And yet, the vast majority of small business owners know nothing about this new rule, and just a few months before year-end, guidance is still forthcoming. Too many questions remain regarding how it will affect the targeted small business owners — those who run a business that had to file a document with the Secretary of State to create the company (C-Corps, S-Corps, and LLCs, most commonly).
The super-surprising part here is that exemptions are only designed for larger companies — not small businesses. Corporations or LLCs with more than 20 full-time employees, more than $5 million in gross receipts, and an operating presence at a physical office in the USA — as well as those already regulated by the federal or state government — qualify for a “large operating company” exemption.
The NFIB Government Relations Director Jeff Brabant comments, “anyone who has a 25% or greater stake in the company or senior officer will have to register a copy of their driver’s license and business information. This is a daunting task and probably the biggest regulation that no one is talking about right now.”
“NFIB is pushing for a full repeal of this legislation,” said Brabant. “We feel it’s unnecessary; however, administratively there is a chance that FinCEN delays it, and there’s also a chance that Congress delays it for one year. The statute allowed for up to two years for reporting for companies once this is passed on January 1; however, FinCEN chose one year. So FinCEN can choose to delay it another year and that’s something we hope they do.”
In today’s AICPA Town Hall, they issued a call to action, asking small business owners — CPA firms especially — to contact their representatives by September 15th and request a delay of the implementation. They’ve provided a Word Doc template with background and speaking points for your email or phone call, and have encouraged members to share it widely.
From the AICPA:
Two bills have been introduced in U.S. Congress to delay this rule – H.R. 4035 and S. 2623, both titled the Protecting Small Business Information Act of 2023. These identical bills introduced in the U.S. House by Representative Patrick McHenry and introduced in the U.S. Senate by Senator Mike Rounds would delay the start date of the rule providing additional time for small businesses to learn about and better understand their new reporting requirements. We want to obtain as many cosponsors in both the U.S. House and U.S. Senate as possible, to keep these bills moving. We are asking you to reach out to your House of Representatives Member to ask them to cosponsor H.R. 4035, and to also reach out to your two United States Senators to ask them to cosponsor S. 2623.
Wolters Kluwer has also created a free set of resources for those who may be affected by the new legislation, which you can access here, including an on-demand webinar where you can learn more.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
Click the image to watch an excellent 20-minute overview video of the IL Secure Choice Program.
There have been rumblings in the news for quite some time now about small businesses being required to provide retirement plans for their employees — but most owners seem to be turning a deaf ear, presuming that their small size exempts them from the requirement.
Not so! There is a phased-in approach to the State of Illinois’ new plan, and this November (2023) is going to catch a bunch of folks unprepared, as the requirements will extend to any business with five or more employees.
That probably means you — and if this sends you into a panic, no fear… we’re going to outline what the requirements are and will offer a couple of suggestions for getting into compliance.
What Is Illinois Secure Choice?
It’s a combination of legislation that requires most employers to offer a retirement plan to their employees — and a system that fills the gap for employers who do not currently offer retirement savings via payroll deductions.
In the words of the Illinois Department of Revenue, “Secure Choice is a program administered by the Illinois Secure Choice Savings Board for the purpose of providing a retirement savings option to private-sector employees in Illinois who lack access to an employer-sponsored plan.” Check out this excellent 20-minute video for an overview.
Enacted in 2015, the Illinois Secure Choice Savings Program Act has been phased in over many years, starting with companies with many employees, and working its way to those with very few staff by comparison.
Wave One began in 2018, and included employers with 500 or more employees. Wave Two, in 2019, included employers with 100‑499 employees, and another wave later that same year included employers with 25-99 employees. The deadline for wave Four — employers with 16 or more employees — was Nov. 1, 2022. The deadline for wave Five, employers with five or more employees, is Nov. 1, 2023.
Why Is Illinois Making Small Business Owners Do This?
