517.789.8900 fax. 517.789.6477
113 w. michigan ave, suite 301, jackson, mi 49201

HOMEBLOGSmall Business Tax Briefs: June 2021


Small Business Tax Briefs: June 2021

Hiring your minor children this summer? Reap tax and nontax benefits

If you’re a business owner and you hire your children this summer, you can obtain tax breaks and other nontax benefits. The kids can gain on-the-job experience, spend time with you, save for college and learn how to manage money. And you may be able to:

  • Shift your high-taxed income into tax-free or low-taxed income,
  • Realize payroll tax savings (depending on the child’s age and how your business is organized), and
  • Enable retirement plan contributions for the children.

A legitimate job

If you hire your child, you get a business tax deduction for employee wage expenses. In turn, the deduction reduces your federal income tax bill, your self-employment tax bill (if applicable), and your state income tax bill (if applicable). However, in order for your business to deduct the wages as a business expense, the work performed by the child must be legitimate and the child’s salary must be reasonable.

For example, let’s say you operate as a sole proprietor and you’re in the 37% tax bracket. You hire your 16-year-old daughter to help with office work on a full-time basis during the summer and part-time into the fall. Your daughter earns $10,000 during 2021 and doesn’t have any other earnings.

You save $3,700 (37% of $10,000) in income taxes at no tax cost to your daughter, who can use her 2021 $12,550 standard deduction to completely shelter her earnings.

Your family’s taxes are cut even if your daughter’s earnings exceed her standard deduction. Why? The unsheltered earnings will be taxed to the daughter beginning at a rate of 10%, instead of being taxed at your higher rate. 

How payroll taxes might be saved

If your business isn’t incorporated, your child’s wages are exempt from Social Security, Medicare and FUTA taxes if certain conditions are met. Your child must be under age 18 for this to apply (or under age 21 in the case of the FUTA tax exemption). Contact us for how this works.

Be aware that there’s no FICA or FUTA exemption for employing a child if your business is incorporated or a partnership that includes nonparent partners. And payments for the services of your child are subject to income tax withholding, regardless of age, no matter what type of entity you operate.

Begin saving for retirement

Your business also may be able to provide your child with retirement benefits, depending on the type of plan you have and how it defines qualifying employees. And because your child has earnings from his or her job, he can contribute to a traditional IRA or Roth IRA and begin to build a nest egg. For the 2021 tax year, a working child can contribute the lesser of his or her earned income, or $6,000, to an IRA or a Roth.

Keep accurate records 

As you can see, hiring your child can be a tax-smart idea. Be sure to keep the same records as you would for other employees to substantiate the hours worked and duties performed (such as timesheets and job descriptions). Issue your child a Form W-2. Contact us if you have questions about how these rules apply to your situation.

Recordkeeping DOs and DON’Ts for business meal and vehicle expenses

If you’re claiming deductions for business meals or auto expenses, expect the IRS to closely review them. In some cases, taxpayers have incomplete documentation or try to create records months (or years) later. In doing so, they fail to meet the strict substantiation requirements set forth under tax law. Tax auditors are adept at rooting out inconsistencies, omissions and errors in taxpayers’ records, as illustrated by one recent U.S. Tax Court case.

Facts of the case

In the case, the taxpayer ran a notary and paralegal business. She deducted business meals and vehicle expenses that she allegedly incurred in connection with her business.

The deductions were denied by the IRS and the court. Tax law “establishes higher substantiation requirements” for these and certain other expenses, the court noted. No deduction is generally allowed “unless the taxpayer substantiates the amount, time and place, business purpose, and business relationship to the taxpayer of the person receiving the benefit” for each expense with adequate records or sufficient evidence.

The taxpayer in this case didn’t provide adequate records or other sufficient evidence to prove the business purpose of her meal expenses. She gave vague testimony that she deducted expenses for meals where she “talked strategies” with people who “wanted her to do some work.” The court found this was insufficient to show the connection between the meals and her business.

When it came to the taxpayer’s vehicle expense deductions, she failed to offer credible evidence showing where she drove her vehicle, the purpose of each trip and her business relationship to the places visited. She also conceded that she used her car for both business and personal activities. (TC Memo 2021-50)

Best practices for business expenses

This case is an example of why it’s critical to maintain meticulous records to support business expenses for meals and vehicle deductions. Here’s a list of “DOs and DON'Ts” to help meet the strict IRS and tax law substantiation requirements for these items:

DO keep detailed, accurate records. For each expense, record the amount, the time and place, the business purpose, and the business relationship of any person to whom you provided a meal. If you have employees who you reimburse for meals and auto expenses, make sure they’re complying with all the rules.

