Businesses Receiving PPP Loans Cannot Claim Tax Deductions for Expenses
May 01,2020
This article was updated on May 1 at 5:10 p.m. On Thursday, April 30, the Internal Revenue Service (IRS) issued guidance on expenses related to the Paycheck Protection Program (PPP). The guidance states that businesses with forgivable loans cannot claim tax deductions for expenses covered by the PPP.  The IRS Notice 2020-32 is expected to be published on May 18, 2020. The IRS notice “clarifies that no deduction is allowed under the Internal Revenue Code for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a covered loan” as outlined by the Coronavirus Aid, Relief and Economic Security (CARES) Act. Expenses that are not eligible for tax deductions include: Payroll costs Certain employee benefits relating to healthcare Interest on mortgage obligations Rent Utilities Interest on any other existing debt obligations As a reminder, any amounts forgiven are not taxable pursuant to the CARES...
CARES Act Aids Employers Who Continue to Pay Employees
Apr 29,2020
The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides two distinct and substantial employment tax benefits for certain employers under Sections 2301 and 2302 of the Act.  Section 2301 provides a refundable payroll tax credit for certain wages paid to employees from March 13 to December 31, 2020. Section 2302 allows employers to defer the deposit of certain employment taxes for as much as two years. Taken together, these provisions provide significant relief for employers and are designed to encourage employers to continue paying wages to employees during these unprecedented times. Section 2301 Employee Retention Credit  Insight: This credit is not limited to small employers. However, any employer who receives a Small Business Administration Loan under the Paycheck Protection Program of the CARES Act is ineligible to receive this employee retention credit. Section 2301 of the CARES Act provides a payroll tax credit of up to $5,000 per employee...
Congress Passes Paycheck Protection Program and Health Care Enhancement Act
Apr 23,2020
Today (April 23, 2020), Congress passed, and the President is expected to quickly sign, the 4th piece of coronavirus-response legislation that includes $484 billion in relief for small businesses, hospitals and funding for COVID-19 testing. The Paycheck Protection Program and Health Care Enhancement Act provides an additional $310 billion for the Paycheck Protection Program (PPP), a new provision worth $60 billion for economic disaster loans, $75 billion for hospitals and $25 billion for expanded testing. A breakdown of the bill is below. Please note that as soon as we have had an opportunity to review the Act in detail, we will provide more information to you. Paycheck Protection Program Of the $310 billion approved for the Paycheck Protection Program, $60 billion is dedicated for smaller lending facilities described in the bill as "community financial institutions, small insured depository institutions and credit unions with assets less than $10 billion." Applications and...
Fed Announces Moves to Provide Additional Lending
Apr 09,2020
The Federal Reserve announced on Thursday, April 9, 2020 that it will inject about $2.3 trillion into the economy through a variety of lending programs, including bolstering the effectiveness of the Small Business Administration's Paycheck Protection Program (PPP) by supplying liquidity to participating financial institutions through term financing backed by PPP loans to small businesses. Federal Reserve Chairman Jerome  Powell said in a statement, “The Fed’s role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible.” Lending Programs A press release issued by the Fed said the program will: extend credit through the Paycheck Protection Program Liquidity Facility (PPPLF) to eligible financial institutions that originate PPP loans, taking the loans as collateral at face value; buy up to $600 billion in loans through its Main...
IRS Extends Deadlines for 403(b) Plans and Pre-Approved Defined Benefit Plans
Apr 09,2020
As a result of the COVID-19 pandemic, the Internal Revenue Service (IRS) has announced that plan sponsors now have three additional months to amend any of their 403(b) plans that do not currently meet certain requirements. The initial remedial amendment period for 403(b) retirement plans has been extended from March 31, 2020 to June 30, 2020. Tax-exempt organizations and governmental employers who sponsor these plans now have until June 30 to amend an individually designed plan or adopt a pre-approved one. Individually Designed Plans 403(b) plan sponsors with individually designed plan documents that were intended to comply with the applicable code but failed to do so because of defects to the form of the document will now have until June 30, 2020 to retroactively correct them. These corrections can be applied retroactively as far back as January 1, 2010 or the plan's effective date, only if the plan sponsor meets...