Research has shown that Americans are 15 times more likely to save for retirement when it’s done through a payroll deduction at work. With more than 50% of us unprepared to retire when the time comes — even taking Social Security into account — the state decided that one way to address this problem would be to offer a program that helped the 40% of employers who do not offer a retirement plan a way to auto-enroll its team members into making payroll deductions into a Roth IRA.
Since it is estimated that most of us, when we retire, will need around 70-80% of pre-retirement income, the need to save is essential. The stress that it places on the social safety net when folks do not have sufficient funds to care for themselves after they stop working is enormous, so it’s not surprising that the state decided to facilitate individual savings through their workplaces.
It’s worth mentioning that the gap in retirement savings disproportionately affects workers at small businesses, lower-wage workers, people of color, and women. According to AARP, among businesses with 10-24 employees, nearly 59% of workers are not covered by a workplace retirement plan, and for businesses with fewer than 10 employees, that figure is nearly 73%.
Are Employees Being Forced To Save For Retirement?
No. Although the program starts with auto-enrollment, employees may opt-out (or back in) at any time, just like the majority of 401k plans out there. And as a reminder, the employer is able to offer their own 401k plan instead of IL Secure Choice; there is no obligation to participate in this particular program, as long as another qualified plan exists.
The default option for program participants is to enroll in a target-date Roth IRA with a 5 percent contribution rate. Participants can choose to change their contribution level or fund option at any time. Accounts are owned by individual participants and are portable from job-to-job.
Is The State of Illinois Going To Manage My Retirement Plan?
No. Investments are held in a separate trust outside the Illinois Treasury and are managed by private-sector investment managers. Acensus, a private-sector financial services firm, administers the program, which is overseen by a public board chaired by the Illinois State Treasurer. Each employee gets their own IRA account, which like any other IRA, belongs to them and is not associated with which employer or job they have.
If your company (or non-profit) has been in business for two or more years, has five or more employees, and does not already offer a qualified retirement plan, then you have two choices:
start offering a qualified retirement plan (more on that later); or,
participate in the Illinois Secure Choice program.
Supposedly, Illinois Secure Choice was not intended to replace or compete with traditional employer-sponsored qualified retirement plans, like 401(k), 403(b), SEP and SIMPLE programs. So if you’ve been thinking about starting one of those for your company — especially if you are interested in being able to sock away more retirement money for yourself than an IRA allows — this is the time to adopt a plan for your business, rather than signing up for IL Secure Choice.
That said, the fees and employer contributions involved in these types of plans can be prohibitive to many small businesses, which is one of the reasons the IL Secure Choice program was developed. The three “hurdles” that employers deal with that prevent them from having a retirement plan are 1) the administrative burden, 2) fees, and 3) fiduciary liability. The program was designed to reduce and, as much as possible, eliminate these concerns.
What Do Employers Need To Do To Comply?
Employers need to do the following:
Choose whether to establish a qualified retirement plan or facilitate IL Secure Choice.
Register your organization at employer.ilsecurechoice.com by the state-required deadline (or note that you are exempt because you already have a qualifying plan). All employers should receive a “welcome notification” email or letter with an Access Code; use this to register or inform them of your exemption.
If facilitating IL Secure Choice:
set up account portal
submit and maintain employee roster
submit employee contributions every pay period
keep employee lists up-to-date
reconcile the employee contributions liability account each month and annually (to make sure the correct amounts have been both withheld and submitted)
Why Would We Choose To Sponsor A Qualified Retirement Plan (401k/403b) Instead of Illinois Secure Choice?
Our company, like many others, has chosen to offer a 401(k) plan instead of IL Secure Choice. Why?
We are fans of increasing our own retirement contribution limits well beyond what can be saved with an IRA-based plan like IL Secure Choice (generally $6,500);
The competitive advantage of offering a plan that includes employer contributions (not allowed with IL Secure Choice) is significant in our field of work;
We love the ease of not having to maintain employee lists or submit contributions (more on this below).
