News & Tech Tips

Meals & Entertainment Deductions

Kathleen Hargrove on June 29, 2021

 

By: Morgan K. Webster, CPA

 

 

Writing off meals and entertainment as business expenses can be complex at times. Some things are 100% deductible, some are 50%, and a few are nondeductible. It all depends on the purpose of the meal or event, and who benefits from it.

 

The Consolidated Appropriations Act of 2021 issued a temporary 100% deduction for businesses for food and beverage expenses that are provided by a restaurant for amounts paid after December 31, 2020 and before January 1, 2023. These expenses were formerly 50% deductible under the TCJA. A restaurant, as defined under IRS Notice 2021-25, is a “business that prepares and sells food or beverages to retail customers for immediate consumption, regardless of whether the food or beverages are consumed on the business’s premises”.

 

The temporary 100% deduction does not include food and beverages provided by grocery stores, specialty food stores, liquor stores, vending machines, etc.

 

Entertainment expenses are still nondeductible. Food and beverages purchased at an entertainment activity are still 50% deductible if the food and beverages are purchased separately from the cost of the entertainment, or if the food and beverage is separated out on a bill or receipt.

 

In order to maximize your tax deductions for your business, we suggest your trial balance accounts reflect the following:

 

  • 50% meals
  • Restaurant meals (100%)
  • Whole-staff lunches (100%)
  • Entertainment (0%)

 

If you have any questions on this guidance, please contact your Whalen advisor for assistance.

 

 

Real Property Tax Valuation Relief

Kathleen Hargrove on April 28, 2021

Governor DeWine signed into law Senate Bill 57 yesterday (4/27) to provide further relief and assistance to Ohio taxpayers who have experienced a decline in the value of their real estate due to the COVID-19 pandemic.

 

Sponsored by State Sen. Bob D. Hackett (R-10th District) and State Sen. Nickie J. Antonio (R-23rd District), Senate Bill 57 modifies the law regarding property tax exemptions and procedures to authorize COVID-19-related property tax valuation complaints.

 

The law goes into effect on July 26, 2021. If you are an Ohio real property tax taxpayer who believes the value of your property has depreciated due to the impact of COVID-19 pandemic, you can file a complaint beginning on this effective date. Complaints must be filed on or before August 25, 2021.

 

It also authorizes an eligible party can file a special “COVID-19” complaint with the specific county Board of Revision requesting that a property’s tax valuation for tax year 2020 be determined as of October 1, 2020, instead of the typically mandated tax lien date of January 1, 2020.

 

Ohio’s statutory restriction on filing only one complaint in each three-year valuation period can also be waived if an owner chooses to file a tax year 2020 COVID-19 complaint.

 

If you have any questions on this new law, please contact your Whalen advisor for assistance.

Updated Guidance on Food/Beverage Deductions

Kathleen Hargrove on April 9, 2021

The Treasury Department and the IRS have issued Notice 2021-25 providing guidance under the Taxpayer Certainty and Disaster Relief Act of 2020. The Act added a temporary exception to the 50% limit on the amount that businesses may deduct for food or beverages. The temporary exception allows a 100% deduction for food or beverages from restaurants.

Beginning January 1, 2021, through December 31, 2022, businesses can claim 100% of their food or beverage expenses paid to restaurants as long as the business owner (or an employee of the business) is present when food or beverages are provided and the expense is not lavish or extravagant under the circumstances.

 

Where can businesses get food and beverages and claim 100%?

Under the temporary provision, restaurants include businesses that prepare and sell food or beverages to retail customers for immediate on-premises and/or off-premises consumption. However, restaurants do not include businesses that primarily sell pre-packaged goods not for immediate consumption, such as grocery stores and convenience stores.

Additionally, an employer may not treat certain employer-operated eating facilities as restaurants, even if these facilities are operated by a third party under contract with the employer.

If you have any questions on this updated guidance, please contact your Whalen advisor or refer to the IRS Notice containing further details.

Ohio Income Tax Update: Unemployment Benefits

Kathleen Hargrove on April 8, 2021

Last month, Sub. S.B. 18 was signed into law. This incorporates recent federal tax changes into Ohio law effective immediately.

 

Specifically, federal tax changes related to unemployment benefits in the federal American Rescue Plan Act (ARPA) of 2021 will impact some individuals who have already filed or will soon be filing their 2020 Ohio IT 1040 and SD 100 returns (due by May 17, 2021).

 

Ohio taxes unemployment benefits to the extent they are included in federal adjusted gross income (AGI). Due to the ARPA, the IRS is allowing certain taxpayers to deduct up to $10,200 in unemployment benefits. Certain married taxpayers who both received unemployment benefits can each deduct up to $10,200. This deduction is factored into the calculation of a taxpayer’s federal AGI, which is the starting point for Ohio’s income tax computation.

 

Many taxpayers filed their 2020 federal and Ohio income tax returns and reported their unemployment benefits prior to the enactment of this deduction.

 

As such, ODT offers the following guidance related to the unemployment benefits deduction for tax year 2020:

 

  • Taxpayers who previously filed federal and Ohio tax returns and are waiting for IRS to issue a refund based on the unemployment benefits deduction.

 

  • All other taxpayers who previously filed their federal and Ohio returns prior to the enactment of this federal deduction and are waiting for the IRS to issue a refund based on the unemployment benefits deduction do not need to take any additional action on their originally filed Ohio IT 1040 return (and/or SD 100) at this time. The Department will provide further guidance when more details are available from the IRS, please continue to monitor our website.

 

  • Taxpayers who previously filed federal and Ohio tax returns without the unemployment benefits deduction, but who are not entitled to any additional Ohio refund.

 

  • Taxpayers who previously filed their federal and Ohio returns prior to the enactment of this federal deduction and whose Ohio income tax liability amount (IT 1040, line 10) was $0, do not need to take any additional action. Such taxpayers are not entitled to any additional Ohio refund.

 

  • Taxpayers who are amending their federal return to claim the unemployment benefits deduction.

 

  • Taxpayers who file an amended federal return should wait to file their amended Ohio IT 1040 (and an amended SD 100 if applicable) until the IRS has approved the requested changes.

 

  • Please note that the IRS does not recommend filing an amended return for the adjustment at this time.

 

The IRS’s current guidance on the federal taxation of unemployment benefits can be found here and how they will recalculate taxes on unemployment benefits can be found here.

 

If you have additional questions or need assistance, please work with your Whalen Advisor.

 

 

SOURCE: Ohio Department of Taxation

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

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