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Eligible small employers who provide health care coverage to their employees can receive a Small Business Health Care Tax Credit from the Federal government. Here’s what you need to know about who qualifies and how to take advantage of the credit.

What is the Small Business Health Care Tax Credit?

Small business owners make numerous decisions about employee benefits. For example, the type of benefits offered can entice the most desirable candidates to apply for their company’s positions. The right type of benefits can also boost employee retention. An excellent employee benefit to consider is health insurance. If that’s a perk being offered, the small business health care tax credit is a feature of the Affordable Care Act (ACA) that may be of interest. The tax credit is limited to employers with less than 25 employees, and it operates as a sliding-scale credit based on the size of the employer. The larger the employer, the smaller the tax credit. The maximum credit is 50 percent of premiums paid (35 percent for tax-exempt employers).

Qualifying small employers can take advantage of the small business health care tax credit for two consecutive tax years providing the business owes no taxes during those years. The credit can also be carried forward or back to other tax years. Any excess amount paid for health insurance premiums over the allowable credit can be claimed as a business expense.

Who qualifies for the Small Business Health Care Tax Credit?

As mentioned above, the small business health care tax credit is for small employers with fewer than 25 full-time equivalent employees (FTE). Note that the FTE concept is based on hours worked rather than the actual number of employees.

Other qualifications include that:

The employer pays less than $50,000 a year per FTE in average wages. Determining FTEs and average annual wages should be done by your qualified tax preparer, CPA, or via guidance from the Internal Revenue Service (IRS).

The employer offers a qualified health plan to employees through a Small Business Health Options Program Marketplace (SHOP).

The employer pays at least 50 percent of the employee’s premium cost. (Not family or dependent premium cost.)

What about Tax-exempt Organizations?

Tax-exempt organizations are also eligible for the small business health care tax credit. In this case, the credit is refundable to the extent that it does not exceed income tax withholdings or Medicare tax liability. Refunds to tax-exempt organizations are reduced by the current fiscal year sequestration rate. For an explanation of sequestration and how it impacts the small business health care tax credit, consult your tax advisor or accountant.

How do small businesses take advantage of the Small Business Health Care Tax Credit?

To claim the small business health care tax credit, the IRS requires Form 8941 (Credit for Small Employer Health Insurance Premiums) to be filled out and submitted. For small businesses, the amount should be included as part of the general business credit on the company’s federal tax return. The amount should be included on Form 990-T (Exempt Organization Business Income Tax Return) for tax-exempt organizations. Note: this form must be filed for a tax-exempt organization to claim the small business health care tax credit, even if the business does not typically file that form.

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Small business owners may find that offering perks like health insurance aren’t beyond their economic reach with incentives like this. As always, a trusted tax professional is the place to turn regarding this and other tax credits for small businesses.

While another stimulus plan waits in the wings, we’re still learning about the impact of the previous one on small businesses.

It was a long time coming, but it’s finally here. On December 27, 2020, then-President Trump signed a $900 billion stimulus bill into law, the Consolidated Appropriations Act. Along with many new provisions, the CAA expanded some elements of the earlier CARES Act.

President Biden has unveiled a $1.9 trillion package that would provide, among other things, more support for small businesses, the unemployed, and poverty-stricken individuals. It would also include funds for state and local governments and COVID-19 vaccinations and testing, in addition to $1,400 stimulus checks to qualified Americans.

When and if the American Rescue Plan gets passed and signed, there will be a lot more relief coming your way. For now, we’re still unpacking the details of the late 2020 $900 billion package, as we’re told its funds have not all yet been allocated. Here’s a look at some of what your small business needs to know.

The Paycheck Protection Program

The Paycheck Protection Program (PPP) was very popular when it was rolled out last year as a part of the CARES Act. So popular, in fact, that we heard numerous stories about small, struggling businesses being shut out because larger companies with existing banking relationships and more financial resources beat them to it. $285 billion in loans has been reserved for the PPP this time around. And the rules have gotten stricter and more targeted, allowing those missed the first time to secure much-needed funds. These loans are now capped at $2 million. They’re earmarked for companies that experienced a minimum 25 percent reduction in sales for at least one quarter during 2020, and which employ fewer than 300 individuals.

