New Child Tax Credit Rules: What to Know

child tax credit - what to know
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President Biden signed into law his first legislative act related to the COVID-19 crisis.  The  American Rescue Act of 2021 (ARPA) included an expanded 2021 child tax credit, aimed to help families with children endure the impacts of the COVID-19 pandemic. The Child Tax Credit, alongside a Recovery Rebate Credit (third stimulus) and several other kid-focused tax credits, can significantly reduce your tax bill this season if you meet the requirements imposed. The professionals at SD Associates are sharing everything you need to know about the new tax credit and how it may affect your family. 

 

How Much You Get Per Child

Under the American Rescue Act, more money will be given to more families. The new 2021 child tax credit is a refundable tax credit that provides parents with up to $3,600 per qualifying child under 18. Parents who have children aged 6 to 17 will be provided with a $3,000 credit and those with children under the age of 6 will receive $3,600. This is up from $2,000 per dependent child up to age 16. The credit if fully refundable meaning low-income families who weren’t eligible for the previous benefits will now be eligible to receive the 2021 child tax credit.

 

The credit will be split; half will be paid through the tax refund and the other half will be paid in advance throughout the year, with payments ranging from $250 or $300 between the months of July and December. Families who are eligible will be required to claim the remainder of the credit on their 2021 tax return next April. It’s also important to note the child credit income limit. The credit begins to phase out when Adjusted Gross Income (AGI) reaches $75,000 for single filers, $150,000 for joint filers and $112,500 for head of household filers. High-earning families will still be eligible for the old $2,000 credit, which begins to phase out when AGI exceeds $200,000 for single filers and $400,000 for joint filers.

 

Who Qualifies for the 2021 Child Tax Credit?

Some other child-related eligibility requirements for the child tax credit include:

  •   You must have provided at least half of the child’s support during the last year, and the child must have lived with you for at least half the year (there are some exceptions to this rule; the IRS has the details here).
  •   The child cannot file a joint tax return (or file it only to claim a refund).
  • To take the Child Tax Credit for the 2020 tax year, the child has to be 16 or younger on December 31, 2020. To take the Child Tax Credit for the 2021 tax year, the child has to be 17 or younger on December 31, 2021.
  • Family income – the child credit income limit phases out at certain thresholds. The phase out threshold was $75,000 for single filers, $112,500 for head of household, and $150,000 for joint filers. For 2020 tax year $400,000 for married filing jointly, and $200,000 for everyone else.

 

New Child and Dependent Care Tax Credit Changes

For the 2021 tax year, the Child and Dependent Care Credit can get you up to 50% of up to $8,000 (up from $3,000 in 2020) of child care and similar costs for a child under 13, a spouse or parent who cannot care for themselves, or another dependent so that you can work and up to $16,000 of expenses for two or more dependents (up from $6,000 in 2020). This is a refundable credit.

 

If you’re looking for reliable tax services , look no further than the experts at SD Associates. We work closely with our clients to deliver cost-effective solutions and value-added services whether it is in accounting, auditing, consulting, or tax engagement. Connect with our team of professionals today to have all your tax questions answered.

What a 3rd Stimulus Check May Look Like

What a 3rd Stimulus Check May Look Like
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Though there’s no guarantee yet, talks of a third stimulus check have been making their way around Washington DC for weeks. While the first round took months to reach some people, and the second round appeared too little to most, the path to a third check seems to be happening quickly. With another possible $1,400 on the horizon, there are still a lot of open questions, like “When are we getting a third stimulus check?” “How much will you get for your kids?” and “Who will qualify?”. The team at SD Associates is here to share some valuable information on what a third stimulus check may look like.

 

Who Could Qualify for the Third Stimulus Check?

While millions of people were eligible for the first and second checks, the third round could look a little bit different. Many taxpayers who were eligible for the first two could now find themselves excluded from the $1,400 based upon their earnings. Under President Biden’s $1.9 trillion coronavirus relief package (“Budget Reconciliation Act”), the new bill excludes individual taxpayers earning over $75,000 and joint filers making over $150,000. There will still be phase-outs for higher earning taxpayers.

