Articles related to the COVID-19 crisis

Small Business Accounting Services in Orlando

What I Need to Know BEFORE Preparing My Taxes

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.

What I Need to Know BEFORE Filing for PPP Forgiveness

Regardless of our individual situations, I think we can all agree that 2020 proved to be a remarkable year! Now that we’re in 2021, we begin to turn our attention to 2020’s impact on this year. For many of us, that might include applying for forgiveness on the PPP loans we obtained.

If you haven’t already applied for forgiveness, here are a couple of items you should consider before completing your application:

  • Forgiveness of PPP loans has been simplified – It’s good news if you borrowed $150,000 or less. From the guidance provided so far, it appears that the application for forgiveness is almost automatic. It’s NOT automatic, but the process for applying definitely gives the impression that nearly all of these loans will be forgiven, provided you meet the criteria for forgiveness.
  • The definition of “forgivable” expenses has been expanded – Forgivable expenses originally only included payroll (and related) expenses and all rent and mortgage interest. To receive full forgiveness, consistent with the original guidelines, at least 60% of the forgivable expenses must still relate to payroll. The original definitions of the non-payroll expenses still apply and have been expanded. These new definitions apply to loans made before, on, or after the date of enactment, including the forgiveness of the loan  to include the following:
    • Worker protection expenditures (such as personal protective equipment) incurred to help comply with federal health and safety guidelines (as well as any equivalent State and local guidance) related to COVID-19 between March 1, 2020 and the end of the national emergency declaration.
    • Costs associated with property damage (not covered by insurance) such as those related to public disturbances that occurred during 2020.
    • Operating expenditures such as payment for software, cloud computing, and other human resources and accounting needs.
    • Supplier costs pursuant to a contract, purchase order, or order for goods in effect prior to taking out the loan for items essential to the recipient’s operations when the expenditure was made.  Costs for perishable goods can be included whether made before or during the life of the loan.
  • Check directly with your lender – Treasury has made the forgiveness application forms available to download. While the ultimate decision to forgive the loans rests with the Treasury Department, each lender is required to process its own forgiveness applications. Accordingly, each lender has its own way of doing things so you should consult directly with your lender to understand their requirements.

As always, our team is available to help you navigate these uncharted waters. Let us help! Contact us today to schedule a consultation.

Tax Considerations for At-Home Workers

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!

 

PPP Good News, Bad News

The introduction of PPP loans provided a dose of good news and a welcome reprieve for thousands of business owners this year. In this unprecedented crisis full of unknowns, this economic stimulus gave many businesses the shot in the arm they needed to pay their employees and keep moving forward.

Even better news arrived when owners realized that the government would be forgiving most of these PPP loans, meaning that they wouldn’t have to repay these loans. Ever.

Now the IRS is hitting owners with some not so good news–PPP-funded expenses will likely not be deductible because the income associated with the forgiveness is excluded from gross income under the CARES Act. While not altogether surprising, this ruling is not set in stone.

The AICPA, for one, has indicated that they believe that the IRS’s interpretation denying deductions of expenses forgiven under the PPP program is contrary to Congress’s intent. Time will tell whether Congress will provide direct guidance to the IRS on this matter.

We will keep an eye on this ever-evolving situation. Please check back regularly for updates, and as always, feel free to contact us to discuss your specific tax preparation needs.

Helpful Links Related to COVID-19

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.

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

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!

Fintech Companies Provide PPP Loan Options

As a small business ourselves, we understand many of the the difficulties COVID-19 has presented, many of which are financial. Gratefully, the government’s response to the coronavirus pandemic has included providing financial aid to small businesses. One of the most well-known and highly-utilized mechanisms is the Payroll Protection Program (PPP), which helps small businesses secure loans through the Small Business Administration (SBA) to keep its workers employed. Best of all, most or all of the loan proceeds are forgivable, meaning the loans will not require repayment!

Originally, the only lenders offering access to PPP loans were traditional banks. Unfortunately, many small businesses did not have an established lending relationship with a large bank, community bank, or credit union. Many traditional banks reserved their lending efforts to their existing customers, leaving a large number of small businesses unserved or underserved.

Enter Fintech. Fintech (financial technology) companies have now also been approved by the SBA to accept applications from small businesses as part of the PPP. This offers new opportunities for small businesses who have not yet been able to access PPP funds.

Below are links to several fintech companies offering PPP loans to small businesses. We are providing these solely as a reference, specifically for any clients who have not had success with traditional banks or who prefer more innovative solutions.

As always, if you need help completing gathering the information needed to prepare your application, or if you just want a sounding board or affirmation as you go through the process, our KuberneoCPA team is ready to help! Contact us today to schedule a consultation and let us assist you.

UPDATED-PPP Forgiveness Forms

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!

 

New Safe Harbor Deadline to Return PPP Funds

The U.S. Small Business Administration (SBA) has extended the “safe harbor” deadline to return unqualified PPP funds to May 14. That means companies can return the funds before that date without penalty. If your organization received a Paycheck Protection Program (PPP) loan and you have now determined that you don’t meet the requirements for “economic uncertainty,” this is your opportunity to return the funds without incident. In other words, SBA guidance and regulations provide that any borrower who applied for a PPP loan prior to April 24, 2020 and repays the loan in full by May 14, 2020 (previously May 7) will be deemed by SBA to have made the required certification in good faith.

Specifically, before submitting a PPP application, the SBA instructs all borrowers to review carefully the required certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification

All indicators point to the fact that the PPP was intended for smaller businesses hardest hit by COVID-19. However, the money available to borrow ran out very quickly. Officials discovered that large companies received tens of millions of dollars in relief—despite their relative stability. The SBA has therefore indicated that they will audit all borrowers who receive funding of $2 million or more. This is an apparent response to the backlash of larger and more financially secure companies receiving PPP funds during the initial loans, to the exclusion and detriment of smaller organizations with a greater need.

The PPP has since been infused with an additional $310 billion, along with new safeguards and areas of scrutiny.

If you’ve received a PPP loan, we recommend that you scrutinize your situation to make sure you qualify for the funds, that is, your “ability to access other sources of liquidity sufficient to support [your] ongoing operations in a manner that is not significantly detrimental to the business.” You should return any unqualified PPP funds you have received during the safe harbor window to avoid penalties.

Even if you do not deem it necessary to return the funds, you should still document thoroughly the purpose of your loan and the specific use of your loan proceeds. Track how you’re spending these funds, particularly those amounts spent on the items originally intended to be covered by the PPP (including the number of employees and their respective compensation).

We will continue to post the latest developments and resources to our COVID-19 Resource Center, so please check back often!

PPP and EIDL Funds Replenished

On April 23, 2020, Congress passed the Paycheck Protection Program and Health Care Enhancement Act. This bill allocates a combined $370 billion of additional funding for the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) programs to assist businesses affected by the economic impacts of COVID-19.

It is widely assumed that these newly approved funds will once again deplete very quickly, so we urge you to be in contact with your preferred lender as soon as possible to initiate the application process. Please contact us with any questions regarding support for your loan application(s) and how best to allocate your funds and track your spending.

KuberneoCPA will continue to monitor the U.S. government response to the COVID-19 pandemic and other actions to keep you as informed as possible. We will continue to post updates on our COVID-19 Resource Center so check back often!