Further, $12 billion in loans has been reserved for minority-owned businesses. And publicly-traded companies will not be allowed to apply. Businesses can now deduct expenses incurred in administering their forgiven PPP loans that would previously have been considered ordinary and necessary business expenses. This change is retroactive to the CARES Act.

Relief for Restauranteurs

The restaurant industry, which was hit particularly hard by COVID-19 closures and reductions in business, will benefit from the tax break for corporate meal expenses. Rather than the 50 percent deduction that’s been allowed since the Tax Cuts and Jobs Act was signed into law, companies will be able to deduct 100 percent of business meals at restaurants for the 2021 and 2022 tax years.

Extension for Deferred Payroll Taxes

You may recall that President Trump allowed businesses to defer payment of the employee-side payroll tax between September 1, 2020 and December 31, 2020 in certain cases. The repayment deadline has been moved from April 30, 2021 to December 31, 2021. The original deferral deadline of December 31, 2020 still stands.

Extension of Paid Sick and Family Leave Tax Credits

In response to work absences due to COVID-19, eligible employers could receive refundable payroll tax credits for compensation paid to employees who had to take time off between April 1, 2020 and December 31, 2020. Employers are not required to offer this leave between January 1. 2021 and March 31, 2021, but they will be eligible for the tax credits if they do.

Additional Funding for the Economic Injury Disaster Loan Program (EIDL)

Small businesses and nonprofit organizations who have suffered temporary revenue losses because of COVID-19 were eligible for loans to cover financial obligations and operating expenses that they were unable to meet due to the pandemic. Funds for this program ran out in mid-2020, but the CAA added $20 billion for new EIDL grants. The deadline is December 31, 2021, but you should apply as soon as possible in case the money is depleted quickly again.

Employee Retention Credit (ERC) Extended

This provision in the CARES Act was designed to encourage eligible employers whose businesses were affected by COVID-19 to keep employees on their payrolls. It was a fully-refundable tax credit that was equal to 50 percent of qualified wages (with limitations). It originally expired on January 1, 2021, but the CAA extended this to June 30, 2021 and modified the original regulations in ways advantageous to both employers and employees.

Many Critical Limitations

As with all tax laws, the individual provisions of the CAA come with many restrictions. Your business may or may not be eligible for all of the individual elements mentioned here. Rules for the second round of PPP loans are especially complex.

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If your operations and finances have been affected by COVID-19, contact an accounting professional to see if you can get some relief from your losses.

Our Albuquerque, NM CPA firm provides accounting services  for all types of small businesses. Call us at 505-200-0094 now and tell us about your business or request a complimentary consultation online.

 

What is FFCRA?

The Families First Coronavirus Response Act (FFCRA) was passed in response to the spread of the novel coronavirus and the disease it causes, COVID-19. The Act became effective on April 1, 2020, encompassing two other acts, the Emergency Family and Medical Leave Expansion Act (EFMLEA) and the Emergency Paid Sick Leave Act (EPSLA).

The purpose of FFCRA was to:

• expand the Family and Medical Leave Act (FMLA) until December 31, 2020, for leave and income loss for employees who must stay home to care for children due to school or childcare closures in response to COVID-19
• create two weeks of paid sick leave for childcare and other coronavirus-related leave
• provide tax credits related to paid leave mandated by the act

THE IMMEDIATE QUESTION: What Happens Now that FFCRA has Ended?

When the Act was proposed, no one anticipated that coronavirus would be part of everyone’s daily life, nor that “pandemic” would become a household word. Now that this is the case – and now that there’s a new POTUS – questions buzz about the FFCRA’s fate. While the FFCRA no longer requires employers to provide COVID-related sick pay or paid leave, employers who choose to do so will receive a tax credit for those wages through March 31, 2021.

The IRS is expected to provide further guidance soon to businesses impacted by the FFCRA. Until then, employers are on their own in terms of deciding whether to provide leave. If they do, they must carefully navigate their decision to avoid potential discrimination issues.

GENERAL INFORMATION ABOUT FFCRA

Which Employers are Responsible?

Government agencies and private businesses with fewer than 500 employees must comply with the FFCRA. Businesses with fewer than 50 employees are exempt from the FFCRA if they can show that providing benefits would put them at risk of going out of business. Businesses with fewer than 25 employees do not have to reinstate employees that return from leave. All businesses with 25 or more employees must reinstate employees after returning from leave.

