Embarking on the journey of becoming a landlord, whether in the commercial or residential real estate sector, is a promising venture. However, before you start reaping the benefits of rental income, it’s essential to understand the tax implications of the initial costs involved. In particular, start-up expenses play a crucial role in shaping the financial landscape for landlords. In this article, we will delve into the intricacies of start-up expenses, exploring the two broad categories and the tax deductions available to landlords.
Understanding Start-Up Expenses:
Start-up expenses encompass the costs incurred before a property is offered for rent. These can be broadly categorized into two types:
Deducting Start-Up Expenses:
Landlords have the opportunity to deduct their start-up expenses when they commence their rental business. The deduction is calculated as follows:
When filing tax returns, landlords automatically elect to deduct start-up expenses by labeling and deducting them on Schedule E or the appropriate return.
Business Entity Formation Costs:
It’s important to distinguish between start-up expenses and costs associated with forming a business entity such as a partnership, limited liability company (LLC), or corporation. While the former can be deducted based on the rules mentioned earlier, entity formation costs are subject to a different tax rule.
Landlords can deduct up to $5,000 of entity formation costs in the first year of business. Any remaining costs can be amortized over the first 180 months of the business. This rule applies to the costs incurred in creating partnerships, LLCs, or corporations related to the rental business.
Expanding Your Rental Business:
Expanding an existing rental business is not considered a start-up expense. Instead, expansion costs are treated as ordinary business operating expenses. As long as these costs are deemed necessary and within the scope of the existing rental business, they are deductible.
Geographic Considerations:
The IRS and tax court emphasize that a rental business exists within the geographic area of the property. Therefore, purchasing or seeking to purchase property in a different location is viewed as starting a new rental business. Consequently, the associated expenses for expanding into a new location are considered start-up expenses and can be deducted accordingly.
Active Participation Requirement:
A crucial point to note is that the ability to deduct start-up expenses is reserved for active rental business owners, not mere investors. To qualify for these deductions, landlords must actively engage in the management and operations of their rental properties.
Becoming a landlord is an exciting venture that comes with its share of financial considerations. Understanding the nuances of start-up expenses and the associated tax deductions is essential for optimizing the financial outcomes of your rental business. By navigating the tax landscape with clarity, landlords can make informed decisions and lay the groundwork for a successful and profitable venture in the real estate market.
As we usher in the new year, businesses in the United States are gearing up for a significant change—the implementation of the Corporate Transparency Act (CTA) on January 1, 2024. This federal mandate brings with it a fresh filing requirement for a broad spectrum of business entities, aiming to enhance transparency and curb illicit financial activities. In this article, we’ll delve into the intricacies of the CTA, exploring its requirements, exemptions, and implications for businesses.
The Corporate Transparency Act in a Nutshell:
The CTA casts its net wide, covering most corporations, limited liability companies (LLCs), limited partnerships, and certain other business entities. The central requirement of the CTA is the filing of a Beneficial Owner Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN) by December 31, 2024.
Identifying Beneficial Owners:
The heart of the BOI report lies in identifying and disclosing beneficial owners—individuals who control 25 percent or more of the ownership interests in the entity or exercise substantial control over it. Each beneficial owner’s information must include their full legal name, date of birth, complete current residential address, a unique identifying number (from a U.S. passport, state/local ID, or driver’s license), and an image of the document providing the unique identifying number.
The BOSS Database:
FinCEN is set to establish the Beneficial Ownership Secure System (BOSS) to house the BOI data. This database aims to assist law enforcement agencies in preventing the use of anonymous shell companies for various illegal activities, including money laundering, tax evasion, and terrorism. Notably, the BOI reports will not be publicly accessible.
The CTA primarily applies to business entities formed by filing documents with a state secretary of state or a similar official. Additionally, foreign entities registering to do business in the U.S. fall under the purview of the CTA. However, certain entities are exempt, such as larger businesses with 20 or more employees and $5 million in receipts, as well as those already heavily regulated by the government, including publicly traded corporations, banks, insurance companies, and non-profits.
Sole proprietors and general partnerships in most states are exempt from the CTA, providing some relief to smaller businesses. However, single-member LLCs, despite their pass-through tax treatment, are subject to the CTA’s requirements.
While the initial BOI report filing does not expire, businesses must remain vigilant in fulfilling their ongoing duty to keep the report up to date. Any changes in beneficial ownership must be promptly reported to FinCEN within 30 days of occurrence. This continuous monitoring ensures that the information remains accurate and relevant.
