Tax & Pandemic Relief Update
Tax & Pandemic Relief Update
Whew! We just finished a crazy month of filing hundreds of W-2s and 1099s and applying for PPP 2.0 loans. Now we shift gears and focus on the upcoming tax season and working on PPP 1st draw loan forgiveness. We have some updates to keep you informed of what is going on and what to expect in the coming months. We’re going to be buckling up because the next several months look like they’ll be quite bumpy for us!
2020 Taxes & the IRS
Will the filing deadlines get pushed back?
We don’t know yet and it’s hard to predict. If the latest pandemic relief gets passed and it includes the promised additional economic impact payments (i.e., stimulus checks), the odds are pretty good the filing deadline will be pushed. The IRS will likely need to prioritize those payments above processing tax returns.
We are operating as if the following filing dates will be in effect:
- March 15th for S-corporations and partnerships
- April 15th for individuals, corporations and trusts
- May 15th for nonprofit organizations
Watch your inboxes for invitations to our Tax Portal!
When Can I eFile my tax return?
The IRS is not accepting tax returns until February 12th this year, which is the latest I can recall the date being. However, we are processing returns and getting them in the queue. So, if you’re ready to submit your tax documentation to us and haven’t received your invitation to the Tax Portal, reach out to Solutions@symsolutionscpa.com.
What is going on with all these IRS Notices?
As you may have heard, the IRS is still wading through the million pieces of unopened mail, getting caught up from their own shutdown and periodically redirecting their work to process economic impact payments. The IRS knows they have an issue with sending out these notices that may no longer be accurate or have actually been resolved. However, I advise we address these notices rather than following the IRS’ suggestion that we can just wait to see if we get another notice.
Why can’t I get through to the IRS on the phone?
While it has never been quick and easy to get through to the IRS, the wait times are even longer these days. As a CPA I have access to a “priority” number and can be on hold up to 3 hours. They also have a wonderful “courtesy disconnect” service in which a recorded voice reports they are too busy and we need to try calling back later before the call is disconnected. It is incredibly frustrating for us all. It may take me weeks of calling before I am able to reach a live human being at the IRS. Also, I am limited in the number of clients I can discuss per phone session.
Will the IRS make you pay fines, penalties & interest?
In general, the answer is that it depends on the reason for the penalty. However, the past year with the pandemic we are likely in a strong position to request abatements for reasonable cause. I’ve been hearing that most penalties that are under $1,000 are being approved using reasonable cause, citing pandemic-related causes.
How do you get your economic impact payment if you haven’t received it yet?
When we file your 2020 tax return we will be asking about those payments and how much you received. We will determine if you received the amount you should have and if you didn’t, we will be able to request the payment via a Recovery Credit that will be added to your refund.
PPP 2.0 Loans & PPP 1.0 Loan Forgiveness
Why is it taking so long to get the 2nd PPP loans approved?
The SBA has been experiencing quite a few technical issues in how they coded their loan portal. There are many applications (about 30%) that are being erroneously rejected and others that cannot pass validation checks in the SBA system. For example, sole proprietors are being required to enter an EIN versus their SSN while many sole proprietors do not even have an EIN. Also, we are finding that the approved loan amounts are being capped at $35,000 per employee without any guidance regarding this cap.
As a result of the above issues, the SBA has had to make coding changes to their loan portal. Also, it is my opinion that the change in administration is affecting the process. The change in leadership and the time it takes to appoint and install new leadership impacts how business is run. The AICPA recently wrote a letter to the Acting Administrator of the SBA urging the Administration to address these issues and communicate to the borrowers and lenders how and when they are going to address these specific issues.
Will there still be funds available for your loan if it takes longer to get approved?
Yes, I believe there will be sufficient funds. There is still $212B available of the amount that was available for this 2nd tranche of funds.
Isn’t the deadline fast approaching to request forgiveness of the 1st PPP loan?
Yes, for most of our clients it is just around the corner. The dilemma we are facing is that the vast majority of our clients fall into the category of PPP loans under the $150,000 threshold. The SBA published the newest forgiveness application on January 19th specifically for loans in that category. Also, the Economic Aid Act made some changes to PPP loan forgiveness that required revisions to all the applications. We are being told that the SBA is not going to be ready to accept those applications until March because they have to work on system changes in order to accept that particular form. Many banks are now even reporting that they are not going to accept those applications until the SBA is ready. Chase bank is one of those banks.
I am working on these application packages and gathering all the necessary documentation. Priorities keep shifting based on all the changes that keep happening. I am mindful of the requirements and deadlines and I will be getting these packages out to you as we go through the next several weeks so we are ready when we are able to submit the applications.
Will the expenses paid with PPP 1.0 funds be deductible at the state level?
Maybe. Maybe not. Unfortunately, just because the federal government has decided those expenses will be deductible when you file your federal tax return doesn’t mean the state will adopt that same rule. Each state’s regulations will have to be reviewed to determine if the state in which your business is located will allow those expenses to be deducted.
As of today the state of Ohio is NOT permitting the deduction of these expenses. I personally wrote my legislators urging them to follow the federal government in this manner. I encourage you to do the same. Let them hear your voice, as well as mine. If you’re in Ohio, the following site will help you do so with a few simple clicks. https://ohiocpa.com/advocacy/Take_Action#/ I am sure other states have similar tools.
Will my Ohio Bureau of Workers Compensation Premium Rebates be taxable?
Many of my Ohio-based clients received very generous rebates from the OH BWC in 2020. These will be includable as other income. As those in Ohio know, business income is subject to a Commercial Activity Tax (CAT). It is my opinion this should not be subject to the CAT and is also the position of the Ohio Society of Certified Public Accountants. I sent a letter to my legislators regarding this subject, as well, and urged them to reconsider their position that the premium be included in income when filing the CAT. I encourage my Ohio clients to do the same. https://ohiocpa.com/advocacy/Take_Action#/
Posting Date: February 5, 2021