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San Jose, CA business law attorney for business interruption insuranceThe COVID-19 virus has impacted every facet of our lives. Schools across the country have been canceled and replaced by online classes, employees have been laid off from their jobs, and business owners have lost valuable income. From restaurants to doctor’s offices, business owners are suffering. If you are a small business owner, you may be extremely concerned about the effect “shelter-in-place” directives are having on your business. You may even wonder whether or not your business will survive. One option that may be beneficial is business interruption insurance.

What Is Business Interruption Insurance?

Business interruption insurance covers business losses caused by a disaster. It is an optional form of coverage that may be included in a business owners’ policy or a comprehensive multi-peril commercial policy, or it can be issued on a standalone basis. This insurance is intended to protect against losses resulting from disruptions to normal business operations. In addition to replacing lost income, business interruption insurance may also cover:

  • Estimated profits based on previous months’ profits
  • Fixed costs such as operating expenses
  • Employee wages and worker training costs  
  • Civil authority ingress/egress
  • Taxes
  • Loan payments
  • Other reasonable expenses

Will Business Interruption Coverage Cover Losses Due to COVID-19?

There has been a great deal of uncertainty and confusion regarding business insurance coverage and shutdowns caused by COVID-19. Recently, the Pennsylvania Supreme Court made a ruling in the case of Friends of Danny DeVito v. Wolf that may influence business interruption insurance claims. The plaintiff in this case was asking for the shutdown order to be set aside on the grounds that the mandated shutdown was an overreach. In the end, the Pennsylvania Supreme Court ruled that the order should not be canceled, because the coronavirus is “a natural disaster and a catastrophe of massive proportion.” If other states, including California, agree with the Pennsylvania Court’s classification of the coronavirus pandemic as a natural disaster, insurers would likely be required to pay business interruption claims based on COVID-19.

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San Jose, CA business tax attorney use taxesA recent U.S. Supreme Court case has prompted California legislators to change a state use tax law that affects out-of-state sellers. Under the new law, some retailers outside of California must register with the California Department of Tax and Fee Administration (CDTFA) and collect California use tax.

The law applies to remote sellers who have total sales of $500,000 in tangible personal property for delivery in California in the preceding or current calendar year. The law went into effect on April 1, 2019, so these sellers are required to collect and remit taxes on sales which occurred on or after this date. 

Examples of out-of-state sellers that may be affected by this change include online merchants, mail-order catalogs, or telephone salespeople. Retailers with a physical presence in California will continue to have the same registration and use tax obligations as before the new law was passed.

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San Jose business tax deduction attorneyHistorically, business owners have been able to utilize tax deductions based on the cost of assets bought for business use and the depreciation of those assets. However, the recent Tax Cuts and Jobs Act (TCJA) modified the rules regarding the deduction of expenses under Section 179(a) and the deduction of depreciation under Section 168(g). These changes affect business taxes filed for years 2018 and beyond.

Section 179(a): Business Asset Deductions

This law permits businesses to deduct the purchase price of certain assets as an expense for the year the business begins to use the property. The recent updates to the law raised the maximum expense deduction to $1 million (up from $500,000). The updated law also raised the phase-out limit to $2.5 million (up from $2 million).

This deduction is available for tangible property like tools and technology used in business. The deduction is also available for qualified real property. Under the TCJA, qualified real property includes qualified improvement property, as well as certain types of improvements to nonresidential property, which includes: 

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San Jose small business payroll tax lawyerCalifornia employers are responsible for withholding payroll taxes, filing returns, and paying state and federal payroll taxes. The laws governing payroll taxes are complex, and as your small business grows, the onerousness of compliance with these tax rules will intensify.

What Are Payroll Taxes?

California has four state payroll taxes. Two are paid by the employer: Unemployment Insurance (UI) and Employment Training Tax (ETT). Two are withheld from workers’ wages: State Disability Insurance (SDI) and Personal Income Tax (PIT). Payroll taxes are administered by the Employment Development Department (EDD).

In addition, employers must handle federal payroll taxes. A small business will be required to pay federal taxes for Medicare, Social Security, and unemployment (FUTA). Also, an employer withholds federal personal income taxes, Medicare, and Social Security from workers’ wages.

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San Jose, CA small business tax credit lawyerThe federal Tax Cuts and Jobs Act of 2017 has brought sweeping changes to many areas of tax law. One change that might have been overlooked by businesses is that employers are now eligible for a tax credit if they offer certain kinds of paid family and medical leave to full and part-time workers. If you act before the end of this year, you may be able to qualify for this tax credit.

Qualifying for Tax Credits

Eligible businesses that enact qualifying paid family leave programs or amend existing ones by the end of this year will be able to claim the employer credit. This tax credit will be available for tax years 2018 and 2019. The credit is retroactive to the beginning of the business’ 2018 tax year for qualifying leave already given.

To qualify for the tax credit, employers must meet the following requirements:

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