The CTA underscores the seriousness of compliance by imposing hefty penalties for failure to adhere to the filing requirements. Businesses that neglect to file the BOI report or provide inaccurate information may face significant monetary fines and, in extreme cases, imprisonment for up to two years.
As the Corporate Transparency Act takes effect in 2024, businesses must adapt to the new regulatory landscape. Compliance with the BOI reporting requirements is not only a legal obligation but also a crucial step toward fostering transparency and combating financial crimes. By understanding the nuances of the CTA, businesses can navigate the reporting process with confidence, ensuring a smooth transition into this era of heightened corporate accountability.
The IRS has recently intensified its efforts to combat improper Employee Retention Credit (ERC) claims. In response to a surge in questionable claims, the IRS has taken several actions. In this article, we will delve into these actions and their implications for businesses seeking ERC relief.
1. Temporary Halt on New ERC Claims:
On September 15, 2023, the IRS announced a temporary stop in processing new ERC claims, effective until the end of the year at the earliest. This decision stems from the IRS’s concern about the rising number of improper ERC claims. While some tax experts and associations support this measure, there are differing opinions. Some believe that all valid claims should be addressed promptly, especially for businesses facing ongoing financial hardships. Despite the processing delay, it’s advisable to submit your claim now to secure a spot in the queue.
2. Slower Processing of Existing Claims:
The IRS faces a backlog of over 600,000 ERC claims, causing delays in processing. The standard processing goal of 90 days has been extended to 180 days, with even longer processing times for claims requiring further review or audit. For legitimate ERC claims, patience is essential, and having proper documentation is crucial. Those with questionable claims should consult IR-2023-169 and engage with their tax professionals to explore options.
3. New IRS Q&A Document:
The IRS released a new Q&A document with a headline that some find problematic. The document aims to provide clarity on ERC eligibility, but its wording may discourage eligible businesses. Clear guidance on qualification and non-qualification is essential. The IRS’s primary mission should be helping taxpayers pay the correct tax, not intimidating them.
4. Watch Out for Red Flags:
The ERC is a legitimate tax credit, but it has become a target for aggressive marketing to businesses that may not qualify. In a September 2023 news release, the IRS warns businesses to be cautious of improper assistance in claiming credits. The example of paying hefty fees to promoters, only to have claims disallowed, serves as a cautionary tale. The rule of thumb is to ensure the validity of your claim.
5. IRS’s Recruitment of 3,700 New Employees for Audits:
The IRS’s latest hiring effort includes the recruitment of 3,700 new employees, primarily for audit purposes. This expansion of the audit workforce will focus on high-income earners, partnerships, large corporations, and promoters. For promoters, the IRS aims to investigate those involved in peddling abusive schemes.
The IRS’s actions against improper ERC claims signify a commitment to ensuring that tax credits are granted to those who genuinely qualify. Businesses seeking ERC relief should be cautious, patient, and well-prepared to navigate these changes and protect their interests. Additionally, the IRS’s efforts to crack down on promoters of abusive schemes aim to maintain the integrity of the tax system.
Two tax term that hold significant value are ‘safe harbor.’
Moreover, five more tax terms that bring great benefits are ‘tax-advantaged expensing without recapture.’
To establish and safeguard your safe-harbor expensing, you, your corporation, or your partnership must formally elect, on your tax return, to utilize the de minimis safe harbor for assets valued at $2,500 or less (or $5,000 with applicable financial statements, as explained later).
This advantageous safe-harbor election removes the hassles associated with:
The term ‘safe harbor’ signifies that the IRS will approve your expensing of the qualified assets as long as you adhere to the safe-harbor rules.
For asset purchases that do not qualify for safe-harbor expensing, there is no issue: Section 179 expensing and Section 168(k) bonus depreciation are both available options.”
Overview
You aim to have your safe-harbor expensing ready for implementation by January 1, 2024, which is why you’re reading this article in September 2023. We’re providing this information well in advance to ensure you have ample time to establish your safe harbor for the upcoming year.
If you’ve utilized safe-harbor expensing in previous years, you should find your prior-year safe-harbor election on those respective tax returns.
If you’re a small business that has chosen the $2,500 limit for safe-harbor expensing, let’s consider a scenario where you purchase two desks, each costing $2,100. The invoice indicates a quantity of two, a total cost of $4,200, along with a sales tax of $378 and a $200 delivery and setup fee, bringing the total to $4,778.
