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Alexis Nash

Since the American Rescue Plan Act of 2021 (ARPA) was signed by President Biden, there has been a flurry of changes and updates impacting individual taxpayers. Initially, attention was focused on the distribution of the $1,400 economic impact payment and shifted to other issues such as the 2020 tax exemption on certain unemployment benefits. Attention quickly changed when it was announced the IRS would extend the individual tax filing deadline by 32 days to May 17th.

On Saturday, March 6, 2021, the U.S. Senate passed the American Rescue Plan Act of 2021, (the Act) the latest in a series of COVID-19 relief legislation. The package, which includes $1.9 trillion in aid, is set to be signed into law by President Biden within days. While much of the Plan is focused on relief for individuals and families as well as vaccine distribution, a substantial portion is aimed at supporting Atlanta businesses still impacted by the ongoing pandemic.

The challenges of managing through the COVID-19 pandemic have impacted each Atlanta individual and family differently. While some have been able to tolerate the changes with little difficulty, others have been required to make tough decisions about expenses and finances. As the pandemic has persisted the related challenges continue to grow. Earlier this week President Trump signed the Consolidated Appropriations Act, 2021, which included the COVID Related Tax Relief Act of 2020 (the Act) that provides the comprehensive relief many have been awaiting. This includes economic impact payments, extended unemployment benefits, and an expansion of penalty-free plan withdrawals.

Atlanta businesses looking for last-minute options to increase cash flow before the end of the year may be in luck. The CARES Act, passed earlier this year, contained several tax benefits and incentives to help struggling businesses create a capital infusion. While the list is comprehensive there was one change that offers significant savings benefit, the temporary expansion of Net Operating Losses (NOLs).

In a year when businesses have overcome a variety of obstacles and challenges brought about by the COVID-19 pandemic, many are excited for the year to come to an end. During this time, management is analyzing overall sales, operational, and financial performance, while making plans and setting goals for 2021. Navigating a path through the pandemic has changed the strategic planning process requiring management to venture beyond traditional performance metrics.

One of the many lessons learned from the COVID-19 pandemic is the importance of cash flow and the need for cash flow planning. When the pandemic first arrived in Atlanta many businesses were scrambling to adjust to the various government orders including forced business closures. This meant some had to make challenging decisions to reduce costs when limited, to no revenue, was generated.  Congress stepped in offering a lifeline in the form of the CARES Act which not only created the Paycheck Protection Program (PPP) but also introduced the  Employee Retention Tax Credit (Credit).

The COVID-19 pandemic created once in a lifetime business challenges and economic conditions. Not only were Atlanta businesses impacted by government orders about when and how they could operate, but there were also issues related to employee health and the threat of infection. As COVID-19 spread many Atlanta employers were forced to deal with employees that were either infected or forced to quarantine and not able to work. Not only did this impact production but it also stressed companies that had to pay sick benefits at a time when financial challenges were popping up everywhere

The changes to the meal and entertainment deduction caught many off-guard. Tax reform eliminated the opportunity for businesses to deduct entertainment-related activities and changed the deduction for certain meal expenses to 50%. Unlike other aspects of tax reform that have been modified during COVID-19, this deduction has not been changed. In fact, the IRS had only published proposed rules which were effective until the release of final regulations (TD-9925).

Over the past few years, there has been a renewed focus by the IRS and Department of Labor (DOL) on worker classification. Atlanta employers have the option of classifying a worker as either an employee or an independent contractor depending on a number of factors. While a background detail to those working for the company, in either capacity, there are tax ramifications for the business depending on classification.

The Paycheck Protection Program (PPP) has been an essential source of funding and capital for Atlanta businesses working through the COVID-19 pandemic. Although the program’s popularity seemed to dwindle in recent weeks, the Small Business Administration reported that over 174,000 loans totaling $14.6B have been issued to Georgia companies.