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Deadline Modifications

Posted by Admin Posted on June 10 2020
 
FEDERAL: Due date extension for tax year 2020 payments. Individual and business taxpayers who needed to make estimated tax payments for tax year 2020 on 4/15 and 6/15 are reminded that deadlines for both were extended to 7/15.
 
Virginia: Payments due during the period from 04/01/2020 to 06/01/2020 submitted before 06/02/2020 incurred no penalty or interest. No interest will accrue on tax paid by June 1, but interest accrues from the original due date on any amount left unpaid.
 
Maryland: Income tax return filing and payment has been automatically extended to July 15, 2020. Second quarter estimated income tax payments extended to 07/15/2020
For corporations that request a federal income tax extension by July 15, 2020, the Maryland income tax return is automatically extended to November 15, 2020
 
DC: The deadline for taxpayers to file and pay their 2019 District of Columbia franchise tax returns (D-20, D-30) is extended to July 15, 2020.

PPP Modifications

Posted by Admin Posted on June 10 2020

President Trump Signs Paycheck Protection Program Flexibility Act:  On 6/5/20, President Trump signed the Paycheck Protection Program Flexibility Act (PPPFA) of 2020 (H.R. 7010), which modifies provisions related to the forgiveness of loans made to small businesses under the PPP. The PPPFA (1) eliminates a CARES Act provision that prevented certain PPP participants from deferring the payment of payroll taxes; (2) requires borrowers to use at least 60% (rather than the original 75%) of PPP funds on payroll costs; (3) gives borrowers 24 weeks (rather than the original eight weeks) to spend PPP funds; (4) pushes back the original 6/30/20 deadline to rehire workers to 12/31/20; (5) provides additional exceptions if a borrower is unable to rehire the required number of employees; and (6) extends the minimum maturity date of the loan (for proceeds that are not forgiven) to five years. The full legislative text of the bill is available at www.congress.gov/bill/116th-congress/house-bill/7010/text .

SBA Paycheck Protection Program (PPP) FAQs

Posted by Admin Posted on May 18 2020

Forgiveness of loan

The 8 week period begins on the date the lender makes the first disbursement of the loan. The lender must make the first disbursement of the loan no later than 10 calendar days from the date of the loan approval.

Payroll costs, health care benefits, mortgage interest payments, rent, utility, interest payments on debt incurred prior to February 15, 2020, and/or refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020.

The CARES Act defines utilities in Sec.1106(a)(5) as electricity, gas, water, transportation, telephone or internet access for service which began prior to February 15, 2020. Further guidance released added gas used when driving a business vehicle.  Other common utilities such as garbage collection or security monitoring may also be classified as a utility, but a business should confirm with the lending institution.

The CARES Act uses the standard of “full-time equivalent employees” to determine whether loan forgiveness must be reduced in the measurement period.

  • Owner compensation replacement (calculated based on 8/52 of 2019 net profit from Form 1040 Schedule C)
  • Employee payroll costs (as defined by the interim rule)
  • Business mortgage interest payments on real/personal property
  • Business rent payments
  • Business utility payments
  • Interest payments on debt obligations incurred before February 15, 2020
  • Refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020

Note that the individual must have claimed or be entitled to claim a deduction for the included expenses on 2019 Form 1040 Schedule C.

The amount of the loan forgiveness will depend on the amount spent during the 8 week period on:

  • Payroll costs as defined by the interim rule (does not include benefits for owners)
  • Owner compensation replacement (limited to 8/52 of 2019 net profit and excluding any qualified sick or family leave equivalent amount for which a credit was claimed under FFCRA)
  • Interest payments on mortgage obligations for real/personal property incurred before February 15, 2020
  • Rent payments on lease agreements in force before February 15, 2020
  • Utility payments under service agreements dated before February 15, 2020

*Note that for interest, rent and utility payments, the amounts must be deductible on Form 1040 Schedule C.

The employee federal withholding is included in allowable payroll costs for the purposes of determining the amount to be forgiven. The employer federal payroll taxes (i.e. FICA and Medicare taxes) imposed on the gross payroll are not eligible payroll costs for the loan forgiveness calculation.

At least 75% of the loan proceeds must be used for payroll costs. If salaries decrease by more than 25% for any employee who made less than $100,000 annualized in 2019 OR if the number of FTEs decreases, the forgiveness amount will be reduced. A loan calculator to assist in the determination of the forgiveness amount will be coming soon.

For businesses that take this credit, the wages will be excluded from the determination of payroll costs.

More guidance is needed on this issue. As the statute is written in the CARES Act, the forgiveness is tied to employee count comparisons and also specific employees and whether their pay was substantially reduced. 

FAQ #40 addresses the situation where a business lays off an employee, offers to rehire the same employee and the employee declines the offer. SBA and Treasury intend to issue an interim final rule that excludes laid-off employees that the business offers to rehire from the forgiveness calculation. The business must make a good faith, written offer to rehire and the rejection of the offer must be documented. It was also noted that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.

A decrease in wages of more than 25% will decrease forgiveness and wages is capped at an annualized rate of $100,000 per employee. The current guidance does not prevent an increase in pay in the form of a short term pay increase, hazard pay or bonus.