With Gusto, our preferred payroll provider (my referral link gets you $100 or more when you run your first payroll), and Guideline, our preferred retirement plan, the two systems sync with each other, so there’s no need to maintain employee lists or submit contributions — it all happens automatically. This is a huge administrative burden lifted for us. (Plus, our clients receive the first five months of Guideline fees free of charge, so that’s an added bonus.) This alone certainly isn’t worth it for your company when deciding which path to choose, but if you’re also eager to increase your own retirement contributions as a business owner, and to distinguish yourselves as a desirable employer in a competitive labor market, then in my opinion, it’s a no-brainer.
This came up in the Q&A in my state rep’s presentation (see the bottom of this post for the link), and the response was that although by statute, penalties can certainly be assessed, the goal is not to punish employers who are trying to do the right thing. Right now they are focused on outreach, education, and trying to ensure they are reaching employers who are required to comply. As long as you register as soon as you discover that you missed the deadline, you should be fine. Otherwise, employers that do not comply could face penalties of $250 per employee for the first year and $500 per employee for each subsequent year.
What Options Do My Employees Have For Investing?
Lots. And they’re good — the board who developed this program really was thoughtful in their design. To learn more, please watch the video I referenced at the beginning of the post, as this is meant to be a guide for employers who are trying to suss out their requirements. If you’ve already decided to go for it and facilitate the IL Secure Choice Plan, then you should definitely watch the video to learn more. It’s only 20 minutes long, you can do it!
How Do I Onboard And Submit Contributions?
Again, this blog post is meant to help employers sort out their requirements and get their bearings. To learn how it all works, please watch the 20-minute video referenced at the beginning of the post. (Honestly, if you can’t even watch a short video, then you’re really not going to like the administrative overhead of facilitating the program, and might want to consider going with the Gusto/Guideline combo I mentioned earlier.)
Where Can I Learn More?
The FAQ on the Illinois Secure Choice website is astounding in its comprehensiveness. Check it out. If you have a question, someone has likely already answered it there.
And if that all wasn’t enough for you, check out the most excellent version of this same presentation that was offered by my state rep’s office in December of 2022. It’s the same presenters of the slideshow portion as above, but there are also other participants that offer more context, and a very long and informative Q&A. They’ve granted me permission to share it here, and you can use passcode Vd*Uqgn2 to view or download the zoom recording.
Click the image above to access a zoom recording of the IL Secure Choice webinar — Passcode: Vd*Uqgn2
They truly did a great job with both the presentation and the Q&A and I encourage you to watch the whole thing while you’re reviewing the program details on the IL Secure Choice website.
Good luck navigating the system (if you are one of our clients — please reach out and we’ll help you), and congratulations on helping your employees save for retirement!
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
I met the charming and intelligent Christine Gervais earlier this year, having shared an article of hers from Tax Practice News to my LinkedIn feed with my own perspectives. We immediately connected and met via zoom to get to know each other better, compare notes on our practices, and discuss ways in which we might collaborate. (Side note: TPN picked up an important article of mine shortly afterwards due to Christine’s recommendation.)
What an honor that some months later, I was named one of Insightful Accountant’s Top 100 ProAdvisors of the Year and accepted the award at the annual Scaling New Heights conference. I had recommended the jam-packed educational event to Christine, and to my delight, she attended and we met in-person. What neither of us expected was that she ended up being the interviewer in my Top 100 spot with Insightful Accountant, as Tax Practice News is a sister publication.
The question posed was, “if you could start your own practice over again, what would you do differently?” As anyone who has been in the industry — or run their own business — for a while knows, we are constantly making mistakes and learning from them. The goal is not to make the same one twice. So it’s natural to have regrets. But sharing those stories can be immensely helpful to others in the space — whether it’s younger entrepreneurs wondering which next steps to take, or colleagues who feel isolated because they think they’re the only ones who don’t have it all figured out yet.
