2021 TAX SEASON HAS STARTED

Here at LKM, we have already begun processing business and personal returns.  However, due to IRS and GA limitations, we will not be able to efile these returns for another week or two.  Please get in touch with your CPA with any questions.

Consolidated Appropriations Act of 2021

On 12/27, the President signed the Consolidated Appropriations Act of 2021 (the CAA) into law.

We wanted to take this opportunity to highlight critical information for our clients.  Please be aware that this law is less than two weeks old, and so we do not have all the details yet.  Please consider this a “big picture” email, and we will work diligently to get into the details as soon as they are available.  More information is coming!

PPP Expenses – These expenses are now fully deductible.

PPP Forgiveness – Loans of $150,000 or less can use the simplified application (the SBA has 24 days from 12/27 to prepare this form, but then the banks will need time to update their systems)

PPP Second Round – There is a second round of PPP available – but it is very limited.  You may be able to get more PPP funding if you can show a reduction in gross receipts.

Payroll Credits – there were quite a few changes and extensions to various coronavirus payroll credits – if you feel that you qualify for one of these, or would like to discuss further, please contact your CPA

EIDL Advance – The EIDL advance now does not reduce the amount of the PPP forgiveness, and the EIDL is not included in taxable income.

Big 1099 Changes – If you are required to issue 1099s – there are big changes here.  The 1099-MISC form for services (used to be Box 7 of Form 1099-MISC) has been replaced by a new 1099-NEC form.  The deadline for this form is Feb. 1 with no extensions.  The penalties for late filing is $110 per form if filed before 8/1, $270 per form if after 8/1, and $550 if found that the form was willfully not filed.

Georgia Department of Labor Tax Rates 2021

The Georgia Department of Labor has announced that the 2021 tax rate notices will be delayed and will not come out until February 2021.  Please make sure to check your employer portal at the DOL site, or give us a call if you need assistance.

PPP Expenses not Deductible

The IRS has come out with Revenue Ruling 2020-27, which gives us some direction on how to treat the PPP loan and the related expenses.

Lets look at each separately.

If your business received the PPP loan and it is forgiven, that money is considered non-taxable income.

However, the expenses that your business listed to qualify for forgiveness (payroll, utilities, etc) are not deductible in 2020.

 Revenue Ruling 2020-27 clarifies that these 2020 expenses that were used to apply for forgiveness are not deductible, even if the PPP is not forgiven until 2021, as long as you reasonably expect the PPP to be forgiven.

 This is the way that the law currently stands.  There is some talk in Congress about changing the law and making these expenses deductible, but as of this writing, that is still just talk.

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PPP LOANS OF 50k OR LESS

Paycheck Protection Program (PPP) borrowers of $50,000 or less now have an opportunity to apply for forgiveness using a simplified application that has been released.

Loans of less than $50,000 are now exempted from any reductions in forgiveness based on reductions of employees or reductions in wages.

https://www.sba.gov/sites/default/files/2020-10/PPP Loan Forgiveness Application Form 3508S.pdf

PPP LOAN UPDATE

Have you gotten a notice that your PPP loan payments are starting to come due?

Those payments may now be deferred – take a look at the following article.

https://www.journalofaccountancy.com/news/2020/oct/ppp-loan-repayments-deferral-period.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=08Oct2020

If you have any questions about your PPP loan, or need help with forgiveness, please give one of our CPAs a call!

Payroll tax deferral update

On August 8th, the President issued a presidential memorandum that would allow employers to defer the employee’s portion of payroll taxes.

On Friday August 28th, the IRS issued guidance regarding this deferral.

From Sept 1, 2020 to December 31, 2020, employers can defer the withholding, deposit, and payment of the employee portion of the OASDI tax (typically called the Social Security tax).

HOWEVER – this is just a deferral.  Under the guidance, employers will need to start withholding and depositing the deferred tax beginning January 1, 2021 through April 30, 2021.  This effectively means that the employee will have double the social security tax withheld (one as a part of the normal payroll, and then the additional amount that was deferred) from January to April 2021.

Additionally, this deferral only applies to any employee whose pretax wages during any biweekly pay period is less than $4000.

There is no guidance for what to do if an employee is no longer employed in 2021 and took advantage of the deferral.

Is this right for you?  Give one of our CPAs a call to discuss!

Presidential Order on Payroll Taxes — FYI

On August 8th, the president issued a memorandum that will suspend certain employee payroll taxes from September 1, 2020 to December 31, 2020.  There are still questions on the details of the memorandum, and we will update you on our blog as we get those answers.  Of course as always, if you have any questions, please contact your CPA or your paraprofessional.

Forgiveness of PPP

The laws are still changing on the forgiveness of PPP loans, if you have questions we advise to contact the bank your PPP loan is through.  Most likely the best advice is to wait.