More Stimulus Coming Soon

House Democrats unveiled a $3 Trillion Bill to respond to health and economic problems brought about by the coronavirus pandemic. Dubbed the HEROES Act, which is a rather lofty mnemonic standing for the Health and Economic Recover Omnibus Emergency Solutions Act (“Omnibus” was clearly the filler word needed to complete the mnemonic). Lofty as the name is, the provisions in the Bill are equally lofty. This would represent the largest stimulus package ever. Many of the provisions will either be eliminated or modified when the final version of the legislation is finalized and agreed upon by both the House and the Senate, as the GOP and Dems are nowhere near a consensus. The bill, however, provides a useful reference to the sorts of measures that will be debated in this next round of coronavirus relief.

As it pertains to small businesses and individual taxpayers, the below provisions in the House Bill should be of interest:

Elimination of the State and Local Tax (SALT) cap of $10K for tax years 2020 and 2021
- Previously, taxpayers have been prohibited from deducting SALT taxes greater than $10K on their Schedule A, which has substantially reduced tax benefits under the TCJA for high-income taxpayers in high-tax states.
  - DARK HORSE OBSERVATION: This could result in substantial federal income tax savings which, if passed into law, should factor into your W-2 withholdings and/or estimated tax payments so as not to over-withhold.
Extension of the $600 weekly unemployment expansion under the Pandemic Unemployment Assistance program to December 31st
- DARK HORSE OBSERVATION: Self-employed (Sole Proprietors, independent contractors) individuals should be careful not to collect unemployment if they are being paid for services by their clients. It’s unclear how exactly states will figure out who is collecting unemployment that shouldn’t be, but you can bet audits will be substantially increased over the next year or two.
Another round of stimulus checks that would increase the $500 payment per child to $1,200 per dependent, with a maximum total payment of $6,000 (2 spouses and 3 children @ $1,200/person). Under the CARES Act the dependent had to be your child but under the HEROES Act, anyone who would qualify as your dependent on a tax return would count.
- The qualifying income limits remain unchanged but the Act would allow those who filed tax returns with an individual who did not have an SSN or ITIN to receive a payment.
  - DARK HORSE OBSERVATION: Be careful about filing your 2019 tax return if you haven’t already because you could cause yourself to be ineligible to the stimulus payment if your 2019 AGI is too high to qualify whereas your 2018 AGI qualified. Conversely, if you didn’t qualify for the first payment because you hadn’t filed your 2019 tax return (which had qualifying AGI) and your 2018 tax return did not allow for you to qualify, you very well may want to file your 2019 return now so that you have the best chance of qualifying for the next stimulus payment, should it come.
Increasing the 8-week forgiveness window for Paycheck Protection Program loan forgiveness to 24 weeks. There is, however, no additional funding called for in this Bill for the PPP.
- DARK HORSE OBSERVATION: Whether or not this passes, it looks inevitable that there will be some modification to the existing 8-week time period for loan forgiveness. What this looks like is highly uncertain and most companies have already made attempts to re-staff as much as possible to receive loan forgiveness. If you have no use for your employees right now and have the PPP funds in-hand, however, you may be well advised to just wait until you can put your employees to work in a productive manner in anticipation of favorable modifications to the 8-week provision.
$10 Billion in increased funding for Emergency EIDL Grants
Federal student loan payments suspended through September 30, 2021 with no interest accruing during that time
Full COBRA subsidies for those who lost their employer-provided health care coverage

There is a lot to be added, deleted and modified over the next couple of weeks (if not months). The timing for passing a bill into law is unclear, mostly because the need is not as urgent and dire as it was prior to the passage of the CARES Act, as well as the significant divide between the priorities of Republicans and Democrats. We will be keeping a close eye on this for our clients and will keep this blog and our social channels updated with the latest information.

About Dark Horse CPAs

Dark Horse CPAs provides integrated tax, accounting, and CFO services to small businesses and individuals across the U.S. The firm was founded to save small businesses (and their owners) from subpar accounting and tax services and subpar client experiences. These small businesses are Dark Horses among their larger and more well-known competition. Being a Dark Horse CPA means advocating for small businesses by bringing them the tax strategies and accounting insights previously reserved for big business. Get a quote today.

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Oct 29, 2020

California Taxes in Focus: AB 85

California Assembly Bill AB 85 will limit the amount of tax credits a business can claim AND suspend any Net Operating Loss deductions for tax years 2020 - 2022. AB 85 became law via the passage of the 2020 Budget Act on June 29, 2020. This one is a bit sneakier than some of the other proposals out there (such as AB 1253 and Proposition 15). The tax increases affect businesses and business owners in the following ways:

Tax Credits are Limited to $5 Million per Taxpayer per Year for 2020 – 2022.

