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Data collection from employers isn't new. The Equal Employment Opportunity Commission (EEOC) has been harvesting employment-related information for a long time. The last year employers had to file the EEO-1 report was for 2018, which was due in 2019. Now that the EEOC is returning to a more normal staffing level, companies that are required to report census data will need to file an EEO-1 report for 2019 and for 2020 (due by July 19, 2021). It's been a while since you filed these reports, so you might need a refresher course. Which Employers Are Required to File? The first step is determining whether you need to file a EEO-1 report. Your employee count may have changed enough from two years ago that you're no longer required to file (though you'll still need to notify the EEOC of your changed status). Or you may need to fill out a report for the first time. For private employers, if you have 100 or more employees during the subject year, you need to file. (For companies doing business with the federal government, the threshold is 50 or more employees.) If you're an affiliate of a parent organization, the parent has the filing responsibility. Filing Nuts and Bolts If you're new to the EEO-1 report, this legal requirement has been in place since 1966 — two years after the enactment of the Civil Rights Act of 1964. What's somewhat new is that the filing is now all electronic, so you'll need to set up an online account with the EEOC. You can either submit the report directly into a secure EEOC portal or simply upload the data. The information you report must be based on your employee census for a particular "workforce snapshot pay period" during any of the final three months of the year. The pay period is whatever you use for payroll (for example, weekly, every two weeks or bimonthly). This means that if your headcount was below 100 before October, but rose above it in the 4th quarter, you'd be required to file the EEO-1. Also, you can pick a different 4th-quarter snapshot pay period for each year's report. Which employees need to be counted? You must count both full and part-time, including those who work from their homes. Also, even if an employee left your company after the snapshot pay period, that employee must still be counted for the census. Breaking Down the Details The employee census data requires you to group employees by gender, ethnicity and job category. In addition to the employee census data, you'll need to provide not only your EIN, but also your North American Industry Classification System (NAICS) Code and Dun & Bradstreet (D-U-N-S) Number. The EEOC employer Q&A website breaks down some of the variables you might deal with in collecting data. Here are three examples: Employees are requested to self-identify their race/ethnic classification; however, doing so is voluntary. What if an employee declines to state his or her ethnicity? The EEOC allows the use of existing employment records or observer identification. However, data obtained from someone other than the employee should be kept separate from the employee's regular personnel file. Employees are asked to report their gender, but some workers may list gender as "nonbinary." How does the EEOC recommend the employer record that data? In that situation, employers are instructed to write "additional employee data" with an explanation in the comment box of the certification section of the online form. Employers are expected to identify jobs on the EEO-1 based on a list of nine job categories: first/mid-level officials and managers, professionals, technicians, sales workers, administrative support workers, craft workers, operatives, laborers and helpers, and service workers. What if some jobs in your company don't fit easily into a category? Employers may consult the EEOC's 32-page job classification guide with scores of examples of job titles and the broader classification they fall under. More answers will be provided by the EEOC as new questions arise. Why Bother to Report? Many employers wonder, "What are the legal consequences of failing to fill out these forms?" If you're caught, the federal regulations state that you "may be compelled to file by order of a U.S. District Court." While penalties aren't specifically stipulated and the chances of being caught if you don't run into any other compliance problems may be relatively small, following the rules may have important benefits. You won't have to worry about being the rare example of a company that gets caught flouting the rules, especially if you're a small business. However, completing the reports gives you a chance to look at your workforce from the perspective of an employee who might be inclined to file a discrimination case against you. If there are clear patterns that hint at illegal employment discrimination (intentional or otherwise), it's better to proactively address the situation than to wait until you are sued. Also, if you do face an employment discrimination lawsuit and haven't filed EEO-1 reports, your credibility in defending yourself may be seriously compromised. Final Thoughts EEOC.gov offers more details about filing exceptions for the EEO-1. The deadline is still weeks away. But don't put off collecting the data, especially if you'll have employees taking time off in the summer months. If you still have questions, contact us today! We are committed to being your most trusted Business Advisor. We view every client like a partnership, and truly believe our success is a result of your success! We assist clients with accounting, tax preparation and financial advising in the Bryan and Navasota, Texas, area. Interested in working with us? Fill out a new client inquiry here.

Many privately held businesses have incurred losses during the COVID-19 pandemic. Unfortunately, the federal income tax passive activity loss (PAL) rules can limit an owner's ability to currently deduct tax losses thrown off by passive activities. Here's an overview of how the PAL rules apply to members (owners) of limited liability companies (LLCs). Focus on LLCs An LLC that's owned by one individual is generally treated as a sole proprietorship for federal income tax purposes. Losses from single-member LLCs are potentially subject to the PAL rules. An LLC that has several members (owners) is generally treated as a partnership for federal income tax purposes. Losses passed through to individual members of such LLCs are also potentially subject to the PAL rules. PAL Basics In general, you can deduct PALs only to the extent you have passive income from other sources, such as positive income from other passive activities or gains from assets used in other passive activities. Unfortunately, many individuals have little or no passive income, so most (or all) of their PALs are suspended and carried over to future tax years. You can deduct suspended PALs when you have passive income or when you sell the activities that produced the PALs. But those events might not happen for years. However, when an LLC member "materially participates" in an LLC's tax-loss activity for the year, that activity is classified as nonpassive. That means it's exempt from the PAL rules for that year. So, you can currently deduct losses from the activity unless some other federal income tax rule prevents that favorable outcome. For individuals, meeting the material participation standard is the key to deducting losses from business activities for federal income tax purposes. Individual owners must pass at least one of seven tests to meet that standard. Individual owners of multi-member LLCs that are treated as partnerships for federal income tax purposes must apply the material participation tests at the member (owner) level, rather than at the LLC level. (See "7 Material Participation Tests" at right.) Unfavorable Rule for Limited Partners If an individual LLC member is classified as a limited partner for PAL purposes, he or she must pass the first, fifth or sixth test to establish material participation. The other four tests aren't available to LLC members who are classified as limited partners for PAL purposes. Some individual members of multi-member LLCs that are classified as partnerships for federal income tax purposes may be classified as limited partners for PAL purposes; others are classified as general partners. Consult your tax advisor to determine which classification applies to your ownership interest. Work Done in Capacity as Investor Time spent in the capacity as an investor doesn't count for purposes of passing the material participation tests unless the individual is directly involved in the day-to-day management or operations of the activity. For purposes of this restriction, work done in the capacity as an investor includes: Studying and reviewing financial statements or reports on operations of the activity, Preparing or compiling summaries or analyses of the finances or operations of the activity for the individual's own use, and Monitoring the finances or operations of the activity in a non-managerial capacity. Unfavorable Exception for Self-Rentals IRS regulations establish another unfavorable exception: the self-rental income recharacterization rule. Under this exception, an individual's net rental income can be recharacterized as nonpassive if it's collected from a business in which the individual materially participates (in other words, a nonpassive business owned by the individual). This rule aims to prevent individuals from generating passive net rental income by renting property to businesses in which they materially participate, and then using passive losses from other sources to offset that passive net rental income. However, the opposite isn't the case: When the self-rental activity generates a net loss, it remains a passive loss. 7 Material Participation Tests: The IRS has prescribed the following seven tests to determine if you can meet the material participation standard with respect to a particular business activity: 1. More-than-500-hours test . This is passed if the individual participates in the activity for more than 500 hours during the year. 2. Substantially-all test . This is passed if the individual's participation in the activity during the year constitutes substantially all the participation by all individuals (including those who aren't owners of interests in the activity) during that year. 3. More-than-100-hours test . This is passed if the individual participates in the activity for more than 100 hours during the year, and no other individual (including nonowners) participates more during that year. 4. Significant participation activity (SPA) test . This is passed if the activity is a SPA in which the individual participates for more than 100 hours during the year, and the individual's total participation in all SPAs during the year exceeds 500 hours. 5. Prior-year material participation test . This is passed for the year if the individual materially participated in the activity for any five of the 10 immediately preceding years. 6. Personal service activity test . This is passed for the year if the activity is a personal service activity, and the individual materially participated in the activity for any three preceding years. 7. Facts and circumstances test . This is passed if consideration of relevant facts and circumstances show that the individual materially participates in the activity on a regular, continuous and substantial basis. The individual must participate for more than 100 hours to be eligible for this test. In addition, an individual's hours performed in the management of an activity don't count for purposes of this test unless 1) no other person who performs management services for the activity receives compensation for such services, and 2) no other person who performs management services for the activity spends more time on such services than the individual. If you pass one or more of these seven tests for the tax year in question, you meet the material participation standard for that activity for that year, which means that activity is non-passive for you for that year. If so, you're exempt from the PAL rules for that activity for that year. Need Help? If you own an interest in an LLC that incurs losses, the PAL rules can be a big deal. We can help determine whether you meet the material participation standard. If so, you may be allowed to deduct your losses in the current tax year — if not or if you're affected by an unfavorable exception, your losses may be suspended under the PAL rules and carried over to future tax years. Don't hesitate to contact us today! We are committed to being your most trusted Business Advisor. We view every client like a partnership, and truly believe our success is a result of your success! We assist clients with accounting, tax preparation and financial advising in the Bryan and Navasota, Texas, area. Interested in working with us? Fill out a new client inquiry here.

