Wow, does it ever feel good to have turned the page on 2020. This first “working week” is when I finally began to feel the newness of it all. Yes, it’s “just a date” on a Gregorian calendar, but … 2021 holds great promise for our Los Angeles County business clients. With the potential of easing lockdowns in our future (assuming that the vaccine and other developments will enable a further re-opening of society), and with the extensions of the PPP and other very nice provisions in the CAA, here at Ross & Associates Accountancy Corp, we are champing at the bit to help our Sierra Madre SMB clients build something great in 2021. And by “great”, I mean financially secure. That is our wheelhouse. There’s plenty more that I write about and discuss with our clients, but ensuring that your Sierra Madre business never has to worry about disaster striking (again) is a key motivator for us. If you need to reach us, we’re here: 626-357-9703 Now … I’d like to take today’s Note to go over some of the SMB provisions of the clunkily-named “Coronavirus Response and Relief Supplemental Appropriations Act of 2021”, also known as the “Consolidated Appropriations Act” or CAA for short (the CAA is the entire bill … the clunky name is for the part that directly applies to this conversation). I shared some of this last week, but I know that the holidays might have gotten them lost in the shuffle. Plus, there’s more to say… Provisions of the Second Coronavirus Relief Bill That Affect Sierra Madre Small Businesses“What would you attempt to do if you knew you could not fail?” -Robert Schuller The passage of this relief bill brought some changes that we had been hoping to see for months (notably the deductibility of PPP-related expenses), but there is much more to this relief bill than merely that, and the $600 stimulus payments that get all of the press. So I thought I’d delve a little deeper than I did last week on the high points of this CAA bill. (And now that year-end is mostly behind us, if you need to talk through any of this, we’re right here, and have more availability):626-357-9703 PPP-Related ProvisionsAs I mentioned, Sierra Madre businesses are now allowed to deduct expenses associated with their forgiven PPP loans — this is amazing news. Further, the new law provides $284.45 billion to reopen and strengthen PPP for first and second time borrowers and reauthorizes the program through March 31, 2021. However, the requirement in order to receive a second PPP is that the small business has less than 300 employees and can demonstrate a revenue reduction of 25 percent. Oh and simplified forgiveness applications for loans under $150K. Every lender will handle slightly differently, but what the bill indicates is that the borrower signs and submits a one-page certification that requires the borrower to list the loan amount, the number of employees retained, and the estimated total amount of the loan spent on payroll costs. That’s it! The bill also expands the list of eligible expenses to include covered operations (software, cloud computing and other human resources and accounting needs), PPE, covered supplier costs and damage costs due to public disturbances. Oh, and I had missed this last one before, but this is also a very nice bonus: the bill repeals the CARES Act provision that requires borrowers to deduct their EIDL Advance from their PPP loan forgiveness amount. Also very nice. If you have already applied for forgiveness under previous provisions, you will want to contact your lender to find out how you can take advantage of these new provisions. Be patient, though … they will certainly be slammed. More EIDLThe new law provides $25 billion to restart and extend the EIDL Advance Grant for small businesses in low income communities, AND it creates a process for existing EIDL Advance grantees that received less than $10,000 to reapply for the difference between what they received and the maximum EIDL Advance Grant of $10,000. Here is where you can do that. Employee Retention Credit For The WinBeginning on January 1, 2021 (and through June 30, 2021), the new relief bill: Increases the payroll tax credit rate from 50 percent to 70 percent of qualified wages. Very nice. Also it expands eligibility for the credit by reducing the required year-over-year gross receipts decline from 50% to 20% and provides a safe harbor allowing employers to use prior quarter gross receipts to determine eligibility. This might not seem significant, but believe me, for the right business, this is VERY good news. Increases the limit on per-employee creditable wages from $10,000 for the year to $10,000 for each quarter. Much more generous. Increases the 100-employee delineation for determining the relevant qualified wage base to employers with 500 or fewer employees. Here’s the best part: employers who receive Paycheck Protection Program (PPP) loans may still qualify for the ERTC with respect to wages that are not paid for with forgiven PPP proceeds. Previously, you had to choose one program or the other … now, as long as you qualify for both (see above for those newly-expanded qualifications), you can use both. Further Miscellany Go take some clients out for meals! Because there’s now 100% deduction for business meal food and beverage expenses (provided by a restaurant) that are paid or incurred in 2021 and 2022. Last year, this was only 50% … now it’s full. Contractors who were temporarily unable to work due to facility closures and other restrictions will be able to receive reimbursement for paid leave from federal agencies. This is great news. It remains to be seen what inflation will result from all of these measures … or exactly how all of this will be paid for by Uncle Sam, but that’s not my lane. My lane is helping you and your business THRIVE in 2021. We’re here for you… Warmly,   Rodney Ross(626) 357-9703Ross & Associates Accountancy Corp   Feel free to share this article with a Sierra Madre area (or beyond!) business associate or client you know who could benefit

