Year-end is the perfect time to reflect on accomplishments achieved since January. It’s also an important time to put things into perspective as we turn the page and start a new year.
What We Learned
With so much change in 2020, the opportunities to learn have been abundant. Take a moment and contemplate the following:
What new skills did you learn this year that you have put to work in your business?
What topics did you become wiser about?
What situations have you learned to master?
Goals Met
If you set goals for 2020, which ones did you achieve? Because it was a volatile year, you may have achieved a lot of things that were not planned. Or you may have simply maintained status quo, which is an amazing accomplishment in its own right in 2020. Give yourself credit for all of that as well.
As we transition to 2021, set new goals to be achieved in your business and record the list so you can look back periodically to monitor your progress.
Gaining Perspective
The circumstances of the pandemic present a constant challenge to keep things in perspective.
Gain perspective by asking yourself these questions:
What kind of business person do I want to be in 2021?
How do I see my business in five years?
What can my business contribute to its customers, employees, and other stakeholders?
Reflect, plan, and gain perspective as we usher in 2021. And have a Happy New Year!
The Consolidated Appropriations Act, 2021 (CAA 2021) became law on December 27, 2020, and among many other things, provided for a second round of potentially forgivable Paycheck Protection Program loans to small businesses that were financially impacted by the effects of the pandemic.
The Act not only provides funds and guidelines for a round two of PPP money; it also expands PPP round one in a number of ways. Here are a few of the highlights.
Changes to PPP Round 1 Loans
Existing borrowers with PPP loans can reapply for a loan or request a loan increase as long as they have not received forgiveness. This includes borrowers that returned all or part of their PPP loan or whose loan maximum has increased due to regulations implemented after receipt of their loan.
Businesses that have not been granted forgiveness can spend PPP money and apply for forgiveness on an expanded list of expenses, including:
Software, cloud computing, HR, and accounting
Property damage
Supplier costs
Essential contracts in force prior to loan
Worker protections, e.g. PPE
Payroll costs can include group insurance including group life, disability, vision, dental
They can now choose their covered period at any time between 8 and 24 weeks (previously it was 8 OR 24 weeks only).
There will be a simplified forgiveness application for loans under $150,000. However, do note that this is not the rumored rubber stamp: the backup paperwork and calculations are still required.
The SBA has until January 21, 2021 to establish the guidelines for the application process.
PPP Second Draw Loans
Additional PPP monies will be available to qualifying businesses, up to loan amounts of $2 million. The business must:
Employ 300 or fewer employees
Have used or plan to use the full amount of PPP1
Can prove a 25 percent drop in revenue in any quarter of 2020 compared to 2019
Businesses, certain non-profit organizations, housing cooperatives, veterans’ organizations, tribal businesses, self-employed individuals, sole proprietors, independent contractors, and small agricultural co-operatives are eligible.
In round two, borrowers may receive a loan amount of up to 2.5X the average monthly payroll costs in the one year prior to the loan or the calendar year. Businesses with NAICS code 72 (Accommodation and Food Services) may receive loans of up to 3.5X average monthly payroll costs. The rules for forgiveness are the same as in round one.
Organizations not eligible for PPP2 include:
Businesses not in operation on Feb 15, 2020
Businesses that received a Shuttered Venue Operator Grant
Entities normally ineligible for SBA loans in general, except for nonprofits and religious organizations
Political organizations and lobbyists
Entities affiliated with entities in the People’s Republic of China
Registrants under the Foreign Agents Registration Act
Publicly traded companies
The entire program is extended to March 31, 2021.
There are also special provisions for these types of businesses:
Venues
Farmers and Ranchers
Housing Cooperatives
News Organizations
501(c)(6) and Destination Marketing Organizations
Businesses in bankruptcy proceedings
The disclosures have also gotten stronger, with specific provisions for collection of demographic information and required disclosures for leaders in government to publicize their receipt of PPP forgiveness as well as prohibition of them receiving PPP loans in the future.
The law gives SBA a deadline to act, which varies from 10-24 days depending on the section. The next course of action for businesses that want to apply for these funds is:
Continue gathering your documents,
Make your calculations,
Check with your accountant if you need help,
Select your SBA-approved bank, and
Wait for both
The SBA guidance and
Your bank to open the application portal
The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act starts on page 2042 of the 5593-page bill in case you want to review it.
On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act, 2021 which included measures for both COVID-19 relief and sweeping funding provisions for the government through September 2021. While there are many sections of this law to explore, this article will focus on the stimulus checks.
Qualifying individuals will receive these economic impact payments, and the Washington Post reports that more than 85 percent of US households will receive a check. To qualify:
For individuals making up to $75,000 per year, or if a couple, making up to $150,000 per year, the check will be $600.
For individuals making between $75,000 and $86,900 (couples: $150,000 to $173,900), the check will be between $595 and $5. In this phaseout, the amount of the check decreases by $5 for every $100 of income above $75,000/$150,000, phasing out completely at $87,000/$174,000.
The amount sent will be based on the amount you earned (adjusted gross income, to be exact) on your 2019 tax return.
Includes children. The definition for child will be the same as the one used to calculate the child tax credit.
Excludes dependent adults over 17 at the end of the tax year.
Excludes persons who died on or before January 1, 2020.
Includes individuals who file jointly with an ITIN, but excludes the person with the ITIN.
Includes 2019 non-filers who receive benefits from Social Security Administration, Railroad Retirement Board, and the Department of Veterans Affairs.
Here are some examples: A family of four – mom, dad, and two children under 17 – that earns a total of $100,000 per year will receive $2,400. A single man earning $80,000 per year that lives with his disabled father will get $350 (80,000 – 75,000 = 5,000 / 100 = 50 * $5 = $250. $600 – $250 = $350). A woman with 2 small children earning $87,000 will not get anything.
