AMERICAN RESCUE PLAN ACT OF 2021: CHILD TAX CREDIT

AMERICAN RESCUE PLAN ACT OF 2021: CHILD TAX CREDIT

Under the American Rescue Plan Act (ARPA), the IRS will be releasing advance monthly child tax credit payments to eligible taxpayers in equal amounts starting July 15th. Following the first payment in July, the payments will go out on the 15th of each month through December of 2021.

Many taxpayers may want to unenroll using the link below if the amount of 2021 taxes owed are expected to be greater than the expected refund.

For taxpayers who are married filing jointly, each person must unenroll separately.

The payments will be as follows:

  • Up to $300 per month per child under age 6, and
  • Up to $250 per month per child ages 6-17.

For 2021, ARPA raised the child tax credit amount to up to $3,000 for each qualifying child between the ages of 6 and 17 at the end of the 2021 tax year, and $3,600 for each qualifying child under the age of 6 at the end of the 2021 tax year. ARPA also made the child tax credit for 2021 fully refundable if the taxpayer (or spouse, on a joint return) has a primary residence in the United States for more than half of the 2021 tax year.

For more detailed information and frequently asked questions about child tax credit payments, or to unenroll, visit the IRS Child Tax Credit Update Portal. Please call our office at 251-343-1012 if we can be of further assistance.

Hurricane Sally Business Casualty Losses

Business Casualty Losses

For partial business losses, the deductible amount of the loss is the value of the destroyed portion or the adjusted basis of the property, whichever is less, reduced by insurance or other compensation received.

For business property that is completely destroyed, the deductible amount of the loss is the adjusted basis of the property minus any salvage value and any insurance or other compensation received or recoverable.  This is the case whether or not the fair market value (FMV) of the business property immediately preceding the total casualty is less than the adjusted basis of the property.

Two methods may be used to determine the decline in FMV of property damaged in a casualty:

  • Appraised value immediately before and immediately after the casualty to determine the amount of deductible loss.
  • Cost of repairing the damaged property to set the amount of the loss.

The IRS has announced relief related to Hurricane Sally. In summary, the filing and payment due dates for various individual and business tax returns due on or after September 14, 2020 have been extended to January 15, 2021. Please note this does not include an extension to pay your 2019 tax liability, it only extends the time to timely file the tax return. The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance. Currently this includes Baldwin, Escambia and Mobile counties in Alabama, but taxpayers in localities qualifying for individual assistance added later to the disaster area, elsewhere in the state and in neighboring states, will automatically receive the same filing and payment relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov. The Alabama Department of Revenue is also offering similar relief. For more information, please go to the Alabama Department of Revenue Website.

If you have any questions, please call your accountant at CSB or our main office at 251-343-1012.

Hurricane Sally Personal Casualty Losses

Personal Casualty Losses

Hurricane Sally is a federally declared disaster and therefore personal casualty losses can be taken by taxpayers who itemize deductions.  The casualty loss deduction is subject to

  • $100 floor per casualty AND
  • 10% of adjusted gross income (AGI) limitation
  • The loss must exceed the $100 floor and 10% of AGI before it “counts” as a deduction.

Casualty losses can be taken for damaged property as well as property that is totally destroyed.  The amount of the loss is the lesser of

  • The adjusted basis of the property OR
  • The reduction in the property’s fair market value caused by the casualty
  • The loss must be reduced by the amount of any salvage value and insurance or other reimbursement received.

The IRS has provided safe harbors for calculating residential real property losses.

  • Estimated Repair Cost Safe Harbor Method – This method is available for losses of $20,000 or less. A taxpayer may use the lesser of two repair estimates prepared by two separate and independent contractors licensed in accordance with state or local regulations.
  • Insurance Safe Harbor Method – A taxpayer may determine the decrease in fair market value by using the estimated loss determined in reports prepared by the taxpayer’s insurance company.
  • Contractor Safe Harbor Method – A taxpayer may use the contract price for repairs as set out in an itemized contract prepared by a licensed contractor. The contract must be binding and signed by the taxpayer and the contractor.

The IRS has also established safe harbors for personal belonging losses based on replacement cost adjusted 10% for every year the item is owned.

Additionally, the IRS has announced relief related to Hurricane Sally. In summary, the filing and payment due dates for various individual and business tax returns due on or after September 14, 2020 have been extended to January 15, 2021. Please note this does not include an extension to pay your 2019 tax liability, it only extends the time to timely file the tax return. The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance. Currently this includes Baldwin, Escambia and Mobile counties in Alabama, but taxpayers in localities qualifying for individual assistance added later to the disaster area, elsewhere in the state and in neighboring states, will automatically receive the same filing and payment relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov. The Alabama Department of Revenue is also offering similar relief. For more information, please go to the Alabama Department of Revenue Website.

