Tag Archives: covid

New Poll Shows Small Businesses Hopeful as Pandemic Recovery Accelerates

June 16, 2021Uncategorizedcoronavirus, covid, economics, economy, finance, Money, small business, taxes, united statesjennifer

The Q2 2021 Met Life and US Chamber of Commerce SBI, released this week, finds that as more Americans received the COVID-19 vaccine, states lift restrictions and businesses continue to reopen, a majority (65%) of small business owners are more optimistic that the worst of the pandemic is over.

According to the poll taken April 21 – May 6th, the dominant emotion small business owners are feeling about their current strategy is hopeful. 31% say they are feeling comfortable and 24% say they are concerned.

“Small businesses are seeing real reasons for optimism this quarter and we’re seeing that reflected in the data,” said Tom Sullivan, vice President of small business policy at the US Chamber of Commerce. “The easing of capacity restrictions due to increased vaccinations means more small businesses are welcoming more customers. Increased foot traffic equates to economic growth and that is moving our country’s recovery forward.

Small businesses are very clear on what will help their businesses thrive: both easing COVID restrictions and more vaccinations. Small businesses say that easing COVID-19 restrictions (29%) and ramping up vaccinations in their area (28%) are the two biggest keys to their success in the remainder of 2021.

When it comes to views of the economy, positive outlooks are growing and negative ones are declining. Currently, 27% of small businesses rate the overall US economy as good, up from 21% who said the same in Q1. Driving this uptick is the decreasing number of small businesses seeing the economy as bad. While 46% continue to say the national economy is poor, this is the first time this measure has fallen below 50% during the pandemic. Just last quarter, 60% of small businesses said the economy was poor.

Additional Findings

Additional survey findings include:

COVID habits may be here to stay. 76% of small businesses intend to keep all COVID-19 safety precautions in place until the Coronavirus pandemic ends.
In a tight labor market, employers are holding onto the workers they have. Most small businesses anticipate retaining the same staffing level. 32% plan to increase staffing, and around 11% plan to decrease staffing over the next year.
Small businesses see revenue improving in the future. About 57% of small businesses anticipate their revenue increasing this year, up 10% compared to last quarter, the most positive outlook of this metric during the pandemic.

Is a new COVID-19 bill coming? The house and the senate have been apparently working on another bill.

December 18, 2020Uncategorizedact, bill, CARES, covid, fund, government, payroll, relief, stimulus, tax[email protected]

Here are the highlights from our perspective.

On December 15, 2020, two bipartisan COVID-19 relief bills, the Bipartisan COVID-19 Emergency Relief Act of 2020 and the Bipartisan State and Local Support and Small Business Protection Act of 2020, were introduced that contain payroll-related provisions.

Background. Earlier in 2020, the federal government enacted legislation with COVID-19 relief provisions aimed at helping employers and workers. This included the Families First Coronavirus Relief Act (FFCRA) and the Coronavirus Aid, Relief and Economic Security (CARES) Act. Certain provisions in each bill provided aid for employers and workers such as the Paycheck Protection Program (PPP) and Pandemic Unemployment Assistance (PUA).

Negotiations for further COVID-19 relief legislation between the White House, Senate and Congress have stalled several times.

A new hope? However, the two bipartisan bills introduced in the Senate on December 15 may make it to the finish line before the end of the year based on the statements made by Senators who introduced the bills. According to Senator Joe Manchin (D-WV), who introduced “The Bipartisan COVID-19 Emergency Relief Act of 2020,” with other Senators: “We’re not going home for Christmas until this gets done.”

Senator Mitt Romney (R-UT) who, with other Senators, introduced “The Bipartisan State and Local Support and Small Business Protection Act of 2020,” noted: “This compromise represents the best path forward for Congress and the Administration to provide much-needed relief for the American people before the end of the year.” Senator Rob Portman (R-OH) added: “The Senate should not adjourn until we have passed a new COVID-19 package to provide the relief Americans need.” The Bipartisan COVID-19 Emergency Relief Act of 2020. A summary of The Bipartisan COVID-19 Emergency Relief Act of 2020 says it contains the following payroll-related provisions:

PPP and small business support. This bill would provide $300 million to the Small Business Administration (SBA) to allow the hardest hit small businesses to receive a second forgivable PPP loan. Eligibility for these loans would be limited to businesses with 300 or fewer employees that have sustained a 30% revenue loss in any quarter in 2020.