Based on current guidance, the covered 8-week period starts when the loan is funded. If the borrower is not able to operate or is operating at a limited capacity when the PPP loan proceeds are received, the borrower may choose to pay employees who are not able to work. This choice may be made to help the borrower maximize loan forgiveness as current guidance states that not more than 25% of the loan forgiveness amount may be attributable to non-payroll costs.

The actual amount of loan forgiveness will depend, in part, on the total amount of payroll costs and other eligible costs paid during the 8-week covered period. There are reductions in the amount of forgiveness based on the percentage of eligible costs attributable to non-payroll costs, any decrease in FTEs and decreases in salaries/wages per employee. See PPP Loan Forgiveness Steps for additional information.  Also, the SBA is expected to issue additional guidance related to loan forgiveness.

More guidance is needed on this issue. The guidance provided discusses “payments”, but further clarification is needed.

To be forgiven, the CARES Act states costs must be incurred and paid during the covered period. Further guidance specifically addresses that prepayments of mortgage payments is not allowed.

IRS Notice 2020-32 was issued on April 30, 2020 to state that no deduction is allowed for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a PPP loan. The AICPA recently submitted a letter of support for legislation that would clarify that the receipt and forgiveness of Coronavirus assistance through the PPP does not affect the deductibility of ordinary business expenses.

No, the forgiveness of the loan does not constitute federal taxable income. However, recent guidance by the IRS indicates that no deduction is allowed for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a PPP loan, which effectively negates the goal of Congress (in my opinion). The AICPA recently submitted a letter of support for legislation that would clarify that the receipt and forgiveness of Coronavirus assistance through the PPP does not affect the deductibility of ordinary business expenses. States are providing guidance on state taxability that will be included in the AICPA state tax guidance chart

This has not been specifically addressed in guidance released as of April 29, 2020. Based upon guidance received to date, related party rents are allowed subject to the 25% limit for expenses other than payroll.

The following documentation is required:

  •          * certification that the documentation provided is true and correct and the amount for which forgiveness is required was used to retain employees, and make interest, rent and utility payments
  •          * If the self-employed individual has employees, Form 941 and state quarterly tax reporting forms or equivalent payroll processor records that correspond to the covered period
  •          * Evidence of business rent, mortgage interest payments or utility payments for loan proceeds used for these purposes
  •          * 2019 Form 1040 Schedule C

Economic Impact Payments and YOU

Posted by Admin Posted on Apr 07 2020

You’ve probably heard that IRS will be making millions of ‘‘economic impact payments’’ (also called ‘‘recovery rebates’’) in the coming months to help people stay afloat during this time of economic uncertainty related to the COVID-19 crisis. Here’s what you need to know about this program. 

Amount of payment. IRS will soon begin making payments of up to $1,200 to eligible taxpayers or up to $2,400 to married couples filing joint returns. Parents will get an additional $500 for each dependent child under age 17. Thus, the payment for a married couple with two children under 17 will be $3,400.

Who is eligible. U.S. citizens and residents are eligible for a full payment if their adjusted gross income (AGI) is under $75,000 (singles or marrieds filing separately), $112,500 (heads of household), and $150,000 (joint filers). The individual must not be the dependent of another taxpayer and must have a social security number that authorizes employment in the U.S.

Phaseout based on income. For individuals whose AGI exceeds the above thresholds, the payment amount is phased out at the rate of $5 for each $100 of income. Thus, the payment is completely phased out for single filers with AGI over $99,000 and for joint filers with no children with AGI over $198,000. For a married couple with two children, the payment will be completely phased out if their AGI exceeds $218,000.

How to get a payment. The vast majority of people won’t have to do anything in order to get an economic impact payment. IRS will calculate and send the payment automatically to those who are eligible.

If you’ve already filed your 2019 tax return, IRS will use the AGI and dependents from that return to calculate the payment amount. If you haven’t filed for 2019 yet, information from your 2018 return will be used.

IRS will deposit the payment directly into the banking account reflected on the return. IRS plans to develop a web-based portal for individuals to provide banking information to IRS, so that payments can be received as a direct deposit rather than by check sent in the mail.

People who are not otherwise required to file a tax return will need to file an abbreviated return to receive an economic impact payment. IRS will soon provide instructions on how to do this. This category includes low-income taxpayers, some veterans, and individuals with disabilities.

Social security recipients who aren’t typically required to file tax returns won’t have to file an abbreviated return to receive a payment. IRS will use information from social security Form SSA- 1099 or Form RRB-1099 to generate an automatic payment. The payment will be made by direct deposit or paper check, in the same manner as the recipient’s regular benefits.

Payments nontaxable. Economic impact payments will not be included in the recipient’s income for tax purposes.

Register: Covid-19 Webinar Hosted by Town of Vienna

Posted by Admin Posted on Apr 01 2020

COVID-19 Employer Impact: CARES Act, Financial Resources & Employment Law

Mike Anderson will be cohosting a 60-minute interactive webinar with Karen A. Doner, Esq., to address relevant information on how to obtain a quick infusion of cash to cover your business right now, how to obtain capital to cover the cost of retaining employees, requirements and impacts of the health crisis on employers--including information related to the Coronavirus Aid, Relief and Economic Security (CARES) Act, and federal paid sick leave and emergency paid FMLA under the Families First Coronavirus Response Act.

Register here viennava.gov/covidwebinar

Welcome to Our Blog!

Posted by Admin Posted on June 29 2017
This is the home of our new blog. Check back often for updates!