When the pandemic ends, many companies will find that their business model has been changed in fundamental ways. The reality is that these changes will not just be in what consumers expect, but also in how employees operate, as well as the overall business culture.

Some business leaders are yearning to have everyone back in the office, but it is important that they understand how their employees’ needs and desires have changed. Retaining the best talent will likely require greater flexibility in the work environment. That is why leading tech companies such as Twitter, Facebook, Oracle, Google and Salesforce have announced flexible working arrangements for their employees.

A Harvard business school survey found that 27% of employees hope to work remotely full-time, 61% would like to work 2-3 days a week from home, and only 18% want to go back to the office full-time. A Pew Research Center survey found similar results with more than half of Americans currently working remotely due to the pandemic, wanting to continue working from home most or all of the time.

Michael Watkins, professor at IMD Business School, defined ‘organizational culture’ as consistent, observable patterns of behavior in organizations. Obviously, the pandemic has fundamentally changed those patterns, and therefore changed the culture of just about every business and organization. In the post-COVID world, leaders need to seriously consider the new business culture that was created by the pandemic and avoid trying to recreate their pre-COVID cultures. Here are steps that leaders can consider as they prepare their organizations and employees to emerge stronger in the post-pandemic world.

Integrate Slowly. Emerging from any profoundly disruptive experience takes time, and this pandemic is no different. Some employees may be ready and hoping to return to “normal,” believing that it will bring renewed focus. Other employees have changed their lives around to make remote work possible, and are now finally comfortable with the current arrangement. Some may even be exhausted and confused, needing time to process what they have experienced. Employees will need the chance to integrate and reflect as they begin to adjust once again to their work practices post-pandemic. Your business culture undoubtably changed and it will need to be rebuilt collectively.

Identify What Worked. To keep up during the pandemic, businesses were forced to act quickly. Decisions and plans that often took weeks or months, were being decided in days. According to the Harvard Business Review, a leading retailer was exploring how to launch a curbside-delivery business and the plan stretched over 18 months. When the COVID lockdown hit, it went live in two days. During the pandemic, clear goals, rapid decision making and focused teams replaced corporate bureaucracy. As we move into the post-COVID era, leaders must acknowledge and commit to not going backwards. Rethinking their organization and culture will go a long way in developing a long-term competitive advantage.

Identify What to Discard. It will be important to retain some long-established cultural practices and beliefs, institutionalize others that developed during the crisis and discard those that are no longer useful. You need to identify which is which. Are your employees happier and more effective working remotely, or is face-to-face interaction an important component of your business and industry?

Embrace the Future of Work. The future of remote work was always coming, but COVID has hastened the pace. Employees across all industries have learned how to complete tasks remotely, using digital communication and collaboration tools. Continuing this shift will call for substantial investment in workforce training, specifically in new skills using digital tools. It will also require employers to seriously consider hybrid working models for their employees.

Business leaders need to have a sound understanding of the evolution of their industry to determine how their business will succeed in the future. Your business’s culture has been influenced by the pandemic, but those changes can have a positive impact, if managed correctly.

“Money doesn’t grow on trees,” roared Papa Bear in The Berenstain Bears’ Trouble with Money.

Though ‘cancel culture’ may not have criticized the Berenstain Bears for their gender stereotypes, they ought to call them out them for their misconception about finances.  Because apparently, money does grow on trees.

As of now, the total cost of stimulating the COVID-stricken economy stands at $3.4 trillion, according to the Committee for a Responsible Federal Budget. This includes monies spent on PPP loans, direct stimulus checks and other government spending programs. (And that’s on top of the $2.9 trillion that the Federal Reserve spent on their own asset purchasing, including junk debt.)

Now, Congress is debating a $2 trillion infrastructure bill proposed by President Biden which includes things like roads, airports, railways, a guaranteed job program…you know, ‘infrastructure.’ (We’re not implying that these things aren’t crucial, but calling them ‘infrastructure’ is simply inaccurate.)

If you’re wondering, ‘Well who’s gonna pay for all this?’ you’re not alone. (Don’t wonder too loudly though, or you’ll be met with a ‘you don’t care about the poor!’)

Defining the financial role of the Federal Government has always been a debate among economists. But this debate has taken a backseat to a new debate, which we’re about to explore. And that is: Does national debt even matter?

What started out as a fringe belief in the minds of a few economists has started to creep into the progressive wings of our liberal lawmakers. This is known on the Street as MMT, or Modern Monetary Theory.

Economists who buy into MMT argue that a country that prints its own currency has little to worry about its debt. The crux of MMT is that national debt isn’t actually bad,  since it’s basically another way for the government to pour money into the private sector. See, when a government enacts a spending program,  it prints and circulates more money into the economy. So yes, the government is taking on debt, but it can always print more money to cover it. MMT says that the national debt deficit should be upped to the point where a country has full employment, because the deficit will be made up for by the output from the employees. (The only thing a money-printing country should worry about, argues MMT, is inflation.)

Remember the old Keynesian view on monetary policy? The one where economist John Maynard Keynes argued that in an economic downturn, the government could stimulate demand by paying people to dig holes in the ground, and paying others to fill them back up?  His point was that we should inject money into the economy from the top – through government programs – and to let the money just keep circulating downwards.

Well, MMT takes the Keynesian view to a whole new level.

According to MMT economists, the purpose of taxes is not to serve as federal income for the government to cover its expenses.  Rather, its purpose is to solve income inequality and limit inflation by taking money from the rich.

