Applications Are Open For DC's New Bridge Fund Grant
As you may have seen from RAMW’s ongoing correspondence, DC launched its most recent pandemic relief fund today, and applications are now open for this new Bridge Fund Grant. This is another pot of federal money made available by the city to DC-based small businesses in the restaurant, retail, hospitality, and entertainment sectors that grossed less than $5M each year in 2019, 2020, and 2021. The grant is available whether your business was operating pre-pandemic or opened mid-pandemic.
Important: Clients that received RRF funding are ineligible for this grant.
In addition to the basic requirement that businesses must have experienced a 30% reduction in revenue during the pandemic, the other eligibility requirements are as follows:
My Business is a for profit business at a physical location in the District
My Business has an active DC Basic Business License and an active ABRA License, if applicable
My Business is currently in operation unless mandated otherwise by public health guidance
My Business is able to provide a Clean Hands Certificate at the time of application and dated within 90 days of the application date.
My Business generated no more than $5 million in gross receipts each (sales) in 2019, 2020, and 2021
The process is slightly frustrating, as we discovered with our first application - many elements require ownership input such as an image of the business owner’s valid photo ID, current Certificate of Occupancy, current Clean Hands Certificate, and a Self Certification by the applicant. Your Harmony team will be here to support you throughout the grant application process, but due to the information and certification requirements, our clients will need to directly prepare and file the grant applications. Reach out as you begin the applications so your Harmony team members know you are working on them - we will need to pull reports for your use in the applications.
See the Full Bridge Fund Application Guide
If you believe you are eligible for this grant, please begin the process as soon as you’re able, and reach out to your Harmony team member if you need any help with any aspect of the application. The applications need to be submitted between January 24th and February 24th at 5:00PM / EST, so you have several weeks to complete the applications.
As always, stay tuned to the blog and to Harmony’s newsletter for ongoing updates, advice, and breaking tax news.
Harmony Group's 2021 Year End Checklist
Tax Reminder: Guaranteed Payments vs. W2 Wages
The IRS Releases Guidance on Retroactive ERC Termination
This week the IRS released its guidance regarding the retroactive termination of the Employee Retention Credit (ERC). Officially retroactively terminated with last month’s signing of the Infrastructure Investment and Jobs Act, the ERC now applies only to wages paid before October 1, 2021. The only exception is recovery startup businesses (generally, businesses started after February 12, 2020, with less than $1M in annual sales).
We’ve discussed this disheartening move in previous communication, but the long and short of it is that if you’ve claimed ERC deposits for any payments after September 30, 2021, including any advance payments, you’ll need to prepare to return those funds. Failure to deposit penalties are not waived if deposits are reduced after December 20, 2021.
Here’s the IRS’s breakdown:
Employers who Received Advance Payments
Generally, employers that are not recovery startup businesses and received advance payments for fourth quarter wages of 2021 will avoid failure to pay penalties if they repay those amounts by the due date of their applicable employment tax returns.
Employers who Reduced Employment Tax Deposits
Employers that reduced deposits on or before December 20, 2021, for wages paid during the fourth calendar quarter of 2021 in anticipation of the Employee Retention Credit and that are not recovery startup businesses will not be subject to a failure to deposit penalty with respect to the retained deposits if—
The employer reduced deposits in anticipation of the Employee Retention Credit, consistent with the rules in Notice 2021-24 PDF,
The employer deposits the amounts initially retained in anticipation of the Employee Retention Credit on or before the relevant due date for wages paid on December 31, 2021 (regardless of whether the employer actually pays wages on that date). Deposit due dates will vary based on the deposit schedule of the employer, and
The employer reports the tax liability resulting from the termination of the employer's Employee Retention Credit on the applicable employment tax return or schedule that includes the period from October 1, 2021, through December 31, 2021. Employers should refer to the instructions to the applicable employment tax return or schedule for additional information on how to report the tax liability.
Reduce Your Tax Bill: An HSA Can Save Thousands
As we approach the end of the 2021 tax year, it’s a great time to take stock of your finances and make sure you are taking advantage of all of the available ways to save your tax dollars.
