Lee B

Copied from the AICPA: "5 reasons borrowers shouldn’t rush their PPP forgiveness applications Posted by AICPA Communications on Jul 14, 2020 This blog post explains why borrowers shouldn’t rush their PPP loan forgiveness applications. Please share with clients who participated in the program. Borrowers who received Paycheck Protection Program (PPP) loans under the Coronavirus Aid, Relief, and Economic Security (CARES) Act are asking their CPAs if and how they will qualify for PPP loan forgiveness. There is uncertainty over some of the program details. Organizations — especially small businesses — worry about meeting the maximizing loan forgiveness requirements. While you may be anxious to apply for forgiveness, here are five factors affecting the forgiveness application process. Most lenders are not ready to process forgiveness applications. Many are developing technology tools such as “forgiveness portals” or will leverage other automation options for a more efficient process. Until the U.S. Small Business Administration (SBA) and the U.S. Treasury Department issue final guidance, those technology tools can’t be finalized. The timing on when that guidance will be available is uncertain. Bank of America, as one example, is telling PPP loan holders it expects to begin opening its online loan forgiveness application process in early August and will email instructions to borrowers when it’s ready. Organizations have 24 weeks to use their PPP money, leaving them more time to take steps that will help them qualify for full loan forgiveness. Borrowers who received their loans before June 5, 2020, can choose either eight weeks or 24 weeks for their covered period. That increased flexibility in the time to use PPP funds can be important in maximizing loan forgiveness. "Payroll costs are a significant component of PPP forgiveness. Many payroll providers are developing custom reports specifically to comply with PPP guidance. However, like lenders, they are waiting on final SBA and Treasury guidance so they can prepare the PPP-compliant reports borrowers will need. Borrowers aren’t required to make any loan payments before they apply for forgiveness or until 10 months after their covered loan period ends. Since payments aren’t due yet, there is less urgency to apply for forgiveness. Applying for forgiveness may be easier than clients expect. Borrowers can use a simplified process through SBA Form 3508EZ if they meet at least one of these requirements: They are self-employed individuals, independent contractors or sole proprietors who had no employees when they applied for their PPP loan and who didn’t include any employee salaries in calculating their average payroll amount in their application. They didn’t reduce salaries or hourly wages for certain employees by more than 25% during the loan period and — except for specified exceptions — didn’t reduce the number of employees or the average paid hours for employees between Jan. 1, 2020, and the end of their covered loan period. They didn’t reduce salaries or hourly wages for certain employees by more than 25% during the loan period and were unable to operate at the same business activity level during the loan period because of federal safety requirements or guidance related to the pandemic. CPAs expect SBA guidance to help determine how broadly this safe harbor can be used. Be prepared While waiting for final program guidance, borrowers can take steps to prepare for the forgiveness application process by documenting how the loan proceeds are used. Gather documentation needed to support non-payroll costs for expenses such as mortgage interest, rent or lease payments and utilities, including account statements and other proof of payments. Lenders may not request supporting documentation for all disbursements as part of the forgiveness application; however, increased scrutiny is guaranteed for loans of $2,000,000 or more. Be patient PPP loans have gone to 4.8 million organizations through June 30, 2020. Recent legislation extended the opportunity for organizations to apply for loans until Aug. 8. While questions remain about some forgiveness process details, CPAs are following developments. It can be difficult to be patient when your organization is affected by the ongoing uncertainty COVID-19 created. But that may be the best approach until the SBA and your lender establish a forgiveness application process. Count on your CPA to continue to be your trusted adviser throughout the process. The AICPA has several Paycheck Protection Program resources available to the public during this challenging time. You’ll find an overview of the PPP loan forgiveness process, answers to frequently asked questions and more. Lisa Simpson, CPA, CGMA, Director — Firm Services, Association of International Certified Professional Accountants" Based on what I learned from my 4th online CPE course about this process, I completely agree.

The employee only has a say if the employer chooses to opt in, due to the way the memorandum and the IRS Guidance is worded.

"The Internal Revenue Service said companies will be responsible for collecting and paying back any deferred payroll taxes under a directive by President Donald Trump aimed at helping workers while the administration and Democrats are stalemated on a stimulus deal. The agency issued guidance Friday that implements Trump’s order to delay the due date for payroll taxes for millions of workers from Sept. 1 through year-end. Come next year, the taxes will need to be paid by April 30, however — unless Congress votes to forgive the liabilities, the release showed. If lawmakers don’t step up, the guidance says employers must withhold the taxes from employees from Jan. 1 through April 30, meaning that workers will have double the deduction taken from their paychecks next year to pay back the deferred portion. Employers “may make arrangements to otherwise collect the total applicable taxes from the employee,” if necessary, the release said. The guidance puts the responsibility on employers for ultimately paying back the levies, and that could cause many to decline putting the extra money in workers’ paychecks — blunting any potential economic or political boost Trump had hoped to reap." This clearly puts the responsibility on the employer to collect all of the deferred taxes plus the responsibility for paying any uncollected deferred taxes.