Last week, when I wrote my message to our Sierra Madre business clients, the biggest news was the second round of the PPP, and that expenses covered under the first round of it would be tax deductible. Has anything happened since then? Goodness, even just the “mere” fact that both houses of Congress are under Democrat control now, after the Georgia elections, would have been the subject of many tax and business policy discussions. But with ALL of the events of the week in view, we really do have a choice to make as business owners: Will we marinate in fear and anger … or will we take care of our customers, our team, and our business? I’m going to leave the cultural commentary aside today (we’re being bombarded with it from all sides, after all), and instead I’m going to be the voice that says: you have a job to do; so let’s do it. Here’s a nice palate-cleanser to start. I was pointed to that Twitter thread via email (I normally don’t spend large amounts of time on Twitter, nor do I suggest that you do) … but I suggest you read it and digest. As a Los Angeles County business owner, there is much there to think about. I particularly liked this: My team and I find great fulfillment in coming alongside Sierra Madre businesses like yours and pointing towards the way of financial hope. And there is plenty to like about the tax and regulatory regime that we will be operating under in TY2021. And obviously … we don’t know yet exactly how it will all change. (And change, it will.) But in the meantime, if you need to reach us, we’re here:626-357-9703 Now … last week I went over some specifics of the CAA and how it affects your business (as I alluded to above). If you missed that, let me know. Today, I’d like to begin a deeper conversation around the foundations of your business. I offer these questions on an annual basis, and they are worth considering AT LEAST that often… My Sierra Madre Small Business Health Quiz (Part 1)“Be more concerned with your [business’] character than your reputation, because your character is what you really are, while your reputation is merely what others think you are.” –John Wooden These are questions that might raise a few concerns, and that’s fine — it’s what we’re here for. Alongside establishing clear measurables for success (KPI’s), these are the sort of things that effectively-growing small businesses really need to get a handle on, regardless of their tax situation. I like to share these questions regularly with my people, simply because it’s good practice to continuously revisit these things and ensure we’re headed in the right direction. And further, as a business owner, it’s important that you take a REGULAR, clear-eyed look at the underlying legal and financial foundations for your business. As we all pull our tax documentation together, I can’t think of a better time. This is a bit of a different approach than I normally take in my Strategy Note, but if you take it seriously … it can be a transformative process. Take a look at each of these questions, and if you are troubled by any of your answers — send me back an email. If it’s not something we’re equipped to handle, we can equip you with a good advisor. Regardless, we can talk about them when we do meet for your taxes. Ross’ Small Business Health Quiz #1: Is the value of your business firmly established?Questions to consider: Have I ever had my business value appraised by an outside party? Do I have a formal buy/sell agreement in place? Is my buy/sell agreement funded? Does my buy/sell agreement adequately protect my heirs, my business, and my partners? Has this agreement been reviewed in the last 3 years? If you have any plans to someday extricate yourself from your business (and you should ALWAYS consider your exit strategy), these are critical questions. #2: Is there an emergency plan?Questions to consider: Do I have a will, and is it up to date with my business wishes? Do I have a plan to retain key employees if something were to happen to me? Are my assets protected from potential litigation? Have I identified and written down my trusted advisors? Unless you plan to forever cheat death, a business owner would be foolish to not prepare for that event. #3: What happens next?Questions to consider: Do I have a formal succession plan prepared and on file? Does my succession plan have a provision for disability? Have I involved both family members AND key employees in my succession planning? Do I have a disability buy-sell, or overhead expense coverage? Do I have contribution protection for my retirement if I were to become disabled? Again, these eventualities always seem remote on the front end … but if your answer is “no” to more than a couple of the above questions, it would be a good idea to get in contact with someone competent to help you fix it. I’ll be back next week with a few more questions for you… I’m grateful for our partnership, and for your referrals. Warmly,   Rodney Ross(626) 357-9703Ross & Associates Accountancy Corp   Feel free to share this article with a Sierra Madre area (or beyond!) business associate or client you know who could benefit from our assistance. While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for families and business owners.

