For Individuals
Stimulus Checks Round 2 aka Economic Impact Payments
A second round of stimulus checks are already heading your way for those that qualify. These are like the ones you may or may not have qualified for this past summer. The same income rules apply and are based on your 2019 income tax return filings. The new payment is $600 per taxpayer and $600 per dependent child under age 17.This link has FAQ regarding how you will receive your payment.
https://www.irs.gov/coronavirus/get-my-payment-frequently-asked-questions#bank
These payments are not considered taxable income.
Unemployment
Unemployment benefits will include an additional $300 per week until March 14, 2021. Unemployment is taxable just like a W2, so be careful on withholdings so you won’t end up with a big tax bill come April 15th.Charitable Donations
There is an improved deduction for cash donations in 2020 and 2021. For those who file standard deductions they didn’t get a tax benefit from donations. Now everyone can get a $300 deduction per taxpayer no matter if you itemize or standard deduct. So be sure to send along your donations this year.For those who itemize, the donation phaseout limits have also improved. Previously donations were capped at 60% of your adjusted gross income. Now it’s 100% of your adjusted gross income.
All these points apply to cash donations and not noncash donations, including stock.
For Business
PPP Expenses Deductible
This was the biggie every small business owner receiving PPP funds was waiting with baited breath. The new law overturns the IRS’s stance and now expenses paid with forgiven PPP funds are now deductible like normal.The forgiven PPP loan is not taxable either.
If you were waiting to submit your PPP forgiveness application because of this, you may now proceed. See comment below if your loan was less than $150,000.
New Simplified PPP Forgiveness Application
There will be a new simplified PPP forgiveness application for all loans under $150,000. The SBA has 24 days to roll out the new form, so we should expect it around January 24, 2021. You lender should be providing you the updated form and their method for transmitting to them.The new form will ask for these items:
• Current number of employees
• Amount spent (we suggest use payroll)
• Total PPP loan given, seeking forgiveness
EIDL Advance
Some folks received money called an EIDL Advance. This was the one that was up to $10,000. Up until now, anyone who filed a forgiveness application had the amount of the EDIL Advance NOT forgiven. Essentially it became a loan to repay.The new law overturned this and now all EIDL Advances are forgivable. VERY IMPORTANT if you have already been forgiven but have an EIDL Advance hanging out there it will NOT automatically be forgiven. You must contact your bank and file an amended application or ask them how they are making these changes. IT IS NOT AUTOMATIC.
Make sure you know the difference if you got an EIDL Advance or an actual EIDL LOAN. If it were an actual loan, there is no change. An EIDL Loan is a true SBA loan that needs repayment.
Round 2 PPP Loans
There is a second round of PPP loans opening for businesses. The same rules apply in terms of forgiveness and deductibility as the first. There are however new qualification requirements outlined below:If you received round 1 PPP funding:
• Must have used up the first round funding. We interrupt this to mean that when you compute forgiveness you have more qualified expenses than loan. In other words does payroll costs over the 24 week period equal more than the PPP loan? If yes, you’ve met this requirement.
• 300 or less employees
• 25% decline in gross income for ANY quarter of 2020 compared to that quarter in 2019
If this your first PPP loan:
• 500 or less employees
• Must meet existing requirements for the first round (note this does not include the 25% decline test noted above)
• New additional qualifying expenses: costs to make your workplace safe for employee’s including supplies, software for cloud/computing for remote work and accounting needs.
The maximum second PPP loan is $2,000,000, based on 2.5 months of payroll. The lookback period for payroll is the higher of either:
• 1 year prior to the loan request
• 2019’s payroll
Loans will be processed like the first round, through qualified lenders. They each have their own unique method to do so and there is no word on what they will ask for to prove the 25% gross income decline. We suggest having your books ready to produce a profit and loss statement showing the 2020 quarter vs the 2019 quarter.
