Category: Business Law Planning

New Rules for the Employee Retention Tax Credit

The Consolidated Appropriation Act, 2021 was signed into law on December 27, 2020. This law clarifies and expands the employee retention tax credit (ERTC) enacted under the CARES Act. A key retroactive change is that employers who took PPP loans are now eligible to take the employee retention credit, so long as the same wages are not used for both.

Employee Retention Tax Credit Rules For 2020:

The credit provides a 50% tax credit up to $10,000 on qualified wages paid to the employee from 3/2/2020 to 12/31/20. The credit is available to all employers regardless of size including tax exempt organizations. There are only two exceptions: (1) state and local governments and their instrumentalities and (2) small businesses who take Small Business Loans.

Qualifying wages are all wages including health care costs that were paid to employees by employers who meet one of two alternative tests. The tests are calculated each quarter:

  1. the employer’s business is fully or partially suspended by government order due to Covid-19 during the calendar quarter or
  2. For any quarter in 2020, the employer’s gross receipts are below 50% of the comparable quarter in 2019. Once this happens, every quarter is an “eligible quarter” until the END of the quarter in which the business’s receipts have returned to at least 80% of what they were for the same quarter in 2019.

Under the 2020 rules for a company with more than 100 full time employee equivalents (FTES), no credit was available for wages paid to an employee performing services for the employer. If the employer had 100 or fewer employees on average in 2019, then the credit is based on wages paid to all the employees. If employees worked full time and were paid full time work, the employer gets the credit on those wages, as well as, any wages paid to employees who did not work.

Therefore, if you have LESS than or equal to 100 average monthly full time employee equivalents (FTES) for 2019, then ALL wages paid to an employee during an eligible quarter can give rise to the credit, even if the employee worked. For a company with more than 100 employees, the credit is allowed only for wages paid to employees who did not work during the calendar quarter.

Employee Retention Tax Credit Rules For 2021:

Effective January 1, 2021, the credit amount is increased to 70% of qualified wages, which is includes the cost to continue providing health benefits.

Effective January 1, 2021, the credit is increased to $7,000 per employee for each of the first two quarters of 2021($10,000 in qualified wages x 70% tax credit rate), so that the maximum credit for 2021 will be $14,000 per employee.  This credit is available even if the employer received the $5,000 maximum credit for wages paid to such employee in 2020.

Effective January 1, 2021, business operations must meet one of these tests: (1) business operations must be either fully or partially suspended by a Covid-19 lockdown order, or (2) for a quarter in 2021, if gross receipts are less than 80% of gross receipts for the same quarter in 2019 are eligible for the credit.

Effective January 1, 2021, this threshold will be raised to 500 employees, so that for the first quarter of 2021, a company with 500 or fewer employees will be eligible for the credit, even if employees are working.

The Treasury will draft guidance to allow an advance payment of the credit for companies with 500 or fewer employees, based on 70% of average quarterly payroll of the same quarter in 2019.  If the amount of the actual credit determined at the end of the quarter is less than the amount of the advance payment, the company will need to repay the excess to the government.

If you would like my help or simply would like to talk about it, please call me on my cell phone at 513-509-7829.

How to Deduct Assisted Living and Nursing Home Bills

Watch your wallet: the median cost in 2018 for an assisted living facility was $48,000 and over $100,000 for nursing home care.

If you could deduct these expenses, you’d substantially reduce your income tax liability—possibility down to $0—and dramatically reduce your financial burden from these costs.

As you might expect, the rules are complicated as to when you can deduct these expenses. But I’m going to give you some tips to help you understand the rules.

Tax Deductions for General Medical Expenses

On your IRS Form 1040, you can deduct expenses paid for the medical care of yourself, your spouse, and your dependents, but only to the extent the total expenses exceed 7.5 percent of your adjusted gross income.  In December 2019, Congress retroactively reduced the 10% adjusted gross income limitation to 7.5% in 2018.  Therefore, taxpayers can file amended personal income tax returns for 2018 and 2019 as a result of that retroactive tax law change.

Medical care includes qualified long-term care services.

Assisted living and nursing home expenses can be qualified long-term care expenses depending on the health status of the person living in the facility.

If you operate a business, your business could establish a medical plan strategy that could make the medical expenses business deductions for your business. Learn more about deducting your medical expenses.

Qualified Long-Term Care Services

The term “qualified long-term care services” means necessary diagnostic,preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and maintenance

or personal care services, which

  • are required by a chronically ill individual, and
  • are provided pursuant to a plan of care prescribed by a licensed health care practitioner.

Chronically Ill Individual

A chronically ill individual is someone certified within the previous 12 months by a licensed health care practitioner as

  1. being unable to perform, without substantial assistance from another individual, at least two activities of daily living for a period of at least 90 days due to a loss of functional capacity;
  2. having a similar level of disability (as determined under IRS regulations prescribed in consultation with the Department of Health and Human Services) to the level of disability described in the first test; or
  3. requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment.

A licensed health care provider is a doctor, a registered professional nurse, a licensed social worker, or another individual who meets IRS requirements.

Activities of Daily Living Test

For someone to be a chronically ill individual, at least two of the following activities of daily living must require substantial assistance from another individual:

  • Eating
  • Toileting
  • Transferring
  • Bathing
  • Dressing
  • Continence

Substantial assistance is both hands-on assistance and standby assistance:

  • Hands-on assistance is the physical assistance of another person without which the individual would be unable to perform the activity of daily living.
  • Standby assistance is the presence of another person within arm’s reach of the individual that’s necessary to prevent, by physical intervention, injury to the individual while the individual is performing the activity of daily living.