How can tenants pay their regular monthly rent bills if they're out of job? As unemployment skyrocketed due to the COVID-19 pandemic, Congress enacted a series of laws designed to provide relief to renters and protection from potential eviction. But these relief measures often left owners of residential rental properties holding the bag. However, for some landlords, the adverse effects of these measures haven't been as bad as they initially feared. And, fortunately, those who are being adversely affected can take steps to mitigate damages. Financial Relief Measures During the pandemic, many renters and homeowners have had difficulty making ends meet. The White House recently reported that one in five tenants is behind on rent, while more than 10 million owners were in arrears on mortgage payments. Congress and various other government authorities have provided relief to tenants through the following: The CARES Act authorized 120 days of eviction relief for tenants in federally backed housing. During this eviction moratorium period, landlords couldn't impose late fees, penalties or comparable charges. But this wasn't a point-blank exclusion from the obligation to pay rent. The Federal Housing Finance Agency announced an extension of the eviction moratorium from Fannie Mae and Freddie Mac properties until December 31, 2020. The Consolidated Appropriations Act (CAA) extended the eviction moratorium to January 31, 2021. President Biden subsequently extended it to March 31, 2021. The Centers for Disease Control and Prevention (CDC) continued the eviction moratorium through June 30, 2021, for single renters earning $99,000 or less (or married couples making $198,000 or less) who couldn't pay rent due to COVID-19. The American Rescue Plan Act (ARPA) provided $21.55 billion in emergency rental assistance through September 30, 2027, including $5 billion in emergency housing vouchers through September 30, 2030. These initiatives have been supplemented by others on the federal, state and local levels. Important: On May 5, U.S. District Court Judge Dabney Friedrich threw out the CDC's nationwide moratorium on evictions, saying that the agency exceeded its authority with the moratorium. As of this writing, the U.S. Justice Department plans to appeal the ruling and will seek an emergency order to put the judge's decision on hold. However, there still may be relief available for many renters: At least 43 states and Washington, D.C., have also temporarily halted residential or business evictions, though the protections are far from uniform. Mixed Bag of Financial Effects Initially, you might think that owners of residential rental properties are bearing much of the burden of the financial fallout from COVID-19 in the housing sector. But not every landlord is struggling — especially not those with sufficient resources to cushion the blow. In fact, many landlords have stayed profitable during the pandemic — and some have even realized record profits, according to a recent report. CBS MoneyWatch has also reported the following findings on the effects of COVID-19 in the housing sector: As of January 1, 2021, the delinquency rate for loans tied to apartment buildings was only 2.3%, compared to 13% for retail malls and 19% for hotel owners. In 2020, rents at Mid-America Apartment Communities increased by 2.5% on properties it owned before the pandemic. Operating profits jumped by 60%. The nation's largest landlord of single-family homes, Invitation Homes, reported its most profitable year ever in 2020. Residential landlords have largely benefited from governmental relief measures, particularly the eviction moratorium, which cut down on tenant turnover. The reason is simple: It costs more to find new tenants than it does to retain existing ones, even if you make certain financial concessions to keep them. Despite these relief measures, however, many other real estate owners — particularly small operators or those with low-income tenants — have felt considerable economic pain. If you're in this boat, you'll have to be flexible to stay afloat until the pandemic completely abates. 8 Ways to Reduce Damages Here are eight strategies for struggling landlords to consider: 1. Obtain your own relief . Landlords may benefit from foreclosure provisions, dating back to the CARES Act and extended thereafter. Notably, Biden extended the foreclosure moratorium for federally guaranteed mortgages through June 30, 2021. Similarly, the mortgage payment forbearance was extended through June 30, 2021, and borrowers who entered forbearance on or before June 30, 2020, can receive up to six months of additional mortgage payment forbearance. Relief may also be available through individual states. 2. Apply for a loan . A landlord may be able to obtain a favorable line of credit or a low-interest disaster loan from the Small Business Administration (SBA). Currently, banks are increasing credit lines, waiving fees and offering deferrals to qualified landlords. The SBA has also instituted other programs, so check to see what is available for your situation. 3. Work out partial payments . Although taking partial rental payments has traditionally been discouraged, it may be your best option right now. If you adopt this approach, update the loan agreement to specify, in writing, the amount and length of time this arrangement will remain in place. 4. Rely on security payments . Substitute the security deposit for the next monthly payment (or longer, if feasible). This short-term solution can buy some time if a tenant suddenly can't come up with a payment or two. But you should consider this measure only for tenants who have been dependable payors in the past. 5. Reward loyal tenants with a little give-and-take . Consider making certain concessions on a case-by-case basis to renters with a long history of timely payments. Be creative about finding alternatives. For example, you might revisit your expenses to help develop ways for tenants to continue payment, perhaps even temporarily lowering their rates. 6. Establish a rent deferral program . A written rent deferral program can help address the issue of late payments head-on by spelling out the eligibility requirements and the term for deferral. Identify tenants who may participate and notify them of this option. 7. Waive late payment penalties . Your existing lease agreements may stipulate that tenants owe various penalties or comparable late payment fees, depending on the infraction. When it's feasible, you might waive certain fees to engender loyalty among tenants — which, in turn, can help improve retention rates. 8. Revise rules for moving out . Unfortunately, some tenants may be forced to vacate, despite the assistance being provided. Offer to waive any fees for breaking the lease as a gesture of goodwill. Tenants may be more inclined to stay if they know they can easily move out later. Final Thoughts There's some light at the end of the tunnel, but landlords can't relax just yet. It's important to continue taking proactive steps to minimize the pandemic's impact, while you hold onto sound investment properties. We can help you evaluate the big picture and avoid making any knee-jerk reactions. View our business advisory services for more information! We are committed to being your most trusted Business Advisor. We view every client like a partnership, and truly believe our success is a result of your success! We assist clients with accounting, tax preparation and financial advising in the Bryan and Navasota, Texas, area. Interested in working with us? Fill out a new client inquiry here.