DON’T reconstruct expense logs at year end or wait until you receive a notice from the IRS. Take a moment to record the details in a log or diary or on a receipt at the time of the event or soon after. Require employees to submit monthly expense reports.

DO respect the fine line between personal and business expenses. Be careful about combining business and pleasure. Your business checking account shouldn’t be used for personal expenses.

DON’T be surprised if the IRS asks you to prove your deductions. Meal and auto expenses are a magnet for attention. Be prepared for a challenge.

With organization and guidance from us, your tax records can stand up to scrutiny from the IRS. There may be ways to substantiate your deductions that you haven’t thought of, and there may be a way to estimate certain deductions (“the Cohan rule”), if your records are lost due to a fire, theft, flood or other disaster. 

2021 Q3 tax calendar: Key deadlines for businesses and other employers

Here are some of the key tax-related deadlines affecting businesses and other employers during the third quarter of 2021. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

Monday, August 2

  • Employers report income tax withholding and FICA taxes for second quarter 2021 (Form 941) and pay any tax due.
  • Employers file a 2020 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or request an extension.

Tuesday, August 10

  • Employers report income tax withholding and FICA taxes for second quarter 2021 (Form 941), if you deposited all associated taxes that were due in full and on time.

Wednesday, September 15

  • Individuals pay the third installment of 2021 estimated taxes, if not paying income tax through withholding (Form 1040-ES).
  • If a calendar-year corporation, pay the third installment of 2021 estimated income taxes.
  • If a calendar-year S corporation or partnership that filed an automatic extension:
    • File a 2020 income tax return (Form 1120S, Form 1065 or Form 1065-B) and pay any tax, interest and penalties due.
    • Make contributions for 2020 to certain employer-sponsored retirement plans

Traveling for business again? What can you deduct?

As we continue to come out of the COVID-19 pandemic, you may be traveling again for business. Under tax law, there are a number of rules for deducting the cost of your out-of-town business travel within the United States. These rules apply if the business conducted out of town reasonably requires an overnight stay.

Note that under the Tax Cuts and Jobs Act, employees can’t deduct their unreimbursed travel expenses through 2025 on their own tax returns. That’s because unreimbursed employee business expenses are “miscellaneous itemized deductions” that aren’t deductible through 2025.

However, self-employed individuals can continue to deduct business expenses, including away-from-home travel expenses.

Here are some of the rules that come into play. 

Transportation and meals

The actual costs of travel (for example, plane fare and cabs to the airport) are deductible for out-of-town business trips. You’re also allowed to deduct the cost of meals and lodging. Your meals are deductible even if they’re not connected to a business conversation or other business function. The Consolidated Appropriations Act includes a provision that removes the 50% limit on deducting eligible business meals for 2021 and 2022. The law allows a 100% deduction for food and beverages provided by a restaurant. Takeout and delivery meals provided by a restaurant are also fully deductible.

Keep in mind that no deduction is allowed for meal or lodging expenses that are “lavish or extravagant,” a term that’s been interpreted to mean “unreasonable.”

Personal entertainment costs on the trip aren’t deductible, but business-related costs such as those for dry cleaning, phone calls and computer rentals can be written off. 

Combining business and pleasure

Some allocations may be required if the trip is a combined business/pleasure trip, for example, if you fly to a location for five days of business meetings and stay on for an additional period of vacation. Only the cost of meals, lodging, etc., incurred for the business days are deductible — not those incurred for the personal vacation days.

On the other hand, with respect to the cost of the travel itself (plane fare, etc.), if the trip is “primarily” business, the travel cost can be deducted in its entirety and no allocation is required. Conversely, if the trip is primarily personal, none of the travel costs are deductible. An important factor in determining if the trip is primarily business or personal is the amount of time spent on each (although this isn'’t the sole factor).

If the trip doesn’t involve the actual conduct of business but is for the purpose of attending a convention, seminar, etc., the IRS may check the nature of the meetings carefully to make sure they aren’t vacations in disguise. Retain all material helpful in establishing the business or professional nature of this travel.

