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Business Highlights in the New American Rescue Plan Act

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President Biden signed the $1.9 trillion American Rescue Plan Act (ARPA) on March 11. While the new law is best known for the provisions providing relief to individuals, there are also several tax breaks and financial benefits for businesses.

Here are some of the tax highlights of the ARPA.

The Employee Retention Credit (ERC). This valuable tax credit is extended from June 30 until December 31, 2021. The ARPA continues the ERC rate of credit at 70% for this extended period of time. It also continues to allow for up to $10,000 in qualified wages for any calendar quarter. Taking into account the Consolidated Appropriations Act extension and the ARPA extension, this means an employer can potentially have up to $40,000 in qualified wages per employee through 2021.

Employer-Provided Dependent Care Assistance. In general, an eligible employee’s gross income doesn’t include amounts paid or incurred by an employer for dependent care assistance provided […]

By Linkenheimer LLP|2021-03-16T16:32:05+00:00March 16th, 2021|covid-19, credit, New Tax Laws|0 Comments

The Power of the Tax Credit for Buying an Electric Vehicle

Although electric vehicles (or EVs) are a small percentage of the cars on the road today, they’re increasing in popularity all the time. And if you buy one, you may be eligible for a federal tax break.

The tax code provides a credit to purchasers of qualifying plug-in electric drive motor vehicles including passenger vehicles and light trucks. The credit is equal to $2,500 plus an additional amount, based on battery capacity, that can’t exceed $5,000. Therefore, the maximum credit allowed for a qualifying EV is $7,500.

The EV definition

For purposes of the tax credit, a qualifying vehicle is defined as one with four wheels that’s propelled to a significant extent by an electric motor, which draws electricity from a battery. The battery must have a capacity of not less than four kilowatt hours and be capable of being recharged from an external source of electricity.

The credit may not be available because of a per-manufacturer cumulative sales limitation. Specifically, it phases out over six quarters beginning when a manufacturer has sold at least 200,000 qualifying vehicles for use in the United States (determined on a cumulative basis for sales after December 31, 2009). For […]

By Linkenheimer LLP|2021-02-03T22:48:29+00:00February 3rd, 2021|credit, tax credit|0 Comments

California Tax Updates for 10/2

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California expands its professional exemption. Effective Sept. 9, 2020, this exemption is expanded to include employees who provide instruction for a course or laboratory at colleges and universities in CA. To qualify, an individual must satisfy the duties test and salaries test. Employees must earn the monthly equivalent to no less than twice the state minimum wage in which the employee is employed for at least 40 hours per week, or a minimum salary in 2020 of $117 per classroom hour. In 2021, this hourly rate rises to $126 and in 2022 to $135. Beginning in 2023 the rate will be adjusted based on the state minimum wage. Contact your Linkenheimer CPA with questions.

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The California Franchise Tax Board (FTB) is hoping to increase the number of Californians who receive the CA earned income tax credit. The FTB is required to analyze and develop a plan to increase the number of claims of the CA earned income tax credit, […]

By Linkenheimer LLP|2020-10-02T17:27:26+00:00October 2nd, 2020|ca, CA tax, california, credit, ftb, income tax, state income|0 Comments

Even If No Money Changes Hands, Bartering Is A Taxable Transaction

During the COVID-19 pandemic, many small businesses are strapped for cash. They may find it beneficial to barter for goods and services instead of paying cash for them. If your business gets involved in bartering, remember that the fair market value of goods that you receive in bartering is taxable income. And if you exchange services with another business, the transaction results in taxable income for both parties.

For example, if a computer consultant agrees to exchange services with an advertising agency, both parties are taxed on the fair market value of the services received. This is the amount they would normally charge for the same services. If the parties agree to the value of the services in advance, that will be considered the fair market value unless there is contrary evidence.

In addition, if services are exchanged for property, income is realized. For example, if a construction firm does work for a retail business in exchange for unsold inventory, it will have income equal to the […]

By Linkenheimer LLP|2020-09-03T20:02:13+00:00July 20th, 2020|business, credit, irs, tax planning, taxable income|0 Comments

Answers to Questions About the CARES Act Employee Retention Tax Credit

The recently enacted Coronavirus Aid, Relief, and Economic Security (CARES) Act provides a refundable payroll tax credit for 50% of wages paid by eligible employers to certain employees during the COVID-19 pandemic. The employee retention credit is available to employers, including nonprofit organizations, with operations that have been fully or partially suspended as a result of a government order limiting commerce, travel or group meetings.

The credit is also provided to employers who have experienced a greater than 50% reduction in quarterly receipts, measured on a year-over-year basis.

IRS issues FAQs

The IRS has now released FAQs about the credit. Here are some highlights.

How is the credit calculated? The credit is 50% of qualifying wages paid up to $10,000 in total. So the maximum credit for an eligible employer for qualified wages paid to any employee is $5,000.

Wages paid after March 12, 2020, and before Jan. 1, 2021, are eligible for the credit. Therefore, an employer may be able to claim it for qualified wages paid as early as March 13, 2020. Wages aren’t limited to cash payments, but also include part of the cost of employer-provided health care.

When is the operation of a […]

By Linkenheimer LLP|2020-09-03T20:03:10+00:00April 6th, 2020|business, credit, employer, New Tax Laws, relief, small business, tax credit, tax planning|0 Comments