Tax News In A Nutshell - 01.04.21
What’s Up in Washington, D.C.
New Year – New Congress
The 117th Congress convened its first session on Sunday, January 3, 2021. Nancy Pelosi was re-elected as Speaker of the House of Representatives and will face a narrower margin of Democratic control as she guides a new agenda through the first two years of President-Elect Joe Biden’s term.
While normally seats are set at this point, all eyes are on the two Georgia Senate runoff races on January 5th that will determine control of the Senate. Of the 100 possible Senate seats, Democrats currently have 48 for the coming term, with 50 previously won by Republicans. If both Senate seats are taken by Democrats, they will have the majority when figuring in Vice President Kamala Harris as the tie-breaking vote. But if Republicans retain even one of those seats, they maintain control and a split Congress remains for the foreseeable future. This means more potential gridlock and makes it unlikely that Biden will be able to implement his proposed significant tax increases on the wealthy. But if the Dems win the Senate, they’ll be in a position to implement desired changes without Republican support.
Two additional upcoming dates are important as well: on January 6th a joint session will certify Electoral College votes confirming the outcome of the Presidential election, and on January 20th the elected President will begin his term.
Stimulus Checks Roll Out
Treasury and the IRS began sending the second round of Economic Impact Payments (stimulus checks) to eligible individuals. Payments in this round equal up to $600 for individuals, $1,200 for married couples, plus $600 per dependent child under age 17. President Trump’s last-minute attempt at increasing this round of checks to $2,000 did not come to fruition. The House did pass a bill to increase checks to this amount, but added in language that would change the definition of eligible dependents to include those over age 17 as well that may have aided the bill’s death in the Senate, as Majority Leader Mitch McConnell and other Republicans were already in opposition of the blanket increase.
U.S. citizens and resident aliens not eligible to be claimed as a dependent on another’s income tax return will qualify for a second payment if 2019 AGI is below thresholds of $150,000 for married couples filing joint and surviving spouses, or $75,000 for individuals. No action is required to receive the payment, as the same methods of delivery in the first round will be utilized again in the second round. Most will be direct deposited by min-January, but if not a check or debit card may be issued.
Payments in this round are based on the 2019 tax return or Social Security retirement, survivor or disability benefits (SSDI), Railroad Retirement benefits as well as Supplemental Security Income (SSI) and Veterans Affairs beneficiaries for those who did not file a 2019 return. Those who used the IRS.gov Non-Filers tool in time or sent in a simplified tax return for purposes of receiving a round-one check will also automatically receive a payment if eligible.
The 2020 Form 1040 houses a taxpayer friendly one-way true-up based on 2020 taxpayer information. Taxpayers who should have received a higher payment, based on 2020 information, or who never received a payment will receive the benefit in the form of the refundable recovery rebate credit against 2020 taxes. On the other hand, if a taxpayer received more in an advanced payment than they would have when using 2020 data to calculate the correct amount, there is no mechanism or requirement to pay the overpayment back, with the exception of ineligible deceased taxpayers having been requested to return payments received in error.
At this time, economic impact payments made to taxpayers are verified via Notices 1444 for the first round and Notice 1444-B for round two. Taxpayers may also visit www.IRS.gov/Account for this information if the Notices are unavailable.
Speak Now or Forever Hold your PPPeace
The SBA has announced its second request for public comments on the PPP’s hotly contested Loan Necessity Questionnaires via Forms 3509 and 3510 in response to initial comments that not enough time was given to review and respond regarding the forms. Commenters now have 60 more days to provide “specific and detailed” feedback to improve collection, reduce burden on respondents, and opine on whether information requested by the forms is necessary to the SBA.
An extended safe harbor for offshore or federal land renewable energy developers to begin construction of qualified facility and energy property projects was provided in recent guidance released. Notice 2021-05 provides that the safe harbor to claim §§45 and 48 federal tax credits is met if qualified property is placed into service within ten calendar years after the project began.
Rev. Proc. 2021-9 was released providing a safe harbor for businesses to treat residential living facilities as an electing real property trade or business under §163(j)(7)(B). Comments received in response to Notice 2020-59 are addressed, reducing the average period for customer or patient use requirement from 90 to 30 days, providing flexibility in determining the average period of days, and including an alternative test to meet the definition of a residential living facility. In addition, the process of making the election is explained and is available for tax years beginning after December 31, 2017.
Can’t keep track of it all? The IRS has you covered for due dates in the 2021 Tax Calendar found here.
New Year – New Tax Resolution
Check out Three New Year’s Resolutions for Tax Policymakers, by Erica York of the Tax Foundation here.
One that we likely can all relate to is #2 on her list. Make the tax code stable. (Amen!)
“Taxpayers deserve stability. They should not have to gamble on what their tax situation will be over the coming years. Stable, permanent policies allow taxpayers to make better decisions and lead to more pronounced effects than temporary policies characterized with uncertainty.”
Let us hope they are listening!
If your goal is to invest in yourself by continuing to learn, à la Tony Nitti's previous resolution for tax pros, you’re in the right spot by reading these highlights! And if you’d like to learn more about the Employee Retention Credit that was recently enhanced and extended, check out Tony’s latest articles that cover the topic in great depth. Part 1 & Part 2.
Have a great week and a Happy New Year!
Information provided is for educational purposes and attempted humor, please consult your advisors.