Edition 22

Business COVID relief funds have been plentiful. We have seen it all from state and local grant programs to the Restaurant Revitalization Fund and Paycheck Protection Program (PPP). The dollars have flowed freely during the past two years although some programs were certainly simpler than others. The Employee Retention Credit (ERC), unfortunately, has been the most complex and misunderstood relief program. It deserves serious consideration along with a second and third look. ERC has suffered from a branding problem, from repeated changes, and because the PPP overshadowed it. The CARES Act brought both programs to life in March 2020 , but small businesses quickly ignored the ERC in favor of the forgivable PPP loans. A taxpayer could only choose one of these programs until the December 2020 COVID relief law retroactively allowed them to coexist in the same business. But once again a second round of PPP loans overshadowed the ERC. Perhaps now with the grants awarded and PPP funds issued, the ERC can finally get the attention it deserves. The benefits are tremendous at up to $5,000 per employee in 2020 and $28,000 per employee in 2021. Opportunities abound for businesses and advisers to be on the hunt for ERC eligibility both obvious and obscure. Today, let’s review the program and cover some of the unusual ways to qualify.

When recognizing capital gains during a tax year, it can often make financial sense to sell assets that have lost value to offset profits in other investments or regular income. In this situation, you swap stocks, bonds, or mutual funds by buying a similar asset, selling the old asset and taking a loss. This strategy is called tax-loss harvesting, and it can be applied under certain circumstances which will lower your taxes. Yet while the tax deduction might seem appealing, you might have a hard time locking in that loss forever, and you may be inclined to repurchase the same investment in case the value rebounds. This strategy may appear brilliant on paper; however, the IRS doesn’t allow such manipulation just to reduce taxes. The Wash Loss Rule prevents traders from realizing a tax loss on a position that the taxpayer reacquires within 30 days after (or before) selling a security. But a little known loophole may allow you to complete a wash sale and claim your deduction without recognizing the loss forever as long as it is crypto. Cryptocurrency continues to be an area where the rules don’t always seem to make sense. Most experienced investors are already familiar with the “Wash Loss Rule,” while many newer investors have recently learned about it the hard way. To learn this valuable strategy for offsetting your capital gains while remaining in the investment gain for expected future growth, continue reading to learn more.

Question: I run a virtual business with no employees, but independent contractors perform all the work. I heard about that case in California. Should I be doing something different in my business? Do I owe any penalties for how I’ve done it in the past? Answer: Effective January 1, 2020, AB 5, later AB 2257, radically changed the rules and criteria for determining whether a worker’s classification is independent contractor or employee. The so-called “gig law” was effective based on a California Supreme Court case from 2018. The significance of the ruling is that it changed the criteria of worker classification and held that workers are presumptively employees and the burden is on the hiring entity to establish that a worker is an independent contractor not subject to wage order protections in California. Although this is a change impacting California employers, the rest of the country has eagerly watched and hoped to cash in on the changes that would generate billions in employment taxes. Businesses that prefer to work with independent contractors such as Uber and Lyft were quick to propose a ballot initiative in 2020 that the voters passed and now drivers are exempt from the new criteria (insert eyeroll here). Want to know how to get your own exemption from AB-5? Continue reading.