Which Employees are Eligible and What do They Receive?

Full-time employees who have been employed for at least 30 days and are unable to work (i.e., via remote) and who must care for children at home due to the coronavirus health emergency are eligible.

Part-time employees are eligible for the number of hours of leave they work on average over a two-week period.

Employers first offer unpaid leave (or accrued vacation time) for ten days (80 hours). After that time, paid leave begins at two-thirds of the employee’s regular pay rate. Compensation can continue up to 10 weeks as long as daily pay does not exceed $200 and total pay (for the ten weeks) does not exceed $10,000.

For employees unable to work because they are quarantined for COVID-19 exposure, illness, or symptoms, employers must pay them at their full pay rate for ten days (80 hours). A 10-week extension exists for full-time employees at two-thirds of their regular pay rate if needed for a total of 12 weeks for these employees.

Qualifying Reasons for Leave

An employee qualifies for paid leave if they are unable to work at their place of employment OR via remote (i.e., from home) due to:

• Federal, State, or local quarantine or isolation related to COVID-19
• A health care provider’s advice to self-quarantine due to COVID-19
• Symptoms of COVID-19 while in the progress of actively seeking a medical diagnosis (i.e., testing)
• The need to care for a quarantined individual or an individual who is having symptoms of COVID-19 (i.e., a child who cannot attend school or daycare or a child whose school or daycare is closed due to COVID-19 restrictions)

What Tax Credits are Businesses Entitled to under the FFCRA?

Private companies can seek reimbursement through fully refundable tax credits each quarter for paid sick leave and paid family leave (i.e., FMLA). The tax credits are applied against an employer’s already-owed Social Security taxes. If that is not enough to offset the payouts to employees, the Treasury Department helps cover the balance.

What’s Next?

Since Congress did not renew, the FFCRA employers are no longer required to offer paid sick time or paid leave to employees. However, employers who choose to do so voluntarily can still claim tax credits for doing so until March 31, 2021. In light of this federal ruling, employers should keep in mind that state and local laws in their areas may not be the same. Some states extended rulings that require employers to cover pay for COVID-related leave. Check with your state and local government to know the laws where you are.

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And as always, your tax professional should be up-to-date on all the latest guidelines and regulations about FFCRA, so check with them first so that your business is on track moving ahead in these still-uncertain times of the pandemic.

All Business CPA is here to help you successfully navigate the unprecedented economic challenges you face, and get your business back to business as quickly as possible. We provide assistance with finding the right program(s) for your unique set of circumstances, filing necessary forms and documentation, and providing sound financial advice at a time when you need it most. Contact us today at 505-200-0094 or fill out our simple form to get started right away.

Much like a map or a GPS provides clear directions to your destination, a business plan can help define your goals and spell out the steps your business must take to achieve them. It can also establish a set of benchmarks to measure your progress. A business plan is critically important when it comes to obtaining financing. Here are the key sections that a business plan should include.

Executive Summary

Your executive summary outlines the primary points in the subsequent sections and touches on your company profile and goals.

Company Goals/Mission Statement

This section summarizes your company’s purposes and goals. It defines who you are and what you want to achieve.

Market Analysis

Here you can demonstrate your industry knowledge and present conclusions based on your assessmenAt of the industry, your potential market and its demographics, and your main competitors.

Company Description

Provide information on what you do, how you do it, the markets your business serves, and what differentiates your business from the competition. You can include examples of recent projects that were completed and, if advisable, the names of some of your major clients.

Organization and Management

Here you can outline your business’s organizational structure and identify the company owners, management team, and board of directors.

Service or Product Line

This section provides the opportunity to explain what you sell and how your products or services benefit customers.

Strategy and Implementation

It’s important to summarize how you plan to market your business and what your sales strategy is. This section should include information on how you will reach target customers and penetrate the market and should provide details about pricing, promotions, and distribution.

Financial Plan

This is where you present an overview of your finances. It is where you lay out your assumptions about revenue growth, operating costs, and cash flows. Include balance sheets, income statements, and cash flow schedules as well as details about capital requirements.

Our Albuquerque, NM CPA firm provides accounting services  for all types of small businesses. Call us at 505-200-0094 now and tell us about your business or request a complimentary consultation online.