If you have any questions, please call your accountant at CSB or our main office at 251-343-1012.

Crow Shields Bailey PC – The Families First Coronavirus Response Act

In response to the COVID-19 pandemic, Congress passed, and the President signed into law on March 18, 2020, the Families First Coronavirus Response Act.  The Act contains two sections that significantly alter the FMLA: the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act (“FMLA Expansion”).

For full-time employees with more than 30 days of work history, the two sections work in conjunction to mandate 12 weeks of partially paid leave due to a school or child care facility closure.  As a stand-alone section, the Paid Sick Leave Provisions mandate 10 days of paid sick leave for all employees, regardless of work history.

To offset the cost of the Act, covered employers will receive dollar for dollar tax credits against quarterly payroll taxes, subject to the requirements of forthcoming Treasury Department regulations.

For small businesses, the Act is expected to provide some flexibility with respect to workers who return to work following a COVID-19 related illness or event, including whether or not they are allowed to return to work at all.  In some cases, small businesses may be exempted from the paid leave provisions of the Act entirely.

Covered employers must be prepared to implement the provisions of the Act on or before April 2, 2020. Covered employers are businesses with up to 500 employees.  The provisions of the Act are temporary and will automatically sunset on December 31, 2020.

Emergency Paid Sick Leave Act

Under the Emergency Paid Sick Leave Act, employers with fewer than 500 employees and government employers are required to provide all employees with paid sick leave for the following Covid-19 related reasons:

  1. The employee is subject to a federal, state, or local quarantine or isolation order;
  2. A health care provider has advised the employee to self-quarantine;
  3. The employee has symptoms of COVID-19 and is seeking diagnosis;
  4. The employee is caring for an individual subject to a federal, state, or local quarantine or isolation order related to COVID-19 or who has been advised to self-quarantine by a health care provider;
  5. The employee is caring for a child whose school or place of care has been closed, or whose child care provider is unavailable due to COVID-19 precautions; or
  6. The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services.

For qualifying circumstances, employers are required to provide 10 days or 80 hours of paid sick leave at the employee’s regular rate, but not more than $511 per day or $5,110 in aggregate.  Those qualifying circumstances are:

  1. The employee is subject to federal, state, or local quarantine or isolation order.
  2. A health care provider has advised the employee to self-quarantine.
  3. The employee has symptoms of COVID-19 and is seeking diagnosis.

For other qualifying circumstances, the employer is required to pay 2/3rds of the employee’s regular pay, subject to a maximum of $200 per day and $2,000 in aggregate for the first 10 days of leave. Those qualifying circumstances are:

  1. The employee is caring for an individual subject to a federal, state, or local quarantine or isolation order related to COVID-19 or who has been advised to by a health care provider to self-quarantine.
  2. The employee is caring for a child if the child’s school or place of care has been closed, or the child care provider is unavailable due to COVID-19 precautions.
  3. The employee is experiencing any other substantially similar condition specified by the Secretary.

FMLA Expansion

The FMLA Expansion requires employers having less than 500 employees to provide 12 weeks of job protected FMLA leave to eligible employees who are unable to work because their child’s school or place of care has been closed, or the child care provider is unavailable due to the COVID-19 health emergency

The first 10 days of this leave is typically unpaid; however, some employees may qualify for pay during the first 10 days of leave under the Emergency Paid Sick Leave Act.  During these first ten days, employees may use their accrued sick leave or PTO, but employers may not require that they do so.  After the first 10 days, employers are required to pay qualifying employees 2/3 of their regular compensation, but no more than $200 per day or $10,000 total, for ten weeks if there is a public health emergency related school or child care closure.

Under the FMLA Expansion, the usual FMLA requirement that an employee must have been employed for at least 12 months and have worked 1,250 hours to be eligible for leave do not applyAny employee is covered if the employees has been employed for at least 30 calendar days.

Job Protected Leave

Prior to the amendment, the FMLA required that an employee returning from leave be restored to the employee’s original job or to an equivalent job with equivalent pay, benefits, and other terms and conditions of employment. The Act leaves in place most of the key job protection provisions of the FMLA without any change.  However, there is one significant change affecting small businesses.  Under the FMLA Expansion, the job restoration requirements will not apply to employees who take COVID-19 related leave if they are employed by an employer with fewer than 25 employees and these conditions are met:

  1. The employee’s job no longer exists on account of economic conditions related to the outbreak of the coronavirus;
  2. The employer makes reasonable efforts to restore the employee to an equivalent position; and
  3. The employer makes reasonable efforts to contact the former employee for up to one year if a position becomes available.

