It’s not unusual for entrepreneurs to face a multitude of unique challenges every day that can stretch their ability to stay productive, especially during the current pandemic. When you have employees relying on you and a mountain of deadlines to meet, shutting your door and curling up into a ball in the corner is not an option. Besides money and health, time is the greatest commodity an entrepreneur can have. It makes sense, then, that the most successful business owners have figured out how to work more efficiently with the time they do have. Listed below are some productivity tips that we’ve picked up along the way.

“Eat your frog” first. Wait, what?! Mark Twain said it best: “Eat a live frog first thing in the morning, and nothing worse will happen to you the rest of the day.” In other words, spend your morning working on something that you don’t want to do, which requires a large amount of concentration. By doing so, you’ll get the more tedious task done, freeing yourself up to move on to the other pressing items on your to-do list.

Want to be productive? Don’t multitask. Multitasking in the morning when you have lots to do, tons of energy, and a venti-sized cup of coffee with a double shot of espresso in front of you, is tempting. However, doing so can set your whole day back. Research conducted at Stanford University confirmed that multitasking is less productive than working on one task at a time. Researchers found that people who are regularly bombarded with several streams of electronic information cannot pay attention, recall information, or switch from one job to another, as well as those who complete one task at a time.

Take care of yourself. This is both the most important and the most overlooked tip for any entrepreneur to follow. All the business and productivity advice in the world won’t help you if you’re already stressed out, sleep deprived, and running yourself into the ground before you take that first sip of coffee or tea in the morning.

Whether you’re looking to improve your tax position, build your brand through a business transaction, or guarantee a legacy for your family, Talley is uniquely equipped to provide the technical and managerial expertise to help you plan, negotiate, structure, and execute your goals.

To learn more how Talley can help your business become more productive and profitable, contact us today.

Last week, a judge ruled that former National Football League wide receiver, Keyshawn Johnson, owes at least $905,000 in state income tax, penalties, and interest. Johnson tried overturning a 2017 California administrative ruling that he was a resident of California in 1996, when he graduated from the University of Southern California and was drafted by the New York Jets. In January, Johnson took his dispute to the Los Angeles County Superior Court.

Tax domicile has become a more pressing issue as states seek to generate additional revenue. The standard definition of domicile is “the place which an individual intends to be his or her permanent home and to which such individual intends to return whenever absent.” When domicile is not clear, over 28 states have created tests in order to determine if an individual is a resident, typically a days-in-and-out equation, with 183-day-presence being the most common. Most states often see domicile and residence as the same thing.

But California focuses on facts and circumstances. While an individual’s intent is considered when determining domicile, the FTB also looks at the individual’s acts and declarations.

Knowing these definitions is important in Johnson’s case. Judge Mark V. Mooney decided to back the Franchise Tax Board in last Wednesday’s ruling. This decision was based on many reasons. One of them was Johnson owning a house in the suburbs of Los Angeles, and filing a New York nonresident return in his 1996 federal return. At the time, Johnson was only able to claim a mortgage deductible by being a primary resident. This means that Johnson’s claim is inconsistent with the original filing. Mooney said that proving that Johnson rented a place in New York for four months is not enough evidence to be considered a New York residence. On the same note, Johnson previously claimed that he was a Nevada resident since he rented a room for $300 a month while also renting an apartment for his girlfriend and baby back in California. Where your spouse and children are located is one of many key factors the CA FTB considers when determining residency in California.

While fighting this battle, Johnson was also trying to abate the interest and penalties accrued. He owes about $905,000 in tax, penalties, and interest; $219,000 of which is the initial Income Tax. This was denied since Judge Mooney did not have the authority to overrule these fees. Judge Mooney also stated that he would not have felt inclined to wave these fees since Johnson could have been paying them while continuing with his dispute.

Talley’s team of tax professionals provide comprehensive tax compliance and consulting services so you can preserve, enhance and pass on the assets and wealth to the next generation. We welcome the opportunity to discuss the current options available for you. For more information, contact us today.

