The Consolidated Appropriations Act, 2021 expands the Paycheck Protection Program (PPP) established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, that provides loans (covered loan) to assist small businesses with certain expenses incurred during the economic challenges due to the COVID-19 emergency. The Consolidated Appropriations Act, 2021 also clarifies the deductibility of certain expenses paid for with funds from a loan under PPP and the tax impact on income for the forgiveness of the related debt.
The Consolidated Appropriations Act, 2021 clarifies that:
This clarification under the Consolidated Appropriations Act, 2021 is effective for tax years ending after March 27, 2020, the date of enactment for the CARES Act. This clarification also applies to any subsequent Payroll Protection Loans for tax years ending after the date of enactment of the Consolidated Appropriations Act, 2021.
The expanded list of eligible expense under the Consolidated Appropriations Act, 2021 includes:
The Consolidated Appropriations Act, 2021, also provides a simplified process for recipients of a covered loan of not more than $150,000 to apply for loan forgiveness.
Please call our office if you have any questions on covered loans under the Paycheck Protection Program and the expanded relief provided by the Consolidated Appropriations Act, 2021.
The Consolidated Appropriations Act, 2021 extends and expands the employee retention credit first created under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The employee retention credit is designed to encourage businesses to keep workers on their payroll and support small businesses and nonprofits through the Coronavirus economic emergency.
Eligible employers may claim the credit against employment taxes equal to a percentage of qualified wages paid to employees who are not working due to the employer’s full or partial suspension of business or a significant decline in gross receipts.
Calendar Quarters Beginning After December 31. 2020
For calendar quarters beginning after December 31, 2020, the amount of the credit is increased from 50% to 70% of qualified wages. The limitation per employee is also increased from amounts paid up to $10,000 per year to amounts paid up to $10,000 per quarter. Eligible wages are wages paid between March 12, 2020, and July 1, 2021, extended from January 1, 2021.
In addition, the definition of an eligible employer is more inclusive under the Consolidated Appropriations Act, 2021 and thereby allows a greater number of employers to qualify.
An eligible employer is defined as:
However, if the employer was not in existence as of the beginning of the same calendar quarter in 2019, then the employer may use the same calendar quarter in 2020. Employers also have an election to determine if they meet the gross receipts test based on the immediately preceding quarter.
Qualified wages are based on the business’s average number of full-time employees in 2019.
There are special rules for seasonal workers. If an employer is eligible due to a full or partial suspension of operations, only wages paid while operations are suspended count as qualified wages.
Employers must report their qualified wages on their federal employment tax returns, usually Form 941, Employer's Quarterly Federal Tax Return. They can reduce their required deposits of payroll taxes withheld from employees’ wages by the amount of the credit. They can also request an advance of the employee retention credit by submitting Form 7200.
No Double Benefit
There are limitations when considering an eligible employer's ability to claim the employee retention credit. This credit is impacted by other credit and relief provisions as follows:
Because of the enhancements and expansion of the employee retention credit, your business may now have an opportunity to take the advantage of this tax benefit. Please call our office to discuss the employee retention credit and other business tax relief under the Consolidated Appropriations Act, 2021.
As part of the massive Consolidated Appropriations Act, 2021, Congress has included another round of stimulus payments. Eligible individuals will receive $600 ($1,200 for joint filers) plus $600 for each dependent child.
Similar to the stimulus payment under the CARES Act, the amount of each payment is phased out by $5 for every $100 in excess of a threshold amount. This threshold amount is based upon 2019 adjusted gross income. The phaseout begins at $75,000 for single filers, $112,500 for heads of households, and $150,000 for joint filers. Thus, the payments are completely phased out for single filers with 2019 adjusted gross income over $99,000, heads of household with $136,500, and joint filers with $198,000.