Examples of standby assistance include being ready to

  • catch the individual if the individual falls while getting into or out of the bathtub or shower as part of bathing, or
  • remove food from the individual’s throat if the individual chokes while eating.

Cognitive Impairment Test

Severe cognitive impairment is a loss or deterioration in intellectual capacity that is comparable to, and includes, Alzheimer’s disease and similar forms of irreversible dementia, and measured by clinical evidence and standardized tests that reliably measure impairment in the individual’s short- or long-term memory; orientation as to people, places, or time; and deductive or abstract reasoning.

Substantial supervision is continual supervision (which may include cuing by verbal prompting, gestures, or other demonstrations) by another person that is necessary to protect the severely cognitively impaired individual from threats to his or her health or safety (such as may result from wandering).

You have much to consider if you face the medical issues above. I’m happy to help you understand if your medical expenses can qualify for the medical deductions and what this means taxwise.

William E Hesch

William E. Hesch Law Firm, LLC

William E. Hesch CPAs, LLC

3047 Madison Road, Suite 201

Cincinnati, Ohio  45209

Office:  513-731-6601

Direct:  513-509-7829



The Top 3 New Year’s Resolutions for the Long-Term Success of your Small Business

As a small business owner, how many times have you set lofty New Year’s resolutions for your business that never amounted to anything? This year, you can set three achievable resolutions that are simple to accomplish yet stay focused on the long-term success of your business. These resolutions will finally address those lingering tax savings, succession planning, and estate planning issues that you have put off for too long.  Accomplishing these resolutions will affect your bottom line and give you peace of mind for years to come.

Resolution #1: Implement Simple Choice of Entity Strategies for Tax Savings in 2017

Do you know if your business is taxed as a sole proprietorship, partnership, C-Corp, or S-Corp?  Do you know what tax bracket you are in? Did you know that if you are single, your business is a sole proprietorship, and you make between $37,650-$91,150, or if married, and you make between $75,300-$151,900, that your taxable rate on your business profits is 46%?  A business’ choice of tax entity can have major tax implications, but many small business owners are unaware that such issues exist. As a result, many small businesses are often taxed as the wrong type of entity and they end up paying too much in taxes.  This year, meet with your attorney and CPA to review your choice of entity options and see if you can save taxes by being an S-Corp.

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Releasing Tax Liens on Business Assets-Case Study

If your business has IRS and/or Ohio state tax liens, your tax problems will not just go away on their own.  The IRS and state of Ohio will eventually seize your assets or force you to declare bankruptcy – causing mayhem for you, your business, and your family.  However, if you find yourself deep in a hole with tax liens, there are different settlement strategies you might be able to implement to release these liens without completely paying them off.  These strategies may require you to sell most or all of your business assets, but you’ll ultimately save the time, money, hassle, and embarrassment of going through bankruptcy proceedings or having your assets seized.

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Affordable Care Act Changes

Under the Affordable Care Act, there are new reporting requirements for the employer to report the cost of coverage under an employer-sponsored group health plan. For years after 2011, employers generally are required to report the cost of health benefits provided on the Form W-2. All employers that provide “applicable employer-sponsored coverage” under a group health plan are subject to the reporting requirement.
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Become A Better Business Owner Pt.2-More Tips!

How To Become a Better Business Owner: MORE Tips from a Successful Entrepreneur

Business owners need to properly plan for a large number of roadblocks that will challenge the success of their business. Bill Hesch is a successful entrepreneur with over 22 years of experience managing his law firm and CPA firm in the Cincinnati and Northern Kentucky area. Bill is uniquely experienced to consult with his CPA and law firm clients who are business owners regarding their legal, tax, and financial problems and concerns.

Last month, Bill provided five tips that every business owner can use to become a better business owner. Here are five more tips to help you achieve that goal:

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How to Become a Better Business Owner

Business owners need to properly plan for a large number of roadblocks that will challenge the success of their business. Bill Hesch is a successful entrepreneur with over 22 years of experience managing his law firm and CPA firm in the Cincinnati and Northern Kentucky area. Bill is uniquely experienced to consult with his CPA and law firm clients who are business owners regarding their legal, tax, and financial problems and concerns.

Here are a few tips from Bill that every business owner can use to become a better business owner:

1. The main reason most business owners do not succeed is because the business plan is flawed and not enough capital is raised to get the business to its breakeven point.

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Cutting Corners to Save Money-Forming Your Business

When it comes to starting your own business, you don’t want to cut corners to save money. Some business owners choose not to work with an attorney because they believe that their business model is too simple to require legal counsel or that the up-front costs of an attorney are too expensive. However, even if you have a very simple business plan, there are numerous legal issues you still need to address with your business and tax attorney. If you choose not to work with an attorney, these legal issues can potentially become major problems for the success of your business. Here are three legal issues you should discuss with an attorney before forming your business.

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Small Business Succession Plans

Over time, business owners spend a lot of blood, sweat, and tears crafting a good business plan, finding an appropriate corporate structure, and seeking the best possible financing options for their businesses. However, the one part of their businesses which is often overlooked is succession planning. Nobody is going to be able to run a business forever, so all small business owners should have a plan in place for what will happen to their company upon their death, disability, incompetence, bankruptcy, or retirement.

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Chamber Memebership

My Chamber membership has been invaluable in helping me grow my law firm and CPA firm over the past 15 years. I have found that networking within Chamber committees and events, being a speaker for Chamber seminars and advertising in the Business Journal have allowed my business to thrive.

-Bill Hesch, Esq., CPA, PFS, William E. Hesch Law and CPAs

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