Forgivable expenses would be expanded to include supplier costs and investments in facility modifications and personal protective equipment needed to operate safely. Also, business expenses paid for with the proceeds of PPP loans are specifically tax deductible, “consistent with Congressional intent in the CARES Act,” according to the summary.

In addition, the loan forgiveness process would be simplified for borrowers with PPP loans of $150,000 or less.

Unemployment assistance. The bill would also provide for a 16 week extension of all pandemic unemployment insurance programs, including PUA and pandemic emergency unemployment compensation (PEUC). The 16 weeks would run from the end of December 2020. It would also ensure beneficiaries of Railroad Retirement Board received the same benefits as other workers.

In addition, federal supplemental unemployment insurance benefits would be expanded by $300 per week for 16 weeks, from the end of December into April 2021.

Payroll support program extension. The bill would extend the Payroll Support Program (PSP) through March 31, 2021. As in the CARES Act, funds will go directly to frontline aviation workers’ wages, salaries, and benefits. The Bipartisan State and Local Support and Small Business Protection Act of 2020. A summary of The Bipartisan State and Local Support and Small Business Protection Act of 2020 says it contains the following payroll-related provisions:

State, local and tribal government relief. This bill would provide for $160 billion for state, local and tribal assistance. And, would extend the deadline for spending CARES Act Coronavirus Relief Fund (CRF) aid on COVID-related expenses through December 31, 2021.

Liability protection. This bill would also provide “liability protection” for employers. Employers would not be subject to liability under federal employment law in COVID-19 exposure cases or for changes in working conditions related to COVID-19 if the employer was trying to conform to public health standards and guidance.

The bill would also ensure that an employer’s personal protective equipment (PPE) requirements, COVID-19 policies, procedures, or training, workplace testing, or financial assistance to an independent contractor does not create evidence of an employer-employee relationship.

How Technology Can Steer You Through the Fast Lane of the Post-Covid World

December 8, 2020Uncategorizedcoronavirus, covid, covid-19, Entrepreneurs, Technologyadmin

Now, given the rapid changes in an uncertain economy affected by the virus, knowing how to utilize and navigate technology in the post-COVID world will be even more crucial for entrepreneurs, college graduates, other job seekers, and upwardly mobile professionals, says Tim Mercer, ForbesBooks author of Bootstrapped Millionaire: Defying the Odds of Business.

“Corporate America is undergoing a major transformation,” says Mercer, who also is founder of IBOX Global (IBOXG), which provides technology services to government agencies and Fortune 500 corporations.

“Technology is at the center of this seachange. The virus will have a tremendous long-term impact on the workplace, and the influence of technology will loom larger as a result of the lessons we’ve learned during this unprecedented time.

“Company structures are appearing more tailored to the entrepreneurial mind. The evolving trend is working from home, smaller workplaces, and niche-focused businesses. The work is moving faster, and whether a business owner or freelancer, you must be agile and nimble to compete. All these changes can be good, but only if you are ready.”

The Key To Success In The Post-COVID World

Mercer says the key to success in the post-COVID world is understanding these business-related benefits of technology:

The internet is the great equalizer for knowledge and opportunity

“The internet is the driving force behind the access to today’s opportunities,” Mercer says. “With the global economy, and technology connecting so many of us to it simultaneously, success has more to do with your ability to identify the right opportunities and your desire to go after them.” While the internet enables someone to gain knowledge quickly, Mercer says it’s also important to be vigilant in discerning the quality of online sources.

Leveraging technology correctly helps businesses run efficiently

You don’t need to earn a degree in information technology or become a computer whiz to leverage the benefits of technology, Mercer says. “What’s most important is that you know how to use technology to achieve your business goals,” he says. “For example, through the power of tools like QuickBooks, I was able to manage the financial aspect of several of my businesses without having to hire a full-time finance team. Leverage the strength of technology to carry more of your workload while increasing your profitability.”