Other expenses

The rules for deducting the costs of a spouse who accompanies you on a business trip are very restrictive. No deduction is allowed unless the spouse is an employee of you or your company, and the spouse’s travel is also for a business purpose.

Finally, note that personal expenses you incur at home as a result of taking the trip aren’t deductible. For example, the cost of boarding a pet while you’re away isn’t deductible. Contact us if you have questions about your small business deductions.

Eligible Businesses: Claim the Employee Retention Tax Credit

The Employee Retention Tax Credit (ERTC) is a valuable tax break that was extended and modified by the American Rescue Plan Act (ARPA), enacted in March of 2021. Here’s a rundown of the rules.


Back in March of 2020, Congress originally enacted the ERTC in the CARES Act to encourage employers to hire and retain employees during the pandemic. At that time, the ERTC applied to wages paid after March 12, 2020, and before January 1, 2021. However, Congress later modified and extended the ERTC to apply to wages paid before July 1, 2021.

The ARPA again extended and modified the ERTC to apply to wages paid after June 30, 2021, and before January 1, 2022. Thus, an eligible employer can claim the refundable ERTC against “applicable employment taxes” equal to 70% of the qualified wages it pays to employees in the third and fourth quarters of 2021. Except as discussed below, qualified wages are generally limited to $10,000 per employee per 2021 calendar quarter. Thus, the maximum ERTC amount available is generally $7,000 per employee per calendar quarter or $28,000 per employee in 2021.

For purposes of the ERTC, a qualified employer is eligible if it experiences a significant decline in gross receipts or a full or partial suspension of business due to a government order. Employers with up to 500 full-time employees can claim the credit without regard to whether the employees for whom the credit is claimed actually perform services. But, except as explained below, employers with more than 500 full-time employees can only claim the ERTC with respect to employees that don’t perform services.

Employers who got a Payroll Protection Program loan in 2020 can still claim the ERTC. But the same wages can’t be used both for seeking loan forgiveness or satisfying conditions of other COVID relief programs (such as the Restaurant Revitalization Fund program) in calculating the ERTC. 


Beginning in the third quarter of 2021, the following modifications apply to the ERTC:

  • Applicable employment taxes are the Medicare hospital taxes (1.45% of the wages) and the Railroad Retirement payroll tax that’s attributable to the Medicare hospital tax rate. For the first and second quarters of 2021, “applicable employment taxes” were defined as the employer’s share of Social Security or FICA tax (6.2% of the wages) and the Railroad Retirement Tax Act payroll tax that was attributable to the Social Security tax rate.
  • Recovery startup businesses are qualified employers. These are generally defined as businesses that began operating after February 15, 2020, and that meet certain gross receipts requirements. These recovery startup businesses will be eligible for an increased maximum credit of $50,000 per quarter, even if they haven’t experienced a significant decline in gross receipts or been subject to a full or partial suspension under a government order.
  • A “severely financially distressed” employer that has suffered a decline in quarterly gross receipts of 90% or more compared to the same quarter in 2019 can treat wages (up to $10,000) paid during those quarters as qualified wages. This allows an employer with over 500 employees under severe financial distress to treat those wages as qualified wages whether or not employees actually provide services.
  • The statute of limitations for assessments relating to the ERTC won’t expire until five years after the date the original return claiming the credit is filed (or treated as filed). 

Contact us if you have any questions related to your business claiming the ERTC.

Leave A Comment


nike off whtie
24 August, 2021

I not to mention my buddies happened to be looking through the great items located on your web page and then before long got an awful suspicion I had not thanked the site owner for those techniques. All the ladies are already certainly glad to see all of them and have clearly been having fun with those things. Thank you for really being considerably considerate and also for finding variety of fantastic subjects millions of individuals are really wanting to discover. My personal sincere regret for not saying thanks to sooner.
nike off whtie nike off whtie

jordan 13
25 August, 2021

I definitely wanted to write a simple remark to appreciate you for all of the magnificent steps you are posting at this site. My rather long internet research has now been compensated with brilliant points to go over with my co-workers. I ‘d mention that most of us visitors actually are rather endowed to exist in a decent community with very many marvellous professionals with great tactics. I feel somewhat blessed to have seen the website page and look forward to many more enjoyable moments reading here. Thanks a lot once again for everything.
jordan 13 jordan 13

