A Proactive Approach to COVID-19
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To Our Clients and Friends,
During these difficult times, and as you are dealing with the outbreak of COVID-19, we want to reach out to let you know that we are here and will continue to assist you in your accounting and advisory matters in order to help you achieve peace of mind.
- Our offices will remain open for the foreseeable future, however, the majority of our employees are working from home. BMSS employees are fully equipped and able to work remotely to provide you with uninterrupted service during this time.
- In an attempt to prevent the spread of COVID-19, we will be minimizing in-person meetings. Please drop off, scan or email as much information as possible; we will be doing the same.
This page will be kept up-to-date with valuable information for you and your business throughout the duration of COVID-19. Please refer back on a regular basis to see valuable information.
BMSS RESOURCES: (listed in chronological order)
December 22, 2020:
Congress Agrees Upon New COVID-19 Relief Bill
This week, Congress agreed upon a new COVID-19 relief package to aid businesses and individuals that are suffering financial hardship due to the ongoing pandemic. The package is part of the massive year-end appropriations bill passed by Congress late last night and follows the Families First Coronavirus Response Act and the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed earlier in the year. The new bill extends and modifies many of the earlier COVID-19 tax incentives as well as provides much needed clarity on the tax treatment of the Paycheck Protection Program (PPP) loans. It is expected that President Trump will sign the bill in the coming days.
One of the most talked-about issues among business owners and tax professionals as year-end tax planning wraps up is the deductibility of the expenses paid with PPP loan funds. In November, the IRS issued guidance amplifying its position that expenses paid with PPP funds are not deductible. Since then, several organizations representing businesses and tax professionals have urged Congress to pass legislation reversing this position. The latest bill accomplishes this by stating 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.” This clarifies that the expenses paid with the PPP loans, even if forgiven, are deductible. This also clarifies that PPP forgiveness will increase basis in pass-through entities (S Corporations and LLCs/Partnerships). However, additional guidance may be necessary to determine the timing of the basis increase. Owners of pass-through entities that received PPP loans with basis limitation concerns should contact their tax advisors immediately to determine if action should be taken before the new year.
The bill also creates a second round of PPP loans for small businesses up to $2 million. For the business that already received a PPP loan, some of the new qualifications to receive a second loan include: (1) have 300 or fewer employees, (2) have used or will use the full amount of their first PPP loan, (3) can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019. Additional expenses that qualify for loan forgiveness include: (1) covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines, (2) expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations, (3) covered operating costs such as software and cloud computing services and accounting needs, and (4) covered property damage costs. Click here for the rest of this overview.
IRS Releases Guidance Regarding Deductibility of PPP Loan-Related Expenses
When the Paycheck Protection Program (PPP) was introduced as part of the CARES Act in March, the law provided that any loan forgiveness would not be included in taxable income. The IRS released guidance in April that indicated that expenditures funded by PPP loan proceeds would not be deductible for federal income tax purposes to the extent of any loan forgiveness, essentially offsetting the tax-exempt loan proceeds. Legislation was introduced in Congress in May to explicitly provide that expenditures funded by loan proceeds would be deductible, regardless of loan forgiveness. Unfortunately, that legislation has never been enacted. The failure to provide a legislative solution means the IRS will stand by its position above.
Despite the earlier IRS guidance, uncertainty remained as to the timing of the disallowance of a deduction for expenditures funded by loans forgiven in whole or in part. This uncertainty is more pronounced when a loan is forgiven in a different tax year (for example 2021) than when the expenditures were incurred and normally deducted (for example 2020). Late Wednesday, the IRS released long-awaited guidance on this timing issue.
Revenue Ruling 2020-27 holds that a taxpayer computing taxable income on the basis of a calendar taxable year may not deduct PPP funded expenditures in its 2020 taxable year if, at the end of the 2020 taxable year, the taxpayer has a reasonable expectation of PPP loan forgiveness on the basis of the eligible expenses it paid or accrued during the covered period. This holding applies even if the taxpayer has not submitted an application for forgiveness of the covered loan by the end of such taxable year.
Revenue Procedure 2020-51, provides a safe harbor which allows taxpayers to claim a deduction in 2020 if:
- The eligible expenses are paid or incurred during the taxpayer’s 2020 taxable year,
- The taxpayer received a PPP loan and at the end of the year the taxpayer expects the loan forgiven in a taxable year after 2020, and
- In that subsequent taxable year, the taxpayer’s request for forgiveness is denied or the taxpayer never requests forgiveness.