In recent years, the Equal Employment Opportunity Commission (EEOC) has annually fielded around 25,000 alleged violations related to the Americans with Disabilities Act (ADA). And while the majority of these claims are deemed unworthy of action by the EEOC, you don't want your company to be the exception. The average award in settled cases is roughly $60,000. Here's some important background on ADA claims and some recent cases that provide valuable lessons for employers. ADA Myths and Misconceptions The EEOC states that certain "myths" about the 30-year-old ADA have skewed the way some employers view its requirements. Perhaps the most basic, yet widely accepted myth is that the ADA forces employers to hire unqualified individuals with disabilities. What's the truth? According to the EEOC: "Applicants who are unqualified for a job cannot claim discrimination under the ADA." In addition, employers aren't required to give preference to qualified people with disabilities over others who don't have a disability. Many people also believe that employers "must give people with disabilities special privileges, known as accommodations." It's true that employers covered by the ADA (meaning those having at least 15 employees) are required to make reasonable accommodations. But the misunderstanding is in what's deemed "reasonable." The EEOC defines reasonable modifications as: "Modifications to a job, work environment or the way work is performed that allows an individual with a disability to apply for a job, perform the essential functions of the job, and enjoy equal access to benefits available to other individuals in the workplace." Accommodations often involve no direct cost to an employer, but when there is a cost, it's typically around $500. Case Round-Up Here are four recent cases brought by the EEOC. Each illustrates a specific category of ADA violations and how the concept of reasonable accommodations looks from a legal enforcement perspective. 1. Preemptive termination I. An employee was hospitalized for several weeks with pancreatitis, acute respiratory distress syndrome and pneumonia. Ultimately the person was cleared by a physician to return to work without restrictions. At that point, however, he was deemed by his employer to be a "liability" to the company and was terminated. The reason given was that, due to his health condition, he was at risk of being injured on the job. Terminating an employee based on "a disability or perceived disability" violates the ADA, the EEOC stated. "Too often employers rely on unfounded assumptions about an employee's ability to do his job, rather than the results of a medical examination." The company paid $85,000 to the employee in monetary relief as part of the settlement. 2. Preemptive termination II. The second case also involved the termination of an employee with a serious health condition. In this situation, the employer cited an industry standard as the basis for its decision. The terminated employee was a commercial diver who maintained his job while undergoing radiation and chemotherapy cancer treatment. He took a leave of absence for surgery but was terminated when he sought to return to work. Industry guidelines suggest people who have had cancer within the past five years are, in general, unfit to perform that kind of work. But, the EEOC noted that those guidelines also call on employers "to make individualized medical assessments," which this employer failed to do. More importantly, the ADA has a similar requirement, and the law supersedes industry guidelines. "This lawsuit reminds employers that the ADA takes precedence over internal policy or trade association guidelines," the EEOC commented. The company agreed to pay $125,000 in monetary relief. 3. Failure to accommodate. Here, an employer accepted a $160,000 settlement after backing away from a "reasonable accommodation" arrangement with an employee. The worker developed a serious ailment in both feet and was urged by her physician to stay off her feet as much as possible. Her employer initially agreed to allow her to telecommute. But after a week, the employee was placed on unpaid leave without benefits, and it didn't appear that she would be allowed to return to her job. The employer's decision was "unilateral" and made "despite the fact that she could perform the essential functions of her job from home," according to the EEOC. "An employer should accommodate an employee who can perform the essential functions of the position with a limited period of telework if it does not impose an undue hardship" on the employer, it added. The outcome of the case was affected by the employer acting without a required "interactive process" to seek a reasonable compromise and the failure to give the telecommuting arrangement a longer trial period. 4. Job offer withdrawn. The ADA protects job applicants as well as employees. This case involves an individual who had been offered a job but had to defer the date of reporting for work due to a sudden pregnancy-related disability. Specifically, the woman developed preeclampsia, and, five days prior to her scheduled start date, had to undergo a premature induced labor. She immediately informed the employer by email. "Within hours, she received a voicemail from [the employer] withdrawing the offer of employment, even though she needed only the minor accommodation of delaying her start date by several weeks," according to the EEOC. "The law requires that employers engage with applicants and employees to provide reasonable accommodations for disabilities," commented the EEOC. Although the case hasn't yet run its course, the EEOC stated that it "underscores that pregnancy-related disabilities are covered by the ADA." Last Words ADA requirements may appear counterintuitive in some scenarios. So, it's prudent to seek counsel from an expert in the field prior to making any important employment-related decisions when a disability – short-term or permanent – may be involved. We are committed to being your most trusted Business Advisor. We view every client like a partnership, and truly believe our success is a result of your success! We assist clients with accounting, tax preparation and financial advising in the Bryan and Navasota, Texas, area. Interested in working with us? Fill out a new client inquiry here.

If you've had to lay off employees as far back as Nov. 1, 2019, a tiny portion of the $1.9 trillion American Rescue Plan Act (ARPA) might go to them. That's the good news for eligible former employees. The bad news for employers is that your company will have some administrative responsibilities to see that the funds those employees are entitled to actually reach them. In other words, your company will need to pay the cost of maintaining health benefits through your health plan under COBRA provisions and recoup those costs later. The six-month effective date of the new COBRA tax credit program runs from April 1 through Sept. 30 of this year. "Assistance eligible individuals" or AEIs as they're referred to in ARPA, are former employees who were laid off, that is, involuntarily terminated for economic reasons, but not for "cause." Under these COBRA rules (as opposed to regular COBRA rules) former employees who quit on their own aren't eligible for this additional benefit. Laid-off employees who opted not to receive COBRA coverage when they left might be eligible to reapply for coverage now and receive some fully subsidized benefits going forward. COBRA Period Not Extended This COBRA subsidy program doesn't extend COBRA benefits beyond the regular 18-month maximum time frame. For example, a former employee whose 18-month COBRA anniversary (end date) is July 1 wouldn't be eligible for the subsidized COBRA benefits after that date, even though the ARPA benefit runs through September. A laid-off employee can only qualify for the maximum six-month benefit if he or she would have been eligible for regular COBRA benefits for the full April 1, 2021 through Sept. 30, 2021 period. Suppose, for example, the 18-month eligibility for regular unsubsidized COBRA benefits began April 1, 2020. It would end Sept. 30, 2021. For every one month period prior to April 1, 2020, the COBRA eligibility period began, the maximum eligibility period for the fully subsidized benefit would be reduced by one month. So, for example, if the employee became eligible for COBRA on March 1, 2020, his or her 18-month eligibility would run out at the end of Aug. 2021, one month short of the end of the subsidy period that ends Sept. 30, 2021. Similarly, if an employee became eligible for COBRA after April 1, 2021, the fully subsidized COBRA would be reduced, because the program ends Sept. 30, 2021. How Employers Get Reimbursed As noted, you'll be "made whole" through tax credits. They'll be applied to the Medicare hospital insurance portion of your quarterly federal payroll tax filings, if you're self-insured. If the amount of the subsidy exceeds that payroll tax obligation, you can make up the difference by getting a tax credit against other federal tax obligations. If instead you have a state-regulated fully insured health plan, your health insurance carrier will front the subsidy and receive the tax credit. AEI Rights and Responsibilities Former employees receiving health benefits under COBRA as of April 1, 2021, don't need to apply for the ARPA benefit; they're entitled to it and will just receive it. It's a different story for former employees who didn't apply for a regular COBRA benefit when they first became eligible and are still within the 18-month regular COBRA benefit period. Those former employees have a special "second chance" right to obtain subsidized COBRA benefits under this program as of April 1, 2021. As the employer, you're required to give employees who declined COBRA a heads-up about this "second chance" opportunity within 60 days of April 1, 2021. No matter how "AEIs" receive the COBRA subsidy, they lose their entitlement to that benefit as soon as they become eligible to receive health benefits through another employer, or Medicare. When that happens, the AEIs are required to inform your plan administrator immediately or face federal penalties if they don't and are caught. No Gaming the System The law tries to give COBRA beneficiaries some flexibility, but not to the point of allowing them to game the system. Below is an example of how that could happen. Former employees who are using regular COBRA benefits may change from the original health benefit option they were using at the time they became COBRA-eligible. This option is also available under the ARPA subsidized premium benefit, within limits, including that they can't switch to a more expensive plan to maximize the value of the full subsidy. Unanswered Questions The law includes more details on how the program is designed to work but a lot of questions remain unanswered at this time. Here are a few questions that still await guidance from the U.S. Department of Labor: Is a former employee who took advantage of an incentive plan to leave your company as part of a downsizing eligible for a COBRA subsidy? Do COBRA plan features that are eligible for subsidy include dental and vision benefits as well as basic medical coverage? What happens if you ordinarily provide a COBRA subsidy to terminated employees? Can you drop that benefit so that its cost can be picked up by the federal government? While these issues and more are being addressed by the Department of Labor, employers need to determine which former employees are at least potentially eligible for this benefit, and the notification requirements that apply to them. In the meantime, detailed guidance can be obtained from your health benefits technical experts. We are committed to being your most trusted Business Advisor. We view every client like a partnership, and truly believe our success is a result of your success! We assist clients with accounting, tax preparation and financial advising in the Bryan and Navasota, Texas, area. Interested in working with us? Fill out a new client inquiry here.