Before adopting the safe harbor option, you would typically have treated each desk as a capital expense, totaling $2,389 ($4,778 ÷ 2). Subsequently, you would have either utilized Section 179 expensing or depreciation for both desks. Additionally, you would have maintained the desks on your depreciation schedule until they were eventually disposed of.
However, with the safe harbor provision, you can expense the desks as office supplies. This eliminates the necessity to include the desks in your accounting books, simplifying your financial record-keeping process.
Safe Harbor
When put into practice, involves the following:
The de minimis safe harbor consists of two options, and which one applies to you depends on whether you have what’s called an “applicable financial statement” (AFS) for your business. If your financial statements have been subject to a certified public accountant (CPA) audit or a similar process, then you have an applicable financial statement.
The key difference between having an AFS and not having one is as follows:
Creating the Safe Harbor
The Rise of Pass-Through Entity Tax (PTET)
The pass-through entity tax (PTET) has emerged as a game-changing solution for owners of pass-through businesses, such as S corporations and multi-member LLCs. Previously an exception, PTET has now taken center stage in most states. This innovative approach allows businesses to circumvent the $10,000 annual limitation on state and local tax (SALT) deductions.
Demystifying PTET Mechanics
At its core, the PTET process is elegantly simple yet remarkably impactful. Pass-through entities (PTEs) now have the option to pay state income taxes on their business earnings, a responsibility typically borne by the individual owners. Subsequently, the PTE claims a federal business expense deduction for these state income tax payments. Importantly, states permit individual owners to claim a credit or deduction for these taxes, enabling them to sidestep the SALT limit.
This strategic maneuver results in a dual benefit for owners: they leverage the federal deduction against state income tax, all while avoiding the shackles of the $10,000 SALT limit on a portion or entirety of their pass-through income.
State-Level Progress
Presently, 36 out of the 41 states that impose income taxes have embraced some iteration of the PTET concept. Notably, this trend continues in 2023, with Hawaii, Indiana, Iowa, Kentucky, Montana, Nebraska, and West Virginia joining the ranks of PTET adopters.
Of this group, Indiana, Iowa, Kentucky, and West Virginia have implemented retroactive PTET policies dating back to 2022. Nebraska’s PTET has retrospective implications for 2018. Meanwhile, Hawaii and Montana have chosen not to apply retroactive measures to their PTET implementations.
Eligibility Criteria
Eligibility for PTET hinges on the type of business entity. Partnerships, S corporations, and multi-member LLCs taxed as such are generally eligible to opt for state PTET. Conversely, sole proprietorships, single-member LLCs taxed as sole proprietorships, C corporations, most trust structures, and LLCs taxed as C corporations are typically ineligible.
Election Deadlines and Opt-Outs
It is important to note that while no state, except Connecticut, mandates a PTE to pay a state PTET, the decision to do so rests with the entity. Election deadlines for PTET vary from state to state.
In most states, a PTET election applies universally to all owners within the PTE, with individual owners usually unable to opt-out. Exceptions to this rule exist in Arizona, California, New York, and Utah.
Connect with Us
If the intricacies of the pass-through entity tax (PTET) raise questions or concerns, please do not hesitate to reach out directly at 757-410-8030. We are here to ensure that you have the clarity and confidence needed to navigate this evolving tax landscape effectively.
Filing taxes can be a daunting process, but for some, it’s much more than that – tax audits. This stressful situation involves having the IRS put your tax return under a microscope to see if you reported all your income and to see if you overstated your deductions and expenses. The IRS’s main goal in an audit is to assess more taxes, penalties, and interest. It’s an intimidating experience that most Americans dread facing!
An IRS audit can cause even the most squeaky-clean of taxpayers to become fearful and anxious when faced with defending themselves to an auditor. It’s understandable why the majority feel powerless in this situation. You also have to understand and get comfortable with, in the eyes of an IRS auditor, you are guilty until proven innocent. Navigating the tax code on your own is not a good place to be.
Tax audits don’t have to be a source of fear as long as you’ve remained compliant with all the rules and regulations. The best way to ensure peace of mind is to work with an experienced Tax Resolution Specialist who represents clients in such matters and has a good track record. Contact our firm for a complimentary no-obligation consultation to assess your situation. https://calendly.com/premierbusinessstrategist/freeconsult
An IRS audit can be a very time-consuming and intrusive exercise that can include a visit from the auditor. Audits can also be conducted remotely. This method, known as a desk audit, involves sending documents through fax or mail to evaluate accuracy and compliance with established law.
