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PPP Round 2

January 6, 2021

At the end of 2020, Congress passed, and the President signed, a new law that provides for additional relief related to the coronavirus (COVID-19) pandemic. This law, the Consolidated Appropriations Act, 2021 (CAA 2021), includes a second draw of Paycheck Protection Program (PPP) loans. It also allows businesses to deduct ordinary and necessary expenses paid from proceeds of PPP loans.

The CAA 2021 permits certain small businesses who received an Original PPP Loan and experienced a 25% reduction in gross receipts to take a PPP Second Draw Loan of up to $2 million.

In order to qualify for a PPP Second Draw Loan a taxpayer must have taken out an Original PPP Loan. In addition, prior PPP borrowers must meet all the following conditions to be eligible for PPP Second Draw Loans:

Employ no more than 300 employees per physical location
Have used or will use the full amount of their first PPP loan
Demonstrate at least a 25% reduction in gross receipts in the first, second, third, or fourth quarter of 2020 relative to the same 2019 quarter.

Borrowers may receive a PPP Second Draw Loan of up to 2.5 times the average monthly payroll costs in the one year prior to the loan or in calendar year 2019. However, borrowers in the hospitality or food services industries may receive PPP Second Draw Loans of up to 3.5 times average monthly payroll costs. Only a single PPP Second Draw Loan is permitted to an eligible entity.

Like Original PPP loans, PPP Second Draw loans may be forgiven to the extent their proceeds are used to maintain payroll during the pandemic and to cover certain other expenses.

If you have questions or would like additional guidance and assistance, we are here to help.

For more information please contact Oles + Associates.

Thinking Outside the Box: Section 139 Tax-Free Payments to Employees

December 11, 2020

As a result of the COVID-19 pandemic being declared a national emergency, employers have the opportunity to provide funds to their employees in a rare tax-free way. For example, many employees may have incurred unexpected expenses as a result of the coronavirus, including being quarantined or under a stay at home order. One way in which an employer can provide assistance to employees impacted by the pandemic is by making tax-free “qualified disaster relief payments” under Code Section 139. Qualified disaster relief payments represent a tax planning opportunity for employers because they are both excludable from employees’ wages (i.e. not included on their W-2) and fully tax deductible by the employer – a “win-win.” However, time is of the essence. Employers that have successfully weathered the 2020 year and are in a position to assist their employees need to act now. For more information please contact our office.

IRS doubles-down: no tax deduction for expenses paid with forgiven PPP funds

December 11, 2020

In guidance issued in late November (Rev. Ruling 2020-27), the IRS reiterated its position that taxpayers cannot claim a deduction for any otherwise deductible expense if the payment of the expense results in forgiveness of a Paycheck Protection Program (PPP) loan. It is the position of the IRS that if the taxpayer has a reasonable expectation for reimbursement of the PPP loan (in the form of loan forgiveness) at the end of 2020, that any deduction of the related expenses is disallowed. Regardless of whether the formal PPP loan forgiveness application process has been started or not. This means that expenses paid with money that originated from PPP loans that have been, or are reasonably expected to be, forgiven are not eligible for tax purposes. Taxpayers should be aware of the tax implications of the nondeductible nature of these expenses and consults their tax advisors to see how Rev. Ruling 2020-27 may impact their business(es).

Small Business Relief Grant (SBRG) Announcement

October 26, 2020

Governor Mike DeWine recently announced the SBRG, a new grant program available to small businesses in Ohio. This $125 million grant fund is designed to help small businesses that have felt the negative impacts of COVID-19. Eligible small businesses can apply to receive a $10,000 grant as reimbursement for certain COVID-19 related expenses. These eligible expenses include items such as: personal protective equipment or other measures undertaken to protect employees, customers, or clients from COVID-19; mortgage or rent payments for business premises; utility payments; salaries, wages, or compensation paid to contractors or employees (including employer share of health insurance costs); and business supplies or equipment.