Tech certifications can be more powerful than four-year degrees

Many college graduates aren’t working in fields related to their majors, and today’s employers are increasingly shifting toward skills-based hiring for technology jobs. “With the demand in tech, that means certification programs are on the uptick, often providing a quicker and more cost-effective way of getting hired than does a four-year college degree,” Mercer says. “A person’s overall earning powers in tech can more than double. Our general educational system often doesn’t meet the demands of today’s business environment. Typical college grads and most students lack the skills required for today’s tech positions.”

Freelancing and independent consulting are on the rise

Gigging – taking on multiple freelance jobs – is growing in popularity, largely due to the growth in digital platforms and social media. “This has given rise to a freelancer and consulting boom that has opened the door to a more flexible and creative workforce of contractors to accommodate the heavy workflow of today’s companies,” Mercer says. “The power of social media and online platforms is making it easier for entrepreneurs to engage a more diverse and global market. You can use your individual skills to bring more value to your business simply by selling those skills and services to others.”

“Technology has a hugely important role in enabling us to meet the many economic and business challenges presented by the pandemic,” Mercer says, “and to be better prepared for whatever comes next.”

Security Warning for COVID Related Scams

November 6, 2020Uncategorizedalert, covid, fake, IRS, phishing, scam, text, warning[email protected]

The Security Summit, a coalition of the IRS, state tax agencies, and the private sector tax industry, is warning taxpayers about a new text scam that tricks people into disclosing bank account information under the guise of receiving the $1,200 Economic Impact Payment (EIP).

The text message states: “You have received a direct deposit of $1,200 from COVID-19 TREAS FUND. Further action is required to accept this payment into your account. Continue here to accept this payment” This is followed by a link to a fake phishing web address. The IRS reminds taxpayers that it will never send texts asking for bank account information. Those targeted by the scam should take a screen shot of the text message and email it to [email protected] with the (1) date, time, and time zone that they received the message; (2) the number that appeared on their caller ID; and (3) the number that received the text message.

News Release IR 2020-249.

If you receive any notice like this, please contact us to discuss if we can be of assistance.

Financial/Accounting/Income Tax Thoughts During This Period of COVID-19

April 27, 2020Uncategorizedaccounting, bank, business, CARES act, coronavirus, covid, covid-19, estate planning, financial, income, loan, tax, tax bill, tax filing, tax planning, taxes, Trump, update[email protected]

During 2008/2009, the Great Recession, we learned some things. When the economy is hurt, there are some things we can do to be better prepared, and there are some actions we can take to benefit from the financial stress. During those times, the banks took steps to reduce or close lines of credit and end banking relationships. If you feel this might be an issue for you, and you would like to have more cash, then consider drawing down on your line of credit to hold the cash. This will generally give you the opportunity to get more cash in your bank before the bank would reduce your line of credit. Now, I have not heard from anyone that they banks are doing this yet, but we are going through some financially challenging times. Each individual should consider if this strategy is a good strategy for them and weigh the costs of the interest expenses. Perhaps after a couple of months you can repay the line of credit.

Keep your accounting up to date, as the banks might want to check your financial statements to continue your leading relationship.

Consider if you can benefit from any of the tax law updates, which we have written about. Did you have a net operating loss in 2018, and if so, contact us to discuss how you can get a refund. Were you limited in the amount of interest expense you could deduct in 2018? If so, contact us.

One item in the CARES Act that we did not write about, which was brought up by a client of ours, is that for 2020, the charitable deduction limitation is removed. The law previously stated that a taxpayer cannot take a charitable deduction in 2020 if the deduction exceeded 60% of their adjusted gross income (AGI), but with the CARES Act, that limitation has been removed. However, the requirements in general are that the donation must be in cash and typically must go to a 501(c)(3) charity. If you are interested in more information about this, please contact us so we can discuss the whole law and see if this could benefit you.

Some other items to consider:

Due to the stock marketing value dropping, this might be an opportunity to do some estate and gift tax planning with reduced values of securities. Contact us to discuss if you are interested.

