IRS Acknowledges Congressional Reversal on Deducting Eligible PPP Expenses
January 7, 2021
We would like to share some clarity on the Consolidated Appropriations Act, 2021, which contains The COVID-related Tax Relief Act of 2020, specifically providing 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” of a PPP loan. Yesterday, the Internal Revenue Service issued Revenue Ruling 2021-2, which reflects this change in the law. Revenue Ruling 2021-2 obsoletes IRS Notice 2020-32 and Revenue Ruling 2020-27, which disallowed deductions for the payment of eligible expenses when the payments resulted (or could be expected to result) in forgiveness of a covered loan and “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”
Please let us know if you have any questions or need any assistance as it relates to any PPP concerns.
This page has valuable information for you and your company. Please check back frequently as this situation is fluid and things change rapidly.
October 15 deadline to register for Economic Impact Payment for non-filers.
The IRS will mail the letters to people who typically aren’t required to file federal income tax return but may qualify for an Economic Impact Payment. The letter urges recipients to visit the special Non-Filers: Enter Payment Info tool on IRS.gov before the October 15 deadline to register for an Economic Impact Payment.
These letters are part of a final stage of the IRS’s sweeping outreach and public awareness campaign on the Economic Impact Payments that began in March. These efforts included IRS outreach to thousands of partner groups across the nation, including partner groups serving underserved communities, people experiencing homelessness, and those whose primary language isn’t English.
This months letters, delivered from an IRS address, are being sent to people who haven’t filed a return for either 2018 or 2019. Based on an internal analysis, these are people who don’t typically have a tax return filing requirement because they appear to have very low incomes based on Form W-2 and 1099, and other third-party statements available to the IRS.
The letter urges the recipient to register at IRS.gov by October 15. You do not have to wait to receive the letter to register on the website. The IRS cautions that receiving a letter is not a guarantee of eligibility. An individual is likely eligible for an Economic Impact Payment if they:
- are a U.S. citizen or resident alien;
- have a work-eligible Social Security number; and
- can’t be claimed as a dependent on someone else’s federal income tax return. For more information on eligibility requirements, see the Economic Impact Payment eligibility FAQ’s IRS.gov.
Below is a recent IRS letter with important information about interest which you may be getting from the IRS.
Issue Number: IR-2020-183 August 18, 2020
Inside This Issue
13.9 million Americans to receive IRS tax refund interest; Taxable payments to average $18
WASHINGTON – This week the Treasury Department and the Internal Revenue Service will send interest payments to about 13.9 million individual taxpayers who timely filed their 2019 federal income tax returns and are receiving refunds.
The interest payments, averaging about $18, will be made to individual taxpayers who filed a 2019 return by this year’s July 15 deadline and either received a refund in the past three months or will receive a refund. Most interest payments will be issued separately from tax refunds.
In most cases, taxpayers who received their refund by direct deposit will have their interest payment direct deposited in the same account. About 12 million of these payments will be direct deposited.
Everyone else will receive a check. A notation on the check − saying “INT Amount” − will identify it as a refund interest payment and indicate the interest amount.
By law, these interest payments are taxable and taxpayers who receive them must report the interest on the 2020 federal income tax return they file next year. In January 2021, the IRS will send a Form 1099-INT to anyone who receives interest totaling at least $10.
This provision is different from the long-standing 45-day rule, generally requiring the IRS to add interest to refunds on timely-filed refund claims issued more than 45 days after the return due date.
Instead, this year’s COVID-19-related July 15 due date is considered a disaster-related postponement of the filing deadline. Where a disaster-related postponement exists, the IRS is required, by law, to pay interest, calculated from the original April 15 filing deadline, as long as an individual files a 2019 federal income tax return by the postponed deadline − July 15, 2020, in this instance. This refund interest requirement only applies to individual income tax filers − businesses are not eligible.
