Tax News In A Nutshell - 1.15.21
What’s Up in Washington, D.C.
Stimulus Talks Heat Back Up
The December bipartisan stimulus bill was declared a down payment by many Democrats – promising more to come – and with that, President-elect Joe Biden has unveiled his additional pandemic relief plan. He will reportedly try to work with Republicans on this next round, instead of utilizing a reconciliation process where they would potentially not be needed.
Initial discussions tag the two-step rescue and recovery bill at $1.9T, with investments in economic recovery, racial justice, and a significant reduction in child poverty. The plan also applauds low-earning essential workers and calls for an increase in the minimum wage to $15 per hour.
Tax highlights of the plan include:
$1,400 direct stimulus payments to qualifying individuals, with dependents age 17 and over now qualifying,
Additional paid sick, family, and medical leave through the end of September,
An expanded refundable Child and Dependent Care Credit,
An expanded and refundable Child Tax Credit, with dependents age 17 qualifying,
An expanded Earned Income Tax Credit, and
An increased Premium Tax Credit to lower or eliminate health insurance premiums.
The plan also includes extended unemployment and support for bars, restaurants, and other disproportionately affected businesses, but has already drawn criticism for not addressing joblessness and Main Street. Details of the next round of stimulus are likely to change as discussions progress - and personally, I'd like to see more help for the travel industry! Wanderlust hitting hard for many, including this Iowa-based tax girl!
Check out more details here.
Small Lenders: You May Now PPProceed
After giving underserved community-focused lenders a couple-day head start, the revived PPP will continue its reopening on Friday, January 15 to roughly 5,000 small lenders who have $1B or less in assets. All remaining participating PPP lenders will have access to the program on Tuesday, January 19.
Find details on the enhanced and extended PPP here.
All taxpayers who can verify their identity may now obtain an IP PIN to protect their tax account and returns if they wish. The “Get an IP PIN” tool is available for 2021. The process for those who have been victims of identity theft will not change; they will automatically receive an IP PIN via mail once their case is resolved.
Section 7508A proposed regulations were released regarding the mandatory 60-day postponement of time-sensitive tax-related deadlines by reason of federally declared disasters. The guidance reinforces Treasury’s authority to specify which acts will be postponed and confirms that federally declared disasters include both emergencies and major disasters declared under the Stafford Act. The regulations also directly address the COVID-19 pandemic, stating that because no incident date was specified in the President’s emergency declaration, there is no mandatory postponement period under section §7508A(d).
The “Coach Tax” rules added by the TCJA that impose an excise tax on compensation in excess of $1M paid by applicable tax-exempt organizations to certain employees were finalized, with mention of further contemplation on subjecting federal instrumentalities to the tax in the future.
Final regulations released on the air transportation excise tax and the exemption for amounts paid for certain aircraft management services modify several definitions, clarify related party and other matters, and remove proposed anti-abuse rules.
Final rules regarding the deduction of certain fines, penalties, and other amounts under §162(f) were finalized and also provide guidance on related information reporting requirements. The regulations explain the disallowance of deduction applies whether or not the taxpayer admits guilt or liability, apply favorable rules regarding modifications to Pre-December 22, 2017 binding orders or agreements, and maintain proposed reporting threshold amounts paid equal to or over $50,000 now on an annual basis.
Farmers received disappointing final guidance that didn’t make key changes requested from positions in previous regulations on how co-ops apply §199A. Rev. Proc. 2021-11 was simultaneously released to give co-ops methods for calculating W-2 wages.
Rev. Proc. 2021-12 extends the expiration dates relevant to the application of REMIC safe harbors.
Final rules clarifying the application of the ACA’s employer shared responsibility provisions and nondiscrimination rules to HRAs largely stay consistent with previously released proposed regulations and provide that employees using, or who are eligible to use, health reimbursement arrangements (HRAs) related to ACA benefits are not allowed premium tax credits.
Around The World
The 2017 TCJA drastically revamped the taxation of U.S. corporations, bringing the top rate down from 35 percent to 21 percent. Double taxation was left intact, however, with a corporate dividend rate at 20 percent, plus a 3.8 percent Net Investment Income Tax.
President-Elect Joe Biden has targeted the corporate tax rate in his tax plan, proposing an increase to 28 percent. Check out how the U.S. compares to other parts of the world in this Tax Foundation article.
Don't worry, it's not Monday yet! I write these highlights for my firm each week and we made a decision to move them to Fridays so that I might have a chance to snooze a little longer and spend time with family on the weekends. So that's when you'll get them here as well, hope that's alright!
Enjoy your weekend - go Chiefs!
Information provided is for educational purposes and attempted humor (if any). Please consult your advisors.