by: Charles Lee, CPA

As we have entered into the second half of tax year 2023, it is a good time to start thinking about tax planning and saving taxes.

For businesses that have operated during 2020 and 2021, there is a popular payroll tax refund program called the Federal Employee Retention Credit (ERC).  Other taxpayers may be considering selling certain capital assets that result in capital gains tax.  There are several tax planning techniques to defer paying the capital gains tax to the future.

The Employee Retention Credit (ERC) is a refundable tax credit for businesses and tax-exempt organizations.  The credit amount can be up to $26,000 per employee for the six quarters covered in 2020 and 2021.  For example, if a business had 3 employees, then the tax refund can be up to $78,000 ($26,000 x 3 employees).


The credit is available to eligible employers that paid qualified wages to some or all employees after March 12, 2020, and before January 1, 2022. Eligibility and credit amount vary depending on when the business impacts occurred.

Generally, businesses and tax-exempt organizations that qualify are those that:

•    Were shut down by a government order due to the COVID-19 pandemic during 2020 or the first three calendar quarters of 2021, or 
•    Experienced the required decline in gross receipts during the eligibility periods during 2020 or the first three calendar quarters of 2021, or
•    Qualified as a recovery startup business for the third and fourth quarters of 2021

Eligible employers must have paid qualified wages to claim the credit.  Eligible employers can claim the ERC on a quarterly adjusted employment tax return (IRS Form 941-X) by April 15, 2024 for the 2020 tax refunds and April 15, 2025 for the 2021 tax refunds.


Certain limitations apply to the ERC. For example, employers can’t claim the ERC on wages that were reported as payroll costs for Paycheck Protection Program (PPP) loan forgiveness. Qualified wages for purposes of the ERC do not include payroll costs in connection with shuttered venue operators grants or restaurant revitalization grants.

Beware of ERC Scam Promotions

Employers should be wary of ERC advertisements that advise them to “apply” for money by claiming the ERC when they may not qualify. Anyone who improperly claims the credit has to pay it back and may owe penalties and interest. The ads are all over radio, TV and social media. You may even get ads that look like official government letters, or texts, emails and phone calls advertising ERC eligibility.

Capital Gains Tax Deferral

The business and real estate valuations are near record highs and the threat of higher capital gains tax in the near future has persuaded many owners and investors to sell their capital assets now.

Internal Revenue Code (IRC) Section 1202 allows capital gains from qualified small business stocks to be excluded from federal tax. Among other rules, the stock must be held for at least five years in order to exclude the gains.

For certain sales of corporation stock or assets, there can be tax free exchanges or reorganizations under IRC Section 368.

Some of the most common ways to defer paying the capital gains tax is to use IRC Code Section 1031, like-kind exchange transactions for sales of real estate investment properties.

Certain installment sales transactions under IRC Section 453 works well for a seller that wants to sell their business or real estate and desires to invest the sales proceeds into another investment activity.  The capital gains tax can be paid up to 30 years later and still provide cash through a nontaxable loan where the loan and related interest is repaid with the sales proceeds up to 30 years later.

The above tax planning can apply to sales of the below capital assets:

– Real estate (residential or commercial) and businesses,
– Ownership interest in partnerships/LLCs and stock of privately owned corporations (C or S),
– Contract rights, farm or ranch properties,
– Precious metals & collectibles (e.g., gold, silver, antiques, art, coins, gems, stamps),
-Trademarks, patents, or goodwill,
– Crypto or virtual currencies such as Bitcoin, Ethereum, and other coins, and
– Other capital assets except publicly traded stock and assets that produce ordinary income

Charles Lee, CPA is the CEO and owner of Reliant Tax Consulting, Inc. which specializes in certain Federal and California tax incentives & tax planning such as the Federal employee retention credit (ERC), federal hiring income tax credit Work Opportunity Tax Credit (WOTC), research (R&D) income & payroll tax credits, cost segregation to accelerate tax depreciation on real estate buildings, deferral of capital gains tax, and tax incentives for exporting businesses.  U.S. businesses claim over $30 billion in tax credits & incentives annually.  Reliant helps businesses save taxes going back up to four years to claim tax refunds and reducing, deferring or eliminating current and future taxes.

Charles also owns Charles K. Lee & Company, CPA, Inc. which is a traditional accounting and tax practice servicing small to medium sized businesses focused on tax planning including retirement plans, trust, gift, estate tax planning, international tax, business entity set up, mergers and acquisitions and multistate tax planning.

Prior to Reliant, Charles started his career with the Big Four international accounting firms:  Ernst & Young (1992 – 1996), KPMG (1996 – 2000) and Deloitte & Touche (2000 – 2002). After 10 years with the Big Four firms, Charles established his own tax consulting practice in 2002.

Charles is a licensed certified public accountant in California (since 1997) and a member of the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants (CalCPA).  He also serves as a board member of the local chapter of CalCPA, Asian Pacific CPA Association (APCPAA), Asian Business Association (ABA), and two other nonprofit organizations. You can contact Charles at (213) 379-0649 or