Discover more from The 21 Hats Morning Report
Don't Miss Out on the ERTC
Businesses can still take advantage of the remarkably generous pandemic-related tax credit, but there is reason to be cautious.
Here are today’s highlights:
Gene Marks lets his employees find their own health insurance.
Ami Kassar is moving his small-business finance column to 21 Hats.
Mark Zandi doesn’t believe a recession is a sure thing.
The FTX collapse means you can stop feeling FOMO about crypto.
A cottage industry is helping businesses take advantage of the employee-retention tax credit. But watch what you pay and how much you claim: “Businesses can claim up to $26,000 per employee in refunds by amending payroll tax returns from 2020 and 2021. An array of firms have popped up with the express goal of getting more businesses to file ERTC claims. They are using radio spots, online ads and cold calls to compete with one another and with traditional accounting firms, payroll companies and tax credit specialists. The IRS has already paid out more than $58 billion in ERTC claims. ... For those who stretch claims beyond the eligibility criteria, however, that move could be the first step toward a painful IRS audit.”
“‘It’s a bit of a gold rush,’ said Gary Romano, president of Civitas Strategy, which has processed more than $125 million in ERTC refunds for child-care providers. His consulting firm charges a flat fee—about $800 per ERTC filing. Some ERTC advisers collect 25 percent or more of the refund, industry participants say.”
“‘There are many who just don’t understand that they are potentially eligible for this, and we’re slowly but surely contacting as many of them as is in our ability,’ said Tom Hammond, a Paychex vice president. Paychex has said it charges a flat ERTC fee averaging about $4,000.”
“To qualify for the ERTC, employers must show a significant decline in gross revenue from 2019. They can also qualify if they experienced a full or partial suspension of operations because of government orders or were hurt by supply-chain disruptions caused by Covid-related government orders. ‘The revenue decrease is science. The other two are art,’ said David Goldin, managing member of Finance ERC.” READ MORE
THE 21 HATS PODCAST: DASHBOARD
How Gene Marks Stopped Sweating Health Insurance: You want to negotiate with Blue Cross every year? Go ahead. Gene Marks says he's found an alternative that he believes allows him to take care of his employees without the hassle of actually buying health insurance. Plus: Why Gene doesn’t discount his services for nonprofits and what he thinks is the most important takeaway for business owners from last week’s midterm elections.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Ami Kassar is bringing his column to 21 Hats: “For me, the last straw was when Inc., where I have written a column for eight years, recently published its inaugural Power Partner Awards, offering its readers a ‘seal of approval for B2B companies that you can rely on.’ The feature indicates that Inc. did deep research—‘we are journalists after all’—to pick reputable, reliable companies that business owners can trust. In the Finance category, several of Inc.’s Power Partners actively and aggressively promote short-term, high-interest loans that often come with merchant cash advances and annual percentage rates north of 50 percent.”
“I don’t believe that those kinds of loans serve the interests of business owners and entrepreneurs, and I don’t want to be associated with a publication that does.”
“I am thrilled to join Loren on his mission to build a community where small business owners and entrepreneurs can compare notes, share their wins and losses, and learn from each other.”
“I look forward to focusing my column on growth and financing tips—and the lessons we learn along the way. I aim to help business owners and entrepreneurs think about growth and risk and explore the choices between debt and equity.” READ AMI’S FIRST 21 HATS COLUMN
Social media is now a destination for holiday shopping: “Research shows 60 percent of Gen Z (born from 1997 to 2012) and 56 percent of millennials (1981 to 1996) will do at least some holiday shopping on TikTok, Instagram, YouTube, and similar apps, according to the consulting firm Deloitte. That’s a significant leap from the 49 and 46 percent, respectively, recorded in 2021. Even Gen X and boomers have warmed up to the trend, the study found. What’s more, social media is a key starting point: 6 in 10 shoppers say they get ‘inspiration and ideas’ from the sites, according to a global survey by the IBM Institute for Business Value, in association with the National Retail Federation.”
“TikTok, which in five years became the dominant social media app among Gen Z, is expanding opportunities for brands, offering tools and guides to best draw in an audience and manage ads.”