Under the above scenario, the taxpayer is allowed to deduct expenses originally thought to be non-deductible on a timely filed return or can amend the return in the taxable year. Extending 2020 calendar year returns might be advisable for some taxpayers who will be applying for loan forgiveness in 2021.
This is a brief summary of the guidance released on November 18, 2020. For additional questions regarding deductibility of PPP loan-related expenses, please contact your BMSS professional at (833) CPA-BMSS.
In this webinar, Anoop Mishra, Vice President and Regional Executive of the Birmingham Branch of the Federal Reserve Bank of Atlanta, and Greg Canfield, Secretary of the Alabama Department of Commerce, provided us with an overview of what is happening in the economy from a federal and a state perspective.
The Current State of the PPP: What You Need to Know Now About Your Loan
The Paycheck Protection Program, which was established by the CARES Act, was created to provide small businesses with funds to provide coverage of payroll costs for an 8-week period during the height of COVID-19. Now that we are in the loan forgiveness stage, there are still a great deal of unknowns as well as obstacles in the way of finalizing loan forgiveness. In this hour-long webinar, BMSS Member Bill Lorimer, CPA and Senior Manager Mark Underhill, CPA, CM&AA help us understand what steps we should be taking today.
IRS Issues Guidance for Deferral of Certain Employee Payroll Tax in Light of the Ongoing COVID-19 Pandemic
On Friday, August 28, 2020, the IRS issued a news release announcing that Notice 2020-65 had been issued to provide guidance to implement the Presidential Memorandum issued on August 8, 2020. This memorandum allows employers to defer withholding and payment of the employee’s portion of the Social Security tax if the employee’s wages are below a certain amount.
The employee Social Security tax deferral may apply to payments of taxable wages to an employee that are less than $4,000 during a bi-weekly pay period, with each pay period considered separately. No deferral is available for any payment to an employee of taxable wages of $4,000 or above for a bi-weekly pay period.
The relief available for employers generally applies to wages paid starting September 1, 2020, through December 31, 2020. Any withholding deferred under the notice must be withheld ratably from wages paid between January 1, 2021 and April 30, 2021. The guidance allows employers to defer withholding and paying the tax, but it does not require employer participation.
“Revive Alabama” – New Small Business Grant Program from Governor Kay Ivey
Governor Kay Ivey implemented a new small business grant program called “Revive Alabama.” This program will offer up to a combined $100 million for small businesses across the state that have been impacted by COVID-19 and will reimburse affected businesses for expenses they have incurred due to interruptions caused by the pandemic and related business closures.
Qualifying businesses may receive a cash grant of up to $15,000 in reimbursements if they have not received federal assistance for the corresponding item they are claiming with the state of Alabama. Grants will be awarded on a first-come, first-serve basis until the funds are exhausted. So, if your business qualifies, you can apply by visiting the Revive Alabama homepage when the application opens at noon on July 16th. Applications will close at midnight on July 25th.
Don’t Rush Your PPP Loan Forgiveness Application. Here’s Why:
In a nutshell, details are still being worked out by the Small Business Administration (SBA), the U.S. Treasury Department and lenders. Until those details are finalized, it may be wise to wait. Here are five factors affecting the application process:
- Most lenders are not ready to process forgiveness applications and are building technology tools to help streamline the process.
- Since the covered period was extended to 24 weeks, it may be prudent to use that extra time to fully maximize the funds for forgivable expenses.
- Payroll providers, like lenders, are developing custom reports to comply with PPP guidance but are waiting on final guidance from the SBA and Treasury.
- Borrowers are not required to make any loan payments until they apply for forgiveness or until 10 months after their loan period ends.
- The application process may be easier than expected if you qualify for the SBA Form 3508EZ. (Click on the link to access the checklist for using the SBA Form 3508EZ.)
As in all things, it is best to evaluate your own unique circumstances when deciding when is the right time to apply. Schedule a call with your BMSS professional to discuss what options may be best for you and your company.