 

It’s important to note that the third round’s eligibility requirements are different from the sliding scale that was used previously to determine past stimulus payments. The new Democratic proposal follows the same path as the second stimulus check, with the IRS reducing checks by 5% for the total amount made over the AGI limit. This means for every $100 made over the limit, the payment goes down by $5.

 

Larger Base Amount

The base amount of the third stimulus check is expected to be $1,400, $200 more than the first round of $1,200 that was delivered under the CARES Act and $800 more than the second round that just hit many bank accounts in January 2021. The $1,400 came about after many Americans complained about the second $600 check being too little, too late.

 

Another possible change? Families with dependent children aged 16 or under could see a little bit more. During the first round, families saw an extra $500 for each child, and that amount was raised to $600 for the second stimulus check. This time around, lawmakers are calling for a higher amount.

 

Quicker Timeline

“Are we getting a third stimulus check?” has been on everyone’s mind since the second check was delivered to many Americans. Should Congress pass a standalone bill centered on stimulus checks by the intended mid-March 2021 timeline, Americans could begin to see their payment in a matter of weeks. However, this date could be delayed due to several factors, including how long it takes the IRS to begin calculating your payments during the busy tax season.

 

Based on 2020 Tax Returns

The first stimulus payment was calculated based on either your 2018 or 2019 tax return. If you didn’t file during those two years, the IRS welcomed you to send in any necessary documentation through an online portal. The IRS also took information from the Social Security Administration, Railroad Retirement Board, or Department of Veterans Affairs if you received benefits. If no information was provided and you didn’t receive government benefits, the IRS is permitting the option to claim the “recovery rebate” credit on your 2020 tax returns. The second stimulus check was based on your 2019 return. If you didn’t file, didn’t use the non-filers portal to get your first payment, and didn’t receive benefits, then the IRS offers the option to claim the “recovery rebate” credit on your 2020 tax returns.

 

Because the IRS has already begun processing tax returns, those who file sooner could not only get their refund quicker, but they might also receive their third stimulus check faster as well.

 

Social Security

With the next round of stimulus funds, it might be possible that having a Social Security number will no longer be a requirement. During the first round of payment, without a Social Security number, people were unable to qualify for the $1,200. For families with children, both parents were required to have one to receive the extra $500 per dependent. After the COVID-Related Tax Relief Act was passed, the guidelines surrounding this loosened, allowing married couples to claim the additional money even if one of the parents didn’t have a Social Security number. This rule was also applicable for the first round of checks, allowing families to claim up to $1,200 with the additional $500 as a recovery rebate credit.

 

The third round of payments could see this requirement dissolve altogether. Under the HEROES Act, individuals, including non-U.S. citizens, would only need a Taxpayer Identification Number to receive the next payment.

 

In the grand scheme of things, the possibility of the third round of stimulus checks is moving at lightning speed. For the most up-to-date news, turn to the professionals at SD Associates. Not only can we provide valuable updates on the proposed third stimulus check, but we’re also here to assist you with our professional tax services all season long. Contact our team today for more information.

What the New Stimulus Bill Means for Your Small Business

Small Business Guide To New Stimulus Bill

 

On December 27, 2020, President Trump signed into law the second stimulus bill, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act. This new bipartisan bill offers as much as $284 billion more for the Paycheck Protection Program (PPP), tax relief, and Economic Injury Disaster grants to small businesses that are struggling because of the ongoing COVID-19 pandemic. For some, this second round of money could be the difference between staying afloat and closing their doors for good. You may be wondering how this new bill affects your small business and if you can take advantage of it, we’re sharing the highlights and some guidance for your situation.

