Monday, November 02, 2020

IRS issues final regulations on W-2 reporting on tax deferrals

 IRS issues details on W-2 reporting on payroll tax deferral

The Internal Revenue Service has posted instructions for both employers and employees about how to handle the Form W-2 reporting for the payroll tax deferral under President Trump’s executive action.

Trump signed a memorandum in August to defer the 6.2 percent employee’s share of Social Security taxes from Sept. 1, 2020 until Dec. 31, 2020, but the taxes would need to be repaid by April 30 of next year. So far, relatively few companies have implemented the tax deferral as it would need to be repaid by either the employees or employer. However, the federal government and military are both implementing it. The payroll tax deferral only applies to employees with biweekly pre-tax income of less than $4,000, with the goal of stimulating the economy in the midst of the coronavirus pandemic.

The IRS has created a web page that provides more detailed guidance for employers and employees than the limited information the IRS rushed out in Notice 2020-65 in late August, shortly before the Sept. 1 start date.

For employers, the IRS said that if they have deferred the employee portion of Social Security tax when reporting total Social Security wages paid to an employee, on the W-2, they should include any wages for which they deferred withholding and payment of employee Social Security tax in box 3 (Social Security wages) and/or box 7 (Social Security tips). However, they shouldn’t include in box 4 (Social Security tax withheld) any deferred employee Social Security taxes that haven’t been withheld.

Any Social Security tax deferred in 2020 that’s withheld in 2021 and isn’t reported on the 2020 Form W-2 should be reported in box 4 (Social Security tax withheld) on Form W-2c, Corrected Wage and Tax Statement.

“On Form W-2c, employers should enter tax year 2020 in box c and adjust the amount previously reported in box 4 (Social Security tax withheld) of the Form W-2 to include the deferred amounts that were withheld in 2021,” said the IRS.

All Forms W-2c should be filed with the Social Security Administration, along with Form W-3c, Transmittal of Corrected Wage and Tax Statements, as soon as possible after employers have finished withholding the deferred amounts.

The IRS then goes on to provide further instructions for employers, including how to report any deferred withholding taxes on railroad retirement compensation.

For employees, the IRS provides detailed instructions on what to do if they had multiple employers in 2020, and there’s a correction in box 4 or 14 of the Form W-2c, Corrected Wages and Tax Statement, for 2020.  Thanks to Michael Cohn from Accounting Today for this article.

Wednesday, September 23, 2020

100% Bonus Depreciation Final Regs

The 100% additional first year depreciation deduction was created in 2017 by the Tax Cuts and Jobs Act and generally applies to depreciable business assets with a recovery period of 20 years or less and certain other property.

The Treasury Department and the Internal Revenue Service have released the last set of final regulations implementing the 100% additional first year depreciation deduction that allows businesses to write off the cost of most depreciable business assets in the year they are placed in service by the business.

The 100% additional first year depreciation deduction was created in 2017 by the Tax Cuts and Jobs Act and generally applies to depreciable business assets with a recovery period of 20 years or less and certain other property. Machinery, equipment, computers, appliances and furniture generally qualify.

The deduction applies to qualifying property (including used property) acquired and placed in service after Sept. 27, 2017. The final regulations provide clarifying guidance on the requirements that must be met for property to qualify for the deduction, including used property.

Additionally, the final regulations provide rules for consolidated groups and rules for components acquired or self-constructed after Sept. 27, 2017, for larger self-constructed property on which production began before Sept. 28, 2017.

For details on claiming the deduction, see the final regulations and the instructions to Form 4562, Depreciation and Amortization (Including Information on Listed Property).

In addition, the Treasury Department and the Internal Revenue Service plan to issue procedural guidance for taxpayers to opt to apply the final regulations in prior taxable years or to rely on the proposed regulations issued in Sept. 2019.

Thanks to CPA Practice Advisor for this information.



Tuesday, August 18, 2020

IRS makes Form 1040-X amended tax returns available for e-filing

The Internal Revenue Service is now letting taxpayers submit Form 1040-X electronically when they want to file an amended tax return through commercial tax software, in what the agency called a “major milestone in tax administration.”

The move comes after years of effort by the IRS to streamline the process of filing an amended return as more taxpayers use commercial tax prep software to file their own tax returns. The IRS said the enhancement would allow taxpayers to quickly correct their previously filed tax returns while minimizing errors.

