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* 2020 Tax Alerts

Filing Deadlines for 2019 Tax/Information Returns

* Due date for providing W-2 to employees and to SSA.

**** Also the due date for Schedules K-1 that entity must provide to equity holders.

Type of Taxpayer (calendar year) Due Date Extended Due Date
Employer – Form W-2* January 31, 2020 1 non-automatic 30-day extension
Partnerships, LLCs - Form 1065** March 16, 2020 September 15, 2020
S Corporations – Form 1120S** March 16, 2020 September 15, 2020
Individuals – Form 1040 April 15, 2020 October 15, 2020
Estates and Trusts – Form 1041 April 15, 2020 October 1, 2020
FBAR – FinCEN Form 114 April 15, 2020 October 15, 2020
Corporations – Form 1120 April 15, 2020 October 15, 2020
Exempt Organizations – Forms 990 May 15, 2020 November 16, 2020
Exempt Organizations – Forms 990 July 31, 2020 October 15, 2020

Tax Alerts
Tax Briefing(s)

April 28, 2020

RE: Paycheck Protection Program — Legal and Regulatory Considerations

President Trump signed the Paycheck Protection Program and Health Care Enhancement Act (“Enhancement Act”) on April 24th.


April 21, 2020

The Senate has passed the Paycheck Protection Program and Health Care Enhancement Act, which will add an additional $320 billion to the Paycheck Protection Program. This is in addition to the $349 billion that was previously authorized under the CARES Act.

It has been reported that Bill summaries of this legislation will also add an additional $60 billion for loans and grants under the Small Business Administration's Economic Injury Disaster loan program.

Whether this latest legislation will provide any additional clarity regarding loan elibility or loan forgiveness is uncertain at this time. Eligible persons may continue to apply for these PPP loans now that this funding has been approved.

The bill is now being sent to the House( where it is expected to be passed), and then to the President, who is expected to sign.


The 2017 tax act signed into law on December 22, 2017 imposes a broad limit on the deductibility of business interest expense for tax years beginning in 2018 and later, which may result in increased tax liability for corporations and investors in pass-through businesses that finance acquisitions with debt.

 


This article will give you a better understanding of the first-year expensing (also referred to as §179 expensing) and additional first-year depreciation (also referred to as bonus depreciation). Businesses that purchase capital assets are allowed to deduct the decline in value of the assets over their useful lives. This depreciation deduction is intended to help businesses to eventually recover the costs of capital assets.


The Patient Protection and Affordable Care Act (PPACA), 816 enacted March 23, 2010, and the Health Care and Education Reconciliation Act of 2010 (HCERA), 817 enacted March 30, 2010, ushered in a series of changes to the rules for obtaining and providing health care. The laws, as amended, are commonly referred to as the Affordable Care Act (or “ACA”). These rules are administered by the Departments of Treasury (and the IRS), Labor (DOL) and Health and Human Services (HHS), jointly or separately, as appropriate. 818


This article will explain under what circumstances you may be eligible for the §199A deduction for qualified business income (QBI). 


As a fundamental rule, taxpayers are entitled to take deductions only where specifically authorized by the Internal Revenue Code. Thus, because deductions are a matter of “legislative grace,” courts closely scrutinize taxpayers’ claims and reject those that do not clearly respect the letter of the law. Each taxpayer bears the burden of proving his or her entitlement to a deduction, and ambiguities are often resolved in favor of the government. Accordingly, taxpayers should carefully review their maintenance and reconditioning expenditures on property used in a trade or business to determine whether such amounts are deductible or capitalizable. Further, they should retain full and adequate records to substantiate all such costs.

 

 


The IRS has provided guidance regarding whether taxpayers receiving loans under the Paycheck Protection Program (PPP) may deduct otherwise deductible expenses. Act Sec. 1106(i) of the Coronavirus Aid, Relief, and Economic Security (CARES) Act ( P.L. 116-136) did not address whether generally allowable deductions such as those under Code Secs. 162 and 163 would still be permitted if the loan was later forgiven pursuant to Act Sec. 1106(b). The IRS has found that such deductions are not permissible.


