January 31st is right around the corner. If you’re an employee, you should receive your W2 soon. Or, if you are an independent contractor, one or more 1099s should likewise arrive. (If you’re an employer, remember that W2/W3 and 1099/1096 filings are due soon, too!) Receiving a W2 or 1099 usually triggers most of us to start preparing our taxes, or at least to begin gathering the information our tax preparers will need from us.

This year, employers and employees face some unique tax circumstances and a number of new rules. We outline a few of these new rules and other noteworthy changes below.

• You can deduct your PPP forgiveness expenses – The original C.A.R.E.S. Act left many items subject to interpretation. As such, the IRS originally took the position that businesses would not be able to deduct the expenses paid for with funds provided by PPP loans, if those loans were forgiven. They contended that companies “double-dipped” if they had tax-free income and subsequent deductible expenses. The AICPA (and others) lobbied against that ruling, and thankfully, Congress listened. Before you apply for forgiveness, please read this.

• There is a bigger meal deduction – Allowing businesses to deduct meals is nothing new. However, the IRS has, to this point, limited the percentage of the expense that was allowable. Now, though, you may deduct the entire amount you spend on business meals for 2021 and 2022, provided they take place at a restaurant. Essentially the government gives you a tax benefit when you support restaurants with your patronage. That’s a win-win! If you’re a restaurant owner, it’s probably a good idea to remind your customers of this new benefit!

•  You can donate more to non-profits (and if you are a non-profit, then you can get more donations!) – The government has extended the above-the-line charitable contribution through 2021 at $600 for those married filing jointly and $300 for other filers. In other words, taxpayers will not have to itemize their deductions to take advantage of this benefit. You can take the standard deduction and deduct up to $600 in charitable giving from your taxable income. Last year, you could deduct up to $300 above-the-line for charitable contributions, so this doubles the benefit! We believe that generosity is always rewarded, but this year provides yet another incentive!

• You can take advantage of the employee retention tax credit through 2026 – If you are fortunate enough to have the capacity to hire new workers, the government offers you added incentive to do so. This credit can be up to $9,600 and applied against the taxes you owe. To qualify, you will need to hire certain long-term unemployed workers, those on welfare, and veterans. This existing law has been extended for five years to 2026. Talk to us about taking advantage of this credit before you make your next hire.

• Social security tax deferral has been extended – Employees generally pay about 7-8% of their income in payroll taxes, and employers must match that amount. While they still have to pay the taxes, employers can now defer their share of social security taxes through March 2021 and pay those amounts back as late as the end of 2022. Extending the payment deadline doesn’t relieve you of your obligations, but it does provide an interest free loan from the government, should you choose to take advantage of this. Be careful, though, as you want to make sure you have the resources to pay these taxes when they’re due!

The changes keep coming, and we will continue to try to keep you updated.

And remember, you’re not alone! Our team is available to help you plan and prepare all your tax filings. Let us help! Contact us today to schedule a consultation.

COVID-19 has created an unusual working environment this year. It began with forced shutdowns, leaving many employees furloughed or out of a job altogether. It has since developed into an accepted culture of at-home employees, Zoom meetings, and other ad hoc solutions.

Gig economy workers may have been ahead of the game on working from home, but a lot of these solutions are now commonplace for even the most traditional employees. The tax implications, however, continue to evolve.

It seems the rules and benefits differ greatly, depending on whether you’re an employee or independent contractor.

Unfortunately, employees lost the ability to deduct expenses related to maintaining a home office at the end of 2017. In this new culture, many employees now working from home may need to make some purchases to make their home more workable. Lacking income tax deductibility for these expenses, employees find themselves in one of three situations, each with its own financial and tax implications:

1. Their employer provides for them – “Pack up your desk and go home.” This could include such items as computer monitors, printers, supplies, and sometimes even the desk itself. Usually these will be considered “de minimus fringe benefits” and not be taxable to the employee, yet still deductible for the employer.
2. Their employer reimburses them – “Buy what you need and we’ll pay you back.” Similar to the first situation, the reimbursement won’t be taxable income to the employee in most situations. However, employers should have an “accountable plan,” that is, clear guidelines of what qualifies for reimbursement.
3. They buy what they need but do not receive reimbursement. Sadly, in this situation, no federal tax benefit currently exists.

Independent contractors fare a little better in this new environment. For one, they operate more like an employer than an employee in that many home office expenses are already deductible (home office deductions are subject to very specific IRS guidelines and requirements). Further, in most cases, independent contractors have no preconceived expectation of reimbursement.

Tax rules vary greatly depending on your particular situation, so please don’t jump to any conclusions about the deductibility of an expense. Allow our tax professionals to review your situation with you and provide current, specific guidance tailored specifically to you. Contact us to schedule a consultation today.

We can schedule a Zoom call so you can speak to us directly from your new home office!

 

Even before this strange season we find ourselves in, KuberneoCPA has sought to provide assistance and helpful resources to our clients. When the COVID-19 crisis first began, we quickly established our resource center. As the volume of resources has grown, we thought it might be useful to aggregate a few of the links we’ve shared over the past several months into one post for quick and easy reference.

• U.S. Chamber of Commerce
• Small Business Administration (SBA)
• Treasury Department
• Florida Department of Economic Opportunity

You might also want to check out some of our more popular posts:

• Frequently Asked Questions
• Payroll Protection Program (PPP)
• The ABCs of Surviving a Crisis or Business Interruption

We will continue to post new articles and updates at our resource center. And as always, please contact us if you have questions, concerns, or just want to talk through an issue. Our KuberneoCPA team is ready to help!

UPDATE — The SBA and Treasury recently announced a simpler PPP forgiveness form for loans of $50,000 or less. It uses a new form called the 3508S that is even more streamlined than the “EZ” form introduced previously. This is good news for small borrowers under the PPP!

ORIGINAL POST — The Departement of Treasury and the Small Business Administration (SBA) this week announced a revised, borrower-friendly simplified loan forgiveness application form to supplement the more robust (and complicated) Form 3508. This is good news for smaller borrowers, as it greatly simplifies the application process and potentially increases the likelihood of full loan forgiveness.

The new “EZ” version of the forgiveness application applies to borrowers that:

• Are self-employed and have no employees; OR
• Did not reduce the salaries or wages of their employees by 25%, and did not reduce the number or hours of their employees; OR
• Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%.

The revised EZ forgiveness application requires less documentation and fewer calculations for eligible borrowers. Details can be found in the instructions to the new form.

Both the full and EZ applications give borrowers the option of using the original 8-week covered period (if their loan was made before June 5, 2020) or an extended 24-week covered period. These changes will result in a more efficient process and make it easier for businesses to realize full forgiveness of their PPP loan.

We’ve also heard from our clients that many banks are creating customized electronic versions of the forgiveness application forms that will work seamlessly with the banks’ existing online systems.

For your reference, links to the two forms are provided below:

PPP Loan Forgiveness Application 3508 EZ Form

PPP Loan Forgiveness Application Full Form 3508

The legislation is still developing, so we will continue to monitor the forgiveness process and post updates from time to time. Check back often and be on the lookout, too, for guidance issued directly by your lender.

As always, if you need any help navigating this ever-changing environment, the KuberneoCPA Team is available to you. Contact us to discuss your particular situation, and we will walk beside you every step of the way!