Tax Nightmares May Come Early in 2023
If your business deferred Social Security taxes because of the pandemic, you have a payment coming due in January.
Here are today’s highlights:
One of the original cupcake chains tries a comeback, this time with digital marketing.
Sick kids are keeping parents out of work at record-setting rates.
October’s Producer Price Index offers more good news on inflation.
Who said it? Elon Musk or Mr. Burns. Take the quiz.
A beloved oyster bar that had a business-model problem has closed in NYC: “Pearl was always crammed with happy people. At the beginning, before an expansion into the next-door space, there was seating for fewer than 30 people. The bar, on one side, sat a dozen. Mere feet behind it were ten more stools for the unfortunate, facing a wall and granted maybe a foot and a half of counter space to eat. In the middle were the stand-ups, drinking and knocking over cutlery at tables on either side. There was just one window-table four-top, that, [owner Rebecca] Charles says, ‘was fought over vigilantly.’ It was boisterous and annoying and I loved it.”
“Nearly immediately, Pearl’s lobster roll — toasted, top-split Pepperidge Farm bun, spilling over with chilled tail, knuckle, and claw meat dressed in Hellmann’s and celery — became a runaway hit.”
“James Gandolfini, as Tony Soprano, yearned for its excellence, post-stroke, in a 2006 episode of The Sopranos. In his hospital gown in bed, he says to Edie Falco’s Carmela after she asks what would be the meal of his dreams: ‘Pearl’s Oyster Bar … the lobster roll.’”
“It was never meant to be a signature, says Charles, and its success did not necessarily translate to financial freedom: ‘There’s just no way to make money on a lobster roll,’ the chef sighs. ‘It’s like running a charity — making a lot of people happy but not making a lot of money.’” READ MORE
Crumbs, which grew from a mom-and-pop bakery into the largest cupcake chain in the U.S. before folding, is trying again: “For the first time in nearly a decade, cupcake brand Crumbs is building a presence online. The company plans to spend its marketing budget on social media platforms to reach audiences on TikTok and Instagram. Crumbs is doing this to capitalize on nostalgic millennials as well as introduce itself to Gen Z. The company kicked off this effort with a two-week social teaser campaign prior to its relaunch of the brand from Oct. 16 to Oct. 30. Over those two weeks, the brand’s Instagram account grew from zero followers to over 6,000 followers. To showcase what is coming from the relaunch, Crumbs also posted its offerings and short form video teasers on TikTok.”
“‘When we first launched Crumbs, Myspace, Facebook, and YouTube were all totally new platforms that were not our top priority from a marketing perspective in the early days of the company,’ said Jason Bauer, co-founder of Crumbs Bakeshop.”
“To drum up interest in the relaunch, the brand published behind-the-scenes Reels on its making of the cupcakes along with photos including a giveaway of its six-pack cupcakes to three winners. The post drew over 900 comments with entries with the winners to be announced on Nov. 11.”
“Bauer said Crumbs will be spending between $50,000 and $75,000 a month on paid advertising across all social platforms for the next few months in order to build awareness around the relaunch and point to where consumers can purchase its products (e-commerce, direct-to-consumer, and mentioning supermarkets carrying the new CPG line).” READ MORE
The coming year will bring tax nightmares for some businesses: “For starters, there’s a big tax bill coming due for many business owners related to the pandemic, well ahead of the April 2023 federal income tax deadline. Small businesses that took advantage of Covid provisions in 2020 to defer some of their Social Security taxes had to repay 50 percent of what was owed at the beginning of 2022. The other 50 percent is due on Jan. 3, 2023. The IRS has been sending out notices reminding business owners to pay what they owe by the due date, but still it’s something that can easily fall through the cracks, especially if owners aren’t paying careful attention, said Eric Bronnenkant, head of tax at Betterment and an adjunct professor of taxation at Seton Hall University.”
Also: “For tax year 2022, many business owners may be receiving a form they haven’t in the past. That form is a 1099-K and owners who receive payment of $600 or more through a third party processor such as Venmo or PayPal should be receiving it.”
“A good rule of thumb for businesses starting out — and for all business owners to avoid the situation in which they can’t foot the full tax bill — is to set aside 30 percent to 35 percent of net income ...” READ MORE
Sick kids are keeping parents out of work at record-setting rates: “A new round of viral infections — flu, RSV, covid-19 and the common cold — is colliding with staffing shortages at schools and daycares to create unprecedented challenges for parents and teachers. More than 100,000 Americans missed work last month because of child-care problems, an all-time high that’s even greater than during the height of the pandemic, according to new data from the Bureau of Labor Statistics. Those absences are rippling across the economy and straining families and businesses, just as many thought they’d turned a corner.”
“‘We have sick kids at the same time we have a child-care crisis — you put the two together and there just isn’t any wiggle room,’ said Diane Swonk, chief economist at KPMG.”
“‘People are falling through the cracks. It means missed paychecks, disruptions at home, and staffing shortages that erode productivity growth and increase costs at a time when we’re already worried about those things.’” READ MORE
In Europe, it’s now the employers who want everyone working from home: “For two years, Milan’s Mayor Beppe Sala tried to get the city’s public servants to return to the office after working from home at the height of the Covid-19 pandemic. Now he is asking staff to stay home more, to cut high municipal energy bills. He isn’t alone. Around Europe, some employers are encouraging their staff to spend less time at the office as high electricity and heating bills become outsize overheads, slowing down—or even reversing—the push to end widespread working from home. ‘It started with the war in Ukraine,’ said Mr. Sala, who recently made Friday a day of mandatory remote working for more than 2,000 of Milan’s municipal employees. ‘We all need to save energy.’”