 

Your Small Business May Be Eligible for a Second PPP Loan

The new funds for PPP loans are available through March 31, 2021. Owners who did not receive a loan in the first draw can apply. Those who did receive a loan and have either used or plan to use it may also be eligible to apply, but with limitations. Borrowers can receive one first draw and one second draw PPP loan as part of the new stimulus package. Second draw loans will be calculated similarly to the first draw at 2.5 times the average monthly payroll of the prior year or, for the Accommodation and Food Services sector (NAIS Sector 72), 3.5 times the average payroll. No loan amount may exceed $2 million. Second draw applicants also:

 

  • Must be a small business with 300 employees or fewer
  • Have had at least a 25% reduction in gross revenue in one or more quarters of 2020 when compared to the same quarters of 2019

 

If your business continued to struggle throughout 2020 and into the new year, you might be eligible and can apply for this loan.

 

You May Be Paying Fewer Taxes

Probably the most welcoming change, small business owners who received PPP loans – whether through the first round or the new round, the act clarified certain tax positions whereby, if you used your PPP to pay business expenses that are normally deductible, you can take those deductions just like you would during a normal, COVID-free year. This means as a small business owner, you will likely have fewer taxes to pay in 2020. Neither the forgiveness in the PPP loans nor Economic Injury Disaster grants will be taxed in the 2020 season.

 

More Expenses Included

The first PPP loan allowed small business owners to use the funds to cover many critical expenses including payroll costs, mortgage interest, rent, and utilities. With the new legislation, more expenses are included in loan forgiveness including operations, property damage cost, supplier costs, and worker-protection expenditures (PPE).

 

 

 

Nonprofits are Now Eligible

Many nonprofits who didn’t qualify for the first round of PPP are now eligible for the second round of relief. The new requirement for 501(c)(6) nonprofit organizations includes:

 

  • Must have 300 employees or fewer
  • No more than 15% of their gross revenue most come from lobbying
  • The organization must plan to or have used its full PPP amount

 

If you need help applying for forgiveness or the application in the second round or just have more questions on the new relief bill that was passed, reach out to our team today. We provide affordable tax services throughout the Tri-State area, offering the highest quality of personalized service to our clients.

Resolve to Practice Better Business Habits…and Live Longer?

A recent study found that the wealthiest among us add, on average, want an extra nine happy and healthy years to their lifespan. This is comparable to quitting smoking and more than if you decided to start hitting the gym five times a week. So what New Year’s resolutions are you setting in place?  Forget about the gym, diet, and Nicorette and focus on practicing business habits that can help you maximize profits. Whether you are starting off with a new business venture or looking to make improvements within your already established company you need an advisor with a proven track record to assist you.

Here are four basic tips to help you save time and money.  Of course, every business and business owner are unique so please do yourself a favor and let SD Associates help guide you toward wealth and potentially a longer life. 

Keep Business Finances in a Separate Account
One of the first things you can do to set yourself up for success is to separate your business and personal spending. This requires opening a separate account to track all your business expenses. Having a dedicated business account will save you time and money in the long run. At SD Associates, our accounting and bookkeeping services will allow you more time to focus on the important aspects of your business, while we take care of the financial aspects.

Establish Clear Payment Terms
Successful companies have strong, open lines of communication with their clients. Establishing clear payment terms from the start can help you and your company avoid late payments and cash crunches. Get paid faster with solidified invoice payment terms. Clearly state accepted forms of payment, due dates and late-payment penalties from the get-go. Don’t be afraid to send out reminders and follow-ups.

Budget for Emergency Expenses
There’s no such thing as being overly prepared. Putting a portion of your profit aside or building space within your budget can save you in case of an emergency. Whether unforeseen office renovations arise, or immediate work equipment replacements are needed, having the extra funds set aside for these situations can help you get back on your feet. Keep at least six months to a year’s savings put aside for these situations— it will make all the difference.

Work with a Professional
Connecting with professionals in the field of accounting will give you a greater insight into your current business standings and what your next steps to success should look like. A professional accountant or bookkeeper can keep your records and books up to date and make you aware of any loopholes, potential fees or additional tax deductions that you might be eligible for. The accounting services offered by SD Associates will give you more time to focus on the forefront of your company rather than stressing over the behind-the-scenes finances.