Not all employers are bound by the record-keeping and reporting requirements established by the Occupational Safety and Health Administration (OSHA). Generally, an employer must have more than 10 employees to be subject to those legal obligations, unless OSHA specifically instructs you otherwise. Your company also must be in an industry that's considered hazardous, such as manufacturing, construction, utilities, agriculture and wholesale trades. Examples of non-hazardous industries include retail, financial services, and real estate. OSHA classifies industries using the Census Bureau's North American Industrial Classification codes. If you're uncertain about your status regarding OSHA, contact the agency. Reporting requirements can vary by each business establishment — defined as "a single location where business is conducted or where services or industrial operations are performed." That means if you have multiple locations with varied functions, it's possible that one location is subject to OSHA record-keeping (maintaining an OSHA log) and reporting requirements, and another isn't. OSHA "General Duties Clause" Beyond administrative requirements, all employers large enough to be subject to regulations specific in the Occupational Safety and Health Act (regardless of industry) are covered by the law's "general duties clause." This clause specifies that employers must give employees a place to work "free from recognized hazards that are causing or likely to cause death or serious physical harm." Also, 28 states have their own laws and regulations governing occupational health that might be more stringent than OSHA's. Perhaps you operate in one of them. If you're subject to OSHA's record-keeping and reporting requirements, how does COVID-19 fit into that picture? According to OSHA, the following conditions must be met before you are required to record an employee COVID-19 case: Most basic: The employee's ailment is, indeed, proven to be COVID-19, The case "involves one or more of the general recording criteria" laid out in OSHA regulations, including, for example, that the condition can't be remedied with basic first aid procedures, and The disease was contracted in conjunction with the employee's work. Determining What's "Work-Related" OSHA concedes that "in many instances, it remains difficult to determine whether a COVID-19 illness is work-related, especially when an employee has experienced potential exposure both in and out of the workplace." With that challenge in mind, OSHA has laid out some "enforcement guidance" for its investigators to determine violations applicable to COVID-19 cases. Here are three highlights included in that guidance: A discussion of the reasonableness of the employer's investigation into work-relatedness. "Employers, especially small [ones], should not be expected to undertake extensive medical inquiries, given employee privacy concerns." An examination of the evidence available to the employer. Employers shouldn't be penalized for good-faith determinations when limited evidence was at hand to draw an accurate conclusion about whether a COVID-19 case was work-related. A look at how available evidence is interpreted. The OSHA enforcement guidance offers several illustrations of evidence that is likely to lead to a reasonable conclusion that a COVID-19 case was work-related. One example is when several employees who work closely together all come down with COVID-19 and there's no alternative explanation. Another involves the employee whose job duties "include having frequent, close exposure to the general public in a locality with ongoing community transmission." Recordable vs. Reportable As with other workplace-related illnesses and injuries, a work-related COVID-19 case may be "recordable" (and thus logged), but not "reportable" — that is, promptly reported to OSHA. To be recordable, an illness or injury must be too serious to be remedied with basic first aid and involves time away from work. COVID-19 cases often fit that description. To be reportable, the case either involves in-patient hospitalization or, in the ultimate example, death. However, that standard isn't as clear-cut as it might appear with COVID-19. That's because to meet the "reportable" standard, the hospitalization must occur within 24 hours of the incident. In the COVID-19 case, the incident is exposure to the SARS-CoV-2 virus that leads to the disease. It's unlikely that someone who is exposed to the virus one day would be hospitalized within 24 hours. You'd also need to know that the employee was hospitalized and that the COVID-19 case was work-related. Knowing both promptly may be improbable. However, as soon as you do determine that the case was work-related, you've got 24 hours to report it to OSHA. When an employee dies of a confirmed COVID-19 case, and the death occurs within 30 days of exposure to the virus, you have an eight-hour window to report it to OSHA from the time you know "both that the employee has died, and that the cause of death was a work-related case of COVID-19," according to a Q&A provided by agency. A Little Perspective OSHA's enforcement guidance — and common sense — indicate that proper recording and reporting take a back seat to a basic concern for employee health. "In all events," the guidance states, "it is important as a matter of worker health and safety, as well as public health, for an employer to examine COVID-19 cases among workers and respond appropriately to protect workers, regardless of whether a case is ultimately determined to be work-related." We are committed to being your most trusted Business Advisor. We view every client like a partnership, and truly believe our success is a result of your success! We assist clients with accounting, tax preparation and financial advising in the Bryan and Navasota, Texas, area. Interested in working with us? Fill out a new client inquiry here.

As millions of people sign up for COVID-19 vaccines across the United States, dishonest people see yet another opportunity to defraud, cheat or steal from unsuspecting victims. Don't let yourself be swept up in these types of scams. Too often, these con artists make promises that they can't keep, including offers of faster access to vaccine shots or even personalized delivery. If you fall for one of these bogus claims, you could pay for services or products you'll never receive, and your personal information might be compromised, leading to dire financial consequences. Plus, you could miss out on available appointments to receive a legitimate vaccine. 6 Common Scams The Federal Trade Commission (FTC), the Federal Bureau of Investigation (FBI) and the U.S. Department of Health and Human Services (HHS) have identified six fraudulent claims that are being made about COVID-19 vaccines. 1. You must pay up front to receive the vaccine. You do not have to pay anything to get your shot. It's free if administered at an authorized location, including a participating hospital, pharmacy or mass vaccination site (such as a sports stadium, arena or amusement park). To find the list of authorized COVID-19 vaccination locations for your state, visit the Centers for Disease Control and Prevention . Important: In some limited instances, a vaccine provider may charge an administrative fee for which you may be reimbursed through your insurance or, if you're uninsured, the Health Resources and Services Administration. But you won't be turned away at the door. If a provider insists on payment, it's a scam. 2. You can pay to have your name put on a waiting list. The COVID-19 vaccination process isn't uniform throughout the United States. So, there are no "bright line rules" for how vaccinations are being handled, or should be handled, in your area. In many parts of the country, you'll be contacted to go on a waiting list or to register for a vaccination appointment. Take advantage of these opportunities, but don't be fooled into thinking that you must pay for the privilege. 3. You can pay a fee to get your vaccine sooner. Each authorized location has a vaccine waiting list. But vaccine administrators aren't allowed to accept a payment to move your name higher on the list. If you receive an offer to be vaccinated early in exchange for a payment, report it to the FTC. Note that a fraudster is likely working from a random list that isn't based on your existing vaccination date. So, you may be contacted by these scammers, even if you don't have any appointment yet. 4. You're asked to schedule an appointment on a suspicious platform. It's hard to keep up with the various entities offering vaccination appointments — and the list seems to grow every day. In general, it's best to stick with scheduling offers being made through state and local agencies, hospitals and approved pharmacies. If you're asked to register on an unfamiliar site or one that closely resembles a familiar one, don't click on any links. The scammer could use your personal information for illegal means. 5. You can pay to have a vaccine sent to you. Another scam exploits the desire of some Americans to avoid physically visiting vaccination sites where they might come in close contact with someone who has COVID-19 or has been exposed to someone with the virus. Instead, the scammer offers to have the vaccine shipped to your personal residence for a fee. However, state and local authorities and pharmacies aren't shipping out any vaccines. They're only administered at approved sites by personnel who have been specifically trained. Don't pay to have a vaccine shipped to your house. It's unlikely to show up. 6. You can pay to take tests to obtain a vaccine. Some con artists offer to provide a vaccine appointment only if you submit to additional COVID-19 testing. This scam may include offers through emails, texts or phone contacts, encouraging you to pay for test products and services. Beware: No authorized vaccination providers require this type of testing. Ways to Avoid Scams The FTC recommends checking with state and local health departments for details on the vaccination programs in your area. You also may want to consult with your personal physician, pharmacist or health insurance provider before scheduling an appointment. Other practical suggestions listed on the FTC website include the following: Don't pay to sign up for the vaccine. There are no charges for making an appointment or getting in line. Rely strictly on approved vaccination providers. Ignore ads to buy the vaccine from other sources. Watch out for suspicious texts. If you're asked to click on a link in a text, verify its legitimacy first. Call someone you trust — perhaps your physician or pharmacist — if you're unsure about the nature of a text. Delete emails and attachments from unknown sources. The scammer could infect your device with malware if you click on a link. Senior Citizens: A Prime Target for COVID Scams Everyone is fair game for a COVID-19 scam, but some senior citizens are especially vulnerable. The problems are compounded for elderly people who have been living in isolation during the pandemic and aren't familiar with the latest technology, such as online banking and mobile payment systems. When someone calls and sounds legitimate, an elderly person may be all too willing to engage in conversations that put them at risk. Some warning signs of senior fraud include: A new, dependent relationship with someone outside the immediate family, A sudden need for assistance with tasks that the senior had previously performed independently, Paranoia about those they have trusted in the past, Isolation from the rest of the family, Unexpected changes in spending habits, bank account access or payment card usage, Misplaced or lost retirement plan account information, banking statements and other financial records, and A lack of understanding about financial matters. If a loved one has exhibited some of these traits, they may be in the crosshairs of a scam. Hold a family meeting but handle the matter with sensitivity. The worst thing you can do is to create even greater distance from those who are in the most danger. Final Thoughts It's imperative to protect your private information from unscrupulous third parties. No one — not the vaccine distribution site, health care provider, pharmacy, health insurance company or Medicare — will contact you to get your Social Security number or banking information to sign up for your vaccine appointment. Follow the procedures established by your state and local authorities. We are committed to being your most trusted Business Advisor. We view every client like a partnership, and truly believe our success is a result of your success! We assist clients with accounting, tax preparation and financial advising in the Bryan and Navasota, Texas, area. Interested in working with us? Fill out a new client inquiry here.

