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The American Rescue Plan Act extended the Employee Retention Tax Credit (ERTC) for the third and fourth quarters of 2021.  It has also expanded the pool of eligible employers who can take the credit to include businesses started during the pandemic.

A Recovery Startup Business (RSB) is a business that was started after February 15, 2020 and has average annual receipts of no more than $1,000,000.  While under the CARES Act, an employer had to experience a full or partial suspension of operations due to COVID-19-related governmental orders or a significant decline in gross receipts to take advantage of the ERTC, an RSB does not need to meet those requirements.

The time period to claim this credit for an RSB is from July 1, 2021 through December 31, 2021.  It can be claimed on an originally filed Form 941 or an amended 941.  As with other businesses, the credit continues to be capped at 70% of qualified wages limited to $10,000 per employee per quarter ($7,000 per quarter per employee), but an RSB is also limited to a maximum $50,000 in ERTC per quarter, regardless of the number of employees.

For new businesses, this is an incredible tax benefit and a great safety net to the normal struggles of any startup. The goal is to get employment back to pre-pandemic levels. The total benefit could be as high as a $100,000 cash infusion for 2021, so it’s definitely worthwhile for eligible employers to take advantage of this while available!

You may already be doing your part to help save the planet. From recycling to driving electric cars, to avoiding the use of plastic bottles and carrying reusable bags to the grocery store, there are myriad ways for all of us to make a difference—both big and small. However, it may be important to stop and ask ourselves: Are we currently doing enough?   

If you have considered pursuing an even more sustainable lifestyle, guess what? There’s an app for that! Actually, there are a few different apps to help you accomplish the goal of tracking your carbon footprint. In doing so, you can physically see your carbon environmental impact.

Below, we have detailed some of these apps and their benefits. Take a look! If you have any questions, please don’t hesitate to reach out.

Capture 

Capture is an app that calculates users’ monthly CO2 targets by asking a series of questions. These questions include things like, “How many flights a year do you take?” and “What kind of diet do you adhere to?” Capture also utilizes GPS tracking to predict emissions from transportation.

Specifically, the app was designed to not only make planet-friendly living possible, but also make the process easy—or, easier—for those interested. With the capture app, users can conveniently “track, reduce, and remove CO2 emissions from everyday life.”

Interestingly, the app can be used single-handedly or with colleagues. If you are a numbers person who likes measuring and tracking, Capture is for you.

Almond 

UK-based, Almond’s mission is simple: to help as many people reach Net Zero carbon emissions as possible, and in just four easy steps:

1. Understand your carbon footprint
2. Discover responsible brands
3. Earn offset coins when you make a switch
4. Offset your carbon footprint

Almond allows you to scan products to not only learn about that particular item’s story but also see what’s in the product (i.e., if it’s environmentally-friendly). Then, you can earn money with crypto rewards to plant and protect trees, which offset your carbon footprint. The more you earn, the faster you can grow your forest to achieve a carbon-balanced lifestyle and reach your personal CO2 Net Zero.

Pawprint 

Pawprint allows individuals to fight climate change in the palm of their hands. This online tool helps to measure, understand, and reduce your carbon footprint.

Known as the “Eco companion,” this app delivers the following:

• Science-based data you can trust
• Carbon-reducing tips and challenges that suit your particular lifestyle
• Better insight into how your carbon footprint measures up to the rest of the UK (this app is also UK-based)

One factor that sets Pawprint apart from other carbon footprint tracking apps, is that all of its data is validated by Mike Berners-Lee’s Small World Consulting, an expert in the industry.

Of course, there are plenty of other smartphone apps and tools available to help you better track and reduce your carbon footprint, including The Extra Mile, My Planet, and Carbon Footprint. The trick is to find the app or tool that works best for you and your lifestyle.

The Child Tax Credit (CTC) is not new, but it was expanded as part of the American Rescue Plan Act of 2021, and you may be wondering what that means and how it will impact your situation.  The biggest takeaway is that instead of waiting until filing your 2021 tax return (in 2022) to take advantage of the credit, you can instead opt to receive part of the credit in advance, during 2021.

First, the overall amount of the credit was increased for taxpayers under a certain income level.  For those individuals, the CTC is $3,600 for each child 5 and under, and $3,000 for each child between the ages of 6 and 17.  This is an increase from $2,000 per child under the existing rules.  To receive the full amount of the expanded credit, your Adjusted Gross Income (AGI) must fall within the following limits:

• Single Filer – $75,000 or less
• Head of Household Filer – $112,500 or less
• Joint Filers – $150,000 or less

Beginning on July 15, 2021, IRS will begin sending monthly payments to parents with eligible dependent children.  These payments represent an advance on the full CTC, and the rest can be claimed on the 2021 tax return.  The full monthly payment will be $300 per child under 6 or $250 per child 6 to 17 years old, and will be paid each month from July to December 2021.  Keep in mind that if you are over the above income thresholds but within the existing income thresholds for receiving the CTC, you can still receive up to $2,000 per child, just like in years past.