Set time aside to meet with a trained and experienced CPA for a better tomorrow for your small business. Contact us today to start saving money now to make your new year the best one yet.

How Small Businesses Should Prepare for a Second COVID-19 Lockdown

How Small Businesses Should Prepare For A 2nd Covid-19 Lockdown

 

 

As COVID-19 continues to surge across the country, one thing is certain—the pandemic is far from over. The second wave of coronavirus is here, coinciding with cold and flu season, making everyone extra cautious. Experts believe that this second wave could last longer than the first, with restrictions going beyond face coverings and washing your hands. If you’re running a business during the COVID-19 pandemic and are wondering how to keep your small business successful during this unprecedented time, SD Associates is here to help. Here are some guidelines below to assist your small business for a second COVID-19 lockdown.

 

Build & Save Cash Reserves

One way to keep your small business successful during this time is to not be caught off guard. This includes building and saving assets in case of an interrupted cash flow. Your savings are there to support your business in the event of an emergency. During the first shutdown, if you found you only had enough cash to cover expenses for a couple of weeks, it’s time to formulate a plan and work on aggressively building up a reserve. Experts suggest asking landlords, suppliers, and your bank for deferrals. With our advisory services, we can help you layout your perfect strategy, catered specifically to your business.

 

Tighten Budgets & Spending

While you might already be operating on a tighter budget, now is the right time to consider trimming any excessive “fat”. Try to prioritize your spending based on needs, rather than wants. Negotiating with vendors to defer or stretch payables, spending less on advertising or marketing efforts, and running down inventory to minimum quantities should all be considered when trying to slim down your budget.

 

Strengthen E-Commerce Business

Running a business during the COVID-19 pandemic has forced many businesses to pivot, and this could be mean switching to an e-commerce business model during these unstable times. Nowadays, most people have access to the internet through their phone, computer, or tablet and if your business isn’t online yet, you should make that a top priority. Setting up an e-commerce store is going to be your biggest asset and can help keep sales afloat. If you sell products, services, or food, try moving them online. Take pictures and videos to advertise your specialties to keep business rolling in. If there’s one thing we’re sure of, it’s that the internet isn’t going anywhere anytime soon.

 

Invest in Remote Technology

Remote work became a staple for most businesses at the onset of the pandemic. While most people have a phone and internet connection at home, many companies weren’t set up to allow employees to work out of their homes. The use of video calls, secure Wi-Fi networks, and collaborative tools, like Microsoft Teams, Zoom, and Google Workspace, all allow people to work together virtually, and they come in handy during this shift to a remote-first approach. If the first lockdown brought challenges to your remote work, take this time to assess what went wrong and what you need to do to improve these items.

 

If the first shutdown taught us one thing, it’s to always be prepared for the unexpected. While many businesses around the country brace for a second lockdown, it’s now time to set up and execute a disaster plan. Having a plan in place could be the difference between surviving during the second shutdown and your business closing its doors. If you need help with financial services or planning for your small business, contact the experts at SD Associates in Elkins Park, PA today.

Fall Tax Tips for the Small Business Owners

Whether your small business has a great fall season or slows down, thinking about tax preparation probably falls to the bottom of your to-do list faster than the leaves fall to the ground. But this new season means that the holidays will come and go, winter will be over and tax season will be here once again before you know it. Rather than putting your tax preparation off until the new year. There are some easy tax tips for small business owners that will make tax season much easier.

Create a Checklist

Leaving something out or having an error on your tax return can cause your small business to lose money and may result in you losing precious time. To avoid this, it’s best to write out or type up a list of all the items that are important for filing your business’s taxes. This will include, but is not limited to, the following:

  • Filing payroll forms
  • Submitting 1099 forms to certain employees
  • Putting together income and expense records
  • Collecting expense records

Get Everything Organized

Almost every business owner has dealt with the stress of taking care of business taxes at the last minute of tax season, but there’s no need to put this additional stress on your already full plate. Instead, now is the time to prepare yourself tax filing—you can do this by making sure your bookkeeping is up-to-date, putting all of your tax-related documents in the same place and organizing the receipts that have accrued over the course of the year. In addition making sure your accounting software is up to date including all bank reconciliations have been done timely.