“The ability to file the Form 1040-X electronically has been an important long-term goal of the IRS e-file initiative for many years,” said Sunita Lough, IRS deputy commissioner for services and enforcement, in a statement on Monday. “Given the details needed on the form, there have been numerous challenges to add this form to the e-file family. Our IT and business operation teams worked hard with the nation’s tax industry to make this change possible. This is another success for IRS modernization efforts.”

Allowing the 1040-X to be e-filed has been a goal for the tax software and tax professional industry for years and has been a perennial recommendation from the Internal Revenue Service Advisory Council and the Electronic Tax Administration Advisory Committee.

Currently, taxpayers need to mail a completed Form 1040-X to the IRS for processing. The new electronic option enables the IRS to receive amended tax returns faster while reducing errors typically associated with manually filling out the form.

While tax software enables users to enter their data in a simple question-and-answer format, it also makes it easier for IRS employees to respond to taxpayer questions since the data has been entered electronically and submitted to the agency almost simultaneously.

In the initial phase of the IRS’s new change, only tax year 2019 Forms 1040 and 1040-SR returns can be amended electronically, but further improvements are expected in the future.

Approximately 3 million Forms 1040-X are filed by taxpayers every year. Taxpayers will still have the option to send a paper version of the Form 1040-X and the IRS advised them to follow the instructions for preparing and submitting the paper form. Taxpayers who file a Form 1040-X electronically and on paper can use the "Where's My Amended Return?" online tool to check the status of their amended return.

Thank you to Michael Cohn Editor-in-chief, AccountingToday.com  for this information!

Wednesday, July 29, 2020

IRS not Auditing as much

IRS Pumps the Brakes on In-Person Audits

Are you representing clients in an IRS examination or have any been recently contacted regarding an audit? A “kinder, gentler” IRS is making it easier to resolve these matters during the COVID-19 pandemic.

Are you representing clients in an IRS examination or have any been recently contacted regarding an audit? A “kinder, gentler” IRS is making it easier to resolve these matters during the COVID-19 pandemic.

According to a new memorandum sent on July 10 to field collection employees from Hank Kea, Field Collection director of the Small Business/Self-Employed Division, the IRS will continue to rely on remote contact between its employees and taxpayers for the vast majority of its cases. It says that face-to-face meetings and field activities will only be required in exceptional cases. Invasive audits will be at a minimum.

More details: IRS revenue officers work on cases involving tax debts or delinquent tax returns. If a taxpayer is affected by a disaster, the revenue officer can use "soft contact" procedures to reach out to them about tax debts. This means approaching the taxpayer with caution and extreme sensitivity to their personal circumstances.

IRS agents have been instructed to consider stress and fatigue even when the taxpayer didn’t experience any personal, monetary or physical damage from the disaster.

Due to the COVID-19 outbreak, the IRS has halted field revenue officer enforcement actions. In the meantime, field agents will operate remotely for routine activities.  They may be permitted to conduct essential face-to-face activities on a voluntary basis, only when necessary and appropriate and only with territory manager concurrence.

This might include making field contacts to view assets, serving a summons, taking necessary and appropriate investigative and enforcement actions and conducting interviews with taxpayers, their designated representatives or third parties at their homes or business locations (when there no reasonable alternatives).

The memo further spells out guidelines for those rare instances when face-to-face meetings may be authorized.

  • There is no effective alternative to face-to-face contact and a failure to act poses a risk of permanent loss to the government (e.g., expiration of a statute, assets being placed permanently beyond government reach or compounding payroll taxes; or
  • The taxpayer or representative has requested face-to-face contact and the IRS agent and manager agree this would advance the case.

In all instances of public contact, employees are expected to wear masks or other face coverings, practice social distancing, and adhere to CDC guidelines (handwashing, etc.) to guard against possible exposure to or spread of COVID-19.

