Category: General

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

Categories
General Jackson, TN Martin, TN Memphis, TN Milan, TN Murray, KY Nashville, TN Paris, TN

Tennessee Business Relief Program Issues $200 Million in Coronavirus Relief Funds

The State of Tennessee is making $200 million available for small businesses through the Tennessee Business Relief Program. The relief funds are intended for businesses that suffered during the mandatory business closures in the midst of COVID-19 shutdowns. 

More details are to come, but the relief program anticipates about 28,000 Tennessee small businesses to qualify, with more than 73% of those businesses earning annual gross sales of $500,000 or less. Allocations are based on the annual gross sales of the business.

Eligible Businesses
  • Barbershops
  • Beauty shops
  • Nail salons
  • Tattoo parlors, spas, and other personal care services
  • Gyms and fitness centers
  • Restaurants
  • Bars
  • Hotels and other travel accommodations
  • Theaters, auditoriums, performing arts centers and similar facilities
  • Museums, zoos, and other similar attractions
  • Amusement parks
  • Bowling centers and arcades
  • Marinas
  • Amusement, sports and recreational industries
  • Promoters of performing arts, sports, and similar events
  • Agents and managers of artists, athletes, and entertainers
  • Independent artists, writers, and performers
The Following Small Businesses May Qualify

Furthermore, the following small businesses may qualify if their sales were at least 25% lower on their April sales tax returns, which should have been filed in May:

 

  • Furniture stores
  • Home furnishing stores
  • Clothing stores
  • Shoe stores
  • Jewelry, luggage, and leather goods stores
  • Sporting goods, hobby, and musical instrument stores
  • Book stores
  • Department stores
  • Office supply, stationery and gift stores
  • Used merchandise stores
  • Other miscellaneous stores

ATA is keeping up-to-date on details as they are released. You can visit our COVID-19 Resource Page for information.  Visit Tennessee Business Relief Program for FAQ about the funds. 

We are here to help in this unprecedented time. Contact your CPA for more information. 
Categories
Dyersburg, TN General Henderson, KY Henderson, TN Jackson, TN Martin, TN Memphis, TN Milan, TN Murray, KY Nashville, TN News Owensboro, KY Paris, TN Tupelo, MS Union City, TN

The CARES Act liberalizes net operating losses

The Coronavirus Aid, Relief, and Economic Security (CARES) Act eliminates some of the tax-revenue-generating provisions included in a previous tax law. Here’s a look at how the rules for claiming certain tax losses have been modified to provide businesses with relief from the novel coronavirus (COVID-19) crisis.

NOL deductions

Basically, you may be able to benefit by carrying a net operating loss (NOL) into a different year — a year in which you have taxable income — and taking a deduction for it against that year’s income. The CARES Act includes favorable changes to the rules for deducting NOLs. First, it permanently eases the taxable income limitation on deductions. Under an unfavorable provision included in the Tax Cuts and Jobs Act (TCJA), an NOL arising in a tax year beginning in 2018 and later and carried over to a later tax year couldn’t offset more than 80% of the taxable income for the carryover year (the later tax year), calculated before the NOL deduction.

As explained below, under the TCJA, most NOLs arising in tax years ending after 2017 also couldn’t be carried back to earlier years and used to offset taxable income in those earlier years. These unfavorable changes to the NOL deduction rules were permanent — until now. For tax years beginning before 2021, the CARES Act removes the TCJA taxable income limitation on deductions for prior-year NOLs carried over into those years. So NOL carryovers into tax years beginning before 2021 can be used to fully offset taxable income for those years.

For tax years beginning after 2020, the CARES Act allows NOL deductions equal to the sum of: 100% of NOL carryovers from pre-2018 tax years, plus the lesser of 100% of NOL carryovers from post-2017 tax years, or 80% of remaining taxable income (if any) after deducting NOL carryovers from pre-2018 tax years. As you can see, this is a complex rule. But it’s more favorable than what the TCJA allowed and the change is permanent.

Carrybacks allowed for certain losses

Under another unfavorable TCJA provision, NOLs arising in tax years ending after 2017 generally couldn’t be carried back to earlier years and used to offset taxable income in those years. Instead, NOLs arising in tax years ending after 2017 could only be carried forward to later years. But they could be carried forward for an unlimited number of years. (There were exceptions to the general no-carryback rule for losses by farmers and property/casualty insurance companies). Under the CARES Act, NOLs that arise in tax years beginning in 2018 through 2020 can be carried back for five years. Important: If it’s beneficial, you can elect to waive the carryback privilege for an NOL and, instead, carry the NOL forward to future tax years.In addition, barring a further tax-law change, the no-carryback rule will come back for NOLs that arise in tax years beginning after 2020.