Be Aware of Deductions Eligibility

Far too often, small business owners miss out on tax deduction opportunities, meaning they also miss out on the opportunity to put more money into their pockets. The following is a list of popular small business tax deductions that may apply to yours:

  • Expenses for your home office
  • Costs from starting up your business
  • Office supplies
  • Office furniture
  • Office equipment (may include cell phones used for business)
  • Mileage from transportation to job sites, client visits, etc.
  • Costs from business trips (flights, car rental, meals, etc.)

If you are unsure of which tax deductions your small business is applicable for, now is the time to contact a tax services professional.

Handle Things Early to Maximize Deductions

By “things” we mean spending more money throughout the fall to help maximize your deductions. If your small business is financially stable, then you may want to consider taking care of the following expenses prior to December 31, 2019:

  • Paying vendors
  • Paying advertisers
  • Leasing a vehicle
  • All employee bonuses paid before year end
  • Purchasing new equipment

Although all of these options will cost you, it will make a big difference in your tax refund (in a positive way).

Whether you need assistance with tax preparation by getting your bookkeeping in order, or you need the help of a tax services professional, the team at SD Associates in Elkins Park, PA is here for you. Contact us today to schedule your appointment!

IRS Extends Stimulus Check Deadline to November

If you haven’t received a stimulus check yet, you still have time. The IRS has recently extended the deadline to register for your stimulus check to November 21, 2020, five weeks past the previous October 15, 2020 deadline. This can impact over 9 million people across the country, helping to soften the blow of the coronavirus pandemic. The professionals at SD Associates are sharing everything you need to know about the extension and the non-filers stimulus check.

Who Qualifies?

The non-filer stimulus check is typically reserved for those who have not received a stimulus check yet, including low-income families who live in underserved areas or individuals who made little or no money and didn’t have to file. U.S. citizens and U.S. resident aliens are eligible for checks of up to $2,400 if filing joint tax returns and can get up to an extra $500 with qualifying children aged 16 or younger at the end of 2019. To receive the full payment, there are also income limits including:

  • $150,000 for married couples filing joint returns
  • $112,500 for the head of household filers
  • $75,000 for all other eligible individuals

This extended deadline could help millions of people pay rent, cover bills, feed their families, and pay for other essentials.

How to File

To meet the deadline for the stimulus check, individuals should register as quickly as possible using the Non-Filers tool on IRS.gov. It’s important to understand that this tool will not be available after the November 21 deadline because the IRS needs to prepare for the upcoming 2020 tax filing season. IRS Commissioner Chuck Rettig states, “Any further extension beyond November would adversely impact our work on the 2020 and 2021 filing seasons. The non-filers portal has been available since the spring and has been used successfully by many millions of Americans.” According to the IRS, they sent nearly 9 million letters in September reminding people who meet the requirements for the $1,200 Economic Impact Payment but who don’t normally file a tax return to register for their stimulus check.

Individuals should know there is no cost to register. If you do not have access to the internet, the IRS encourages you to file a tax return for 2019 with the IRS or electronically through your tax preparer, tax software provider, or the IRS Free File. To speed up the process, choose to receive your check by direct deposit versus a paper check by mail. You may review the status of your check by using the IRS Get My Payment tool. If you miss the deadline for the stimulus check, you will have to file a 2020 income tax return to claim your credit.

SD Associates is here for you. As the pandemic carries on, our CPAs are here to offer expert tax services at affordable prices to ensure you and your business gain peace of mind and control over your taxes. Whether you’re looking to find eligible tax credits, develop a smart payment plan or you just want to create an effective business strategy, know our team is here to help. Connect with our accountants today and let us help you with all your tax service needs.