Tuesday, June 23, 2020

PPP SBA LOANS can be forgiven early

PPP recipients can apply early for loan forgiveness, SBA says

By Jeff Drew
11 minutes ago

New Paycheck Protection Program (PPP) guidance released Monday night declares that PPP recipients can apply for loan forgiveness early but that doing so could cost them money.
In a 34-page interim final rule (IFR) issued in consultation with Treasury, the U.S. Small Business Administration (SBA) addresses a number of issues related to the PPP, which was created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136, to provide forgivable loans to small businesses, not-for-profits, and certain other entities hurt by the economic impacts of the COVID-19 pandemic and associated government-imposed quarantines.  
Specifically, the new interim final rule makes revisions to previous guidance to reflect the Paycheck Protection Program Flexibility Act of 2020, P.L. 116-142, which became law on June 5 and made significant changes to the PPP, most notably:
  • Expanding to 24 weeks, from eight weeks, the covered period during which PPP loan recipients can spend the funds and still qualify for loan forgiveness. The 24-week period applies to all loans made on or after June 5. Borrowers that received loans before June 5 can choose to elect an eight-week period.
  • Lowering to 60% from 75% the proportion of PPP funding that must be used on payroll costs to qualify for full forgiveness.
  • Expanding the term for new loans to five years from two years. Borrowers with loans received before June 5 can extend their loan term to five years if their lender agrees.
Most of the changes implemented by the new interim final rule were covered in previous guidance and in the PPP loan forgiveness applications released last week. Chief among the new material is the explanation of the process for applying early for loan forgiveness.

Early loan forgiveness applications

Many small businesses have inquired about whether they can apply for PPP loan forgiveness before their covered period expires. The new interim final rule says that if a borrower applies for loan forgiveness before the end of the covered period and has reduced any employees’ salaries or wages by more than the 25% allowed for full forgiveness, the borrower must account for the excess salary reduction for the full eight-week or 24-week covered period, whichever one applies to its loan.  
Under that guidance, PPP borrowers that apply early for loan forgiveness forfeit a safe-harbor provision allowing them to restore salaries or wages by Dec. 31 and avoid reductions in the loan forgiveness they receive. For example, if a borrower has a 24-week period that ends in November but wants to apply in September, any wage reduction in excess of 25% as of September would be calculated for the entire 24-week period even if the borrower restores salaries by Dec. 31.
An example provided in the interim final rule shows how the calculations would work:
Example: A borrower is using a 24-week covered period. This borrower reduced a full-time employee’s weekly salary from $1,000 per week during the reference period to $700 per week during the covered period. The employee continued to work on a full-time basis during the covered period, with an FTE of 1.0. In this case, the first $250 (25% of $1,000) is exempted from the loan forgiveness reduction. The borrower seeking forgiveness would list $1,200 as the salary/hourly wage reduction for that employee (the extra $50 weekly reduction multiplied by 24 weeks). If the borrower applies for forgiveness before the end of the covered period, it must account for the salary reduction for the full 24-week covered period (totaling $1,200).

Other interim final rule provisions

The interim final rule clarifies that it is the borrower’s responsibility to provide an accurate calculation of the loan forgiveness amount. Lenders are expected to perform a good-faith review, in a reasonable time, of the borrower’s calculations and supporting documents, but lenders do not have to independently verify the borrower’s reported information provided that the borrower:
  • Supplies documentation supporting its request, and
  • Attests that it has accurately verified the payments for eligible costs.
The IFR reinforces previous guidance that the SBA will deduct Economic Injury Disaster Loan (EIDL) Advance Amounts from PPP forgiveness amounts. It also reiterates previous guidance, including:
  • Employer health insurance contributions for S corporation owners cannot be included when calculating payroll costs; however, employer retirement contributions for S corporation owners are eligible costs.
  • For owner-employees and self-employed individuals, including those who file Schedule C, Profit or Loss From Business, or Schedule F, Profit or Loss From Farming, forgiveness for owner compensation is calculated for the eight-week period as 8 ÷ 52 × 2019 compensation, up to a maximum of $15,385, in total for all businesses. For the 24-week period, the forgiveness calculation is limited to 2.5 months’ worth (2.5 ÷ 12) of 2019 compensation, up to $20,833, also in total for all businesses.