Interest is paid at the legally prescribed rate that is adjusted quarterly. The rate for the second quarter ending June 30 was 5%, compounded daily. Effective July 1, the rate for the third quarter dropped to 3%, compounded daily.
Where the calculation period spans quarters, a blended rate applies, consisting of the number of days falling in each calendar quarter. No interest will be added to any refund issued before the original April 15 deadline.
For more information, visit IRS.gov.
Below is a potential opportunity for additional funds for your business. It is quick and easy to apply by clicking on the links in the article below.
The application period for We’re All In Business Grants has been extended until 11:59 p.m. Friday, June 26.
We’re All In Small Business Grant program is designed to help small businesses get back on their feet as they re-emerge from the COVID-19 pandemic and Safer at Home, while also encouraging adoption of best practices to keep employees, customers and communities safe.
Funded by the federal CARES Act, the We’re All In Small Business Grant will provide $2,500 to 30,000 Wisconsin small businesses to assist with the costs of business interruption or for health and safety improvements, wages and salaries, rent, mortgages and inventory.
To be eligible, businesses must:
- Be a Wisconsin-based, for-profit business
- Employ 20 or fewer full-time equivalent (FTE) employees, including the owner
- Earn greater than $0 but less than $1 million in annual revenues, and
- Been in business in February 2020
The online grant application will be accessible for through 11:59 p.m. Friday, June 26, 2020.
Please contact Pam at the Chamber if you plan to apply and need a letter confirming that you were in business in February, 2020 by 9:00 am on Friday.
More detailed information can be found at:
https://wedc.org/programs-and-resources/wai-small-business-grant/
https://wedc.org/wai-small-business-grant-frequently-asked-questions/
Resources regarding COVID-19
Through this difficult time we are here for you. We know that you have a lot of questions during this unprecedented time. We are trying to assist as many of you as possible but are unable to get back to everyone as quickly as we would like. Below is a list of resources which may help address some of your questions.
Relief of Charging Due to Public Health Emergency
Small Business Administration Payment Protection Program
AICPA Coronavirus (COVID-19) Resource Center
Grafton Area Chamber of Commerce Covid-19 Business Guide
IRS grants broad coronavirus-related tax relief
Economic impact payments: What you need to know
Non-Filers Payment Info Tool
PAID LEAVE PROGRAMS – Employer Guide
Payroll Protection Program Summary
Coronavirus Emergency Loans Small Business Guide and Checklist
Form 7200, Advance Payment of Employer Credits Due to COVID-19
Paycheck Protection Program
Economic Impact Payments: What you need to know (1)
US Chamber Guide to Families First Coronavirus Response Act(FFCRA) (2)
Small Business Owner’s Guide to the CARES Act (3)
Paycheck Protection Program FAQs for Small Business (4)
Governor Evers COVID19 #12 mandate(6)
Retirement Plan Relief for Employees and Employers Under the CARES Act (5)
If you can’t find answers to your questions here, please reach out to your accountant here at Donahue & Associates and we will help point you in the right direction.
Below is a recent Newsletter from the IRS that will provide some additional information for you. March 31, 2020
Issue Number: IR-2020-62
IRS: Employee Retention Credit available for many businesses financially impacted by COVID-19
WASHINGTON — The Treasury Department and the Internal Revenue Service today launched the Employee Retention Credit, designed to encourage 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.
Does my business qualify to receive the Employee Retention Credit?
The credit is available to all employers regardless of size, including tax-exempt organizations. There are only two exceptions: State and local governments and their instrumentalities and small businesses who take small business loans.
Qualifying employers must fall into one of two categories:
- The employer’s business is fully or partially suspended by government order due to COVID-19 during the calendar quarter.
- The employer’s gross receipts are below 50% of the comparable quarter in 2019. Once the employer’s gross receipts go above 80% of a comparable quarter in 2019, they no longer qualify after the end of that quarter.
These measures are calculated each calendar quarter.
How is the credit calculated?
