The American Families Plan and Your Taxes
May 18,2021
President Biden recently announced the American Families Plan, a $1.8 trillion proposal to help boost the American economy. The plan unveils many items including several tax provisions and an enforcement proposal affecting businesses, individuals and families. The information below is a high-level summary on the tax provisions that are contained in the fact sheet released from the White House on April 28, 2021. Tax increases under the proposed American Families Plan include the following. Increases the top ordinary income tax rate from 37% to 39.6% (above $452,700 if single and $509,300 for joint filers). Creates tax at ordinary income tax rates on long term capital gains and qualified dividends for households making over $1 million, resulting in a top marginal rate of 43.4% considering the 3.8% Net Investment Income Tax (NIIT). Applies the 3.8% NIIT to active pass-through income (LLCs and S-Corps) above $400,000. Eliminates the step-up in basis for...
Refundable Tax Credits for Paid Sick and Family Leave Available Through American Rescue Plan Act of 2021
May 06,2021
On April 21, 2021, the Internal Revenue Service (IRS) and Treasury Department announced details of tax credits that were made available through the American Rescue Plan Act of 2021 (ARP). The credits are aimed to help small and midsize businesses that provide paid sick and family leave due to COVID-19, including leave taken by employees to receive or recover from COVID-19 vaccinations. Who is Eligible? The tax credits are available to both for-profit and nonprofit organizations with fewer than 500 employees. These credits are also available to certain governmental employers. Self-employed individuals are eligible for similar credits. Eligible employers may claim the credits for paid sick and family leave from April 1, 2021, through September 30, 2021. Tax Credit Amounts and Calculations The ARP states that paid leave credits are tax credits against the employer’s share of the Medicare Tax. The tax credits are refundable meaning employers are entitled to...
Common Misconceptions Surrounding the Employee Retention Tax Credit
Apr 22,2021
Over the past few weeks, our tax team has fielded many questions related to the Employee Retention Credit (ERC). We wanted to provide our clients and friends with a quick update as it relates to questions and common misconceptions regarding the ERC. Below is simply an outline addressing some of the questions that have been presented to our team. As always, we encourage you to consult with your tax advisor or a member of our team before taking any action.   I don’t qualify for the ERC at all. False.  A qualifying business is one whose: 1.operations were fully or partially suspended due to orders from a government authority limiting commerce, travel or group meetings due to COVID-19. or 2. gross receipts for any quarter in 2020 were less than 50% of its gross receipts for the corresponding quarter in 2019 OR gross receipts for any quarter in 2021 were...
How Taxpayers Benefit From the American Rescue Plan Act of 2021
Mar 26,2021
On March 10, 2021, Congress passed the $1.9 trillion American Rescue Plan Act of 2021 (ARPA), providing more relief to businesses and individuals affected by the pandemic. ARPA was signed into law by President Biden on March 11, 2021. The information below highlights the tax benefits for individuals. Please note that you should consult your tax advisor before taking any action. Unemployment benefits Unemployment benefits of $300 per week will be available until September 6, 2021, with the first $10,200 in unemployment benefits being tax-free for households with a total income of up to $150,000.  For joint filers, the $10,200 would be excluded for each spouse. Child tax credit The child tax credit for 2021 will be refundable and will increase to $3,000 for eligible children aged six to 17 and $3,600 for eligible children under the age of six when the calendar year ends. Individual filers with an adjustable...
Congress Passes American Rescue Plan Act of 2021
Mar 11,2021
Note: This article was updated on March 31, 2021 to reflect new information on the Paycheck Protection Program.   On Wednesday, March 10, 2021, Congress passed the $1.9 trillion American Rescue Plan Act of 2021, providing more relief to businesses and individuals affected by the pandemic. The bill is expected to be sent to President Biden for his signature as soon as Thursday. The president has said he will sign the bill into law on Friday afternoon. The information below highlights the contents of the Act that will affect small businesses and individuals. Please note that it is recommended you consult your tax advisor before taking any action. Small Businesses Economic Injury Disaster Loan (EIDL) program $15 billion will be given to the EIDL program, which provides long-term, low-interest loans from the Small Business Administration. Among the terms of the program: $10 billion will be used to make payments to...