Past year opportunities

These favorable CARES Act changes may affect prior tax years for which you’ve already filed tax returns. To benefit from the changes, you may need to file an amended tax return. Have questions? Contact us on our leadership page.  © 2020

 

Categories
General Helpful Articles Henderson, TN Jackson, TN Martin, TN Memphis, TN Milan, TN Murray, KY Nashville, TN News Owensboro, KY Tupelo, MS Union City, TN

Have tax questions related to COVID-19? Here are some answers!

The coronavirus (COVID-19) pandemic has affected many Americans’ finances. Here are some answers to questions you may have right now.

My employer closed the office and I’m working from home. Can I deduct any of the related expenses? Unfortunately, no. If you’re an employee who telecommutes, there are strict rules that govern whether you can deduct home office expenses. For 2018–2025 employee home office expenses aren’t deductible. (Starting in 2026, an employee may deduct home office expenses, within limits, if the office is for the convenience of his or her employer and certain requirements are met.) Be aware that these are the rules for employees. Business owners who work from home may qualify for home office deductions.

My son was laid off from his job and is receiving unemployment benefits. Are they taxable? Yes. Unemployment compensation is taxable for federal tax purposes. This includes your son’s state unemployment benefits plus the temporary $600 per week from the federal government. (Depending on the state he lives in, his benefits may be taxed for state tax purposes as well.) Your son can have tax withheld from unemployment benefits or make estimated tax payments to the IRS.

The value of my stock portfolio is currently down. If I sell a losing stock now, can I deduct the loss on my 2020 tax return? It depends. Let’s say you sell a losing stock this year but earlier this year, you sold stock shares at again. You have both a capital loss and a capital gain. Your capital gains and losses for the year must be netted against one another in a specific order, based on whether they’re short-term (held one year or less) or long-term (held for more than one year). If, after the netting, you have short-term or long-term losses (or both), you can use them to offset up to $3,000 ordinary income ($1,500 for married taxpayers filing separately). Any loss in excess of this limit is carried forward to later years, until all of it is either offset against capital gains or deducted against ordinary income in those years, subject to the $3,000 limit.

I know the tax filing deadline has been extended until July 15 this year. Does that mean I have more time to contribute to my IRA? Yes. You have until July 15 to contribute to an IRA for 2019. If you’re eligible, you can contribute up to $6,000 to an IRA, plus an extra $1,000 “catch-up” amount if you were age 50 or older on December 31, 2019.

What about making estimated payments for 2020? The 2020 estimated tax payment deadlines for the first quarter (due April 15) and the second quarter (due June 15) have been extended until July 15, 2020.

Need help? These are only some of the tax-related questions you may have related to COVID-19. Contact one of our experts if you have other questions or need more information about the topics discussed above or email info@atacpa.net. ©2020

Categories
Dyersburg, TN Financial News General Healthcare Henderson, KY Henderson, TN Jackson, TN Martin, TN Memphis, TN Milan, TN Murray, KY Nashville, TN Owensboro, KY Paris, TN Trenton, TN Tupelo, MS Union City, TN

PPP Data Collection Spreadsheet

*As of 4-28-20

View this updated PPP loan forgiveness workbook that can benefit your business. Consider gathering as much information as possible now by using the PPP loan forgiveness data collection form. Click here to download the spreadsheet.