One argument in favor of taking the RMD is that in the long run it's likely that tax rates are going up due to the huge deficits.

It's the employer's decision whether or not to opt in. The employer's participation is not driven by their employee's desire to have more take home pay.

Both of the payroll software programs that I use, have decided to to make no changes to their programs since so many unanswered questions remain!

"Late on Friday, the IRS issued much-anticipated guidance on the payroll tax deferral that was ordered by President Donald Trump in a presidential memorandum on Aug. 8 (Notice 2020-65). The notice allows employers to defer withholding on affected employees’ compensation during the last four months of 2020 and then withhold those deferred amounts during the first four months of 2021 Under the guidance, employers can defer the withholding, deposit, and payment of certain payroll taxes on wages paid from Sept. 1 through Dec. 31, 2020. The deferral applies to the employee portion of the old-age, survivors, and disability insurance (OASDI) tax under Sec. 3101(a) and Railroad Retirement Act Tier 1 tax under Sec. 3201. The due date for withholding and payment of these taxes is postponed until the period beginning Jan. 1, 2021, and ending April 30, 2021. The deferral applies to any employee whose pretax wages or compensation during any biweekly pay period generally is less than $4,000. The notice defines applicable wages, for these purposes, as: wages as defined in [Sec.] 3121(a) or compensation as defined in [Sec.] 3231(e) paid to an employee on a pay date during the period beginning on September 1, 2020, and ending on December 31, 2020, but only if the amount of such wages or compensation paid for a bi-weekly pay period is less than the threshold amount of $4,000, or the equivalent threshold amount with respect to other pay periods. Amounts excluded from wages or compensation under Secs. 3121(a) or 3231(e) are not included when determining applicable wages. Under the notice, the determination of applicable wages is to be made on a pay-period-by-pay-period basis — meaning that if the amount of compensation payable to an employee for a particular pay period is less than the threshold amount ($4,000 for biweekly pay periods), then the payroll tax deferral applies to that compensation, irrespective of the amount paid to that employee in other pay periods. The notice requires affected employers to withhold and pay the deferred taxes from wages and compensation paid during the period between Jan. 1, 2021, and April 30, 2021. Interest, penalties, and addition to tax will begin to accrue on unpaid taxes starting May 1, 2021. The notice says, that, if it is necessary, employers can “make arrangements to otherwise collect the total Applicable Taxes from the employee” but does not provide details on that requirement. The AICPA, in a letter to Treasury and the IRS on Aug. 12, asked for guidance on many open issues regarding the implementation of the presidential memorandum." In the second sentence the verb "allows" is used not "requires". In the third sentence the verb "can" is used not "must" so it appears that employers compliance is "optional". Then any tax deferred must be collected from the employee(s) from January 1, 2021 thru April 30, 2021. As of May 1, 2021 any uncollected tax starts accruing penalties and interest.. I am sure everyone's payroll software will be reprogrammed and ready to go on Tuesday morning. I will be I will strongly advising my clients not to participate.

Yeah, years ago I switched my mouse to my left hand so I could do my calculator and ten key entry with my right hand and my mouse with my left hand.

"WASHINGTON — A debate between the White House and the Treasury Department over President Donald Trump’s payroll tax suspension has delayed crucial information about how the executive order will be carried out, according to people familiar with the matter, leaving businesses across the country uncertain about how to proceed." . . . . . . . "The White House, which is eager to push through a tax cut before the November election, wants the Treasury guidance to ensure that companies, not workers, are held liable for paying the employee portion of the tax when the tax holiday ends." Even for a modest sized small business this could be tens of thousands of dollars of extra payroll tax! No wonder 30 business groups including the US Chamber of Commerce are strongly opposing the payroll tax deferral.