Exemptions for Certain Businesses

The Secretary of Labor may choose to exempt small businesses with fewer than 50 employees if the sick leave mandate “would jeopardize the viability of the business as a going concern.”  The Secretary is expected to issue guidance and regulation with respect to this provision.  The Secretary is also expected to issue regulations that exclude certain health care providers and emergency providers from coverage if their employer chooses to opt out of the paid sick leave mandate.

Noticing Issues

By Employer: Employers falling under the provisions of the Act must post conspicuous notices of the Act in the workplace once the Secretary of Labor provides the form of the notice.

By Employee:  Under the Act, if the leave is COVID-19 related, an employee does not have to give the employer notice prior to beginning leave.  After the first workday of COVID-19 related paid sick leave, the employer can require the employee to follow reasonable notice procedures for the use of additional paid sick leave.  The employer cannot require the employee to look for a replacement worker.

Tax Credits

The Act includes a dollar-for-dollar tax credit in an amount equal to the sick and FMLA leave required to be paid under the Act, subject to the following caps:

  1. $200 per day per employee up to $10,000 for all calendar quarters for paid family leave; and
  2. $511 per day per employee up to $5,110 for all calendar quarters for paid sick leave.

The credit is applied against the employer share of FICA taxes.

In addition to the tax credit, amounts paid for sick and FMLA leave under the Act are not included in wages for purposes of the employer share of Social Security tax. Although the benefits are not excluded from wages for purposes of the employer share of Medicare taxes, the credit calculation will offset the employer share of Medicare tax due on the leave payments.

Leave payments are subject to the withholding of both federal income tax wages (and state income tax in most states) and all employee FICA taxes.

Alexandra K. Garrett is an attorney at Silver Voit & Thompson, Attorneys at Law, P.C. She was raised in Fairhope, Alabama where she currently lives with her husband and sons. She obtained her B.A. in Communications from Spring Hill College in 2004 and her JD from University of Alabama School of Law in 2007.  Alex’s practice focuses on business advising, employment law, business bankruptcy, and wealth and estate planning.  She may be reached at (251) 338-1081 or [email protected].

Matthew Butler is an attorney at Silver Voit & Thompson, Attorneys at Law, P.C.  He was born and raised in Mobile, AL.  He received a B.S. in Economics from the Wharton School of the University of Pennsylvania in 2003 and subsequently worked for Deutsche Bank Securities as an associate.  Matt obtained his JD from the University of Alabama School of Law in 2011.  His practice focuses on business advising, business bankruptcy, and wealth and estate planning.  Matt is married to Dr. Kristen M. Butler, an area surgeon, and they are the proud parents of four children. He may be reached at (251) 338-1084 or [email protected]

Crow Shields Bailey PC COVID-19 Update #1

As we navigate through these unprecedented times, we must work together to ensure the safety of our clients, team members, and families. To comply with the CDC and WHO’s recommendations of social distancing to help slow the spread of COVID-19, we recommend that our clients send in all necessary tax documentation electronically. If you have this capability, please e-mail to your tax preparer for a link to upload your information securely. You can find your tax preparer’s e-mail address on the Meet Our Teams section of our website. If you do not know who your tax preparer is, you can send an e-mail to Emilee Shuler at [email protected] requesting a link for secure upload.

If you do not have the capability to send information electronically, we have drop boxes located in each office and protocols set up to ensure everyone’s safety. You can also send via mail. Additionally, we are holding meetings by phone for now. We are all working either in the office or remotely and available by phone and email for any questions you may have.

If you have any questions or concerns, please do not hesitate to contact us at 251-343-1012. We hope that you and your families stay healthy and safe.

Crow Shields Bailey PC COVID-19 Response

As we all find ourselves in uncharted territory, we want to share with you how CSB is responding to Coronavirus (COVID-19).

CSB is concerned with the health of our clients, team members, vendors and the communities we serve.

We have a plan in place to ensure continuity of services to our clients.  Our team has the ability to work remotely and can access client information in a safe and secure manner. Whether we are working in our offices or remotely, the lines of communication will remain open.