If your business revenues have dropped, then most likely the value of your business has probably been reduced. This can provide an option to provide key employees with some equity participation at a reduced value if that will benefit the company. Again, each business is unique, so contact us to discuss.

We are hoping that the economy will be opening back up soon throughout the entire country. We are here to help, so contact us if you need our assistance.

Update 2: Tax and Financial Updates due to Coronavirus

March 27, 2020Uncategorized401k, accounting, business, congress, coronavirus, covid, covid-19, economic, finance, house of representatives, income, IRS, loan, new tax law, president, SBA, sba loan, senate, small business, tax, tax credit, tax filing, tax planning, taxes, update[email protected]

The novel coronavirus (COVID-19) crisis has touched so many lives, with both illnesses and hardships. In response to this crisis, our office is working remotely on all accounting and tax projects. The best method to contact us is to email us at [email protected]. We are focused on staying up to date on the tax, accounting and finance updates to assist everyone with these challenges. Things are changing hourly, and discussions on the news don’t completely explain the law as written. So, we are explaining in as much detail as we can for the moment. Our focus on this memo are certain provisions we feel are important to our clients.

I read on the Wall Street Journal app this morning at 8:00 a.m. PST today, March 26, 2020, that the Senate passed Senate bill S.3548, the CARES Act. However, when I looked for the formal acknowledgement on www.congress.gov at 3:30 p.m. PST on March 26, 2020, the status doesn’t say it was passed. So, my discussions are based on the actual bill text that is assumed to be passed by the Senate.

Most of the financial assistance offered through the first bill called, HR 6201, FAMILIES FIRST CORONRAVIRUS RESPONSE ACT (discussed on our previous memo), and the CARES Act S. 3548 which is expected to pass the senate, the house and be signed by the president have financial and accounting information requirements necessary for the financial assistance. Accordingly, we are available to assist any client in the SBA application process for financial assistance.

The tax and financial laws are changing daily, therefore I marked this memo with “V2” (version 2) on my memo above. There are various other social service updates, but our memos will focus mainly on finance, business and tax updates.

Highlights of the PROPOSED SENATE BILL S 3548, CORONAVIRUS AID, RELIEF AND ECONOMIC SECURITY ACT OR THE CARES ACT. March 19, 2020. This bill has NOT been passed in the Senate at this time, so it can change, and then the bill would need to go to the House and to the President. You can view the introduced bill at https://www.congress.gov/bill/116th-congress/senate-bill/3548

1. Businesses & Other Employers:
  1. Retention tax credit for eligible employers that continue to pay employee wages while their operations are fully or partially suspended as a result of certain COVID-19 related government orders.
  2. Deferral of employer portion of payments for certain payroll taxes.
  3. Modification of net operating loss (NOL) and limitation rules. Will allow some NOL’s incurred in 2018, 2019, and 20120 to carry them back for refunds to 5 years. This carry back law was exempt for tax years beginning 2018 under the new tax laws that Trump and Congress enacted. Due to this financial crisis they are not allowing NOL carry backs for these periods to be carried back.
  4. Modification of the deduction limitation on business interest rules of IRC section 163(j).
  5. Qualified improvement property technical correction, allowing qualifying interior improvements of buildings to be immediately expenses rather than depreciated over 15 years.
  6. Payroll tax credit for eligible employers up to 50% refundable payroll tax credit on wages paid up to $10,000 during the crisis. The credit would be available to employers whose business were disrupted and retained employees, but they were not able to work. Employers with more than 100 employees and under 100 employees have slightly different calculations.
  7. Expansion of the ways the SBA can help small business.
    1. Loans for small employers with 500 employers or less, including non-profits would be eligible to apply for loans. The size of the loan would be tied to the applicant’s average monthly payroll, mortgage, rent, utilities payment and other debt obligations over the previous year.
    2. The portion of the loan used to cover payroll and payments on pre-existing debt would be forgiven.
    3. Loans are supposed to be streamlined with SBA, and SBA approved banks.
    4. If a business doesn’t have payroll, or not a large amount of payroll, SBA will expand loans for:
      1. Payroll, supply chain disruption, mortgage payments, and other debt obligations.
      2. SBA express loans would be increased from $350k to $1MM.

