The recent Consolidated Appropriations Act, 2021 expanded the employee retention credit significantly. Many new companies may now be eligible for the credit, including those who have previously taken out a Paycheck Protection Program (PPP) loan.
For tax year 2020, businesses must start to use a redesigned Form 1099-NEC, Nonemployee Compensation for reporting certain payments to nonemployees, such as independent contractors. Businesses must issue the form to payees by February 1, 2021.
Owners and officers of S corporations and C corporations may adjust the amounts of compensation they receive from various sources in order to lower taxes. However, according to US tax law, officer compensation must be “reasonable” to be tax deductible. It is imperative to consult an experienced CPA to develop a reasonable compensation structure for your company’s leadership.
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