Businesses need to rely on financial professionals as tax season approaches

Businesses need to rely on financial professionals as tax season approaches

2020-12-09T18:32:26+00:00December 9th, 2020|Atlanta, Banking & Finance, Economy|

By: Felipe Rivas

2 min read December 2020 — The zeitgeist of the new normal created by the COVID-19 pandemic will likely influence the national and global socio-economic landscape and business climate well into 2021 and beyond. Shelter in place measures, business restrictions and social distancing protocols, for example, disrupted business models across major economic sectors, forcing companies and small businesses to pivot with the times. As such, the symbiosis between businesses and the financial professionals who guide them solidified further as they navigated stimulus packages, market uncertainties and changing business models as a result of the pandemic. 

Firms like Peachtree Planning, based in Atlanta, prioritized a holistic approach to help clients recognize sound tax reduction opportunities while guiding clients’ overall financial planning strategies. Mitigating risk and a focus on business continuity planning was a major component of Peachtree Planning’s approach as businesses navigated the pandemic-related uncertainties. “The foundation of our planning for closely held businesses and individuals is mitigating short-term, midterm, and long-term risks to cash flow,” Executive Vice President of Advanced Planning James Gnefkow told Focus: Atlanta. “We identify those risks and build contingency plans if threats to cash flow materialize. COVID-19 and the impact on the economy created severe cash flow strains on businesses without contingency plans in place.”

Since its rollout earlier this year, the Paycheck Protection Program, or PPP, created by the CARES Act, helped embattled businesses meet their payroll needs throughout the year. “PPP helped some businesses partially alleviate the financial burdens caused by reduced economic activity and keep workers employed. We provided education and strategic planning to business owners and helped connect them to qualified lenders,” Gnefkow said. Guiding businesses through the forgiveness process while keeping a close eye on the tax implications of these loans to businesses have been major focuses for the firm as 2020 comes to a close. “More recently, we are providing guidance in order to maximize loan forgiveness. There remain several questions, including whether loan proceeds will be taxed on the state level and whether there will be additional fiscal stimulus legislation. As a firm, we are prepared to help business owners in the community navigate all of these issues,” Gnefkow said. 

2020’s legislative bills are likely to have an impact on businesses and their tax strategies well into the new decade. “The CARES Act and the SECURE Act (passed in December 2019) have several provisions that will affect individuals and business owners in 2020 and beyond. Many of these tax law changes necessitate proactive planning to ensure mistakes are avoided,” Gnefkow said. “For example, Required Minimum Distributions from retirement accounts were suspended in 2020 and the age triggering mandatory distributions was increased to 72,” he pointed out. “There was penalty relief for early distributions from retirement accounts for individuals impacted by COVID-19 and there are specific rules related to paying the tax liability associated with distributions. One of the most notable changes from the SECURE Act impacts the rules for withdrawing money from inherited IRAs and other qualified retirement accounts.  Most non-spouse beneficiaries will be required to deplete the account, and pay any tax liability, within 10 years of the death of the IRA owner or qualified plan participant. All of these changes can have a significant impact on retirement income distribution and legacy planning.”

The change in administration is another factor businesses and financial professionals should watch closely. “It remains to be seen exactly what tax policy changes will be implemented in the Biden administration. Notable items that have been put forth in policy proposals include raising corporate tax rates, reducing the unified credit for estate, gift and generation-skipping tax, and potentially changing step-up in basis rules upon death,” Gnefkow said. “Closely held business owners will need to stay informed of any potential changes and engage in proactive planning that may potentially minimize the tax impact of any additional tax changes.”

James Gnefkow, JD, LLM, MBA, Registered Representative of Park Avenue Securities LLC (PAS). Securities products offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. Peachtree Planning is not an affiliate or subsidiary of PAS or Guardian. Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. The Guardian Network® is a network of preferred providers authorized to offer products of The Guardian Life Insurance Company of America (Guardian), New York, NY and its subsidiaries. Peachtree Planning is an independent agency and not an affiliate or subsidiary of Guardian.2020-112503 Exp 12/22

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