One great, but often overlooked, way to reduce your tax bill is to ensure that you are maximizing your use of a Health Savings Account (HSA) .
Most taxpayers with High Deductible Health Plans (HDHP) - any plan with an individual deductible of $1,400+ or a family deductible of $2,800+ - qualify to take advantage of an HSA. An HSA is a special savings account that you open to save for your medical expenses. In 2021, individuals can contribute up to $3,600, or $7,200 for couples. All of these contributions are directly deducted from your income, potentially lowering your tax bill by thousands of dollars per year, just by putting your own money into a qualified savings account for medical needs. Note that in 2022 these limits will increase to $3,650 and $7,300 for individuals and couples respectively.
These funds can be used for qualifying health care expenses, as a savings account for future health expenditures, or be invested and grow tax free similar to a 401(K) or IRA. Eligible reimbursable expenses can include obvious things like doctor’s visits and prescription drugs, but also include less obvious expenses such as paying for vitamins and supplements recommended by your doctor. Notably, the rules changed with the passage of last year’s CARES Act to make non-prescription OTC drugs and menstrual care/feminine hygiene products reimbursable. Many clients’ plans do not cover mental health, so your HSA can also be a good way to defray the cost if you happened to see a therapist this year.
We encourage you to fund your HSA before the end of the year and reimburse yourself (by check, ATM, or online transfer, depending on your insurance provider’s setup) for any eligible expenses. HSA rules generally apply to calendar years rather than to the date the plan was established, so now is the time to fund it and make sure you’ve reimbursed yourself for any of 2021’s eligible healthcare expenses, and to remind any employees whose plans may include an HSA to do the same.
If you’re reading this and realizing you’ve dropped the ball on utilizing your HSA in previous years, note that you can reimburse yourself at any time for past expenses, so long as they were incurred after your HSA was opened. It literally pays to be thorough, so ask your managing Harmony team member if you think you might need help fully utilizing your HSA.
TL;DR: Fund or form your HSA now and take the time to use it or to reimburse yourself for medical expenses prior to 12/31. Maximizing your HSA usage is an easy way to save thousands on your tax bill each year. Keep an eye on our newsletter and on the CPA Eats Blog for more useful year end tips and strategies as we move into tax season.
The Employee Retention Credit is Imperiled in the Senate
Alarmingly, the Senate is voting this week to defund support for jobs at small businesses that are still suffering from the pandemic.
Just as we're asked to mask up and consider potential restrictions and lockdowns again, the Senate buried a provision to terminate Employee Retention Credits at the end of next month, instead of the end of the year. These credits help pay for payroll costs for small businesses that are still suffering from significant sales declines due to COVID.
Raise your voice to your Senator or local trade group - removing support for employees and small businesses at a time of such looming uncertainty is a huge mistake.
The IRS's New Tax Portals are a Step in the Right Direction
One of the most common ongoing frustrations that we have with the IRS - as taxpayers and tax professionals - is a lack of responsiveness and lack of transparency. With the IRS answering less than 3% of phone calls this year and taking 9+ months to respond to correspondence, any attempt at interacting with them makes me want to tear my (nonexistent) hair out.
Fortunately, there's another way. The IRS has continued to improve its online portals for individual taxpayers, and they're now functionally useful - still far from perfect, but in an anything-is-better-than-nothing kind of way it's a dramatic step up.
We encourage all of our clients to read more and sign up for an IRS Online Account at https://www.irs.gov/account. They list a number of upcoming features that I’ll believe when I see, but for now the apparent commitment to progress is commendable. You can currently use the portal to access tax records, view your balance, make payments and view your payment history, etc etc. Among the handiest new features are new options to approve and electronically sign Power of Attorney and Tax Information Authorization requests made by your Harmony team members, as well as authorizing who else is able to view your tax records.
The portal has a suite of other (mostly) helpful options you can can see a quick breakdown about on their handy one-pager. As always, if you have any questions or clarifications, don't hesitate to reach out.
- Matt