UPDATE: Federal and California April 15th tax deadline for individuals extended to May 17th

Earlier this month, President Biden signed the American Rescue Plan Act into law, which triggered the release of $1,400 economic impact payments along with tax breaks to stimulate the economy. Included in this $1.9 trillion legislation is a one-year expansion of child tax credit, up to $3,600 per child, extension of the employee retention credit, and the addition of more money to the Paycheck Protection Program. It promises to boost the economy substantially as it slowly recovers from the pandemic, which has left millions unemployed.

Employee retention credit. With the Employee Retention Credit that was introduced in the 2020 CARES Act, the goal was to keep workers on the payroll by providing tax credits to employers when the pandemic first started. This act was extended in December 2020 in the $900 billion Consolidated Appropriations Act. The main goal of Biden’s legislation is to extend the employee retention credit as well as the changes made due to the Consolidation Appropriations Act. The changes allow employers to claim a credit against 70% of qualified wages paid. Eligible wages went from $10,000 per year to $10,000 per quarter, and the recent legislation extends it until the end of the year. This means that businesses can get $28,000 per employee instead of the 2020 maximum of $7,000 per employee. This will allow businesses to put non-paycheck expenses towards PPP loan forgiveness since the required attributable wages went from 75% to 60%, giving businesses more potential employee retention tax credits.

Talley LLP is now submitting ERC claims on behalf of our clients. For more information, please Contact Us

Child Tax Credit. Huge benefits to taxpayers with small children, especially big families, are expected to be a result of the expansion of the child tax credit. Although it was used to reduce child poverty for a year, Democrats want to extend it further. The expansion of the child tax credit raised the amount for qualifying children from the 2020 $2,000 to $3,600 for children five and under, and $3,000 for children between six and seventeen. Many families will start to see payments this July. Families are also eligible for daycare expenses up to $4,000 after filing 2021 taxes.

Talley’s experienced team of tax professionals provides comprehensive tax compliance and consulting services so you can preserve, enhance, and pass on the assets and wealth to the next generation. We welcome the opportunity to discuss the current options available for you. For more information, contact us today.

Under pressure to transform its operations digitally, GameStop Corp announced that they hired former Amazon.com Inc. executive Matt Francis as their first chief technology officer. GameStop’s change of focus from its 5,000 stores to e-commerce is due to activist investor Ryan Cohen. Mr. Francis will be overseeing GameStop’s e-commerce and technology functions.

Experts say that for a technology executive to be a successful digital transformation leader, they must have a special set of business and technology skills. These skills include, but are not limited to:

Map Data’s Role Across the Business
Starting with a digital transformation mission will put the focus on technology without understanding the business context. It is important to start with business transformation first to understand how data plays a role in customer engagement and business operations over time. Next, map technology against those strategies and understand where technology transformation is needed. By doing these things, focus changes from bottom-up to top-down, which creates a clear context for change.

Communicate in Language the C-Suite Understands
Understanding technical requirements as well as being able to put them into non-technical business language is important. Although fellow businesspeople may understand your viewpoints, it is best to keep it simple so that people can buy into your plan and are more willing to help out. The best digital transformation leader is one that communicates well, is seen as a colleague, and is seen to be an expert in IT.

Be a Talent Magnet
Being a really strong people leader is something that sets a lot of technology executives apart. No one is going to be able to solve all of the problems that may occur in a digital transformation. They need to set themselves apart in the competition for talent.

Connect Tech Investments to New Lines of Business
Many chief technology officers have to communicate with chief executives, boards, and other C-suite stakeholders to help construct and deliver technology that will be the right fit for the process. It is the digital transformation leader’s job to be in charge of the change when it comes to conversations about how the change will affect costs and revenue. Although many see technology as a way to cut costs, many are coming to realize that with technology, you can create new productivity, products, and lines of business.

Proper business planning is a complex and ongoing effort, requiring expert counsel—a professional with knowledge and experience, familiar with the challenges that characterize an entrepreneur’s business ventures. Talley LLP shares the same entrepreneurial spirit that has helped propel our clients to their current level of success. With over 25 years’ experience in helping high net worth individuals and business owners, Talley has the expertise necessary to assist entrepreneurs throughout their entire journey, from formation through succession.

