New per diem business travel rates became effective on October 1

Are employees at your business traveling again after months of virtual meetings? In Notice 2021-52, the IRS announced the fiscal 2022 “per diem” rates that became effective October 1, 2021. Taxpayers can use these rates to substantiate the amount of expenses for lodging, meals and incidental expenses when traveling away from home. (Taxpayers in the transportation industry can use a special transportation industry rate.)

Background information

A simplified alternative to tracking actual business travel expenses is to use the high-low per diem method. This method provides fixed travel per diems. The amounts are based on rates set by the IRS that vary from locality to locality.

Under the high-low method, the IRS establishes an annual flat rate for certain areas with higher costs of living. All locations within the continental United States that aren’t listed as “high-cost” are automatically considered “low-cost.” The high-low method may be used in lieu of the specific per diem rates for business destinations. Examples of high-cost areas include Boston, San Francisco and Seattle.

Under some circumstances — for example, if an employer provides lodging or pays the hotel directly — employees may receive a per diem reimbursement only for their meals and incidental expenses. There’s also a $5 incidental-expenses-only rate for employees who don’t pay or incur meal expenses for a calendar day (or partial day) of travel.

Less recordkeeping

If your company uses per diem rates, employees don’t have to meet the usual recordkeeping rules required by the IRS. Receipts of expenses generally aren’t required under the per diem method. But employees still must substantiate the time, place and business purpose of the travel. Per diem reimbursements generally aren’t subject to income or payroll tax withholding or reported on an employee’s Form W-2.

The FY2022 rates

For travel after September 30, 2021, the per diem rate for all high-cost areas within the continental United States is $296. This consists of $222 for lodging and $74 for meals and incidental expenses. For all other areas within the continental United States, the per diem rate is $202 for travel after September 30, 2021 ($138 for lodging and $64 for meals and incidental expenses). Compared to the FY2021 per diems, both the high and low-cost area per diems increased $4.

Important: This method is subject to various rules and restrictions. For example, companies that use the high-low method for an employee must continue using it for all reimbursement of business travel expenses within the continental United States during the calendar year. However, the company may use any permissible method to reimburse that employee for any travel outside the continental United States.

For travel during the last three months of a calendar year, employers must continue to use the same method (per diem or high-low method) for an employee as they used during the first nine months of the calendar year. Also, note that per diem rates can’t be paid to individuals who own 10% or more of the business.

If your employees are traveling, it may be a good time to review the rates and consider switching to the high-low method. It can reduce the time and frustration associated with traditional travel reimbursement. Contact Dukhon Tax for more information.


Remind your sales team about the power of storytelling

Everyone loves a story. It’s why movies are still big business and many of us spend hours on the couch binge-watching our favorite television shows. What’s important to keep in mind — and to remind your sales team — is that effective storytelling can also drive sales.

This doesn’t mean devising fanciful, fictional tales to entice customers and prospects into buying. Rather, it involves learning the customer or prospect’s story, putting it into words, and then demonstrating how your company’s products or services can add a happy chapter to the tale. Think of it as a three-act play:

Act I: Set the scene. Building rapport is key in sales. Find out from your sales manager(s) how much time sales staffers are spending with customers and prospects. Ensure they’re not rushing through initial contact. Salespeople should take the time to provide a concise overview of your business, telling its story and emphasizing its capabilities.

Act II: Build the plot. Salespeople should generally ask a series of prepared questions that prompt responses outlining the customer or prospect’s needs and goals. The potential buyer should do most of the talking. The more that salespeople listen, the better chance they’ll have in identifying and filling out the plot of the customer’s story and, one hopes, making the sale.

At this point, the sales staffer also wants to uncover any objections the customer or prospect might have about doing business with your company. These “subplots” can often go overlooked and ultimately ruin the ending of the story for you.

Act III: Resolve the problem. The final scene should be a climactic one. The salesperson needs to summarize the customer or prospect’s story — identifying the key needs revealed by the questions asked. Then, the sales staffer must present a viable solution to meeting those needs and emphasize your company’s ability to efficiently fulfill the products ordered or provide the necessary service(s).

