Schwartz, Giannini, Lantsberger & Adamson

How can you best extract useful insights from your financial statements? One way is to view your financial statements through a variety of lenses provided by key performance indicators (KPIs). For example, working capital (difference between current assets and current liabilities) is a relatively simple KPI for measuring liquidity. Various KPIs called turnover ratios show how efficiently companies manage their assets. And, to assess profitability, private companies can look at profit margin (net income divided by revenue) and gross margin (gross profits divided by revenue). Contact us with any questions you might have about generating financial statements and getting the most out of them. https://bit.ly/3pqwMe6

The IRS is opening the 2020 individual income tax return filing season on Feb. 12. (This is later than in the past because of a law that was recently enacted.) Even if you usually don’t file until closer to the April 15 deadline (or you file an extension), consider filing early. It can potentially protect you from tax identity theft. In these scams, a thief uses another person’s personal information to file a fraudulent return early in the filing season and claim a bogus refund. Another benefit of early filing is that if you’re getting a refund, you’ll get it faster. And if you were eligible for an Economic Impact Payment last year and didn’t receive it, you can claim it on your 2020 return. https://bit.ly/2KB81wO

COVID-19 has caused widespread furloughs and layoffs. Fortunately, employers that keep workers on their payrolls are eligible for a refundable Employee Retention Tax Credit, which was extended and enhanced in the latest law. Under the CARES Act, the credit only covered wages paid between March 13, 2020, and Dec. 31, 2020. The new law extends the covered wage period to include the first two calendar quarters of 2021. In addition, for the first two quarters of 2021 ending on June 30, the new law increases the overall covered wage ceiling to 70% of qualified wages paid during the applicable quarter (versus 50% under the CARES Act). These are just some of the changes. Contact us with questions. https://bit.ly/3sJNiIv

One item of interest for small business owners in the Consolidated Appropriations Act (CAA) is the availability of a second loan from the Paycheck Protection Program (PPP). The recently enacted CAA permits some small businesses who received a PPP loan to take out a PPP Second Draw Loan of up to $2 million. To qualify, you must employ no more than 300 employees per physical location, have used or will use the full amount of your first PPP loan, and demonstrate at least a 25% reduction in gross receipts during any quarter of 2020 (as compared with the same quarter in 2019). Additional rules apply. Contact us with any questions you might have about PPP loans. https://bit.ly/2XBFRV3

Happy Holidays from all of us here at Schwartz, Giannini, Lantsberger & Adamson.

The COVID-19 relief law that was signed recently contains many provisions that may affect you. The law provides for direct payments of $600 per eligible individual ($1,200 for a married couple filing jointly), plus $600 per qualifying child. The government has already started making bank direct deposits or mailing checks. Another provision extends a charitable donation tax deduction for individuals who don’t itemize deductions. For 2020, they can take up to a $300 deduction per tax return and for 2021, married joint filers can claim up to $600. These are only a few provisions in the new law. We’ll make sure that you get all the tax breaks you’re entitled to when we prepare your tax return. https://bit.ly/3b8GhKD

Here are a few key tax-related deadlines for businesses during Q1 of 2021. JAN. 15: Pay the final installment of 2020 estimated tax. FEB. 1: File 2020 Forms W-2 with the Social Security Administration and provide copies to employees. Also provide copies of 2020 Forms 1099-MISC to recipients and, if reporting nonemployee compensation in Box 7, file, too. MARCH 1: File 2020 Forms 1099-MISC if not required earlier and paper filing. MARCH 16: If a calendar-year partnership or S corp., file or extend your 2020 tax return. Contact us to learn more about filing requirements and ensure you’re meeting all applicable deadlines.https://bit.ly/38mCJ4w

Are you eligible to claim the qualified business income (QBI) deduction? Taxpayers other than corporations may be entitled to a deduction of up to 20% of their QBI. For 2020, if taxable income exceeds $163,300 for single taxpayers, or $326,600 for a married couple filing jointly, the QBI deduction may be limited in certain cases. Taxpayers may be able to save taxes with this deduction by deferring income or accelerating deductions at year end so that they come under the dollar thresholds (or be subject to a smaller phaseout of the deduction). You also may be able to increase the deduction by increasing W-2 wages before year end. The rules are complex so consult with us before taking steps. https://bit.ly/3ndBivs

For family business owners, among the most important issues to address is how to best weave together a succession plan with an estate plan. Transferring assets to the younger generation as early as possible removes future appreciation from your estate, minimizing any estate taxes. But you may not be ready to relinquish control of the business or your children might not be prepared to run it. To address this quandary, you can establish a family limited partnership or transfer nonvoting stock. Another challenge is older and younger generations may have conflicting financial needs. Solutions here may include conducting an installment sale or setting up a trust. Contact us for more information. https://bit.ly/2K9sDvp

If your employer offers a 401(k) or Roth 401(k) plan, contributing to it is a smart way to build a substantial nest egg. If you’re not already socking away the maximum allowed, consider increasing your contribution. With a 401(k), an employee elects to have a certain amount of pay deferred and contributed by an employer on his or her behalf to the plan. The contribution limit for 2020 is $19,500. Employees age 50 or older by year end are also permitted to make additional catch-up contributions of $6,500, for a total limit of $26,000 for 2020. The IRS recently announced that the 401(k) contribution limits for 2021 will remain the same as they are for 2020. https://bit.ly/33U7ah1