CPA Bob

A quick FAQ on the PPP Loan: ** How can I request loan forgiveness? *You can submit a request to the lender that is servicing the loan. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility... payments. The lender must make a decision on the forgiveness within 60 days. **What is my interest rate? *1.00% fixed rate. **When do I need to start paying interest on my loan? *All payments are deferred for 6 months; however, interest will continue to accrue over this period. **When is my loan due? *In 2 years. **Can I pay my loan earlier than 2 years? *Yes. There are no prepayment penalties or fees.

PPP loan forgiveness guidance released (05-18-20) The SBA has released the long-awaited loan forgiveness guidance and a Loan Forgiveness Application that Paycheck Protection Program borrowers will submit to their lenders. Here is what we learned:... -The SBA is using a 40-hour full-time equivalency standard rather than the 30-hour FTE standard applied to most SBA loans. However, borrowers may use a simplified method that assigns a 1.0 for employees who work 40 hours or more per week and 0.5 for employees who work fewer hours (even if the employees worked less than 20 hours per week); -Payroll costs "paid and incurred" over the eight-week period have been a concern. The application clarifies that payroll costs incurred but not paid during the borrower's last pay period of the eight-week forgiveness period are eligible for forgiveness if paid on or before the next regular payroll date. To make things a little less complicated, borrowers with a biweekly (or more frequent) payroll schedule may elect to calculate eligible payroll costs using the eight-week (56-day) period that begins on the first day for their first pay period following their loan disbursement date; and -Business rent or lease payments on leases of personal property that were in force before February 15, 2020, will qualify for forgiveness. Here is what we still don't know: -For retirement and health care plan contributions, the instructions do not limit the amount that may be claimed to a pro-rated amount for the eight-week period. Does this mean a borrower could contribute an annual amount during the eight-week period and qualify for forgiveness? We don't think this is the case but we hope additional guidance will be issued to provide further clarification; -The application does not provide any additional guidance on self-rentals; and -The application also does not address the forgiveness of home office expenses for self-employed individuals or any other issues for self-employed borrowers. We are hoping for additional guidance on forgiveness for these borrowers soon. To view the full application and instructions, go to: www.sba.gov//sba-form--paycheck-protection-program-loan-fo

No deductions for expenses paid by PPP debt that is forgiven (04-30-20) As anticipated, the IRS has issued guidance stating taxpayers may not deduct expenses that were paid by Paycheck Protection Program loans, if the payment of the expenses results in loan forgiveness under the program. (IRS Notice 2020-32) Loan forgiveness is available under the program for the following expenses paid and incurred during the eight weeks after the borrower receives their funds: - Payroll cos...ts; - Mortgage interest; - Rent; and - Utilities. Under the Internal Revenue Code, taxpayers are precluded from claiming deductions paid with exempt income. Because PPP loan forgiveness is excludable from taxable income under the CARES Act, taxpayers may not claim deductions for these expenses. The Notice is available at: www.irs.gov/pub/irs-drop/n-20-32.pdf

NEW: PPP loan calculations for self-employed's and partnerships The SBA has finally issued guidelines on calculating monthly payroll costs for Paycheck Protection Program loans for all entities, including self-employed taxpayers and partnerships. Self-employed individuals:... Self-employed individuals with no employees determine their monthly payroll costs by dividing their Schedule C, line 31 net profit amount, up to a $100,000 maximum, by 12. If the line 31 net profit amount is zero, the individual is ineligible for a loan. If the self-employed individual has employees, add the monthly employee payroll costs to the amount above. These payroll costs are based on the 2019 IRS Form 941 taxable Medicare wages and tips (line 5c, column 1), plus any excluded pre-tax employee contributions for health insurance or other fringe benefits, up to a $100,000 maximum per employee. To this amount, add the following 2019 costs: Employer contributions for employee health insurance (portion of Schedule C, line 14 attributable to health insurance); Employer contributions to employee retirement plans (Schedule C, line 19); and Employer state and local taxes assessed on employee compensation (UI, ETT, and SDI). Partnerships: The application for partnerships should be completed at the partnership level. Individual partners may not apply for separate PPP loans. The maximum loan amount is based on 2.5 times the 2019 monthly self-employment earnings reported to U.S.-based general partners on the 2019 Schedule K-1, Box 14a, net earnings from self-employment tax, with a maximum of $100,000 per partner. If the 2019 K-1s have not yet been completed, they must be completed for purposes of the loan application. This amount must be reduced by any claimed IRC 179 expense, unreimbursed partnership expenses, and depletion on oil and gas properties. The result is then multiplied by 0.9235 (to remove the "employer" share of self-employment tax). To this amount, add any 2019: - Monthly employee payroll costs based on the 2019 IRS Form 941 taxable Medicare wages and tips (line 5c, column 1), plus any excluded pre-tax employee contributions for health insurance or other fringe benefits, up to a $100,000 maximum per employee; - Employer contributions for employee health insurance (portion of Form 1065, line 19, attributable to health insurance); Employer contributions to retirement plans (Form 1065, line 18); and Employer state and local taxes assessed on employee compensation (UI, ETT, and SDI). LLCs: LLCs compute their payroll costs based on whether they are taxed as a sole proprietorship (SMLLC), partnership, or corporation. Additional guidance: The guidance also specifies how nonprofit organizations and C and S corporations should calculate their maximum loan amounts, as well as the documentation each entity type must provide with its application. The guidance is available at: https://home.treasury.gov//How-to-Calculate-Loan-Amounts.p

