FAQs About the Advance Child Tax Credit

FAQs About the Advance Child Tax Credit

We’re still getting questions from some folks about the Advance Child Tax Credit that they are receiving. Read below for some answers to common questions we’ve received.

Q: What is it?

A: The Advance Child Tax Credit provides you with an ADVANCE payment of the child tax credit you can claim on your 2021 tax return (filed in early 2022). It is not extra money provided by the government, but rather just an advance of the amount you would typically receive as part of your refund next year.

Q: How is this different than the previous Child Tax Credit?

A: Previously, you had to wait until you filed your tax return to receive the credit. This year, as part of COVID-19 tax law changes, you may receive the credit in monthly payments from July through December. What’s more, the amount has been increased for 2021 only to $3,600 for children under age 6 and to $3,000 for children between 6 and 17.

Q: Who qualifies?

A: You may receive these payments if your dependent child, stepchild, foster child, sibling or other dependent relative does not turn 18 before January 1, 2022, and also:

  • Does not provide more than half of his or her own support during 2021.
  • Lives with you for more than half of tax year 2021.
  • Is a U.S. citizen, U.S. national, or U.S. resident alien.

Q: Can I stop the payments?

A: Yes. If you don’t want to receive the monthly Advance Child Tax Credit payments because you would rather claim the full credit when you file your 2021 tax return, or because you will not be eligible for the credit, you can unenroll through the Child Tax Credit Update Portal. (Note: If you are married and file jointly, BOTH you and your spouse must unenroll individually.)

Q: Will receiving the Advance Child Tax Credit payments affect my other government benefits?

A: No. These payments cannot be counted as income to determine if you are eligible for benefits or assistance, or how much you can receive under any federal, state or local program.

Q: Are the Advance Child Tax Credit payments taxable?

A: No. Because these payments are an advance on your 2021 child tax credit, they are not income and will not be reported as income on your 2021 tax return. However, the total amount of payments you receive is based on the IRS’s estimate of your 2021 child tax credit (generally using information from your previous tax returns). If you receive more in payment than you are eligible to claim on your tax return, you may have to repay the excess amount.

More Questions? Ask Us!

If you have additional questions about the Advance Child Tax Credit, don’t hesitate to contact us. We’ll be happy to help you work through the details. You may also check the IRS’s website for more details.

Premier CPA Services 10 year anniversary logo

May 31 was our 10-Year Anniversary! To celebrate, we will be offering some great giveaways to our clients and Facebook friends. Be sure to follow us and stay tuned!

IRS Issues ERC Safe Harbor

The IRS issued a safe harbor allowing employers to exclude certain amounts from their gross receipts solely for determining eligibility for the Employee Retention Credit (ERC). As an employer, you can elect to apply the safe harbor by excluding these amounts to determine whether you are an eligible employer for a calendar. These amounts include:

  • The amount of the forgiveness of a Paycheck Protection Program (PPP) Loan;
  • Shuttered Venue Operators Grants under the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act; and
  • Restaurant Revitalization Grants under the American Rescue Plan Act of 2021.

You are not required to apply this safe harbor, but may do so on your employment tax return (Form 941 or Form 941-X). If you have questions about the ERC, just give us a call at 706-632-7850.

Social Security 2020 Annual Report

Last year, Social Security paid benefits of $1.096 trillion to approximately 65 million beneficiaries. Meanwhile, an estimated 175 million people paid into Social Security through payroll taxes.

However, the Social Security Administration projects its total annual costs in 2021 will exceed its total annual income for the first time since 1982. And if Congress does not act soon, trust fund reserves will be depleted:

  • Old-Age and Survivors Insurance (OASI) will be depleted in 2033, with 76% of benefits payable at that time.
  • Disability Insurance (DI) Trust Fund will be depleted in 2057, with 91% of benefits still payable.

Video Tax Tip

The IRS Small Business Tax Workshop is a series of online training videos covering tax topics for new and established small business owners.

American Rescue Plan Updates Employer Paid Sick & Family Leave Tax Credits

American Rescue Plan Updates Employer Paid Sick & Family Leave Tax Credits

Paid Sick & Family Leave Credits were enhanced under the American Rescue Plan (ARP), which was enacted in March. The credits reimburse small and mid-size (and certain governmental) employers for the cost of providing paid sick and family leave to their employees for reasons related to COVID-19, including vaccinations. The updates apply to leave taken from April 1 – September 30, 2021.

How the Credits Work

As an employer, the paid leave credits are provided as tax credits against your share of the Social Security and Medicare tax. The tax credits are refundable, which means that you are entitled to payment of the full amount of the credits if it exceeds your share of the tax. The credit is equal to:

  • The sick leave wages paid for up to two weeks (80 hours), limited to $511 per day and $5,110 in total, at 100 percent of the employee’s regular rate of pay; or
  • The family leave wages paid for up to 12 weeks, limited to $200 per day and $12,000 in total, at 2/3rds of the employee’s regular rate of pay.

Note that the amount of the tax credits is increased by allocable health plan expenses and contributions for certain collectively bargained benefits, as well as the employer’s share of social security and Medicare taxes paid on the wages (up to the respective daily and total caps).

How to Claim the Credit

You can claim the credits on your Form 941, Employer’s Quarterly Federal Tax Return, by keeping the federal employment taxes that you otherwise would have deposited — including federal income tax withheld from employees, the employees’ share of social security and Medicare taxes, and your share of social security and Medicare taxes. The Form 941 instructions PDF explains how to do this.

If you do not have enough federal employment taxes set aside for deposit to cover amounts provided as paid sick and family leave wages, you may request an advance of the credits by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19. You will account for the amounts received as an advance when you file your Form 941 for the relevant quarter.

Note that if you are self-employed, you may claim comparable tax credits on your individual Form 1040.

If you need assistance filing for the tax credits, please contact us. We’ll be happy to help you work out all the details.

Beware of These Costly Errors When Claiming Credits

Errors on your Form 941 can be costly. If we handle the filing for you, then we’ll be responsible for any errors made. If you file the forms yourself, however, keep these tips in mind:

  • Ensure line 1 (number of employees) is accurate.
  • Report advanced credits received, not the requested payment of credits.
  • Use Form 7200 to request the advance payment of a credit only, not for reporting the credit.
  • Inform your third-party payers or reporting agents of any credits requested and received.
  • Use fractions of cents line correctly.
  • Only claim credits you are entitled to and don’t exceed the limitations.
  • Complete amended tax returns in detail and be sure they are accurate.
Premier CPA Services 10 year anniversary logo

May 31 was the 10-Year Anniversary of Premier CPA Services! Over the next few months, we will be offering some great giveaways to our clients and Facebook friends to celebrate! Be sure to follow us and stay tuned!

Let Us File Your Payroll Taxes & Forms

Are you filing your payroll taxes electronically? It can save you time and effort, because it’s secure and efficient. Plus, the IRS provides 24-hour confirmation.

You can submit the forms yourself if you have IRS-approved software (there may be a fee).

Or, you can let us file the necessary forms for you. Because we are an authorized IRS e-file provider, we can help you electronically file the following forms:

  • Form 940, Employer’s Annual Federal Unemployment Tax Return
  • Form 941, Employer’s Quarterly Federal Tax Return
  • Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees
  • Form 944, Employer’s Annual Federal Tax Return
  • Form 945, Annual Return of Withheld Federal Income Tax

Are you ready to simplify your payroll accounting? Contact Amber today at amber@premiercpaservices.com for details on how we can help.

The Latest Tax Info You Need to Know

The Latest Tax Info You Need to Know

Tax Return Deadline Extended to May 17

The IRS has extended the federal income tax filing due date for individuals from April 15 to May 17. To accommodate the new deadline, we will accept returns until Thursday, April 15th. If we receive your paperwork AFTER April 15, we will file an extension for you. To help you prepare your files, please download a copy of our 2020 Personal Tax Preparation Checklist.

Note that the deadline for estimated tax payments has NOT changed. First quarter payments are still due on April 15.

