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Clarification of Tax Treatment of Forgiveness of Covered Loans

Posted by Admin Posted on Dec 28 2020

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:

 

  • no amount is included in the gross income of the eligible recipient due to the debt forgiveness

 

  • no deduction is denied, no tax attribute is reduced, and no basis increase is denied because of the exclusion from gross income, and

 

  • in the case of an eligible recipient that is a partnership or S corporation—

 

  • any amount excluded from income is treated as tax exempt income, and in general, any increase in the adjusted basis of a partner’s interest in a partnership with respect to any amount excluded from income is equal to the partner’s distributive share of deductions resulting from costs giving rise to the forgiveness.

 

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:

 

  • payroll costs

 

  • certain healthcare benefits

 

  • interest on mortgage obligations

 

  • rent

 

  • utilities  

 

  • interest on any other debt obligations

 

  • operations expenses

 

  • property damage

 

  • supplier costs

 

  • worker protection expenses

 

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.

Employee Retention Credit Extended and Expanded

Posted by Admin Posted on Dec 28 2020

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:

 

  • An employer whose trade or business is fully or partially suspended during the calendar quarter due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to the coronavirus disease (COVID-19); or

 

  • An employer that experiences a 20% decline (down from 50%) in gross receipts for the calendar quarter compared to the same quarter in 2019.

 

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.

 

  • Small employers, those that had 500 or fewer employees (up from 100), may receive the credit for wages paid to employees whether or not they are providing services to the employer.

 

  • Large employers, those that had more than 500 (up from 100) employees, may only receive the credit for wages paid to employees for time the employees are not providing services to the employer.

 

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:

 

  • wages that are paid for with forgiven Payroll Protection Program (PPP) proceeds cannot qualify for the employee retention credit;

 

  • qualifying wages for this credit cannot include wages for which the employer received a tax credit for paid sick and family leave; and

 

  • employees are not counted for this credit if the employer is allowed a work opportunity tax credit.

 

Contact Us

 

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.

Additional 2020 Recovery Rebates for Individuals

Posted by Admin Posted on Dec 28 2020

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:

 

  • a nonresident alien,

 

  • able to be claimed as a dependent on another taxpayer’s return,

 

  • an estate or trust, and

 

  • must have included a Social Security number for both the taxpayer, the taxpayer’s spouse, and eligible children (or an adoption taxpayer identification number, where appropriate).

 

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. 

Economic Impact Payments

Posted by Admin Posted on Mar 31 2020

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:

Economic impact payments - what you need to know

Filing and payment extension FAQ during COVID-19 emergency

Posted by Admin Posted on Mar 25 2020

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.

Business expense deduction for meals and entertainment

Posted by Admin Posted on Oct 04 2018

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. 

Click here to read more about the changes to the business expense deductions for meals and entertainment 

Reminder about tax scams and phishing

Posted by Admin Posted on Sept 20 2018

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:

IRS news release on Natural Disasters scams

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:

Telltale signs of a scam

The IRS (and its authorized private collection agencies) will never:

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. The IRS does not use these methods for tax payments. Generally, the IRS will first mail a bill to any taxpayer who owes taxes. All tax payments should only be made payable to the U.S. Treasury and checks should never be made payable to third parties.
  • Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
  • Demand that taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.
  • Ask for credit or debit card numbers over the phone.

If you receive an email that seems strange, please call our office to verify its validity.  We are always here to answer your questions. 

Scam Alert

Posted by Admin Posted on Feb 13 2018

Please read this important Scam Alert from the IRS pertaining to erroneous tax refunds: 

IRS Scam Alert

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.

IRS letters and notices

Posted by Admin Posted on July 10 2017

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.

IRS Summertime Tax Tip - IRS Notice or Letter

IRS cautions taxpayers about an increase in tax scams

Posted by Admin Posted on June 26 2017

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.

IRS Bulletin

Reduction in Commercial Leases in Florida in 2018

Posted by Admin Posted on May 31 2017

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%. 

Be extremely cautious of the new W-2 Phishing scam

Posted by Admin Posted on Feb 07 2017

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.

Dangerous W-2 Phishing Scam

Tax Scam warnings from the IRS

Posted by Admin Posted on Dec 08 2016

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.

Please click here to read a very important IRS Newswire   

Tax records - how long should you keep them?

Posted by Admin Posted on Dec 07 2016

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. 

Click here to see full text of the IRS Newswire

Welcome to Our Blog!

Posted by Admin Posted on June 30 2016
This is the home of our new blog. Check back often for updates!