Individual Tax Deadline Extended to May 17, 2021

The IRS has released news on March 17, stating the following:

“…The federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021. The IRS will be providing formal guidance in the coming days.”

The IRS website goes on to state:

“Individual taxpayers can also postpone federal income tax payments for the 2020 tax year due on April 15, 2021, to May 17, 2021, without penalties and interest, regardless of the amount owed. This postponement applies to individual taxpayers, including individuals who pay self-employment tax. Penalties, interest and additions to tax will begin to accrue on any remaining unpaid balances as of May 17, 2021. Individual taxpayers will automatically avoid interest and penalties on the taxes paid by May 17.”

Individual taxpayers do not need to file any forms or call the IRS to qualify for this automatic federal tax filing and payment relief. Individual taxpayers who need additional time to file beyond the May 17 deadline can request a filing extension until Oct. 15 by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Filing Form 4868 gives taxpayers until October 15 to file their 2020 tax return but does not grant an extension of time to pay taxes due. Taxpayers should pay their federal income tax due by May 17, 2021, to avoid interest and penalties.

The IRS urges taxpayers who are due a refund to file as soon as possible. Most tax refunds associated with e-filed returns are issued within 21 days.

This relief does not apply to estimated tax payments that are due on April 15, 2021. These payments are still due on April 15. Taxes must be paid as taxpayers earn or receive income during the year, either through withholding or estimated tax payments. In general, estimated tax payments are made quarterly to the IRS by people whose income isn’t subject to income tax withholding, including self-employment income, interest, dividends, alimony or rental income. Most taxpayers automatically have their taxes withheld from their paychecks and submitted to the IRS by their employer.

State tax returns

The federal tax filing deadline postponement to May 17, 2021, only applies to individual federal income returns and tax (including tax on self-employment income) payments otherwise due April 15, 2021, not state tax payments or deposits or payments of any other type of federal tax. Taxpayers also will need to file income tax returns in 42 states plus the District of Columbia. State filing and payment deadlines vary and are not always the same as the federal filing deadline.

Takeaways:

  • Individuals Federal Tax Filing Deadline has been automatically postponed to May 17, 2021.
  • This does not apply to state returns.
  • Payments for taxes due can be postponed to May 17, 2021, without penalties/interest.
  • Estimated taxes due April 15, 2021, are still due that day.
  • The IRS recommends you file as early as you can, as most refunds are issued within 21 days.

Sources:
https://www.irs.gov/newsroom/tax-day-for-individuals-extended-to-may-17-treasury-irs-extend-filing-and-payment-deadline
https://www.nytimes.com/2021/03/17/business/irs-tax-filing-deadline.html
https://www.aicpa.org/press/pressreleases/2021/aicpa-many-taxpayers-will-not-benefit-from-irs-tax-deadline-extension.html

IRS Guidance on Employee Retention Credit for 2020

The IRS has recently released a guidance regarding the employee retention credit for 2020. Please find the summary below provided by Charles R. Bernardini, Esq., from Nixon Peabody LLP. We have included the actual guidance and FAQ document for download.

In Notice 2021-20, the IRS issued detailed guidance for employers claiming the employee retention credit for calendar quarters in 2020. The credit was created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L 116-136, and amended by the Consolidated Appropriations Act, 2021, P.L 116-260. The IRS says the guidance in the notice is similar to the information it posted in FAQs last year, but the notice clarifies and describes retroactive changes under the new law that apply to 2020, primarily relating to expanded eligibility for the credit for taxpayers who took Paycheck Protection Program (PPP) loans. The AICPA requested authoritative guidance on the 2020 and 2021 employee retention credits from the IRS in a comment letter sent on Feb. 25.

For 2020, the employee retention credit can be claimed by employers who paid qualified wages after March 12, 2020, and before Jan. 1, 2021, and who experienced a full or partial suspension of their operations or a significant decline in gross receipts. The credit is equal to 50% of qualified wages paid, including qualified health plan expenses, up to $10,000 per employee in 2020, meaning the maximum credit available for each employee is $5,000.
For 2020, eligible employers that received a PPP loan are permitted to claim the employee retention credit, although the same wages cannot be counted for both. Notice 2021-20 explains in detail when and how employers that received a PPP loan can claim the employee retention credit for 2020. In January, the AICPA requested clarification from the IRS on this topic and recommended that the filing of a PPP loan forgiveness application should not constitute an election to forgo the employee retention credit with respect to the amount of wages reported on the application exceeding the amount of wages necessary for loan forgiveness.

