Month: August 2020

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News

CARES Act Made Changes to Excess Business Losses

The Coronavirus Aid, Relief and Economic Security (CARES) Act made changes to excess business losses. This includes some changes that are retroactive and there may be opportunities for some businesses to file amended tax returns. If you hold an interest in a business, or may do so in the future, here is more information about the changes.

Deferral of the excess business loss limits

The Tax Cuts and Jobs Act (TCJA) provided that net tax losses from active businesses in excess of an inflation-adjusted $500,000 for joint filers, or an inflation-adjusted $250,000 for other covered taxpayers, are to be treated as net operating loss (NOL) carryforwards in the following tax year. The covered taxpayers are individuals, estates and trusts that own businesses directly or as partners in a partnership or shareholders in an S corporation. The $500,000 and $250,000 limits, which are adjusted for inflation for tax years beginning after calendar year 2018, were scheduled under the TCJA to apply to tax years beginning in calendar years 2018 through 2025.

 

But the CARES Act has retroactively postponed the limits so that they now apply to tax years beginning in calendar years 2021 through 2025. The postponement means that you may be able to amend: Any filed 2018 tax returns that reflected a disallowed excess business loss (to allow the loss in 2018) and any filed 2019 tax returns that reflect a disallowed 2019 loss and/or a carryover of a disallowed 2018 loss (to allow the 2019 loss and/or eliminate the carryover). Note that the excess business loss limits also don’t apply to tax years that begin in 2020.

Thus, such a 2020 year can be a window to start a business with large up-front-deductible items (for example capital items that can be 100% deducted under bonus depreciation or other provisions) and be able to offset the resulting net losses from the business against investment income or income from employment (see below).

Changes to the excess business loss limits

The CARES Act made several retroactive corrections to the excess business loss rules as they were originally stated in the 2017 TCJA. Most importantly, the CARES Act clarified that deductions, gross income or gain attributable to employment aren’t taken into account in calculating an excess business loss. This means that excess business losses can’t shelter either net taxable investment income or net taxable employment income.

Be aware of that if you’re planning a start-up that will begin to generate, or will still be generating, excess business losses in 2021. Another change provides that an excess business loss is taken into account in determining any NOL carryover but isn’t automatically carried forward to the next year. And a generally beneficial change states that excess business losses don’t include any deduction under the tax code provisions involving the NOL deduction or the qualified business income deduction that effectively reduces income taxes on many businesses. And because capital losses of non-corporations can’t offset ordinary income under the NOL rules: Capital loss deductions aren’t taken into account in computing the excess business loss and The amount of capital gain taken into account in computing the loss can’t exceed the lesser of capital gain net income from a trade or business or capital gain net income.

Contact your ATA representative with any questions or email info@atacpa.net regarding how the CARES Act may affect your business. © 2020

Categories
Agriculture Dyersburg, TN Henderson, KY Henderson, TN Jackson, TN Martin, TN Memphis, TN Milan, TN Murray, KY Paris, TN Trenton, TN Tupelo, MS Union City, TN

The Coronavirus Agricultural and Forestry Business Fund (CAFB Fund)

New support has been announced for agricultural and forestry businesses. This relief was established by the Tennessee Department of Agriculture in an effort to stabilize the food supply chain and agribusiness economy during the COVID-19 pandemic. Some of the eligible industries include: community food kitchens, craft breweries, farmers markets, food distributors, sawmills, and many more. Visit Tennessee Cares Act Management System for a full encompassing list. 

 

Applicants must be an agricultural, food, or forestry business, or nonprofit agricultural entity in Tennessee or have a project located in Tennessee. They must demonstrate business disruption impact from March 1, 2020 to December 30, 2020 under one of the four relief categories: 

  • Business Disruption
  • Pandemic Response
  • Supply Chain Enhancement
  • Increased Meat Processing Capacity
 

CAFB Funding is not a loan and does not need to be repaid. Funding is distributed on a reimbursement basis, which provides support from March 2020 until December 2020. Applications close Monday, August 31st; to apply visit, Tennessee Department of Agriculture website.  ATA can give guidance to applicants and help with any further questions. Contact your CPA at https://www.ata.net/ata-offices/.

 

Categories
General

Alexander Thompson Arnold PLLC Climbs Top 200 Firm List in the Nation

IPA Top 200
FOR IMMEDIATE RELEASE

ATA has increased its ranking from 147 to 136 on the 2020 INSIDE Public Accounting (IPA) Top 200 Firms list. This accolade is deemed by the IPA Annual Survey and Analysis of Firms.