The American Rescue plan, which was signed by President Biden on March 11th, and other tax law changes probably affected your finances and returns for both 2020 and 2021. Here are some of the details you need to know:

Contribution Deadlines Extended to May 17

In addition to extending the tax return filing deadline to May 17, the IRS has extended other deadlines that would normally fall on April 15. You now have until May 17, 2021, to make 2020 contributions to your:

  • Individual Retirement Arrangements (IRAs and Roth IRAs),
  • Health Savings Accounts (HSAs),
  • Archer Medical Savings Accounts (Archer MSAs), and
  • Coverdell Education Savings Accounts (Coverdell ESAs).

This new deadline also applies to the reporting and payment of any 10% additional tax due on 2020 distributions from IRAs or workplace-based retirement plans.

IRS to Review Returns, Issue Refunds for Unemployment Benefits

The IRS will automatically begin refunding money in May if you filed your 2020 tax return and reported unemployment compensation before the American Rescue Plan was passed. The new law allows taxpayers who earned less than $150,000 in modified AGI to exclude 2020 unemployment compensation up to $20,400 (married filing jointly) or $10,200 (other taxpayers).

If you already filed and figured your tax based on the full amount of unemployment compensation, the IRS will determine the correct taxable amount. Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed. So there is no need to file an amended return unless the change makes you eligible for additional federal credits and deductions.

If we filed your tax return for you before March 11, we will automatically check it for additional credits and deductions, then let you know if an amended return should be filed. If we have not yet filed your taxes, we will take the new law into account for you. Please contact us if you have any questions about this.

3rd EIP Is Different from Earlier Payments

You may notice that the third Economic Impact Payment you receive(d) is different from the first and second payments. Here’s how:

• The 3rd EIP is an advance payment of the 2021 recovery rebate credit. The two earlier payments are advance payments of the 2020 recovery rebate credit. If you didn’t get a first or second EIP or got less than the full amounts, you may be eligible to claim the 2020 recovery rebate credit on your 2020 tax return.

• The 3rd EIP may be larger. You will receive up to $1,400 as a single taxpayer or $2,800 as a joint filer. If you have qualifying dependents, you will receive up to $1,400 per qualifying dependent.

• More dependents qualify. You will get a payment for all qualifying dependents claimed on your return, not just for children under age 17. This may include older family members like college students, adults with disabilities, parents and grandparents.

• Income phase-out amounts are different. You will not receive a 3rd EIP if your AGI exceeds:

  • $160,000 if married filing jointly or as a qualifying widow/er.
  • $120,000 if filing as head of household.
  • $80,000 if filing single or married filing separately.

• You may be eligible for additional funds. The amount of the 3rd EIP is based on your latest processed tax return (either 2020 or 2019). If it’s based on your 2019 return and is less than the full amount, you may qualify for a supplemental payment after your 2020 return is processed.

Small Businesses: Take Advantage of the Employee Retention Credit

The Employee Retention Credit was modified by the Taxpayer Certainty and Disaster Tax Relief Act of 2020, and applies to the first two calendar quarters of 2021. The changes include:

  • Increasing the maximum credit amount,
  • Expanding the category of employers eligible to claim the credit,
  • Modifying the gross receipts test,
  • Revising the definition of qualified wages, and
  • Revising the ability of employers to request an advance payment of the credit.

Eligible employers can claim a refundable tax credit against the employer share of Social Security tax equal to 70% of the qualified wages they pay to employees after from January 1-June 30, 2021. Qualified wages are limited to $10,000 per employee per calendar quarter in 2021. Thus, the maximum employee retention credit available is $7,000 per employee per calendar quarter, for a total of $14,000 per employee for 2021.

Employers can access the Credit for the 1st and 2nd calendar quarters of 2021 prior to filing their employment tax returns by reducing employment tax deposits. Small employers may request advance payment of the credit (subject to certain limits) on Form 7200, Advance of Employer Credits Due to Covid-19.

Note that the Employee Retention Credit is also available to eligible employers during the third and fourth quarters of 2021, thanks to the American Rescue Plan. The IRS will provide further guidance on this soon.

If you need assistance on how to calculate and claim the Employee Retention Credit, please contact us today.

American Rescue Plan Targets Help to Restaurants

American Rescue Plan Targets Help to Restaurants

Tax Return Deadline Extended to May 17

The IRS has extended the federal income tax filing due date for individuals from April 15 to May 17. To accommodate the new deadline, we will accept returns until Thursday, April 15th. If we receive your paperwork AFTER April 15, we will file an extension for you. To help you prepare your files, please download a copy of our 2020 Personal Tax Preparation Checklist.

Note that the deadline for estimated tax payments has NOT changed. First quarter payments are still due on April 15.

The $1.9 trillion coronavirus relief bill signed by President Biden on March 11, 2021, allocates help to struggling small businesses — especially restaurants — through grants, additional aid, and an expansion of existing credits such as the Employee Retention Tax Credit.

New Restaurant Revitalization Fund Provides Grants

The new law creates a $28.6 billion Restaurant Revitalization Fund (RRF) grant program. Hard-hit restaurants and bars can apply for grants up to $10 million based on lost gross revenue between 2019 and 2020. The vast majority of restaurants and bars will be able to apply for these grants, including those considered: “restaurant, food stand, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brewpub, tasting room, taproom, licensed facility or premise of a beverage alcohol producer where the public may taste, sample, or purchase products.” Those not eligible for the grants include state- or local-government-owned entities, or owners with more than 20 restaurants, though most franchise operators will be eligible.

The Small Business Administration (SBA) will administer and disperse the RRF grants, but the program does not yet have a launch date. In the meantime, if you are a restaurant owner, you should register for the program using the System of Award Management (SAM) here. Also, work with us to prepare relevant paperwork that shows your gross revenue loss in 2020 as compared to 2019.

Employee Retention Tax Credit Extended

In the December 2020 coronavirus relief bill, Congress expanded the Employee Retention Tax Credit (ERTC) to help struggling small businesses for the first two quarters of 2021. The American Rescue Act further helps those same businesses by extending the ERTC for the third and fourth quarters of 2021. The ERTC provides up to $7,000 per employee per quarter for four quarters to help you keep your employees on the payroll.

PPP Deadline Extended to May 31

The Paycheck Protection Program application deadline was just extended, thanks to the passage of the PPP Extension Act. The application deadline is now May 31, 2021, extending the filing deadline for PPP applications by 60 days. It also provides an additional 30 days for the SBA to finish processing applications received by May 31.

If you have any questions about the new coronavirus relief law or other tax questions, please don’t hesitate to contact us. We’re here to help!

Key Due Dates

April 1: Fannin County business property tax report

April 1: Georgia Secretary of State business registration

April 15: Deadline to get your tax return files to us to avoid an extension

April 15: First quarter estimated tax payment

April 30: First quarter payroll tax report

May 17: Individual tax return

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Where’s My Refund?

If you are expecting a refund and haven’t received it yet, you can use the IRS’s “Where’s My Refund?” tool to check the status. Just go to the IRS website or click here to begin. You can start checking your refund status within 24 hours after the IRS receives your e-filed return.

American Rescue Plan Features Several Tax Benefits

American Rescue Plan Features Several Tax Benefits

Please note: The new American Rescue Plan Act signed by President Biden last week includes some items — including unemployment income and healthcare premium assistance — that affect 2020 tax returns.

We will hold all tax returns until more info is released. Depending on how quickly the IRS acts, we may have to file an extension. We will keep you updated!

T he American Rescue Plan Act signed by President Biden last week includes several financial changes and quite a few tax provisions. Here’s a brief look at some of the more important items. We’ll look at them more in-depth in the coming weeks.

Stimulus Checks

A 3rd round of Economic Impact Payments (EIP) worth up to $1,400 per individual and dependent have already started going out. The EIP will begin to phase out for single taxpayers with AGIs of $75,000 and joint filers with AGIs of $150,000.