Categories
General Helpful Articles News

Guidelines Explaining the Families First Coronavirus Response Act

The Department of Labor issued guidelines explaining paid sick leave and expanded family and medical leave under the Families First Coronavirus Response Act (FFCRA), which goes into effect April 1, 2020.
The act provides relief for businesses with less than 500 employees. It covers up to 80 hours or two-thirds the employee’s regular pay based on guidelines outlined in the act. Some of the qualified reasons for leave during COVID-19 are:
  1. The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID–19.
  2. The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID–19.
  3. The employee is experiencing symptoms of COVID–19 and seeking a medical diagnosis.
  4. The employee is caring for an individual who is subject to a Federal, State, or local quarantine or isolation order related to COVID–19 or has been advised by a health care provider to self-quarantine due to concerns related to COVID–19.
  1. The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed, or the child care provider of such son or daughter is unavailable, due to COVID–19 precautions.
  1. The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.
There are other variables under the FFCRA.  The overall goal of the act is to ensure workers’ and businesses’ compensation, while practicing public health safety in hopes of flattening the curve during this pandemic.
Click here to learn the key takeaways of the Families First Coronavirus Response Act from the US Department of Labor.
Categories
General Henderson, KY Henderson, TN Jackson, TN Martin, TN Milan, TN Murray, KY Nashville, TN News Owensboro, KY Paris, TN Press Releases Tupelo, MS Union City, TN

Alexander Thompson Arnold CPAs names Chief Information Officer

Alan Watson
FOR IMMEDIATE RELEASE
Alexander Thompson Arnold PLLC 
227 Oil Well Road
Jackson, TN 38305
731-427-8571
Contact: Alexis Long | along@atacpa.net
Twitter: @atacpa_1
Alexander Thompson Arnold CPAs names Chief Information Officer
Alexander Thompson Arnold CPAs created a chief information officer position and deemed award-winning executive, Alan Watson, as CIO. In today’s rapidly changing digital world, this leadership position was implemented to further guide ATA into the technology realm to achieve the goals of our firm and better our clients. 
When asked about his new role at ATA, Watson said, “I’m excited to be at ATA and bring a strategic technology vision to the firm. My previous experiences across multiple industries have helped prepare me for such an amazing opportunity.”
Watson has an extensive background in technology and leadership. Previously, he was Principal Consultant at Digital Simplicity, former Executive Vice President and Chief Information Officer of ChanceLight Behavioral Health, Therapy & Education, and was named a Citrix Innovation Award Winner. Watson’s excellence in collaborating, networking, and virtualization led him to create customized learning resources in a secure, regulatory compliant environment; this innovative work was awarded by Citrix. 
“As ATA continues to grow and evolve, we saw a need to position ourselves as an innovative accounting firm that uses technology to create a strategic advantage for our firm and our clients,” said, John Whybrew, managing partner of ATA, “We welcome Alan to the ATA team and know that he will be an essential part to our future.”
Watson received a master of business administration from Howard University. He’s an alum of Austin Peay State University with a bachelor of science degree in information technology. His technical skills include being a Microsoft Certified Systems Engineer.   
About ATA
ATA is a long-term business advisor to its clients and provides other services that are not traditionally associated with accounting.  For example, Revolution Partners, ATA’s wealth management entity, provides financial planning expertise; ATA Technologies provides trustworthy IT solutions; Sodium Halogen focuses on growth through the design and development of marketing and digital products; Adelsberger Marketing offers video, social media, and digital content for small businesses; and Center Point Business Solutions is a comprehensive human resource management agency.
ATA has 14 office locations in Tennessee, Kentucky and Mississippi. Recognized as an IPA Top 200 regional accounting firm, it provides 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.  The firm was recognized by Forbes in 2020 as a top recommended tax firm in the country. ATA is also an alliance member of BDO USA LLP, a top-five global accounting firm. This alliance provides the highest level of resources and expertise for ATA’s clients.
 
-###-
Categories
General News

COVID-19 Updates

This page is for all things related to COVID-19.

 

Click here for IRS Notice 2020-18 News *03-26-2020

 

Click here for IRS Notice 2020-17 News *03-20-2020

 

Click here for a message to our clients *03-19-2020

 

Helpful Resources:

Employee Rights: Paid Sick Leave and Expanded Family and Medical Leave under The Families First Coronavirus Response Act (FFCRA)

Federal Employee Rights: Paid Sick Leave and Expanded Family and Medical Leave under The Families First Coronavirus Response Act (FFCRA)

Families First Coronavirus Response Act Notice – Frequently Asked Questions

U.S. Department of Labor  

IRS Q & A

IRS Web Page

The IRS recently created a coronavirus (COVID-19) web page so citizens can keep up with any pertinent news regarding taxes. The special section will focus on helping taxpayers and businesses affected by the virus. Information has been released such as Notice 2020-17, “Relief for Taxpayers Affected by Ongoing Coronavirus Disease 2019 Pandemic” and IRS Notice 2020-15, “High deductible health plans related to COVID-19.” The notice provides guidance on high-deductible health plans, Health Savings Accounts and COVID-19 costs. The IRS stated that the special section will be updated as new information is available. Visit the site: https://bit.ly/3d4sfIF. Please contact our firm with any questions you may have at info@atacpa.net.  