The notice explains (1) who are eligible employers; (2) what constitutes full or partial suspension of trade or business operations; (3) what is a significant decline in gross receipts; (4) what is the maximum amount of an eligible employer’s employee retention credit; (5) qualified wages; (6) how an eligible employer claims the employee retention credit; and (7) how an eligible employer substantiates the claim for the credit.

Although the Consolidated Appropriations Act, 2021 also extended and modified the credit for the first two calendar quarters in 2021, the IRS says this notice addresses only the 2020 rules and that it plans to release additional guidance soon, addressing the 2021 changes.

https://www.journalofaccountancy.com/news/2021/mar/employee-retention-credit-irs-guidance.html

IRS Guidance on the Employee Retention Credit under Section 2301 of the CARES Act


Source:
Charles R. Bernardini

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

Applying for a Second Draw PPP Loan – Key Requirements

If you are interested in applying for Second Draw PPP Loans, or will be a first-time borrower, please take a look at the key requirements below. While these requirements are listed from one bank, they follow the requirements as stated by the SBA and Treasury, as other lenders will.

Key requirements for all applicants:

  • You are an authorized representative who can borrow on behalf of the business.
  • You have an active Business Checking account with your Bank.
  • Must have been in business as of February 15, 2020 and your business hasn’t been permanently closed.
  • If applying as a franchise, you will need to enter the SBA Franchise Identifier Code at the time of application. You can find that code at sba.gov/sba-franchise-directory. If your franchise isn’t on the directory, please contact your local SBA District Office to help you get it added.
  • You should review the requirements and guidance provided by the SBA for complete information regarding the PPP. The SBA continues to release updated guidance. For the most updated PPP rules, requirements and other information, visit SBA.gov and Treasury.gov. You may also want to contact your accountant, attorney or other trusted advisors.

PPP Overview: first and second-time borrowers

First-time borrowers (including affiliates) in general:

  • Can have no more than 500 employees (or fewer or more for certain business types for certain SBA size standards)
  • Accommodations and Food Services companies with NAICS code 72 can have no more than 500 employees per physical location  
  • The loan can be up to 2.5 times the business’ average monthly payroll costs, up to a $10 million loan maximum (or $20 million for a corporate group)

Second-time borrowers (including affiliates) in general:

  • Can have no more than 300 employees
  • Accommodations and Food Services companies with NAICS code 72 can have no more than 300 employees per physical location
  • The second loan can be up to 2.5 times the business’ average monthly payroll costs, up to a $2 million loan maximum (or $4 million for a corporate group)
  • Accommodations and Food Services companies with NAICS code 72 can borrow up to 3.5 times the business’ average monthly payroll costs, up to a $2 million loan maximum
  • The business must have experienced a revenue reduction of 25% or greater in 2020 relative to 2019. In general, a borrower may calculate this revenue reduction by comparing quarterly gross receipts for one quarter in 2020 with the gross receipts for the same quarter in 2019. A business that does not file quarterly or was not in operation for all four quarters of 2019 may still qualify; see the SBA guidelines for details. 
  • Used or will use the full amount of the first PPP loan for authorized purposes on or before the expected date of disbursement of the second PPP

Loan Documents you will need when applying (For both first and second-time borrowers):

If you file IRS Form 1040 Schedule C or 1040 Schedule F:

You must upload all of the following: 

  • 2019 or 2020* (whichever you used to calculate loan amount) Form 1040 Schedule C or Form 1040 Schedule F

Have no employees:

  • 2019 or 2020* (whichever you used to calculate loan amount) IRS Form 1099-MISC detailing nonemployee compensation received (box 7), if applicable
  • 2019 or 2020* (whichever you used to calculate loan amount) invoice, bank statement or book of record that establishes you are self-employed. [if 1099 not provided]
  • A 2020 invoice, bank statement or book of record to establish you were in operation on or around February 15, 2020.

