DMS Digest, December 2021
Sean Brady CPA, General Manager
Hello and welcome to the March 1st issue of the DMS Digest. With 2022 now in full swing, we are two months into implementing the plans we made for the new year to accomplish new goals and better our businesses.
This issue contains some great content from our staff and from our valued guest contributors. Make sure to check out Access to Capital for the Small Business for a look “behind the curtain” on financing related to starting or growing a business. Plan now to implement Vendor Best Practices as outlined by Bob Wallish, and note the latest on the ERTC and upcoming tax deadlines. All of this – and more – in this edition of the DMS Digest.
We look forward to helping you continue the new year strong and positioned for success in 2022.
With the conclusion of the 2021 1099 filing season, make a plan now to implement these six best practices in order to save time next January.
- Request a W-9 before entering into a contract with a vendor. This establishes an understanding that information should be provided by the vendor before the relationship begins.
- Request a W-9 before paying a vendor. Withholding payment until the W-9 is received increases the timeliness of W-9 receipt.
- Enter the vendor Information in your accounting system when the W-9 is received. Updating the vendor profile upon receipt of the W-9 (including whether or not a 1099 is required) keeps vendor info in your financial system up-to-date and allows your software to provide accurate vendor reporting as necessary.
- Establish a filing system. Once you receive vendor information, scan and save the forms on your computer. This allows for easy access and retrieval of information and also prevents misplacing and losing documents.
- If you are using QuickBooks, attach a copy of the W-9 to the vendor.
- Establish an annual vendor update process. Review old vendors and request updated W-9s. Having incorrect information is likely to lead to backup withholding notices (‘B-Notices’) being sent to you from the IRS.
Upcoming Tax Filing Deadlines
- 3/15/2022: Deadline for S Corporations and Partnerships to file income tax return for the 2021 tax year (without extension)
- 4/18/2022: Deadline for Individuals (including Sole Proprietorships) and C Corporations to file for the 2021 tax year (without extension)
- 4/18/2022: 1st Quarter Income Tax estimates due (business and personal)
- 5/10/2022: Ohio CAT 2021 Annual & 1st Quarter 2022 filings due
- 5/16/2022: Filing deadline for Not-for-Profit 2021 tax return (without extension)
— as well as your normal payroll, Sales & Use tax, and BWC payment due dates.
QuickBooks Tips & Tricks
DMS Development Update
DMS Management Solutions places a high priority on providing training, technology tools, and continuing education to our team members so that they can best serve our clients.
Since our last newsletter and in preparation for year-end, we provided resources and education to our team in the areas of:
- Year End Close Process
- Equity Roll Forward
- Updates to 2021 Form 1099
- Year-End Payroll Reconciliation
- Year-End W2 Reconciliation
- S-Corp Medical Reporting on Form W-2
- Proper Recording of Tax Payments for Business vs Individuals
- Venmo / PayPal Revenue: Business vs Personal Transactions
- W-2 Upload to Ohio Business Gateway
Team training continues to be a top priority for DMS in order to improve productivity, maintain quality, and augment career development.
Access to Capital for the Small Business
by guest contributor
Jeff Clawson, Chief Credit Officer
Growth Opportunity Partners, Inc.
You had an idea, your friends and family told you that you were on to something, you decided to go for it, and now you’re looking for capital for your new small business.
Access to capital to start or grow a small business is a big topic. I’ll try to draw back the curtain on the process and give you a few tips to make your search easier.
First, be prepared. When I say “be prepared,” I mean that when you are ready to borrow, or when you think you are, you need to put in some time to figure out your numbers. The numbers I am referring to include your credit score, the cost of the project you want to finance, how much you think you want to borrow, your cash flow, and the value of potential collateral.
We could do an entire newsletter on each of these topics but, I’ll hit each one quickly;
- Your credit score is important; know it, understand as much about it as you can. Many services are available to get, monitor, and improve your credit score. (In today’s world, we should all do this anyway). Your credit reflects how you handle your finances, and funders use that as a proxy for how you would manage your small business’s finances.
- Understand your project cost as best you can. Get quotes on services or equipment and think about hidden expenses that are part of the project. For example, if you buy a welder that runs on 220v but, your garage has 110v service, you’ll need to upgrade to 220v, which should be part of the project cost. Determine if the project can occur in stages and what each stage would cost.
- Get a good idea of what cash flow is. Figuring cash flow can get complicated but doesn’t have to be. You need a feel for the cash that comes into and goes out of the business so you know what size payment you can afford.