The PPP in brief

Congress created the PPP as part of the $2 trillion CARES Act. The legislation authorized Treasury to use the SBA’s 7(a) small business lending program to fund forgivable loans of up to $10 million per borrower that qualifying businesses could spend to cover payroll, mortgage interest, rent, and utilities.
The loans are available to small businesses that were in operation on Feb. 15 with 500 or fewer employees, including not-for-profits, veterans’ organizations, Tribal concerns, self-employed individuals, sole proprietorships, and independent contractors. Businesses with more than 500 employees in certain industries also can apply for loans.
Congress designed the loans to support organizations facing economic hardships created by the coronavirus pandemic and assist them in continuing to pay employee salaries. PPP loan recipients can have their loans forgiven in full if the funds were used for eligible expenses and other criteria are met.
Business swamped the PPP with loan requests when it launched in early April, claiming the initial $349 billion allocated to the program in less than two weeks. Congress allocated an additional $310 billion to the program, but applications for loans dropped dramatically amid concerns about the program’s original loan forgiveness terms and backlash against well-capitalized businesses, including several that are publicly traded, that received PPP funds. Several of those businesses returned the funding after public and political outcry.
As of Monday, the SBA has approved nearly 4.7 million loans for a total of $515 billion. That leaves more than $130 billion available a week before the June 30 final deadline for getting a PPP loan.
AICPA experts discuss the latest on the PPP and other small business aid programs during a weekly virtual town hall. The webcasts, which provide CPE credit, are free to AICPA members. Go to the AICPA Town Hall Series webpage for more information and to register.
The AICPA’s SBA Paycheck Protection Program Resources page houses resources and tools produced by the AICPA to help address the economic impact of the coronavirus.
For more news and reporting on the coronavirus and how CPAs can handle challenges related to the outbreak, visit the JofA’s coronavirus resources page or subscribe to our email alerts for breaking PPP news.
— Jeff Drew (Jeff.Drew@aicpa-cima.com) is a JofA senior editor.

Wednesday, May 13, 2020

SBA Provides PPP Safe Harbor

SBA provides safe harbor for PPP loans under $2 million


Businesses that together with their affiliates accepted Paycheck Protection Program (PPP) funds of less than $2 million will be assumed to have performed the required certification concerning the necessity of their loan requests in good faith, according to guidance posted by the U.S. Small Business Administration (SBA) on Wednesday.
The guidance, provided as Question 46 in Treasury’s Q&As related to the PPP, states that borrowers with loans of more than $2 million may still have an adequate basis for making the required good-faith certification, based on their individual circumstances and the language of the certification and SBA guidance.
Congress established the PPP to provide relief to small businesses during the coronavirus pandemic as part of the Coronavirus Aid, Relief, and Economic Security Act, P.L. 116-136. PPP funds are available to small businesses that were in operation on Feb. 15 with 500 or fewer employees, including not-for-profits, veterans’ organizations, Tribal concerns, self-employed individuals, sole proprietorships, and independent contractors. Businesses with more than 500 employees in certain industries also can apply for loans.
The forgivable loans were designed to help employers keep their employees paid and keep their businesses from succumbing to the economic hardships created by the coronavirus pandemic. An eligible recipient of a covered loan can receive forgiveness of indebtedness on the loan in an amount equal to the sum of payments made for the following expenses (subject to limitations) during the eight-week covered period beginning on the covered loan’s origination date: (1) payroll costs; (2) payment of interest on any covered mortgage obligation; (3) payment on any covered rent obligation; and (4) any covered utility payment. Section 1106(i) excludes from gross income any amount forgiven under the PPP.
The SBA warned April 23 that businesses with substantial access to liquidity may not qualify for PPP loans, and several larger companies returned their PPP funds. On April 28, Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza announced that the SBA would review all PPP loans in excess of $2 million to make sure borrowers’ self-certification for the loans was appropriate.
Out of concerns whether their loans would be deemed appropriate, some larger companies that initially received PPP funds have returned them. For the same reason, some leaders of smaller companies have also considered returning their PPP funds or hesitated to apply for PPP loans.
According to the SBA, borrowers with loans below the $2 million threshold are less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers who obtained larger loans.
The SBA said the safe harbor will promote economic certainty for PPP borrowers with limited resources as they work to retain and rehire employees. The $2 million threshold also will help the SBA conserve its resources and focus its reviews on larger loans.
If the SBA determines during its review that a borrower lacked an adequate basis for certifying the necessity of its loan, the SBA will seek repayment of the outstanding PPP loan balance and inform the lender that the borrower is not eligible for loan forgiveness. The SBA will not pursue administrative enforcement or referrals to other agencies if the borrower repays the loan after receiving notification from the SBA.

Thanks to Ken Tysiac of the JOA for this timely information
The AICPA’s Paycheck Protection Program Resources page houses resources and tools produced by the AICPA to help address the economic impact of the coronavirus.