The American Rescue Plan Act (ARPA) significantly liberalizes the rules for the federal child tax credit, which means more money in the pockets of eligible parents this year. However, the liberalizations are only for the 2021 tax year. Here's the story. Pre-ARPA Rules Before the ARPA, there was one set of rules for parents who qualified for the child tax credit. Now, for 2021, there are two. Under prior law, the maximum annual tax credit for 2018 through 2025 was $2,000 per qualifying child for all taxpayers. A qualifying child was defined as an under-age-17 child who could be claimed as your dependent for the year. Basically, that means the child: Lived with you for at least six months during the year, Didn't provide over half of his or her own support, and Was a U.S. citizen, national or resident. Before the ARPA, the $2,000 child credit for 2018 through 2025 was phased out (reduced) if your modified adjusted gross income (MAGI) for the year exceeded $200,000 ($400,000 for a married couple who files a joint return). The credit was phased out by $50 per $1,000 (or fraction of $1,000) of MAGI in excess of the applicable phase-out threshold. Under prior law, the child credit for 2018 through 2025 was partially refundable, meaning you could collect the refundable amount even if you have no federal income tax liability for the year. The refundable credit amount generally equals 15% of your earned income above $2,500. An alternative formula for determining refundability applies if you have three or more qualifying children. In any case, the maximum refundable credit amount before the ARPA was limited to $1,400 per qualifying child. New, Liberalized Rules for 2021 For 2021 only, the ARPA makes the following taxpayer-friendly changes: Broadened definition of qualifying child . The definition of a qualifying child includes children who are age 17 or younger as of December 31, 2021. As was the case before the ARPA, you must include a qualifying child's name and Social Security number (SSN) on your 2021 tax return to claim a credit for the child. In addition, the SSN must have been issued before the due date for filing your 2021 return. If you don't meet these SSN requirements for a qualifying child, you can claim a smaller $500 nonrefundable credit for the child. You also can claim a $500 nonrefundable credit for the 2021 tax year for a dependent who doesn't meet the ARPA's expanded definition of a qualifying child. The most common situation when this smaller credit will be available is when you have dependent child who will be age 18 or older as of December 31, 2021. However, the smaller credit can also be claimed for other qualifying relatives, as defined by the tax law. The MAGI phase-out rule for this smaller credit is the same as the phase-out rule for the "regular" child credit explained earlier. Bigger maximum credit, subject to separate income phase-out rule . The maximum child credit is increased to $3,000 per qualifying child or $3,600 for a qualifying child who is age 5 or younger as of December 31, 2021. (Parents can claim as many credits as they have qualifying children. There's no limit.) However, the increased credit amounts are subject to their own phase-out rules. So, for 2021, the credit is subject to two sets of phase-out rules: The increased credit amount ($1,000 or $1,600, whichever applies) is phased out for single taxpayers with MAGI above $75,000, for heads of households with MAGI above $112,500 and for married couples who file joint returns with MAGI above $150,000. The increased credit amount is phased out by $50 per $1,000 (or fraction of $1,000) of MAGI in excess of the applicable phase-out threshold. The "regular" $2,000 credit amount is subject to the pre-ARPA phase-out rule explained earlier. Important: If you're ineligible for the increased child credit amount for the 2021 tax year, you can still claim the regular $2,000 credit, subject to the pre-ARPA phase-out rules. The credit is fully refundable for eligible taxpayers . For the 2021 tax year, the child credit is fully refundable if you (or your spouse if you filed a joint return) have a principal place of abode in the United States for more than one-half the year or are a bona fide resident of Puerto Rico for the year. For the 2021 tax year, if you're a member of the U.S. Armed Forces who is stationed outside the United States while serving on extended active duty, you're treated as having a principal place of abode in the United States. The MAGI phase-out rules explained earlier apply in determining your allowable fully refundable child credit for the 2021 tax year. IRS will make advance payments, starting in July . Pursuant to another ARPA provision, the IRS is directed to establish a program to make monthly advance payments of the child credit (generally via direct deposits). Such advance payments will equal 50% of the IRS's estimate of the taxpayer's allowable credit for the 2021 tax year. These advance payments will be made in equal monthly installments in July through December of this year. To estimate your advance child credit payments, the IRS will look at the information presented on your 2020 Form 1040 or on your 2019 return if your 2020 return hasn't yet been filed. However, if IRS determines that it's not feasible to make monthly advance credit payments, it can make advance payments based on a longer interval and adjust the amount of the advance payments accordingly. If you receive advance child credit payments in excess of your allowable credit for the 2021 tax year, you'll generally have to repay the excess in the form of an increase in the federal income tax liability shown on your 2021 return. However, you may be allowed to keep some or all of the excess payments under a safe-harbor rule, if your MAGI is below $80,000 ($100,000 for heads of households or $120,000 for married couples who file joint returns). For example, Olivia is entitled to a child credit of $6,000 for 2021, based on her two qualifying children. Under the advance credit payment deal, the IRS would advance a total of $3,000 to Olivia (50% of her allowable credit) via monthly payments of $500 each for July through December. Olivia would collect her remaining credit of $3,000 after filing her 2021 return. To facilitate the advance payment deal, the IRS is supposed to create an online portal that will allow taxpayers to: Change the number of their qualifying children, Change their marital status, Reflect significant changes in income, and Update other factors as determined by the IRS. Who Qualifies for the Expanded Credit? The rules for qualifying for the newly expanded child credit are complicated. (See main article.) Here are a couple examples to help clarify who's eligible and who's not. 1. Xavier will file as a head-of-household with MAGI of $140,000 for 2021. He has one qualifying child who will be 12 as of December 31, 2021. Unfortunately, Xavier doesn't qualify for the increased credit of up to $1,000, because his MAGI is too high. The increased credit of up to $1,000 is phased out at the rate of $50 for each $1,000 of Xavier's MAGI over the $112,500 phase-out threshold for a head of household filer. His MAGI exceeds the threshold by $27,500 ($140,000 - $112,500), which is rounded up to $28,000. The allowable increased credit amount is reduced, but not below zero, by $1,400 ($50 x 28). So, the phase-out rule completely wipes out the increased credit. However, because Xavier's MAGI is under the $200,000 phase-out threshold for the "regular" child credit, he can claim the maximum $2,000 "regular" credit for 2021. In addition, Xavier's credit for 2021 is fully refundable. He can collect the allowable credit amount even if he has no 2021 federal income tax liability due to lower MAGI and/or other tax breaks for which he is eligible 2. Sara will file as a head-of-household with MAGI of $110,000 for 2021. She has one qualifying child who will be 9 as of December 31, 2021. Because her income is below the $112,500 phase-out threshold for the increased child credit of up to $1,000 for a 9-year-old child, Sara can collect the full increased credit of $1,000 on top of the full "regular" credit for a total child credit of $3,000. In addition, Sara's credit for 2021 is fully refundable. She can collect the allowable credit amount even if she has no 2021 federal income tax liability due to lower MAGI and/or other tax breaks for which she is eligible. Important: If Sara's child will be age 5 or younger as of December 31, 2021, Sara can collect the full increased credit of $1,600 on top of the "regular" credit for a total child credit of $3,600. Remember: These changes are only temporary. After 2021, the child credit rules that were in place before the ARPA will apply through 2025, unless Congress takes action to change the rules. For More Information: For 2021, the temporary changes to the child credit made by the ARPA will make the credit more widely available and worth more for some taxpayers. If you have questions or want more information about the liberalized child credit rules for 2021, please don't hesitate to contact us. We are committed to being your most trusted Business Advisor. We view every client like a partnership, and truly believe our success is a result of your success! We assist clients with accounting, tax preparation and financial advising in the Bryan and Navasota, Texas, area. Interested in working with us? Fill out a new client inquiry here.