Individuals:
1. Recovery rebates of up to $1,200 for single and $2,400 for married couples filing jointly, plus $500 per qualifying child. Phaseouts of the rebates are based on adjusted gross income (AGI) starting at $75k for single, and $150k for married couples.
2. Expansion of unemployment benefits, including self-employed, and gig-economy workers.
3. Waiver of the 10% penalty for COVID-19 related early distributions from IRAs, 401K and other retirement plans. However, taxability of the distribution will need to be considered.
4. Exclusion of certain employer payments of student loans.

Additional Information regarding the PROPOSED SENATE BILL S 3548, CORONAVIRUS AID, RELIEF AND ECONOMIC SECURITY ACT OR THE CARES ACT. March 19, 2020. This bill has NOT been passed in the Senate at this time, so it can change, and then the bill would need to go to the House and to the President. You can view the introduced bill at https://www.congress.gov/bill/116th-congress/senate-bill/3548 . These additional steps can cause other changes. However, based on the proposed S 3548 bill, I’m providing some additional details listed below:

1. Division A – Small Business Interruption Loans
  1. SBA 7(a) Loan Program
    1. This is the most popular loan program with the SBA for small business.
    2. Covered period beginning on March 1, 2020 and ending on December 31, 2020.
    3. Listening to Secretary of the Treasury Steve Mnuchin on March 25, 2020, he stated he expects the loans to be processed by all FDIC banks in a simple format and expect loans to be processed in a day. That would be wonderful.
      1. He did state that they expect to have the money and process ready to provide the funds by 3 weeks which would be around April 15, 2020, but it depends on Congress, and a lot of moving parts.
      2. Secretary of the Treasury also stated the following:
        
        The loans are supposed to be for 8 weeks of payroll, and overhead.
        
        VA Comment: We need to get details on what is included in payroll and overhead, but the Secretary’s discussion seems prudent. However, the proposed S.3548 bill states to take the average monthly payroll for the prior year, plus included overhead and multiple by 4. Can’t exceed $10MM. So, I don’t read the 8 weeks of payroll. Perhaps that was his quick explanation.
        
        This part of the law is for companies with no more than 500 employees.
        
        The maximum loan amount would be the lesser of:
        
        The average total monthly payments for payroll, mortgage payments, rents payments and payments on any other debt obligations incurred during the 1 year period before the date on which the loan is made, except if the employer is seasonal, then they would use the average monthly payments between March 1, 2019 and ending June 20, 2019
        
        Then multiple by 4.
        
        or;$10,000,000.
        
        VA Comment: If you are considering requesting financial relief, then I recommend you get your numbers and support ready for the application process. Plus, you will need to make sure you have enough cash to get you to the date of receiving the financial assistance which is expected to be around April 15, 2020. I would expect that we should have payroll reports that support the numbers on a worksheet that calculates the average, plus your average other included overhead expenses. Being prepared should allow you to get the financial assistance quicker.

Allowable Uses of Program Loans:
1. Payroll support, including paid sick, medical, family leave and costs related to the continuation of group health care benefits during the periods of leave.
  1. Employee salaries (calculating based on the average number of employees for each pay period)
  2. Mortgage payments

Rent (including rent under a lease agreement)

Utilities and
Other debt obligations that were incurred before the covered period.

Loan Considerations: The proposed bill is requiring that the lending institution only consider the following:
1. Was the borrower in operations on March 1, 2020; and
2. Had employee for whom the borrower paid salaries and payroll taxes.
3. Fees will be waived for these loans.
4. The Federal government will guarantee 100% of the loan.
Eligible Borrower means:
1. Small business concern; or
2. An organization made eligible by section (b) which discuses private or public nonprofit organizations with 500 or less employees.
  1. VA Comment: Prior to this bill, the SBA typically didn’t allow loans to non-profits.
3. Deferment of 7(a) Loan. The proposed bill requires the lender to provide complete deferment relief for impacted borrowers with 7(a) loans.
  1. VA Comments: This provision seems to state that payments for the covered loans would be deferred for a period of not more than 1year.
4. Express Loans will be increased from $350,000 to $1,000,000.
  1. Substantially affected by COVID-19 means:
    1. Supply chain disruptions
    2. Staffing challenges.
    3. A decrease in sales or customers; or
    4. Shuttered business.
      1. VA Comment: If you have a business that doesn’t have any payroll, or not much payroll, then perhaps an SBA 7(a) loan for lost revenue would be the best option. An impacted industry might be owners of rental properties. They might not have much payroll, so a loan might be necessary to offset the loss or deferral of rents. I believe the spirt of this financial package is to get money into the hands of businesses and individuals so they can pay rent.