October Is Financial Planning Month: Here Are 6 Steps for a Flaw-Free Financial Plan

financial plan puzzle

 

We all want to have financial security, so it’s important to establish a flaw-free financial plan for yourself in order to achieve this. A financial plan is a comprehensive snapshot of your current finances, your long-term financial goals, and the strategies you put in place for yourself to achieve these goals. A good financial plan strategy will allow you to save money, prepare for the future, and achieve long-term goals, like saving for retirement or your child’s college education. Everyone’s financial plan will look different. We are sharing six common steps how to create a financial plan. 

What Is Financial Planning?

Financial planning is an ongoing process that determines how you will achieve your financial goals and objectives. It can help reduce stress and support your current needs while helping you build a nest egg future needs. A financial plan is important because it helps you create a roadmap for your future so you can make the most of your current assets and help ensure your financial future is comfortable. While you can create a financial plan yourself, it’s best to utilize the talents of a certified financial planner.

 

Set Financial Goals

The first step in creating your financial plan is setting specific goals that will help you stay on track. These goals will be your foundation for financial success. Your goals can include short- or long-term objectives, like paying off student loans or buying a new car. Avoid having grand, lofty goals like, “I want to be rich” and instead focus on smaller objectives like, “I want a college fund for my kids” so you don’t feel overwhelmed trying to accomplish them. Once well-defined and prioritized, your goals will be the driving force behind your financial plan.

 

Track Your Financial Activity

One of the more important aspects of financial planning is creating a budget and tracking where your money goes. Having a sense of your monthly cash flow (expenses/savings/income) can help give you an accurate picture of where your money comes and goes each month and help you establish short, medium, and long-term plans. Once you begin to see where your money goes, you can adjust it to better achieve your goals. For an immediate plan of action, try developing a simple budget. You can create one by:

 

  • Tracking your income and expenses.
  • Using a budgeting app.
  • Utilizing the 50/30/20 budget method. This includes putting 50% of your take-home income toward essentials like housing, utilities, food, and other recurring payments. 30% then goes toward wants like dining out and entertainment. The last 20% goes toward savings and debt payment.

 

Minimizing credit card debt is an example of a medium-term plan and retirement planning is a typical long-term plan.

 

Start Saving

After your major goals are set and you’ve been keeping track of income and expenses, it’s time to start saving! Refer to your budget and re-examine your spending accordingly. You can start immediately saving more by cutting your expenses and increasing your income. First, begin by determining where you’ve been spending too much, such as entertainment or dining out. Then, look for ways to save. Next, find out ways to increase your income. This can be accomplished through a second job, asking for a raise, or even a career change. Once your extra income is flowing, ensure you’re putting it into a savings account.

 

Emergency Expenses

It’s a smart idea to be prepared in the event of an emergency. One of your goals should include putting away extra cash for emergency expenses. Start small—$500 to cover a home repair—and make sure to increase this amount over time to be able to cover a month’s basic living expenses, and so on.

 

Tackle Debt

Unfortunately, you can’t begin your road to financial success if you’re carrying a large amount of high-interest debt. Between large debt with minimum monthly payments with high-interest rates this could take too many years to pay down as well as damaging to your credit score. It’s important to start paying down this type of debt as soon as feasibly possible. Try creating a debt pay-off strategy and be consistent. Slowly reduce credit card balances and other loans and you’ll feel much better about your financial future.

 

Review Your Plan Constantly

Plans change, especially when they involve your finances. It’s important to periodically review your financial situation. Quarterly, ask yourself:

 

  • Have my goals changed?
  • Has my income (or debt) gone up or down?
  • What are the current needs of my health or my family? Have they changed?

 

If anything has changed, it’s simple to alter your goals to handle these unexpected hurdles. Checking in quarterly can help you stay on track and keep plans from derailing.

 

We all want to be financially independent and build wealth, and at SD Associates, our goal is to help you achieve this. Deciding to embark on a journey toward financial independence can be scary and you might not know how to create a financial plan that aligns with your future, but with our guidance, we can help create a fresh beginning with your finances and change your life for the better. Contact us today to get started.