We had a lovely chat — she’s very easygoing and conversational — and covered the following topics, among others:
Hiring your first employee
Traits in an ideal team member – intelligence, written skills, ability to learn, detail-oriented, team-player, caring attitude, enthusiasm
Interviewing with an eye toward building team culture
How teams can collaborate
Networking with colleagues
Trusting your team and clients to support each other
Importance of joining a professional organization and attending conferences
Standardizing systems and establishing workflows
Teaching accountants and bookkeepers what they need to know to specialize and establish a niche
So check it out! And as always, please give us a like and a comment if you enjoyed it — really does mean so much to us and is very helpful in continuing to reach our audience.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
I’ve been a fan of Randy Crabtree’s Unique CPA podcast for a while, and though we’ve run across each other at accounting technology conferences here and there, I had no idea that he was so committed to our industry as to hold an entire in-person event for us! The upcoming “Bridging The Gap” conference will be held right near Chicago’s O’Hare International Airport, and promises two full days of education and networking (plus an optional pre-conference).
Randy’s conference has been virtual the past two years, and this is the first time it’s being held in-person. The focus is on bringing a fresh focus to work-life balance and how it relates to making us better professionals and people. The emphasis on physical and mental health truly makes this a unique conference in the accounting world. I think this was the claim that got me to click the sign-up button:
And even better… you can use code BTG23RTDISC for $150 off the In-Person Conference ticket!
Just to be clear — I’m not being paid to promote this conference… any of our regular readers already knows that I’m passionate about education and community. Realizing that there’s yet one more opportunity to find both at this under-promoted conference motivated me to share — to make sure that my colleagues know not to miss it. Register here and join me August 29-30. Leave a note in the comments if you’ll be there and we’ll try to connect!
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
It’s been almost a year since our shindig with the Logan Square Chamber of Commerce, clients, and friends — celebrating 21 years of working with small businesses in our community. Today we celebrate our 22nd trip around the sun in this amazing neighborhood, and it’s high time we share all those great memories of the blow-out party that was.
Gratitude also goes out to cherished long-time client Vinejoy for the prosecco, Revolution Brewing for the beer, SipJeng for the CBD mocktails, Dill Pickle Food Co-op for the soft drinks, and the amazing Nick Connell for the balloon twisting and general merriment. We couldn’t have done any of this without the dedicated help of Sage Ferguson and her family, as well as the enthusiastic Candy Minx.
Most importantly, we have to thank our entertainers for the event: the best honky-tonk band in Chicago, if not the world — Wild Earp & The Free-For-Alls, with special guest Michelle Billingsley. We are indebted to them for their spirit, talent, charm, camaraderie, generosity — and patience, as the Chamber dealt with power and light challenges at the newly-activated Solidarity Triangle.
Speaking of the Logan Square Chamber of Commerce — this whole crazy event was dreamed up by their energetic Executive Director, who also invited our wonderful drink and food pop-ups, and we were touched that the two previous directors of the Chamber also attended (wish I’d thought to get a photo of all three of them together)! What an honor. Our neighborhood owes so much to LSCC, as well as their incredible Farmers Market.
I could go on and on about what an incredible celebration it was — pretty sure I floated on Cloud Nine for weeks afterwards. Suffice it to say that having hundreds of clients, community members, friends and neighbors come together to commemorate the difference we’ve made together… feels really great. Thank you for letting us be a part of your neighborhood.
Nancy modeling at the Beehive In Bloom Fashion Show | photo by Zak Jacobson
It’s not often I am described as either brilliant or insightful — so it’s a banner day when referred to as both.
And what better day than today, the 22nd anniversary of starting my own accounting firm?
To celebrate, I am delighted to share a recent interview with CanvasRebel, an online magazine and podcast that highlights voices of small business owners — in their words, “stories about our business or career that we might share at dinner or over coffee, but that wouldn’t necessarily make it into our memoir at the end of our lives; stories that illustrate the nitty-gritty details of what it takes to be successful day to day, how to build and grow a client base, recruit, train and manage a team or generate a living.”
I agree wholeheartedly with the folks who interviewed me. “There is so much we can learn from each other, and we hope these stories inspire you to pursue your passion and support those who are doing so themselves.”
Their questions were thought-provoking and caused me to truly reflect and think about some of the universal truths that I’ve learned in working with small business owners as their CPA. Questions such as:
What’s the best advice you’ve ever given to a client?
