[vc_row bg_type=”bg_color” bg_color_value=”#f5f5f5″ css=”.vc_custom_1618938311697{margin-top: 0px !important;margin-right: 0px !important;margin-bottom: 0px !important;margin-left: 0px !important;padding-right: 1em !important;padding-left: 1em !important;}”][vc_column][vc_column_text el_class=”article-info”]by Ellen Sheng, a writer and editor with a focus on business, finance, and fintech & Dean Zerbe, National Managing Director at alliantgroup and Former Senior Counsel to the U.S. Senate Finance Committee March 1, 2021 | published in cnbc.com[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_separator color=”custom” border_width=”5″ accent_color=”#1f365c”][/vc_column][/vc_row][vc_row][vc_column width=”1/4″][vc_custom_heading text=”KEY POINTS” use_theme_fonts=”yes”][/vc_column][vc_column width=”3/4″][vc_column_text]
- The Build Back Better infrastructure bill, which includes proposals to increase capital gains tax and limit business deductions, did not become law and means small business owners avoid potentially significant new taxes.
- Several tax credits and relief measures related to Covid have expired, but the Employee Retention Credit is among the key provisions that can still be claimed by some business owners.
- The Internal Revenue Service is dealing with a record backlog of tax returns already, so don’t expect a responsive IRS this tax season, experts say.
For small businesses that missed the program, it’s not too late to file retroactively. Many business owners are not familiar with the program, said Kevin Kuhlman, vice president of federal government relations at the National Federation of Independent Business, but can still apply. Retroactive filings are expected to be a big part of this year’s taxes. “We have seen a lot of frustration from business owners about the changes to that program, especially the shortening of it. They kind of felt — especially if they were relying on the tax credit — that they had received a little short shrift,” said Kuhlman.
[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_empty_space height=”10px”][vc_custom_heading text=”Tax treatment of operating losses is less generous” use_theme_fonts=”yes”][vc_empty_space height=”5px”][vc_column_text]How business owners can carry back or carry forward net operating loss has changed a lot in the last few years. Previously, NOLs could be carried back two years and carried forward 20 years. Then the Tax Cuts and Jobs Act in 2017 changed the rules by limiting NOL deductions to 80% of taxable income and not allowing carrybacks. When the pandemic hit, the CARES Act waived TCJA rules and allowed business owners to carry back net operating losses generated after Dec 31, 2017 and before Jan 1, 2021 up to five years. Moreover, the cap for business interest expenses was raised to 50% of business income, up from 30%. Net operating losses were prominent in 2020 taxes and business owners also amended previous tax returns with net operating losses that they carried back. Now, the rules around how business interest expenses and net operating loss can be used have changed back to what they were before the pandemic. Limits on net operating losses could mean additional income tax payments. For instance, if a business owner had a net operating loss in 2018, then had taxable income in 2019, they could use net operating loss to decrease 2019 taxable income. Under the CARES Act that could also be carried backwards if they had a taxable income in 2017. That’s now coming to a close.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_empty_space height=”10px”][vc_custom_heading text=”Deferred Social Security payments are due” use_theme_fonts=”yes”][vc_empty_space height=”5px”][vc_column_text]Under the CARES Act, employers could defer deposits of the employer portion of Social Security. Now, those payments are due. Half was due at the end of 2021, and the other half is due at the end of this year. Since the payments have already been deferred, the IRS has warned that there will be penalties to any taxpayers who miss the Dec. 31 deadlines. Tax planners say this change is less likely to cause business owners pain since few took advantage of it. Edward Renn, a partner in the private client and tax team at Withers, said he’s not seeing too many problems as many clients prudently put the money aside in a bank account so the money would be ready when needed. Given all the changes in tax rules over the last two years, small business owners may need to lean on an accountant or tax planner more than ever. Adding to the stress that tax filings often bring is the lack of responsiveness from an overburdened IRS, which is dealing with a record backlog of tax returns. “It just it feels like it’s fallen off the rails. There’s 6 million pieces of returns that still need to be filed and maybe one out of every 10 phone calls are being answered,” said Meredith Tucker, principal at Kaufman Rossin, an accounting and advisory service firm. Tax returns from last year are still being processed. Taxpayers that have an overpayment may want to apply that overpayment to the next period, but the earlier tax filings haven’t been processed yet.[/vc_column_text][/vc_column][/vc_row][vc_section disable_element=”yes”][vc_row][vc_column][vc_separator][/vc_column][/vc_row][vc_row css_animation=”fadeInRight”][vc_column][vc_custom_heading text=”About the Author” use_theme_fonts=”yes” css=”.vc_custom_1621268389440{margin-bottom: 20px !important;}” el_class=”alt-h1″][/vc_column][vc_column width=”1/4″][vc_single_image image=”19004″][/vc_column][vc_column width=”3/4″][vc_column_text]Dean Zerbe is alliantgroup’s National Managing Director based in the firm’s Washington, D.C. office. Prior to joining alliantgroup, Zerbe was Senior Counsel and Tax Counsel to the U.S. Senate Committee on Finance. He worked closely with then-Chairman of the Finance Committee, Senator Charles Grassley, on tax legislation. During his tenure on the Finance Committee, Zerbe was intimately involved with nearly every major piece of tax legislation that was signed into law, including the 2001 and 2003 tax reconciliation bills, the JOBS bill in 2004 (corporate tax reform) and the Pension Protection Act.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_separator][/vc_column][/vc_row][/vc_section][vc_row][vc_column][vc_row_inner][vc_column_inner]
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Quotes by Dean Zerbe, Former Senior Counsel to the U.S. Senate Finance Committee;alliantgroup National Managing Director
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“The truth is that qualifying for the credit is not complex,” said Tilstone.
“Your company simply needs to be working to improve a product or process here in the U.S. There are a number of qualifying research activities (QRAs) that apply to thousands of businesses, including small and mid-sized, in countless industries.“
Featured Leadership
Dean Zerbe is alliantgroup’s National Managing Director based in the firm’s Washington D.C. office. Prior to joining alliantgroup, Mr. Zerbe was Senior Counsel and Tax Counsel to the U.S. Senate Committee on Finance. He worked closely with then-Chairman and current Ranking Member of the Finance Committee, Senator Charles Grassley (R-IA), on tax legislation. During his tenure on the Finance Committee, Mr. Zerbe was intimately involved with nearly every major piece of tax legislation that was signed into law – including the 2001 and 2003 tax reconciliation bills, the JOBS bill in 2004 (corporate tax reform), and the Pension Protection Act. Mr. Zerbe is a frequent speaker and author on the outlook for short-term and long-term changes in tax policy, as well as ways accounting firms can help their clients lower their tax bill. He holds an LL.M. in Taxation from NYU and a J.D. from George Mason University.