Friday, April 03, 2020

PPP Forgivable Small Business SBA Loan

SBA issues details for Paycheck Protection Program loans

By Jeff Drew
1 hour ago

The U.S. Small Business Administration on Thursday issued an interim final rule for the Paycheck Protection Program (PPP), which is offering $349 billion in forgivable loans that small businesses impacted by the coronavirus pandemic can use to cover costs including payroll and rent.  
The interim final rule lays out additional implementation guidelines and requirements for the PPP, which Congress created as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136. The new rule provides greater clarity on several issues and changes the interest rate on loans made under the program from 0.5% to 1%, a change the American Bankers Association said would encourage banks of all sizes to participate in the program.
The CARES Act established the PPP as a new 7(a) loan option overseen by the Treasury Department and backed by the SBA, which is authorized to provide a 100% guarantee to lenders on loans issued under the program. The full principal amount of the loans may qualify for loan forgiveness if the borrower maintains or rehires staff and maintains compensation levels. However, not more than 25% of the loan forgiveness amount may be attributable to nonpayroll costs.
Loan payments will be deferred for six months; however, interest will continue to accrue during the six-month deferment. No collateral or personal guarantees are required.
The program is available to small businesses that were in operation on Feb. 15 with 500 or fewer employees, including not-for-profits, veterans’ organizations, Tribal concerns, self-employed individuals, sole proprietorships, and independent contractors. Businesses with more than 500 employees in certain industries also can apply for loans, according to the SBA and Treasury.
Small businesses and sole proprietorships can apply for PPP loans beginning today. Independent contractors and self-employed individuals can apply beginning April 10.
Under the PPP, the maximum loan amount is the lesser of $10 million or an amount calculated using a payroll-based formula specified in the CARES Act. Note: You can access free loan calculators on the AICPA’s PPP resource page.  
PPP loans will be available through June 30 or until the funds run out. Due to expected high demand, Treasury recommends that applications be submitted as soon as possible. The application can be found here on the Treasury site, along with details for borrowers and lenders.
The CARES Act permits the PPP’s forgivable loans to pay for up to eight weeks of payroll costs, including benefits and other costs. In addition to payroll, recipients also can use PPP funds to pay interest on mortgages, rent, and utilities.
Small businesses applying for PPP loans must submit documentation, such as but not limited to payroll processor records or payroll tax filings, that establishes their eligibility for the loans. The interim final rule issued Thursday clarified that the SBA will allow lenders to rely on the borrower’s documentation to determine if the borrower is eligible for the loans. Lenders can accept e-signatures and e-consents. Lenders who comply with the obligations laid out in the interim final rule will not be held responsible if the borrower submits fraudulent or inaccurate information.
Jeff Drew (Jeff.Drew@aicpa-cima.com) is a JofA senior editor.

Wednesday, April 01, 2020

Covid 19 SBA loan application below

Hello fellow Americans, the Covid19 SBA loan application website is

Covid19relief.sba.gov/#/

If you need help completing the application, contact us!

Tuesday, March 31, 2020

SBA loans that can be foregiven

Applications for small business Paycheck Protection Program open April 3

By Kim Nilsen and Alistair M. Nevius, J.D.
22 minutes ago

Small businesses and sole proprietorships affected by the coronavirus pandemic can apply for loans under the federal Paycheck Protection Program (PPP) beginning Friday.
Starting April 10, independent contractors and self-employed individuals can apply.
The application can be found here on the Treasury site, along with details for borrowers and lenders. Treasury urged those in need of funding to apply quickly, noting that the program has a cap and demand is likely to be high.
The $349 billion program was enacted as part of last week’s Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136. Under the program, small businesses with 500 or fewer employees including not-for-profits, veterans’ organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors are eligible for loans to pay up to eight weeks of payroll costs including benefits as well as other costs. Businesses with more than 500 employees are eligible in certain industries, Treasury said.
Loan forgiveness is based on the employer’s maintaining or quickly rehiring employees and maintaining salary levels, Treasury said in its overview documents. Forgiveness will be reduced if full-time headcount declines or if salaries and wages decrease.
PPP funds can also be used to pay interest on mortgages, rent, and utilities. Treasury noted that due to likely high demand for the program, at least 75% of the forgiven loan amount must have been used for payroll.
Loan payments will be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.
An employer who receives a loan under the PPP is not eligible to also claim an employee retention credit under the CARES Act. The employee retention credit gives eligible employers whose business operations are fully or partially suspended due to the COVID-19 pandemic a credit against employment taxes equal to 50% of qualified wages (up to $10,000 in wages) for each employee.