COVID-19 RELIEF BILL PASSED

The Senate and House of Representatives overwhelmingly passed a $900 billion COVID-19 relief bill yesterday which provides a $600 stimulus to individuals as well as other tax benefits.  Here are just a few highlights:

Simplification of PPP Forgiveness Applications:

1. The bill creates a simpler forgiveness application process for loans of $150,000 or less. Now, a borrower will receive forgiveness if he/she submits to the lender a one-page certification and
   1. includes a description of the number of employees the borrower was able to retain because of the loan;
   2. the estimated total amount of the loan spent on payroll costs;
   3. the total loan amount. 
   4. Borrowers are required to retain relevant records related to employment for four years and other records for three years.  The SBA or others may review and audit these loans to check for fraud.  KB recommends continuing the practice of organizing the same relevant documents that would have been utilized with the original loan process so that the employer has in case of an audit by the IRS or other parties.
2. Repeals the requirement that PPP borrowers deduct the amount of any EIDL advance from their PPP forgiveness amount. This is a nice present, and those who have already filed their applications subtracting the EIDL funds will be eligible for recoupment.   

Tax deductibility for PPP expenses

We have been waiting for this.  Now business expenses paid with forgiven PPP loans are tax-deductible. This supersedes previous IRS guidance that such expenses could not be deducted. This rule change may affect the tax projections that your KB accountant previously prepared, so make sure to contact him or her if you have questions regarding your tax liability for 2020.

Additionally, if you have an S-corporation, and the PPP forgiveness and non-taxability brings your company into a loss position, make sure that you have enough basis to take the loss.  This is a little technicality so please check with your KB CPA for more information on this aspect of tax planning.

Income Tax Changes:

 Medical expenses; the itemized deduction floor is now permanently set at 7.50% of AGI

1. 100% write off for business meals in 2021 and 2022 if provided by a restaurant
2. $300 or ($600 for married filing joint) above the line charitable deduction is extended to 2021
3. 100% of cash charitable contribution deduction to public charities for individuals continues to apply in 2021 for itemizers
4. HSA and dependent care FSA plans are permitted to carry unused benefits to next tax year through 2021

We will continue to update you on this important legislation as more information becomes available.

If you have any questions please contact your Kerkering Barberio team member at 941-365-4617.