employee retention credit

There are a number of tax changes brewing, and we want to help keep you and your business in the loop. Small Business Taxes and Government Changes As the first year of a new President’s term is coming to an end, that means there are lots of potential changes on the horizon. According to the National Federation of Independent Business, new proposed tax plan changes will increase the corporate tax rate from 21% to 26.5%, which will negatively impact small businesses classified as C-corps. The good news is that only about 25% of small businesses are classified this way. However, many experts are saying that these changes would still impact small businesses in the coming tax year, if the plan gets approved. There are also changes coming in the form of increasing the top capital gains tax rate and changes to the estate tax, says the NFIB. 2021 Losses All non-corporate business taxpayers can deduct a net trade or business loss up to $262,000 (or $524,000 for joint returns). This includes Schedules C, E, and F business activities. Employee Retention Credit Your business may also be eligible for Employee Retention Credit (ERC). Though initially only applicable to wages paid from March 13, 2020, to December 31, 2020, the recently passed Consolidated Appropriations Act and American Rescue Plan Act have expanded this credit. For tax year 2021, eligible employers can claim the employer share of Social Security tax if it equals 70% of up to $10,000 in qualified wages paid per employee, per quarter. Maximum credits are $28,000 per employee for the year. Qualifying businesses must prove it fully or partially suspended operations due to the pandemic, had a 50% decline in 2020 gross receipts compared to the same quarter in 2019, or less than 80%of 2021 gross receipts when compared to the same 2019 quarter. Net Operating Loss Limits Are Back to Normal The CARES Act relaxed limits on net operating loss for tax years beginning in 2018. 2019, and 2020. But no such …

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