Tax Week in a Nutshell - 6.26.20
You know, I’ve been watching the tax scene for over a decade and I don’t recall this much tax news and guidance on such a regular basis coming at us. We’re not even getting into the weeds to find shareable content; it’s just coming straight from the fire hose, too much to take in! Maybe I just blocked out difficult past years, either way I think we can agree it’s been intense!
Here are some of this past week’s highlights:
Keep Those Stimulus Letters You Already Tossed in the Trash!
Thank you…IRS…for notifying taxpayers months later that they need to keep that economic impact payment (EIP) letter many had promptly thrown away upon arrival. Landfill hours have been extended for increased traffic.
Don’t forget to disallow certain employee transportation expenses!
What’s that you say? Oh right, the “parking lot tax” from the TCJA. Proposed regulations were released that describe and clarify the rules and exceptions regarding the disallowance of certain qualified transportation fringe (QTF) benefits as a deduction.
Exceptions relevant to the §274(a) disallowance are:
§274(e)(2) for goods, services, and facilities treated as wages to employees
§274(e)(7) for goods, services, and facilities made available to the general public
§274(e)(8) for goods, services, and facilities sold in a bona fide transaction
It’s noted that the IRS received around 500 comments in response to Notice 2018-99, which provided initial guidance on the calculations, that are taken into consideration in these proposed regulations and helped repeal §512(a)(7) for nonprofits.
Note that while the nonprofit section was repealed regarding the increase of UBTI for disallowed QTFs, the proposed regulations explain the rules of §274 and the regulations apply to nonprofits to the extent QTF expenses are directly connected with an unrelated trade or business. This means QTF expenses directly connected with the unrelated trade or business are subject to disallowance as a deduction in calculating the related UBTI.
PPP Transparency, Please!
After outcries from a congressional oversight committee and taxpayers, the SBA and Treasury agreed to make certain data from the Paycheck Protection Program public. Initially the data was claimed to be proprietary but given the program is floated by taxpayer dollars, that argument didn’t last long.
The SBA stated in a news release:
“SBA will disclose the business names, addresses, NAICS codes, zip codes, business type, demographic data, non-profit information, jobs supported, and loan amount ranges as follows:
These categories account for nearly 75 percent of the loan dollars approved. For loans below $150,000, totals will be released, aggregated by zip code, by industry, by business type, and by various demographic categories.”
The SBA will be releasing even more data, including sensitive personally identifiable information, to appropriate congressional committees overseeing the program.
Did you take a required minimum distribution (RMD) in 2020 that you don’t need and isn’t required for 2020 due to the CARES Act? The IRS announced in Notice 2020-51 that you can put it back by August 31st, 2020 even if the repayment is made greater than 60 days after distribution. The repayment will not be treated as a rollover for purposes of the 1 rollover per 12-month period.
PPP Owner Comp Cap Confusion!
More guidance issued on PPP related matters, this one regarding loan forgiveness revisions and clarifications on payroll costs and explanations for owner-employees and self-employed individuals. Here’s a slide from the AICPA Townhall meetings that summarizes key issues, courtesy Brian Streig, CPA:
The IFR also clarifies a borrower can apply for forgiveness prior to the end of the covered period, but the December 31 wage reduction safe harbor is forfeited.
Check out the AICPA’s updated PPP loan forgiveness calculator and other resources here.
Natural Disaster Victims Get More Extensions!
Taxpayers affected by April’s natural disasters in Mississippi, Tennessee, and South Carolina have their July 15 tax deadline extended to October 15, 2020. This includes 2019 individual and business returns, IRA contributions, 2020 estimated tax payments, and quarterly payroll and excise returns.
Deadline relief is automatic, with the IRS using the address of record to determine eligibility. If an affected taxpayer receives a late filing or payment notice from the IRS, the number on the notice can be called to have the penalty abated.
Recall that taxpayers in a federally declared disaster who suffered uninsured or unreimbursed disaster losses can elect to claim the current year loss on the prior year return. That means 2020 disaster losses can be claimed on the 2019 tax return to see a quicker cash benefit.
§199A We Hardly Remember Ye!
Remember when §199A qualified business income (QBI) deduction was the bane of existence? Ah, those were the days. The IRS issued additional final regulations to remind us of the good times. They cover treatment of suspended losses included in QBI, registered investment companies (RICs) with interests in publicly traded partnerships (PTPs), real estate investment trusts (REITs), and rules for trusts and estates related to separate shares and charitable remainder trusts. A more in-depth summary can be found here.
Dolla, Dolla Bills on Refunds, Y’all!
If you’ve got a 2019 individual income tax refund, the IRS announced it will pay interest on refunds from April 15 until the date of the refund. Returns filed by July 15, 2020 will see a 5% interest rate through the second quarter (ending June 30) and 3% for the third quarter.
The IRS did not simply conjure this out of thin air; it was actually there all along if you had the time an energy to read through the tax code related to disasters and extension of the deadline. Normally, the IRS has a 45-day grace period to pay refunds, but it’s removed when the deadline is extended in a federally declared disaster. The WSJ has a great article on the matter here. If you filed your return early and already got your refund before benefiting from this interest, I apologize, but you are not alone.
Had enough? Me too. I didn’t even include the SBA PPP IFR on fishing boats! Read at your leisure if that pertains to you and yours. We have a fishing boat, but the only crew-members are two lazy hound dogs, barely doing enough cute things to earn their keep as it is.
Until next week, friends!
Information provided is for educational purposes only and not to be relied upon as tax advice. Please consult your business and tax advisors to discuss your unique situation.