Last month, Amazon announced Jeff Bezos will step down as CEO and be replaced by the head of the company’s cloud computing unit, Andy Jassy, in the third quarter of 2021. Jassy and Jeff Wilke were likely successors to Bezos. With Wilke’s announcement of leaving Amazon, it was inevitable for Jassy to take the role of CEO. Incoming CEO Jassy is likely to keep Amazon on its current path, increasing the profit that he helped to create despite the pandemic.

Much like Bill Gates, Bezos isn’t going far and will remain a chairman of Amazon. In Bezos’s new role, he is able to focus on one of his passions, innovation, without being encumbered by the daily duties that come with being a CEO of a global empire. Now, Bezos is able to turn his attention to promising ideas as well as his ownership of Blue Origin, his space exploration company, and the Washington Post.

In the quarter ending in March, Amazon estimates projected revenue to be in the range of $100 to $106 billion, with a projected operating income of $3 to $6.5 billion. Amazon, also, reported that fourth-quarter sales jumped to 125.6 billion, an increase of about 44%, beating the average estimate of 119.7 billion. Although Amazon has had much success during the pandemic, investors still remain mindful of Amazon’s rising expenses. According to Amazon, COVID-19 related costs such as lost productivity due to social distancing as well as extensive cleaning and sanitization procedures throughout Amazon warehouses and shipping centers are going to add an estimated $2 billion to expenses for the current quarter.

Colleagues say that Jassy is very similar to his boss, Bezos and is known to becoming a micromanager when it comes to projects he’s passionate about. Jassy, also, prefers data-driven decision-making that puts customers at the center of the company’s thinking.

Proper business planning is a complex and ongoing effort, requiring expert counsel—a professional with knowledge and experience, familiar with the challenges that characterize an entrepreneur’s business ventures. Talley LLP shares the same entrepreneurial spirit that has helped propel our clients to their current level of success. With over 25 years’ experience in helping high net worth individuals and business owners, Talley has the expertise necessary to assist entrepreneurs throughout their entire journey, from formation through succession.

Under the Consolidated Appropriations Act (CAA), 2021, the Employee Retention Credit (ERC) received an update and is now available through June 30, 2021 to eligible employers who retained employees during the COVID-19 pandemic. Its main target is to help ventures and businesses offset the financial turmoil caused by the pandemic. Along with this update, a change to the Paycheck Protection Program (PPP) was also rolled out, allowing businesses that took a loan under it, to now be eligible for the ERC as well.

The CAA includes the following retroactive changes to the ERC. These changes apply to the period from March 13 through Dec. 31, 2020.

  • If you received a PPP loan, you may still qualify for the ERC for any wages not paid with proceeds from the forgiven portion of your PPP loan.
  • The Consolidated Appropriations Act clarifies how qualifying tax-exempt organizations determine “gross receipts.”
  • Group healthcare expenses are considered “qualified wages.” This is true even if no other wages are paid to that employee.

This update means that for employers who qualify, including borrowers who took a loan under the initial PPP, the credit can be claimed against 50% of qualified wages paid, up to $10,000 per employee annually, for wages paid between March 13 and Dec. 31, 2020.

For those who qualify in 2021, including PPP recipients, the new law expands the credit and allows them to claim a credit against 70% of qualified wages paid. In addition, the amount of wages that qualifies for the credit is now $10,000 per employee per quarter for the first two quarters of 2021. So, an employer could claim $7,000 per quarter per employee or $14,000 for 2021.

Who qualifies for the ERC?

Most employers can qualify for the credit, largely determined by two main factors, and at least one of these factors must apply in the calendar quarter the employer intends to use the credit:

  • A trade or business that was fully or partially suspended or had to reduce business hours due to a government order. The credit applies only for the portion of the quarter the business is suspended, not the entire quarter.
  • An employer that has seen considerable decline in gross receipts. With the updated law, beginning in 2021, businesses must be affected by forced closures or quarantines and have seen more than 20% drop in gross receipts in the quarter compared to the same quarter in 2019.

Note: New ventures are allowed by the IRS to use gross receipts for the quarter in which they began business as a reference for any quarter in which they do not have 2019 figures since they were not yet in business.

What wages qualify for the calculation?