What you should know:

  • CSB will have drop off boxes in the lobbies of each of our three locations to limit hand-to-hand contact.
  • We will also need to do more phone meetings rather than meeting face-to-face.
  • We will rely on the use of our secure file transfer services such as SafeSend (to electronically receive and sign tax returns) or Sharefile (to send and receive documents which do not require signatures).

Our plan is to have personnel in each of our offices. However, we will follow local regulations and guidance regarding whether an office should be closed.

We value our relationship with you and will continue to provide updates as needed as we navigate these unprecedented times.

Please feel free to reach out with any questions or concerns. We hope you and your loved ones are safe and healthy.

 

Gina McKellar

Managing Shareholder

CSB Awarded Best Company To Work For By Business Alabama

July 29, 2019

Deborah FisherFirm Administrator | Published by Crow Shields Bailey PC

At CSB, our team is our most valuable asset and one of our top priorities is to recruit and retain the best and the brightest. We make sure that team members have a clearly defined career path, mentors to help them reach their goals, opportunities for excellent training, and we have some fun along the way as well.

Because of our “team first” mentality, we were thrilled and honored to discover that the sentiment is mutual when we were named one of Business Alabama Magazine’s Best Companies to Work For. This award is based, in part, on surveys that our team members completed about what it’s like to work here and their satisfaction level with features like benefits, compensation, flexibility, working environment, and more.

We believe that communication is the key to reaching this level of employee satisfaction. We haven’t always been in this position. Just like many other “Boomers” in management, we came up with ideas in meetings that we thought were great and many times, to our dismay, we were not even close to hitting the mark. That’s when we realized that maybe, just maybe, we should actually ask team members what would make CSB a great place to work.

We took great pride in having an “open door policy” but sometimes that simply meant listening to suggestions. If you don’t take action, then what’s the point?  We began to really listen to team members’ ideas and started taking action. As a result, for the last eight years or so, our team is responsible for many changes such as our dress code (we now have a Dress for Your Day policy), recruiting (our team plans and executes events), community service (we vote on our main charity each year), compensation (our team is responsible for various changes to our compensation structure), time off policy (we ditched traditional “vacation and sick leave” and replaced with PTO), two extra holidays came from team recommendations, and the list goes on.

In summary, if you are putting forth the effort to hire and retain the best and the brightest – let them show you what they can do. We firmly believe that the change in our mindset to move from just listening to listening AND taking action is one of the reasons that we have been named one of the best companies to work for in Alabama. And for that, we are truly grateful.

 

 

 

Accounting Students – Should You Choose Tax or Audit?

June 19, 2019

Caitlyn Grimme, CPA | Supervisor | Published by Crow Shields Bailey PC

One of the biggest decisions an accountant will face is the choice to specialize in tax or audit.  While this decision may come easily to some, for others it can be the most difficult choice of their career.

Tax vs. Audit – What’s the Difference?

While both are accounting professions, the tax and audit paths can vary greatly.   In the tax division, your day will focus on trying to reduce the client’s tax liability.  Meanwhile, the purpose of an audit is to express an opinion as to whether the financial statements of a company are free from material misstatement. As such, auditors devise testing measures and scopes to evaluate the information provided by the client in order to express an opinion.  Additionally, auditors may also work on other forms of attestation engagements such as reviews and compilations, which provide limited to no assurance regarding the financial statements.

Both tax and audit are rules and research based. Tax professionals must comply with rules set by the Internal Revenue Service and The U.S. Securities and Exchange Commission. Auditors must also follow generally accepted accounting principles (GAAP), generally accepted auditing standards (GAAS), additional SEC and PCAOB guidelines if required, as well as certain industry-specific guidance.  However, while auditors rely on research and rules, they also rely heavily on auditor judgment.

Audit professionals must have strong interpersonal communication skills, as you are onsite communicating with clients on a daily basis.  Tax professionals typically work in the firm office and might not communicate directly with a client for several months.

Both career paths are now heavily dependent on computer and software applications, so regardless of your choice, proficiency in technology is important.

There is conflicting information from online sources regarding differences in pay for auditors vs. tax professionals.  Some sites state that lower level audit staff jobs are more plentiful than tax staff positions starting out and might offer higher initial pay.  However, other sites argue that tax professionals have higher initial earning power. At the end of day, I would recommend choosing the path that you are more passionate about, as the earning potential doesn’t appear drastically different for either course (note this may vary by firm, industry specialization, etc.).

Are There Pros and Cons to Each Path?

