Prepare for California Tax Changes 2021
webmanager • May 17th, 2023
Here is our quick guide to help prepare for the changes to come in early 2021.
The State of California’s Department of Tax & Fee Administration began taking reservations for the new small business tax credit (SBHC) (SB 1447) as of December 1st this year. Meaning, if you hire new employees between July and November of next year, you may qualify for a $1000 credit per net increase of Full Time Equivalent Employees.
Who qualifies? Any small business with fewer than 100 employees as of December 31, 2019 and has had a 50% decrease in gross receipts when comparing the 2nd QTR of 2020 to the 2nd QTR in 2019.
How can I claim the credit? You will need to reserve your credit with CDTFA. It’s on a first come, first serve basis. At the time of writing, over $67 million is still available in funds. We don’t recommend waiting long to apply.
How can I use the credit? This is your choice. You can claim it against your personal income tax, franchise tax, corporate income tax, or sales and use tax.
When is the deadline? Credit reservations will only be taken until mid-January 2021.
For more information and to reserve your credit, follow this link.
You may have seen e-mails floating around asking Californian employers to register for a “net retirement savings program” or CalSavers. This is not a scam. CalSavers is California’s new retirement savings program designed to give Californians an easy way to save for retirement.
CA employers with more than five employees are now required to register with the State and enroll eligible employees. There is no cost to the employer. Yet, penalties may apply for non-compliance.
When is the deadline? Employers must register and participate by the following dates:
Wait, I already offer retirement benefits? Great! You still need to certify an exemption at the CalSavers website.
To take action before the deadline, you can find more information here or on the CalSavers website.
If you received a PPP loan earlier this year, you may be wondering how the funds will affect tax deductions this year if you have not yet received loan forgiveness.
Just recently, the IRS gave us an answer.
The IRS announced that taxpayers with reasonable expectation of PPP loan forgiveness may not deduct expenses paid by those funds.
As it can take up to 90 days to get a response from SBA after applying for forgiveness, it may be best to file an extension this year if you don’t receive your forgiveness confirmation by the filing due date.
However, if you did not apply for forgiveness, or if your loan forgiveness is denied or reduced, you may deduct the expenses paid by the fund.
Proposition 19 passed 51% to 49% as of November 17, 2020 and will have a huge affect on many California property owners and inheritance rules.
The details behind Proposition 19: Proposition 19 makes amendments to Prop 13 and Prop 58. Proposition 13 limits your property tax increase to 2% annually, unless reassessed due to sale or other transfers. Proposition 58 allows property owners to transfer property to their children and grandchildren at the same low property tax basis.
So, what changed? Now, Proposition 19 amends the law on inheriting properties. Under Proposition 19, all real estate will be assessed at date of death with the exception of primary residences worth less than $1M, if the heir moves in. If it is worth more than $1M, the balance will be reassessed.
What can we do now? Proposition 19 goes into effect on February 16, 2021. We advise speaking to your estate attorney soon to consider gifting opportunities and other planning strategies.
As always, we’re here to help any way we can. If you have a concern we didn’t address, feel free to schedule a complimentary call anytime.
Samy Basta brings you more than 20 years experience in tax, financial, and business consulting to his role as founder of Basta & Company. His focus is primarily strategic business planning, empowering clients to set priorities, focus energy and resources, and strengthen operations. In addition, Samy and his firm provide strategic counsel, and technical insight, on a wide range of needs, including tax saving strategies, tax return compliance, as well as choice of entity.
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San Francisco, CA 94111