Filing taxes is a complex process and the IRS seeks to ensure accuracy by auditing income tax returns. These examinations may be focused on certain deductions, particularly if taxpayers have claimed for more than what their reported incomes suggest – but this does not necessarily indicate any wrongdoing or misconduct. The IRS can also select your return to be audited for no reason at all. These are referred to as “random” audits to ensure compliance with tax laws.
Taxes are a fundamental pillar of our society and the government strives to ensure that everyone is compliant. To this end, random audits from both Federal and State authorities may be conducted in order to verify taxpayers’ income as well as expenses incurred throughout the year; making sure all taxation payments due remain accurate.
Preparing for a tax audit should be an ongoing process. To avoid any problems, ensure that all deductions taken are backed up with proof and every receipt is kept on file along with the return – you never know what may arise in the future! It’s important to remember: only declare items that can easily be defended – your documents are a crucial piece to your defense. Ensure each tax record remains safely stored away for at least seven years as per IRS regulations.
Protect your finances and future by taking the time to review your tax returns before signing off, even if you have a professional do them. A thorough examination of the documents will not only help ensure accuracy in filing but also offers an invaluable opportunity for you to gain knowledge on taxes – safeguarding against potential penalties or interest charges related to inaccuracies down the line.
Tax audits can be intimidating, but with a little foresight and the right representation it doesn’t have to cause stress. Staying organized throughout the year is key for having peace of mind when tax season rolls around. Finding an experienced professional who understands your individual needs will help make dealing with the audit as painless as possible.
Take the worry out of representing yourself in front of the IRS, which is like going to court without a lawyer. Let our expert team lift this from your shoulders and navigate the IRS on your behalf. Schedule a no-obligation consultation to explore your options and get on track toward permanently resolving any worries you have over having to meet with and defend yourself in an IRS or State income tax audit. https://calendly.com/premierbusinessstrategist/freeconsult
Paying taxes is a fact of life, but when the amount is excessive, you may not have the funds to pay in full. Making a mistake on your taxes can be costly as well, and if you plug in the wrong numbers, the IRS will surely come calling.
Whether you owe money to the IRS due to an innocent oversight, a lack of funds, or something else, ignoring the problem will not make it go away.
Once you owe money to the IRS, the clock is ticking, and all the while penalties and compounded interest will be piling up. So what should you do if you owe back taxes? Here are some critical steps to take.
Until you know how deep the hole is, you will not be able to start digging your way out. Before you do anything else, you should assess the situation, going through your old tax returns, reviewing communications from the IRS, and adding up what you owe the tax agency.
Once you have assessed the situation, you will be in a better position to make concrete plans. If you owe a lot of money, you may not be able to pay it off all at once, but with the help of a tax relief professional, you may be able to come up with a suitable repayment plan or you may be able to settle for less than you owe.
Owing money to the IRS is no fun, but you will have to resolve this one way or another. Hopefully, you can work out a more favorable payment plan
with the IRS, one that might allow you to pay a reduced amount, but that will depend on your income, your allowable expenses, and your assets, if any.
It is important to review your monthly household budget carefully if you owe back taxes to the IRS. Every dollar you can pay back is one less dollar you will owe interest on, so think about where you can cut back and how you might be able to free up some cash.
The bad news is that you owe back taxes to the IRS. The good news is you may be able to settle the entire amount, including penalties and interest, for a fraction of what’s owed through the IRS’s offer in compromise program.
If you qualify for one of those programs, you may be able to settle your debt for less than you owe, but this is not something to tackle on your own. Work with a tax-relief expert, both to identify the proper programs and to make negotiating with the tax agency easier and more effective.
You can use the budget you reviewed earlier to identify sources of income and resources you have access to. Once that information is presented, the tax-relief expert can help you find a suitable tax compromise plan that just might save you a lot of money.
Time is of the essence when you owe money to the IRS. Once those back taxes are assessed, the clock is ticking, and every day that passes will mean higher penalties, and compounding interest.
If you want to put your tax debt behind you once and for all, you will want to act fast. The sooner you start working on your tax resolution plan, the sooner you can take your financial life back.
To help ease the stress from your situation, we offer a free, no-obligation consultation with one of our tax resolution experts. You don’t have to worry about confidentiality or cost because the consultation is free with zero gimmicks or commitments. Schedule an appointment with one of our tax resolution specialists today by clicking on this link: https://calendly.com/premiersmlbus/consult .
