Monthly Archives

January 2021

New Round of Stimulus Payments Authorized

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The Consolidated Appropriations Act, 2021, which was signed into law on December 27, 2020, directs the Department of the Treasury to deliver additional Economic Impact Payments (known more popularly as “stimulus payments”) to U.S. citizens and residents. These payments are generally $600 for singles and $1,200 for married couples filing a joint return. In addition, those with qualifying children will also receive $600 for each qualifying child. Dependents who are 17 and older are not eligible for the child payment.

No action is required on the part of recipients to recieve these payments. The payments are automatic, and may even be delivered via direct deposit before the official payment date of January 4, 2021.

As with the first round of payments under the CARES Act, most recipients will receive these payments by direct deposit. For Social Security and other beneficiaries who received the first round of payments via Direct Express, they will receive this second payment the same way. Anyone who received the first round of payments earlier this year but doesn’t receive a payment via direct deposit will generally receive a check or, in some instances, a debit card.

Eligible individuals who did not receive an Economic Impact Payment this year – either the first or the second payment – will be able to claim it when they file their 2020 taxes in 2021. If you did not receive a payment this year, please contact our office to review the eligibility criteria and see if you are able to claim this on your tax return.

New Law Permits Deduction of PPP Expenses

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The Consolidated Appropriations Act, 2021, signed into law on December 27, 2020, specifies that business expenses paid with forgiven PPP loans are tax-deductible. This supersedes previous IRS guidance which stated that these expenses could not be deducted.

The Appropriations Act clarifies that “no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided” by Section 1106 of the CARES Act (which has been redesignated as Section 7A of the Small Business Act). This provision applies to loans under both the original PPP and subsequent PPP loans.

While the CARES Act excluded PPP loan forgiveness from gross income, it did not specifically address whether the expenses used to achieve that loan forgiveness would continue to be deductible, even though they would otherwise be deductible. In April, the IRS issued Notice 2020-32, which stated that no deduction would be allowed under the Internal Revenue Code for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a PPP loan because the income associated with the forgiveness is excluded from gross income for purposes of the Code under CARES Act Section 1106(i).

In November, the IRS then expanded on this position by issuing Rev. Rul. 2020-27, which held that a taxpayer computing taxable income on the basis of a calendar year could not deduct eligible expenses in its 2020 tax year if, at the end of the tax year, the taxpayer had a reasonable expectation of reimbursement in the form of loan forgiveness on the basis of eligible expenses paid or incurred during the covered period.

If your business received a PPP loan and you would like help determining how these changes will affect your business, please contact our office so that we can help.

New Round of PPP Loans Authorized by Congress

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Part of the Consolidated Appropriations Act, 2021, signed into law on December 27, 2020, authorizes another round of Paycheck Protection Program (PPP) loans for small businesses. This new round of PPP loans, being called “PPP2” by some, is similar to the first round of PPP loans that were authorized early in 2020, but there are some differences too.

Eligibility

PPP2 loans will be available to first-time qualified borrowers and, for the first time, to businesses that previously received a PPP loan. Specifically, previous PPP recipients may apply for another loan of up to $2 million, provided they:

  • Have 300 or fewer employees,
  • Used or will use the full amount of their first PPP loan, and
  • Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.

PPP2 loans are also available to Sec. 501(c)(6) business leagues, such as chambers of commerce, visitors’ bureaus, etc., and “destination marketing organizations”, provided they have 300 or fewer employees, do not receive more than 15% of receipts from lobbying, and fulfill other requirements.

PPP2 will also permit first-time borrowers from the following groups:

  • Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.
  • Sole proprietors, independent contractors, and eligible self-employed individuals.
  • Not-for-profits, including churches.
  • Accommodation and food services operations with fewer than 300 employees per physical location.

The bill allows borrowers that returned all or part of a previous PPP loan to reapply for the maximum amount available to them.

PPP2 Loan Terms

As with the earlier round of PPP loans, the costs eligible for loan forgiveness in PPP2 include payroll, rent, covered mortgage interest, and utilities. However, PPP2 also makes the following expenses potentially forgivable:

  • Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
  • Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.
  • Covered operating costs such as software and cloud computing services and accounting needs.

New COVID-19 Relief Bill Signed Into Law

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On December 27, President Trump signed into law the COVID-19 relief bill that was passed by Congress on December 21, 2020. The legislation, the Consolidated Appropriations Act, 2021, extends weekly benefits for unemployed workers, and provides more than $300 billion in aid for small businesses. It also ensures tax deductibility for business expenses paid with forgiven Paycheck Protection Program (PPP) loans, provides fresh PPP funding, makes Sec. 501(c)(6) not-for-profit organizations eligible for loans for the first time, and offers businesses facing severe revenue reductions the opportunity to apply for a second loan.

Key provisions of the law include:

  • $325 billion in aid for small businesses struggling due to the pandemic. The bill provides more than $284 billion to the U.S. Small Business Association (SBA) for first and second PPP forgivable small business loans and allocates $20 billion to provide Economic Injury Disaster Loan (EIDL) Grants to businesses in low-income communities. In addition, shuttered live venues, independent movie theaters, and cultural institutions will have access to $15 billion in dedicated funding while $12 billion will be set aside to help business in low-income and minority communities.
  • $166 billion for economic impact payments of $600 for individuals making up to $75,000 per year and $1,200 for married couples making up to $150,000 per year, as well as a $600 payment for each child dependent.
  • $120 billion to provide workers receiving unemployment benefits a $300 per week supplement from Dec. 26, 2020 until March 14, 2021. This bill also extends the Pandemic Unemployment Assistance (PUA) program, with expanded coverage to the self-employed, gig workers, and others in nontraditional employment, and the Pandemic Emergency Unemployment Compensation (PEUC) program, which provides additional weeks of federally funded unemployment benefits to individuals who exhaust their regular state benefits.
  • $25 billion in emergency rental aid and an extension of the national eviction moratorium through Jan. 31, 2021.
  • $45 billion in transportation funding, including $16 billion for airlines, $14 billion for transit systems, $10 billion for state highways, $2 billion each for airports and intercity buses, and $1 billion for Amtrak.
  • $82 billion in funding for colleges and schools, including support for HVAC repair and replacement to mitigate virus transmission, and $10 billion in child care assistance.
  • $22 billion for health-related expenses incurred by state, local, Tribal, and territorial governments.
  • $13 billion for emergency food assistance, including a 15% increase for six months in Supplemental Nutrition Assistance Program benefits.
  • $7 billion for broadband expansion.

The bill also extends the employee retention tax credit and several expiring tax provisions and temporarily allows a 100% business expense deduction for meals (rather than the current 50%) as long as the expense is for food or beverages provided by a restaurant. This provision is effective for expenses incurred after Dec. 31, 2020, and expires at the end of 2022.