Points of Interest: Fourth Quarter 2020

• Ruth Bader Ginsburg’s impact on the US Tax Code Read
• 2020’s generational makeup of small business owners Read
• The statistics on one of the fastest-growing demographics of business ownership. Read
• Four tips to put the “quick” back into QuickBooks. Read
• Six tips for conducting your year-end business review well before the year ends. Read

Notorious Tax Law Changes

What does gender have to do with taxes? Just ask Ruth Bader Ginsburg.
The 2018 film On the Basis of Sex centers on Ginsburg, the US Supreme Court justice who passed on September 18, 2020, at the age of 87. More than just a biography, the movie also shines a light on tax law.

The 1972 case involved Charles E. Moritz, who appealed a US Tax Court decision prohibiting a 1968 deduction for caretaker expenses under tax code Section 214, because it was only available to women, divorcees, and widowers. Since Moritz had never married, the Tax Court said he didn’t qualify for the deduction.

The case was the launching point for Ginsburg’s focus on gender issues. She ultimately argued that the deduction should be available to all sexes. The Court of Appeals reversed the Tax Court’s opinion, ruling that discrimination on sex alone doesn’t further the provision’s goal of helping women who are traditionally paid less than men.

The code section has since been repealed, and similar deductions are now under Section 213.

Although deduction cases are still relevant in 2020, a discrimination-focused case is uncommon in Tax Court. However, one could argue that the 2017 tax reform changes discriminate by disallowing deductions for certain groups. Section 199A is the tax law’s 20 percent write-off for pass-through businesses, but certain professions are excluded from the deduction.
Source: bloombergtax.com

---

Facts & Figures

---

Who’s driving this thing?

The pandemic has affected businesses of all sizes, but small businesses have faced particularly unique challenges. We know that small business owners are struggling; what we want to know now is who exactly those owners are.
The largest demographic of US small business owners is Gen X (ages 40 to 55), which makes up 44 percent of all small businesses. Following closely behind are Baby Boomers (ages 56 to 74) at 41 percent.

Millennials (ages 24 to 39) own much less of the market share at just 12 percent, but that number is steadily growing. At the same time, the Greatest Generation (ages 74 and up) is down to just 2 percent. As the impact of COVID-19 comes clearer into focus—and as the ambitious Gen Z begins to enter the fray—we will see the changes that affect the next generation of small businesses.

---

---

Who runs the world?

Owning a business has historically been an uphill battle for women. Not only do men successfully launch more and larger small businesses than women; men-owned businesses also tend to be more profitable, according to smallbiztrends.com.

But women are persistent, powerful, and, as it turns out, great business owners despite the odds. Below are some promising numbers that demonstrate the strength of women-owned businesses—but also show that we have a long way to go before we achieve true business equality.

---

---

Quick Stop

Trim Time-Wasters
Boost your cash flow by emailing invoices and statements directly from QBO, and have your bank transfer data to your QBO account automatically. Look for the “online banking download” tools.

UFA Spotting
If your Undeposited Funds Account is a high number, it may indicate an error in your deposit records.

Set It & (Never) Forget It
Use memorized transactions to automatically track and pay recurring bills.

Daily Habits
If you enter transactions every day, your QBO balance will be more dependable than your bank account.

---

Hindsight in 2020

As business owners, we spend a lot of time looking to the future. Where are we headed? What are our goals for the next quarter? The next year? The next five years?

What we don’t do a lot of is looking in the rearview mirror. Yet, it can provide valuable insights into what has worked and what hasn’t.This year is certainly no exception. However, this year we’re telling our clients to start now. Yes, now.

In the year of COVID-19, many businesses quickly shifted from robust revenue goals to keeping the lights on. If that’s you, that’s totally OK, but don’t wait for December to begin your assessment. Here’s how to start.

1. Revisit your business plan. It’s easy to get lost in gross profit, net margins, and KPIs, but remember that your company is more than its bottom line. “How well did we do our job?” is the most important question to answer during a year-end review. Review your mission and values before you dig into your financial statements. Did you meet the needs of your audience, or did you pivot drastically? Reviewing this information will help you contextualize your numbers.
2. Make any last-minute investments. Is there anything you can purchase before the end of the year? Does your company have a retirement plan in place for owners, partners, or employees yet? Taking action now will increase your 2020 business expenses, keeping this year’s taxable revenues lower.
3. Review your accounts receivable. If you struggled to get your clients to pay their invoices on time this year, reach out and see if you can work with them to be current by December 31. Not possible? Work with your CPA or financial planner on income rollover or revenue deferment plans.
4. Create a short-term strategy. For 2021, consider setting smaller financial milestones. By focusing on the short-term (we suggest monthly,) rather than more intimidating annual goals, you can more easily focus, identify trouble spots, and pivot accordingly.
5. Be proactive about growth. If you want to grow next year, you need to look at several components of your business right now. Ask yourself these questions:
   • Is it time to offer new products or services?
   • Should you raise your pricing?
   • Are you successfully reaching your audience?
   • Where else can you advertise/connect with your audience?
   • How can you be more visible in your community?
6. Make a list of your successes, personal and professional, and celebrate with your staff. No matter what has happened so far, you’ve survived 2020. And that’s something to celebrate!