Copied from The Journal of Accountancy: "The U.S. Small Business Administration (SBA) and Treasury issued an interim final rule Monday addressing Paycheck Protection Program (PPP) forgiveness issues related to owner-employee compensation and the eligibility of nonpayroll costs. Specifically, the interim final rule establishes that owner-employees with less than a 5% stake in a C or S corporation are exempted from the PPP owner-employee compensation rule for determining the amount of their compensation for loan forgiveness. The exemption’s intent is to cover owner-employees who have no meaningful ability to influence decisions over how loan proceeds are allocated, according to the interim final rule. The guidance also details a couple of decisions that the SBA and Treasury said are designed to maintain equitable treatment between a business owner that holds property in a separate entity and one that holds the property in the same entity as its business operations. In the first decision, the SBA and Treasury declare that the amount of loan forgiveness requested for nonpayroll costs may not include any amount attributable to the business operation of a tenant or subtenant of the PPP borrower. The guidance illustrates this with four examples. Example 1: A borrower rents an office building for $10,000 per month and subleases out a portion of the space to other businesses for $2,500 per month. Only $7,500 per month is eligible for loan forgiveness. Example 2: A borrower has a mortgage on an office building it operates out of, and it leases out a portion of the space to other businesses. The portion of mortgage interest that is eligible for loan forgiveness is limited to the percent share of the fair market value (FMV) of the space that is not leased out to other businesses. As an illustration, if the leased space represents 25% of the FMV of the office building, then the borrower may only claim forgiveness on 75% of the mortgage interest. Example 3: A borrower shares a rented space with another business. When determining the amount that is eligible for loan forgiveness, the borrower must prorate rent and utility payments in the same manner as on the borrower’s 2019 tax filings, or if a new business, the borrower’s expected 2020 tax filings. Example 4: A borrower works out of his or her home. When determining the amount of nonpayroll costs that are eligible for loan forgiveness, the borrower may include only the share of covered expenses that were deductible on the borrower’s 2019 tax filings, or if a new business, the borrower’s expected 2020 tax filings. In the second decision regarding certain nonpayroll costs, SBA and Treasury rule that rent or lease payments to a related party are eligible for loan forgiveness provided that (1) the amount of loan forgiveness requested for those payments is no more than the amount of mortgage interest owed on the property during the covered period that is attributable to the space being rented by the business, and (2) the lease and the mortgage were entered into prior to Feb. 15, 2020. However, mortgage interest payments to a related party are not eligible for forgiveness. Per the ruling, PPP loans are intended to help businesses cover nonpayroll costs owed to third parties, not payments to a business’s owner that occur because of how the business is structure."

What I have found out: 1. My clients tax return has been held in"processing" status since April 11th. 2. My client received their state refund via direct deposit on April 17th. 2. No help available over the phone, your only option is to use the "idverify" page at irs.gov. Took an IRS Webinar today on third party authorizations, currently it's taking on average at least 15 business days in order to get a 2848 processed.

In my client's situation there is no change of address or anything else?

Has anyone had one of your clients receive IRS Letter 5071C to asking them to verify their identity before their return is processed. I efiled my client's 1040 on April 11th and it was accepted on the same day. Thanks, in advance,

Copied from Accounting Today: "The U.S. Treasury Department still has yet to tell companies how to handle President Donald Trump’s order delaying the due date for employee payroll taxes, leaving major employers like Walmart Inc. in the lurch. It’s been two weeks since Trump issued his directive deferring the deadline to pay worker’s portions of Social Security taxes from Sept. 1 through the end of the year. But employers, who are responsible for submitting those payments to the Internal Revenue Service, are waiting to hear from the agency on how any tax bill would be handled when it comes due later. “I don’t think there is a bloody chance that, at this point, anybody is implementing anything before Labor Day,” said Adam Markowitz, an enrolled agent and vice president at Howard L Markowitz PA CPA. The Treasury and IRS didn’t respond to requests for comment on when the guidance would be published. Some companies have already shied away from the payroll tax deferral, which Trump touted as a boost for workers as the economy reels from the coronavirus pandemic, because the taxes would ultimately have to be paid unless Congress acts to forgive the liability. Large employers including Walmart, Macy’s Inc. and Procter & Gamble Co. have said they need more details from the IRS. They didn’t immediately respond to a request to comment on whether they would implement the deferral if the IRS didn’t issue any rules by the Sept. 1 start date. The U.S. Office of Personnel Management didn’t respond to a question about whether it plans to defer taxes for federal employees. “Companies cannot do anything until there is guidance,” Veena Murthy, a principal at accounting firm Crowe LLP, said. The order “requires Treasury and IRS to provide some way it can be done. In this case particularly, there really are no answers.” Payroll software providers need time to update their systems, and they can’t do that without guidance from the IRS and Treasury, Markowitz said. And companies have learned the hard way about claiming benefits before having sufficient guidance, he said. Following enactment of the last coronavirus stimulus legislation in March, some businesses quickly took advantage of loans under the Paycheck Protection Program but later found, after guidance was issued, that it might have been in their best interest to ditch the loans in favor of other tax credits or grants, he said. The U.S. Chamber of Commerce has said that many companies are unlikely to implement the deferral, even with the IRS guidance, because it forces a large tax bill on employees in the future and would be very difficult for employers to administer. “Further, the lack of concrete guidance on the most basic of implementation issues presents an untenable situation, making it basically impossible for employers to implement this EO and leaving little choice but for those employers to continue remitting payroll taxes to the Treasury,” Caroline Harris, the Chamber’s chief tax policy counsel, said in a statement. Treasury Secretary Steven Mnuchin has said he can’t force companies to implement the deferral, but said he hopes many companies will participate. Trump has said he would forgive the tax bills if he’s elected to a second term, but that would require participation from a Congress that has been hesitant to cut the funding source for Social Security. The onus is now on employers to provide explanations to their workers about why the company isn’t implementing the deferral and they should prepare to face a potential backlash from employees, Markowitz said. The average employee isn’t going to understand, nor care, that there isn’t any IRS or Treasury guidance, he said. “They’re just going to say, ‘Hey, Trump said I should have 6.2 percent more in my paycheck every week and I don’t." I haven't had any payroll clients ask about this yet