Unemployment Benefits

A $300-per-week supplement to federal unemployment benefits has been extended through September 6, 2021. Also, the first $10,200 in unemployment benefits are tax-free in 2020 for taxpayers making less than $150,000 per year. (This provision affects your current 2020 tax return as noted above!)

Child Tax Credit

The Child Tax Credit is expanded to provide a credit in advance of filing a return — the IRS will estimate each taxpayer’s child tax credit amount and pay it out monthly in advance from July through December 2021. The credit is also increased to $3,000 per child ($3,600 for children under 6), though the increase phases out above certain incomes.

Earned Income Tax Credit

Special rules now apply for individuals with no children: For 2021, the applicable minimum age is decreased to 19, except for students (24) and qualified former foster youth or homeless youth (18), and the maximum age is eliminated. The credit’s phaseout percentage and amounts are also increased.

Child & Dependent Care Credit

For 2021 only, this credit will be refundable. The credit will be worth 50% of eligible expenses, up to a limit based on income. The exclusion for employer-provided dependent care assistance is increased to $10,500 for 2021.

Family & Sick Leave Credits

The credits for sick and family leave originally enacted by the Families First Coronavirus Response Act are extended to September 30, 2021. The limit on the credit for paid family leave is increased to $12,000.

Employee Retention Credit

Originally enacted in the CARES Act, this credit is extended through the end of 2021, and allows eligible employers to claim a credit for paying qualified wages to employees.

COBRA Continuation Coverage

Eligible individuals may receive premium assistance in the form of a refundable tax credit; this applies to premiums and wages paid after April 1, 2021, and through September 30, 2021.

Premium Tax Credit

This credit is expanded for 2021 and 2022 by changing the applicable percentage amounts.

PPP Loans

Eligible companies that receive a first- or second-draw Paycheck Protection Program (PPP) loan after December 27, 2020, can now also receive a Shuttered Venue Operators Grant (SVOG). The amount of the SVOG will be reduced by the amount of PPP funds approved.

EIDLs

Targeted Economic Injury Disaster Loan grants received from the SBA are not included in gross income, and this exclusion from gross income will not result in a denial of a deduction, reduction of tax attributes, or denial of basis increase. Similar treatment is afforded SBA restaurant revitalization grants.

More to Come

In addition to many tax benefits, the new law allocates $50 billion in funding to benefit small businesses through a variety of programs, including EIDL advance payments and additional PPP funds. There is also money for state and local governments, schools, healthcare entities, vaccine distribution and COVID-19 testing.

Obviously, there is much to digest in the new legislation. We’ll be following up in future newsletters with more details on how it may affect you. In the meantime, please contact us with any questions you may have.

March 26 Last Day to Drop Off Tax Returns!

We are working hard to get to everyone’s returns! With all the law changes for 2020 we want to make sure everyone gets their maximum benefit due.

The deadline for dropping off your tax info to us is March 26. If all your info is to us by that date, we will complete your return by April 15.

If we receive your paperwork AFTER March 26, we will file an extension for you.

Thanks everyone for your patience!

To help you prepare your files, please download a copy of our 2020 Personal Tax Preparation Checklist.

PPP Loans Temporarily Expanded for Even Smaller Businesses

PPP Loans Temporarily Expanded for Even Smaller Businesses

I f you’re a sole proprietor, independent contractor or owner of a very small business, now’s your time to apply for a Paycheck Protection Program (PPP) loan.

Thanks to a temporary rule change by the Biden Administration, the SBA will ONLY accept applications for PPP loans from firms with fewer than 20 employees during a 2-week priority window: February 24 through March 10, 2021.

While the typical PPP loan is determined by multiplying average monthly payroll costs by 2.5, the updated formula will use gross income instead of payroll costs or net income, meaning you may be eligible for a bigger — forgivable — loan amount.

 

98% of small businesses employ fewer than 20 people, but have received only 45% of PPP so far, according to the SBA.

Also Keep in Mind

1) You can apply for either a first or second PPP loan. To qualify for a second loan, you must have spent or plan to spend all of your first loan, and show you had a 25% or more drop in revenue in any quarter of 2020.

2) The new rules also eliminate some restrictions on small business owners:

  • with prior non-fraud felony convictions;
  • struggling with student loan debt delinquency; and
  • who are non-citizen, U.S. residents with Individual Taxpayer Identification Numbers (ITIN).

Apply Now!

The window on this special program for extra small businesses closes March 10, so hurry and apply soon if you’re interested. Note that other types of businesses can also still apply for a PPP loan before the program expires on March 31, 2021.

Personal Tax Return Paperwork Due March 26

If you have not yet provided us with the documents to complete your individual income tax returns, please do so no later than March 26. If you will not have them ready by then, let us know if you want us to file an extension for you. To help you prepare your files, please download a copy of our 2020 Personal Tax Preparation Checklist.

Support Your Local Restaurant

The last COVID relief law passed temporarily allows a 100% business expense deduction for meals as long as the expense is for food or beverages provided by a restaurant. The previous deduction was limited to 50%. This provision is effective for expenses incurred from January 1, 2021, through December 31, 2022.

Timely Tax Tips Help Ensure Correct Returns

Timely Tax Tips Help Ensure Correct Returns

When you provide your paperwork to Premier CPA Services, you’re entrusting us to file your tax return accurately and efficiently. We use sophisticated software to handle the math, find common errors and flag missing information. But we also use our years of experience to ensure you get all the valuable credits and deductions due to you.

We’ve created Checklists for both business and personal returns to ensure you provide us with all the necessary materials to prepare your return. You can download those here:

Follow these tips

To further ensure the accuracy of your return, please consider these additional tips:

  • Choose Direct Deposit for your refund (and verify bank routing and account numbers).
  • Verify Social Security numbers.
  • Double-check the spelling of all names.
  • Confirm filing status (i.e., single, married filing jointly, married filing separately, or head of household).
  • Check the final numbers to ensure all income and expenses are accounted for correctly.
  • Review credits and deductions for things like the earned income tax credit, the child and dependent care credit, and the recovery rebate credit.
  • Sign all forms.
  • Return them to us in a timely manner so we can file your forms on time.

Thank you for entrusting us with your tax return. Please let us know if you have any questions or concerns about your tax files.

Tax Tip: Claim Dependent Credit

If you don’t qualify for the child tax credit, you may still be able to claim credit for other dependents, up to a maximum of $500 per dependent. The credit starts to phase out for incomes above $200,000 single, $400,000 married filing jointly.

Dependents must meet certain conditions, including:

  • Be age 17 or older.
  • Have individual taxpayer identification numbers.
  • Be a parent or other qualifying relative you support.
  • Be an unrelated dependent who lives with you.

You can claim the credit if:

  • You claim the person as a dependent on your tax return.
  • You cannot use the dependent to claim the child tax credit or additional child tax credit.
  • The dependent is a U.S. citizen, national or resident alien.

If you’re unsure whether you can claim someone as a dependent, please contact us for details.

Business Returns Due March 15

Don’t forget! While personal tax returns are due April 15, business and corporate returns are due on March 15. To get your business return done on time, please have all your materials to us no later than February 22.

Access your IRS information online

Online Account is a website system where you can securely access your individual account information. You can:

  • See any amounts you owe to the IRS
  • Make a payment, if due
  • View balance details by year
  • Review payment history, including any scheduled or pending payments
  • Review payment plan details and payment plan options, or request a payment plan
  • Get digital copies of select notices from the IRS
  • View any Economic Impact Payments (EIP) you received
  • Review key information from your most recent tax return, or access your tax records via Get Transcript

To gain access to Online Account, you’ll need to create an account by going through a rigorous identity verification process. Click here for more details.

Tax Tip: Sick and Family Leave Credits

If you are self-employed, you may be eligible to claim tax credits for leave taken between April 1, 2020, and December 31, 2020, due to COVID-19 in which you were unable to work or telework for reasons relating to your own health or that of a family member.

Form 7202: Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals will be used to claim the tax credit passed as part of the Families First Coronavirus Response Act (FFCRA). The credits will help offset your federal income tax. Note that you may also be eligible in 2021 for leave taken between January 1, 2021, and March 31, 2021.

