Tax

Businesses in Atlanta and across Georgia breathed a collective sigh of relief when it was announced yesterday afternoon President Trump signed the COVID-19 Relief Bill. It had been over 9 months since the last round of economic stimulus had been passed by Congress despite several failed attempts during the summer and fall. Significant differences in the amount of relief, which incentives and benefits to extend, and the introduction of new programs kept sides apart. The Continuing Appropriations Act, 2021 and Other Extensions (the Act) provide relief for businesses through an expanded PPP (known as PPP2), modifications to Economic Injury Disaster Loans (EIDLs), and changes to several COVID-19 business tax provisions. Given the breadth of changes, the focus of this post will be on business tax opportunities.

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).

Cash-strapped businesses looking at different options to stretch every dollar may be overlooking a valuable tax benefit: the Work Opportunity Tax Credit (WOTC). Atlanta businesses that hired eligible workers in 2020 might be able to claim between $1,200 and $9,600 for each new hire – if certain conditions are met.

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.

Ahead of Inauguration Day next month, businesses are preparing for a wide-ranging possibility of tax changes and increases under the new Administration. He campaigned on a platform of tax increases for those earning more than $40,000 per year and rolling back select business tax cuts made in the Tax Cuts and Jobs Act of 2017 (tax reform). This includes an increase in the corporate tax rate to 28%, phase-out of the Section 199a deduction, 15% tax on corporate book income, and more.

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).

For many physicians, making it to the end of 2020 successfully is an achievement of perseverance, planning, pivots, and good business sense. An industry not traditionally associated with financial challenges was tested thanks to COVID-19 when in-office patient contact was restricted, elective procedures were all but halted, and ongoing medical care shifted to virtual. Many offices were forced to shut their doors or furlough staff, and the added cost of PPE and technology upgrades strained already-tight budgets.

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.

As the closing weeks of 2020 quickly approach many Atlanta businesses are taking a closer look to uncover new tax-saving opportunities. Given the number of challenges presented by the COVID-19 pandemic, it is not surprising there have been several new and extended federal tax incentives introduced to help businesses survive and recover. While valuable tax-saving opportunities, it is important not to forget about the tax extenders passed by Congress at the end of 2019. The one most relevant to Atlanta construction companies and contractors is the Section 45L, New Energy Efficient Home Tax Credit, which provides a credit for meeting certain energy efficiency minimums.