For 2020, if you averaged more than 100 full-time employees, only wages for those you retained who are not working can be claimed. If you employed 100 or fewer workers, you can claim wages for all employees whether or not they are working.

For 2021, the threshold is raised to 500 full-time employees, meaning if you employ more than 500 people, you can only claim the ERC for those who are not providing services. If you have 500 or fewer employees, you can claim the ERC for all of them, working or not.

How do the credits work?
The Employee Retention Credit is taken off the employer’s share of Social Security taxes. However, the credit is fully refundable. So, if the credit were to exceed the employer’s total amount owed of Social Security in any calendar quarter, the excess is refunded to the employer.

At the end of the quarter, the amounts of these credits will be reconciled on the employer’s Form 941.

Talley’s professionals have spent literally hundreds of hours reviewing the law, regulations, and FAQs issued on an almost daily basis regarding the ERC and PPP, and we are happy to assist you in the process. We are available to simply answer a quick question or assist in the application and/or refund process.

 

Over the past month, there have been large rumblings in the stock market after a group of Reddit users manipulated the price of stocks such as GameStop, AMC, and Blackberry, achieving huge gains overnight. Google searches for “What is short selling?” and “Purchase GameStop stock” likewise exploded, as more and more wanted to jump into the fracas in hopes of a quick payday. While most investors may have already notched tens of thousands, with some saying they’ve scored millions, many of those who want to cash in on their gains this year may be caught off guard by the amount of money they owe the government.

Those cashing in on their GameStop stock held for less than a year do not qualify for long term capital gains treatment and any gains will be taxed as ordinary income. Even if these non-day traders end up booking losses in the stock market in 2021, there is a limit to how far their losses can offset ordinary income. Although rates vary depending on what tax bracket the taxpayer is in, rates start at 10% and can be as high as 37%. There is also an additional 3.8% “Net Investment Income Tax” that applies to high earners, single filers making more than $200,000, or couples filing jointly who make more than $250,000, for a final rate of 40.8%. Those who have claimed that they have had GameStop Stock since 2019 are eligible for more favorable long-term capital gain tax rates if they recognize gain upon selling. The highest rate would be at 20%, but high earners would still have to pay the additional 3.8% making the rate 23.8%.

Talley’s experienced team of tax professionals provide comprehensive tax compliance and consulting services so you can preserve, enhance, and pass on the assets and wealth to the next generation. We welcome the opportunity to discuss the current options available for you. For more information, contact us today.

 

Under Biden’s proposed tax plan, the modifications to the estate tax code could affect everyone who has valuables that will be left behind to heirs. Although tax policy used to be fairly predictable, it has become quite a dynamic environment given recent changes in control of the Senate. Now that Democrats have control of the Senate, Biden now has a much clearer path to set forth his administration’s agenda. The looming question on many taxpayers’ minds: What happens once President Biden can begin to enact changes to tax policy?

Many political and tax commentators believe that it will be easier for Biden to get the tax cuts he has proposed, rather than increasing taxes. With the current focus on the pandemic and vaccination rollout, as well as the shaky economy and job recovery, there may not be any major changes to taxes until COVID-19 is in the rear-view mirror.

One of the most impactful long-term changes of Biden’s proposed tax agenda involves the estate tax., In contrast to previous changes to the estate tax targeting the high net worth individuals and their families, the tax code may be modified in a way that affects anyone who has something of value to leave to heirs.

For many years, assets were valued at the time of the owner’s death, even if the value had risen. With the established step-up in basis rule, when assets are passed on to heirs, any embedded gain is erased since the base value is higher, leading to no capital gains tax being owed. This applies to any asset, from liquid securities and private investment partnerships to a family home. Furthermore, if the total value of the estate is less than $11.7 million, or 23.4 million for a couple in 2021, no estate tax needs to be paid.

Biden’s proposed tax plan may change all that in dramatic fashion, with the elimination of the step-up. High net worth individuals should be concerned -and not just if you’re on the same level as Jeff Bezos or Elon Musk. For those who have inherited a home or stock portfolio that has appreciated in value, the potential loss of step-up would be very significant.