Second Round of PPP Loan Funding Now Open

Second Round of PPP Loan Funding Now Open

T/he SBA recently reopened the Paycheck Protection Program for both “First Draw” and “Second Draw” PPP loans for eligible small businesses. This second go-round is intended to make PPP loans more flexible, helpful and accessible, especially to hard-hit restaurants. Here’s how:

2nd PPP loan available Businesses that got a PPP loan the first time can apply for a second loan, as long as they’re not a public company, don’t employ more than 300 people, have used or will fully use their first PPP loan for authorized uses, and can show at least a 25% drop in gross receipts in the first, second or third quarters of 2020 compared to the same quarters in 2019.

Targeted funds for vulnerable businesses — $15 billion-$25 billion is earmarked for community development financial institutions that typically lend to minority-owned businesses in underserved communities, and for businesses with fewer than 10 employees, as well as those in low-income areas.

Restaurants get more — Restaurants and lodging businesses can apply for loans equal to 3.5 times their monthly payrolls. Other eligible businesses are limited to 2.5 times their average monthly payroll expenses. All PPP loans are capped at $2 million (down from $10 million previously).

Greater use flexibility — To be fully forgiven, at least 60% of the loan funds must be used for payroll expenses. The remaining 40% may be used to cover a now-broader array of business expenses (beyond mortgage interest, rent and utility payments), including personal protective equipment and other COVID needs, certain operations, property damage and supplier costs.

Simpler forgiveness process — Businesses that borrow $150,000 or less will simply need to submit a one-page certification, which includes the number of employees the business retained as a result of the loan and an estimate of how much of the loan was spent on payroll.

Better tax breaks — PPP loans will continue to be tax-free for recipients if used for authorized purposes. But thanks to the new law, payroll and operating expenses will still be deductible.

For more help determining your PPP loan amount and specifics, give us a call today.

Don’t Miss Out on the COVID Tax Credit for Employers

The Taxpayer Certainty and Disaster Tax Relief Act of 2020 (enacted Dec. 27, 2020), made a number of changes to Employee Retention Credits (ERC) previously available under the CARES Act. The new law makes it easier for businesses that choose to keep their employees on the payroll despite COVID-19 challenges.

Benefits/updates include:

  • The ERC has been modified and extended through June 30, 2021.
  • Eligible employers can claim a refundable tax credit against the employer share of Social Security tax equal to 70% of the qualified wages they pay to employees from January 1-June 30, 2021. Qualified wages are limited to $10,000 per employee per calendar quarter in 2021 (thus maximum ERC is $7,000 per employee per quarter, total of $14,000 in 2021).
  • Employers can access the ERC for the 1st and 2nd quarters of 2021 prior to filing their employment tax returns by reducing employment tax deposits. This must be reported on Form 941.
  • Small employers may request advance payment of the credit on Form 7200, Advance of Employer Credits Due to Covid-19. Keep in mind that Form 7200 is used to request the advance payment of employer credit, not claim it.
  • Employers are eligible if they operate a trade or business January 1-June 30, 2021, and experience either:
    – A full or partial suspension of their trade or business due to governmental orders limiting commerce, travel or group meetings due to COVID-19, or
    – A decline in gross receipts in a quarter in 2021 that are less than 80% of the gross receipts in the same quarter in 2019 (or 50% less in the same 2020 quarter).
  • Paycheck Protection Program (PPP) loan recipients can claim the ERC for qualified wages that are not treated as payroll costs in obtaining forgiveness of the PPP loan.

If you need help determining your business’s eligibility for Employee Retention Credits or filing Form 941, please give us a call. We’re here to help!

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Download Our Tax Preparation Checklist

We put together two checklists to help you pull together your 2020 tax files. If you haven’t yet, you can download them here:

If you prefer, we can email them to you (just call or email Amber at amber@premiercpaservices.com to request your copy).

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Key Filing Dates!

TODAY! Feb. 1: W-2s and 1099s due to recipients

Feb. 12: IRS begins accepting and processing 2020 tax returns

Feb. 22: Projected date for “Where’s My Refund” tool to open

Apr. 15: Tax filing deadline

Oct. 15: Tax extension filing deadline

Money Brief: Tax Filing Season Begins Feb. 12

The IRS will begin accepting and processing 2020 tax year returns no sooner than February 12, 2021. The February 12 start date allows the IRS time for programming and testing following the recent tax law changes. The IRS urges taxpayers to file electronically with direct deposit to speed processing and refunds — nine out of 10 taxpayers should receive their refund within 21 days of when they file electronically with direct deposit (assuming no issues).

We’re now accepting tax returns. If you’ve pulled together all your files, you can drop them off at our office either in person or in the dropbox outside.

2021 Appropriations Act Provides Additional Pandemic Relief

2021 Appropriations Act Provides Additional Pandemic Relief

On December 27, 2020, President Trump signed into law the newest $900 billion COVID-19 relief bill. The legislation, part of the Consolidated Appropriations Act, 2021, provides additional pandemic relief and clarifies the deductibility of business expenses paid with forgiven Paycheck Protection Program (PPP) loans. Key provisions of the new law include:

  • $166 billion for Economic Impact Payments of $600 to each eligible taxpayer (see Money Brief at right).
  • $120 billion for $300 per week in extended weekly unemployment benefits (December 26, 2020-March 14, 2021).
  • $25 billion in emergency rental aid, plus an extension of the national eviction moratorium (through January 31, 2021).
  • $325 billion in aid for small businesses, including $284+ billion for additional PPP loans; $20 billion for Economic Injury Disaster Loan (EIDL) Grants; $15 billion for shuttered live venues, independent movie theaters and cultural institutions; and $12 billion for businesses in low-income and minority communities.
  • $45 billion in transportation funding (for airlines, transit systems, state highways and more).
  • $82 billion in funding for colleges and schools, plus $10 billion in childcare assistance.
  • $22 billion for state, local, tribal and territorial governments.
  • $13 billion for emergency food assistance, including a six-month, 15% increase in SNAP benefits.
  • $7 billion for broadband expansion.

The new law also extends the Employee Retention Tax Credit and several expiring tax provisions, and temporarily allows a 100% business expense deduction for meals (up from the current 50%) as long as the expense is for food or beverages provided by a restaurant. This provision is effective for expenses incurred January 1, 2021, thru December 31, 2022.

Second Round of PPP Funds Available

The new round of PPP — or PPP2 — is similar to the first round of PPP loans, but includes several important differences:

1) PPP2 loans are available to both first-time qualified borrowers and to businesses that previously received a PPP loan. Specifically, previous PPP recipients may apply for another loan of up to $2 million if they:

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

2) PPP2 loans are now available to Sec. 501(c)(6) business leagues, such as chambers of commerce, visitors’ bureaus, and destination marketing organizations, if:

  • They have 300 or fewer employees, and
  • Their lobbying activities comprise no more than 15% of their total activities, and cost no more than $1 million during the most recent tax year that ended prior to February 15, 2020.

3) Other first-time borrowers that may now apply for PPP loans include:

  • 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 (those with NAICS codes starting with 72) with fewer than 300 employees per physical location.

4) Borrowers that returned all or part of a previous PPP loan may reapply for the maximum amount available to them.

Perhaps the best part of the new law specifies that business expenses paid with forgiven PPP loans ARE tax-deductible. This reverses previous IRS guidance that such expenses could not be deducted.

PPP Forgiveness Criteria Expanded

As before, the costs eligible for loan forgiveness include payroll, rent, covered mortgage interest and utilities. However, PPP2 also makes the following 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 to the recipient’s current operations.
  • Covered operating costs, such as software, cloud computing services and accounting needs.

To be eligible for full loan forgiveness, PPP2 borrowers will have to spend no less than 60% of the funds on payroll over a period of either eight or 24 weeks. PPP2 borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs in the year prior to the loan or the calendar year, but the maximum loan amount has been cut to $2 million. PPP2 borrowers with NAICS codes starting with 72 (hotels and restaurants) can get up to 3.5 times their average monthly payroll costs, subject to the $2 million maximum.