 

Paycheck Protection Program: Current FAQ For Small Business Owners About Loan Forgiveness

 

up close picture of payment protection program

The financial environment and the current state of the economy are ever-changing. For small business owners navigating these difficult waters, we understand the hardships you may have come across this year. With new rules, requirements, protocols, and processes that change almost every day, we know there may be some lingering questions regarding the Paycheck Protection Program which was enacted by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the related loan forgiveness process.

 

As of August 11th, 2020, the Small Business Administration alongside the U.S. Treasury issued new guidance through Frequently Asked Questions (FAQs) aimed at helping business owners who participated in the Paycheck Protection Program. These FAQs discuss simplified PPP loan forgiveness guidelines and help borrowers navigate maximum loan forgiveness.

 

General Loan Forgiveness

Small business owners have been dealt a lot this year, from storefront closings, layoffs, and the paycheck protection program. With the need for clarity on PPP loan forgiveness guidelines, we’re reporting the key highlights of the ten pages of Treasury FAQs below.

 

  • Self-employed individuals, sole proprietors, and independent contractors with no employees at the time of the PPP loan application and who did not include any employee’s salaries in the total of average monthly payroll in the application form automatically qualify to use Form 3508EZ or lender equivalent.
  • The FAQ addresses a common question regarding making payments while awaiting forgiveness. The answer is no. If the borrower submits an application within 10 months of the end of the Covered Period, the borrower is not required to make any payments until the loan amount is sent to the lender by the SBA. If the loan is fully forgiven, the borrower will not be responsible for any payments. If only part of the loan is forgiven, the remaining balance must be paid in full by the borrower on or before the maturity date of the loan.
  • The Covered Period refers to the 24-week period beginning on the date the PPP loan payment date or if the borrower received the loan before June 5, 2020, the borrower could choose an alternate 8-week period.

Loan Forgiveness Payroll Costs

There are various questions surrounding payroll costs and we’re sharing some of the most important elements of Loan Forgiveness Payroll Costs FAQ:

 

  • Payroll costs that were incurred during the Covered Period or the Alternative Payroll Covered Period but paid after the Covered Period or the Alternative Payroll Covered Period are eligible for loan forgiveness if the payroll costs are paid on or before the next regular payroll date after the Covered Period or Alternative Payroll Covered Period.
  • Borrowers must calculate payroll costs for partial pay periods.
  • When computing compensation, borrowers need to use the gross amount before deductions and not the net amount paid to the employees.
  • Payroll costs include all forms of compensation paid to the employees, including commissions, hazard pay, and tips.
  • Expenses for employee group health care benefits that are paid by the employer can be considered payroll costs that are eligible for loan forgiveness. Expenses paid by the employee are not included in payroll costs.
  • Employer contributions for retirement benefits that are paid or incurred by the borrower during the Covered Period or Alternative Payroll Covered Period qualify as payroll costs and are eligible for loan forgiveness.

 

Calculating Non-Payroll Costs

Non-payroll costs include rent, utilities, and interest on loans incurred before the Covered Period, yet paid during, are eligible as part of the loan forgiveness. Other key points to consider include:

 

  • Non-payroll costs incurred during the Covered Period and paid on or before the next regular billing date, even if this date is after the Covered Period are eligible for forgiveness.
  • Payments made on recently renewed leases on payments on refinanced mortgage loans are eligible for loan forgiveness if the original lease or mortgage existed before February 15th, 2020, and the payments are made following the renewed lease during the Covered Period.
  • Another utility payment eligible for forgiveness includes a “payment for a service for the distribution of . . . transportation” under the CARES Act. This refers to transportation utility fees assessed by state and local governments.