curry 8
29 August, 2021

Thank you for every one of your hard work on this site. My daughter loves participating in investigations and it is obvious why. Most of us know all relating to the lively ways you create worthwhile things via your web blog and as well boost contribution from visitors on that point so our child is without a doubt learning a lot. Take advantage of the remaining portion of the year. You have been conducting a good job.
curry 8 curry 8

curry 7
31 August, 2021

A lot of thanks for all your valuable effort on this website. My mum enjoys doing research and it is easy to understand why. Most of us hear all about the dynamic medium you give great thoughts on your web blog and as well as encourage contribution from other people about this subject matter so our favorite child has always been studying a lot. Take advantage of the remaining portion of the new year. You have been conducting a glorious job.
curry 7 curry 7

02 September, 2021

My husband and i got absolutely fortunate Ervin managed to do his reports from your precious recommendations he was given from your own blog. It’s not at all simplistic just to choose to be handing out concepts that some others have been trying to sell. We really keep in mind we need you to thank for this. Most of the illustrations you have made, the easy site menu, the relationships you can give support to foster - it’s got everything powerful, and it is making our son and us reckon that the article is pleasurable, and that’s rather mandatory. Thank you for all!
yeezy yeezy

kyrie 7
04 September, 2021

I simply wanted to jot down a simple comment so as to say thanks to you for the lovely strategies you are sharing at this website. My prolonged internet look up has at the end of the day been paid with reliable insight to share with my contacts. I would express that many of us readers actually are very blessed to dwell in a fabulous community with many wonderful people with helpful tips and hints. I feel very much lucky to have seen the web pages and look forward to tons of more pleasurable moments reading here. Thanks again for everything.
kyrie 7 kyrie 7

a bathing ape
06 September, 2021

Needed to compose you one very little remark to help thank you so much as before for these remarkable tactics you’ve documented at this time. This is really remarkably generous of people like you to present unhampered precisely what most of us would’ve distributed for an electronic book to generate some profit on their own, specifically now that you could have done it in case you wanted. The principles as well acted to be the good way to fully grasp that other people have similar keenness like my own to understand more when it comes to this matter. I am certain there are a lot more pleasant periods in the future for individuals who discover your blog.
a bathing ape a bathing ape

golden goose
08 September, 2021

Needed to draft you a very little word so as to thank you once again considering the pleasing basics you have contributed in this article. This has been quite shockingly generous of people like you to allow unhampered all that a lot of folks might have sold for an electronic book to make some money for their own end, especially now that you might well have done it if you ever considered necessary. These good ideas in addition worked to be a fantastic way to understand that someone else have similar dream much like my personal own to realize very much more in terms of this matter. I’m certain there are some more pleasurable occasions ahead for folks who scan your blog.
golden goose golden goose

steph curry shoes
10 September, 2021

I simply wanted to send a simple comment to be able to thank you for those pleasant instructions you are giving out on this website. My incredibly long internet lookup has at the end been recognized with awesome content to exchange with my partners. I ‘d believe that we readers are unequivocally endowed to dwell in a decent place with so many brilliant professionals with great tricks. I feel pretty blessed to have seen the web site and look forward to tons of more enjoyable minutes reading here. Thanks once again for all the details.
steph curry shoes steph curry shoes

stephen curry shoes
12 September, 2021

I wish to express my thanks to you for bailing me out of such a dilemma. Right after surfing through the world-wide-web and finding things which are not helpful, I believed my entire life was done. Living devoid of the solutions to the problems you have resolved by means of your good guideline is a critical case, and those which may have badly damaged my career if I had not discovered your web site. Your primary mastery and kindness in controlling everything was priceless. I’m not sure what I would have done if I had not encountered such a stuff like this. I can also now look ahead to my future. Thanks very much for the expert and result oriented help. I won’t think twice to suggest your web page to any individual who should have counselling about this issue.
stephen curry shoes stephen curry shoes

birkin bag
14 September, 2021

I definitely wanted to develop a quick remark to be able to say thanks to you for those wonderful concepts you are giving at this site. My long internet research has at the end of the day been honored with sensible content to write about with my companions. I would suppose that we site visitors actually are very much lucky to dwell in a superb website with so many special individuals with good tricks. I feel really lucky to have encountered your website page and look forward to some more pleasurable minutes reading here. Thanks a lot once again for everything.
birkin bag birkin bag

