Accounting Trends Every Startup Should Follow

The changing conditions of 2020 demonstrated how important vision and preparation are for businesses. Seeing what is coming early can turn challenges into opportunities. That difference can make or break a new venture, especially when owners are investing so much energy into the small-scale efforts that drive early growth. Here is a short list of trends in accounting to help startups stay ahead of the curve in 2021.

Cloud Accounting
The increase in remote work has accelerated a long-term shift towards cloud-based accounting solutions. This means accounting software and data are stored on remote servers, not locally. Cloud accounting systems allow multiple people to collaborate on the same file without the need to install new software or regular upgrades and remove the need for tedious manual backups. In a traditional accounting system, the delay from entering new information to seeing it reflected on a report might just have been an hour when everyone was in the office; with people working remotely, that delay could be days. As remote becomes the norm both for employers and employees, now might be the perfect time to switch to software that allows for that transition.

Data Analytics
Access to timely data is no longer an expensive luxury limited to larger companies with technological improvements like cloud accounting systems. Even the smallest startups can take advantage of this resource in a variety of ways. Useful examples might be understanding which product lines are most profitable, observing changing customer preferences, or examining real-time cash flow numbers for purchasing decisions. Data analysis is an opportunity to understand what is happening now and what might happen in the future. If you frequently find yourself without access to pertinent financial information when you need it, establishing the right set of analytics can solve your problem.

Information Security
This expanded access to information also means that security becomes a larger concern. Whether its ransomware, identity theft, or protecting customer privacy, startups need security solutions that work from day 1 without having to employ a team of IT professionals. Remote work means that personal devices become a new point of vulnerability for businesses. Good policies for technology use are the first step in avoiding problems down the line. For example, these might include how personal devices are stored, restricted use of public WiFi, and how sensitive data is transmitted. Also, choosing good security software along with more advanced options like VPNs are key to keeping everyone’s information safe.

The challenges and opportunities these trends present can be a lot to manage for a new business owner. Getting the right help is key. Crosslin has the expertise and foresight to help your startup or small business in all of these areas. Contact Crosslin’s managed accounting team at (615) 320-5500 if you would like to know more about how we can help you adapt and thrive.

Guidance on tax relief for deductions for food or beverages from restaurants

Businesses can temporarily deduct 100% beginning Jan. 1, 2021

The Treasury Department and the Internal Revenue Service issued guidance under the Taxpayer Certainty and Disaster Relief Act of 2020. The Act added a temporary exception to the 50% limit on the amount that businesses may deduct for food or beverages. The temporary exception allows a 100% deduction for food or beverages from restaurants.

Beginning Jan. 1, 2021, through Dec. 31, 2022, businesses can claim 100% of their food or beverage expenses paid to restaurants as long as the business owner (or an employee of the business) is present when food or beverages are provided and the expense is not lavish or extravagant under the circumstances.

Where can businesses get food and beverages and claim 100%?

Under the temporary provision, restaurants include businesses that prepare and sell food or beverages to retail customers for immediate on-premises and/or off-premises consumption. However, restaurants do not include businesses that primarily sell pre-packaged goods not for immediate consumption, such as grocery stores and convenience stores.

Additionally, an employer may not treat certain employer-operated eating facilities as restaurants, even if these facilities are operated by a third party under contract with the employer.
Contact the Crosslin tax team at (615) 320-5500 with any questions. We are here to help!

PPE Considered Deductible Medical Expense

The purchase of personal protective equipment, such as masks, hand sanitizer and sanitizing wipes, for the primary purpose of preventing the spread of coronavirus are deductible medical expenses, according to a recent announcement by the IRS.

The amounts paid for personal protective equipment are also eligible to be paid or reimbursed under health flexible spending arrangements (health FSAs), Archer medical savings accounts (Archer MSAs), health reimbursement arrangements (HRAs), or health savings accounts (HSAs).

For further clarification, contact a member of the Crosslin tax team at (615) 320-5500. We are here to help!

Flexibility for Health FSAs and Dependent Care

The IRS has released guidance on temporary special rules under the Taxpayer Certainty and Disaster Relief Act of 2020 for health flexible spending arrangements (FSAs) and dependent care assistance programs allowed in response to the impact from COVID-19. These plans now have additional discretion in 2021 and 2022 to adjust their programs to help employees better meet the unanticipated consequences of the public health emergency. In addition, the guidance provides relief to cafeteria plans to implement the expansion under the CARES Act of allowed expenses for health FSAs and health reimbursement arrangements to include over-the-counter drugs without prescriptions and menstrual care products.

As a result of COVID-19, participating employees are more likely to have unused health FSA amounts or dependent care assistance program amounts at the end of 2020 and 2021. Generally, under these plans, an employer allows its employees to set aside a certain amount of pre-tax wages to pay for medical care and dependent care expenses. Amounts spent by the employee are then reimbursed from their designated health FSAs or dependent care assistance programs. Typically, account funds that are not spent by the employee within the plan year, subject to limited grace periods or certain carryover amounts, are forfeited.

Flexibility granted. Flexibility has been granted for employers in the following areas related to health FSAs and dependent care assistance programs, including:

· the carryover of unused amounts from the 2020 and 2021 plan years,

· extend the permissible period for incurring claims for plan years ending in 2020 and 2021,

· adopt a special rule regarding post-termination reimbursements from health FSAs,

· special claims period and carryover rule for dependent care assistance programs when a dependent “ages out” during the COVID-19 public health emergency, and

· allows certain mid-year election changes for health FSAs and dependent care assistance programs for plan years ending in 2021.

Employers are given the option to amend their plans to provide greater flexibility for employees to elect and use these programs during the pandemic without risking the forfeiture of the amounts they have set aside. Employers that choose to implement any or all of these changes may implement them immediately and retroactively.

If you would like more information on the temporary rules and relief granted for health and dependent care flexible spending accounts, please contact the Crosslin tax team at (615) 320-5500. We are here to help!