Although not every firm is the same, here are a few standard pros and cons:

Audit:

Pros:

  • Travel – audit professionals typically spend less time in the firm office than tax professionals. Whether the travel is local, regional, or national can depend on the specific accounting firm.  For instance, audit professionals at large regional or national firms might spend a significant amount of time traveling while professionals at local firms might travel primarily to clients in their area.  Independent of firm size, boutique firms specializing in a specific industry might travel more than others.  If you like a varied day/routine with occasional to frequent travel, audit might be a good fit for you.
  • Steady work flow – while the tax profession is driven by statutory deadlines, audit work is more consistent and constant throughout the year. There are still deadlines in the audit world, but these deadlines (which are usually set by governing bodies such as a board of directors or third parties such as bankers or bonding agencies) are usually spread more evenly throughout the year.
  • Teamwork – audit engagements typically consist of an “audit team” with a partner, manager/in-charge, and staff member, at the least. This environment yields itself to mentorship and in-the-field hands-on learning for those new to the profession.
  • Client interaction – with audit, a large portion of the engagement is performed “in the field” (i.e. at the client’s office). As a result, staff will be interacting with client personnel ranging from accounting clerks to the CEO on a daily basis.

Cons:

  • Travel – while travel might appeal to some, it might be a significant deterrent to others. It is important when interviewing for an audit internship or staff position to question the firm’s expectation regarding amount of time spent traveling, as it can range by firm size or specialization as noted above.
  • Professional skepticism – attestation engagements require independence from the client. This can be a problem for professionals who get too involved in order to “help” the client, as it can lead the auditor to making management decisions for the client and impairing independence and objectivity.

Tax:

Pros:

  • Deadline-driven – while the time surrounding tax deadlines can typically be very busy for CPAs in the tax department, there is usually a lull between these storms that provides plenty of time for vacation, continuing education, professional development, etc.
  • Independent work – while the audit department works on a team, tax professionals have more opportunity for independent work. While there is always someone available for questions if needed, if you prefer to work on projects on your own, then tax might be a better fit.
  • Fast turn-around – while audits may drag out for weeks or months, tax returns are usually much smaller individual engagements which lead to quicker turnaround. If you are someone who likes to quickly cross projects off your list, this might be the path for you.
  • Exposure – although you are not in the field with the client on a daily basis as in auditing, tax professionals receive more exposure to different clients throughout the year. For example, an auditor might work directly with 10-15 clients a year, while a tax professional might deal with 100.

Cons:

  • Deadlines – while the lull provided after a deadline is nice, the weeks and months leading up to a deadline require overtime work by tax professionals, which dissuades many from joining the profession.
  • Client exposure – since tax professionals work primarily in the office, they do not interact face-to-face with clients daily. This could be preferred if you tend to be more introverted, but extroverts might find this arrangement challenging.

I’m Still Undecided – What Can I Do?

If you are still unsure which path is a better fit, try out some of the following:

Apply for an internship – internships are a fantastic way to learn the basics of both disciplines.  Most large firms will offer internship experience on a tax or audit basis which allows full immersion in either path.  Smaller local firms may offer internship opportunities with exposure to both tax and audit in the same internship round (typically a “busy season” internship from January through April 15th).

Online forums – in the age of technology we live in, information is at the tips of our fingers, literally.  There are several sites with forum posts or resources surrounding this subject.  Check out the CPA exam forum on www.another71.com or the AICPA career guidance section, just to name a few.

Ultimately, the career you choose must be the best fit for you.  What are pros for one person might be cons for another (ex. frequency of travel engagements).  However, as long as you know yourself and what is most important to you, you will make the right decision.  Feel free to contact us to set up a job shadowing appointment if you would like to get a glimpse at a normal day for tax and audit professionals.

 

Crow Shields Bailey TCJA Update: Opportunity Zones Offer Investors Significant Tax Benefits

The 2017 Tax Cuts and Jobs Act provides a significant opportunity to defer the tax on gain from the sale or exchange of stock and other assets.

If you invest the gain from the sale in a “qualified opportunity fund” within 180 days after the sale, tax on the gain is not due until December 31, 2026 or, if earlier, the date you sell your investment in the fund. In addition, if you don’t sell your investment for ten years, any appreciation in the value of the investment is not taxed at all.

A qualified opportunity fund is an investment vehicle that is organized as a partnership or a corporation to operate a business in designated low-income areas referred to as “opportunity zones.” Several hundred such zones have been designated by the IRS. You don’t need to live in the zone.

You may invest as a passive partner or shareholder in a fund that is organized and run by a third party. Depending on your situation, you may want to form your own fund and manage the fund’s business. Investments received by a fund must generally be used to purchase new property or substantially improve existing property.

Please call our office to discuss how these changes may affect you.