News & Tech Tips

Commercial Activity Tax (CAT) Update

Kathleen Hargrove on January 22, 2021

Due to Ohio statutes for Commercial Activity Tax (CAT) reporting purposes, in addition to regular revenue typically reported for CAT filing, businesses this year must also include:

 

  • The gross proceeds received from the 3 special BWC rebates issued in 2020 – issued around April, October and December

 

  • Grants received from Ohio, county or local jurisdictions

 

  • EIDL grants for the CARES Act

 

 

Please note that the Ohio Department of Taxation has specifically excluded forgiveness of PPP loans and employee retention credits, so these proceeds do not have to be included for CAT reporting.  

 

 

If you have any questions about this update or would like to discuss your situation specifically, please contact your Whalen advisor for assistance.

IRS Delays Start of Tax Filing Season to Feb. 12

Kathleen Hargrove on January 18, 2021

The IRS announced that the nation’s tax season will start on Friday, February 12, 2021, when they will begin accepting and processing 2020 tax year returns.

 

They typically begin accepting returns at the end of January, but the February 12 start date this year allows the IRS time to do additional programming and testing of IRS systems following the December 27 tax law changes that provided a second round of Economic Impact Payments and other benefits. This programming work is critical to ensuring IRS systems run smoothly.

 

To speed refunds during the pandemic, the IRS urges taxpayers to file electronically with direct deposit as soon as they have the information they need.

 

Individuals can still begin filing their tax returns now, and the returns will be transmitted to the IRS starting February 12.

 

Under the PATH Act, the IRS cannot issue a refund involving the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The law provides this additional time to help the IRS stop fraudulent refunds and claims from being issued, including to identity thieves.

 

The IRS anticipates a first week of March refund for many EITC and ACTC taxpayers if they file electronically with direct deposit and there are no issues with their tax returns. This would be the same experience for taxpayers if the filing season opened in late January. Taxpayers can utilize the Where’s My Refund Tool for their personalized refund date.

 

Overall, the IRS anticipates that the majority of taxpayers will receive their refund within 21 days of when they file electronically with direct deposit if there are no issues with their tax return. Filing via paper could cause additional delays.

 

Check out these helpful tips from the IRS for taxpayers to make filing easier.

PPP Loan…What Expenses Are Deductible?

Kathleen Hargrove on November 23, 2020

As previously communicated in Notice 2020-32, the IRS stated its position that business expenses paid with Paycheck Protection Program (PPP) funds that are forgiven cannot be deducted for federal tax purposes. However, it was unclear how the deduction limitation would be applied if a PPP loan was not forgiven until a subsequent tax year.

 

On Wednesday, the Treasury Department and IRS released guidance clarifying the tax treatment of expenses where a PPP loan has not been forgiven by the end of the year the loan was received.

 

In summary, IRS Revenue Ruling 2020-27 concludes:

 

A taxpayer that received a covered loan guaranteed under the PPP and paid or incurred certain otherwise deductible expenses listed in section 1106(b) of the CARES Act may not deduct those expenses in the taxable year in which the expenses were paid or incurred if, at the end of such taxable year, the taxpayer reasonably expects to receive forgiveness of the covered loan on the basis of the expenses it paid or accrued during the covered period, even if the taxpayer has not submitted an application for forgiveness of the covered loan by the end of such taxable year.

 

The ruling proves two scenarios as examples:

 

Scenario 1

 

A borrower pays expenses that qualify under the CARES Act as valid PPP expenditures. In that scenario, the borrower applies for forgiveness in November 2020 and satisfies all the requirements under the CARES Act to have the loan forgiven, but it doesn’t yet have an answer as to whether it will be forgiven.

 

Scenario 2

 

The borrower pays the same type of valid expenses with its PPP loan and satisfies the CARES Act requirements for the loan, but it has not submitted a forgiveness application before the end of 2020.

 

According to the ruling, the businesses in both scenarios can’t deduct expenses funded with PPP loans because they have a reasonable expectation of forgiveness.

 

In addition, Revenue Procedure 2020-51 was issued which provides a safe harbor for PPP borrowers whose loan forgiveness has been partially or fully denied and who wish to claim deductions for otherwise eligible payments on a return, amended return, or administrative adjustment request.

 

For more information on this, visit Treasury’s website that has links to the full ruling and procedure.

Paycheck Protection Program Loan Necessity Questionnaire

Kathleen Hargrove on November 9, 2020

Last week, the SBA released finalized forms for a PPP Loan Necessity Questionnaire.

 

Businesses and not-for-profits that received $2 million or more in Paycheck Protection Program (PPP) loans must complete one of two new loan necessity questionnaires being sent to lenders by the U.S. Small Business Administration (SBA) for distribution to borrowers.

 

The new forms are designed to collect supplemental information SBA loan reviewers will use in evaluating the good-faith certification borrowers made on their PPP applications that economic uncertainty made their loan request necessary to support ongoing operations.

 

The forms are available to view:

 

SBA Form 3509: Paycheck Protection Program Loan Necessity Questionnaire (For-Profit Borrowers)

 

SBA Form 3510: Paycheck Protection Program Loan Necessity Questionnaire (Non-Profit Borrowers)

 

 

For any questions or assistance with this form, please contact your Whalen advisor.

 

 

SOURCE: Journal of Accountancy

Another Round of 2020 BWC Refunds for Ohio Employers

Kathleen Hargrove on November 5, 2020

The Ohio BWC announced this week that they are issuing a $5 billion dividend to ease the financial pressures organizations may be experiencing amid the ongoing coronavirus (COVID-19) pandemic.

 

This is being issued in addition to a recent $1.3 billion dividend that was issued at the end of October.

 

Checks will be mailed by the BWC to eligible employers in Mid-December.

 

 

How much will an employer receive?

 

BWC defines the private employer dividend as 372% of billed premium for eligible employers for the policy period of July 1, 2019, through June 30, 2020. BWC will apply the percentage to the blended premium amount.

 

BWC defines the public employer dividend as 372% of billed premium for eligible employers for the policy period of Jan. 1, 2019, through Dec. 31, 2019. BWC will apply the percentage to the blended premium amount.

 

 

Who is eligible for the dividend?

 

Eligibility is defined as follows:

 

  1. State Insurance Fund employers (private employers or public employer taxing districts only).
  2. The employer must have reported payroll greater than zero for the applicable policy period.
  3. The employer must have been billed premium for the applicable policy period.
  4. Employers must have completed their payroll true-up for policy year 2019 as of Oct. 2, 2020.
  5. The employer must be in an active, reinstated, combined, cancelled – business sold, or debtor-in-possession status or, in a lapsed status with a lapse date of Jan. 1, 2020 or later as of Oct. 2, 2020.

 

 

For further details on this dividend, please visit the BWC website here.

 

 

If you have any questions regarding this announcement, please contact your Whalen advisor.

 

 

SOURCE: Ohio BWC

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