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.

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.
Important Changes to Your 2019 Taxes & Tax Forms

Important Changes to Your 2019 Taxes & Tax Forms

Several years later, the 2017 Tax Cut & Jobs Act continues to impact our taxes and the tax return forms we use. Keep these changes in mind when filing this year:

Standard Deductions — The standard deduction is a specified amount that’s subtracted from your AGI to help determine your taxable income. In many cases, it makes sense to use the Standard Deduction instead of itemizing. See the chart here for the 2019 rates.

Itemizing Considerations — To benefit from itemizing, your personalized deductions should be more than your standard deduction. This may be the case if you pay a mortgage, have high medical bills and/or make extensive charitable donations. If you choose to itemize, note that the 5% AGI limit on medical expenses has expired; the floor is now 10% for 2019. Also:

  • The maximum deduction for charitable cash donations to qualified organizations is 60% of your AGI.
  • Deductible mortgage interest is capped for loans up to $750,000.
  • Moving expenses are no longer deductible for job relocation, unreimbursed employee expenses or employer-subsidized parking and transportation reimbursement.
  • Deductions for casualty and theft losses, tax preparation costs and other miscellaneous deductions are no longer available.
  • Alimony payments are no longer deductible (and if you receive alimony, you don’t have to claim it as income anymore).

Health Insurance Penalty — This rule has been repealed; there is no longer a penalty if you do not have health insurance coverage.

Capital Gains/Losses — In general, taxes on capital gains are lower unless you’re among those in the highest income brackets. Updated from last year, total capital gains (or losses) are once again directly entered on Form 1040 (Line 6) and not on Schedule 1.

Senior-friendly — A new tax return with a large, easy-to-read font has been created for taxpayers born before January 2, 1955 (IRS Form 1040-SR: US Tax Return For Seniors). It includes a standard-deduction chart, though Schedule A is still available for itemizing deductions as needed.

Of course, the deadline for filing your taxes has NOT changed! But we’re here to help you make sure they’re done correctly and on time. Just drop off your materials by March 27 so we can meet the April 15, 2020, tax-filing deadline. Or, let us know if we need to file an extension for you by calling 706-632-7850 or emailing us today.

Sources: Credit.com, Forbes

The information provided here by Premier CPA Services PC is for general information only. It does not constitute legal, accounting, tax or other professional advice or services, and is presented without any representation or warranty as to the accuracy or completeness of the information. Please contact us for information as it relates to your circumstances.
Georgia Loves Its Retirees!

Georgia Loves Its Retirees!

The Peach State is among the top 10 tax-friendly states for retirees, as ranked by Kiplinger in 2017. Social Security income is exempt from Georgia state taxes, as is up to $35,000 of most types of retirement income for anyone age 62 to 64. When you hit 65, the exemption rises to $65,000 per taxpayer.

Eligible retirement income includes pensions and annuities, interest, dividends, net income from rental property, capital gains, royalties, pensions, annuities and the first $4,000 of wages and other earned income. Many Georgia seniors can also claim property tax exemptions above and beyond normal homestead exemptions.

Social Security Tax-Smarts

Just because Social Security benefits aren’t taxed at the state level in Georgia doesn’t mean you’re off the hook. Uncle Sam is probably going to want a bite, and the amount subject to taxes will be calculated on a sliding scale based on your income.

Coordination Is Everything

Because the tax rules focus so much on income, it’s important to coordinate when you start taking Social Security benefits. You’ll want to weigh when to take benefits with when you expect to receive income from other sources.

For example, you might be tempted to start taking benefits as early as possible — even if you’re still working. The gotcha here is that the wage income you’re earning in that paycheck can easily bump you over the income thresholds at which your benefits will become taxable. Even worse, you’re likely to be in a higher tax bracket because you’re still working, so the tax hit will be a double whammy. Waiting to claim benefits until after you’ve quit working may be smarter, but it really all depends on your financial situation.

One Size Does Not Fit All

The best retirement income strategy varies based on your individual circumstances, so it’s impossible to give one-size-fits-all advice. But we can help you think through your situation — including how to navigate the Social Security taxation rules and how to reduce the amount you have to pay to Uncle Sam. Just call the office to make an appointment today.