Is it a coincidence that the lawmakers that have embraced MMT are the ones who want to institute programs like The Green New Deal or Medicaid For All? You can’t blame the sceptics for believing that this is just a convenient way to answer the “who’s going to pay for it?” question.

Hold tight, ladies and gents. The debate about MMT is about to get settled. If sending out stimulus checks to 85% of the country and dishing out trillions on various random programs doesn’t cause the degradation of the dollar with hyper-inflation, then don’t we all need to agree that MMT wins?

Whether it’s the U.S. dollar or our traditional economy textbooks, something’s about to become worthless. We’ll just need to wait and see which one.

The May 17 deadline for filing your 2020 individual tax return is coming up soon. It’s important to file and pay your tax return on time to avoid penalties imposed by the IRS. Here are the basic rules.

Failure to pay

Separate penalties apply for failing to pay and failing to file. The failure-to-pay penalty is 1/2% for each month (or partial month) the payment is late. For example, if payment is due May 17 and is made June 22, the penalty is 1% (1/2% times 2 months (or partial months)). The maximum penalty is 25%.

The failure-to-pay penalty is based on the amount shown as due on the return (less credits for amounts paid through withholding or estimated payments), even if the actual tax bill turns out to be higher. On the other hand, if the actual tax bill turns out to be lower, the penalty is based on the lower amount.

For example, if your payment is two months late and your return shows that you owe $5,000, the penalty is 1%, which equals $50. If you’re audited and your tax bill increases by another $1,000, the failure-to-pay penalty isn’t increased because it’s based on the amount shown on the return as due.

Failure to file

The failure-to-file penalty runs at a more severe rate of 5% per month (or partial month) of lateness to a maximum of 25%. If you obtain an extension to file (until October 15), you’re not filing late unless you miss the extended due date. However, a filing extension doesn’t apply to your responsibility for payment.

If the 1/2% failure-to-pay penalty and the failure-to-file penalty both apply, the failure-to-file penalty drops to 4.5% per month (or part) so the total combined penalty is 5%. The maximum combined penalty for the first five months is 25%. After that, the failure-to-pay penalty can continue at 1/2% per month for 45 more months (an additional 22.5%). Thus, the combined penalties could reach 47.5% over time.

The failure-to-file penalty is also more severe because it’s based on the amount required to be shown on the return, and not just the amount shown as due. (Credit is given for amounts paid via withholding or estimated payments. So if no amount is owed, there’s no penalty for late filing.) For example, if a return is filed three months late showing $5,000 owed (after payment credits), the combined penalties would be 15%, which equals $750. If the actual tax liability is later determined to be an additional $1,000, the failure to file penalty (4.5% × 3 = 13.5%) would also apply for an additional $135 in penalties.

A minimum failure to file penalty will also apply if you file your return more than 60 days late. This minimum penalty is the lesser of $210 or the tax amount required to be shown on the return.

Reasonable cause

Both penalties may be excused by IRS if lateness is due to “reasonable cause.” Typical qualifying excuses include death or serious illness in the immediate family and postal irregularities.

As you can see, filing and paying late can get expensive. Furthermore, in particularly abusive situations involving a fraudulent failure to file, the late filing penalty can reach 15% per month, with a 75% maximum. Contact us if you have questions or need an appointment to prepare your return.

Owners of incorporated businesses know that there are tax advantages to withdrawing money from a C corporation as compensation, rather than as dividends. The reason: A corporation can deduct the salaries and bonuses that it pays executives, but not its dividend payments. Thus, if funds are paid as dividends, they’re taxed twice, once to the corporation and once to the recipient. Money paid out as compensation is only taxed once — to the employee who receives it.

However, there are limits to how much money you can take out of a corporation this way. Under tax law, compensation can be deducted only to the extent that it’s reasonable. Any unreasonable portion isn’t deductible and, if paid to a shareholder, may be taxed as if it were a dividend. Keep in mind that the IRS is generally more interested in unreasonable compensation payments made to someone “related” to a corporation, such as a shareholder-employee or a member of a shareholder’s family.

Determining reasonable compensation

There’s no easy way to determine what’s reasonable. In an audit, the IRS examines the amount that similar companies would pay for comparable services under similar circumstances. Factors that are taken into account include the employee’s duties and the amount of time spent on those duties, as well as the employee’s skills, expertise and compensation history. Other factors that may be reviewed are the complexities of the business and its gross and net income.

There are some steps you can take to make it more likely that the compensation you earn will be considered “reasonable,” and therefore deductible by your corporation. For example, you can:

• Keep compensation in line with what similar businesses are paying their executives (and keep whatever evidence you can get of what others are paying to support what you pay).
• In the minutes of your corporation’s board of directors, contemporaneously document the reasons for compensation paid. For example, if compensation is being increased in the current year to make up for earlier years in which it was low, be sure that the minutes reflect this. (Ideally, the minutes for the earlier years should reflect that the compensation paid then was at a reduced rate.) Cite any executive compensation or industry studies that back up your compensation amounts.
• Avoid paying compensation in direct proportion to the stock owned by the corporation’s shareholders. This looks too much like a disguised dividend and will probably be treated as such by IRS.
• If the business is profitable, pay at least some dividends. This avoids giving the impression that the corporation is trying to pay out all of its profits as compensation.

You can avoid problems and challenges by planning ahead. If you have questions or concerns about your situation, contact us.