“Europe’s energy crisis is flipping the work-from-home debate on its head. Remote working is now a favor that bosses are asking from their workers, not a pandemic-era pattern that managers want to end.”
“Italy’s biggest telecoms company, Telecom Italia, is in talks with labor unions to shift most employees to compulsory remote work on Fridays, when most buildings will stay shut, the company said. Staff are already allowed two days of home-working a week if they want.”
“Not all workers are happy to be told to work more from home again, for the same reason that employers don’t want them in the office: It is expensive.” READ MORE
Many laid off tech workers in the U.S. on H-1B visas will have to leave the country: “Tech companies in the U.S. depend heavily on foreign workers, particularly from India and China. For years, these companies have said there’s a shortage of workers with the needed technical skills, so they turn to the H-1B program to hire workers from overseas to fill specialty roles.”
“Immigration lawyers say that laid-off workers who intend to stay on an H-1B visa have a 60-day grace period in which they need to find and file another H-1B visa from another employer. If not, they will have to leave the country. Other options include going back to school and changing their status to a student visa to buy more time.”
“For employees on H-1B visas who are on track to get a green card, losing their job could hurt their chances of receiving the green card to become a permanent resident of the U.S., unless they are far along in the approval process.”
“Lawyers say layoffs in tech could lead to more workers heading to Canada, where they can find friendlier immigration policies and typically face shorter wait times for visas than in the U.S.”
“Canada announced recently it is raising its immigration targets amid a labor shortage.” READ MORE
The Producer Price Index eased in October, further indication that inflation is abating: “The producer-price index, which generally reflects supply conditions in the economy, climbed 8 percent in October compared with the same month a year ago, the Labor Department said Tuesday. Though prices continued to rise rapidly, the pace marked an easing from September’s revised 8.4 percent increase, and was down sharply from the 11.7 percent increase in March, the highest since records began in 2010.”
“‘The improvement in the October inflation data, if it persists, supports the Fed’s expectation of a step down in the pace of increases going forward,’ said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.”
“On a monthly basis, the PPI increased 0.2 percent in October from September. That was the same as the revised 0.2 percent increase in September, and matched the average monthly gain in the two years before the pandemic.” READ MORE
Consumer spending continued to rise in October: “Retail sales—which include spending on cars, wine and ottomans as well as meals at restaurants—have generally risen in recent months amid higher prices and rising interest rates that can make purchases, particularly big ones, more expensive. Economists polled by The Wall Street Journal estimated that retail sales rose 1.2 percent in October from September. Unlike many government reports, retail sales aren’t adjusted for inflation, so swings can reflect price differences in addition to purchase totals.”
“Walmart reported Tuesday that comparable U.S. sales rose 8.2 percent in its third quarter compared with a year earlier. The company said that shopper visits increased 2.1 percent in the quarter ended Oct. 28.”
“Alana Carr is the part-owner of four specialty retailers in Washington state. Ms. Carr said her toy store, gift shops and jewelry retailer have all done well this year, with overall sales up by double-digits compared with 2021.”
“Ms. Carr said she has been ready for the holiday shopping season since September. She ordered products early to avoid the shortages she experienced last year.” READ MORE
Twitter users searching for an alternative platform are finding the Matt Hancock app: “For those who might not be familiar with it, that app was launched by Matt Hancock, a British politician who resigned as the health minister after he was caught in an embrace during the country’s Covid lockdown. He came up with the app a few years earlier to connect with voters in his leafy West Suffolk constituency. Until recently it mostly contained pictures of Mr. Hancock doing the sort of things lawmakers do, opening grocery stores or posing with prizewinning pumpkins. Now a wave of new users have signed up to exchange messages and follow each other on its chat function—and they like it.”
“At the moment [Mr. Hancock] is sequestered on a reality television show in Australia’s rainforest, where he has said he is looking to raise awareness for dyslexia, and also for a measure of forgiveness while wriggling through cockroach-infested tunnels or nibbling on camel parts for points and an appearance fee.”
“‘why is this the closest thing to an actual twitter clone I’ve seen so far??’ asked someone going by ‘unfortunatalie.’”
“‘it like…really is,’ replied another, calling themselves ‘elonmusk.’” READ MORE
Who said it? Elon Musk or Mr. Burns. Take The New Republic’s quiz: “The Simpsons’s Mr. Burns and Elon Musk share an eerie number of similarities. Each is the richest person in his respective universe—Springfield for the former, planet Earth for the latter. They boast about their green energy initiatives of electric cars and nuclear power plants, but use their power to advance right-wing politics and fuel their petty personal grievances. Test yourself below to see how well you can separate our cartoonish reality from the world of The Simpsons.” TAKE THE QUIZ
THE 21 HATS PODCAST
For Richer, For Poorer: This week, Liz Picarazzi, Hans Schrei, and Laura Zander talk about something they have in common: They all own and run their business with a partner who also happens to be a spouse. Which suggests some interesting questions: Is someone in charge? How do they divvy up responsibilities? What do they talk about? What do they fight about? Do they fight in front of the employees? How do they make decisions? Who does the dishes? Do they ever wish they were not in business with their spouse? Do they know what would happen to the business if they were to divorce?
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren