When looking at the individuals in your company, their roles will fall into one of four categories: critical, core, supporting or misaligned. Let’s look at each of these in detail to assist you in mapping out responsibilities.
Author: Alexis Long
Although more than 30% of family-owned businesses transition successfully to the second generation, just 12% of those businesses are viable for the third generation, and a mere 3% are operating by the fourth generation, according to Family Business Review. This video series explores practical ways to think outside the box when planning the future of your business such as outsourcing employee functions and creating a strategic succession plan.
Although much of estate planning deals with what happens after you pass, it’s equally important to have a plan for making critical financial or medical decisions if you’re unable to make them for yourself. Carefully designed financial and health care powers of attorney allow you to designate a trusted person to make financial and medical decisions on your behalf in the event an illness or injury renders you unconscious or otherwise incapacitated. They also allow you to provide your designee with guidance on making these decisions, including your preferences regarding the use of life-sustaining medical procedures.
Review and revise as needed
Powers of attorney can provide peace of mind that your wishes will be carried out, but it’s important not to get lulled into a false sense of security. You should revisit these documents periodically in light of changing circumstances and consider executing new ones.
Possible reasons you may need new powers of attorney include:
1. Your wishes have changed.
2. The person you designated to act on your behalf has died or otherwise become unavailable.
3. You’re no longer comfortable with the person you designated. (For example, perhaps you designated your spouse, but have since divorced.)
4. If you’ve moved to another state, your powers of attorney may no longer work the way you intended. Certain terms have different meanings in different states, and states don’t all have the same procedural requirements. Some states, for example, require durable powers of attorney to be filed with the local county recorder or some other government agency.
Honoring your powers of attorney
Even if your circumstances haven’t changed, it’s a good idea to execute new powers of attorney every few years. Why? Because powers of attorney are effective only if they’re honored, and — because of liability concerns — some financial institutions and health care providers may be reluctant to honor documents that are more than a few years old.
Contact your ATA representative with any questions regarding powers of attorney. We’d be pleased to further explain how they work or, if your estate plan already includes powers of attorney, help determine if you need to revise them or execute new documents. © 2021
For businesses, so much has changed over the past year or so. The COVID-19 pandemic hit suddenly and companies were forced to react quickly — sending many employees home to work remotely and making myriad other tweaks and revisions to their processes. Understandably, you may not have fully documented all the changes you’ve made. But you should; and among the ideal places to do so is in your employee handbook.
Now that optimism is rising for a return to relative normalcy, why not look at your handbook with fresh eyes and ensure it accurately represents your company’s policies and procedures.
Legal considerations
Among the primary reasons companies create employee handbooks is protection from legal challenges. Clearly written HR policies and procedures will strengthen your defense if an employee sues. Don’t wait to test this theory in court: Ask your attorney to review the legal soundness of your handbook and make all recommended changes.
Why is this so important?
A supervisor without a legally sound and updated employee handbook is like a coach with an old rulebook. You can’t expect supervisors or team members to play by the rules if they don’t know whether and how those rules have changed. Make sure employees sign a statement acknowledging that they’ve read and understood the latest version of your handbook. Obviously, this applies to new hires, but also ask current employees to sign a new statement when you make major revisions.
Motivational language
Employee handbooks can also communicate the total value of working for your company. Workers don’t always appreciate the benefits their employers provide. This is often because they, and maybe even some managers, aren’t fully aware of those offerings. Your handbook should express that you care about employees’ welfare — a key point to reinforce given the events of the past year. It also should show precisely how you provide support. To do so, identify and explain all employee benefits. Don’t stop with the obvious descriptions of health care and retirement plans. Describe your current paid sick time and paid leave policies, which have no doubt been transformed by federal COVID relief measures, as well as any work schedule flexibility and fringe benefits that you offer.
Originality and specificity
One word of caution: When updating their handbooks, some businesses acquire a “best in class” example from another employer and try to adopt it as their own. Doing so generally isn’t a good idea. That other handbook’s tone may be inappropriate or at least inconsistent with your industry or organizational culture. Similarly, be careful about downloading handbook templates from the Internet. Chances are you’ll have no idea who wrote the original, let alone if it complies with current laws and regulations.
Document and guide
Your employee handbook should serve as a clearly written document for legal purposes and a helpful guide for your company’s workforce.
Our family of firm company, ATA Employment Solutions, can provide guidance on updating business guidelines and employee handbooks. Click here for more information on ATAES. ATA CPAs can help you track your employment costs and develop solutions to any challenges you face as you look at your human capital with fresh eyes. Visit our website to learn more about ATA’s bookkeeping and client accounting services. © 2021
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ATA Business Insights
Join us for our free quarterly webinar to gain business insights to help shape strategies, solve problems, and grow your company. This quarter’s topic: Supercharge Your Business with an Innovation Strategy Session.
Register with this Zoom link for the June 8th event. It will start 11AM central time.
The inflation-adjusted Health Savings Account (HSA) thresholds for next year have been announced by the IRS. For calendar year 2022, a high deductible health plan is one with:
- an annual deductible of at least $1,400 for individual coverage (unchanged from 2021), or $2,800 for family coverage (unchanged from 2021)
- maximum out-of-pocket expenses of $7,050 for individual coverage (up from $7,000 in 2021), or $14,100 for family coverage (up from $14,000 in 2021). For 2022, the maximum annual contribution to an HSA is $3,650 for self-only coverage (up from $3,600 in 2021) and $7,300 for family coverage (up from $7,200 in 2021).
Talk with your CPA if you have tax-related questions regarding your HSA.
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The American Families Plan Fact Sheet
President Biden outlined some of his tax proposals in his address to Congress on April 28. The White House also released a fact sheet on The American Families Plan, which contains tax breaks for low-and-middle-income taxpayers and tax increases on those making over $400,000 per year.
The proposals include: extending the increased 2021 Child Tax Credit through 2025; permanently raising the Child and Dependent Care Credit; increasing the top individual tax rate from 37% to 39.6% (applying to those in the top 1%); and increasing the tax on capital gains for households making over $1 million to 39.6%.
The proposals would have to be passed by Congress. The fact sheet: https://bit.ly/3gPrF5Y
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Child Tax Credit
The American Rescue Plan Act (ARPA) expands the child tax credit amounts and eligibility requirements for tax year 2021. The credit is increased from $2,000 to $3,000 per qualifying child ($3,600 for children under age 6). The definition of a qualifying child is expanded to include a child who has not turned 18 by the end of 2021. The credit is fully refundable for a taxpayer with a principal place of abode in the U.S. for more than one-half the tax year, or for a taxpayer who is a bona fide resident of Puerto Rico for the tax year.
The additional $1,000 credit amount per qualifying child ($1,600 per qualifying child under age 6) begins to phase out at a rate of $50 for each $1,000 when a single filer’s modified adjusted gross income (MAGI) exceeds $75,000 ($150,000 for joint filers and $112,500 for head of household filers). A single filer with one qualifying child over age 6 will phase out of the increased credit amount if the taxpayer’s MAGI exceeds $95,000. Similarly, situated joint filers will phase out of the increased credit amount if their MAGI exceeds $170,000.
After application of the phase-out rules for the temporarily increased credit amount, the remaining $2,000 of credit is subject to the phaseout rules under existing law ($400,000 for joint filers and $200,000 for all other filers). A single filer with one qualifying child will phase out of the remaining credit if his or her MAGI exceeds $240,000, while joint filers with one qualifying child will phase out of the remaining credit if their MAGI exceeds $440,000.
The ARPA directs the IRS to establish a program in which monthly advance payments equal to 1/12th of the estimated 2021 Child Tax Credit amount will be paid to the taxpayer during the period July 2021 through December 2021. The remaining 50% of the annual estimated amount will be claimed on the 2021 tax return. Initially, the advanced amount will be determined based on a taxpayer’s 2019 or 2020 tax filing. However, upon receipt of a more recent tax filing or other taxpayer-provided eligibility information, the IRS may modify the advance amount.
The IRS announced on March 12, 2021 that it is reviewing implementation plans for the ARPA and that it will be issuing guidance on relevant provisions. We will share more news with clients as further guidance is released about 2021 child tax credits. Contact your ATA representative for any questions.
The IRS on April 2, 2021, issued additional guidance for employers claiming the employee retention credit (ERC) under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), as modified in December 2020 by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act). The ERC is designed to help eligible businesses retain employees by offering a credit against employment taxes when qualified wages and healthcare expenses are paid during the COVID-19 pandemic.
Notice 2021-23 provides additional guidance for taxpayers to use when preparing credit claims and explains the changes to the employee retention credit for the first two calendar quarters of 2021, including:
Increased Credit Amount
- Eligible employers may now claim a refundable tax credit against the employer share of social security tax equal to 70% of the qualified wages paid to employees after December 31, 2020 and before January 1, 2022.
- The maximum employee retention credit available is $7,000 per employee per calendar quarter, for a total of $14,000 for the first two calendar quarters of 2021.
Broadened Eligibility Requirements
- Employers who suffered a 20% decline in quarterly gross receipts compared to the same calendar quarter in 2019 are now eligible.
- A safe harbor is provided allowing employers to use prior quarter gross receipts compared to the same quarter in 2019 to determine eligibility.
- Employers not in existence in 2019 may compare 2021 quarterly gross receipts to 2020 quarters to determine eligibility.
- The credit is available to some government instrumentalities, including colleges, universities, organizations providing medical or hospital care and certain organizations chartered by Congress.
Determination of Qualified Wages
- Employers with 500 or fewer full-time employees in 2019 may include all wages and health plan expenses as “qualified wages.”
- The Relief Act strikes the limitation that qualified wages paid or incurred by an eligible employer with respect to an employee may not exceed the amount that employee would have been paid for working during the 30 days immediately preceding that period (which, for example, allows employers to take the ERC for bonuses paid to essential workers).
Advance Payments
- Employers with fewer than 500 full-time employees will be allowed advance payments of the ERC during a calendar quarter in which qualifying wages are paid. Special rules for advance payments are included for seasonal-employers and employers that were not in existence in 2019.
ERCs have become a regular discussion with ATA clients as they can be a relief to businesses who have been impacted by COVID-19. Please contact your ATA representative with further questions and guidance on this opportunity.
The IRS and the Treasury Department on April 22 released guidance that provides a safe harbor for businesses that received Paycheck Protection Program (PPP) loans in the first round of relief but did not deduct otherwise eligible business expenses because they relied on now-superseded guidance.
Under prior guidance, businesses that received PPP loans in 2020 to cover payroll costs, interest on covered mortgage obligations and covered utility payments could not deduct the corresponding expenses.
The new guidance – Rev. Proc. 2021-20 – provides a safe harbor in line with a provision in the Consolidated Appropriations Act, 2021, signed Dec. 27, 2020. Businesses now may deduct those expenses on their original federal tax return for the first taxable year following the 2020 taxable year, rather than filing an amended return or an administrative adjustment request.
To apply the safe harbor, taxpayers must make an election by attaching a statement with the information listed in the revenue procedure to their federal income tax return (or information return) for the first taxable year following the 2020 taxable year. The election may be made only on subsequent returns that are timely filed, including extensions.
An important limitation on the scope of the revenue procedure is that it applies only to returns that were originally filed on or before December 27, 2020. Thus, the guidance applies only to fiscal-year taxpayers whose year ended during 2020, for which a return was filed on or before the Consolidated Appropriations Act, 2021, was signed into law. As a result, the new guidance may have limited applicability to S corporations, many of which are calendar-year taxpayers. It may be more broadly applicable to C corporations, but only if they are fiscal-year corporations, and may apply to partnerships that use a fiscal year.