Taxpayers do not have to do anything to receive their stimulus checks. Many taxpayers will receive their stimulus checks via direct deposit, if that information was included on your 2019 return. If the IRS does not have your bank account information, you will likely get a check or a pre-paid debit card. If you’ve moved, you can update your address by completing an IRS change-of-address form (allow six weeks).
The checks are supposed to start hitting bank accounts early in January. You do not have to pay tax on this income.
One of the biggest tax issues of 2020 has been clarified with the signing of the Consolidated Appropriations Act, 2021, (CAA 2021), and that was whether expenses that are normally deductible and that were paid with the proceeds of a Paycheck Protection Program (PPP) loan that is forgiven are truly deductible.
The CARES Act, which became law on March 27, 2020, was drafted so quickly that the question of deductibility was left out, but several members of Congress made it clear that deductibility was the intent all along. The IRS went the other way, publishing a notice (2020-32), a revenue ruling (2020-27), and a revenue procedure (2020-51), that took the opposite stance: PPP-related expenses that were forgiven were not deductible, therefore potentially causing business’s taxes to become much higher.
Congress has now reversed the IRS’s position with CAA 2021 in Section 276 (PPP) and 278 (EIDL). Gross income does not include forgiveness of PPP loans and emergency EIDL grants. Deductions are allowed for normally deductible expenses paid with PPP loan proceeds that were forgiven. It also provides deductibility for Second Draw PPP loans. This is all good news for taxpayers with PPP loans.
However, there could be timing issues that could reduce the deductibility of the full amount of the PPP expenses. There could also be amounts “at risk,” which is a tax term that limits your deductions in certain cases.
All of these issues need to be carefully considered on a case-by-case basis. Your tax professional is your best source to help you review all of these factors so that both your PPP loan forgiveness and allowable deductions are timed to reduce your tax bill.
New year, new challenges, and the potential for new successes. Here are five ways you can improve your financial management in the new year.
If you are already using QuickBooks Online, you know how it has solved the paperwork confusion of the past. However, are you taking advantage of all of its capabilities? As you turn your digital calendar to January, consider expanding your use of the software to set yourself up for success in the upcoming year. Here are five features to explore if you have not already.
Practice Proactive Reconciliation:
QuickBooks Online Banking screen display registers for the bank and credit card transactions that have been posted by your banks. Do you review these regularly? It will save time when you do your monthly reconciliations with your bank statements. Hover over Transactions in the toolbar and select Banking. You can see some of your transaction management options in the image below.
Once QuickBooks Online has downloaded a transaction from your bank, you have multiple options for dealing with it and finalizing the posting of the transaction.
When your statement comes and you are ready to reconcile, you can use QuickBooks Online tools that take you step by step through the process. Hover over Accounting in the toolbar and select Reconcile. Let us know if you need help with reconciliation or with managing downloaded transactions.
Start Accepting Online Payments:
This is probably the #1 way to encourage customers to pay you faster. When you set up a merchant account through QuickBooks Payments, you are be able to accept credit cards, debit cards, and ACH bank transfers. Your invoices will include a Pay Now button and will contain the information your customers need to pay electronically. Their funds will go into your bank account.
There are other ways they can pay you directly. You can take their card numbers over the phone. You can also get a free card reader from Intuit and swipe their cards on your mobile device. And you can set up recurring payments that will occur automatically.
Tip: We work directly with Intuit to offer QuickBooks Payments. Intuithas very affordable monthly rates and completive swipe and key rates. Adding QuickBooks Payments to your offerings can save steps in recording payments in QuickBooks. You send an invoice via email and offer ACH or credit card as payment options. Your customer will click on a button in your email to make a payment and QuickBooks will know which invoice it is for and QuickBooks and will link the payment to the appropriate invoice.
Set Weekly and Monthly Report Schedules:
You may run reports in QuickBooks Online on a monthly basis. Some reports, though, should be created more frequently, like Accounts receivable aging (detail or summary), Accounts Payable Aging, Open invoices, and Unpaid Bills. These reports help you keep a close watch on what you owe and who owes you.
It is important to run some other reports on a monthly basis, including Balance Sheet, Profit and Loss, and Statement of Cash Flows. Rather than just providing snapshots of where you stand with money coming in and going out, they give you a more comprehensive view of your finances that can help you make better business decisions. They are complex and often difficult to analyze, though, which is why QuickBooks Online categorizes them as For my accountant. While they are categorize under the Accountant group we recommend you view them at least monthly and if you need help interpreting them let us know.
Expand QuickBooks Online Features by Using Apps:
QuickBooks Online is generic enough that it can be used by a wide variety of small businesses. But that flexibility may mean that, it is not quite robust enough in one area or another, like inventory management or time tracking. Check out the hundreds of apps that can integrate with QuickBooks Online to fill in the gaps by clicking on APPs in the toolbar. Again, we are available to help if you need assistance in choosing the right app for your business.
Evaluate the Cost-effectiveness of Your Vendors:
It is easy to stick with the same old suppliers because it is a hassle to change. However, it is good to review the pricing of your current vendors and compare to other vendors to make sure you are getting the best pricing as well as customer service. To review your vendor list, hover over Expenses in the toolbar and click on Vendors. As you are reviewing the list, this might be a good time to clean up dated information. Click the down arrow at the end of each row and select Make inactive if you haven’t ordered from specific suppliers over the last year.
As we said earlier, we are available to meet with you and explain any of the concepts discussed here in more depth. Best wishes to you in the new year!