Economic impact payment direct deposit portal open (04-15-20) The IRS opened its direct deposit portal on its website this morning. By clicking on the "Get My Payment" button at www.irs.gov/coronavirus/economic-impact-payments, taxpayers can: Enter their bank account information if they hadn't previously requested direct deposit on a return, or if they want to update their information;... Confirm the payment type: direct deposit or check; and Check their payment status. Taxpayers wanting to add their bank account information to speed up the receipt of their payment must provide the following information: - Their AGI from their most recent tax return submitted, either 2019 or 2018; - The refund or amount owed from their latest filed tax return; and - Bank account type, account and routing numbers. Comment: It appears that if a taxpayer does not qualify for a payment due to income level, after entering the requested information a message stating "Payment Status Not Available" and a link to information on eligibility rules will be displayed.

A quick FAQ on the PPP Loan: ** How can I request loan forgiveness? *You can submit a request to the lender that is servicing the loan. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility... payments. The lender must make a decision on the forgiveness within 60 days. **What is my interest rate? *1.00% fixed rate. **When do I need to start paying interest on my loan? *All payments are deferred for 6 months; however, interest will continue to accrue over this period. **When is my loan due? *In 2 years. **Can I pay my loan earlier than 2 years? *Yes. There are no prepayment penalties or fees.

Good news... Wells Fargo received permission from the central bank to start loaning funds TODAY for the PPP (payroll protection plan) - Checks are starting to go out!

The FTB has posted the following new FAQs about conformity to various portions of the CARES Act: Q: Are the payments that individuals receive from the federal government (i.e., $1,200 [$2,400 for individuals filing a joint return] and $500 per qualifying child) under the recently enacted federal CARES Act subject to California income tax? A: No, these payments are not subject to California income tax.... Q: Is the emergency increase in unemployment compensation benefits (in the amount of $600 per week) that individuals receive under the recently enacted federal CARES Act subject to California income tax? A: No, these payments are not subject to California income tax. Q: Are the modifications for net operating losses (NOLs) in the recently enacted federal CARES Act applicable for California income and franchise tax purposes? A: No, these modifications for NOLs do not apply for California income and franchise tax purposes. Q: Does California conform to the federal early withdrawal penalty waivers for distributions from qualified retirement accounts under the recently enacted federal CARES Act? A: Yes, the federal early withdrawal penalty waivers for distributions from qualified retirement accounts under the federal CARES Act also applies for California income tax purposes. The FTB's COVID-19 FAQs can be found at: www.ftb.ca.gov/ab/newsroom/covid-19/help-with-covid-19.html

As many of you already know, the President signed the stimulus bill on March 27th. Here are some details and useful links to help navigate the new bill and what it means fo you: The President has signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act, H.R. 748). In addition to the tax provisions previously reported, the CARES Act provides for Payroll Protection loans of up to $10 million to COVID-19 impacted businesses. The loans: - Are guaranteed 100% by t...Continue reading

New filing date extension. You now have until July 15th to file, tho the Government is encouraging those who expect a refund to file now and not wait. Stay tuned for more updates as they come up. We know these times are taxing, but together we will get through this. :) https://mailchi.mp/133e4e8ab55a/tax-season-573799

https://mailchi.mp/3e44f40a450b/tax-season-2020

To clarify - The filing date is still April 15th, but if you owe under 1 million then your tax payment deadline had been extended to July 15th in case you need extra time. You can still file for an extension for your filing date but the final deadline for all payments will remain July 15th. https://home.treasury.gov/news/press-releases/sm948

Dear Valued Clients, I wanted to take a moment to let you know that we take the health and well-being of you and your families very seriously! As such, I want to make sure that we are taking all the necessary steps and precautions to ensure that we all stay safe as we continue to navigate through COVID-19 and the ever-evolving changes it's bringing. In order to minimize in-person meetings, we ask that you please submit forms via email, as well as any questions you may have. ... Stay tuned for updates as we receive more information on possible extensions and other changes that may affect you this tax season. Be well, Bob Davis [email protected] 760-434-7762

Need help understanding AB 5 and the ABC Test? Read on.... RE: Independent contractors Dear Client, In 2019, the Governor signed AB 5. Under AB 5, most workers are presumed to be employees for purposes of the Labor Code, the Unemployment Insurance Code, and for most wage orders of the Industrial Welfare Commission unless a hiring entity satisfies a three-factor test, referred to as the ABC test. This means that many workers previously classified as independent contractors are...Continue reading