 

Reduction in Work or Wages

Layoffs and the inability to rehire or hire new employees has brought about many complicated issues within the PPP program. Recent regulations have changed and the FAQ states:

 

  • A borrower may exclude any reduction in FTE (full-time equivalent) employees if the borrower can document the inability to rehire individuals employed on February 15th, 2020, and similarly qualified individuals for unfilled positions on or before December 31st, 2020. Borrowers are required to inform the unemployment insurance office of any rejected rehires within 30 days of the rejection.
  • Seasonal employers who use a 12-week period between May 1st, 2019, and September 15th, 2019 to calculate their maximum PPP loan amount must use the same 12-week period as the reference period for the calculation of any reduction in the amount of forgiveness.
  • Certain pay reductions that arose for employees during the Covered Period or the Alternative Payroll Covered Period may reduce the amount of loan forgiveness.

 

If you need assistance with the paycheck protection program or have further questions about the small business loan forgiveness, do not hesitate to contact our team of CPAs. The professionals at SD Associates are here to offer you and your small business the best financial services possible to help you successfully navigate these difficult and uncertain times. Call us today at (215) 517-5600 or contact us here.

7 Signs You Should Invest in a Bookkeeping Service

invest in bookkeeping servicesAs a small business owner, you probably wear many hats within your business. You may be preparing invoices one day and dealing with the bank the next. As an entrepreneur, it only makes sense that you want to keep a watchful eye on all the activities of your business. In the beginning, this can be quite resourceful and can help minimize costs. However, over time, this can lead to deeper problems for your company. One of the main culprits, is poor bookkeeping services. When it comes to, it’s best to leave this job to the professionals. Whether you’re looking for long-term success, internal growth, or a more sustained profit, the experts at SD Associates are sharing why bookkeepers are essential and eight signs you should invest in a bookkeeping service.

 

Books are outdated

Your company’s general ledger should always be kept up to date. Outdated books and records can equal bad news for your business. You’ll have trouble understanding your cash flow needs and as well as not maintaining a firm handle on your finances. So, if you have paperwork scattered across your dinner table and shoeboxes filled with untracked receipts, it’s time to call in a professional to help you better keep track of your business transactions.

 

Set of books has never been maintained before

You’re an entrepreneur, which probably means you may have not gone to school for finance, and that’s okay! While you may prefer to handle most aspects of your business yourself, if you’ve never tackled bookkeeping before, now is not the time to start. Running a business and trying to learn a whole new field of study can cause some major bumps in the road that will end up costing you more than it saves you.

 

Just too busy

As your business grows, so does your list of responsibilities. Your DIY approach to your bookkeeping will begin to become unsuitable. If you can’t find the time to get everything done, it’s time to reprioritize and outsource your bookkeeping services to help your business continue to grow.

 

Bills are being paid late

With the paperwork piling up and your lack of time, bills are bound to fall through the cracks. Late payments not only make you look unprofessional, but it can also tarnish your business’s reputation. Professional bookkeeping services include proper time management to ensure you never miss a beat (or a bill).

 

Missed out on tax deductions

Just as bills can fall through the cracks, so can tax deductions. Employing a professional bookkeeper can make sure your many business expenses such as digital downloads, phone bills, and online subscriptions never go undocumented. These deductibles can be used to offset the total income owned come tax time each year.

 

Unpredictable cash flow

Have you ever scrambled at the end of the month to cover your expenses due to a lack of cash? While this can happen because of several different scenarios, the bottom line is you have a cash flow problem. When you hire a professional to perform your bookkeeping services, they can track your accounts payable and receivable, ensuring you are always on top of your cash flow needs.

 

Bookkeeping software being used as a replacement

You should never completely replace your general ledger with a bookkeeping software service. While smart tools like QuickBooks can make your process more efficient and streamlined, a computer program can never substitute for a true professional.

 

If you’re ready to grow your business, increase profits, and streamline productivity, it’s time to consider hiring a professional bookkeeper. As your business grows, your DIY approach to managing your finances will become counterproductive. At SD Associates, we can assist you in managing your books and day-to-day financial transactions, so you have more time to make sound business decisions without the added stress of bookkeeping. Call us today at (215) 517-5600 or contact us here.