By Jim Dudlicek, Director, Communications and External Affairs
The pandemic of the past year brought on many complications to doing business, both operational and financial, making the 2021 tax season appear more daunting.
In a recent webinar hosted by NGA, Robert Graybill, president and CEO of FMS Solutions, shed light on some of the newer COVID-related and other tax deductions and provisions.
Here are some key takeaways for business owners from the discussion:
Tax rates are rising: The highest bracket for federal income tax rate will rise from 37% to the pre-Trump rate of 39.6%. The corporate rate is expected to rise from 21% to 28%; meanwhile, a 15% alternative minimum tax would apply to corporate book income of $100 million and higher. Graybill recommended shifting as much income as possible before these changes.
Death tax resurrection: The estate tax exemption is expected to drop by about 50% and the step-up basis at death would be eliminated. The exemption is expected to go back down to $11 million from $22 million. Selling or gifting a minority interest in your business could reduce this liability, Graybill advised.
PPP expenses are tax deductible: A second round of loans is available, which Graybill acknowledged would likely be irrelevant for most grocers since sales have been robust. However, he noted that many family-owned grocery businesses also have other interests that could qualify under these conditions: You have no more than 300 employees; you have used or will use the full amount of your first PPP loan; you can show a drop of at least 25% in annual gross receipts or for any quarter of 2020, compared with the same quarter in 2019; and you have not permanently closed (businesses that have temporarily closed or suspended operations can receive a second-draw loan).
You can claim employee retention credits if you experience either a suspension of business because of governmental orders limiting commerce, travel or group meetings due to COVID-19, or a significant decline in gross receipts. Prior reduction in payment for sick time and delayed employer portion may be considered and deducted from the employee side of payments.
Disaster payments are tax-exempt as long as they’re not wages, hero pay or for expenses covered by insurance. They don’t need to be reported and there’s no specific limit on reimbursement.
Retail glitch amendments: With the fix last April, 15-year property qualifies for bonus depreciation and business owners can amend returns back to 2018.
For other tax insights, view this complete webinar, along with others in the series, at https://nga.sclivelearningcenter.com/MVSite/default.aspx.