The COVID-19 pandemic created unique conditions for businesses in the Bay Area and across California. The combination of forced business closures and stay-at-home orders left many companies in uncharted waters. Some were forced to close while others had to find new ways to deliver products and services to customers. At the same time, many were searching for new lines of credit, business loans, or other ways to access working capital. It was against this backdrop that FASB made the decision to delay the implementation of ASC 842 (new lease accounting rules) by one year, starting with reporting periods after December 15, 2021. Although early adoption was permitted, many decided to delay implementation to focus on pandemic-related issues. As the recovery continues and year-end is just a few months away, businesses need to re-examine the new lease accounting rules to ensure compliance. (more…)
On September 13, 2021, The House Ways and Means Committee released proposed tax changes to pay for and be incorporated in the Build Back Better act (the $3 trillion budget reconciliation bill currently being discussed by Congress). The House proposals modified many of the tax changes on President Biden’s agenda, ignored some of his proposals, and included a few surprises. Here are the highlights of the proposed changes with most being effective in 2022. The themes of the proposed legislation are tax increases for corporations and wealthy taxpayers and the “marriage penalty” is back. We will continue to keep you updated as there will be many changes and modifications to the proposed bill before being approved by the House and Senate. (more…)
Good News for Business Owners – California Assembly Bill 150
By Rob Trammell, Principal
For those of us living in California, or other high tax states, there was a nasty section of the Tax Cuts and Jobs Act (TCJA) that has been causing some pain since 2018. That was the $10,000 limitation on the amount of state and local taxes that could be deducted for federal purposes. Even though your state income and property taxes could well exceed that amount, the maximum deduction on your federal return was limited to $10,000. (more…)
The SBA announced that PPP borrowers of $150,000 or less (for either first draw or second draw loans) have access to a simplified loan forgiveness process:
- SBA Loan Forgiveness Portal – Borrowers are able to submit their loan forgiveness application directly to the SBA through a streamlined portal as of August 4, 2021, rather than to their lender/bank.
- The lender/bank must opt-in to participate in this program. Therefore, check with your lender to see if you can utilize the SBA Portal. Currently, nearly 900 banks representing over 2 million borrowers have agreed to participate, however, it is expected that most large financial institutions will not participate and continue to use their proprietary portals. The SBA has provided a list of participating lenders.
- The Portal will allow borrowers to complete Form 3508S which was recently revised.
- The SBA set up a PPP customer service team to answer questions and directly assist borrowers with their forgiveness applications. The customer service team is available by calling (877) 552-2692, Monday – Friday, 5:00 AM – 5:00 PM PDT.
With working remotely more common now, many business owners are looking closely at how they might deduct some of the costs associated with maintaining their home offices.
Although the Tax Cuts and Jobs Act (TCJA) of 2017 eliminated the home office expense deduction for most employees until 2026, business owners may still be able to deduct such expenses—but only if they meet a number of conditions. These conditions vary depending on how the business entity is structured. (more…)
After several rounds of revisions and reversals, the IRS is about to release its final version of instructions for partnerships to use when calculating and reporting their partners’ capital accounts on Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc. The instructions, which the IRS is expected to finalize within a few weeks, will apply to the 2020 tax year—the tax preparation season that is already underway for most organizations.
The IRS says it will provide penalty relief for the 2020 requirement as long as partnerships “take ordinary and prudent business care in following the form instructions”. On January 21, 2021, the IRS issued Notice 2021-13 providing additional penalty relief applicable to the calculation of beginning capital balances. Compliance could require considerable data gathering and complex calculations, so partnerships should begin working on these tasks immediately. (more…)
The CARES Act clearly states that a forgiven PPP Loan would not be treated as taxable income. However, it did not specify if the eligible expenses would be deductible. In April, the IRS issued Notice 2020-32 taking the position that these expenses would not be deductible. The Notice did not address how a taxpayer would report these non-deductible expenses if they were incurred in one tax year and loan forgiveness occurred in a subsequent tax year. (more…)
Action Required On December 1, 2020
In September 2020, California enacted Senate Bill 1447, the Small Business Hiring Tax Credit (SBHTC) to provide financial relief to qualified businesses and encourage hiring and retaining employees. The tax credit is $1,000 per increase in full-time equivalent (FTE) employee up to a maximum credit of $100,000 per employer. Unlike most tax credits, this credit can benefit unprofitable businesses that do not have an income tax liability as the credit can also be applied to offset the payment of sales and use tax deposits. The credit will be administered by the California Department of Tax and Fee Administration (CDTFA) which is requiring employers to reserve an allocation of the credit beginning December 1, 2020. (more…)
One of the changes businesses will see during the upcoming tax season is a redesign of the 1099 series of information reporting forms. This year, taxpayers must use a new Form 1099-NEC (Nonemployee Compensation) to report payments to nonemployees such as independent contractors, freelancers, and other service providers, rather than reporting them on Form 1099-MISC as they did in years past.
While the new Form 1099-NEC is relatively simple to complete, the redesign also triggered several rule and deadline changes that affect other information reporting forms. (more…)