When executed properly, the three acts above should increase the odds for an encore (or a sequel, as the case may be). Buyers who know that your business understands their story will be more likely to become return customers.

Although using storytelling as a sales tool may seem simplistic, it’s a tool that needs sharpening from time to time. Dukhon Tax can help you evaluate your sales process from a financial perspective so you can implement changes as necessary.

© 2021


2021 Q4 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 fourth 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.

Note: Certain tax-filing and tax-payment deadlines may be postponed for taxpayers who reside in or have a business in federally declared disaster areas.

Friday, October 15

    • If a calendar-year C corporation that filed an automatic six-month extension:
      • File a 2020 income tax return (Form 1120) and pay any tax, interest and penalties due.
      • Make contributions for 2020 to certain employer-sponsored retirement plans.

Monday, November 1

  • Report income tax withholding and FICA taxes for third quarter 2021 (Form 941) and pay any tax due. (See exception below under “November 10.”)

Wednesday, November 10

  • Report income tax withholding and FICA taxes for third quarter 2021 (Form 941), if you deposited on time (and in full) all of the associated taxes due.

Wednesday, December 15

If a calendar-year C corporation, pay the fourth installment of 2021 estimated income taxes.

Friday, December 31

  • Establish a retirement plan for 2021 (generally other than a SIMPLE, a Safe-Harbor 401(k) or a SEP).

Contact Dukhon Tax if you’d like more information about the filing requirements and to ensure you’re meeting all applicable deadlines.

© 2021


Is your business tracking website metrics?

In today’s data-driven world, business owners are constantly urged to track everything. And for good reason — having accurate, timely information displayed in an easy-to-understand format can allow you to spot trends, avoid risk and take advantage of opportunities.

This includes your company’s website. Although social media drives so much of the conversation now when it comes to communicating with customers and prospects, many people still visit websites to gather knowledge, build trust and place orders.

So, how do you know whether your site is doing its job — that is, drawing visitors, holding their attention, and satisfying their curiosities and needs? A variety of metrics hold the answers. Here are a few of the most widely tracked:

Page views. This metric is a good place to start, partly because it’s among the oldest ways to track whether a website is widely viewed or largely ignored. A page view occurs when a visitor loads the HTML file that represents a given page on your website. You want to track:

  • How many pages each visitor views,
  • How long each “unique visitor” (see below) remains on the page and your website, and
  • Whether the visitor does anything other than peruse, such as submit a form or buy something.

Unique visitors. You may have encountered this term before. It’s indeed an important one. The unique visitor metric identifies everyone who comes to your website, counting each visitor only once regardless of how many times someone visits.

Think of it like friendly neighbors stopping by your home. If Artie from next door stops by twice and Betty from down the street drops in three times, that’s two unique visitors and five total visits. Tracking your unique visitors over time is important because it lets you know whether your website’s viewing audience is growing, shrinking or staying the same.

Bounce rate. At one time or another, you may have heard someone say, “All right, I’m going to bounce.” It means the person is going to depart from their current surroundings and go elsewhere. When a visitor quickly decides to bounce from (that is, leave) your website, typically in a matter of seconds and without performing any meaningful action, your bounce rate rises.

This is not a good thing. A high bounce rate could mean your website is too similar in name or URL to another company’s or organization’s. Although this may drive up page views, it will more than likely aggravate the buying public and reflect poorly on your company. An elevated bounce rate could also mean your site’s design is confusing or aesthetically displeasing.

To quantify bounce rate, unique visitors and page views — as well as many other useful metrics — look to your website’s analytics software. Your website provider should be able to help you set up a dashboard of which ones you want to track. Contact Dukhon Tax for help using these metrics to determine whether your website is contributing to revenue gains and providing a reasonable return on investment.

© 2021


M&A transactions: Be careful when reporting to the IRS

Low interest rates and other factors have caused global merger and acquisition (M&A) activity to reach new highs in 2021, according to Refinitiv, a provider of financial data. It reports that 2021 is set to be the biggest in M&A history, with the United States accounting for $2.14 trillion worth of transactions already this year. If you’re considering buying or selling a business — or you’re in the process of an M&A transaction — it’s important that both parties report it to the IRS and state agencies in the same way. Otherwise, you may increase your chances of being audited.