The Small Business Administration (SBA) has finally released the much-anticipated, revised PPP Forgiveness application along with a newly created Form EZ version which simplifies the process for eligible borrowers. These forms and their accompanying instructions have been updated to account for the recently passed PPP Flexibility Act of 2020.
Please join us as we discuss the updated loan forgiveness application, newly created Form EZ, changes from the PPP Flexibility Act, as well as other lending options that may be of use as you navigate these challenging times.
To register, click on this link: https://bmss.zoom.us/webinar/register/WN_cy9VfBdCTCSe1JaxgZisJw
On May 14, we hosted BMSS Presents: An Update for the Manufacturing & Distribution Industry within the COVID-19 Environment. Click here for the slides and below for the recording:
On April 30, we hosted BMSS Presents: Loan Forgiveness Within the Paycheck Protection Program. Click here for the PPT slides and below for the recording:
On April 21, we shared a survey with clients and contacts entitled The Business Impact from the COVID-19 Crisis. We received nearly 150 responses which can be reviewed here.
If you are participating in the Paycheck Protection Program (PPP) and have received your funding, it is likely you have questions about the second phase of the program – loan forgiveness. The loan forgiveness aspect of PPP is anticipated to be extremely complex and likely to be ever changing. Read to post to be prepared: Important Update on the Loan Forgiveness Phase of the PPP.
COVID-19 has affected nearly every industry, including manufacturing and distribution.
Read how the CARES Act is assisting manufacturers during this time:
Coronavirus Aid, Relief and Economic Security Act: Manufacturing Impacts
Read how to navigate supply chain disruption throughout COVID-19:
How Manufacturers Can Navigate the Novel Coronavirus’ Supply Chain Impacts
Could Your Company’s Retirement Plan be Affected by COVID-19?
Everyone is getting hit hard from the effects of COVID-19 and the quarantine orders. While you are focused on your businesses and employees, have you considered how your company’s retirement plan may be affected?
Click on this link to read some information for you to consider. If you have any questions, please reach out to your BMSS employee benefit plan professional. We’re here to help.
Everyone is getting hit hard from the effects of COVID-19 and the quarantines, including nonprofit organizations. Click on the link below to read some information about how the CARES Act may impact nonprofits. If you have any questions, please reach out to your BMSS professional. We’re here to help.
Please join us Thursday, April 9 at 9 a.m. as BMSS Wesson Wealth Solutions CEO, Mark Wesson, discusses the latest developments in the market and economy precipitated by the COVID-19 crisis and how this may affect you.
To reserve your space in this webinar, register at this link.
Click here to access a four-part recording of today’s webinar, Exploring the CARES Act: What it Could Mean for You & Your Business
Click here for our COVID-19 Construction Industry Checklist. Construction job sites and projects are still considered essential, the construction industry is not immune from the effects of the virus. We’re here to help.
Exploring the CARES Act: What it Could Mean for You & Your Business (WEBINAR)
Presented by Keith Barfield, Steve Smith, Trip Umbach and more
Thursday, April 2 at 9 a.m.
Link to register
COVID-19 has affected everyone but especially the consumer business industry. How can you get prepared to weather the storm? Click here for our COVID-19 Consumer Business Response Checklist.
Are you uncertain how the COVID-19 could impact you and your business? Do you want to be better prepared for possible outcomes? Join Tuesday, March 24 at 9:00 a.m. as tax, human resources and insurance experts discuss the latest details about tax relief provisions, SBA initiatives, and human resources and insurance issues. Click above link for more details and to register.
Washington and Families First Coronavirus Response Act Updates from BMSS Tax Member Steve Smith
In addition, we would like to share timely medical content from March 12th’s seminar, BMSS Presents: A Proactive Approach to COVID-19:
The Medical Impact:
As the situation evolves, please refer to the Centers for Disease Control and Prevention (CDC) and the World Health Organization for steps to help mitigate the spread of this disease. We will continue to monitor the situation and wish everyone continued good health during this disruption to our business and personal lives.
The accounting, tax and general business implications of COVID-19 is a rapidly evolving situation and BMSS will provide updated and/or revised information as it becomes available. Some information that we provide, for example, updates on the progress, passage, and contents of The Families First Coronavirus Response Act, may raise legal implications in addition to tax and accounting issues. Our mention of any such matters is for general information purposes and not intended to be legal advice. We encourage you to consult with your legal counsel on such matters.