CS&L in the News
Consolidated Appropriations Act, 2021
Congress Passes Additional Relief Bill for COVID-19
On December 21, 2020, the House and Senate passed a $900 billion relief bill for the ongoing Covid-19 pandemic and economic stimulus. The bill is now headed to the President for his approval. The Act includes several extensions of the previous COVID-19 relief provisions that were set to expire, a second round of Paycheck Protection Program (PPP) Loans including clarification of the deductibility of related expenses, and a new round of Stimulus Payments to many Americans.
PAYCHECK PROTECTION PROGRAM (PPP) LOANS
Treatment of Business Expenses
The Act ensures the deductibility for business expenses paid for with forgiven PPP loans, superseding previous IRS guidance to the contrary. The bill clarifies that “no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied by reason of the exclusion from gross income provided” under the Cares Act.
Additional PPP Loan Funding
The Act provides funding for additional PPP Loans including loans for first-time appliers and a second round of loans for businesses facing severe economic shortfalls due to the pandemic. This additional round of PPP funding includes making loans available to Not-for-Profits, including churches. Businesses may apply for a second PPP Loan provided they have 300 or fewer employees, have used or will use the full amount of their first PPP loan and can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019. The new round of PPP loans are limited to $2,000,000.
Forgiveness Application
The Act mandates a new 1-page loan forgiveness form for PPP loans that are less than $150,000.
STIMULUS PAYMENTS
The Act includes additional direct payments to taxpayers in an effort to further stimulate the economy. The new round of stimulus payments includes $600 payments to individuals and $1,200 to joint filers with an additional $600 per dependent. These payments are subject to phase out for individuals with gross income over $75,000 ($150,000 for joint filers) and will be considered a credit against a taxpayer’s 2020 income tax.
EXTENTION AND MODIFICATION OF COVID RELIEF
Deferred Payroll Taxes
The Act extends the “payback period” to December 31, 2021 for the deferred employees share of payroll taxes allowed under prior relief. The previous “pay back” period was due to expire on April 30, 2021.
Teacher Expenses
The Act provides that certain expenses related to personal protective equipment and other supplies used by teachers to prevent the spread of Covid-19 qualify for the above-the-line educator expense deduction.
Tax Credits
The Act extends the employer credit for paid sick and family leave originally created under the Families First Coronavirus Response Act. The covered period is now extended to March 31, 2021. The Act increases the Employee Retention Credit percentage to 70% and extends the employee retention tax credit to apply to compensation paid to a covered employee through June 30, 2021.
Business Meal Deduction
The Act temporarily increases the deduction for business meals provided by restaurants to 100% through the end of 2022.
Charitable Contributions
The Act includes an extension through 2021 to temporary changes to the limitation on charitable contributions in order to encourage support to charities. The limitation is increased to 100% of adjusted gross income for individuals and 25% of taxable income for corporations.
The IRS recently announced in Notice 2020-51 that taxpayers who already took a required minimum distribution (RMD) in 2020 from certain retirement accounts now have the opportunity to roll those funds back into a retirement account by August 31, 2020. The IRS has provided guidance on rollover opportunities, answers to frequently asked questions, and sample plan amendments for plan administers following the Coronavirus Aid, Relief, and Economic Security (CARES) Act RMD waiver for 2020.
RMD rules. The CARES Act waives all RMDs for 2020, regardless of whether the taxpayer has been impacted by the pandemic. The waiver under the CARES ACT applies for calendar year 2020 to defined contribution plans, certain annuity plans, and traditional or Roth IRAs (the waiver does not apply to defined-benefit plans). The waiver allows seniors to hold on to their plan assets when they might otherwise have to sell at market lows. There may be an additional benefit of the waiver for taxpayers who turned 70 ½ in 2019 and did not take their first required distribution in 2019. For those individuals who chose to wait until April 1, 2020 and had not yet taken the distribution at the time legislation was passed, they can waive both the 2019 and 2020 RMDs.
The required minimum distribution (RMD) rules prevent taxpayers from extending the tax benefit for retirement savings indefinitely. In general, a minimum required distribution must be made for the later of the year in which the participant turns 70 1/2 (or 72, if they have not reached 70 1/2 before 2020) or retires, and for every year thereafter. The required beginning date cannot be delayed until retirement if the participant is a five-percent owner of the employer, or if the account is an IRA. The distribution for the first year can be made as late as April 1 of the following year. For other years, the required distribution must be made during the calendar year.
