News & Tech Tips

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

Ohio Urging Victims of Unemployment Fraud to Act Now to Avoid Tax Troubles

Kathleen Hargrove on February 10, 2021

The Department of Taxation (ODT) is warning Ohioans who may be victims of unemployment fraud to report the suspected fraud or potentially face higher taxes.

 

The Ohio Department of Job and Family Services (ODJFS) has identified more than 80,000 cases of unemployment fraud by criminals using stolen identities.

 

Victims of that identity theft who have received Form 1099-G from ODJFS showing that they received unemployment benefits – but never applied for benefits – could potentially pay federal and state tax on that un-received benefit if they don’t act to correct the record.

 

Unemployment benefits are taxable and the IRS is notified when someone receives benefits. Victims of unemployment fraud who’ve received an unwarranted 1099-G are being advised to contact ODJFS, report the fraud, and ask for a corrected 1099-G.

 

ODJFS will then contact the IRS and correct the record so the victim of fraud will not incur a tax liability.

 

The Internal Revenue Service (IRS) has issued guidance to taxpayers regarding identity theft and ODT is advising fraud victims that they do not need to have a determination from ODJFS on their ID theft claim or a corrected 1099-G to file your federal and state income tax returns.

 

Taxation officials say fraud victims generally don’t need to report the un-received unemployment benefit on their tax return but need to pursue a corrected 1099-G from ODJFS after returns are filed to avoid a future tax bill from the IRS or ODT.

 

For additional information or guidance, please contact:

 

ODJFS at (833) 658-0394 or: https://unemploymenthelp.ohio.gov/, and click on the red ‘Report Identity Theft’ button

 

The IRS at: https://www.irs.gov/newsroom/irs-offers-guidance-to-taxpayers-on-identity-theft-involving-unemployment-benefits

 

ODT at: https://tax.ohio.gov/wps/portal/gov/tax/help-center/resources/1099g

 

 

 

SOURCE: Ohio Department of Taxation

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.

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.

Small Business Relief Grant

Kathleen Hargrove on October 29, 2020

The Small Business Relief Grant is designed to provide relief to Ohio businesses that have been negatively affected by COVID-19.

 

Governor Mike DeWine has designated up to $125 million of funding received by the State of Ohio from the federal CARES Act to provide $10,000 grants to small businesses to help them through the current crisis.

 

The program, which will begin accepting applications November 2, 2020, will be administered by the Ohio Development Services Agency.

 

For the full Terms and Conditions for participation in the Small Business Relief Grant, please click here.

 

 

For questions or assistance with the application process, please contact your Whalen advisor.

 

 

 

SOURCE: Ohio Development Services Agency

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