Have employees:

  • 2019 or 2020* (whichever you used to calculate loan amount) Form 941 (or other tax forms or equivalent payroll processor records containing similar information)
  • State quarterly wage unemployment insurance tax reporting forms from each quarter in 2019 or 2020* (whichever you used to calculate loan amount) or equivalent payroll processor records
  • A payroll statement or similar documentation from the pay period that covered February 15, 2020 must be provided to establish you were in operation on February 15, 2020.

If you file IRS Form 1065 (Partnership):

You must upload all of the following:

  • 2019 or 2020* (whichever you used to calculate loan amount) IRS Form 1065 (including K-1s) and other relevant supporting documentation if the partnership has employees
  • 2019 or 2020* (whichever you used to calculate loan amount) IRS Form 941 State quarterly wage unemployment insurance tax reporting form from each quarter (or equivalent payroll processor records or IRS Wage and Tax Statements)
  • Records of any retirement or health insurance contributions
  • If the partnership has employees, a payroll statement or similar documentation from the pay period that covered February 15, 2020 must be provided to establish the partnership was in operation and had employees on that date.
  • If the partnership has no employees, an invoice, bank statement or book of record establishing the partnership was in operation on February 15, 2020 must instead be provided

If you file IRS Form 1120-S (S-Corp) or Form 1120 (C-Corp):

You must upload all of the following:

  • 2019 or 2020* (whichever you used to calculate loan amount) IRS Wage and Tax Statements (such as IRS Form 940, IRS Form W-3, or IRS Form W-2s) or equivalent payroll processor records or IRS Form 941 and state quarterly wage unemployment insurance tax reporting form from each quarter
  • 2019 or 2020* (whichever you used to calculate loan amount.) IRS Form 1120, IRS 1120-S
  • Records of any retirement or health insurance contributions
  • 2020 Q1 IRS Form 941, a payroll statement or similar documentation from the pay period that covered February 15, 2020 to establish you were in operation and had employees on that date

If you file IRS Form 990 (Non-profit):

You must upload all of the following:

  • 2019 or 2020 (whichever you used to calculate loan amount) IRS Wage and Tax Statements (such as IRS Form 940, IRS Form W-3, or IRS Form W-2s) or equivalent payroll processor records or IRS Form 941 and state quarterly wage unemployment insurance tax reporting form from each quarter
  • 2019 or 2020* (whichever you used to calculate loan amount) IRS Form 990 Part IX or other documentation of any retirement and health insurance contributions, if applicable
  • 2020 Q1 IRS Form-941, a payroll statement or similar documentation from the pay period that covered February 15, 2020 to establish you were in operation and had employees on that date

Second-time borrowers only:

  • Documentation that shows the business experienced a revenue reduction of 25% or greater in 2020 relative to 2019.

IMPORTANT NOTE: For loan requests of $150,000 or less, you won’t have to provide documentation when you apply for the loan, but you will have to provide documentation when you request Forgiveness.

– If your first PPP loan was NOT through the same bank you are currently applying for the second loan, have the information available:
SBA loan #
First PPP loan amount
*If using 2020 to calculate loan amount, this is required regardless of whether you have filed a 2020 tax return with the IRS.


Source:

https://business.chase.com/business-PPP-loan?jp_cmp=bb/101393/ema/EGSBAED011921/Body_Textlink_1%201/7#key-requirements

PPP Second Draw Application Forms and Information

The Journal of Accountancy’s senior editor Jeff Drew, has published an summary of the recent changes to the PPP Loan in light of the recent Acts that add funds to allow for a second round of loans. The applications are now open to all, both previous borrowers (please see below for details) and new borrowers as well. The final day to apply for and receive the Second Draw Loan is March 31, 2021.    Please see the abridged article below. Downloadable forms from the SBA will be located below the article.

The forms are Form 2483 – Paycheck Protection Program Borrower Application Form and Form 2483-SD – PPP Second Draw Borrower Application Form. Form 2483 is updated from previous iterations that started with the original PPP program. Form 2483-SD is a new form for qualified PPP borrowers to seek a second draw of a forgivable loan as they try to navigate economic seas churning in the throes of the COVID-19 pandemic.