To automatically receive these payments if eligible, you need to have filed a tax return for 2020 by the extended May 17, 2021 filing deadline, even if you are usually a non-filer.  You are eligible for these payments even if you do not have any income to report or taxes due.  If you were not able to file by then, you will still get the higher credit amount if eligible, but will need to wait until filing your 2021 tax return to take advantage of it.

If you would prefer to NOT receive the advance payments and instead take advantage of the full CTC when filing your 2021 tax return, you will be able to opt out using an online portal that IRS will be opening on July 1, 2021.  There will also be another portal where you can update your information, such as changing the number of dependents you have.

You may someday find yourself in a unique tax situation and want to remove any uncertainty of the tax treatment of that situation.  In that case, you can request a Private Letter Ruling (PLR) from the Internal Revenue Service.

A PLR is a written statement that interprets and applies tax law to your particular facts. As long as the taxpayer frames the question properly and provides accurate information, the ruling can be considered binding for that specific situation and taxpayer.

A private letter ruling request has no specific form; it is basically a letter explaining your particular facts. The following are required to be addressed in a PLR request:

• Statement of Facts, including
  • The names, addresses, phone numbers, and taxpayer identification numbers of all interested parties;
  • The annual accounting period and overall method of accounting;
  • A description of the taxpayer’s business operation (if applicable);
  • A complete statement of the reasons for the transaction; and
  • A detailed description of the transaction.
• Copies of any contracts, deed, agreements, or other documents that are applicable.
• An analysis of the facts surrounding your transaction.
• If applicable, a statement regarding whether the same issue is on an earlier return.
• Your conclusion, with an explanation of what your grounds are for the conclusion and any authority you relied on to support it.
• Any authority contrary to your conclusion. If none exists, that should be mentioned.
• A statement identifying pending legislation, if any.

Requesting a PLR is not free – a “user fee” is required to be submitted when making the request. The user fees start at $275 but can be in the thousands of dollars in certain situations, and they must be submitted with the request. The first Revenue Procedure issued each year outlines the rules surrounding PLR submissions and the fees.

Because of the cost involved and the complexity, assess whether the IRS is likely to rule in your favor before going this route. Consider working with an experienced tax professional or tax attorney first to determine if this is the best option for you!

The Chart of Accounts is the backbone of your accounting records. It is a list of all of the accounts – bank, loan, asset, revenue, and expense – in your General Ledger, which holds all of your accounting transactions.

Think of your Chart of Accounts as a collection of buckets that hold dollars of items related to your business. Each bucket should be meaningful and have a purpose. For example, if you have three checking accounts, you need three buckets on your Chart of Accounts to hold the transactions for each bank account.  It would not make any sense to have more or less than exactly one bucket for each checking account.

While it’s standard to have certain buckets or accounts for assets, liabilities, and equity, the number of buckets that you create for revenue and expenses can vary greatly from company to company.  It makes sense to create and design your accounts for what you need for tax, accounting, and decision-making purposes in your business.

Let’s say you are a hair stylist.  Do you want your revenue to be in one big bucket? That’s all that Uncle Sam requires. But for decision-making purposes, you may want to break out men’s and women’s services, or cuts versus color and other treatments, or both. In that case, you would have four revenue accounts: men’s cuts, men’s color, women’s cuts, and women’s color.  This type of detail would help you see where your revenue is highest so that you can better manage your supplies as well as target your marketing to that group.

Having certain expense accounts matched to the tax requirements can reduce extra work at tax time. For example, separating travel costs – hotel and airfare – from meals and entertainment is a common one, as is keeping meals and entertainment separate.

The goal is to get your Chart of Accounts working for you. If, when you first set up your accounting system, you accepted the default Chart of Accounts, it may be time to redesign and restructure the list so it serves your needs better. Here are some additional considerations.

• What revenue or expenses do you want to watch more carefully? Should they be broken out in more detail?  You can also use subaccounts to group transactions.
• Is there cleanup work to do due to misspelling or other duplication?
• Have you interviewed all the financial information users in your company to see how they need the data organized?
• What spreadsheets could be eliminated if the Chart of Accounts was better organized?
• Does your Chart of Accounts support your budgeting process? If two people are responsible for controlling spending from one account, would it be useful to break it out?
• Do you have too many accounts?  Or too few?  (Most people have too many due to poor data entry hygiene.)
• Are you properly using other categorizing features in the accounting system, such as classes, divisions, and custom fields?
• What reports could produce better information for taking profit-focused actions in your business if the Chart of Accounts stored the transactions differently?
• How could key performance indicators be better linked to the Chart of Accounts?

These questions can help you begin thinking about how your Chart of Accounts can better serve you.  After all, it’s your business, your accounting system, and your Chart of Accounts.

And if we can help you through the redesign process, please let us know.