How did you get to where you are today?
What do you think helped you build your reputation within your market?
Do you have any insights you can share related to maintaining high team morale?
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
Chicago Office Of Labor Standards Minimum Wage Chart
The City of Chicago and Cook County both saw increases to their minimum wage requirements as of July 1, 2023 (they have fiscal years that end June 30, which is why we see their updates at this time each year, rather than January 1, which is when the State of Illinois changes usually go into effect). Since reaching $15 per hour in 2021, the minimum wage for Chicago increases annually per ordinance according to the Consumer Price Index, or 2.5%, whichever is lower.
In Chicago, minimum wage will increase to $15.80/hr for “large” employers (21 or more employees) and domestic workers. The minimum will be $15/hr for “small” employers (4-20 employees). For tipped workers, who tend to earn a large portion of their pay from gratuities, the minimum wage is going up to $9.48/hr for large employers, and $9/hr for small. (Efforts to eliminate this practice are yet again gaining momentum under the new mayor.) As has always been the case, if tips do not bring the worker up to the non-tipped employee minimums, the employer must make up the difference. Most payroll software (including Gusto) will address this discrepancy automatically, but it’s worth checking your system to make sure.
The overtime minimum wage for non-tipped employees is calculated at 1.5 times the minimum wage. The overtime wage for tipped Employees is calculated at 1.5 times the tipped minimum wage, minus no more than the current maximum tip allowance. The maximum tip allowance is calculated by subtracting the tipped minimum wage from the regular minimum wage. Therefore, in Chicago, overtime minimum wages will increase to $23.70 and $22.50, respectively.
Rates for “youth” workers in Chicago — those under age 18, in a subsidized temporary youth employment program, or transitional employment program — are now $13.50/hr for regular pay, $20.25 for overtime, and $8.10 for tipped workers.
In addition, the minimum wage to be paid under City of Chicago contracts or concessionaire agreements is increasing from $16.00 to $16.80 per hour for non-tipped employees and from $8.20 to $8.80 per hour for tipped employees.
Chicago’s Minimum Wage and Paid Sick Leave Ordinance guarantees a minimum wage for employees working more than 2 hours in any 2-week period in Chicago for an employer with four or more workers. Domestic workers are guaranteed Chicago’s “large” employer minimum wage irrespective of the number of workers.
Employers must provide the Minimum Wage and Paid Sick Leave notice to all covered employees with their first paycheck, as well as in communal areas at a workplace. Notices must be provided in English and any language spoken by employees that do not speak English proficiently, if a notice in that language has been provided by the Department of Business Affairs and Consumer Protection on the Office of Labor Standards website. Notices can be provided electronically.
Parts of Cook County that are not in Chicago, and for which the municipality did not “opt out”, allow lower rates than Chicago ($13.70/hr regular pay and $8/hr for tipped workers), but require higher hourly pay than the State of Illinois ($13/hr regular pay and $7.80 tipped workers).
The federal minimum wage, which was last raised in 2009, stands at $7.25 an hour, which when adjusted for inflation is the lowest in 66 years.
Reactions to increased minimum wages by small business owners are understandably mixed. On the one hand, higher wages often help the local economy and boost consumer spending power. On the other, many small businesses owners operate on slim margins and make far less per hour than their employees. An increase in the minimum wage often means that some staff hours are reduced or eliminated in order to stay in the black.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
QuickBooks ProAdvisors are first nominated, and then go through a lengthy vetting process, before eventually opening up to a public vote. Applicants for this prestigious award are ranked based on their performance across various categories, measuring everything from QuickBooks knowledge and continuing education, to utilizing the best tools and partner apps within the QuickBooks ecosystem. Real-world experience with clients is a requirement. Winners have said the Top 100 recognition by peers and their industry has opened doors and provided inspiration and new perspectives.