Transition guidance. The IRS provided guidance in Notice 2020-51 on three items:
- Rollover guidance. The IRS is providing relief to allow taxpayers who receive certain distributions to roll them into an eligible retirement plan. This applies to distributions received in 2020 and in 2021 for employee with a required beginning date of April 1, 2021.
- Permitted repayments of distributions previously received. An IRA owner or beneficiary who has already received distributions from an IRA of an amount that would have been an RMD in 2020, the participant can repay the distribution to the IRA by August 31, 2020. This repayment is not subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs.
- Plan amendments. Two sample plan amendments are provided for employers to adopt to give to plan participants and beneficiaries whose RMDs are waived. Plan amendments must be adopted no later than January 1, 2022.
If you would like more information on the rollover and repayments of RMDs in 2020, and how this affects your personal tax situation, please call our office. We are here to assist you.
As you are aware, the Treasury Department and the Internal Revenue Service (IRS) have announced special Federal income tax return filing and payment relief in response to the ongoing Coronavirus Disease 2019 (COVID-19) emergency. The due date is automatically extended from April 15, 2020, to July 15, 2020, without penalties and interest regardless of the amount owed. Any person with a Federal income tax return or payment due on April 15, 2020, is eligible for relief.
This includes any type of taxpayer, such as an individual, a trust, an estate, a corporation, or any type of unincorporated business entity. This relief also applies to gift tax or generation-skipping transfer tax payments due or the requirement to file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return on April 15, 2020.
The payment due refers to both 2019 Federal income tax payments (including payments of tax on self-employment income) and 2020 estimated Federal income tax payments (including payments of tax on self-employment income), regardless of the amount owed. The return or payment must be due on April 15, 2020 - this relief does not apply to Federal income tax returns and payments due on any other date.
Taxpayers do not have to be sick, or quarantined, or have any other impact from COVID-19 to qualify for relief. Also, taxpayers do not need to file any additional forms or call the IRS to qualify for this automatic federal tax filing and payment relief.
You do not need to call our offices to inquire as to your extension. We are working through the information you’ve submitted (if you have sent us your material) and are trying our best to complete your tax returns as quickly as possible. We will reach out to you if we are missing items or if you have a deadline (for example a State or City tax return) that has not been automatically extended. If you have not provided us with your material, please send it in as soon as you are able. The preferred method at this time is for you to provide your documents electronically via our Sharefile portal or via mail. To access the portal visit our website at www.cslcpa.com and click on the “Sharefile” tab at the top of the page.
Thank you for your patience during this unusual and stressful time. We too have been impacted by requiring a remote work environment, and many of our wonderful staff are impacted by the requirement to educate their children from home during the day. These conditions have resulted in a significant reduction in work efficiencies and an increase to the time required to complete your tax returns. We applaud our staff for their dedication to continue to work through these very adverse times on our client’s behalf.
On March 25, the Senate passed a $2 trillion emergency aid proposal to stimulate the US Economy in the midst of the Coronavirus pandemic. The House is scheduled to vote on the bill Friday, and then it will go to President Donald Trump, who is expected to sign it. This legislation, H. R. 748, ‘‘Coronavirus Aid, Relief, and Economic Security (CARES) Act,” aka the “Phase 3” bill, provides significant tax and non-tax stimulus to individuals and businesses. Click here to download a brief summary of key provisions.
On March 24, 2020, the IRS released frequently asked questions (FAQ) pertaining to Notice 2020-18, which extends Tax Day to July 15, 2020. One of the items we mentioned in our March 22, 2020 Email correspondence was clarified and not the result we anticipated.
Excess elective deferrals in 2019 to a workplace-based retirement plan must be withdrawn from the plan no later than April 15, 2020, in order to exclude the distributions from income. This date was not extended as a result of the Notice 2020-18 tax relief.
The IRS has confirmed that 2019 contributions to IRA and HSA accounts will be extended to July 15, 2020 as a result of the Notice 2020-18 tax relief.
The FAQ website is a good resource for specific questions you may have can be found here:
https://www.irs.gov/newsroom/filing-and-payment-deadlines-questions-and-answers