In order to be eligible for a stimulus payment, the individual must not be:
The advance credit is based on the adjusted gross income reported and the qualifying children claimed on the eligible individual’s 2019 return. The IRS will make the payment via electronic funds transfer to the bank account that the payee authorized, on or after January 1, 2019, for the delivery of a refund,or payment of taxes. However, if an individual has not filed a 2019 return by the time the payments are determined, the payment is based on information provided by the Social Security Administration, Railroad Retirement Board, or Secretary of Veterans Affairs for calendar year 2019.
As soon as practicable after the IRS distributes any payment to an eligible taxpayer, the IRS will send a notice bymail to the taxpayer’s last known address. The notice will indicate the method by which the payment was made, the amount of the payment, anda phone number to contact at the IRS to report any failureto receive such payment.
If you have any questions on the stimulus payments, please call our office. We are here to help you.
Internal Revenue Service has issued additional information pertaining to the issuance of economic impact payments, also known as stimulus checks, and we highly recommend that you visit the IRS website for up to date information on coronavirus relief. Please click below for more detail:
Dear clients and friends,
We hope you are all staying safe and healthy during this unprecedented time. CODIV-19 has changed the definition of normal, and one of them is filing taxes on April 15th. As you are all aware, the IRS has extended the filing deadline and payment deadline of some returns to July 15th. On March 24th, the IRS has published Frequently Asked Questions pertaining to the new filing deadline. Please use the IRS website (click bold text above) to learn more.
As always, should you have any questions, feel free to contact us.
With the passage of the Tax Cuts and Jobs Act, known as TCJA, you may have heard about some changes to the deductability of some business expenses such as meals and entertainment.
In general, the new law has eliminated the deduction for entertainment, while leaving the deduction for the business meals. In the latest news release, the IRS has provided taxpayers with additional guidance on the law changes.
In wake of Hurricane Florence, the Internal Revenue Service is reminding everyone that criminals are once again trying to take advantage of those trying to help out people in need. Please read the following news release to avoid various scams and schemes:
We also would like to take this time to remind you that tax scammers are continuing making phone calls and sending emails impersonating IRS and at times tax practitioners. Per IRS:
Please read this important Scam Alert from the IRS pertaining to erroneous tax refunds:
As always, when in doubt, call our office with any questions. Do not send money to anyone without speaking to us. IRS does not demand money over the phone and always sends you a correspondence.
Receiving an envelope from an IRS may seem daunting, however you must always take that first step and make sure to open the envelope to look at its contents. If you have received an IRS notice, timely response is always important, and we can always help you with that process. Please read below these helpful tips on how to handle an IRS notice or a letter. Remember to always contact us for assistance and sucessful resolution.
Next time your phone rings, and you see an unfamiliar number, pause before answering your phone, especially if the number on your display is not a local number. Tax scam is on the rise, and in the latest IRS bulletin, you will find a listing of the latest scams going around. Read below for more, and if you ever get contacted by the IRS, please make sure to let us know.
On May 25, 2017 Governor Rick Scott signed House Bill 7109, which is supposed to reduce the state sales tax rate on commercial leases from 6% to 5.8% starting 1/1/18. This rate decrease will be applicable to new leases. In addition, there is no change to the local surtax, which for Sarasota county is currently 1%. As a result, effective rate in Sarasota County for leases starting on or after January 1, 2018, would be 6.8%.
IRS has issued a very urgent alert to employers about a W-2 phishing scam that is being distributed via email. Everyone should be on alert and question any request that comes in for a W-2 information from a superior. Please read this alert below and feel free to contact our office with any questions.
Should you ever receive an email, a phone call or a pop-up online informing you that you owe money to the IRS, this is a sign of a scam. The IRS never calls you or emails you or reaches you online, and the IRS never demands that you make any payments over the phone. If you ever receive any communication from the IRS, please contact our office.
New tax season is almost upon us, but what do we do with our prior documents and tax returns? According to the IRS, you should keep copies of your tax returns and supporting documentation for at least three years. Certain documents should be kept for 7 years should you need to amend your return. Documents pertaining to the sale of real estate should also be kept for 7 years. For more information, and full text of this informative IRS Newswire, please see the link below. As always, feel free to call our office with any questions.