To be eligible for the grant, the applicant business must meet the following requirements:

be a for-profit entity (including sole proprietor, partnership, LLC, corporation, or joint venture)
employ at least 1 but no more than 25 employees paid through W2 wages as of January 1, 2020
have a physical location in Ohio and earn at least 90% of annual revenue based on activities performed in and taxable to Ohio
have been in continuous operation since January 1, 2020 (except for interruptions required by Covid-19 public health orders) and have the ability to continue as a going concern

The application for the SBRG opens November 2, 2020 at 10:00 AM and can be submitted at https://businesshelp.ohio.gov/. Grants are awarded on a first come, first served basis by each county.

Our commitment to you

Whether you have tax or financial planning questions or need advice on ways to navigate the application process and requirements, we’re here for you. If you have any questions or concerns, please don’t hesitate to contact us at 614-487-0774.

Rest assured, we’re here to help with your questions.

Individual Tax Announcement 4/6/2020

We previously published a Business Tax Announcement outlining some of the provisions affecting businesses as a result of recently passed legislation. With this Announcement, we are again providing our clients and business associates with a high-level summary of some of the key provisions impacting individuals. We again recommend discussing your particular circumstances with us in more detail.

Relief available

There are several recently enacted tax changes and new or expanded benefits that might be helpful to you.

Income tax provisions:

The IRS extended the April 15, 2020 federal income tax filing and payment deadline to July 15, 2020. However, we continue to work on filing returns as soon as possible.
First quarter estimated tax payments usually due April 15, 2020 are now extended to July 15, 2020.
Ohio House Bill 197, enacted March 27,2020 extends the filing and payment due dates from April 15, 2020 to July 15, 2020. Additionally, the first and second quarter payments (originally scheduled for April 15 and June 15) for most taxpayers have been extended to July 15, 2020.

Recovery rebates:

Payments to individuals of $1,200 ($2,400 for joint filers) plus $500 for each qualifying child are expected to be delivered around mid-April.
The recovery rebate begins to phase out for taxpayers with adjusted gross income (AGI) above $150,000 for joint filers, $112,500 for heads of households and $75,000 for other individuals. If you’d like to estimate the amount you’ll receive, visit our CARES Act stimulus calculator at aicpa.org/covid19tax.
The payment is not taxable.

Retirement accounts:

Through the end of the year, individuals who are under 59 ½ years old can take up to $100,000 in coronavirus-related distributions from retirement plans without the usual 10% penalty for early distributions. The distributions may be repaid within three years and any resulting income inclusion can be taken over three years.
If you were over 70½ at December. 31, 2019, you won’t have to take required minimum distributions (RMD) in 2020. If your retirement assets have taken a hit, not having to take an RMD may allow those assets to recover some value before you liquidate them.

Student loans:

If you have a federally held student loan, your payments will be suspended through September. 30, 2020 and interest won’t accrue during this period. Note that this relief does not apply to private student loans.

Other benefits:

Other benefits are available including expanded unemployment, emergency paid sick and family leave benefits (with some limitations and exceptions). Unemployment benefits are extended to self-employed and part-time workers.

Protecting our clients and staff

There are limitations on our physical work environment due to COVID-19; however, we’re working to minimize disruptions and impacts to you so that we can still offer the same level of superior service and support you have come to expect from our team.

Our commitment to you

Whether you have tax or financial planning questions or need advice on ways to navigate the expanded benefits outlined above, we’re here for you. If you have any questions or concerns, please don’t hesitate to contact us at 614-487-0774.

We’re in this together and our thoughts go out to all that have been impacted by this unprecedented situation.

Rest assured, we’re here to help with your questions.

Oles + Associates, CPAs

Business Tax Announcement 4/2/2020

As the coronavirus (COVID-19) continues to affect local communities and global economies, you may have concerns about your company’s financial well-being as well as the well-being of your employees. You may also be wondering about how recently passed legislation impacts you and your enterprise. We’re providing a high-level summary of some of the key provisions impacting businesses and recommend discussing your particular circumstances with us in more detail.

Relief available

There are several recently enacted tax changes and new or expanded benefits that might be helpful to you.

Income tax filing and payment deadlines

The IRS extended the April 15, 2020 filing and federal income tax payment deadline to July 15, 2020. We continue, however, to work on filing returns as soon as possible.
First quarter estimated tax payments usually due April 15, 2020 are now extended to July 15, 2020.
Ohio House Bill 197, enacted March 27, 2020 extends the filing and payment due date from April 15, 2020 to July 15, 2020. Additionally, the first and second quarter payments (originally scheduled for April 15 and June 15) for most taxpayers have been extended to July 15, 2020.