If a sale involves business assets (as opposed to stock or ownership interests), the buyer and the seller must generally report to the IRS the purchase price allocations that both use. This is done by attaching IRS Form 8594, “Asset Acquisition Statement,” to each of their respective federal income tax returns for the tax year that includes the transaction.

Here’s what must be reported

If you buy business assets in an M&A transaction, you must allocate the total purchase price to the specific assets that are acquired. The amount allocated to each asset then becomes its initial tax basis. For depreciable and amortizable assets, the initial tax basis of each asset determines the depreciation and amortization deductions for that asset after the acquisition. Depreciable and amortizable assets include:

  • Equipment,
  • Buildings and improvements,
  • Software,
  • Furniture, fixtures and
  • Intangibles (including customer lists, licenses, patents, copyrights, and goodwill).

In addition to reporting the items above, you must also disclose on Form 8594 whether the parties entered into a non-compete agreement, management contract, or similar agreement, as well as the monetary consideration paid under it.

What the IRS might examine

The IRS may inspect the forms that are filed to see if the buyer and the seller use different allocations. If the tax agency finds that different allocations are used, auditors may dig deeper and the examination could expand beyond the transaction. So, it’s best to ensure that both parties use the same allocations. Consider including this requirement in your asset purchase agreement at the time of the sale.

The tax implications of buying or selling a business are complex. Price allocations are important because they affect future tax benefits. Both the buyer and the seller need to report them to the IRS in an identical way to avoid unwanted attention. To lock in the best results after an acquisition, consult with us before finalizing any transaction.


EIDL program retooled for still-struggling small businesses

For many small businesses, the grand reopening is still on hold. The rapid spread of the Delta variant of COVID-19 has mired a variety of companies in diminished revenue and serious staffing shortages. In response, the Small Business Administration (SBA) has retooled its Economic Injury Disaster Loan (EIDL) program to offer targeted relief to eligible employers.

A brief history

The EIDL program was in place well before 2020. However, the federal government has ramped up the initiative’s visibility while trying to help small businesses during the pandemic.

With the entire country essentially declared a disaster area, the CARES Act established an enhanced EIDL program for small businesses affected by COVID-19. It offered lower interest rates, longer repayment terms and a streamlined application process.

The American Rescue Plan Act upped the ante, offering eligible companies targeted EIDL advances that are excluded from the gross income of the person who receives the funds. The law stipulates that no deduction or basis increase will be denied, and no tax attribute will be reduced, because of this gross income exclusion.

Latest enhancements

The SBA’s most recent enhancements to the EIDL program offer “a lifeline to millions of small businesses who are still being impacted by the pandemic,” according to SBA Administrator Isabella Casillas Guzman. (Eligible employers include not only small businesses, but also qualifying nonprofits and agricultural companies in all U.S. states and territories.)

First and foremost, the loan cap has increased from $500,000 to $2 million. Eligible small businesses can use these funds for almost any operating expense, including payroll and equipment purchases. Funds can also be applied for certain debt payments. Specifically, the SBA has expanded the allowable use of EIDL funds to prepay commercial debt and pay down federal business debt.

In addition, the agency has implemented a new deferred payment period under which borrowers can wait until two years after loan origination to begin repaying their COVID-related EIDLs.

Application details

If you believe your small business could qualify and benefit from these newly enhanced EIDLs, first identify how much money you need and how soon you need it. The SBA is offering a 30-day “exclusivity window” to approve and disburse loans of $500,000 or less. Approval and disbursement of loans of more than $500,000 will begin after this 30-day period.

The agency has also rolled out a streamlined application process that establishes “more simplified affiliation requirements” modeled after those of the Restaurant Revitalization Fund. The deadline for applications remains December 31, 2021. As is the case with any government loan, it’s better to apply earlier rather than later in case funds run out.

Help with the process

For further details about the new and improved COVID-related EIDL program, go to sba.gov/eidl. And don’t hesitate to contact us. We can help you determine whether your small business qualifies for one of these loans and, if so, assist with completing the application process.