During the COVID-19 crisis, some key tax deadlines were postponed until July 15, 2020. If your business and/or personal federal income tax return is still awaiting completion, you may have significant retroactive tax-planning flexibility. The same holds true for individuals who own interests in pass-through business entities and haven't yet filed their personal tax returns. Here's what business owners need to know. ​ Postponed Deadlines for Business Entities The IRS has postponed until July 15 deadlines for federal income tax. This includes payment obligations and filing obligations that would otherwise fall on or after April 1, 2020, and before July 15, 2020. The crisis-relief measures depend on how your business is structured: ​ For calendar-year C corporations. The normal deadline for calendar-year corporations to remit unpaid federal income tax for the 2019 tax year was April 15, 2020. However, the IRS extended that deadline until July 15. Likewise, the deadline for calendar-year corporations to file a 2019 federal income tax return (Form 1120) has been deferred from April 15 to July 15. ​ In addition, the deadlines for making the corporation's first and second estimated federal income tax installments for the 2020 tax year, which would normally be due on April 15 and June 15, are postponed to July 15. ​ These deferrals are automatic. You didn't have to file an extension with the IRS to take advantage, and your corporation won't owe any interest or penalty if you defer payment or filing. ​ For individuals who own calendar-year, pass-through businesses. The IRS has also postponed the deadlines for federal income tax payment obligations and federal income tax return filing obligations of individuals who own interests in so-called "pass-through" business entities, including: Sole proprietorships, Single-member limited liability companies (LLCs) treated as sole proprietorships for tax purposes, Partnerships, Multi-member LLCs treated as partnerships for tax purposes, and S corporations. Income from an ownership interest in a pass-through business is generally reported on the individual owners' personal tax returns. The normal deadline for individuals to remit unpaid federal income tax (including any self-employment tax) for the 2019 tax year was April 15, 2020. However, the IRS extended that deadline until July 15. Likewise, the deadline for individuals to file their personal 2019 federal income tax return (Form 1040) has been deferred from April 15 to July 15. ​ In addition, the deadlines for making an individual's first and second estimated federal income tax installments for the 2020 tax year that would normally be due on April 15 and June 15, are postponed to July 15. ​ The deferred deadlines are also automatic. You didn't have to file an extension with the IRS to take advantage, and you won't owe any interest or penalty if you defer payment or filing. ​ These deferrals are intended to help businesses that are struggling during business interruptions caused by COVID-19. Until your return is filed, here are some last-minute strategies for businesses to consider. ​ Fiscal-Year Business Entities ​ Business entities that use fiscal tax years (years not ending on December 31) may have still-unfiled federal income returns for tax years that started in 2018. The July 15 deadline relief applies to these entities for federal income tax payments and federal income tax returns that would otherwise be due on or after April 1 and before July 15. ​ The Bonus Depreciation Conundrum ​ With bonus depreciation, business taxpayers can deduct 100% of the first-year cost of qualifying assets placed in service between September 28, 2017, and December 31, 2022 (or December 31, 2023 for certain assets with longer production periods and aircraft). The 100% first-year write-off is allowed for both new and used qualifying assets. This includes most categories of tangible depreciable assets, off-the-shelf software and real estate qualified improvement property (QIP). ​ When it's allowed, claiming 100% first-year bonus depreciation is usually a tax-smart move. But, if you anticipate higher tax rates in future years, consider forgoing bonus depreciation and, instead, depreciating assets over several years. That way, the depreciation write-offs would offset future income that you're expecting to be taxed at higher rates. The decision to claim 100% first-year bonus depreciation (or not) is made on your still-unfiled business tax return. ​ Important: The Coronavirus Aid, Relief, and Economic Security (CARES) Act allows a five-year carryback privilege for a business net operating loss (NOL) that arises in a tax year beginning in 2018 through 2020. Claiming 100% first-year bonus depreciation on an affected year's return can potentially create or increase an NOL for that year. If so, the NOL can be carried back, and you can recover some or all of the federal income tax paid for the carryback year. This factor could cause you to favor claiming 100% first-year bonus depreciation on a still unfiled return. ​ However, creating an NOL for the year would eliminate the qualified business income (QBI) deduction for owners of pass-through businesses. (See "QBI Deductions" below.) Ask your tax pro what makes the most sense in your situation. ​ Retroactive COVID-19 Business Tax Relief Measures ​ The CARES Act includes some retroactive tax relief for business taxpayers. The following provisions may affect a still-unfiled return: ​ Liberalized NOL rules. NOLs that arise in tax years beginning in 2018 through 2020 can be carried back five years. This means that an NOL that's reported on a still-unfiled return can be carried back to an earlier tax year and allow you to recover federal income tax paid in the carry-back year. Because federal income tax rates were generally higher in years before the Tax Cuts and Jobs Act (TCJA) took effect, NOLs carried back to those years can be especially beneficial. ​ QIP technical corrections. QIP is generally defined as an improvement to an interior portion of a nonresidential building that's placed in service after the date the building was first placed in service. The CARES Act includes a retroactive correction to the statutory language of the TCJA. The retroactive correction allows much faster depreciation for real estate QIP that's placed in service after the TCJA became law. ​ Specifically, the correction allows 100% first-year bonus depreciation for QIP that's placed in service in 2018 through 2022. Alternatively, you can depreciate QIP placed in service in 2018 and beyond over 15 years using the straight-line method. ​ Suspension of excess business loss disallowance rule. A so-called "excess business loss" is a loss that exceeds $250,000 or $500,000 for a married couple filing a joint tax return. An unfavorable TCJA provision disallowed current deductions for excess business losses incurred by individuals in tax years beginning in 2018 through 2025. The CARES Act suspends the excess business loss disallowance rule for losses that arise in tax years beginning in 2018 through 2020. ​ Liberalized business interest deduction rules. Another unfavorable TCJA provision generally limited a taxpayer's deduction for business interest expense to 30% of adjusted taxable income (ATI) for tax years beginning in 2018 and beyond. Business interest expense that's disallowed under this limitation is carried over to the following tax year. ​ In general, the CARES Act temporarily and retroactively increases the limitation from 30% of ATI to 50% of ATI for tax years beginning in 2019 and 2020. Special complicated rules apply to partnerships and LLCs that are treated as partnerships for tax purposes. ​ Important: Businesses with average annual gross receipts of $25 million or less (adjusted for inflation) for the three previous tax years are exempt from the business interest expense deduction limitation. Certain real property businesses and farming businesses are also exempt if they choose to use slower depreciation methods for specified types of assets. ​ Tax Break for Setting up a SEP ​ If you work for your own small business and haven't yet set up a tax-favored retirement plan for yourself, you can establish a simplified employee pension (SEP). Unlike other types of small business retirement plans, a SEP can be created this year and still generate a deduction on last year's return. In fact, if you're self-employed and extend your 2019 Form 1040 to October 15, 2020, you'll have until the extended deadline to establish a SEP and make a deductible contribution for last year. ​ Your deductible pay-in can be up to: 20% of your 2019 self-employment income, or 25% of your 2019 salary if you work for your own corporation. The absolute maximum amount you can contribute for the 2019 tax year is $56,000. So, the tax savings can be significant. Important: Cost is a major drawback to this strategy for small businesses with employees. A SEP might have to cover employees — and you might be required to contribute to their accounts. If your business has employees, consult a tax pro before setting up a SEP. To Extend or Not to Extend? ​ The tax laws have undergone significant changes over the last few years, and recent COVID-19-related economic relief measures and the upcoming election further complicate the tax planning environment. Business owners have a lot of information to digest if they still haven't filed 2019 federal income tax returns. Some of the recent changes are retroactive and/or temporary. Moreover, what you choose to do today may affect taxable income in future years — when tax laws may not necessarily be as taxpayer friendly as they are today. ​ All things considered, extending your return past July 15 might be wise. That would give you more time to evaluate all the relevant factors in your situation. ​ As this was written, the normal procedures must be followed to further extend filing deadlines for federal income tax returns past July 15. Contact your tax professional to discuss the advisability of extending. Your tax pro can help you file the appropriate forms to extend the deadlines for filing your business return and/or your 2019 personal return. ​ Coming Soon ​ If you haven't already filed a federal income tax return for your business entity's most recently ended tax year or your personal return for the 2019 tax year, the July 15 deadline for filing or extending (if applicable) is right around the corner. Contact us today to discuss last-minute tax saving strategies in the context of today's evolving tax rules. We are committed to being your most trusted Business Advisor. We view every client like a partnership, and truly believe our success is a result of your success! We assist clients with accounting, tax preparation and financial advising in the Bryan and Navasota, Texas, area. Interested in working with us? Fill out a new client inquiry here.