No Prepayment Penalty for loans made on or before December 31, 2020.
Loan Forgiveness:
1. A 7(a) loan for the covered period which is beginning on March 1, 2020 to June 30, 2020.
2. An eligible recipient shall be eligible for forgiveness of indebtedness on a covered 7(a) loan in an amount equal to the cost of maintaining payroll continuing during the covered period.
  1. Payroll costs have limits.
    1. Compensation to an individual employee can’t exceed $33,333 during the covered period.
    2. Qualified sick leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act; or
    3. Qualified family leave wages for which a credit is allowed under section 7003 of the Families First Coronavirus Response Act.
      1. VA Comments: It seems that the loan forgiveness is not meant to forgive loans used for compensation, sick or family leave in which the employer would receive a credit also. Seems like they don’t want a double dip. If a company utilizes the credit method, there will need to be an adjustment.
      2. VA Comments: The borrower will probably have to provide financial statements, and federal, state employee records, and unemployment insurance filings, and a certification. If there is NO documentation, then there will be no forgiveness. This should be done prior to apply for the forgiveness.
  2. Upon application for the loan forgiveness, the lender will require documentation to support the loan forgiveness within 15 days, so be prepared when you start the process. The lender will provide a forgiveness decision within 15 days.

Treatment of Amounts Forgiven: Amounts which have been forgiven under the law shall be considered canceled indebtedness by lenders, BUT Not Taxable.
1. VA Comment: The bill states the forgiveness of debt will be treated as cancelation of indebtedness. However, a section in the proposed bill under “Taxability” states, Cancelation of indebtedness under this section shall be excluded from gross income for purpose of the Internal Revenue Code of 1986.
If there is a reduction of employees, then there can be a reduction of the loan forgiveness.
1. VA Comment: I read or heard that the forgiveness of any part of the debt wouldn’t negatively affect the credit score of the borrower, but I didn’t read that provision in this bill. This might be an issue that needs to be corrected.

Relief for Individuals, Families, and Businesses. Rebates and Other individual Provisions.
1. Eligible individuals shall be allowed as credit against the tax for the first taxable year beginning in 2020 an amount equal to the lesser of:
  1. Net income tax liability, or
  2. $1,200 ($2,400 in the case of joint returns)
    1. The credit should not be less than $600
    2. $500 per qualifying children
  3. Eligible individuals are based on adjusted gross income (AGI) of
    1. $75,000 and $150,000 in the case of a joint return. Once a taxpayer AGI is either $75k or $150k the credit begins to be reduced and phased out. The phase out is $99k and $198k.
  4. Delay in filing deadlines. In the case for returns for tax year 2019, due dates for April 15, 2020, are delayed to July 15, 2020.
  5. Individual ES Payments: Different from the prior communication from Treasury, this bill states that individual estimated tax payments are not due before October 15, 2020.

Retirement Accounts: Early withdrawal penalties under IRC section 72(t) which is typically 10% for Federal and then some states add a lower penalty are waived if the early distributions are $100,000 or under.
1. Amounts distributed may be paid back. There is also a provision that allows taxpayers that took early distributions to make one or more contributions over a three-year period to contribute up to the amount of distributions they took.
2. Income inclusion of premature distribution. A taxpayer can spread the taxability of the premature distribution over 3 years.
Loans from retirement plans: The bill allows for an increase in loans and not to be treated as distributions. The loan amount is increased from $50,000 to $100,000.
1. Loan repayments will be delayed by 1 year.
Charitable Contributions: The allowance to deduct more charitable donations have been increased for both individuals and Corporations.
1. VA Comments: Seems as if the individual 30% / 50% AGI limitation is temporary suspended. The 10% limitation for C Corporations seem to be increased to 25%.