The new COVID-19 relief law creates a simplified forgiveness application process for loans of $150,000 or less. It also repeals the requirement that PPP borrowers deduct the amount of any EIDL advance from their PPP forgiveness amount.

Tax Deductibility for PPP Expenses Clarified

Perhaps the best part of the new law specifies that business expenses paid with forgiven PPP loans ARE tax-deductible. This reverses previous IRS guidance that such expenses could not be deducted. The new law states 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 both PPP1 and PPP2 loans.

Keep in mind, however, that the state of Georgia may not follow the new federal rules regarding business expenses. For example, for taxable years beginning on or after January 1, 2018, and before January 1, 2019, Georgia has NOT adopted any of the 2019 or 2020 federal changes, including the federal CARES Act. So we may need to wait a bit — or file an amended state return — to find out how Georgia will handle the newly passed federal tax law.

We’re currently putting together a list of items we’ll need from you to file your taxes. Please bear with us as we negotiate all the changes involved due to COVID-19. If you have any questions, please feel free to contact us.

Source: Journal of Accountancy

Prepare Now for Tax Season

We expect tax season to be a little more chaotic this year, so we’ll be putting together a checklist of items you’ll need to supply with your paperwork for us to prepare and file your taxes. Look for it early next year!

Beginning on January 8, 2021, we’ll be open on Fridays to assist you with your tax and financial planning needs.

We’re also taking tax appointments now if you’re a new client or have major changes to your taxes. Plan ahead and call Amber at 706-632-7850 to reserve your spot. Note that you do NOT need an appointment for us to handle your tax preparation — you can just drop off your files when you’re ready.

Money Brief: New $600 Stimulus Payments

You can expect to receive $600 directly deposited into your bank account within the next week or two, if you haven’t already. Paper checks have also started mailing out. The payments are part of the COVID-19 relief package signed by President Trump on December 27. Eligible individuals who meet income limits will receive $600; couples, $1,200; and families, an additional $600 per child. As before, your most recent tax return determines your eligibility for the stimulus payment — you’ll receive the full amount if you made under $75,000 as an individual or $150,000 as a couple.

Money Brief: GDOL Update

If you are a Georgia business owner, note that your 2021 Annual Unemployment Insurance (UI) Tax Rate Notice will be delayed. The Georgia Department of Labor expects to release the notices on the Employer Portal in February. Because of this, Employer Quarterly Tax and Wage reports will NOT be accepted for the 1st quarter of 2021 until the new tax rates are released. Look for an email once the 2021 tax rate notices are published — they will NOT be mailed. If you are not already registered on the GDOL Employer Portal, be sure to register to avoid delays in receiving your notice. Go to dol.georgia.gov, click on the Employers tab, and select Employer Portal.

Money Brief: 2021 Mileage Rates Decrease

The standard mileage rate for business use of a vehicle is decreasing in 2021 — to 56 cents per mile — down from 57.5 cents per mile in 2020. The rate applies for self-employed taxpayers who deduct automobile expenses if they qualify as ordinary and necessary business expenses, and employers who reimburse their employees for operating an automobile for business.

Money Brief: EITC/ACTC May Delay Refunds

If you claim the Earned Income Tax Credit or Additional Child Tax Credit, your refund (if any) may be delayed. By law, the IRS must hold the entire refund — even the portion not associated with EITC/ACTC — until at least mid-February. If you choose direct deposit, EITC/ACTC-related refunds should be available by the first week of March.

8 Top Tax Tips for Year-end 2020

8 Top Tax Tips for Year-end 2020

I think most of us will be glad when 2020 is finally over so we can look forward to a new start in 2021. As the year winds down in the next four weeks, take some time to look over your finances. There may be a few things you can do before the end of the year to get ready for the 2021 tax-filing season.

Check Your Financial To-Do List

#1  Report changes — If you moved in 2020, notify the IRS of your new address. Name changes should be updated with the Social Security Administration.

#2 Renew expiring ITINs — If your Individual Taxpayer Identification Number is set to expire at the end of this year, be sure to renew it now. Visit the ITIN page for more details.

#3 Donate to charity — Even if you don’t itemize your deductions anymore, the CARES Act passed earlier this year allows you to take a charitable deduction of up to $300 for cash contributions made to qualifying charities. The Coronavirus Aid, Relief, and Economic Security Act also temporarily suspends limits on charitable contributions and temporarily increases limits on contributions of food inventory.

#4 Check your EIP — If you received an Economic Impact Payment (EIP), you should have also received a Notice 1444, Your Economic Impact Payment, which you’ll need to give to your tax preparer. If you did NOT receive an EIP, you may be able to claim the Recovery Rebate Credit if you meet certain criteria. For additional information, visit the Economic Impact Payment Information Center.

If you received interest of at least $10 on a delayed federal tax refund for your 2019 return, you will receive a Form 1099-INT from the IRS. In true IRS fashion, this interest payment is taxable, and must be included on your federal tax return for 2020.

#5 Verify retirement plan distributions — The CARES Act waived required minimum distributions (RMDs) during 2020 for IRA or retirement plan accounts, and allowed eligible individuals to take a coronavirus-related distribution of up to $100,000 by December 30, 2020. Ask us for more details, or visit the IRS’s page on retirement plan relief.

#6 Contribute to your retirement plan — Depending on your AGI, you may be able to take a tax credit of 50%, 20% or 10% of eligible contributions to your IRA or employer-sponsored retirement plan. While the total salary deferral limit for 2020 is $19,500 ($26,000 if you’re 50+), only contributions of up to $2,000 qualify for the credit ($4,000 if married filing jointly), making the maximum credit $1,000 ($2,000 if married filing jointly). See the chart below for details.

Also note that the Setting Every Community Up for Retirement Enhancement (SECURE) Act repealed the maximum age for traditional IRA contributions, so you can continue to contribute to a traditional IRA at any age as long as you earn compensation. The SECURE Act also increased the minimum RMD age from 70½ to 72.

#7 Verify your withholding — Use the IRS’s tax withholding estimator to make sure your withholding and estimated taxes align with what you actually expect to pay. Keep in mind that most income is taxable, including unemployment compensation. If you received non-wage income like self-employment income, investment income, taxable Social Security benefits and, in some instances, pension and annuity income, you may be in danger of underpaying your taxes, which could result in penalties. In this case, you can make an end-of-the-quarter estimated tax payment or have additional taxes withheld from your next few paychecks.

#8 Make business purchases — If you own a business, consider purchasing some business supplies now to take the deduction in 2020. Everything from reams of paper to a new computer or desk can qualify as an eligible business expense.

Also note that the CARES Act fixed a technical issue with bonus depreciation, a provision that allows businesses to immediately deduct the full cost of many types of investments. The legislation expands bonus depreciation to qualified improvement property (QIP), which applies to almost any improvement to the interior of a building that is either owned or leased. The fix is retroactive, so businesses can deduct qualified improvements dating back to January 1, 2018, either by amending their 2018/2019 returns, or by employing an accounting method change.

Prepare Now for a Smooth Tax-Filing Season

With so many changes affecting tax filing for 2020, we expect there could be confusion and delays. Start gathering your paperwork now, so you’re ready to go when your Forms W-2, Forms 1099-Misc and other income documents start arriving in the mail. If you have any questions, we’re here to help — just call 706-632-7850 or email us.

Money Brief: Feb. 1, 2021, Deadlines

Wage and tax statements normally due on January 31 of each year will be due on Monday, February 1, 2021, because January 31 falls on a Sunday next year. Keep this in mind and plan ahead if you are required to file:

  • Form W-2, Wage and Tax Statements,
  • Form W-3, Transmittal of Wage and Tax Statements,
  • Forms 1099-MISC, Miscellaneous Income, and
  • Forms 1099-NEC, Nonemployee Compensation.