(Source: smartasset.com/retirement/georgia-retirement-taxes)

Visit SSA.Gov
You can get a good estimate of your future Social Security benefits by looking at your most recent Social Security statement. To check it online, you’ll just need to create an account at www.ssa.gov. There’s a ton of valuable information here in addition to benefit estimates.

Social Security Fast Facts

Did you know …

  • President Franklin D. Roosevelt signed the Social Security Act into law on August 14, 1935.
  • Ida M. Fuller, a retired legal secretary in Vermont, was the first person to collect Social Security; her check, paid on January 1, 1940, was for $22.54.
  • As of December 31, 2018, about 176 million people were paying Social Security taxes, and about 63 million were receiving monthly Social Security benefits.
  • To qualify for Social Security retirement benefits, you must be at least 62 and have paid into the system for 10+ years.
  • The longer you wait to collect Social Security (up to age 70), the higher the monthly benefit you’ll receive.
  • Your spouse and/or ex-spouse may be eligible for benefits based on your earnings record.
  • Social Security may provide benefits to your spouse and younger children in the event of your death.
  • If you can’t work due to a long-term disability, you may be eligible for Social Security disability benefits.
The Million Dollar Question: Are You (Really) Ready for Retirement?

The Million Dollar Question: Are You (Really) Ready for Retirement?

People tend to underestimate how much they are going to need for retirement. Americans aged 65-74, for example, currently spend an average of $55,000 a year. But 60% of Baby Boomers who haven’t yet retired believe they will need less than that to live on during retirement — in fact, 44% believe they will need less than $35,000.

Unfortunately, those statistics are just two of the many disconnects we have over the need for retirement savings. Several recent studies find that many Americans, especially younger ones, might not be financially ready to retire when the time comes. Consider:

  • 66% of working Millennials (those aged 22-37) have no retirement savings whatsoever, and only 5% are saving adequately for retirement.
  • Thanks to the “Great Recession,” Millennials today generally earn about 20% less in wages, are less likely to own a home and have accumulated about half of the wealth of their parents at the same stage of their lives.
  • 47% of Gen Xers (those aged 38-53) have no retirement account, and about 48% of those who do have less than $50,000 saved.
  • Some reports say up to 45% of Baby Boomers (those aged 54-72) have zero retirement savings!
  • For retiring Boomers, the average Social Security check is $14,000 a year. And only 23%-38% of Boomers expect any income from a private company pension plan.

The news doesn’t have to be all bad, though. Individual Retirement Accounts (both Roth and Traditional) remain a proven way to put away money on a tax-advantaged basis. And special “catch up provisions” allow taxpayers age 50 and older to sock away a little more each year. For 2019, your total contributions to all of your traditional and Roth IRAs is limited to $6,000 ($7,000 if you’re age 50 or older), or the total amount of your taxable compensation for the year (if it’s less than the limit). And you have until April 15, 2020, to make this year’s contribution.

Just call us at 706-632-7850 or email us to schedule an appointment — we’ll be happy to walk you through your retirement saving options!

Sources: National Institute on Retirement SecurityCNBCBusiness Insider ForbesMarketWatch, IRS

Term of the Week:
Tax-deferred

Tax-deferred refers to investment earnings, such as interest, dividends or capital gains, that accumulate tax-free until the investor takes the profits — at which time income taxes and capital gains taxes come due. The most common types of tax-deferred investments are individual retirement accounts (IRAs) and deferred annuities. Because no taxes are paid until you take a withdrawal, your money can grow at a faster rate than it would in a taxable product.

So You Want to Be an Astronaut

Adventurous (and rich!) folks can soon take a ride to the International Space Station (ISS). NASA has opened up the ISS to companies that fly “private astronauts” into space for a visit of up to 30 days. It will only cost you about $52 million to buy a seat on SpaceX, Elon Musk’s famous spaceship! (Source: CNBC)

The information provided here by Premier CPA Services PC is for general information only. It does not constitute legal, accounting, tax or other professional advice or services, and is presented without any representation or warranty as to the accuracy or completeness of the information. Please contact us for information as it relates to your circumstances.