IRS Relief for Small Business

tax-tips

The IRS (Internal Revenue Service) is offering penalty relief for any employer that fails to deposit employment taxes with the IRS by the correct date.

In Notice 2021-24, the IRS intensified prior guidance from 2020. The new notice offers relief for employers who are required to pay eligible sick leave wages and qualified family leave wages, along with qualified health plan expenses that can be allocated to those wages, as mandated by the Families First Coronavirus Response Act, which was amended by the COVID-related Tax Relief Act of 2020, along with the American Rescue Plan Act of 2021.

The IRS guidance targets to help businesses who were hurt by the COVID-19 pandemic through the coronavirus relief packages passed by Congress since last year, including the CARES Act, the Consolidated Appropriations Act, and most recently the American Rescue Plan Act. The guidance helps employers benefit from some of the tax credits available to them under those laws — such as for paid sick leave, family leave, and the Employee Retention Credit — while they continue to pay employees during the pandemic with some of the payroll taxes they otherwise would have needed to deposit with the IRS.

The notice also offers relief for some employers for whom COBRA continuation coverage premiums weren’t paid by former employees who were eligible for assistance with coverage under the American Rescue Plan Act.

In a statement from the IRS, “This relief ensures that such employers may pay qualified sick leave wages and qualified family leaves wages, qualified wages, and COBRA continuation coverage premiums using Employment Taxes that would otherwise be required to be deposited without incurring a failure to deposit penalty.”

The assistance also provides some relief for employers who experienced a full or partial closure order due to COVID-19 or who suffered a decline in business.

Overall, many businesses will experience a plethora of benefits from the IRS’s new guidance and the various coronavirus relief packages passed by Congress.

As always feel free to reach out to us so that we can make sure you are the best positioned on all of the above. Feel free to reach out to us and let’s set up a time for a review – call us at SWVA Tax & Accounting at 540-250-3198.

Does Your PPE Spending Qualify For Medical Deduction? by Rebekah Hodges

According to the IRS, amounts paid for personal protective equipment (PPE) used primarily to prevent the spread of COVID-19, including things like masks, hand sanitizer, sanitizing wipes, and other things, can be treated as medical care costs under Sec. 213(d). Because of this, if a taxpayer is not reimbursed by their insurance or a separate party for costs spent on COVID-19 PPE used by the taxpayer, the taxpayers spouse, or the taxpayers dependents, those costs are deductible under Sec. 213(a) if the taxpayer’s total medical expenses exceed 7.5% of adjusted gross income. 

Another option for taxpayers is to have PPE costs reimbursed under health flexible spending arrangements (health FSAs), Archer medical savings accounts (Archer MSAs), health reimbursement arrangements (HRAs), or health savings accounts (HSAs). But if an amount is covered in any way by a health FSA, Archer MSA, HRA, HSA, or any other health plan, it is no longer deductible under Sec. 213.

If the terms of a group health plan such as FSAs or HRAs do not allow for COVID-19 PPE reimbursements, they may be amended under this announcement to provide for reimbursements of expenses for COVID-19 PPE incurred for any period beginning on or after Jan. 1, 2020, and that amendment will not be treated as causing a failure of any reimbursement to be excludable from income under Sec. 105(b) or as causing a Sec. 125 cafeteria plan to fail to meet the Sec. 125 requirements.

However, a group health plan may only make an amendment under the announcement if the amendment is adopted before the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective, no amendment with retroactive effect is adopted after Dec. 31, 2022, and the plan is operated consistent with the terms of the amendment, including during the period beginning on the effective date of the amendment through the date the amendment is adopted.

As always if you have any questions about your deductions or whether or not something counts, make sure to reach out to us at 540-250-3198 or visit us online at www.swvatax.com.

Changes in the PPP

ppploan
There have been recent changes to the Paycheck Protection Program Loan (PPP) by the Small Business Administration (SBA). The PPP was part of the federal relief program under the CARES Act to give small business loans during the pandemic. The federal government has amended the PPP to assist rural, urban, and underserved areas. Do you still need a PPP Loan to help with your small business? The PPP Loan application deadline is March 31, 2021. Here are some of the changes you need to know about the PPP Loan.
As mentioned, the PPP Loan was changed to better serve small businesses in rural, urban, and underserved areas. When first rolled out the PPP Loan was criticized for not considering the smallest small business. Now, the PPP Loan calculation has been revised to include independent contractors, sole proprietors, and self-employed individuals for support. If your business falls under one of these three types of business, apply for the PPP Loan.
    Previously, if you had been arrested or convicted for a felony related to financial assistance fraud five years ago or had any felony within the previous year, you were ineligible for the PPP Loan. Now, you can apply as long as you are not incarcerated at the time of applying for the PPP Loan. Also, business owners who have been delinquent on student loans now apply for a PPP Loan. Last, small business owners who are legal residents and Green Card holders with visas are eligible to apply. If you are an independent contractor or sole proprietor who already received a PPP loan before March 3, 2021, you cannot amend your loan. However, if a sole proprietor or independent contractor has a 25% cut in revenue for any quarter in 2020, compared to the same quarter in 2019, they can get a Second Draw PPP Loan. For more details about the amended PPP Loan please visit whitehouse.gov or sba.gov  to apply for a PPP Loan. The sooner you apply, since the window of opportunity will be closing on March 31.
    We want to mention that during these challenging times some small businesses, unfortunately, laid people off. With the recent passing of the American Rescue Plan (aka the stimulus bill), part of the deal struck was a $10,200 tax waiver for those who received unemployment benefits in 2020. Taxpayers who had support in 2020 will not have to pay the first $10,200 of unemployment benefits they received. This tax waiver is only for 2020, not for 2021.
    Do you still have questions about the PPP Loan?  The great news is SWVA Tax & Accounting can help you navigate the complexity of the PPP Loan. SWVA Tax & Accounting is a full-service accounting firm that specializes in the needs of small businesses. Please reach out and contact us at 540-250-3198 or schedule an appointment today. We’ll run the numbers, while you run the business.