Automatic extensions of time to file Forms W-2 are not available. If you need assistance filing any of these forms for your employees, please contact us as early in January as possible. You might want to get a head start now on verifying or updating employee information like names, addresses and Social Security numbers.

Money Brief: IRS Interest Rates

Interest rates charged by the IRS will remain the same for the first quarter of 2021:

  • 3% for overpayments (2% in the case of a corporation);
  • 5% for the portion of a corporate overpayment exceeding $10,000;
  • 3% for underpayments; and
  • 5% for large corporate underpayments.

Money Brief: Newly Marrieds

If you got married in 2020, consider this quick checklist:

  • Name and Address Changes — If you plan to change your name, be sure to notify the Social Security Administration. The name on your tax return must match the one on file with the SSA to avoid refund delays. To update your information, file Form SS-5, Application for a Social Security Card, available at SSA.gov, by phone at 800-772-1213 or at your local SSA office. If you changed your address, send the IRS Form 8822, Change of Address.
  • Withholding Taxes — Ask your employer for a new Form W-4, Employee’s Withholding Allowance. Depending on how you choose to file, you may want to adjust your withholding amount. Check the IRS Withholding Estimator or give us a call to help you complete a new Form W-4.
  • Filing Status — If you are married as of December 31, you are considered married for the whole year for tax purposes. And as a newly married couple, you can choose to file your federal income taxes jointly or separately next year. In most cases, filing jointly is typically more beneficial. But we can help you determine the best method for your personal situation.

Take a $300 Charitable Deduction Thanks to the CARES Act

Take a $300 Charitable Deduction Thanks to the CARES Act

When the Tax Cuts and Jobs Act (TCJA) was passed in 2017, it changed the way charitable contributions were handled at tax time. Basically, you can only deduct donations to charity if you itemize your deductions. And the TCJA makes itemizing less enticing for most taxpayers.

With the CARES (Coronavirus Aid, Relief, and Economic Security) Act, passed in April 2020, a certain portion of your charitable contributions may now be deductible for tax year 2020.

What Has Changed

#1 — Taxpayers who do NOT itemize deductions may now take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations. Qualifying organizations include:

  • Religious
  • Charitable
  • Educational
  • Scientific
  • Literary

To make sure the organization qualifies, you can check its status on the IRS’ “Tax Exempt Organization Search” page here.

#2 — The CARES Act also suspends limits on charitable contributions. Previously, the amount of charitable cash contributions you could deduct on Schedule A as an itemized deduction was limited to a percentage (typically 60%) of your adjusted gross income. To qualify, however, the contribution must be:

  • a cash contribution;
  • made to a qualifying organization; and
  • made during the calendar year 2020.

#3 — The CARES Act temporarily increases limits on contributions of food inventory. This special rule allows enhanced deductions by businesses for contributions of food inventory for the care of the ill, needy or infants. For contributions of food inventory in 2020, business taxpayers may deduct qualified contributions of up to 25% (previously 15%) of their aggregate net income from all trades or businesses from which the contributions were made or up to 25% of their taxable income.

Don’t Forget About Qualified Charitable Distributions

Did you know that if you are 70½ or older, you can make a qualified charitable distribution from your IRA – up to $100,000 – directly to an eligible charity? This is generally a nontaxable distribution made by the IRA trustee to the charitable organization of your choice. What’s more, this qualified charitable distribution counts toward your minimum distribution requirement for the year.

We Can Help

Not sure whether you qualify for a charitable deduction? Just provide us with all your tax information and receipts come tax-time next year, and we’ll make sure you’re taking advantage of every deduction possible. As always, please feel free to contact us with questions.

 

SBA Will Require PPP Loan Necessity Form from Large Borrowers

Businesses and nonprofits that received $2+ million Paycheck Protection Plan (PPP) loans are required to complete a loan necessity questionnaire. The new forms (one for businesses and one for nonprofits) are designed to collect supplemental information to evaluate the good-faith certification PPP borrowers made that economic uncertainty made their loan request necessary.

The forms are SBA Form 3509, Paycheck Protection Program Loan Necessity Questionnaire (For-Profit Borrowers) (PDF here), and SBA Form 3510, Paycheck Protection Program Loan Necessity Questionnaire (Non-Profit Borrowers) (PDF here). They will be sent from the lender to the borrower, who will then have 10 business days to return the completed form and supporting documents. Warnings on the new forms say that, “failure to complete the form and provide the required supporting documents may result in SBA’s determination that you were ineligible for either the PPP loan, the PPP loan amount, or any forgiveness amount claimed, and SBA may seek repayment of the loan or pursue other available remedies.”

The nine-page forms each include 21 questions, many of which have multiple parts and require supporting documents. If you need assistance completing Form 3509/3510, please contact us as soon as you receive it. We can help you put the reasoning behind your PPP application into the context of the pandemic’s early days, when the length and severity of business shutdowns were unknown.

Source: AICPA

Money Brief: PPP Loan Expenses

Because Congress did not enact specific legislation affecting expenses related to Paycheck Protection Program (PPP) loans, the Treasury and IRS has clarified the tax treatment of those expenses:

  • If you took out a PPP loan that has been forgiven or you expect to be forgiven, then your expenses related to the loan are NOT deductible (whether you have filed for forgiveness or not).
  • If your PPP loan has not or will not be forgiven, then you will be able to deduct related expenses.

The reasoning: Since businesses are not taxed on the proceeds of a forgiven PPP loan, the expenses are not deductible. The Treasury is encouraging businesses to file for forgiveness sooner rather than later.

Money Brief: Tax Deductions

In an update to the Tax Cuts and Jobs Act’s $10,000 cap on state and local tax deductions, the IRS issued regulations earlier this month (Notice 2020-75) regarding taxes paid by Partnerships and S-Corps. Essentially, state and local taxes will be allowed as a deduction in computing the Partnership’s or S-Corps’ non-separately stated taxable income or loss, and are therefore NOT subject to the state and local tax deduction limitation for partners and shareholders who itemize deductions. Taxpayers can apply these rules to a tax year ending after December 31, 2017.

Money Brief: Taxpayer Relief

The IRS announced a Taxpayer Relief Initiative to help taxpayers who owe taxes but are struggling financially due to the pandemic. These initiatives include:

  • Taxpayers who qualify for a short-term payment plan may now have up to 180 days to resolve their tax liabilities instead of 120 days.
  • The IRS is offering flexibility for some taxpayers who are temporarily unable to meet the payment terms of an accepted Offer in Compromise.
  • The IRS will automatically add certain new tax balances to existing Installment Agreements, for individual and business taxpayers who have gone out of business.
  • Certain qualified individual taxpayers who owe less than $250,000 may set up Installment Agreements without providing a financial statement if their monthly payment proposal is sufficient.
  • Some individual taxpayers who only owe for the 2019 tax year and owe less than $250,000 may qualify to set up an Installment Agreement without a notice of federal tax lien filed by the IRS.
  • Qualified taxpayers with existing Direct Debit Installment Agreements may be able to use the Online Payment Agreement system to propose lower monthly payment amounts and change their payment due dates.

While tax relief is not automatic, taxpayers can request additional payment relief via a variety of other, existing options, including:

Are You Taking Advantage of These 3 COVID-Related Business Tax Credits?

Are You Taking Advantage of These 3 COVID-Related Business Tax Credits?

Put into place to help small business owners during the COVID-19 crisis, these tax credits may help you reduce your business’s financial burden:

Employee Retention Credit

This credit encourages businesses to keep employees on their payroll. The refundable tax credit is 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19. The credit is available to all employers and tax-exempt organizations regardless of size, except for state and local governments, and small businesses who take small business loans. To qualify, your business must be fully or partially suspended by government order due to COVID-19 during the calendar quarter, OR your gross receipts are below 50% of the comparable quarter in 2019. Once your gross receipts go above 80% of a comparable quarter in 2019, you no longer qualify after the end of that quarter.

Paid Sick Leave Credit

This credit allows businesses to receive a credit for an employee who is unable to work due to coronavirus quarantine, self-quarantine or has coronavirus symptoms and is seeking a medical diagnosis. Those employees are entitled to paid sick leave for up to 10 days (up to 80 hours) at the employee’s regular rate of pay — up to $511 per day, $5,110 in total.