Employee retention and payroll tax credits

A refundable tax credit has been created to assist employers in retaining employees. The credit is computed at 50% of qualified wages paid by eligible employers for up to $10,000 paid to each employee between March 13, 2020 and December 31, 2020.
Subject to limitations and exceptions, employers of less than 500 employees are required to provide mandatory sick time and paid family leave, but are eligible for payroll tax credits to offset the costs. Eligible self-employed individuals also qualify for the credits. Healthcare providers and emergency responders are excluded; employers with fewer than 50 employees can be exempted.
Employers (including self-employed individuals) will be able to postpone the employer’s share of Social Security taxes through the end of this year. The delayed payments are due in two equal payments, the first due December 31, 2021 and the second due December 31, 2022.

Small Business Administration (SBA) loans

Small businesses are eligible to apply for an Economic Injury Disaster Loan grant of up to $10,000. Funds should be made available within three days of a successful application, and this grant will not have to be repaid.
Small businesses may also apply for a loan through the Payroll Protection Program. This program is designed to help provide capital to cover the cost of retaining employees. If certain criteria are met, the loan can be forgiven.
Other SBA programs are also available. For more guidance, see SBA’s Coronavirus Small Business Guidance and Loan Resources.

Other business provisions

Unfortunately, many businesses are facing losses due to the economic impacts from the pandemic. For losses arising in tax years 2018, 2019 and 2020, a five-year carryback is now allowed to help businesses recoup some of their prior taxes.
Interest expense deduction limitations are more taxpayer favorable. Under prior legislation, net interest expense was limited to 30% of adjusted taxable income. This limitation has been increased to 50% for tax years 2019 and 2020.
Depreciation modifications were made in connection with qualified improvement property to allow for a faster write-off of these assets. Under prior legislation, this type of property was required to be depreciated over 39 years. Under the recent legislation, this depreciation period has been reduced to 15 years, and these assets will now be eligible for bonus depreciation which will allow for an immediate deduction of the entire cost of the property.

Our commitment to you

During this unpredictable and challenging time, it’s more important than ever to stay connected. We’re in this together and our thoughts go out to all who have been impacted by this unprecedented situation.

Rest assured, we’re here to help with your questions.

Oles + Associates CPAs

March 12, 2020 COVID-19 ANNOUNCEMENT

As we continue to monitor the everchanging developments concerning the coronavirus, we recognize that some of our clients, business associates, and friends may be affected by the impacts of the global pandemic. Our focus, as always, is the well-being and safety of our clients, staff, business associates, and community. To that end, we stand ready to work with and support those experiencing difficulty during these trying times.

We have previously put into place various strategies and systems to enable us to provide uninterrupted service to our clients and business associates during this most busy time of the year. Those systems involve maintaining a germ-free environment as much as possible and monitors to alert management of infection issues with which to deal. In addition, we have contingency plans in place to prevent any service disruptions due to coronavirus impacts. Those include remote access capabilities and alternate work locations for staff.

We remain focused in assisting our clients to timely file their tax returns. We are maintaining a position of vigilance to stay ahead of the process rather than to catch up and to this date our plans have been successful.

As a result of the Governor’s State of Emergency declaration and out of an abundance of caution, we have further enacted an immediate cancellation of visits and face-to-face meetings by all visitors to our office until after April 15, 2020. We will be happy to receive/deliver client information via postal mail, email, fax, and courier. We will also communicate with our clients and business associates via telephone, cell, email, and/or phone conference. We are keenly aware that many of our clients prefer to preview and post review their tax matters and we will be most willing to make that happen after April 15. Until that time, we will use other non-contact communication methods.

We take very seriously the responsibility that our clients are expecting: to deliver timely filed financial reports and tax returns. To that end, we will continue to focus on the events as they unfold and react to them accordingly.

Oles + Associates recently mailed copies of our Tax & Financial Planning Guide for 2019-2020 to our clients. If you did not receive a copy and would like one, please email oainfo@oles-cpa.com or contact us by phone at (614) 487-0774. A PDF download of the guide is also available below.

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