Six New Tax Breaks for Small Businesses

Hotels had their worst year ever. Restaurant chains get a little boost. And what the Biden Administration inherits.

TAXES

The Covid rescue packages contain important tax breaks for small businesses: “If you lost money in 2020 and earlier, file your tax returns quickly. A little-known, but significant tax benefit remains from the first round of stimulus funding last March. For one-time only, companies that lost money in 2020 (2019 and 2018 tax years are also eligible) can carry back that loss for up to five years against their prior tax returns. Which means that if you paid taxes in those years, you can get a tax refund. It’s not automatic, so if you need the cash, file that return.”

  • “The Employee Retention Tax Credit has been enhanced and extended through June 30. To qualify for the credit, your business must have fewer than 500 employees (it was previously 100). You also must have been forced to at least partially suspend business operations due to a Covid or had a 20-percent revenue decline in any quarter versus last year.

  • “If that’s the case, then you’re entitled to a tax credit equal to 70 percent of each employee’s wages (which now includes health insurance payments), up to $10,000 per worker per quarter.”  READ MORE

Ami Kassar says many small businesses desperately need accounting help and suggests a Teach for America-style solution: “Similar to the TFA vision, Accounting For America would benefit both parties involved. The recent accounting grads would gain hands-on experience and valuable work references. Simultaneously, the small businesses would be able to get their bookkeeping in order at a presumably lower rate than hiring a seasoned professional. Besides providing jobs for recent grads, the proposed program could solve a significant problem that I see in many small businesses—out-of-date financials and sloppy bookkeeping.”

  • “A small-business owner who isn't current on financials is at a substantial disadvantage.”

  • “It's impossible to run a successful business without knowing where your money is coming from and where it is going.” READ MORE

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THE BIDEN ADMINISTRATION

President Biden inherits a country with a weaker economy and shorter life expectancy than at any time in recent years: “Key metrics of financial and social well-being show the challenges Mr. Biden faces as he moves into the White House on Wednesday. The coronavirus pandemic halted the 11-year economic expansion and drove up unemployment just as the typical American household was starting to enjoy sustained income growth. Americans were living longer—an improvement from a period when the opioid crisis eroded life expectancy—until the pandemic exacted a swift, deadly toll.”

  • “One government official said life expectancy could decline by the largest amount since World War II once the government completes last year’s mortality figures.” READ MORE

THE ECONOMY

U.S. hotels suffered their worst year ever in 2020: “Hotel occupancy was just 44 percent for the year, down from 66 percent in 2019 and the lowest number on record, according to data provider STR. The industry passed 1 billion unsold rooms for the first time in history, topping the previous record of 786 million in 2009. The industry will likely show nearly zero profit for the year, STR said.”

  • “Industry experts expect a slow recovery, with occupancy rates staying below 2019 levels through 2024.” READ MORE

Restaurant chains are getting a lift: “Restaurants chains say they are getting a sales bump from the latest round of stimulus money going to households, but spending patterns from the first batch of checks earlier in the pandemic suggest the lift can fade quickly. The roughly $900 billion coronavirus aid package signed into law last month provided a second round of stimulus payments––$600 per adult and $600 a child. While the amounts are lower than the $1,200 and $500 delivered last spring, they are having an impact, at least short-term, according to some restaurant executives and industry data.”

  • “Church’s Chicken, Checkers Drive-In Restaurants, Noodles& Co. and TGI Fridays are among the companies crediting higher sales to the stimulus, according to executives.”

  • “Some McDonald’s restaurant owners also attributed strong January sales to the recent checks, as did fine-dining chain Fogo de Chão.” READ MORE

REGULATION

President Biden ordered a review of environmental policies: “Businesses prepared for an era of stricter regulation Wednesday as President Biden ordered a review of dozens of environmental policies—foreshadowing more stringent efficiency requirements for auto makers and appliance manufacturers, new limits on mining and drilling on federal lands and tougher emissions standards for power plants. The actions were aimed at reversing former President Donald Trump’s deregulatory push in environmental regulation, prompting optimism among many executives backing renewable technologies but irking others.”

  • “Mike Sommers, president and chief executive of the American Petroleum Institute, used his annual address last week to strike a conciliatory tone at times, saying it wanted to work with Mr. Biden on emissions limits and trade policy.”

  • “Mr. Biden’s first-day agenda included revoking a permit granted by Mr. Trump to allow developers of the Keystone XL pipeline to extend it across the U.S.-Canada border. The project developer, TC Energy Corp., suspended the effort and laid off 1,000 workers on Wednesday.” READ MORE

INTERNATIONAL

In Europe, small businesses are a bigger part of the economy: “The oversize exposure of banks to small businesses is part of Europe’s economic fabric. Companies with fewer than 250 employees account for 99.8 percent of all firms and two-thirds of all private-sector jobs in the European Union, according to the European Commission. Small businesses in the U.S. also have economic weight, but they tend to be bigger. About half of Europe’s workforce is employed by firms with fewer than 50 people, compared with about a quarter in the U.S., according to the U.S. Census Bureau.”

  • “Given their size and the small economies they serve, many European companies have a hard time attracting investors, relying heavily on bank loans for financing.”

  • “In Europe, some 80 percent of small business financing comes from banks, compared with 50 percent in the U.S., where small companies find funding from private-equity firms, angel investors, initial public offerings as well as leasing and factoring, according to Euler Hermes, a credit insurance provider.” READ MORE

Under Brexit, big companies are faring better than small companies: “One of Peter White’s trucks carrying $136,267 worth of fresh lamb waited at a French port for 44 hours as its paperwork was cleared. Yet Ford Motor has shipped engines from its British factory into the European Union with few problems. Britain’s first weeks of doing business outside of the EU have been mixed, as goods from large companies mainly sail through ports but many small businesses struggle with the new post-Brexit rules.”

  • “Before Jan. 1, Dartmouth Crab Co. would land its shellfish on England’s south coast on a Friday, load the catch onto trucks and have it on sale in Portugal by Sunday morning.”

  • “Today, it says the nine different documents it needs in hard copy for each cargo—around 40 pieces of paper—and the checks at the French border mean the fish could take until the following Wednesday to reach Portuguese customers.”

  • “It is easier to export to the Far East than to France, and that is crazy,” said Mark Moore, the company’s manager.” READ MORE

THE 21 HATS PODCAST

Episode 45: I Will Be Here: This week, Paul Downs and Jay Goltz talk about their New Year’s resolutions. Here’s Paul’s: “My New Year's resolution is that we will be open on December 31st, 2021. And I don't know whether I'll have the same number of employees, but we will be open. I will be here.” And here’s Jay’s: “My New Year's resolution is, I'm not gonna do anything stupid this year. So far, so good.” Paul and Jay also talk about Paul’s disappearing backlog, each of their plans for PPP Round II, Jay’s efforts to lure one of his sons into his business, and—responding to a listener question—how they handle business and personal expenses. “I think we have to stop recording right here,” says Paul.

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