Keeping CPAs Up to Date on Tax Matters
A site devoted to articles on current developments in federal taxes geared toward CPAs in tax practice.
The SBA released the first PPP loan guidance to modify prior guidance due to the passage of the Paycheck Protection Program Flexibility Act (PPPFA) in a new interim final rule (IFR).[1] The new rule modifies the interim final rule originally published on April 2, 2020 to deal with certain provisions changed by the PPPFA.
Read MoreTreasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza have issued a joint statement that provides certain details about the SBA’s planned implementation of changes found in the Paycheck Protection Program Flexibility Act signed into law on June 5, 2020.[1]
The release describes the following guidance the SBA expects to release on the changes made by this law.
Read MoreIn Notice 2020-42[1] the IRS has provided relief from a physical presence requirement for spousal and other qualified retirement plan related consents in recognition of the COVID-19 emergency. The purpose of the notice is described as follows:
In response to the unprecedented public health emergency caused by the Coronavirus Disease 2019 (COVID-19) pandemic, and the related social distancing that has been implemented, this notice provides temporary relief from the physical presence requirement in Treasury Regulations § 1.401(a)-21(d)(6) for participant elections required to be witnessed by a plan representative or a notary public, including a spousal consent required under § 417 of the Internal Revenue Code (Code). While this temporary relief, which covers the period from January 1, 2020, through December 31, 2020, is intended to facilitate the payment of coronavirus-related distributions and plan loans to qualified individuals, as permitted by section 2202 of the Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136, 134 Stat. 281 (2020) (CARES Act), the temporary relief applies to any participant election that requires the signature of an individual to be witnessed in the physical presence of a plan representative or notary.[2]
Read MoreThe IRS, in releasing the drafts for the 2019 Form 1065 and related instructions, indicated that all partnerships would have to provide information on tax basis capital accounts on Schedules K-1 prepared for 2019 and later years. The IRS in the end decided to remove the requirement from the 2019 Form 1065 Schedule K-1s after receiving a number of comments indicating that providing that information would be very difficult or impossible for many partnerships. The agency indicated that it would be providing additional information on the calculation of partner tax capital.
In Notice 2020-43[1] the IRS indicated the agency had decided that, in lieu of providing that information the agency would propose to offer two proposed methods for partnerships to comply with the tax capital reporting requirement. The agency is using the notice to request comments on these proposed methods.
Read MoreCongress has now passed the Paycheck Protection Program Flexibility Act of 2020 (PPPFA),[1] with the Act passing the Senate by unanimous consent in the early evening hours of June 3, 2020. The Act changes a number of provisions in the original PPP loan program enacted as part of the CARES Act. The President is expected to sign the bill into law.
Update: The President signed the bill into law on June 5, 2020, which now becomes the date of enactment for items where that date is referenced in the law.
Read MoreGuidance has been posted on the IRS website in the form of questions and answers regarding the carryback of net operating losses for corporations under the CARES Act into years when the alternative minimum tax (AMT) was still in force.[1]
The Tax Cuts and Jobs Act (TCJA) repealed the corporate alternative minimum tax beginning in 2018 and removed the ability for taxpayers to carry losses from 2018 back into 2017 and earlier years. However, when the CARES Act added a provision allowing net operating losses from 2018-2020 to be carried back five years, these losses from years when the AMT no longer applied were being carried back to years when the AMT still applied to taxpayers. So what was the alternative tax net operating loss (ATNOL) for these years to carry back to those earlier years?
Read MoreThe IRS has expanded relief for the performance of certain time sensitive actions in Notice 2020-35.[1] The relief provision covers:
Certain employment taxes,
Employee benefit plans,
Exempt organizations,
Individual retirement arrangements (IRAs),
Coverdell education savings accounts,
Health savings accounts (HSAs), and
Archer and Medicare Advantage medical saving accounts (MSAs).
The notice also provides “a temporary waiver of the requirement that Certified Professional Employer Organizations (CPEOs) file certain employment tax returns and their accompanying schedules on magnetic media.”[2]
Read MoreThe IRS announced in a news release[1] that later this summer the agency will begin accepting Form 1040-X, Amended U.S. Individual Income Tax Return, electronically. However, the agency did not announce a specific date for the availability of this option.
The electronic filing option will initially be limited to amendments of 2019 individual returns, as the news release states:
When the electronic filing option becomes available, only tax year 2019 Forms 1040 and 1040-SR returns can be amended electronically. In general, taxpayers will still have the option to submit a paper version of the Form 1040-X and should follow the instructions for preparing and submitting the paper form. Additional enhancements are planned for the future.[2]
Read MoreThe Small Business Administration issued a second interim final regulation late in the evening of May 22, 2020, this one entitled “Business Loan Program Temporary Changes; Paycheck Protection Program – SBA Loan Review Procedures and Related Borrower and Lender Responsibilities.”[1]
The SBA’s potential review of loans has been a topic of discussion since the SBA released Q&A 31 in the “Paycheck Protection Program Loans Frequently Asked Questions (FAQs),” where the agency indicated concern over loans taken by various public companies, followed up by Q&A 39 where the agency announced:
To further ensure PPP loans are limited to eligible borrowers in need, the SBA has decided, in consultation with the Department of the Treasury, that it will review all loans in excess of $2 million, in addition to other loans as appropriate, following the lender’s submission of the borrower’s loan forgiveness application.[2]
This particular IFR was issued to describe the review process and related responsibilities for the borrower and the lender.
