Lee B

Your post implies that you didn't prepare the 1120S, if so all you can do is advise them of the problem and what needs to be done.

Facts & circumstances. What did they do and how many hours did they work. It's possible it's totally OK

Perhaps your client means their 3rd stimulus rebate, since the IRS says they finished 3 weeks ago. I guess it's possible that your client threw away a debit card and the IRS is replacing it, but that means as far as the IRS is concerned your client has received their rebate. No matter what you do you are in a "no win" situation ! If I was in this situation with a client I would outline their options in writing, let them tell you how they want you to handle it under their signature.

First, Unemployment Benefits are not earned income for EIC purposes. Second, the $ 10,200 which is exempt from income tax will not be included in AGI, unless there is a specific adjustment to add it back.

Margaret, I must say you have the most interesting clients

Wouldn't any step up in basis go to the person inheriting the Partnership Interest? Do you do that person's tax return? NEI

I remember the IRS recalculating and issuing refunds, I think it was about 12 or 13 years ago, don't remember the details.

I am not sure where you are going with this, perhaps nowhere other than quoting instructions? When I have encountered this situation, I recorded a onetime wage payment as of December 31st, and filed the appropriate 4th quarter and annual payroll reports and had the client pay the payroll taxes due.

I haven't done any returns for clients who received unemployment benefits, however I have some in my to do pile. If this bill gets signed into law, our tax software will probably get revised fairly quickly. My concern is what will Oregon do ? Oh well, back to working on PPP Loan Applications.

I should know better than to rely on news reports for accurate information

FAQ # 3 dated Sept 20, 2020: "3. Am I a qualified individual for purposes of section 2202 of the CARES Act? A3. You are a qualified individual if – You are diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention; Your spouse or dependent is diagnosed with SARS-CoV-2 or with COVID-19 by a test approved by the Centers for Disease Control and Prevention; You experience adverse financial consequences as a result of being quarantined, being furloughed or laid off, or having work hours reduced due to SARS-CoV-2 or COVID-19; You experience adverse financial consequences as a result of being unable to work due to lack of child care due to SARS-CoV-2 or COVID-19; or You experience adverse financial consequences as a result of closing or reducing hours of a business that you own or operate due to SARS-CoV-2 or COVID-19. Under section 2202 of the CARES Act, the Treasury Department and the IRS may issue guidance that expands the list of factors taken into account to determine whether an individual is a qualified individual as a result of experiencing adverse financial consequences. The Treasury Department and the IRS have received and are reviewing comments from the public requesting that the list of factors be expanded."

The 2021 unemployment bill currently being considered by the Senate would exempt the first $10,200 of 2021 benefits paid from from Income Tax. It is unclear whether it will pass. If it does pass it will not exclude any benefits paid during 2020 from Income Tax. Mod edit for anyone reading this - as of today, 3/6/21, Senate passed the bill that now will exclude up to $10,200 of UI benefits for TY 2020.

Do they have an "other country not listed option" which should work?

I remember seeing similar posts, when I was still using ATX. If I remember correctly the issue was addressed recalculating and saving frequently?

Yesterday the SBA issued significantly revised PPP Loan Guidance for Schedule C Filers. Now I have whole new group of clients to talk to about PPP Loans. Now SP can borrow 2.5 times their monthly Gross Income, limited to a maximum of $ 20,833. Talk about chasing a moving target! They better extend the April 15th deadline because I will not be finishing very many tax returns the next 10 days or so! Copied from the Journal of Accountancy: "The U.S. Small Business Administration (SBA) issued new Paycheck Protection Program (PPP) rules that allow self-employed individuals who file Form 1040, Schedule C, Profit or Loss From Business, to calculate their maximum loan amount using gross income instead of net profit. The change opens the door for larger loans to self-employed individuals, many of whom don’t record much, if any, net profit on their Schedule C. The calculation change is detailed in a 32-page interim final rule published late Wednesday afternoon by the SBA, which administers the PPP in partnership with Treasury. The SBA also released an updated set of frequently asked questions and six updated or new application forms, as follows. Updated PPP borrower first-draw (Form 2483) and second-draw (Form 2483-SD) application forms. New PPP first-draw (Form 2483-C) and second-draw (Form 2483-SD-C) borrower application forms for Schedule C filers using gross income. A revised lender application form for PPP loan guaranty (Form 2484) A revised PPP second-draw lender application form (2484-SD) AICPA leaders will discuss the SBA guidance, new forms and FAQs during an online Town Hall that will start at 3 p.m. ET Thursday. The new IFR The interim final rule, titled “Business Loan Program Temporary Changes; Paycheck Protection Program — Revisions to Loan Amount Calculation and Eligibility,” revises the maximum loan calculations for sole proprietors who file Schedule C returns, but the change is not retroactive. The SBA and Treasury have ruled that borrowers whose PPP loans already have been approved cannot increase their loan amount based on the new methodology. The new IFR allows a Schedule C filer who has yet to be approved for a PPP first- or second-draw loan in the current, $284.5 billion phase of the program to elect to calculate the owner compensation share of its payroll costs based on either net profit (as reported on line 31 of Schedule C) or gross income (as reported on line 7 of Schedule C). If a Schedule C filer has employees, the borrower may elect to calculate the owner compensation share of its payroll costs based on either net profit or gross income minus expenses reported on lines 14 (employee benefit programs), 19 (pension and profit-sharing plans), and 26 (wages (less employment credits)) of Schedule C. If a Schedule C filer has no employees, the borrower may simply choose to calculate its loan amount based on either net profit or gross income. The IFR provides different sets of maximum loan calculation instructions for Schedule C filers with no employees (see pages 10–11 of the PDF) and with employees (see pages 11–13). These borrowers may use their PPP proceeds to cover the following: Owner compensation (if net profit is used) or proprietor expenses (business expenses plus owner compensation if gross income used). Employee payroll costs. Mortgage interest payments. Business rent payments. Business utility payments (for borrowers entitled to claim a deduction for such expenses on their 2019 or 2020 Schedule C, depending on which one was used to calculate the loan amount). Interest payments on any other debt incurred before Feb. 15, 2020 (these are not eligible for PPP loan forgiveness). Covered operations expenditures, as defined in Section 7A(a) of the Small Business Act, to the extent they are deductible on Schedule C. Covered property damage costs, as defined in Section 7A(a) of the Small Business Act, to the extent they are deductible on Schedule C. Covered supplier costs, as defined in Section 7A(a) of the Small Business Act, to the extent they are deductible on Schedule C. Covered worker protection expenditures, as defined in Section 7A(a) of the Small Business Act, to the extent they are deductible on Schedule C.

