Author Archives:
Alexis Nash

The challenges of managing through the COVID-19 pandemic have impacted each Atlanta individual and family differently. While some have been able to tolerate the changes with little difficulty, others have been required to make tough decisions about expenses and finances. As the pandemic has persisted the related challenges continue to grow. Earlier this week President Trump signed the Consolidated Appropriations Act, 2021, which included the COVID Related Tax Relief Act of 2020 (the Act) that provides the comprehensive relief many have been awaiting. This includes economic impact payments, extended unemployment benefits, and an expansion of penalty-free plan withdrawals.

Atlanta businesses looking for last-minute options to increase cash flow before the end of the year may be in luck. The CARES Act, passed earlier this year, contained several tax benefits and incentives to help struggling businesses create a capital infusion. While the list is comprehensive there was one change that offers significant savings benefit, the temporary expansion of Net Operating Losses (NOLs).

In a year when businesses have overcome a variety of obstacles and challenges brought about by the COVID-19 pandemic, many are excited for the year to come to an end. During this time, management is analyzing overall sales, operational, and financial performance, while making plans and setting goals for 2021. Navigating a path through the pandemic has changed the strategic planning process requiring management to venture beyond traditional performance metrics.

When President-Elect Biden takes office in January, he will inherit a battered economy, historical national debt, and the ongoing public health crisis from COVID-19. He campaigned on promises to raise taxes for corporations and wealthy Americans and reinstate or expand tax credits and incentives for lower- and middle-income earners. But campaign promises and future reality are often two different scenarios. With 2021 right around the corner, many Atlanta taxpayers are wondering what changes they can expect to individual income taxes after Inauguration day. Important insights into the potential changes can be gleaned from the President-Elect’s proposed changes for individual income taxes.

One of the many lessons learned from the COVID-19 pandemic is the importance of cash flow and the need for cash flow planning. When the pandemic first arrived in Atlanta many businesses were scrambling to adjust to the various government orders including forced business closures. This meant some had to make challenging decisions to reduce costs when limited, to no revenue, was generated.  Congress stepped in offering a lifeline in the form of the CARES Act which not only created the Paycheck Protection Program (PPP) but also introduced the  Employee Retention Tax Credit (Credit).

The Tax Cuts and Jobs Act of 2017 (tax reform) was designed to make the tax code easier to navigate and reduce taxes on American businesses allowing them to be more competitive. Many of the changes were well received including the reduction of the corporate tax rate to 21%, a new 20% deduction for pass-through entities, and an increase in Section 179d expensing. However, there were other changes not well received by Atlanta businesses including the elimination of the entertainment expense deduction, limitation on business meal expense deductions, and implementation of a $10,000 cap on the deduction of state and local taxes (SALT) for pass-through entities.

The COVID-19 pandemic created once in a lifetime business challenges and economic conditions. Not only were Atlanta businesses impacted by government orders about when and how they could operate, but there were also issues related to employee health and the threat of infection. As COVID-19 spread many Atlanta employers were forced to deal with employees that were either infected or forced to quarantine and not able to work. Not only did this impact production but it also stressed companies that had to pay sick benefits at a time when financial challenges were popping up everywhere

The changes to the meal and entertainment deduction caught many off-guard. Tax reform eliminated the opportunity for businesses to deduct entertainment-related activities and changed the deduction for certain meal expenses to 50%. Unlike other aspects of tax reform that have been modified during COVID-19, this deduction has not been changed. In fact, the IRS had only published proposed rules which were effective until the release of final regulations (TD-9925).

The combination of 1031 like-kind exchanges and cost segregation studies have long been two of the better tax tools in construction and real estate owners’ toolboxes. The combination of tax deferrals and bonus depreciation created advantageous scenarios where capital gains were deferred, investments continued to grow, and personal property could be depreciated at an accelerated rate. When the Tax Cuts and Jobs Act (TCJA) was passed in 2017, it limited the use of 1031 exchanges to real property only.

Over the past few years, there has been a renewed focus by the IRS and Department of Labor (DOL) on worker classification. Atlanta employers have the option of classifying a worker as either an employee or an independent contractor depending on a number of factors. While a background detail to those working for the company, in either capacity, there are tax ramifications for the business depending on classification.