 

Reminder

In support of the CDC’s recommendation, we are encouraging the practice of social distancing as follows: 
  • Teleconferencing and virtual meetings
  • Electronic signatures
  • Digital transmission of documents 
Categories
Financial Institutions and Banking General

Take steps to curb power of attorney abuse

A financial power of attorney can be a valuable planning tool. The most common type is the durable power of attorney, which allows someone (the agent) to act on the behalf of another person (the principal) even if the person becomes mentally incompetent or otherwise incapacitated. It authorizes the agent to manage the principal’s investments, pay bills, file tax returns and handle other financial matters if the principal is unable to do so as a result of illness, injury, advancing age or other circumstances. However, a disadvantage of a power of attorney is that it may be susceptible to abuse by scam artists, dishonest caretakers or greedy relatives.
  • Watch out for your loved ones. A broadly written power of attorney gives an agent unfettered access to the principal’s bank and brokerage accounts, real estate, and other assets. In the right hands, this can be a huge help in managing a person’s financial affairs when the person isn’t able to do so him or herself. But in the wrong hands, it provides an ample opportunity for financial harm. Many people believe that, once an agent has been given a power of attorney, there’s little that can be done to stop the agent from misappropriating money or property. Fortunately, that’s not the case. If you suspect that an elderly family member is a victim of financial abuse by the holder of a power of attorney, contact an attorney as soon as possible. An agent has a fiduciary duty to the principal, requiring him or her to act with the utmost good faith and loyalty when acting on the principal’s behalf. So your relative may be able to sue the agent for breach of fiduciary duty and obtain injunctive relief, damages (including punitive damages) and attorneys’ fees. 
  • Take steps to prevent abuse. If you or a family member plans to execute a power of attorney, there are steps you can take to minimize the risk of abuse: Make sure the agent is someone you know and trust. Consider using a “springing” power of attorney, which doesn’t take effect until certain conditions are met, such as a physician’s certification that the principal has become incapacitated. Use a “special” or “limited” power of attorney that details the agent’s specific powers. (The drawback of this approach is that it limits the agent’s ability to deal with unanticipated circumstances.) Appoint a “monitor” or other third party to review transactions executed by the agent and require the monitor’s approval of transactions over a certain dollar amount. Provide that the appointment of a guardian automatically revokes the power of attorney. Some state laws contain special requirements, such as a separate rider, to authorize an agent to make large gifts or conduct other major transactions. 
  • Act now. If you’re pursuing legal remedies against an agent, the sooner you proceed, the greater your chances of recovery. And if you wish to execute or revoke a power of attorney for yourself, you need to do so while you’re mentally competent. 
Considering appointing a power of attorney? Contact your long-term business partner to discuss planning. Contact us with questions.
Categories
General Henderson, KY Henderson, TN Jackson, TN Martin, TN Memphis, TN Milan, TN Murray, KY Nashville, TN News Owensboro, KY Paris, TN Tupelo, MS Union City, TN

Family & Education tax planning 

Watch the Family and Education Tax Planning video here.

 

Family & Education

While the Tax Cuts and Jobs Act of 2017 has reduced or eliminated many tax breaks for the next several years, most child and education-related breaks remain intact or even enhanced.

Child Credit 

For each child under age 17, you may be able to claim a $2,000 credit.  This credit phases out for higher-income taxpayers, but the income ranges are much higher than before the Tax Cuts and Jobs Act.   If your dependent child is age 17 or older or if you have a dependent elderly parent, a $500 family credit is available, also subject to income-based phase out.

Tax credits reduce your tax bill dollar for dollar, so for many taxpayers, these expanded credits will make up for losing the dependency exemptions.

Education Credits

If you have children in college now or are currently in school yourself, you may be eligible for the American Opportunity Credit.  The maximum credit, per student, is $2,500 per year for the first four years of postsecondary education. Again, this credit is subject to income-based phaseouts, but if your income is too high for you to qualify, your child might be eligible.

 

Be sure you and your family take advantage of available credits and other tax-saving opportunities to make saving taxes a family tradition.