February 9, 2021 Update

February 9, 2021

A few quick thoughts from SBS CPA Group

This is the second email of 2021 and it is a much shorter email.  The prior emails were much longer and explained various new tax law changes.

Individuals

Once you have everything gathered for your 2020 income taxes please drop everything off including a filled-out tax planner (You have to fill out at least page one of the tax planner).  Please do not drop anything off until you have everything.  Once you have everything please drop off fairly quickly because if you drop off now you can still beat the rush.

The largest problem we are having is in regards to the stimulus payments.  We need you to tell us exactly how much you were paid for round 1 and then we also need you to tell us exactly how much you were paid in round 2, and round 2 was received in January of 2021.  We must have both numbers and they cannot be combined into one number.  The 2nd stimulus payment paid in January of 2021 is reported on your 2020 income tax returns.

If you collected unemployment, please download your 1099-G form from the Department of Workforce Development website, and give it to us.

Businesses

Please make sure you tell your CPA when the SBA tells you that your round 1 PPP loan was forgiven, we must have this information.

Far fewer businesses qualify for the 2nd round of PPP loan funding; however, about 25% of our business clients might qualify for this funding.  Please contact your CPA if you have questions about this 2nd round of PPP loan funding.  Congress does not expect the 2nd round of PPP loan funding to be used; however, some of the banks are saying the money is going fast.  About 73 billion dollars in round 2 PPP loans have been distributed and the program has about 202 billion dollars left in it.  If you want to apply for a 2nd round PPP loan please contact your CPA this week.  If you get a 2nd round PPP loan please tell your CPA the amount of the loan and exact date you got the money.

As discussed in prior emails the rules surrounding the 2020 Employee Retention Credit (ERC) have changed.  This is a complicated program and only a few of our clients will qualify for the 2020 ERC.  That being said, we have a few clients who will be eligible for hundreds of thousands of dollars of ERC credits.  If you have any quarter in 2020 where your gross receipts (business revenue not counting PPP loans and EIDL advances) decreased by more than half please contact your CPA.  If your business was shut down for an extended period due to the Covid-19 lockdown and you paid your employees wages contact your CPA.

There is an expanded ERC for 2021 that will be easier to qualify for and is a much larger credit.  Our business clients really need to look at their 1st quarter 2021 gross receipts in early April.  You will qualify for a much larger Employer Retention Credit if either of the following is true for your business for Q1 2021:

Your Q1 2021 gross receipts are more than 20% less than your Q1 2019 gross receipts OR

Your Q4 2020 gross receipts are more than 20% less than your Q4 2019 gross receipts

You will qualify for the ERC for Q2 2021 if:

Your Q2 2021 gross receipts are more than 20% less than your Q2 2019 gross receipts OR

Your Q1 2021 gross receipts are more than 20% less than your Q4 2020 gross receipts

We are currently working on income taxes primarily; however, we are also looking at our clients as we do their income taxes to see if they qualify for the 2020 ERC.  Most of our clients do NOT qualify for the 2020 ERC; however, the few who do will get hundreds of thousands of dollars of credits.

Please watch your gross receipts in the first 2 quarters of 2021 and contact your CPA if you think you qualify for ERC 2021.  This credit can be as high as $7,000 per employee in both the 1st and 2nd quarters of 2021.  Currently the program ends June 30th, 2021.   Businesses that qualify could get as much as $14,000 per employee just for the 1st two quarters of 2021.

If you know other business owners please feel free to forward this email to them and feel free to forward our prior emails to them.  There is a lot of help available for businesses due to Covid-19.

Mike Sylvester, CPA

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