The SBA and Treasury also published top-line summaries of the first-draw and second-draw PPP loans and a pair of procedural notices.

Congress revived the PPP as part of the $900 billion COVID-19 relief bill that was signed into law on Dec. 27. The original PPP provided $525 billion in forgivable loans over five months before it stopped accepting applications in August. The new PPP has $284.5 billion available, including $35 billion for first-time loans and $15 billion set aside for community financial institutions.

Quick overview of PPP borrower application forms

The PPP borrower application forms released Friday contain instructions on how to calculate payroll costs consistent with the guidance provided on Wednesday. In general, first- and second-time PPP borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs (with a cap per employee of $100,000 annualized) in 2019, 2020, or the year prior to the loan. PPP borrowers with North American Industry Classification System (NAICS) codes starting with 72 (such as hotels and restaurants) can receive up to 3.5 times their average monthly payroll costs on second-draw loans.

The forms also outline adjustments to the calculations for seasonal businesses, new businesses, farmers and ranchers, and partnerships.

The maximum loan amount is $10 million for first-time borrowers and $2 million for second-time PPP borrowers.

PPP borrowers can have their first- and second-draw loans forgiven if the funds are used on the following eligible costs: payroll, rent, covered mortgage interest, and utilities, covered worker protection and facility modification expenditures, covered property damage costs, covered payments to suppliers and payments for business software or cloud computing services that facilitate business operations, product or service delivery, and a number of back-office functions, including accounting.

To be eligible for full loan forgiveness, PPP borrowers must spend no less than 60% of the funds on payroll over a covered period of their choice between eight and 24 weeks.

First time PPP loans are available to borrowers that were in operations on Feb. 15, 2020 and are from one of the following groups:

  • Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.
  • Sole proprietors, independent contractors, and eligible self-employed individuals.
  • Not-for-profits, including churches.
  • Accommodation and food services operations with NAICS codes starting with 72 that have fewer than 500 employees per physical location.
  • Sec. 501(c)(6) business leagues, such as chambers of commerce, visitors’ bureaus, etc., and “destination marketing organizations” that have 300 or fewer employees and do not receive more than 15% of receipts from lobbying. The lobbying activities must comprise no more than 15% of the organization’s total activities and have cost no more than $1 million during the most recent tax year that ended prior to Feb. 15. 2020. Sports leagues are not eligible.
  • News organizations that are majority-owned or controlled by an NAICS code 511110 or 5151 business or not-for-profit public broadcasting entities with a trade or business under NAICS code 511110 or 5151. The size limit for this category is no more than 500 employees per location.

Borrowers are eligible for a second-draw PPP loan of up to $2 million, provided they have:

  • 300 or fewer employees.
  • Used or will use the full amount of their first PPP loan on or before the expected date for the second PPP loan to be disbursed to the borrower. The IFR also clarifies that the borrower must have spent the full amount of the first PPP loan on eligible expenses.
  • Experienced a revenue reduction of 25% or more in all or part of 2020 compared with all or part of 2019. This is calculated by comparing gross receipts in any 2020 quarter with an applicable quarter in 2019, or, in a provision added in the IFR, a borrower that was in operation for all four quarters of 2019 can submit copies of its annual tax forms that show a reduction in annual receipts of 25% or greater in 2020 compared with 2019.

PPP Borrower Application Form – First Time Borrower
PPP Borrower Application Form – Second Time Borrower

The AICPA’s Paycheck Protection Program Resources page houses resources and tools produced by the AICPA to help address the economic impact of the coronavirus.

For more news and reporting on the coronavirus and how CPAs can handle challenges related to the outbreak, visit the JofA’s coronavirus resources page or subscribe to our email alerts for breaking PPP news.

Sources:

https://www.journalofaccountancy.com/news/2021/jan/ppp-application-forms-released.html

https://www.sba.gov/document/sba-form-2483-sd-ppp-second-draw-borrower-application-form

https://www.sba.gov/document/sba-form-2483-ppp-first-draw-borrower-application-form

https://www.jdsupra.com/legalnews/economic-aid-act-10-things-to-know-5901027/#:~:text=1.,for%20Second%20Draw%20PPP%20Loans.