I would love to express great appreciation to Gary DeHart and the entire Insightful Accountant team for their hard work evaluating the nominees — it’s quite special to receive an award from a publication that has been a trusted go-to resource for so many years. And special thanks to all those who voted, in particular my esteemed colleagues and valued clients. It’s extremely exciting to share space with luminaries in the Intuit QuickBooks world such as Alicia Katz Pollock, Lynda Artesani, Michelle Long, Caleb Jenkins, Marnie Stretch, Stacey Byrne, and Veronica Wasek. Looking forward to the formal announcement at Scaling New Heights. If you see me there, please come on up and introduce yourself!
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
Chase Bank seems to be having issues today… many small business owners have reported seeing duplicate Zelle notices, but it turns out: those aren’t just duplicate notices. Chase is actually taking the money out twice!
From Chase —- We’re sorry that some customers are seeing duplicate transactions and fees on their checking account. We’re working to automatically reverse any duplicates and adjust any related fees. 6/2/2023 11:59:40 AM ET
Chase banner notice as of June 2, 2023
Our professional advice to clients? Let’s just all take a deep breath and hope Chase fixes everything by Monday. Meanwhile and most importantly — make sure anyone who gets a duplicate payment knows that the second one will be reversed soon, and conversely, that any duplicate payments you receive are likely to be pulled back out momentarily.
This will also complicate small business owners’ QuickBooks bank feed this month, with a lot of duplicate transactions, duplicate reversals, fees and fee reversals… let’s wait until the dust settles and then decide how to handle them all. Generally, if you go ahead and accept them to the place where they would normally be categorized, then make sure to accept the reversal to the same category.
Please spread the word to other Chase users.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
I used to find it annoying when a client would forward me an article about a tax deduction or credit, to make sure I would take it on their tax return. But even though I take approximately 70 credit hours of continuing education each year (almost twice the requirement for Illinois CPAs), every once-in-a-while a new tax law falls between the cracks, or I might not realize a given client is suddenly eligible for an old one. So, while 99% of these shares are “old news”, it’s worth avoiding the eye roll and taking a look just in case. Out with the ego, in with the knowledge.
To that end, when you do share something with your tax preparer, I beg you to phrase it in respectful language that recognizes they are experts in their field. Examples: “I’m sure you already know about this but just wanted to play it safe,” or “I read about this new tax law and am constantly amazed at how much y’all have to keep up with; any chance this applies to my situation?”
There are five tax benefits I’ve noticed — in my interactions with colleagues at conferences, in webinar chat, or in our online communities — that seem to keep flying under the radar. Most likely the tax preparer is expecting the bookkeeper or taxpayer to bring it up if one of these situations exists, but they may not know it’s significant, and may forget to note it in the books or tax organizer. So, to make sure we’re all on the same page, here are a few choice tax benefits that are often overlooked.
Credit for Small Employer Retirement Plan Startup Costs
Credit for Small Employer Retirement Plan Startup Costs — SECURE 2.0 gets most of the airtime these days, but back in late 2019, the original version of this law passed, making it easier for small business owners to set up “safe harbor” retirement plans that are less expensive and easier to administer, and made them accessible to a wider range of employees. Although many of these benefits were modified and expanded upon with SECURE 2.0, the new rules didn’t take effect until 2023. But that shouldn’t stop you (or your preparer) from taking a look at the benefits in place in 2022. For starters, Form 8881, Credit for Small Employer Pension Plan Startup Costs provides for a maximum tax credit of up to $500 per year for startup costs, and another $500 per year to employers who create a 401(k) or SIMPLE IRA plan with automatic enrollment. This benefit is a win-win for employers and employees, especially when the employee additionally qualifies for the retirement savers’ credit.
Employer Credit for Paid Family and Medical Leave — Effective starting 2018, the Section 45S Employer Credit for Paid Family and Medical Leave is designed to cover up to 25% of the cost to employers of providing paid family and medical leave to their staff. The FMLA credit is claimed on Form 8994, Employer Credit for Paid Family and Medical Leave. To qualify, employers must have a written policy providing all eligible employees access to at least two weeks of paid family and medical leave annually, paid at 50% or more of normal wages (yes, short-term disability policies often count).
