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Tax breaks, attrition and collections
August 31, 2020
Tax breaks, attrition and collections
            I'm going to start this article the same way I am going to end it, talk to your accountant about potential tax breaks that may be available because of the pandemic.  I'm going to mention them, but I am not a tax expert and you need to find out if the tax break applies to you and how you can best leverage it.
            I'll also address something I do know something about, and that's attrition and collections, so let's start with that.  According to an article in the Wall Street Journal [yes I have canceled my NY Times subscription and I'm much happier every morning] there are 32 million small businesses in the US.  Already in 2020 over 2 million have closed their doors.  We've got 4 months left in 2020 and as I write this article restaurants in NYC are not going to be allowed in-door dining.  There are around 27,000 restaurants in NYC.  How many do you think can survive without in-door dining?  Those that haven't closed yet will soon be facing weather too cold to continue outdoor dining [and that doesn't even address the NYC problem of out-door dining sharing the space with the homeless who have been given top priority and immunity from arrest].  As businesses fail rent doesn't get paid.  Landlords unable to collect rent cut expenses, including contractors servicing the buildings.  You get the idea.  Guess who is on the list of cuts?  Alarm companies.  For intrusion systems it's usually the tenant in the building; for fire it's the building owner and for cameras it could be either tenant or landlord or both.  That's a lot of alarm customers who aren't going to be paying their security and fire services.
            The good news is that alarm companies are not yet on the bull's eye for failing businesses.  There's plenty of customers and plenty of work.  But RMR comes from existing customers, not yet calculated from new business.  The RMR is often the lifeblood of the alarm business, providing stable continuous revenue that covers the basic expenses of the business.  Loss of existing customers affects that bottom line.  You need to keep vigilant watch over this part of your alarm business.  
            The old customary advice to wait 90 days in arrears before taking action is no longer the best advice.  Customers who fail to make payment outside of their customary practice need to be addressed immediately.  Obviously customers who are not open for business, but still paying their bills, need to be monitored.  Building owners need to be put on a tight leash and if you monitor the fire alarm you need to know that shutting off that monitoring and reporting the termination to the fire AHJ is your most potent threat and course of action.
            Subscribers who have defaulted should be turned over for collection without delay.  The only assessment you need to make is whether the subscriber is truthfully gone and collection efforts would be futile.  Looking to the guarantee on the contract may be your only hope, and that needs to be explored.  If you use the Standard Kirschenbaum Contract ™ forms then K&K's collection department will support you.  Contact Kathleen Lampert at 516 747 6700 x 321 or to get started.  
            There are a few tax breaks available in 2020 because of the pandemic.  I don't profess to understand them, so consult with your accountant.  If you don't have an accountant, or need a new one, contact Mitch Reitman at  
            Here are the tax breaks that may help:
  *  section 165 (i) lets individuals and businesses claim losses from last year's tax return.
  *  this springs Cares Act allows current losses to offset prior years taxes
  *  the Cares Act also allows you to switch from accrual accounting to cash accounting [you should make this switch]
  *  section 1244 allows for generous treatment for losses from failed businesses
  *  section 1202 allows sale of business tax free under some circumstances [if selling make sure you check with your accountant on this one]
            Much to think about.  Stay healthy.

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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301