16 September, 2021

I wish to show my thanks to this writer just for bailing me out of this problem. Right after browsing through the world wide web and finding techniques which are not powerful, I assumed my life was gone. Living minus the approaches to the issues you have fixed all through your entire short post is a serious case, as well as the ones which may have negatively affected my entire career if I had not encountered the website. Your own personal mastery and kindness in taking care of the whole thing was priceless. I am not sure what I would’ve done if I had not come upon such a point like this. I can now relish my future. Thanks so much for your skilled and effective help. I won’t hesitate to recommend the blog to any individual who should get recommendations about this matter.
moncler moncler

supreme new york
20 September, 2021

I enjoy you because of all your valuable hard work on this blog. My niece takes pleasure in engaging in investigations and it’s really simple to grasp why. All of us learn all relating to the dynamic mode you render sensible guides on this website and as well welcome contribution from other individuals on the topic plus our own girl is truly being taught a whole lot. Enjoy the rest of the year. You are always carrying out a fantastic job.
supreme new york supreme new york

bathing ape
22 September, 2021

I must get across my love for your kind-heartedness supporting people that actually need assistance with this important concept. Your very own commitment to passing the solution throughout had become extremely functional and have frequently helped employees like me to arrive at their pursuits. Your new helpful report implies much a person like me and even more to my fellow workers. Regards; from everyone of us.
bathing ape bathing ape

24 September, 2021

I wanted to draft you a little observation so as to thank you as before on your lovely tips you’ve shown on this page. It’s simply incredibly open-handed with people like you to convey easily all that a lot of people would’ve distributed for an e-book to generate some money for themselves, notably considering that you might have done it if you ever desired. The tactics additionally acted as the good way to understand that someone else have the same dream just like my very own to figure out significantly more with regard to this issue. I am sure there are thousands of more enjoyable periods up front for individuals who go through your blog.
goyard goyard

cheap jordans
26 September, 2021

I simply wanted to post a quick message to appreciate you for all the wonderful items you are posting at this website. My extensive internet research has at the end been recognized with reliable strategies to share with my partners. I would admit that many of us visitors are undeniably blessed to be in a really good network with many awesome individuals with helpful things. I feel quite privileged to have encountered your web site and look forward to plenty of more fabulous times reading here. Thanks a lot once again for everything.
cheap jordans cheap jordans

28 September, 2021

I as well as my pals appeared to be studying the excellent tricks from your web site then all of a sudden I had a horrible suspicion I never thanked you for those techniques. All the women ended up for this reason passionate to read through them and already have in truth been using these things. We appreciate you being quite accommodating as well as for pick out variety of marvelous themes millions of individuals are really desperate to learn about. Our sincere regret for not saying thanks to you earlier.
jordans jordans

jordan shoes
30 September, 2021

I want to show thanks to you for rescuing me from this particular crisis. Just after looking out through the internet and finding opinions that were not beneficial, I believed my life was gone. Existing without the answers to the problems you’ve fixed by means of your entire short article is a serious case, as well as ones which may have badly affected my career if I had not encountered your blog. The competence and kindness in playing with every part was valuable. I don’t know what I would have done if I had not come upon such a thing like this. I’m able to at this point look forward to my future. Thanks a lot so much for this skilled and amazing help. I will not hesitate to endorse your web blog to any person who desires counselling on this situation.
jordan shoes jordan shoes

giannis antetokounmpo shoes
30 September, 2021

Thank you so much for giving everyone remarkably nice chance to check tips from this blog. It can be very superb and full of a great time for me and my office co-workers to visit your blog a minimum of thrice per week to study the new items you have. And lastly, we’re actually fascinated with your sensational creative ideas you give. Certain 4 facts in this posting are undeniably the very best we have all ever had.
giannis antetokounmpo shoes giannis antetokounmpo shoes

curry 6
30 September, 2021

I wish to get across my love for your generosity supporting people that must have help on this particular content. Your very own commitment to getting the message all over was pretty useful and has frequently enabled guys and women much like me to realize their objectives. Your own insightful help denotes a great deal a person like me and substantially more to my office workers. Regards; from all of us.
curry 6 curry 6

Next Page
Bond & Company Accepts These Credit Cards