Tax Week in a Nutshell - 5.22.20
It’s another Friday already! These weeks are flying, doesn’t it seem? I think it’s even a holiday weekend, right? We have a couple socially-distanced birthdays to celebrate but other than that it’ll be business as usual ‘round here. The IRS and now SBA love to drop guidance on Friday nights though, so we better take a look at what happened since the last nutshell quick before any festivities and/or more reading begin!
Last Friday night the IRS and SBA released the long awaited Paycheck Protection Program (PPP) Loan Forgiveness Application and instructions. SBA Form 3508 tells PPP loan borrowers how forgiveness will be calculated, which is good since many businesses are already well into their 8-week covered period!
Highlights of the application include:
A new option for biweekly (or more frequent) payroll filers to calculate an “alternate payroll covered period” beginning on the first day of the borrower’s first pay period following PPP loan disbursement, which may better align with regular payroll cycles
Flexibilty in payment dates for when eligible costs were incurred but not paid within the covered period if the payment was made on or before the next payroll date for payroll costs or billing date for nonpayroll costs
Safe harbor and exceptions for full-time-equivalent (FTE) employee reduction and pay decreases
A billion ways to calculate FTEs and wages (send flowers to your payroll provider)
My initial impression is that while there’s attempted flexibility in coming to the best answer for each unique borrower, it’s potentially a big headache and a lot of work, especially if you’ve got movement in your FTE count or pay. And it’s a start, but we still need further guidance to clarify several uncertainties.
The AICPA has a forgiveness calculator that should help save some work though. Keep checking back to their resource center for fixes and updates if future guidance changes it again!
As much as you want and need to focus on what’s in front of you, sometimes it’s hard not to look at what might be. This has been espeicially true with the PPP! Updates are occuring so often that even when something major is released you take it with a grain of salt because it may change again!
Here’s the latest on PPP potential legislation:
Extending the covered period is a main theme
Extending the deadline to apply for a PPP loan
Allowing borrowers to use funds more broadly
Allowing expenses paid for with PPP loan proceeds forgiven to be tax-deductible
It’s all speculation at this point whether any of these or more changes might jump through all necessary hoops and become law. So keep on with what you have for now, with one eye on the #TaxTwitter!
Desperate times call for desperate measures, I hear you, but please stay within the legal limits! The Department of Justice is cracking down on COVID-19 related fraud, with the latest being a Texas man who copied a list of names off the internet and falsely claimed them as employees in order to get more than $5 million in PPP loan proceeds. He also forged tax documents with his PPP loan applications. This is worthy of an ESPN-style “c’mon man”!
Charges were filed last week as well with equally questionable actions:
A Texas engineer falsely reported employees on PPP loan applications to obtain more than $10 million in loans
Love & Hip Hop: Atlanta reality TV star Arkansas Mo used 75% of his PPP loan proceeds not for payroll, but for personal expenses like a 5.73 carat diamond ring for himself and potentially a Rolls-Royce
While these charges are allegations at this time and the defendants are awaiting trial, hopefully these announcements will deter further fraudulent activity from occurring.
ANF – America Needs Farmers
The USDA announced details of the Coronavirus Food Assistance Program (CFAP) that will provide up to $16B in payments to help cover lost income for farmers and ranchers impacted by COVID-19. CFAP will provide assistance for producers who have suffered a 5% or greater price decline or losses due to market supply chain disruptions and face significant additional marketing costs. Applications for CFAP begin on May 26th, 2020 and accepted through August 28th, 2020. More info can be found here.
Support will also be provided through the USDA Farmers to Families Food Box program that will purchase $3B in fresh produce, dairy, and meat from farmers to be delivered to Americans in need from May 15 through June 30, 2020.
HSA Inflation Adjusted Numbers for 2021 Released
Being a tax pro means sometimes forgetting what year it actually is. We’re generally working on returns for the prior year, sometimes (more often now) looking back even further to amend returns, working on year-end projections using partial current year data, and forecasting into the great wide open beyond that.
If you’re looking ahead, know that we have small increases to health savings accounts (HSAs) and high deductible health plans (HDHPs) coming. Rev. Proc. 2020-32 announces 2021 annual limits for deductible HSA contributions is $3,600 for self-only coverage, a $50 increase over the prior year, and $7,200 for family coverage, a $100 increase.
Remember, if you’re age 55 or older a catch-up contribution of $1,000 can be made as well each year! And while we’re at it – don’t forget that HSAs for 2019 can be funded until the tax filing deadline, which is now July 15th, 2020 for 2019 returns!
Happy Memorial Day, everyone! Hope you get a chance to relax a little. And if you're in Texas, it looks like the annual sales tax holiday is still on for certain products in an effort to promote energy and water savings! That's all I found for tax deals this weekend, but here are a few more sales tax holidays coming up if you're interested.
See you next week!