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Tax Corner: Recent legislation regarding COVID relief laws

By Neil Seidler, CPA, CMA
Here are some highlights from recent legislation regarding COVID relief laws. Quite a few of these relate to businesses, but we’re including them for those of our readers who aren’t retired yet.

Critical Notes:

1. Wait on your Paycheck Protection Program (PPP) forgiveness application until later in the spring as the process just got simpler. The deadline to apply is within 10 months after the period you were required to use the funds for, so you have time.

2. To qualify for PPP Round 2 you’ll need financial info in 2020 by quarter to compare to 2019 by quarter. This means it is important to get your books up to date to see if you qualify.

The stimulus payments

If you didn’t receive all of the stimulus payments that you were entitled to in either the first or second round of stimulus payments in 2020, you can claim them as a refundable tax credit on your 2020 income tax return.  For the second round, you, your spouse, and dependent children under 17 are all eligible to receive up to $600. If you all have social security numbers and your dependent children are under 17, then you will get up to $600 each.

If one spouse does not have an SSN, only the taxpayer without the SSN doesn’t get the payment.

For single people, the payments are reduced for those with Adjusted Gross Incomes (AGI) above $75,000. Regarding married couples filing jointly, the phase-out begins at an AGI of $150,000. For those filing as head of household, the reductions begin at $112,500.

PPP and EIDL

The PPP1 (and 2) and Economic Injury Disaster Loans (EIDL) grant forgiveness forms just got a whole lot simpler. Look for the new simpler forgiveness forms from your lender in the next month or so. If your loan is under $150K, your forgiveness application is just one page. You will need to provide info on the employees and attest that you have followed the rules. Sign it and you’re done!

EIDL

The EIDL program has been re-funded in the new COVID relief laws. Presumably, they will send the EIDL advances that were missing for the last few months. The initial loans got advances but once the budget ran out of money, the advances stopped.

EIDL grants will not need to be repaid or need to offset PPP

The EIDL advance does not need to apply against the PPP forgiven amount. In other words, you don’t have to pay any of it back, provided you follow the rules.

EIDL grants and PPP forgiven amounts are TAX-FREE

The EIDL grants and PPP forgiven amounts will not be taxed AND you still get to take the deductions those monies went toward. This is HUGE!

PPP opens up for a second round and opens for first-timers too

There is a second PPP available in the COVID relief laws. You can have a PPP2 if you already received a PPP1, provided you qualify. You have to have 300 or fewer employees and gross income in at least one quarter in 2020 must be 25% or less than the corresponding quarter in 2019. So, for instance, Q2 in 2020 gross income must be 25% or less than Q2 2019. This means it is important to get your books up to date if they are not already to see if you qualify.

Business meals and charitable deductions

For 2020 you can claim up to $300 of cash charitable donations as a deduction, even if you don’t itemize!

For 2021 business meals are 100% tax-deductible. 100% – not the usual 50%.

Tax extenders passed

There were a lot of tax extenders passed – extending previous benefits, tax deductions, etc. More on that later.

*****

We welcome your questions and inquiries. If you have tax-related questions, or any other questions that we may be able to address, please email us or comment below and we’ll try to answer them in a future article.

If you need assistance with your tax filings or other accounting matters please feel free to contact me. I’m happy to help. You can email me at Neil@profitprocpa.com. My business website is ProfitPro Accounting and Tax.

The material presented here is for informational purposes only and is not intended to
provide, and should not be relied on, for tax, accounting or legal advice. Readers should
consult their own tax, accounting and legal advisors to discuss their own personal
matters.

Read Neil’s previous posts here.

##RVT989

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