When you owe back taxes and can’t afford to make any payments, then it may be time for a special tax status known as currently not collectible. This means that your debt is still considered valid even though there’s no chance of recovery right now. When you’re approved for currently not collectible status, the IRS can no longer garnish your wages or seize any property.
Now, don’t forget about these debts because the IRS is still looking for payment.
The IRS will place your account in currently not collectible status if you can’t pay both back taxes and reasonable living expenses. You may request this by submitting the proper form with documentation that proves how much income you have left over that is available to make a payment, along with any assets that have been sold recently to cover mounting debts – like homes!
To qualify for the currently not collectible status, you will need to put together a case that you will present to the IRS. Gather copies of your bills, proof of your income (pay stubs, bank statements, alimony, etc), and your investments. It is important to document your inability to pay so that if the IRS determines you cannot afford your necessary expenses, it can grant you status.
When dealing with the IRS, it is best to have a professional in your corner. The IRS can be very intimidating and might ask invasive questions that could land you deeper into trouble than before if you do not know how to answer properly. Remember – they are not friends of yours; their job entails collecting what they believe you owe them so make sure any interaction stays as simple and effective as possible. That is why it is crucial to reach out for help from one of our tax resolution specialists.
If your status is approved, it does not mean you do not have to file your current and future taxes. This status only applies to your back taxes that the IRS is looking to collect. The currently not collectible status is simply a bandaid to help you get back on your feet. That way you can put yourself in a better position to make a payment in the future. The IRS may review your status every year or two if it looks like there is potential for repayment. You will only be able to keep the status active if you still can not make a payment on your back taxes.
The IRS is an institution that prides itself on being collections-oriented. They will try to collect outstanding taxes for only 10 years from the date they were assessed against you. Once the 10 years is up, the IRS can no longer collect the back taxes. This also applies if you have the currently not collectible status. If you do not have the status, are in an installment agreement, or have an offer in compromise pending, the IRS can garnish wages and add more penalties to your case making things worse for you as well as your wallet.
In today’s tough economic climate, many families are struggling to make ends meet. If you’re worried about the IRS garnishing your wages or levying bank accounts, or filing liens against your property for non-payment of taxes you owe – then reaching out may give you some peace of mind.
Our firm will help explain all options available in order to relieve any anxiety associated with these situations because we know how intimidating this can be if nothing has been done before. There is a solution to every IRS problem. Connect with one of our tax resolution specialists to see if you qualify for the currently not collectible status or any of the other IRS settlement options you may be eligible for and the best next steps for your situation. https://calendly.com/premiersmlbus/consult
Dealing with tax issues can often be a challenge and feel overwhelming for many people. Choosing to work with a tax resolution professional is often a great choice if you are dealing with the IRS. These tax relief specialists can guide you throughout the entire process to help you avoid making costly mistakes. You will also have much less stress knowing that an experienced professional is working hard on your behalf.
The IRS is no stranger to audits and it can be a stressful process. If you’ve received a notice from them, don’t panic! There are many things that could help relieve the stress – like working with one of our top-rated tax resolution professionals who will fight hard on your behalf so there’s less risk for penalties or interest charges along with preserving any possible defenses against accusations from this difficult situation.
Here are 5 critical reasons why you need to partner with a tax resolution expert.
When you receive the first letter from the IRS, it can make your stomach drop and your heartbeat a little faster, but working with a tax resolution expert can set your mind at ease because you have a professional working on your case to help you through this gut-wrenching experience. As an added bonus more often than not, once you hire a tax resolution expert you won’t have to meet or speak with the IRS.
One of the benefits of hiring a tax resolution professional is that it gives you access to professionals that do this type of work on a daily basis. Working with a tax resolution expert is especially important if you are dealing with any back taxes. They understand the latest laws impacting your case to help you make the best decision for your situation.
An added benefit of hiring a tax resolution professional is that it can save you a lot of money. Yes it will cost money to hire them, but it’s a lot less expensive compared to having no representation at all. A tax resolution professional also has more experience in handling different issues compared to an accountant, which is why it’s recommended to hire a tax resolution professional if you are dealing with the IRS.
Trying to research all of the regulations involving the tax code is nearly impossible for most people. However, working with a tax resolution professional is a great way to resolve your tax issue as they must keep up to date with the latest laws. These professionals understand all of the in’s and out’s of the IRS maze and can help you negotiate the lowest possible settlement amount or the lowest possible monthly payment amount, allowed by law.
