Tax

Many Atlanta families and high net worth individuals invest significant time uncovering strategies designed to limit federal and state income taxes due. Tax planning focuses on reviewing tax law changes, updates to incentives and deductions, and other changes in areas where savings may be present. Although these activities are most common at year-end, many will make it a regular focus throughout the year.

During the height of the COVID-19 pandemic, many Atlanta businesses were struggling to maintain operations while navigating uncertainty, new safety regulations, and an assortment of government-issued restrictions. One of the federal relief programs offered to help offset the hardships, the Employee Retention Tax Credit (ERC), provided a much-needed cash boost to business owners. However, when the program unexpectedly came to an end 3 months early (end of 3rd quarter of 2021) it created an issue for those who were not expecting to pay employment taxes. Unfortunately, the withheld amount became due, and many employers were simply unable to repay it. Since December 2021, the IRS has been providing relief to these taxpayers and those who filed an amended return but has yet to receive a refund.

"At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?" This new question appears on IRS Form 1040, and taxpayers are required to answer. More than half of new Bitcoin investors joined the platform within the last 12 months, so there are taxpayers who are completely new to the market, and its potential tax implications. Given the new disclosure requirement, it is essential for Atlanta investors to understand the federal tax treatment of cryptocurrency investments.

Georgia taxpayers may be getting an extra refund soon if the state legislature’s latest proposal passes muster. Under H.B. 1302, taxpayers who filed returns in 2020 and 2021 would receive a one-time refund between $250 and $500.

Many Atlanta S-corporation and partnerships have been confused about the new Schedule K-2 and K-3 filings required as part of the 2021 tax return. Not only does the requirement mean the business and partners/shareholders must report international tax-related information on an updated form, but even the type of information required has changed. Despite the fact the updated forms were issued last September, many are unfamiliar with the new filing and concerned about the short adoption timeline. The IRS was aware of the potential for problems and issued IRS Notice 2021-39 which amongst other things offers transitional penalty relief for certain filers. Although helpful, many needed additional time to become familiar and comply with the new requirements. To assuage concern, the IRS announced new exemptions for certain domestic partnerships and S corporations.

Atlanta home builders and contractors had a bumpy ride last two years. Rising material costs, supply chain disruptions, labor shortages, and lower sales combined for a perfect storm of challenging business conditions. Many contractors and developers relied on tax benefits to get by. Some were temporary, like COVID-related tax credits, and others, like energy-efficient tax credits, were industry-specific. In any case, tax incentives helped provide cash flow in an uncertain environment.

Beginning in January 2022, companies looking to claim a refund under IRS Section 41 – better known as the federal Research and Development tax credit – will now have to supply more documentation. Outlined in Office of Chief Counsel Memorandum – 20214101F the extra information, which must be submitted with the annual tax return, is expected to help process R&D credit refunds faster and more efficiently.  Now that the IRS has issued guidance for the new requirements, businesses claiming the credit can work closely with providers to ensure the proper documentation is submitted.

On October 28, 2021, the IRS announced a new fee for executors seeking an estate tax closing letter. An estate tax closing letter specifies the estate tax amount and any generation-skipping transfer tax due. Additionally, it serves as an official certification the estate has been closed and all relevant taxes have been paid. Due to budget constraints and a high volume of estate tax return filings, the letter will now cost filers $67. While this is a nominal fee it represents the estimated direct and indirect costs of managing the totality of letter requests.  Executors, trustees, and other authorized representatives of an estate will need to follow these new requirements when requesting an estate tax closing letter.

Atlanta Employers with tipped employees on the payroll must be mindful of minimum wage requirements which can become complicated when an employee’s job consists of multiple duties. The Department of Labor (DOL) 80/20 rule provides compliance requirements that businesses must follow in such situations. As of December 28, 2021, the rules changed which will now require organizations to pay careful attention to the type and duration of work performed by certain employees. This change will force affected businesses to review and adjust policies to ensure compliance with the new rules.

The chaotic situation which followed the arrival of the pandemic created significant financial challenges for many Atlanta businesses. The variety of government orders combined with public concern about transmission changed the business landscape virtually overnight. The shift meant many businesses needed new and immediate capital infusions to make it through the transition. The Employee Retention Tax Credit (ERC) which was implemented as part of the CARES Act was one of several programs designed to help. Along with other federal relief programs, many were saved from financial uncertainty.