
The bill does allow for some small businesses to apply to be exempt from this requirement, but those businesses must prove that paying would “jeopardize the viability of the business”.
Since this rule has not been tested, we don’t know how lenient or strict federal officials will be with exemptions.
Other Families First Coronavirus Response Act Highlights
According to Forbes, there is more help within the bill for America’s most vulnerable communities.
There are specific funds for Women Infants and Children (WIC) and The Emergency Food Assistance Program (TEFAP). The bill also allows for state plans to provide food to families with children that would have received free or reduced-price meals if school was in session.
It also provides about 25 million more home-delivered and pre-packaged meals to low-income seniors through the Senior Nutrition Program.
It will reimburse people without health insurance for COVID-19 testing and services.
The Department of Veterans Affairs will fund COVID-19 testing for veterans.
Small Business Help in Illinois
States are also doing their part to try and alleviate the pain for small businesses. On Tuesday, Illinois Governor J.B. Pritzker announced that he was filing for a federal loan program to help small businesses in Illinois.
According to WGEM, the Governor’s Office has also taken extra steps to try and alleviate the pain for small businesses and wage workers. Among the moves within the office:
An executive order to waive the 7-day waiting period that residents normally have to wait to receive unemployment insurance. The office is also working with the federal government to try and extend benefits beyond 26 weeks if the crisis continues.
A request to the Illinois Commerce Commission to immediately issue a moratorium on utility shutoffs across the state including energy, telecommunications, and water. As well as a change in the payment process so people are not saddled with debt during this tough time.
An effort to expand the services of state food banks. The state has already received a waiver from the federal government to continue handing out meals to children who qualify for free and reduced lunches.
A federal waiver has been filed to expand Medicaid coverage.