Treasury and the Small Business Administration (SBA) have worked together to release the Paycheck Protection Program (PPP) Loan Forgiveness Application. According to Treasury’s May 15 press release, the application and correlating instructions inform borrowers how to apply for forgiveness of PPP loans under the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act ( P.L. 116-136). The PPP was enacted under the CARES Act to provide eligible small businesses with loans during the COVID-19 pandemic.


Eligible individuals who are not otherwise required to file federal income tax returns for 2019 may use a new simplified return filing procedure to make sure they receive the Economic Impact Payments (EIPs) provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act ( P.L. 116-136).


To encourage businesses that have experienced an economic hardship due to COVID-19 to keep employees on their payroll, the Coronavirus Aid, Relief, and Economic Security (CARES) Act ( P.L. 116-136) has provided several new credits for employers, including a new employee retention credit. The IRS has issued a fact sheet summarizing a few key points about the new credit.


The Treasury Department and the IRS have provided tax relief to certain individuals and businesses affected by travel disruptions arising from the coronavirus (COVID-19) emergency.


The IRS and the Employee Benefits Security Administration are extending certain timeframes during the Outbreak Period for group health plans, disability and other welfare plans, pension plans, and participants and beneficiaries of these plans during the COVID-19 National Emergency. The beginning of the Outbreak Period is March 1, 2020. The end date is yet to be determined.


Due to the 2019 Novel Coronavirus outbreak (COVID-19), the IRS has provided increased flexibility with respect to:

  • 2020 mid-year elections under a Code Sec. 125 cafeteria plan related to employer-sponsored health coverage, health Flexible Spending Arrangements (health FSAs), and dependent care assistance programs; and
  • grace periods to apply unused amounts in health FSAs to medical care expenses incurred through December 31, 2020, and unused amounts in dependent care assistance programs to dependent care expenses incurred through December 31, 2020.

The IRS has released proposed regulations that address changes made to Code Sec. 162(f) by the Tax Cuts and Jobs Act (TCJA) ( P.L. 115-97). The proposed regulations provide operational and definitional guidance on the deductibility of fines and penalties paid to governmental entities.


A partnership was denied a charitable contribution deduction because it had entered in an conservation easement that violated the perpetuity requirement of Code Sec. 170(h)(5) and its regulations. The Tax Court held that if there is a judicial extinguishment of an easement the donee receives a proportionate value of any proceeds.


The IRS has released proposed regulations clarifying that the following deductions allowed to an estate or non-grantor trust are not miscellaneous itemized deductions:


The IRS has issued final regulations that amend the rules relating to hardship distributions from Code Sec. 401(k) plans. The final regulations are substantially similar to the proposed regulations. Further, plans that complied with the proposed regulations satisfy the final regulations as well. The regulations are effective on September 23, 2019.


In order to be tax deductible, compensation must be a reasonable payment for services. Smaller companies, whose employees frequently hold significant ownership interests, are particularly vulnerable to IRS attack on their compensation deductions.


'Tax risk management" is a fairly recent term first used by large accounting firms to underscore to businesses the opportunities and pitfalls inherent within the particular tax positions taken by a business at any point in time. The collapse of Enron and WorldCom, and Congress's response through Sarbanes/Oxley legislation, have elevated corporate tax departments from what were once sleepy backroom operations to key participants in corporate bottom-line performance. Tax reserves and other tax forecasts now take a more prominent role in SEC-required disclosure and their resulting impact on shareholder value. Corporate boards and top executives are now held directly responsible for tax-related mistakes.

For partnerships and entities taxed like partnerships (e.g., limited liability companies), each partner must compute the basis of his/her partnership interest separately from the basis of each asset owned by the partnership. Because the basis of this interest is critical to determining the tax consequences resulting from any number of transactions (e.g., distributions, sale of your interest, etc..), if your business is taxed as a partnership, it is important that you understand the concept of tax basis as well as how to keep track of that basis for tax purposes.


If you are considering selling business property that has substantially appreciated in value, you owe it to your business to explore the possibility of a like-kind exchange. Done properly, a like-kind exchange will allow you to transfer your appreciated business property without incurring a current tax liability. However, since the related tax rules can be complex, careful planning is needed to properly structure the transaction.


Limited liability companies (LLCs) remain one of the most popular choice of business forms in the U.S. today. This form of business entity is a hybrid that features the best characteristics of other forms of business entities, making it a good choice for both new and existing businesses and their owners.