This limit applies to both individuals and corporations. Further, corporations required to file in a combined group will be considered a single corporation for purposes of this limitation. In other words, the combined tax credits for all of those corporations will be limited to $5 million per year.
On the positive side, AB 85 allows the credits to carryover to future years. And, the carryover period will be increased by the number of years it was disallowed because of this law.
This affects all tax credits except low-income housing credits and personal (non-business) tax credits. This means popular tax credits like the R&D credit, Enterprise Zone and hiring credits and California Competes Credit will be impacted.

Net Operating Losses (NOLs) are Suspended for 2020 – 222

For those with $1 million or more of taxable income, NOLs will be suspended. In other words, you will not be able to reduce your taxable income by NOLs accumulated in previous years.
- Dark Horse Observation: because of this, you may want to amend prior tax returns to carryback NOLs because you will not be able to utilize them again until 2023 OR until your taxable income drops below $1 million.
The carryforward period will be extended by the number of years that the deduction is suspended.

Because many taxpayers don’t fully understand how Net Operating Losses work, and may be confused by the language of how tax credits will be limited, AB 85 slipped under the radar for a lot of folks. So, like I said, this one is a bit sneaky. In and of itself, it probably wouldn’t have raised too many eyebrows. Unfortunately, it's part of a larger string of legislation that is burdening the California taxpayer during an economically tenuous time.

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Jan 16, 2025

Tax & Accounting Essentials for Starting Your Business

Starting a business is an exciting journey filled with endless possibilities, but amidst creativity and planning, it’s easy to overlook the financial foundations that keep a business running smoothly. Taxes and accounting might not be the most glamorous part of entrepreneurship, but they are undeniably essential. A strong financial foundation ensures you’re compliant, organized, and ready for sustainable growth.

Entity Structure

One of the first critical decisions you’ll face is choosing the right business structure. Whether you’re leaning towards a Sole Proprietorship, LLC, S-Corp, or C-Corp, your choice will have lasting implications for your taxes, liability, and overall financial strategy. Each structure comes with its own set of advantages and responsibilities, so it’s worth consulting both an attorney and accountant early on to understand the legal and tax impacts of the choices and to make sure everything is setup correctly.

Once your structure is in place, you’ll need to obtain an Employer Identification Number (EIN). Think of it as your business’s Social Security number—it’s essential for tax filings, hiring employees, and even opening a business bank account. Fortunately, obtaining an EIN is a straightforward process through the IRS, and you can apply online at IRS EIN Application.

Tax Compliance

Next comes understanding your tax obligations. Every business owner must navigate a variety of taxes, including income tax, self-employment tax, sales tax, payroll tax, and estimated quarterly payments. Each type serves a distinct purpose, and staying compliant requires planning and organization. Falling behind on these responsibilities can lead to unnecessary fines and stress.

It’s also crucial to stay on top of filing deadlines. Tax calendars are not flexible, and missed deadlines can result in penalties. Setting reminders or working with a professional can ensure you’re always prepared.

Bookkeeping & Accounting

Another vital step is separating your business and personal finances. This isn’t just good practice—it’s essential for accurate bookkeeping and legal protection. Opening a dedicated business bank account and credit card will help ensure clarity when tracking income and expenses.

Speaking of tracking, implementing an accounting system early on can save you countless headaches later. Whether you choose accounting software or hire a professional, having a reliable system to track income, expenses, and financial reports is non-negotiable. Accurate records are not just for tax season; they’re also a window into your business’s financial health.

Alongside a solid accounting system, maintaining proper financial records is equally important. Every receipt, invoice, and expense should be documented and organized. Not only does this make tax time easier, but it also satisfies the IRS requirements for record retention.

Advisory

Understanding tax deductions and credits is another way to keep your tax bill in check. From home office expenses to startup costs, there are numerous opportunities to reduce your taxable income legally. A knowledgeable accountant can help you identify and maximize these benefits. This is why we (as a firm) focus heavily on Tax Advisory with every engagement. It can be the difference of savings hundreds of thousands of dollars vs paying hundreds of thousands of dollars to the IRS.

Lastly, don’t underestimate the value of professional guidance. Working with a CPA or tax advisor isn’t just about compliance—it’s about strategy. Professionals bring insights that can help you avoid costly mistakes, streamline your processes, and maximize your financial opportunities.

Starting a business comes with countless moving parts, but taking the time to build a strong financial foundation will pay dividends in the long run. With careful planning, organized records, and the right professional support, you’ll be well-equipped to navigate the financial side of entrepreneurship and focus on growing your dream into reality.