Employers can also receive the credit for employees who are unable to work due to caring for someone with coronavirus or caring for a child because the child’s school or place of care is closed, or the paid childcare provider is unavailable due to the coronavirus. Those employees are entitled to paid sick leave for up to two weeks (up to 80 hours) at two-thirds the employee’s regular rate of pay — up to $200 per day, $2,000 in total.

Family Leave Credit

Employees are entitled to paid family and medical leave equal to two-thirds of the employee’s regular pay — up to $200 per day, $10,000 in total. Up to 10 weeks of qualifying leave can be counted towards the Family Leave Credit.

How Will You Receive the Credit?

As an employer, you can be immediately reimbursed for the credit by reducing your required deposits of payroll taxes that have been withheld from your employees’ wages by the amount of the credit. If you are eligible, you are entitled to immediately receive a credit in the full amount of the required sick leave and family leave, plus related health plan expenses and your share of Medicare tax on the leave, through December 31, 2020. The refundable credit is applied against certain employment taxes on wages paid to all employees.

You must report your total qualified wages and the related health insurance costs for each quarter on your quarterly employment tax returns or Form 941. If your employment tax deposits are not sufficient to cover the credit, you may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19. You may also request an advance of the Employee Retention Credit this way.

The rules regarding these COVID-19 related tax credits can be confusing. Whether we handle your payroll or you do, please contact us to discuss how you can take advantage of these money-saving tax credits for your small business.

PPP Loans of $50k or Less Get Simplified Forgiveness Application

If you received a Paycheck Protection Program (PPP) loan of $50,000 or less, you can now apply for loan forgiveness using a simple application: SBA Form 3508S. The forgiveness process for smaller loans is streamlined because you are not required to undergo complicated full-time equivalent (FTE) or salary reduction calculations. You will still have to make some certifications and provide documentation to your lender for payroll and nonpayroll costs, however. If you’re ready to get started with the process, contact your lender to be sure they want you to use the new form (they may have their own version). And give us a call if you need help completing the forgiveness application.

Approximately 3.57 million of the 5.2 million total PPP loans approved by the SBA were for $50,000 or less. And about 1.71 million of those loans were made to businesses with zero-to-one employee.

Make Your Appointment

It’s time to make your year-end tax planning appointment. Choose an in-person meeting (limited availability), or a Zoom or phone meeting. Please call Amber at  706-632-7850 or email her to set up a date.

MONEY BRIEF #1

If you do not plan to talk with us before the end of the year, then you should still review your tax withholding and payments now. An adjustment or two can boost your take-home pay OR allow you to increase your tax payments to avoid a surprise tax bill when filing next year. Things that can affect your year-end taxes include:

  • Coronavirus tax relief
  • Unemployment compensation
  • Job change or loss
  • Work-from-home changes
  • Life changes, such as marriage or childbirth

 You can visit IRS.gov/account to view your tax payment history, taxes owed and certain tax return information. And you can use the IRS’s Tax Withholding Estimator tool to determine how much you should be paying throughout the year.

MONEY BRIEF #2

Social Security recipients can expect a modest 1.3% cost-of living adjustment, or COLA, in 2021. The estimated average Social Security payment will increase about $20 to $1,543 a month next year; a typical couple’s benefits would increase $33 to $2,596 per month. (The 2020 increase was 1.6%.) The COLA affects about 1 in 5 Americans, including Social Security recipients, disabled veterans and federal retirees — some 70 million people.

PPP Loan Forgiveness: Is It Time to File?

PPP Loan Forgiveness: Is It Time to File?

I f you were among the first to receive a Paycheck Protection Program (PPP) loan, you may have recently received a notice from your lender that payment was due. This is because those early loans generally provided for a six-month deferral period.

However, the SBA just updated its guidance to clarify the deferral period for ALL PPP loans — including those that were approved before the Paycheck Protection Flexibility Act became law on June 5. According to the new rules, lenders must extend the deferral period for PPP loan payments to either:

  1. The date the SBA remits the borrower’s loan forgiveness amount to the lender, OR
  2. 10 months after the end of the borrower’s loan forgiveness covered period (if the borrower does not apply for loan forgiveness).

What Does This Mean?

Basically, this means you have several more months. Which is good, because you probably don’t want to file for loan forgiveness until the questions surrounding tax deductibility and automatic forgiveness are resolved. Here’s why:

Deductibility of expenses: Forgiven PPP loans are not taxable income, but IRS Notice 2020-32 declared that no tax deduction is allowed for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a PPP-covered loan. The position is that allowing the deductibility of expenses paid with PPP funds would result in a double-dipping scenario. The AICPA and other organizations have urged Congress to allow full deductions for PPP-related business expenses, but congressional action has not yet been taken on this.

Blanket forgiveness: Some members of Congress have proposed legislation that would allow for a simpler forgiveness process for loans under a certain amount (possibly $150,000 and below). Again, no congressional action has been taken yet.

 

By the time the PPP loan program stopped accepting applications on August 8, the SBA had approved roughly 5.2 million loans totaling $525 billion — leaving almost $134 billion of congressionally approved funds unspent. 

What We Do Know About PPP Loan Forgiveness

If you’re eager to file for PPP loan forgiveness, keep in mind:

Forgiveness application due date: There is no defined deadline for submitting the forgiveness application, but loan payments will be required to begin 10 months after the end of the covered period (as noted above). Once you submit a forgiveness application, it triggers deadlines for lenders and the SBA. Lenders have until 60 days after the forgiveness application is received to issue a decision to the SBA. The SBA then has 90 days after receiving the decision from the lender to review the application and remit the forgiveness amount to the lender with any interest accrued through the date of the payment.

Early applications for loan forgiveness: These are permitted, but an eight- or 24-week covered period will still apply. If your loan was funded before June 5, 2020, you can choose to keep the eight-week covered period or move to the 24-week period. If your loan was funded after June 5, 2020, you must use a 24-week covered period. Whether you choose eight weeks or 24 weeks, you may apply for forgiveness before the end of the covered period — but doing so lowers the maximum eligible compensation (amounts would be prorated).

Definition of an owner-employee: The PPP loan forgiveness application established a PPP owner-employee compensation rule for determining the amount of compensation eligible for loan forgiveness. The IRS later defined an owner-employee as someone who is both an owner and an employee of a C corporation, and that the PPP owner-employee compensation rule does not apply to individuals with less than a 5% stake in a C or S corporation.

So … What Should You Do?

With so much uncertainty still hovering around the PPP loan forgiveness process, we suggest that you wait a bit longer before applying for loan forgiveness. In the meantime, document everything. Keep track of all paperwork involving your PPP loan, payroll expenses and other expenses that were paid with your loan. You’ll need to have your paperwork in order when the time finally does come to file.

If you have any other questions or concerns relating to the PPP loan program, please don’t hesitate to contact us. We’ll be happy to answer your questions.

Make Your Appointment

It’s time to make your year-end tax planning appointment. Choose an in-person meeting (limited availability), or a Zoom or phone meeting. Please call Amber at  706-632-7850 or email her to set up a date.

MONEY BRIEF #1

Good recordkeeping is an important part of tax planning and preparing for next year’s return. And it’s never too early to take stock of your record-keeping systems. Here are a few tips:

  • Develop a system that keeps all your pertinent information together. Set up dedicated folders on your computer as well as paper folders in your desk or file drawer.
  • Add tax records and statement to your files as you receive them. This includes your Economic Impact Payment Notice 1444 and any unemployment compensation documentation.
  • Notify the IRS if your address changes by filing Form 8822, Change of Address. Also be sure to notify the Social Security Administration of a legal name change to avoid delays in processing your tax return.
  • Keep any receipts, canceled checks and other documents that support your income and expenses. These include records relating to real estate property transactions, and stock purchases and sales.

For more record-keeping information, see Publication 5349, Year-Round Tax Planning Is for Everyone.

