News & Tech Tips

TIGTA reports IRS swamped with backlog of unprocessed returns

Kathleen Hargrove on April 1, 2021

TIGTA (Treasury Inspector General for Tax Administration) has conducted and audit and reported that the unprocessed individual returns, as well as the additional returns and correspondence in the Error Resolution, Rejects, and Unpostables functions and the Accounts Management inventory, include returns, etc. for taxpayers who still have not received their tax year 2019 tax refunds, the audit noted.

TIGTA stressed that IRS’s ability to resolve the backlog may well be impacted by the need to divert manpower and other resources to issuing economic impact payments or an unforeseen closure of Tax Processing Centers due to the pandemic. “The ability of these taxpayers to contact the IRS to receive updated information about the status of their refunds is a further challenge as staffing issues continue to hinder the IRS’s ability to provide adequate customer service,” the audit said.

The bulk of the work done at Tax Processing Centers “is not conducive to a telework environment,” TIGTA said. As described in the audit, “this work includes the receiving, sorting, and distributing of mail and the processing of paper tax returns, which requires manually inputting information from the tax return into IRS systems, correcting errors, and corresponding with the taxpayer, if needed.”

IRS has been able to restore most of its toll-free taxpayer assistance telephone lines and reopen many of its Taxpayer Assistance enters, the audit said.

PPP Deadline Extension Signed Into Law

Kathleen Hargrove on April 1, 2021

The Paycheck Protection Program (PPP) application deadline formally changed from March 31 to May 31 this week when President Joe Biden signed the extension into law.

 

The U.S. Senate had voted 92-7 last week to approve the PPP Extension Act of 2021, H.R. 1799, sending the legislation to the president for his signature.

 

The additional 60 days provided by the bill will provide additional time to for businesses to complete existing PPP loan applications and file new ones. The bill also provides the SBA time to address significant loan application process challenges, including validation and error codes, delayed guidance, and changes to the PPP loan amount calculation for self-employed borrowers.

 

Patrick Kelley, associate administrator for the SBA’s Office of Capital Access, testified during a Senate Small Business Committee meeting Wednesday that 190,000 applications were still held up in the SBA’s PPP platform due to unresolved error codes related to validation checks instituted by the SBA to help prevent fraudulent applications from being funded.

 

The PPP Extension Act does not provide any additional funding for the current round of the PPP, which Congress provided with more than $290 billion to make forgivable loans to small businesses and not-for-profits. From the program’s opening on Jan. 11 through March 21, the SBA has approved more than 3.1 million loans totaling nearly $196 billion.

 

If you have any questions or need assistance with this, please contact your Whalen advisor.

 

 

SOURCE: Journal of Accountancy

Considering an SBA Loan? Act Now.

Kathleen Hargrove on March 22, 2021

If you have been considering an SBA loan (other than PPP) for your business, this is an ideal time to apply.

 

We have compiled some key SBA loan related provisions included in the Economic Aid Act to further assist you with making this decision:

 

 

Extension of the Debt Relief Program established under the CARES Act

 

  • All borrowers with qualifying loans approved by the SBA prior to the CARES Act will receive an additional three months of P&I, starting in February 2021. Going forward, those payments will be capped at $9,000 per borrower per month.

 

  • After the three-month period described above, borrowers considered to be underserved—namely the smallest or hardest-hit by the pandemic—will receive an additional five months of P&I payments, also capped at $9,000 per borrower per month. They include:

 

  • Borrowers with SBA microloans or 7(a) Community Advantage loans

 

  • Borrowers with any 7(a) or 504 loan in the hardest-hit sectors, as measured by the severity of sector-wide job losses since the start of the pandemic. They include food service and accommodation; arts, entertainment and recreation; education; and laundry and personal care services.

 

 

  • SBA payments of P&I on the first 6 months of newly approved loans will resume for all loans approved between February 1 and September 30, 2021, also capped at $9,000 per month.

 

 

Modifications to 7(a) Loan Programs

 

  • Increases to 90 percent the loan guarantee amount on 7(a) loans, including for Community Advantage loans, until October 1, 2021.

 

  • Increases the Express Loan amount from $350,000 to $1 million on January 1, 2021, and then reverts permanently to a lower amount of $500,000 on October 1, 2021.

 

  • The Express Loan guaranty amount for loans of $350,000 and less is temporarily increased from 50 percent to 75 percent, and for loans above $350,000 the guarantee remains at 50 percent. On October 1, 2021, the guarantee reverts to 50 percent for all Express Loans.

 

 

Temporary Fee Reductions

 

  • Waives lender and borrower fees for both the 7(a) and 504 loan programs.

 

 

 

For further assistance with submitting an application or if you have any questions, please work with your Whalen advisor.

New PPP Changes For Small Businesses

Kathleen Hargrove on February 23, 2021

The Biden Administration announced this week that it will institute a two-week period starting Wednesday, 2/24 during which only businesses with fewer than 20 employees will be able to apply for Paycheck Protection Program (PPP) loans.