Policies must also include leave that covers one or more of the following: – Birth of a child – Adoption or fostering of a child – Care for a spouse or family member with a serious health condition – Employee’s own serious health condition – Spouses and family member of certain active military members
Employers can claim the credit for up to 12 weeks of paid leave benefits. It’s available through 2025 and the IRS has an FAQ on it that’s chock-full of details.
Restaurant Meal 100% Deduction — For 2021 and 2022 only, businesses can deduct the full cost of business-related food and beverages purchased from a restaurant; the limit is usually 50% of the meal, so this can be quite a savings. For our own clients, we’re simply exporting the entire “Meals” category from their financial software and reviewing all payees, sorting out the ones that are not restaurants… yet another benefit for small business owners who heed our cry to “please add payees to all transactions”.
Per the IRS, to qualify for the enhanced deduction: – The business owner or an employee of the business must be present when food or beverages are provided. – Meals must be from restaurants, which includes businesses that prepare and sell food or beverages to retail customers for immediate on-premises or off-premises consumption. – Payment or billing for the food and beverages occurs after December 31, 2020, and before January 1, 2023. – The expense cannot be lavish or extravagant. – Grocery stores, convenience stores and other businesses that mostly sell pre-packaged goods not for immediate consumption, do not qualify as restaurants.
Self-Employed Health Insurance Deduction — Now, this may sound obvious, since almost everyone knows that self-employed people are generally allowed to deduct their health insurance premiums for themselves, their spouses, and their dependents (and in some cases, non-dependent children). Yet we often see this benefit overlooked on tax returns, especially when S-Corp shareholders pay for their insurance through work. There are special and complex rules regarding how this health insurance deduction is claimed, which I suspect is why it is often missed (or sometimes duplicated). It’s important to understand that this is not a business deduction; neither do you have to itemize to take it. The deduction is claimed as a reduction of taxable income, and applies only to income taxes, not to self-employment taxes. It also needs to be subtracted from Section 199A Qualified Business Income before calculating the QBI Deduction, and there are complex issues when it interacts with the Premium Tax Credit (see below), so keep an eye out for these potential issues when claiming this important tax benefit.
Premium Tax Credit — This one is often overlooked on tax returns in more than one direction… often the client forgets to provide Form 1095-A (Marketplace Health Insurance) to their preparer, which shows the advance premium tax credit, and therefore any increase or decrease in the credit based on the current year’s income is missed. How does this happen? Well, the credit is based on the prior tax year’s income, but “reconciled” on the tax return against the current tax year’s income — therefore, if the taxpayer had a good year, they may lose most or all of their credit. By contrast, in more difficult times, they may find out on the return that they’re entitled to more of a credit than they received. Not everyone enrolled on the Marketplace is eligible for a credit, so it’s easy to miss in the long list of tax organizer questions if the client doesn’t know to ask or to submit the form.
Per the IRS: If you benefit from advance payments of the premium tax credit, it is important to report life changes to the Marketplace as they happen throughout the year. Certain changes to your household, income or family size may affect the amount of your premium tax credit. These changes can alter your tax refund, or cause you to owe tax. Reporting these changes promptly will help you get the proper type and amount of financial assistance. For more information, see Claiming the Credit and Reconciling Advance Credit Payments.
To be fair to tax preparers everywhere, there is far more in the Internal Revenue Code (IRC) than any one person could ever know, which is part of why CPAs are required in most states to obtain more continuing education credits than almost any other professional designation. (Though keep in mind — there is no requirement that a tax preparer be a CPA, or even an EA. See here for my guide to finding a qualified tax preparer in your area.) The past five years have seen unprecedented increases in tax law complexity, and quite frankly — it’s hard to keep it all straight. So if you’re concerned your tax preparer is missing something, please approach the matter with respect and deference, and do not judge too harshly if they happen to have missed something. Just be glad you read this article and caught it in time! (And if you didn’t catch it in time, ask them about filing an amendment.)
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