IRS Issues Guidance on Employee Retention Credit, Including PPP Eligibility Rules
Mar 03,2021
On March 1, 2021, the IRS published new guidance for employers who will be claiming the Employee Retention Credit (ERC) for 2020 calendar quarters. The notice provides much needed clarity on the retroactive changes under the Taxpayer Certainty and Disaster Tax Relief Act of 2020, including details on how employers who have already received PPP loan forgiveness can claim the employee retention credit for 2020. The new guidance, which is similar to the previously issued IRS FAQs, also addresses a few outstanding questions about eligibility, qualified wages and the suspension tests. General answers to those questions before the issuance of this new guidance can be found in this Smith & Howard article. The IRS has also promised forthcoming guidance on the 2021 expanded employee retention credits. For more information or help, please contact your Smith & Howard tax advisor or complete the form below.
Information about CP59 Notices Sent by the IRS
Mar 03,2021
Each year, the Internal Revenue Service (IRS) sends CP59 notices to taxpayers who have not filed their returns for the previous year. If you filed your 2019 tax return but recently received this notice, the IRS says you can safely disregard it and do not need to take any action. As a result of delays caused by the COVID-19 pandemic, not all 2019 tax returns have been processed. This caused the notices to be mistakenly sent in February to taxpayers who had filed their 2019 returns but whose returns have not yet been processed. You may have been sent this notice regardless of when and how you filed your 2019 taxes. As long as your 2019 return has been filed, you do not need to respond to the CP59 notice. If Smith & Howard handled your preparation and filing for you, we will be able to confirm that there is...
Tax Benefits for Individuals Included in the Consolidated Appropriations Act
Feb 19,2021
The Consolidated Appropriations Act, 2021 (CAA) extended several provisions for tax relief for individuals. Most of these provisions were introduced by the CARES Act in March 2020 to help both individuals and businesses affected by the COVID-19 pandemic. This article looks at the tax benefits individuals should consider as they file their 2020 tax returns. Charitable Deductions Two provisions from the CARES Act affecting charitable deductions were extended and modified through 2021 by the CAA: Individual donors who make cash contributions to qualifying public charities in 2021 can once again choose to deduct up to 100% (previously 60%) of their adjusted gross income (AGI). Contributions to a supporting organization, a donor advised fund and most private foundations will not qualify for this provision. The CAA modified the amount non-itemizing taxpayers can claim as an above-the-line charitable tax deduction and also increased a related penalty: Married taxpayers who file jointly can...
IRS Further Extends Qualified Opportunity Zone Deadlines
Jan 22,2021
On January 19, 2021, the Internal Revenue Service issued Notice 2021-10, further extending tax deadlines for Qualified Opportunity Funds (QOFs) and investors affected by the ongoing COVID-19 pandemic. The IRS had previously extended these deadlines in June 2020. The following information outlines new deadlines for taxpayers who have invested in Qualified Opportunity Zones (QOZs). 180-Day Investment Period Ordinarily, any capital gains realized from a QOF are expected to be reinvested by taxpayers within 180 days of that sale or exchange. Last June, the IRS extended that 180-day investment period deadline to December 31, 2020. The deadline has now been extended to March 31, 2021, if the last day of the 180-day investment falls before March 31, 2021. This extension for investing gains and qualifying for the program’s tax benefits is automatic, but taxpayers still need to make a valid deferral election. 30-Month Substantial Improvement Period for QOFs Under the new...
Consolidated Appropriations Act, 2021 Offers Expanded Employee Retention Credit and Introduces PPP2
Jan 06,2021
On December 27, 2020, the Consolidated Appropriations Act, 2021 for COVID-19 relief was signed into law by the president. Two items of particular importance for businesses are the expansion of the Employee Retention Credit (ERC) and additional Paycheck Protection Program loans (PPP2). Expansion of the Employee Retention Credit (ERC) The CARES Act introduced the ERC with the aim of providing eligible employers with a refundable tax credit. A qualifying business is one whose: 1.  operations were fully or partially suspended due to orders from a government authority limiting commerce, travel or group meetings due to COVID-19. or 2.  gross receipts for any quarter in 2020 were less than 50% of its gross receipts for the corresponding quarter in 2019. Businesses can continue to take the credit each quarter until gross receipts are 80% of the gross receipts in the same quarter of 2019. Fifty percent of up to $10,000 in qualified...

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