MONEY BRIEF #2

If you are undergoing an audit with the IRS, you have rights under the Taxpayer Bill of Rights, such as:

  • The IRS generally has three years from the date you file your return to assess any additional tax for that tax year. Note that the IRS has an unlimited amount of time to assess tax if you fail to file a return or file a false or fraudulent return.
  • The IRS generally has 10 years from the assessment date to collect unpaid taxes. This 10-year period can be extended if you enter into an installment agreement or if the IRS obtains a court judgment. Also, the 10-year collection period may be suspended if the IRS cannot collect money due to a bankruptcy or an ongoing collection process.
  • If the IRS concludes you owe taxes, it will issue a statutory notice of deficiency. This notice must include the deadline for filing a challenge with the tax court, typically within 90 days of the notice.
  • Generally, the IRS can only audit your tax return once for any given tax year. However, the IRS may reopen an audit for a previous tax year if the IRS finds a fraudulent return or other issues.

Working from Home? Here’s What You Need to Know About Taxes

Working from Home? Here’s What You Need to Know About Taxes

Thanks to COVID-19, you may find yourself working from home — whether for the first time or more often than before. So can you claim a home office deduction when you file your 2020 tax return next year?

First of all, if you are an employee, you are NOT eligible to claim the home office deduction. You may be able to deduct a few expenses, but these are very limited.

What Is Deductible?

  • You must meet specific requirements to deduct home business expenses. Even then, the deductible amount may be limited.
  • The home office deduction is available to both homeowners and renters, whether you live in a house, apartment, condo, mobile home, boat or similar property. It also includes other structures on the property — unattached garage, studio, barn or greenhouse — if they are related to the business.
  • It does NOT include any part of your property used exclusively as a hotel, motel, inn or similar business.
  • Deductible expenses include mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent.
  • There are two basic requirements for your home to qualify as a deduction:
    1. You must use a portion of your home exclusively for conducting business on a regular basis, and
    2. Your home must be your principal place of business.

Figuring Your Deduction

If you qualify for a home office deduction, you may choose one of two methods to calculate the deduction:

  1. The Simplified Option provides a rate of $5 per square foot, up to a maximum of 300 square feet, for a maximum deduction of $1,500 per year.
  2. For the Regular Method, you must determine the percentage of your home devoted to business use to determine the deduction for indirect expenses (utilities, mortgage, etc.). Direct expenses (office supplies, etc.) are deducted in full.

Please contact us for more details or for help determining if you qualify for the home office deduction.

Wallet of money

What You Need to Know About Payroll Tax Deferral

On August 8, President Trump signed a Presidential Memorandum allowing for a Payroll Tax Deferral. The IRS recently issued guidance on the memorandum. Here’s what you need to know:

  • It applies only to employees whose biweekly paychecks are less than $4,000 (about $104,000/year).
  • Employers can stop withholding employees’ payroll taxes from September 1-December 31, 2020.
  • Employees will then have to re-pay those taxes between January 1-April 30, 2021. (President Trump left open the possibility of forgiving the deferred taxes, but that can only be approved by Congress.)
  • This is a voluntary program. It is up to the employer whether to opt in to the payroll tax deferral. Many are not because employees would be forced to pay a big tax bill next year.

If you have questions about this new program, we can help you determine the best option for you — whether you have a company with employees or you are an employee affected by the tax deferral.

MONEY BRIEF #1

If you mailed a check to the IRS to pay your taxes recently, it may still be unopened in the backlog of mail due to COVID-19. Do not cancel your check thinking it may be lost! Any payments sent will be posted as of the date the IRS received them — rather than the date the agency processes them. The IRS is providing relief from bad check penalties for dishonored checks the agency received between March 1 and July 15 due to delays in processing. Note that interest and penalties may still apply if they were received late.

MONEY BRIEF #2

The Work Opportunity Tax Credit is available to employers who hire long-term unemployment recipients and others certified by their state workforce agency if the individual begins work before January 1, 2021. You can find out more about this credit at IRS.gov/wotc or contact us for details on how this general business credit can save you money.

MONEY BRIEF #3

Reminder: The Coronavirus, Aid, Relief and Economic Security Act (CARES Act) enacted earlier this year allows employers to defer the deposit and payment of the employer’s share of Social Security taxes through December 31, 2020. This also allows self-employed individuals to defer certain self-employment taxes. These FAQs address the issue; or call us if you have questions.

MONEY BRIEF #4

Do you use an Individual Taxpayer Identification Number (ITIN) instead of a Social Security number? If so, it may expire at the end of 2020. ITINs are used by people who have tax filing or payment obligations under U.S. law, but are not eligible for a Social Security number. More than 1 million ITINs will expire at the end of 2020, including:

  • ITINs that have not been used on a federal tax return at least once in the last three consecutive years, and
  • ITINs issued before 2013.

If this applies to you, the IRS urges you to submit a renewal application now to avoid refund delays next year. Visit the irs.gov for more details.

COVID-Related Payroll Tax Deferral Raises Questions

COVID-Related Payroll Tax Deferral Raises Questions

In an effort to reduce the burden on workers, President Trump signed a memorandum on August 8 providing for the deferral of payroll taxes from September 1 through December 31, 2020. The new rule defers the employee portion of the old-age, survivors and disability insurance (OASDI) tax and Railroad Retirement Act Tier 1 tax for those whose pretax biweekly wages are generally less than $4,000. Note: Currently this is considered a tax DEFERRAL — not forgiveness — so tax will be due at a later date.

However, because the lack of detail in the memorandum left open a lot of questions, the American Institute of CPAs (AICPA) has requested guidance from the Treasury Department on handling the tax deferral. As soon as these issues are ironed out, we’ll be able to help you implement the tax deferral in your payroll systems. Details to come!

Source: Journal of Accountancy

PPP: Don’t Rush to Apply for Forgiveness

Are you one of the more than 5 million businesses that received a Paycheck Protection Program (PPP) loan? If so, you may be ready to apply for forgiveness.

However, experts are advising most small businesses to wait a little while to apply, even though the SBA opened the forgiveness portal last week. That’s because the SBA continues to make adjustments and issue new guidance (in the form of frequently asked questions).

The delay is mostly because Congress has been unable to agree on a new COVID-19 relief bill, which would hopefully address some outstanding issues. One such issue is whether expenses covered by PPP loans will be deductible on your 2020 tax return or not.

For example, SBA guidance recently issued clarifications for:

  • Payments for vision and dental benefits, which are included in group health care and insurance premiums and are thus eligible to be paid with PPP funds.
  • Payments of transportation utility fees assessed by state and local governments, which are eligible for loan forgiveness.
  • Calculating reductions in loan forgiveness arising from reductions in employee salary or hourly wage.
  • Sole proprietors, independent contractors and self-employed individuals, who qualify to use the simplified PPP Loan Forgiveness Application Form 3508EZ.

While you wait for Congress to act, take the time to gather up your paperwork so that you’re ready to apply when the time is right. If you don’t have a separate business account for the loan proceeds, be sure to keep good books and records that show how you spent the loan funds.

If you have any questions, please don’t hesitate to contact us. We’re here to help!

Source: CNBC

MONEY BRIEF #1

You can use the IRS Tax Withholding Estimator to determine the right amount of tax to be withheld and avoid surprises on your tax bill next year. Income tax withholding is generally based on your expected filing status and standard deduction. Adjusting withholding on your paycheck or revising the amount of your estimated tax payments can help prevent penalties. This is especially important if you work in the “gig” economy, have more than one job or experienced major life changes recently. This also applies if you received unemployment due to COVID-19 layoffs.

MONEY BRIEF #2

During the 2019 fiscal year, the IRS:

  • Collected more than $3.5 trillion in taxes.
  • Processed more than 253 million tax returns and other forms.
  • Issued more than $452 billion in tax refunds.
  • Was called or visited by nearly 61 million taxpayers.
  • Received nearly 651 million visits to its website (irs.gov), where taxpayers downloaded almost 363 million files.