 

IPA 100, 200, and 300 firms are ranked by U.S. net revenues and are compiled by analyzing the more than 550 responses received this year for IPA’s Survey and Analysis of Firms. This is IPA’s 30th annual ranking of the largest accounting firms in the nation.

“It’s a goal of ATA’s to expand our footprint. Over the last several years, our firm has focused on bringing additional service offerings to the markets we serve,” said John Whybrew, managing partner of ATA. “Thank you to our clients and business partners who have helped contribute to our success. We look forward to continuing our services with you,” said Whybrew.

This is an unprecedented time in the accounting industry. With the many changes that took place in early 2020, ATA has proven to be agile and adaptive through these unique circumstances. Continued growth and flexibility while working with clients during this time has proven ATA can arise to any challenge.

As the future arrives, ATA understands its need and responsibility to stay ahead of the curve as new trends and innovative approaches hit the accounting industry. ATA will continue to improve and expand the services that are offered as well as strategically grow its office footprint.

INSIDE Public Accounting (IPA), founded in 1987, is published by The Platt Group. The Platt Group publishes both the award-winning INSIDE Public Accounting newsletter and the award-winning National Benchmarking Report, along with other key reports on the profession. The Platt Group assists firms to become more successful through a variety of services.

ATA has 14 office locations in Tennessee, Kentucky, and Mississippi. Recognized as an IPA Top 200 regional accounting firm, we provide a wide array of accounting, auditing, tax and consulting services for clients ranging from small family-owned businesses to publicly traded companies, and international

corporations. ATA is also an alliance member of BDO USA, LLP, a top five global accounting firm, which allows us to utilize their resources and expertise for clients.

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Categories
General

The possible tax consequences of PPP loans

If your business was fortunate enough to get a Paycheck Protection Program (PPP) loan taken out in connection with the COVID-19 crisis, you should be aware of the potential tax implications.

PPP basics

The Coronavirus Aid, Relief and Economic Security (CARES) Act, which was enacted on March 27, 2020, is designed to provide financial assistance to Americans suffering during the COVID-19 pandemic. The CARES Act authorized up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses through the PPP. In April, Congress authorized additional PPP funding and it’s possible more relief could be part of another stimulus law. The PPP allows qualifying small businesses and other organizations to receive loans with an interest rate of 1%. PPP loan proceeds must be used by the business on certain eligible expenses. The PPP allows the interest and principal on the PPP loan to be entirely forgiven if the business spends the loan proceeds on these expense items within a designated period of time and uses a certain percentage of the PPP loan proceeds on payroll expenses.

An eligible recipient may have a PPP loan forgiven in an amount equal to the sum of the following costs incurred and payments made during the covered period: Payroll costs; Interest (not principal) payments on covered mortgage obligations (for mortgages in place before February 15, 2020); Payments for covered rent obligations (for leases that began before February 15, 2020); and Certain utility payments. An eligible recipient seeking forgiveness of indebtedness on a covered loan must verify that the amount for which forgiveness is requested was used to retain employees, make interest payments on a covered mortgage, make payments on a covered lease or make eligible utility payments.

Cancellation of debt income

In general, the reduction or cancellation of non-PPP indebtedness results in cancellation of debt (COD) income to the debtor, which may affect a debtor’s tax bill. However, the forgiveness of PPP debt is excluded from gross income. Your tax attributes (net operating losses, credits, capital and passive activity loss carryovers, and basis) wouldn’t generally be reduced on account of this exclusion.

Expenses paid with loan proceeds

The IRS has stated that expenses paid with proceeds of PPP loans can’t be deducted because the loans are forgiven without you having taxable COD income. Therefore, the proceeds are, in effect, tax-exempt income. Expenses allocable to tax-exempt income are nondeductible because deducting the expenses would result in a double tax benefit. However, the IRS’s position on this issue has been criticized and some members of Congress have argued that the denial of the deduction for these expenses is inconsistent with legislative intent. Congress may pass new legislation directing IRS to allow deductions for expenses paid with PPP loan proceeds.

PPP Audits

Be aware that leaders at the U.S. Treasury and the Small Business Administration recently announced that recipients of Paycheck Protection Program (PPP) loans of $2 million or more should expect an audit if they apply for loan forgiveness. This safe harbor will protect smaller borrowers from PPP audits based on good faith certifications. However, government leaders have stated that there may be audits of smaller PPP loans if they see possible misuse of funds. Contact us with any further questions you might have on PPP loan forgiveness. © 2020