Clients disappointed with tax refunds, expect more from accountants By Michael Cohn August 21, 2020, "Over half of tax clients (53 percent) aren’t positive that their accountant fully minimizes their tax payment, and 46 percent were disappointed by the size of their tax refund last year, according to a new survey. The survey, by practice management software provider Canopy, nevertheless found that 85 percent of those surveyed would recommend their accountant. The top reasons cited by the individual and business taxpayers polled for what they value most about the relationship they have with their tax accountant are in-person communications, the ability to send and receive documents online, and guidance and knowledge about taxes. The top three things they said they would change about working with their accountant are more in-person meetings, more timely response, and better technology to streamline interactions. Taxpayers are increasingly relying on technology for doing their taxes and communicating with their tax preparers, especially during the novel coronavirus pandemic. While offering the ability to exchange documents online with their accountants is extremely important for taxpayers, only 2 percent of the respondents said that their accountant offers an online portal. Currently, the most common ways clients exchange documents with their accountant are during in-person meetings, through hard printouts and via email. “The accounting industry is rapidly changing, but above all, client expectations are centered around technology-enabled support and services as millennials and generation Z start engaging accounting and tax services,” said Canopy chief product officer Larry Furr in a statement Thursday. “While in-person meetings remain indispensable for most clients, we are in a position where this isn’t very likely and being able to access their accountant and documents online is clearly a critical prerequisite right now.” Seventy-eight percent of the taxpayers surveyed said the technology their accountant uses to make tax preparation easy is important. The top technologies they cited for improving the way they work with their accountants were an online way to send and receive documents, text chat for questions and answers, and the ability to set and change appointments online. Business owners are twice as likely as individual taxpayers to say they like being able to send and receive documents online, according to the survey, while women are nearly twice as likely as men to want online chat as a feature. Many tax clients are unaware of the post-filing services offered by their accountants. One out of three clients didn’t know if their tax accountant provides audit protection services. Business owners are two times less likely than non-business owners to know if their accountant provides audit protection services. Thirty-seven percent of the tax clients polled said they don’t know if their tax accountant provides legal tax service."

1. The IRS publishes guidance specifying the authorized formats for the 1099NEC 2. Software providers submit form format designs to the IRS for review and approval. 3. Following IRS approval, then software providers can move ahead Last month the IRS released a draft of Form 1099 NEC which was 2 forms per page On August 18th, the IRS released a new draft of Form 1099 NEC which was 3 forms per page There is no way to know if and when a 4 up format will be released. The software provider form design teams work closely with the IRS on this stuff so they probably know what's going on, however these details usually aren't known by support staff.

Just had my fourth online CPE class about PPP Forgiveness on Tuesday, since the Treasury and the SBA keep moving the goalposts. Many banks have yet to start accepting applications. The probable reason that banks are dragging their feet, is that most banks don't have the staff and expertise to process these applications, so they are subcontracting out the processing of these applications to large CPA Firms. If the "automatic forgiveness"for loans less than $ 150k ever goes thru it would save the banks a lot of money, which would go straight to their bottom line.