If this change were to happen, many may reconsider which assets they put into a trust. For example, putting assets with greater embedded capital gains into a trust and leaving cash directly to heirs.

Talley’s experienced team of tax professionals provide comprehensive tax compliance and consulting services so you can preserve, enhance, and pass on the assets and wealth to the next generation. We welcome the opportunity to discuss the current options available for you. For more information, contact us today.

 

Earlier this month, the U.S Small Business Association (SBA) and the Treasury Department decided to relaunch the Paycheck Protection Program to new borrowers and to prioritize loans from lenders in the community. As a result of the latest stimulus package passed by Congress, the program now has $284.5 billion for “first draw” PPP loans as well as “second draw” PPP loans. First-draw loans are for the small businesses that did not take advantage of the program last year, while the second draw is for those who used the PPP loans in 2020. Initially, community financial institutions were able to make first-draw and second-draw loans, but the SBA and Treasury have now opened the program to lenders as well.

In response to last year’s shaky launch, the SBA is making a concerted effort to increasing the availability of loans to small businesses. One complication from the PPP being launched with the CARES Act is that money was exhausted by large companies that already had ties with large banks. This left little money for small businesses until Congress appropriated more money. The PPP will be open through March 31st

Main updates to the program:

  • PPP borrowers can set their PPP loan’s covered period to be any length between 8 and 24 weeks to meet their business needs
  • PPP loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures
  • PPP eligibility has expanded to include 501(c)(6)s, housing cooperative, destination marketing organizations, and other organizations
  • The PPP now offers more flexibility for seasonal employees
  • Qualified existing PPP borrowers can request to modify their first-draw PPP loan amount
  • Qualified existing PPP borrowers are eligible to apply for second-draw PPP loans

Borrowers are generally eligible for second draw PPP loan if:

  • Previously received at first-draw PPP loan and will or has used the full amount only for authorized uses
  • Has no more than 300 employees
  • Can demonstrate at least a 25 percent reduction in gross receipts between comparable quarters in 2019 and 2020

Talley’s professionals have spent hundreds of hours reviewing the law, regulations, and SBA PPP FAQs issued on an almost daily basis and we are happy to assist you in the process. We are available to simply answer a quick question or assist in the application and/or forgiveness audit process.

Back in December of 2020, musical icon, Bob Dylan sold his entire songwriting catalog to Universal Music Publishing Group for an estimated $300 million. Bob Dylan’s catalog represents a sizeable asset,  containing more than 600 spanning over six decades. Besides his substantial windfall, Dylan also enjoyed an additional bonus on the sale of his catalog: a smaller tax bill. Musicians and artists are privy to a special tax rate on the sale of their self-created works and do not have to pay ordinary tax rates.

How did Dylan save on taxes? Although code section 1221 defines capital assets in broad terms, it does explain what does not qualify as a capital asset. One of the important exclusions is a literary, musical, or artistic composition, meaning the entirety of Bob Dylan’s catalog. However, Code 1221 (b)(3) states that if there was a sale or exchange for self-created works, then those works will be counted as capital assets, meaning that Bob Dylan’s sale of his songwriting catalog was an exception to the exemption.

If Dylan’s catalog indeed sold for $300 million, the 20 percent capital gains tax rate would result in a $60 million tax bill for Dylan. If the sale fell under the ordinary tax rate of 37 percent, Dylan would owe $111 million in taxes, or $51 million more. 

How were Dylan’s works excepted? Many songwriters in the early 2000s argued that it was unfair to make them pay a higher tax rate for selling their copyrights than the publishers who bought and sold said intellectual property commercially did, so the Nashville Songwriters Association International (NSAI) lobbied Tennessee and Kentucky delegates for a change. Due in part to NSAI’s lobbying, Congress eventually enacted the Songwriters Capital Gains Tax Equity Act in the Tax Increase Prevention of Reconciliation Act of 2005. Thanks to the NSAI, Bob Dylan was able to achieve a higher windfall when selling his copyrights.

Talley’s experienced team of tax consulting professionals provide comprehensive tax planning and consulting services so you can preserve, enhance, and pass on the assets and wealth to the next generation. We welcome the opportunity to discuss the current options available for you. For more information, contact us today.


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