"The AICPA on Thursday sent a letter to IRS Commissioner Charles Rettig and Acting Assistant Secretary Mark Mazur urgently asking for the deadlines for filing all 2020 federal income tax and information returns and for making payments to be extended from April 15 to June 15, 2021, in response to a number of issues that make it impossible for many taxpayers to meet the April 15 deadline. The letter follows up on the AICPA’s earlier request for tax deadline certainty. Among the many reasons the AICPA stated that a postponement is needed are the delay of the start of the filing season until Feb. 12, a second round of Paycheck Protection Program loans, and changes to the employee retention credit. In addition, continued stay-at-home orders make it difficult to access taxpayer data, particularly among certain populations such as the elderly, and the IRS continues to be short of staff due to the COVID-19 pandemic. In the letter, the AICPA “urgently request[s] that the 2020 Federal income tax, information returns, and payments (e.g., extension and estimated payments) originally due April 15, 2021 be granted additional time to file and pay until June 15, 2021."

"On March 1, 2021, the IRS issued Notice 2021-20 providing additional guidance on eligibility for the Employee Retention Credit (ERC) and more specifically for those participating in the Payroll Protection Program (PPP). As previously discussed, the Consolidated Appropriations Act, 2021 (CAA21) extended eligibility for the Employee Retention Credit (ERC) for businesses whose PPP loan(s) had previously made them ineligible. The March 1st notice formally addresses uncertainties in the previous IRS FAQs on the interaction between the ERC and PPP loan forgiveness. Note that this guidance only addresses PPP/ERC implications for tax year 2020. Businesses should expect additional IRS guidance for 2021. Under this new guidance, employers who received a PPP loan cannot take the ERC for payroll costs reported on their PPP forgiveness application that were needed to support full loan forgiveness. However, qualified wages not included in PPP payroll costs or that exceed the minimum amount required for PPP forgiveness are still eligible for the ERC. The IRS provided several examples to show how this works: Example 1: Employer A received a $200,000 PPP loan and reported $250,000 of eligible payroll costs on its PPP forgiveness application. Employer A is deemed to have made an election out of the ERC for the $200,000 (up to the amount of the forgiveness), but the remaining $50,000 exceeding the PPP loan amount remains eligible for the ERC. Example 2: Employer B received a $200,000 PPP loan and reported $200,000 of eligible payroll costs and $70,000 of other eligible expenses on its PPP forgiveness application. Because of the $70,000 in other eligible expenses, Employer B only needed $130,000 of its eligible payroll costs to receive full loan forgiveness. As a result, $70,000 of the qualified wages reported as payroll costs may be treated as qualified wages for purposes of the ERC." There is also some additional clarification of some definitions etc

The White House has reached a compromise with the moderate Democrats in the Senate. The compromise phaseout range for for MFJ would be $ 150,000 to $ 160,00 and MFS $75,000 to $ 80,000.

I have a few clients who have tried emailing a number of pages by taking pictures with their cell phone cameras, with no straight lines, lots of wavy curves . Many times it's almost impossible to read, makes me nauseous and gives me a headache. I had to draw a line with these clients and insist they mail me the original documents or use a standard scanner! There are just some things you shouldn't have to put up with!

Darn, this is a 102 pages long, guess I will wait some detailed analysis https://www.irs.gov/pub/irs-drop/n-21-20.pdf

That's the thing about opinions, everyone has one, but how we react to someone else's opinion is a choice.

From just published GAO Report on the IRS: . . . . "Additionally, costs increased including interest on delayed refunds which exceeded $3 billion in fiscal year 2020." . . . . .

That's with my last eyeglass prescription, I see at 115%

This is not a new problem, it's the same problem that had existed for years when I switched from ATX to Drake, 3 years ago.

Darlene, I don't know how you cope with all the chaos going on around you. I couldn't do it. I feel truly fortunate that my client/ office situation is fairly stable and relatively calm. Darn, now I have probably jinxed myself.