Read MoreThe SBA continued with the release of guidance late in the evening, with a release around 10:00 pm EDT on May 23.
A week after issuing the application form for PPP loan forgiveness, the Small Business Administration released an interim final rule covering the forgiveness process.[1] The IFR provides the formal guidance to go with the application package.
Read MoreMany employers offer some form of stock-based compensation to employees. In AM-2020-004[1] the IRS has issued guidance related to the computation of payroll and withholding taxes on certain types of such compensation, as well as the timing of payroll tax deposits related to such compensation.
The guidance deals with three different programs:
Nonqualified stock options
Stock-settled stock appreciation rights (SARs)
Stock-settled restricted stock unit (RSU)
There actually are tax developments other than COVID-19 issues. The first set of inflation adjusted numbers have arrived for 2021.
The inflation adjusted numbers for health savings accounts (HSAs) and high deductible health plans (HDHPs) for 2021 have been released by the IRS in Revenue Procedure 2020-32.[1]
Read MoreThe Small Business Administration has issued interim final rules clarifying how foreign affiliates affect a borrower’s qualification to obtain a Payroll Protection Program (PPP) loan.[1]
The IFR deals with whether an applicant must count employees of foreign affiliates who will generally have residences outside the United States when determining if the entity has more than 500 employees and thus is not eligible for a PPP loan. The SBA concludes that the answer will be yes if the foreign entity fits the definitions found in the SBA’s own affiliation rules.
Read MoreThe SBA has released the “Paycheck Protection Program Loan Forgiveness Application”[1] that contains information on the PPP forgiveness program.
The application consists of:
The PPP Loan Forgiveness Calculation Form;
PPP Schedule A;
The PPP Schedule A Worksheet; and
The (optional) PPP Borrower Demographic Information Form.
The SBA issued a new interim final regulation that is focused on the qualification of certain electric cooperatives under the PPP loan program.[1]
The preamble explains the entities that this IFR applies to:
Existing SBA regulations define a “business concern” as “a business entity organized for profit,” subject to certain limitations. 13 CFR 121.105(a)(1). Generally, electric cooperatives are organizations that are owned and controlled by members who receive services from the cooperative. Electric cooperatives periodically return any excess of net operating revenues over their cost of operations – generally referred to as “savings” – to their member-owners. In addition, electric cooperatives meeting the description of section 501(c)(12) of the Code may be exempt from federal income taxation under section 501(a) of the Code. To qualify for the exemption, an electric cooperative must receive at least 85 percent of its income each year from its members. The 85 percent member income test is computed annually. An electric cooperative may be exempt in one year, lose exemption in another year if it does not derive at least 85 percent of its income from members, and become exempt in a third year. Because of their potential tax exemption under section 501(c)(12) of the Code, electric cooperatives have faced uncertainty about their eligibility to receive PPP loans.
Read MoreThe SBA is now offering one more extension of time to repay a loan under the safe harbor that was originally set at May 7 in third iteration of the PPP loan FAQ issued on May 13.[1] Now the SBA has delayed the date for repayment to avoid a question regarding the certification of the need for the loan to May 18th. Of interest, though, is that this has been issued on the same day the SBA issued guidance that provided the question would not be asked on loans of less than $2 million, as well as providing a later safe harbor for repaying the loan if the SBA determines there was no need for the loan.
The one major reason left to repay the loan would be to obtain the right to claim the employee retention credit in the future, assuming the IRS will move the date to repay the loan and regain the right to claim the credit to May 18.
Read MoreIn an FAQ[1] updated on May 13, 2020, the SBA appears to have mostly backed off the threat to review PPP loans of less than $2 million for improperly certifying their loan was necessary.
On April 29, 2020, Treasury Secretary Mnunchin and SBA Administrator Jovita Carranza issued a Joint Statement that read, in part:
To further ensure PPP loans are limited to eligible borrowers, the SBA has decided, in consultation with the Department of the Treasury, that it will review all loans in excess of $2 million, in addition to other loans as appropriate, following the lender’s submission of the borrower’s loan forgiveness application. Regulatory guidance implementing this procedure will be forthcoming.[2]
The statement specifically was issued discussing the review of loans and repayment before the then May 7 deadline to avoid having questions raised regarding the correctness of a borrower’s certification that a loan was necessary.
Read MoreIn Notice 2020-23[1] the IRS revised the maximum amount a cafeteria plan may allow a participant to carry over to the next year for a medical flexible savings account and clarified that a health plan may reimburse individual insurance policy premium expenses incurred prior to the beginning of the current year.
Read More