The amount of the credit is 50% of qualifying wages paid up to $10,000 in total. Wages paid after March 12, 2020, and before Jan. 1, 2021, are eligible for the credit. Wages taken into account are not limited to cash payments, but also include a portion of the cost of employer provided health care.
How do I know which wages qualify?
Qualifying wages are based on the average number of a business’s employees in 2019.
Employers with less than 100 employees: If the employer had 100 or fewer employees on average in 2019, the credit is based on wages paid to all employees, regardless if they worked or not. If the employees worked full time and were paid for full time work, the employer still receives the credit.
Employers with more than 100 employees: If the employer had more than 100 employees on average in 2019, then the credit is allowed only for wages paid to employees who did not work during the calendar quarter.
I am an eligible employer. How do I receive my credit?
Employers can be immediately reimbursed for the credit by reducing their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit.
Eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their quarterly employment tax returns or Form 941 beginning with the second quarter. If the employer’s employment tax deposits are not sufficient to cover the credit, the employer may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.
Eligible employers can also request an advance of the Employee Retention Credit by submitting Form 7200.
Where can I find more information on the Employer Retention Credit and other COVID-19 economic relief efforts?
Updates on the implementation of this credit, Frequently Asked Questions on Tax Credits for Required Paid Leave and other information can be found on the Coronavirus page of IRS.gov.
COVID-19 Statement
In light of the recent events surrounding the spread of COVID-19, we wanted to provide a brief synopsis of Donahue & Associates LLC operational plan that will enable us to continue to meet the needs of our clients while also placing a high priority on the safety of our employees and the community we service.
Based on current guidance, Donahue & Associates LLC will continue to remain open for business with normal hours. We ask that you use email or the mail service as much as possible. If you know the email address of your accountant, you may use that to correspond. If you do not, feel free to use the email address info@donahuecpa.biz. Mail may be directed to Donahue & Associates LLC, PO Box 128, Grafton, WI 53024.
As always you may call us at any time with questions.
Donahue & Associates LLC is a locally owned and operated small business that takes the roles we play in our community very seriously. Please be assured that your well being is of the utmost importance to us. As the situation evolves, we will keep you updated if our plans change.
Citations:
- IRS – March 30, 2020 https://www.irs.gov/newsroom/economic-impact-payments-what-you-need-to-know
- US Chamber of Commerce. COVID-19 Coverage: Resources & Relief info for Small Businesses – March 26, 2020.
https://www.uschamber.com/co/start/strategy/families-first-coronavirus-response-act-guide - U.S. Senate Committee on Small Business & Entrepreneurship. March 2020. The Small Business guide to the CARES Act by Senator Ben Cardin. https://secureservercdn.net/166.62.115.136/748.ea8.myftpupload.com/wp-content/uploads/2020/03/F2CF1DD78E6D6C8C8C3BF58C6D1DDB2B.small-business-owner-s-guide-to-the-cares-act-final-.pdf
- U.S. Senate Committee on Small Business & Entrepreneurship. March 2020. Paycheck Protection Program FAZ’s for Small Businesses. https://secureservercdn.net/166.62.115.136/748.ea8.myftpupload.com/wp-content/uploads/2020/03/SBA-Paycheck-Protection-Program.pdf
- Vetter Buelow, Buikema Olson & Vliet, LLC. Legal Update. Retirement Plan Relief for Employees and Employers Under the CARES Act Legal Update. March 27, 2020 https://secureservercdn.net/166.62.115.136/748.ea8.myftpupload.com/wp-content/uploads/2020/03/Retirement-Plan-Relief-Under-the-CARES-Act_032720.pdf
- Tony Evers, Governor, Palm, Andrea Palm, Secretary. State of Wisconsin Department of Health Services Emergency Order #12 Safer at Home Order. March 24, 2020. https://evers.wi.gov/Documents/COVID19/EMO12-SaferAtHome.pdf