“The app also rolled out a live-shopping feature in the United Kingdom and in Asian markets. The social media giant is gearing up for a U.S. launch in the coming weeks, the Financial Times reported.” READ MORE
Mark Zandi believes a recession is far from a sure thing:
Do you know where your remote workers are? You’d better. “Alex Atwood, chief executive of the gig-economy marketplace GravyWork, says he was blindsided late last year when notices arrived from government agencies in California and Texas, saying the company had failed to register as a business and owed money. Unbeknown to him, a former software engineer on his full-time staff had worked remotely for extended periods in those states, where Virginia-based GravyWork hadn’t set up shop. Mr. Atwood says his company owed between $20,000 and $30,000 in taxes, registration fees and penalties.”
“He estimates the total cost was closer to $500,000, factoring in the time he spent in meetings about the surprise bills and the hours it took for his accounting and HR departments to resolve the problem.”
“He adds that several other employees on a roughly 60-person team have been open about working while traveling—some internationally, which raised cybersecurity concerns. ‘We’d never even thought about these things,’ he says.”
“Unwilling to deal with the headaches of nomadic employees, GravyWork converted some to independent-contractor status with the help of a professional employer organization, a type of business that specializes in managing mobile workers.” READ MORE
Where did older Gen Z workers go? “The exodus from the labor force in the pandemic’s early months has mostly reversed, but one group remains oddly absent: people in their early 20s. For people over age 15, the labor-force participation rate—the share of people employed or actively seeking a job—dropped from an average of 63.1 percent in 2019 to 61.7 percent in 2021, and recovered to 62.2 percent in October. But for people ages 20 to 24, participation that averaged 72.1 percent in 2019 stood at just 70.8 percent in October. That equals a shortfall of about half a million workers in their early 20s when comparing the current size of that workforce with 2019 levels.”
“Participation for people over 55 also remains well below pre-pandemic levels. That seems at least partly due to many of them taking early retirement, either by choice or because of difficulty finding suitable work late in their careers. Those reasons don’t apply to people in their 20s, who are usually just starting out in their careers.”
“The Organization for Economic Cooperation and Development, an intergovernmental group that promotes economic growth, tracks the share of people who aren’t in employment, education or training, known as the NEET rate. The NEET rate for U.S. workers ages 20 to 24 rose from 14.67 percent in 2020 to 18.27 percent in 2021, the highest since 2014.” READ MORE
Mexico exports more beer than any other country, but drought represents a growing concern: “Brewers and other heavy industrial water users have landed at the center of the climate fight in Mexico, with activists leading a movement to reclaim resources from corporations that has gained recognition at the highest levels of government. Even the promise of jobs and economic development is wearing thin as extreme weather events put the disparity in access to water between private industry and households on clear display, forcing some of the biggest global brands onto unsure footing.”
“In July, eight of Mexico’s 32 states experienced moderate to extreme drought, resulting in more than half of its 2,463 municipalities confronting water shortages, according to the National Water Commission.”
“In response, President Andrés Manuel López Obrador of Mexico said in August that he would end beer production in the north, where the majority of the industry operates, and send it to the more water-rich south.”
“‘This is not to say we’re not going to produce any more beer,’ he said during a news conference. ‘It’s to say we’re not going to produce beer in the north. That’s over.’” READ MORE
An Airbnb co-founder has a new business that builds small homes in backyards: “The new startup, known as Samara, plans to sell factory-produced studio and one-bedroom units to homeowners. The company is looking to capitalize on laxer laws and rising demand for affordable housing spurred by surging home prices and ballooning rents. Samara is initially launching in California, which is one of the states trying to boost its housing supply by easing restrictions on accessory dwelling units. The modest residences are located on the same lot as a single-family home and in California can be as small as 150 square feet. The state now allows homeowners to build ADUs in their backyard even if the homeowners association prohibits it.”
“The company, which takes its name from the samara fruit, hopes eventually to expand beyond California. It is betting that worsening housing shortages and the rising popularity of remote work will increase the need for ADUs.”
“Starting prices for Samara’s ADU line, dubbed Backyard, will range from $299,000 for 430-square-foot studios to $339,000 for 550-square-foot one-bedroom units in the San Francisco Bay Area, with slightly lower prices for homes in Southern California, the company said.” READ MORE
At least one venture capitalist is owning up to his mistake in backing FTX:
Thanks for reading, everyone. — Loren