Interesting, I paper filed an amended 2018 1040 for a client in late March. She received her federal refund check plus interest a month ago. However she is still waiting for her Oregon refund. Even in years past I remember amended returns taking over 4 months

I didn't look this up but if it's non degree program, can you claim AOC?

Yeah, now that it's become known that this wasn't even an Executive Order, it was an Executive Memorandum which has the force of a f**t in the wind.

Apparently the Treasury Secretary has been receiving heavy pressure from businesses to resolve this SNAFU, because he was quoted today as saying, that business participation in the payroll tax deferral would be optional! I don't even know what to say ?

Copied from Accounting Today: "Employers wait for guidance on payroll tax deferral By Roger Russell August 18, 2020 In what amounted to an end run around Congress, President Trump signed a series of executive memorandums and an executive order on Aug. 8, 2020, to address issues left unresolved by the congressional failure to agree on additional bipartisan stimulus legislation. “It’s actually a memorandum rather than an executive order,” observed Mark Luscombe, CPA and principal federal tax analyst for Wolters Kluwer Tax & Accounting. “The difference is not legally significant. An executive order gets published in the Congressional Record.” While three of the executive actions are not tax-related — addressing enhanced unemployment payment, eviction moratoriums, and student loan relief — the fourth defers payroll taxes from Sept. 1, 2020, to Dec. 31, 2020. “There were three presidential memoranda and one executive order,” said Luscombe. “The order was the one relating to evictions.” The performance platform for the modern firm Firms are facing a new reality in how business is done. Right Networks and Rootworks have aligned front and back-office functions in a powerful... SPONSOR CONTENT FROM “The president has been pushing for forgiveness of payroll tax for some time, but neither Republicans nor Democrats were in favor of it because it doesn’t provide much immediate help, just a gradual benefit over time," Luscombe continued. "They would prefer a stimulus with more of an immediate benefit, but Trump went with a payroll tax deferral because that’s all he felt he could do with executive action without congressional involvement.” “The administration felt it only had the power to issue a deferral, not a forgiveness,” Luscombe said. “The memorandum only applies to the 6.2 percent employee’s share of Social Security taxes. It does not apply to the 1.45 percent employee’s share of Medicare taxes.” In addition, the memorandum only applies to biweekly income under $4,000 or less, which translates to annual income of $104,000, he said: “Some commentators have pointed out that if your salary is variable, you could end up being eligible even if your income for the year ends up being higher than $104,000.” Since the memorandum constitutes just a deferral, will someone have to pay the piper come January? “It’s likely that this would have to start to be repaid in January,” Luscome said. “The Treasury is expected to issue guidance on how the deferral will work and address several uncertainties. A lot of employers are waiting for the guidance to be issued.” “Many employers are concerned about implementation because it’s just a deferral,” he said. “There could be a double withdrawal from employees’ paychecks in 2021. That would be a burden on employees if Congress doesn’t get around to enacting forgiveness.” It’s not currently clear if employers will start deferral immediately, according to Luscombe. “Most employers think the executive memorandum is optional, not mandatory,” he said. “Some employers are worried that employees are not prepared for a future reduction in their paychecks,” he said. “They’re also concerned about getting their systems revised to take care of withholding. And if employees leave between now and the end of the year, will the employer be required to recoup the money out of their own pockets if they can’t get it from the employees starting in January?” The “Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster” directs the secretary of the Treasury to “explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred pursuant to the implementation of this memorandum.” “Most people think the direction on forgiveness can only be accomplished by congressional action,” said Luscombe. “It’s likely we will get guidance from the Treasury pretty quickly because of the Sept. 1 start date." What a mess!

You need at least some basic paperwork. Have A sell the business to B for $ 1 plus the assumption of the loan, otherwise the interest expense is still deductible on A's Schedule C.

There are many, many different factors that go into determining whether someone is an employee or an independent contractor, as last count I read that 39 separate factors have been identified. The socalled gig employees fall somewhere in the middle. IMHO they are closer to being employees than they are to be independent contractors. And Tom you are totally right the state decides. In Oregon residential contractors for years tried this structure; a general contractor with zero employees, all the work being done by various subcontractors who also had zero employees. Until state law made it mandatory that someone on the job site had to have a workers compensation policy that covered everyone working on the job site, including the independent contractors.

That may be, but I remember about 10 or 12 years ago a discussion where the IRS said that they paid attention to how many days on average it took 1st class mail to travel from the sender's mailing location to their P O Box and that unless it was Certified Mail the postmark was not considered to be the determining factor. As I recall this came up because so many people had access to programs like Stamps.com or there own small postage meter which could allow you to imprint postage on a letter and then mail the letter some days later.