It’s going to take us many weeks to digest everything in this massive omnibus of a relief bill that the President signed on Sunday night. And with year-end barrelling at us (2021 is on FRIDAY), it’s unlikely that we will be able to make substantive action on your behalf THIS WEEK. That doesn’t mean that we aren’t already diving into the thing — we are — but just that we are prioritizing year-end matters for our clients this week. If you need to reach us, we’re here: 626-357-9703 Please do have patience with us. Because of the volume of client requests this time of year (on top of family and holiday-related disruptions), we’re not always able to respond as quickly as you might need. But I did want to quickly highlight some provisions of this massive bill that apply to Sierra Madre SMB’s, and about which many will be glad about… This is BIG: the deduction of business expenses paid for with forgiven Paycheck Protection Program loan proceeds is now ALLOWED. This has been a raging debate among tax nerds, and Congress ended the ambiguity in favor of deduction. Streamlined forgiveness for PPP loans under $150K. Also a significant development for many — check with your lender about how they want that now to be handled. Restoration of the 100 percent business meals deduction for two years to help the restaurant industry (it was 50 percent) Extension of the employee retention credit through June 30, 2021 — AND (also potentially significant) … you can now take this credit even if you also took a PPP because of the decoupling of the PPP from any kind of tax credits Some of these are a big deal for certain Los Angeles County clients, and we’re going to have fun with them on your behalf as we prepare your 2020 taxes. Ultra Last Minute Tax Moves for Sierra Madre Businesses“Every task, goal, race and year comes to an end…therefore, make it a habit to FINISH STRONG.” – Gary Ryan Blair As I mentioned to my Sierra Madre family clients, time is short, and some moves do require more than this week to pull off — so I’m restricting myself to those items which you can realistically do something with before the end of the year. And, again–these are focused on what will apply to your business. If you didn’t get that list for a personal/family return, let me know and we’ll shoot it over to you. Also, the fact that expenses paid via PPP loan proceeds are now deductible might affect these calculations for you. If you want us to give you quick advice, shoot an email using the link at the top of the page, or use this:626-357-9703 1) Buy Supplies in Advance (to increase expenses and offset income)How much disposable equipment do you expect to use in 2021? Order it now so the cost is deductible in 2020 if you need to offset income. Buy what you think you’ll need for the coming year, as long as you have the space to store it. This is especially easy to do with software, information courses, or other subscriptions that you know you want to keep. A word of caution: Under a 12-month rule, you cannot deduct prepaid expenses that run more than the end of the year following the current year. For example, if you prepay a three-year subscription to a trade journal, the cost is deductible over three years (not just one). 2) Work Now, Bill LaterInstead of sending an invoice immediately so you’ll receive payment this week, consider waiting until next week. This will ensure that payment is received in 2021, and taxes on the income are deferred for another year. However, it may make sense to adopt the opposite approach — bill immediately to receive the income this year. 3) Get Ahead On Other Vendor CostsYou may have bills piled up that are not due until 2021. If you pay them now, you can deduct the expenses in 2020. Don’t have the funds in your bank account at the moment? Consider putting the expenses on your business credit card if the vendor or other party allows it. Costs charged to credit cards before the end of the year are deductible this year even though the credit card bill isn’t due until 2021. I do hope these help — and remember that we’re always here to help! Warmly,   Rodney Ross(626) 357-9703Ross & Associates Accountancy Corp   Feel free to share this article with a Sierra Madre area (or beyond!) business associate or client you know who could benefit from our assistance. While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for families and business owners.

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