Tax News in a Nutshell - 11.2.20
What’s Up in Washington, D.C.
Election Day is Here
Months of debating outcomes of the next election will soon come to rest – Election Day is upon us. If you haven’t already cast your vote and plan to do so, make sure to understand policies of those on the ballot. Research credible, unbiased sources to make an informed decision.
Tony & Charlie’s (of RubinBrown) Presidential Tax Plan Comparison (Also appearing in BloombergTax!)
Many states have proposed changes up for grabs as well, such as the proposals by Arizona, New Jersey, South Dakota, and Montana to legalize and tax recreational marijuana, Nebraska’s initiative to tax gross annual racetrack gambling revenue, and Illinois and Colorado’s proposed changes to income tax rates. The Tax Foundation is tracking the most notable state ballot measures here.
Supreme Court Confirmation
The Senate confirmed Amy Coney Barrett to be an Associate Justice of the Supreme Court on a 52 to 48 vote, bringing the nation’s highest Court to a 6-3 conservative standing.
Both sides trade blows on who is responsible for the stimulus stalling; it is now a waiting game to see the election outcome to begin further speculation on timing of another relief bill. Reports vary from November-December to after the first of the year. Stay tuned, they seem to agree that something else will be coming, but as with most things in life…the devil is in the details.
As mentioned last week, the SBA snuck in a new “Loan Necessity Questionnaire” form without much explanation. The form is being released to banks and appears to require PPP loan recipients who received greater than $2M in loan proceeds to justify their good-faith economic uncertainty certification on their loan request application.
Forms are not available on the SBA website as of the time of this writing, but that has not deterred public backlash for what many view as another retroactive change in the rules. The AICPA has contacted the SBA and Treasury regarding the new questionnaire to gain a better understanding of the form and relay their concerns that the information requested doesn’t align with the intent of the law.
Retirement Bill Revealed
House Ways and Means Committee Chairman Neal and Ranking Member Brady released what is being touted as SECURE 2.0, a retirement bill that has been in the works for several months. The bipartisan bill has promise to move forward despite Congressional gridlock on other issues. It includes increasing the RMD starting age to 75 and allowing student loan paydowns to qualify for employer match, without those employees having to contribute to a 401(k).
IRS Chief Counsel Michael Desmond has confirmed partnerships are a target for ensuring tax compliance. Practitioners have presumed as much in the last few years, as notable Schedule K-1 reporting changes have popped up that will greatly increase transparency on items which may previously have been swept under the rug.
The day you’ve all been waiting for has arrived – annual inflation adjustments for 2021 were announced! Rev. Proc. 2020-45 covers over 60 affected tax provisions, including the standard deduction, §179, §199A, and income tax tables. Reminder, personal exemptions are still zero for 2021, á la TCJA.
Cost of living adjustments for 2021 retirement related provisions were also posted. Traditional and Roth IRA contribution income phase-out ranges were increased, while IRA and 401(k) contribution limits remained the same as 2020.
The SBA released a nice little PPP factsheet that gives a high-level overview of the rules.
Employers got instructions on how to report on any employee Social Security tax deferred during 2020. Amounts of tax not reported in on the 2020 Form W-2 will be reported on a corrected Form W-2 “as soon as possible after you have finished withholding the deferred amount.” An amended return may be required by the individual at that point if corrected Forms W-2c show excess Social Security tax.
If despite best efforts this year a tax return was not timely filed, the AICPA has made available a template for practitioners to use to request a reasonable cause or first-time penalty abatement.
Don’t forget Form 1099-NEC is coming at us soon for the first time since 1982! It will report nonemployee compensation instead of having such information found on Form 1099-MISC and is due to the recipient and the IRS by January 31. Separating nonemployee compensation onto its own form will assist in avoiding filing deadline confusion on Form 1099-MISC, which generally has a later IRS submission date. Here’s a look below, if you haven’t yet seen it.
Proposed regulations on the Low-Income Housing Credit were released that would affect the average income test under §42(g)(1)(C).
That’s all for now – have a great week!
Information provided is for educational purposes only and not to be used as tax advice.