Student Loan Temporary Relief: The bill states the Secretary shall suspend all payments due for loans under part D of title IV for Higher Education Act of 1965 for 3 months.

Business Provisions:
1. C Corporation estimated tax payments. Delay of estimated tax payments for Corporations. Like individuals, the required estimated tax payments for C Corporation is delayed till October 15, 2020.
2. Delay in Payment of Employer Payroll Taxes. The bill states that employers can delay payment of the employer portion of payroll taxes till December 31, 2021 for 50% of the deferral and the balance due on December 31, 2022. This also applies to the estimated payroll deposits.
  1. VA Comment: If a small business is going to request and receive a loan for payroll and overhead, this deferral might not be necessary. If a defer is desired, a liability should be posted on the companies’ financial statements.
3. Net Operating Loss (NOL) Carrybacks: The NOL carry back was removed for tax years after 12/31/2017. This bill will allow NOL’s generated from year 2018, 2019, and 2020 to carry back and request a refund for up to a 5 year carry back period. The 80% limitation is removed also.
  1. VA Comment: If you incurred a loss in 2018 or 2019, or expect a loss in 2020, please get us the information and quickly as possible so we can begin preparation of a NOL carryback. If your tax return had qualified improvement property and the return couldn’t take the deduction, this new bill corrects that prior error and that deduction might generate a taxable loss for a NOL carryback.
4. A taxpayer may elect out of the 5-year NOL carry back. If elected, it can’t be changed. It is irrevocable.
  1. VA Comment: For tax returns with NOL’s for 2018 or 2019 that have been filed, the return needs to be amended within 120 days from the enactment of this bill regarding the NOL carryback provision.
5. Loss limitation for taxpayers other than Corporations: IRC section 461(l)(2) was added by the Tax Cuts and Jobs Act of 2017 and was effective for tax years 2018 to 2025 which disallowed any excess business loss for a non-corporate taxpayer. Generally, the law prohibited business losses to only be deducted against no more than $250,000 / $500,000 of non-business income. Any non-deductible business loss was carried forward. The bill removes those limits from being implemented till December 31, 2020 (previously applied on December 31, 2017).
  1. VA Comment: We know this loss limitation occurred with some of our clients, and we will have to review affected taxpayers to ask them if they want us to amend their tax returns. The IRS will need to provide guidance on the amendment process.
6. Interest Deduction Limitation: The Tax Cuts and Jobs Act of 2017 enacted an interest deduction limitation. For taxpayers where it was applicable, taxpayers with gross sales over $25MM, the interest deduction was limited to 30% of the adjusted taxable income. The bill now increases the limitation amount for 30% to 50% for tax years 2019 and 2020.
  1. VA Comment: This means a taxpayer that this limitation would apply to will be allowed more of an interest deduction.
7. Technical correction for qualified Improvement Property: This bill corrected a prior law error.
  1. The Tax Cuts & Job Act (TCJA) removed investment barriers by allowing businesses to immediately deduct the cost of certain investments under a provision called 100% bonus depreciation.
  2. Due to legislative oversight, the law accidentally excluded improvements property to be eligible from 100% bonus depreciation.
  3. This bill corrects this error and thus the improvements would be eligible for bonus depreciation and should make this asset a 15-year recovery period.
8. Foreign controlled corporation/shareholder:
  1. The bill is changing the US owned foreign corporation from 10% to 50%.
9. Limitation of Paid Leave: Section 110(b)(2)(B) of the Family and Medical Leave Act of 1993 is providing limitation. An employer shall not be required to pay more than $200 per day and a $10,000 in aggregate for each employee for paid leave under this section.

Please read our memo dated March 17, 2020 which was Version 1. If you can’t find it, please contact us at [email protected] to request a copy or you can read it on our website at www.verticaladvisors.com under blogs.

Lastly, and as always, please contact us if you need assistance or have any questions.