The American Rescue Plan Act (ARPA) was signed into law on March 11, 2021. The new law will provide roughly $1.9 trillion in much-needed financial relief to individuals, businesses, not-for-profit organizations, and state and local governments during the pandemic. Here are some of the key ARPA provisions that will affect federal income taxes for some people in 2020 and 2021. Key Changes for Individuals The new law includes the following tax and financial provisions for individuals and families: Additional EIPs. A third round of economic impact payments (EIPs) will provide $1,400 for eligible individuals ($2,800 for married couples) and $1,400 for each qualifying dependent. For this round of EIPs, qualifying dependents may include individuals over 16. However, the income caps for receiving these payments has been significantly reduced from the caps that applied to prior EIP payments. These payments generally will be based on your 2019 tax return, unless you've already filed your 2020 return. Expanded and partially exempt unemployment benefits. Federal unemployment benefits of $300 per week have been extended through September 6, 2021. In addition, taxpayers who report less than $150,000 of adjusted gross income (AGI) may exclude up to $10,200 of unemployment benefits from gross income for tax years beginning in 2020. Married couples with AGI of less than $150,000 may exclude up to $20,400 of unemployment benefits if both spouses received these benefits in 2020. Expanded and increased Child Tax Credit (CTC). This credit has been expanded for 2021 to include qualifying children under age 18, and for eligible taxpayers, the amount has been increased from $2,000 to $3,000 per qualifying child ($3,600 for children under age 6 at year end). The increased CTC is subject to lower phaseout thresholds than the original $2,000 credit per qualifying child, however. So, for 2021, the credit is subject to two sets of phaseout rules. To be eligible for the full payment, you must have a modified AGI of under $75,000 for singles, $112,500 for heads-of-households and $150,000 for joint filers and surviving spouses. The credit phases out at a rate of $50 for each $1,000 (or fraction thereof) of modified AGI over the applicable threshold. Under the new law, eligible taxpayers will receive advance payments of the child tax credit for the year, rather than waiting until next year's tax season to start benefiting from the credit. The IRS has been directed to create a program to make monthly payments (generally by direct deposits) equal to 50% of eligible taxpayers' 2021 CTCs, from July through December 2021. If you aren't eligible to claim an increased CTC for 2021, because your income is too high, you may be able to claim the regular CTC of up to $2,000, subject to the existing phaseout rules. Expanded EITC. The earned income tax credit (EITC) has been increased for certain people without children for 2021. The new law also eliminates the age cap for older workers and raises the income threshold for this credit. Enhanced child and dependent care credit. For 2021, this credit will be refundable, and the amount will increase for eligible taxpayers. For taxpayers with AGI of $125,000 or less, the maximum amount of the credit for 2021 is $4,000 for one qualifying child or dependent ($8,000 for two or more qualifying children and dependents). The credit is phased out at higher income levels. Exclusion for student loan forgiveness. Partial and full discharges of certain student loans given after December 31, 2020, but before January 1, 2026, may be exempt from federal income tax. Key Changes for Businesses The new law includes the following tax-related provisions for businesses and self-employed individuals: Expanded Employee Retention Tax Credit. This credit has been extended through the end of 2021 (before the law, it had been scheduled to end on June 30). It's also been expanded to apply to recovery startup businesses that launched after February 15, 2020, and have average annual gross receipts under $1 million. Increased exclusion for employer-provided dependent care assistance. The exclusion for assistance provided under a qualified dependent care assistance program has been increased to $10,500 ($5,250 for married people who filed separate returns) for 2021. Exclusion for EIDL advances. Eligible small businesses that receive targeted Economic Injury Disaster Loan (EIDL) advances may exclude the amounts received from gross income for federal tax purposes. Because these advances are treated as tax-exempt income, they will be allocated to partners or shareholders and increase their bases in their ownership interests. Exclusion for restaurant revitalization grants. Businesses that provide food or drinks — such as restaurants, food trucks and bars — may receive restaurant revitalization grants from the U.S. Small Business Administration. These grants are excluded from gross income for federal tax purposes. Because these amounts are treated as tax-exempt income, they will be allocated to partners or shareholders and increase their bases in their ownership interests. Expanded limit on compensation for public companies. A public company's compensation deduction is limited to $1 million per year for compensation paid to any covered employee. Under the new law, for tax years that begin after December 31, 2026, the definition of "covered employee" only includes the corporation's principal executive officer, principal financial officer, the eight other highest-paid employees. (Previously, the definition included only the three other highest-paid employees.) Extension of limitation on excess business losses. Noncorporate taxpayers are currently subject to a limit on excess business losses of $250,000 ($500,000 for a married joint-filing couple). These limits are adjusted annually for inflation. Losses that are disallowed under this rule are carried forward to later tax years, then they can be deducted under the rules that apply to net operating losses. Previously, the CARES Act temporarily suspended the excess business loss rule for losses arising in tax years beginning in 2018 through 2020. This limitation comes back into play for 2021 and was scheduled to expire at the end of 2025. The ARPA pushes back the expiration date by one year to the end of 2026. Need Help? The COVID-19 pandemic has affected every household and business in some way. This article only covers some of the provisions in the 628-page new law. If you or your business have suffered financial losses, contact us today to discuss resources under the ARPA that may be available to help you with recovery. We are committed to being your most trusted Business Advisor. We view every client like a partnership, and truly believe our success is a result of your success! We assist clients with accounting, tax preparation and financial advising in the Bryan and Navasota, Texas, area. Interested in working with us? Fill out a new client inquiry here.

Tax season has started. Your tax professional is ready to prepare your 2020 federal and state returns — but are you ready? The pandemic has led to several changes to the tax rules for last year. Here's a summary of four taxpayer friendly changes that may affect your 2020 federal income tax return. 1. Limited Charitable Deduction Can Be Claimed If You Don't Itemize For the 2020 tax year, you can claim an above-the-line deduction for up to $300 of cash contributions to IRS-approved charities. This temporary COVID-19 tax relief measure was included in the CARES Act. "Above-the-line" means you can take the write-off whether you itemize deductions or not. That helps the estimated 87% of filers who the IRS says claim the standard deduction instead of itemizing. The $300 deduction limit applies equally to unmarried individuals and married couples who file joint tax returns for 2020. (However, if you use married-filing-separate status, the limit is $150 for 2020.) Important: The recent Consolidated Appropriations Act extends the $300 write-off for charitable contributions in 2021 and doubles the deduction limit for 2021 to $600 for married couples who file joint returns. 2. Recovery Rebate Credit Can Be Claimed to Collect Full Stimulus Payments Many taxpayers are eligible for first- and second-round "Economic Impact Payments" (EIPs) from the federal government. These COVID-19 relief payouts are sometimes called stimulus payments. Your 2020 Form 1040 can come into play in determining how much you are entitled to collect. First-round payments . Congress approved the first round of EIPs in March 2020. If you were eligible, you could have received up to $1,200 for an unmarried adult ($2,400 for a married couple). Plus, you may have received up to $500 for each qualifying child. Eligibility depends on your adjusted gross income (AGI) and filing status. People under the following AGI thresholds are eligible to receive the maximum first-round EIPs: $75,000 for single people and married people who file separate returns, $150,000 for married people who file joint returns, and $112,500 for people who use head-of-household filing status. Once your AGI reaches the following thresholds, you're ineligible for first-round payments: $99,000 for single people and married people who file separate returns, $198,000 for married people who file joint returns, and $136,500 for people who use head-of-household filing status. Second-round payments . Congress approved a second round of EIPs in December 2020. If you were eligible, you could potentially have received up to $600 for an unmarried adult ($1,200 for a married couple). Plus, you could have received up to $600 for each qualifying child. Again, eligibility depends on your AGI and filing status. People under the following AGI thresholds may have received the maximum second-round amounts: $75,000 for single people and married people who file separate returns, $150,000 for married people who file joint returns, and $112,500 for people who use head-of-household filing status. Once your AGI reaches the following thresholds, you're ineligible for second-round payments: $87,000 for single people and married people who file separate returns, $174,000 for married people who file joint returns, and $124,500 for people who use head-of-household filing status. Important: Most people have already received their first and second round EIPs based in information shown on their 2018 or 2019 federal income tax returns or information provided to the IRS. If you've already received payments based on your 2018 or 2019 AGI, you can keep those amounts even if you wouldn't be entitled to that much based on your 2020 AGI. However, some taxpayers may be entitled to more EIP money. That's because the maximum payments that you're entitled to are based on your 2020 income, which will be reported on your 2020 Form 1040. If your 2020 AGI entitles you to bigger EIPs than what you've already collected, you can claim a so-called "recovery rebate credit" for the difference on your 2020 Form 1040. In effect, you're allowed to true up your allowable EIPs based on your 2020 income now that it's finally known. 