- Determine the amount you want to borrow. Once you know the project cost and how much cash flow you have access to, you need to figure out where to get the money. Sources of funding for your project would include the money you have on hand (sometimes called your “equity” in the project) as well as the money that you will borrow. Please, NEVER approach a bank or funder and ask, “how much can I get?” because this gives the impression you haven’t got this all figured out. Instead, base the amount you seek to borrow on the project cost and the business’s ability to make payments.
- Lastly, get behind the value of your potential collateral. Funders and banks want collateral for most loans that they provide. Some collateral is better than others. Hard assets such as home equity or equipment have easily determined values. Valuation of customer lists or trademarks is subjective and not as readily confirmed. Understand that lenders have limits for what they will lend against most types of collateral and those limits vary from lender to lender.
It’s hard to put into a short column like this everything that I would tell you about searching for capital when your small business has a project to finance, and this one only hits the high points. If you have questions or want to talk about finding capital your business needs feel free to get in touch. I’d be happy to talk about it with you. Please reach out to Sean Brady and he will make the connection.
About the author
Jeff is the Chief Credit Officer at Growth Opportunity Partners, Inc. His background is in underwriting for commercial banking and small business banking. He takes an active role in the business development and qualification of prospective clients to determine their alignment with the mission of Growth Opportunity Partners.
Before joining Growth Opportunity Partners, Jeff was a Senior Credit Officer at KeyBank’s Credit Campus in Brooklyn, Ohio, responsible for a team of underwriters managing small business loans throughout Ohio, Michigan, and Indiana.
Growth Opportunity Partners, Inc.
A new study highlighted in the MIT Sloan Management Review indicates that implementing a “no meeting day” (or two, or three) each week can increase productivity by up to 73%.
The study was conducted by researchers at four business schools who surveyed 76 companies that had no-meeting policies. Productivity rose 35% when companies banned meetings one day per week, and increased to 71% with meeting bans two days per week. A slight increase to 73% was observed when meetings were banned three days per week. In addition to productivity increases, other increases were noted as well: autonomy, engagement, communication, and satisfaction all increased, while stress and micromanaging decreased.
Not every organization can ban meetings three days per week, but a one or two days without meetings policy might be the just the ticket to increasing your productivity and that of your team!
Corrigan Krause CPAs: Making Sense of the Employee Retention Tax Credit
The American Rescue Plan Act signed into law March 11, 2021 extended and expanded the employee retention tax credit to December 31, 2021 to eligible employers who retained employees during the COVID-19 pandemic.
What is the Employee Retention Tax Credit?
The employee retention tax credit is a refundable tax credit that employers can claim based on qualified wages, including certain health insurance costs, they paid to employees.
Who Qualifies for the Employee Retention Tax Credit?
Qualifying standards have changed over the months (see below), but as a baseline, qualification is determined by one of two factors. One of these factors must apply to the calendar quarter the employer would like to claim the credit:
1. 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 was suspended, not the entire quarter.
Based on IRS guidance, some businesses do not meet this first factor and would not qualify.
Businesses that are considered essential, unless they have their supply of critical materials/goods disrupted in a way that negatively affected their ability to continue to operate and businesses closed, but still able to continue operations mostly intact through telework still may qualify if they experience the second factor:
2. An employer that has a significant decline in gross receipts in 2020 or 2021 compared to the same quarter in 2019
What Wages Qualify for the Employee Retention Tax Credit?
Generally, wages that are subject to FICA taxes and qualified health expenses can be included when an employer calculates the employee retention credit. These wages must have been paid after March 12, 2020 and, now through to December 31, 2021. Depending on the circumstances, the IRS has multiple ways to calculate qualified health expenses.
To start determining the qualified wages that can be claimed, and employers needs to determine how many full-time employees they have. For the employee retention credit, a full-time employee is any employee who worked at least 30 hours per week or 130 hours in a month in any calendar month of 2019.
The employee retention credit cannot be claimed for wages that are expected to be forgiven under a Paycheck Protection Plan loan or other Covid-relief programs
Again, there have been changes in the qualifying wages in the last year, so please see below for more details.
Changes in the Employee Retention Tax Credit
Over the past fourteen months, the employee retention tax credit has undergone a number of changes since it was initially introduced. To understand the full picture of the ERTC, starting with the CARES Act passed in March 2020, read our entire blog post.
About Corrigan Krause
Corrigan Krause is a mid-size CPA firm located in Westlake, Ohio, specializing in servicing closely-held businesses since 1989. With a team of over 70 individuals, Corrigan Krause provides various accounting, tax, compliance, and consulting solutions to the challenges that small companies face in the ever-changing business environment. Corrigan Krause is also an independent member of MSI Global Alliance, a worldwide organization of professional accounting firms and business advisors in more than 100 countries.