 

The exclusive application window is one of several moves the White House said it is making to further target the PPP funds to the smallest businesses. The administration also will:

 

  • Change the PPP loan calculation formula to help sole proprietors, independent contractors, and self-employed individuals receive more financial support. In addition, $1 billion will be set aside for businesses in this category that don’t have employees and are located in low- and moderate-income areas. Details of the changes have not yet been released.

 

  • Eliminate a restriction preventing small business owners with prior nonfraud felony convictions from obtaining relief through the PPP.

 

  • Remove a rule preventing small business owners who are delinquent on federal student loan payments from securing a PPP loan.

 

  • Allow noncitizen small business owners who are lawful U.S. residents to use individual taxpayer identification numbers (ITINs) to apply for relief.

 

The administration said the 14-day exclusive application period is designed to help the 98% of small businesses that have fewer than 20 employees, noting that these businesses often struggle more than larger businesses to collect the necessary paperwork and secure a PPP loan through a lender.

 

The White House statement also said that the administration would continue to work with lenders and other stakeholders to address PPP processing delays caused by anti-fraud validation checks that must be completed before loan guaranty approval is granted. The statement said the U.S. Small Business Administration (SBA) would continue to work with lenders to create streamlined processes to resolve issues as quickly as possible while still working to ensure taxpayer funds are spent wisely.

 

The administration also will make the following moves:

 

  • Update key areas of SBA websites to help more applicants find resources for understanding relief options and completing applications.

 

  • Continue to conduct stakeholder outreach to learn more about challenges and opportunities in the implementation of current emergency relief plans.

 

  • Launch a new initiative to increase communication with lenders. Specifically, the SBA will increase opportunities for lenders to provide recommendations and ask questions about the PPP. The goal is to drive resolution of open questions and concerns in a more streamlined way.

 

The application window for the current $284 billion iteration of PPP is scheduled to close March 31.

 

For any questions regarding this announcement or assistance with your PPP filing, please contact your Whalen advisor.

 

 

Source: Journal of Accountancy

Employee Retention Tax Credit Update

Kathleen Hargrove on January 22, 2021

The Consolidated Appropriations Act, 2021 that was signed into law on December 27, 2020 includes several significant changes to the Employee Retention Tax Credit. 

 

The new law affects the credit for both 2020 and 2021. The most significant change is that taxpayers who previously received PPP funding that was forgiven (or is expected to be forgiven) can now also qualify for the Employee Retention Tax Credit.

 

Here are the key updates regarding the Employee Retention Tax Credit for 2020 for businesses who employed 100 or fewer employees in 2019, or paid employees who are not performing services in 2020:

 

  • Businesses with operations that were fully or partially suspended during 2020 due to government orders related to COVID-19 may qualify for the credit

 

  • Businesses with a 2020 quarterly decline of more than 50% in gross receipts when compared to the same quarter in 2019 may qualify for the credit

 

  • The maximum credit is 50% of the first $10,000 in wages paid to an employee between March 12, 2020 and December 31, 2020

 

  • Aggregation rules apply to the 100 employee limit

 

 

Here are the key updates regarding the Employee Retention Tax Credit for 2021 for businesses who employed 500 or fewer employees in 2019, or paid employees who are not performing services in 2021:

 

  • Businesses with operations that were fully or partially suspended during 2021 due to government orders related to COVID-19 may qualify for the credit

 

  • Businesses with a 2021 quarterly decline of more than 20% in gross receipts when compared to the same quarter in 2019 may qualify for the credit

 

  • The maximum credit is 70% of the first $10,000 in wages paid to an employee during the first quarter of 2021 and another 70% of the first $10,000 in wages paid to an employee during the second quarter of 2021. This allows for a maximum credit of $14,000 per employee over the first two quarters of 2021.

 

  • Aggregation rules apply to the 500 employee limit

 

The same wages that were used for PPP forgiveness or any other tax credit, such as the Work Opportunity Tax Credit, cannot be used for the Employee Retention Tax Credit. The new tax legislation also allows group health plan expenses to be considered qualified wages for the Employee Retention Tax Credit.

 

There are also new rules that allow businesses who were not in existence for all or part of 2019, or all or part of 2020, to be able to claim the Employee Retention Tax Credit.

 

The 2020 Employee Retention Tax Credit can be obtained by filing or amending the 4th quarter 941 tax return due January 31, 2020. The 2021 Employee Retention Tax Credit can be obtained by filing or amending the 1st quarter 941 tax return due April 30, 2021 and/or the 2nd quarter 941 tax return due July 31, 2021.

 

 

CLIENT RESOURCES:

 

We are providing two flowcharts that visually show the process of qualifying for the Employee Retention Tax Credit. One flowchart is for 2020 and the other is for 2021.

 

In addition, we are providing a questionnaire that can assist us in identifying if your company is a candidate for the Employer Retention Tax Credit.

 

Please complete the questionnaire and email it back to your advisor at Whalen & Company if you feel you may qualify for this tax credit. Your advisor can provide assistance navigating the new rules pertaining to the Employee Retention Tax Credit and help determine whether you qualify.

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