3. CTC and EITC Credits Can Be Calculated Using 2019 or 2020 Earned Income So-called "refundable" tax credits can be collected even if you have no federal income tax liability. For 2020, eligible taxpayers can claim a refundable child tax credit (CTC) equal to 15% of earned income in excess of $2,500, subject to a maximum refundable amount of $1,400. While the CTC can be up to $2,000, only up to $1,400 can be refundable. The refundable amount is called the additional child tax credit. The earned income tax credit (EITC) is fully refundable. It equals the applicable percentage of an eligible taxpayer's earned income. Earned income for purposes of these two credits means wages, salaries, tips, other taxable employee compensation and self-employment income. Many people had lower earned income in 2020 than in 2019 due to COVID-19 economic fallout, which could result in lower refundable credits. For purposes of calculating the refundable CTC and the EITC for the 2020 tax year, you can use either your 2019 or 2020 earned income. This provision could result in bigger credits if your 2019 earned income was greater than the 2020 figure. 4. People Who Took CVDs Have Two Recontribution Options Under the CARES Act, IRA owners who were adversely affected by the COVID-19 pandemic could take tax-favored coronavirus related distributions (CVDs) from their IRAs in 2020. If you took advantage of this privilege, you can recontribute all or part of the CVD amount(s) back into one or more IRAs within three years of the distribution date(s). You can treat each distribution and later recontribution as a federal-income-tax-free IRA rollover transaction. CVDs could be a useful cash-management tool for those experiencing a cash crunch in the COVID-19 era. There are no restrictions on the use of CVD funds. For example, you could have used the money to pay bills and recontribute later (within the three-year window) when your financial situation improves. Or you can help your adult kids now and recontribute later. Or you can keep the CVD money and pay the resulting tax hit, which may be modest depending on your tax circumstances for last year. If you took a CVD, you'll receive a Form 1099-R for 2020 that reports the distribution. Now you must decide what to do. You have two options: Recontribute all or part of the CVD amount by the due date of your 2020 Form 1040 (including any extension). Here, the recontributed amount is effectively treated as a federal-income-tax-free rollover. So, if you extend your 2020 return to October 15, 2021, you have until that date to recontribute and get the desired tax-free treatment, or Recontribute nothing by the due date of your 2020 Form 1040 (including any extension). Here, taxable income is triggered, but you won't owe the 10% penalty that usually applies to taxable IRA distributions taken before age 59½. Now, you must decide to either: 1) report the entire amount on your 2020 return, or 2) spread the reported income evenly over 2020, 2021 and 2022. If you opt for the latter and then recontribute any part of a CVD within the three-year window, you can recover the federal income tax hit(s) by filing an amended return to report the recontribution. When all is said and done, you'll have achieved federal-tax-free treatment for the recontributed amount. You must treat all CVDs received in 2020 the same way. Important: This tax-favored treatment applies equally to CVDs taken from traditional IRAs, SEP-IRAs and SIMPLE-IRAs. Similar rules apply if you took a CVD from a company retirement plan last year. We Can Help You Navigate the Rules Multiple rounds of COVID-19-related relief legislation were enacted in 2020. These laws contain provisions that could affect your 2020 federal income tax return. Contact us today to determine whether you're eligible for these and other tax-favored relief measures. There are no one-size-fits-all strategies. What's right depends on your personal situation! We are committed to being your most trusted Business Advisor. We view every client like a partnership, and truly believe our success is a result of your success! We assist clients with accounting, tax preparation and financial advising in the Bryan and Navasota, Texas, area. Interested in working with us? Fill out a new client inquiry here.

Good news! Business taxpayers may still be able to take actions to lower their federal income tax liabilities for 2020, as well as for future years. Consider these ideas before you file last year's return. Claim 100% First-Year Bonus Depreciation — Or Maybe Not For qualifying assets placed in service in 2020, business taxpayers can deduct 100% of the cost in the first year. The 100% immediate write-off is allowed for both new and used qualifying assets, which include most categories of tangible depreciable assets. Claiming 100% first-year bonus depreciation whenever it's allowed is usually considered a tax-smart move. But you should think twice about claiming it for 2020 additions if you anticipate higher tax rates in future years. In that case, consider forgoing bonus depreciation on last year's return and, instead, depreciate the assets in question over a number of years. That way, the depreciation write-offs will offset future income that you suspect might be taxed at higher rates. The choice to claim 100% first-year bonus depreciation for 2020 asset additions (or not) is made on last year's return. Important: Factor the net operating loss (NOL) issue into your decision. The CARES Act allows a five-year carryback privilege for a NOL that arises in a tax year beginning in 2020. Claiming 100% first-year bonus depreciation can potentially create or increase an NOL for the year. If so, the NOL can be carried back, and you can recover some or all of the federal income tax paid for the carryback year. This factor argues in favor of claiming 100% first-year bonus depreciation on last year's return. Talk with your tax advisor about what makes the most sense for your specific situation. Take Advantage of COVID-19 Relief Provisions The CARES Act included various tax relief provisions for business taxpayers. These provisions can impact last year's business return. Here are four examples. 1. Liberalized NOL deduction rules . Under the law, business NOLs that arose in tax years beginning in 2020 can be carried back up to five tax years. So, an NOL that's reported on last year's return can be carried back to an earlier year and allow you to recover some or all of the income tax paid in the carryback year. Because federal income tax rates were generally higher in years before the Tax Cuts and Jobs Act (TCJA) took effect, NOLs carried back to those years can be especially beneficial. 2. Faster depreciation for real estate QIP . Qualified Improvement Property (QIP) is generally defined as an improvement to an interior portion of a nonresidential building that's placed in service after the date the building was first placed in service. The CARES Act provision allows 100% first-year bonus depreciation for QIP that was placed in service in 2020. Alternatively, you can depreciate QIP placed in service in 2020 over 15 years using the straight-line method. 3. Suspension of excess business losses . An unfavorable TCJA provision disallowed current deductions for so-called "excess business losses" incurred by individuals in tax years beginning in 2018 through 2025. An excess business loss is one that exceeds $250,000 or $500,000 for a married couple that files a joint tax return. The CARES Act suspended the excess business loss disallowance rule for losses that arose in tax years beginning in 2020. 4. Increased limit on business interest expense deductions . Under the TCJA, the deduction for business interest expense was generally limited to 30% of adjusted taxable income (ATI) for tax years beginning in 2020. Business interest expense that's disallowed under this limitation is carried over to the following tax year. In general, the CARES Act increased the taxable income limitation to 50% of ATI for tax years beginning in 2020. Special complicated rules apply to partnerships and limited liability companies (LLCs) that are treated as partnerships for tax purposes. Important: Businesses with average annual gross receipts of $25 million or less (adjusted for inflation) for the three previous tax years are exempt from the business interest expense deduction limitation. Certain real property businesses and farming businesses are also exempt if they choose to use slower depreciation methods for specified types of assets. Establish SEP for Big Tax Savings If you work for your own small business and haven't yet set up a tax-favored retirement plan for yourself, consider creating a simplified employee pension (SEP). Unlike other types of small business retirement plans, a SEP can be created this year and still generate a deduction on last year's return. In fact, if you're self-employed and extend your 2020 Form 1040 to October 15, 2021, you'll have until then to establish a SEP and make a contribution for last year. The deductible contribution can be up to: 20% of your 2020 self-employment income, or 25% of your 2020 salary if you work for your own corporation. The absolute maximum amount you can contribute for the 2020 tax year is $57,000. Beware: You may not want a SEP if your business has employees, because you might have to cover them and make contributions to their accounts, which could make this option cost-prohibitive. Extend Your Business Return 2020 was a crazy year. COVID-19-related tax relief measures and the election outcome have created lots of moving parts. Business owners have much to consider before filing their last year's income tax returns. Moreover, what you choose to do on last year's return can affect your tax bills for later years. All things considered, extending last year's return might be a wise move. That would give you more time to evaluate all the relevant factors in your specific situation. Here's an overview of the due dates for different types of businesses. For sole proprietorships or single-member LLCs that are treated as sole proprietorships for tax purposes, the filing deadline for the 2020 Form 1040 is April 15, 2021. Those returns can be extended for six months, to October 15, 2021. For the calendar-year partnerships, LLCs treated as partnerships for tax purposes and S corporations, the filing deadline is March 15, 2021. Those returns can be extended for six months, to September 15, 2021. For calendar-year C corporations, the filing deadline for the 2020 Form 1120 is April 15, 2021. Those returns can be extended for six months, to October 15, 2021. Important: While you can extend the deadline for filing your return, you can't extend the deadline for paying what you owe without penalty. Consult with a Tax Pro These are just some of the last-minute tax-saving maneuvers that business owners can take before Tax Day. As always, contact us and we can advise you on the optimal strategies for your specific situation! We are committed to being your most trusted Business Advisor. We view every client like a partnership, and truly believe our success is a result of your success! We assist clients with accounting, tax preparation and financial advising in the Bryan and Navasota, Texas, area. Interested in working with us? Fill out a new client inquiry here.