CARES Act Introduces Temporary Changes to Retirement Plans
Apr 09,2020
A growing number of people are facing economic stress because of the COVID-19 pandemic, through job loss or shortened work hours. The Coronavirus Aid, Relief and Economic Security (CARES) Act, which was signed into law on March 27, 2020, contains several measures to help those in need. Among them are temporary changes that apply to retirement plans. The four provisions apply to 401(k), 403(b), 457 plans and IRAs, and the changes are outlined below. Hardship Distributions Those facing financial hardship because of the pandemic will find that the usual limitations placed on hardship distributions have been lifted. Normally, hardship distributions: cannot be repaid to the plan. are taxed in the year they are taken. have an additional 10% early withdrawal penalty imposed on those under the age of 59 ½. limit the amount that can be withdrawn according to what is deemed necessary. According to the terms of the CARES...
CARES Act Brings Change to Net Operating Losses to Benefit Businesses
Apr 06,2020
The recently passed Coronavirus Aid, Relief and Economic Security (CARES) Act contains many provisions designed to bring financial help to both corporate and individual taxpayers as they face financial struggles during the COVID-19 pandemic. One of the provisions is a change in net operating losses (NOLs), aimed at giving tax relief to taxpayers who will lose money this year because of the pandemic or who had losses in 2018 and 2019. Losses Carried Back as Far as 2013 The new provision allows NOLs generated in taxable years beginning after December 31, 2017 and before January 1, 2021 to be carried back 5 taxable years. Under pre-TCJA (Tax Cuts and Jobs Act of 2017) law, a 2-year NOL carryback was allowed but starting in 2018 under TCJA, carrybacks were disallowed. Now, because of the CARES Act, 2018 losses can be carried back as far as 2013. Careful Analysis Needed to Realize...
CARES Act Helps Businesses with Change in Interest Expense Deduction for 2019 and 2020
Apr 06,2020
The Coronavirus Aid, Relief and Economic Security (CARES) Act, which was passed by Congress to help people and businesses facing financial hardship as a result of the COVID-19 pandemic, is temporarily changing some tax limits that were put in place by the Tax Cuts and Jobs Act (TCJA) of 2017. Prior Interest Expense Deduction Rules Section 163(j) of the Internal Revenue Code (IRC) created a limitation on the deduction of business interest expenses for tax years beginning after December 31, 2017. The law applied to interest on all business debt without a transition rule in place prior to the law. Deductions for business interest expense were limited to the sum of: Business interest income Floor plan financing interest expense 30% of Adjusted Taxable Income (ATI) Interest expense that had been disallowed as a deduction in the current tax year could be carried forward indefinitely to future years and would be...
Treasury Department Announces Small Businesses Can Apply for Loans
Apr 01,2020
This article was updated on April 2, 2020 at 9:30 pm ALERT: On the evening of April 2, 2020, the SBA issued an Interim Final Rule (IFR) on the Payroll Protection Program.  We expect the IFR to provide additional needed guidance and clarification on certain points for those planning to apply for SBA loans under the CARES Act, as well as for participating lending institutions. We will issue an update on April 3 as soon as we have had an opportunity to fully analyze the document. Late in the afternoon of March 31, 2020, the U.S. Department of the Treasury released additional guidance (available here) surrounding the Payroll Protection Program. The guidance includes: Overview Application form Borrowers information sheet Lenders information sheet Of note, the release states that small businesses and sole proprietors can begin applying April 3, 2020; independent contractors and self-employed can begin applying April 10, 2020. Based...
Employers Can Immediately Provide Tax-Free Qualified Disaster Payments to Employees in Connection with COVID-19
Mar 31,2020
Employers are scrambling to find ways to help their employees who are impacted by the novel coronavirus (COVID-19). Help is available. Now that the COVID-19 has been declared a national emergency,[1] Internal Revenue Code Section 139 can be used to allow employers to make tax-free payments or reimbursements to employees as “qualified disaster payments.” Below are some frequently asked questions about how employers can use Section 139 immediately to help employees cope with COVID-19.   [1] COVID-19, was designated as an emergency under the Stafford Act on March 13, 2020. Although there is some debate over the legal technicalities of that declaration, it appears that Section 139 relief has been triggered. Specifically, Rev. Rul. 2003-29 says that for Section 165(i) (which is cross-referenced in Section 139), an “emergency” is treated as a “disaster.” In addition, an IRS Chief Counsel Memorandum dated June 28, 2019, states “A Federally declared disaster includes a...

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