Mistakes can easily happen while you are dealing with the IRS without you even knowing it. Unfortunately, even small mistakes can lead to significant penalties and cause plenty of headaches. Hiring a tax resolution professional is a great option for avoiding these mistakes. They deal with these situations on a daily basis and understand how to work with the IRS to ensure you can save the most amount of money.
Working with a tax resolution professional is something that many people find to be both beneficial and necessary. They can help you avoid costly mistakes when filing taxes or during an IRS audit, as well offer much needed guidance throughout the process of doing so! By partnering up for this kind of work, you’ll have saved yourself tons of time by working together instead of spending hours trying to figure out what’s wrong on your own – while avoiding stress altogether.
If you owe the IRS or state $10,000+ and are feeling blindsided every year by a huge tax bill – don’t wait. We can help! Contact us today for more information about how we’ll work to settle your debt so that it doesn’t become impossible tomorrow. It’s always difficult when faced with major financial problems such as unpaid taxes; however there is relief available through reputable organizations like Premier Business Solutions which specializes in settling debts without going into collections agencies.
https://calendly.com/premiersmlbus/consult
During much of 2020 and 2021, you may have qualified for the Employee Retention Credit (ERC).
With the ERC, you found (or could find) tax credits of up to $26,000 per employee. That’s a lot. With 10 employees, that’s $260,000.
Key point. If you have not claimed the ERC, you can amend your 2020 and 2021 payroll tax returns for the credit. (Amending the payroll is not difficult—so no sweat on that score.)
Three Ways to Qualify
Two Types of ERC Qualifications: Receipts and Government Orders
First, if you can qualify for the ERC under the gross receipts test, go that route. It’s easy to prove. And you get the ERC for the full quarter.
With the shutdown or modification because of a government order, you get the ERC only for the days that you suffered a full or partial suspension or suffered more than a nominal effect on your business. For example, if you suffered for 27 days, you can qualify for the credit for those 27 days.
If you can’t qualify under the 50 percent or 20 percent decline in gross receipts tests, your only alternative is the government order.
What Government Order Creates the ERC for You?
If you can establish that your business was fully or partially suspended because of a federal, state, or local government order, you are eligible on a day-by-day basis for the ERC during those periods of full or partial suspension. Given the possibility of tax credits equal to $5,000 per employee in 2020 and $21,000 per employee in 2021, this is worth pursuing.
Remember 2020 and 2021. It’s hard to think that your business did not suffer due to a federal, state, or local government order during this COVID-19 pandemic. Even if you are an essential business, you likely suffered to some degree.
Here’s a short list of how a government order could have caused your full or partial shutdown:
Full or Partial Shutdown Safe Harbor
You likely have no trouble identifying the full shutdown caused by a federal, state, or local government order. One thing to remember, as we mentioned before: when you qualify for the ERC under the full or partial shutdown, you earn the ERC only for the shutdown period.
To determine if your business suffered a partial suspension of operations from a government order, you need to have had more than a nominal portion of your business suspended. The question follows: “What is a nominal portion?” Say thanks to the IRS. Rather than rely on facts and circumstances, you can rely on the IRS safe-harbor 10 percent definition of nominal portion.
It works like this.
The effect of the government order is deemed to constitute more than a nominal portion of your business operations if either
Example. A 2020 government order requires Sam to shut down his bar and restaurant to sit-down service. Sam looks at his 2019 quarterly results and finds that his sit-down service was 73 percent of his gross receipts for that quarter. During the 61 days that Sam was shut down by this government order, he qualifies for the ERC.
The full or partial shutdown is about a physical space change. You can also qualify for the ERC if the government order caused a modification to your business.
Nominal-Effect Safe Harbor for a Modification to Your Business
Unlike the partial shutdown, where you can identify affected operations by physical space, the nominal-effect safe harbor comes into play when there’s a modification required by a federal, state, or local COVID-19 governmental order that has more than a nominal effect on your business operations. For example:
Here, you are faced with a facts-and-circumstances situation.
But again, you can thank the IRS for another safe harbor. The IRS deems that the federal, state, or local COVID-19 government order had a more-than-nominal effect on your business if it reduced your ability to provide goods or services in the normal course of your business by not less than 10 percent.
Example. Linda’s restaurant had to reduce its dining capacity from 100 to 60 patrons because of a government order. For this period, Linda qualifies for the ERC because she suffered more than a 10 percent reduction in the restaurant’s ability to service customers.
If you have some ERC possibilities and want my help, please call me on my direct line at 757-410-8030.