The Value of our Accounting Relationship
Earlier in the month I talked about the Consolidated Appropriations Act of 2021 (CAA) which was signed into law on December 27, 2020. Today I want to address recent guidance from the SBA and the US Treasury on this new law and also answer three questions I’ve received a few times this week.
“Filing season starts February 12th”:
The Internal Revenue Service recently announced the 2021 tax filing season begins February 12, 2021 which was a very confusing announcement to many people! This date is the date that the tax agency will begin accepting and processing 2021 tax returns for individual filers. The filing season for small businesses opened this week.
Tax return filing dates:
As of today, we do not have any information on delays in the filing deadlines. S-Corporation and Partnership tax returns are generally due to be filed or extended by March 15th. Individual, C-Corporation and Trust tax returns are generally due to be filed or extended by April 15th. All tax is due before these dates, even if you extend!
New Administration:
We are watching closely to see what tax legislation will come out of the new administration, if any. We expect to see debates over many tax issues including the corporate tax rate, higher tax credits for lower income individuals and IRS funding shortfalls but we do not know anything more at this time. We will keep you posted!
PPP2
The reports that we’ve seen recently seem to show the program is well funded this time and should be able to provide the financing needed for qualified businesses. Hopefully, this means that the process shouldn’t require the same rush as last year. The application due date is March 31st so time is sensitive, but we advise you to proceed with caution and thoroughly evaluate your options.
If you apply for a second draw PPP loan, you will be required to certify that you completed a self-assessment regarding need and documented the calculation of the 25% or greater reduction in gross receipts. This can be a stressful process so please reach out to talk to us if you have questions or need assistance. Both Crystal and I are working with many clients on options and document management and we can be reached by email here: Crystal Brady or Kim Hitchcock.
Over 5,700 eligible SBA lenders have been approved to service PPP2 loans and approximately 3,000 have started processing these loans. They do have variances in the process as each lender is permitted to request their choice of supporting documents. You are not required to use the same lender as you used for the first draw, but it could help reduce document requests. We are available to help support you in the application process, aid in the determination of eligibility for PPP2, and to gather the documents for this application.
PPP Forgiveness
You may also be in the process of applying for forgiveness for your first draw PPP loan. The SBA has clarified that you can either apply for forgiveness for your first draw before applying for PPP2 or you can apply for forgiveness for both simultaneously. Talk to your lender directly with questions on the forgiveness process.
The SBA recently issued form 3508S for forgiveness of loans of $150k or less. This is a slightly more streamlined form which allows you to submit your assertions without supporting proof for spending, however, you are still required to do the math and retain the support. Remember that your EIDL advance will no longer impact forgiveness.
Employee Retention Credit
The ERC or Employee Retention Credit is a fantastic credit for the hardest hit businesses. There are strategies to maximize the credit and the PPP Loans if you qualify for both programs so please reach out on this topic if you qualify. It is a bit confusing to calculate but here is the general rule:
You qualify to claim the ERC in any quarter in 2020 if:
- You did not spend PPP Loan funds at the same time AND
- you experienced a >50% reduction in gross receipts as compared to the same quarter in 2019 or you were shut down by government order
- You qualify to claim the ERC in Q1 or Q2 of 2021 if:
- You did not spend PPP Loan funds at the same time AND
- you experienced a >20% reduction in gross receipts as compared to the same quarter in 2019 or 2020
- This credit exists for self-employed individuals as well so please run the numbers, even if you file as a Schedule C. Schedule C or sole proprietors are treated as an employee for purposes of the PPP and the ERC.
The SBA and the US Treasury issued many IDRs and guidance over the past few weeks, most recently on Tuesday the 19th, and we will continue to receive more information as time passes. The AICPA is a great resource for these documents which you can reach here: AICPA Link to Guidance
Please email or call soon to get on our schedule if you want to meet or zoom interview for your tax prep this year! Your 2020 Tax Organizer is available on Sharefile or at our front desk. Appointments can always be scheduled by phone or using our online tool at: Mcnurlincpa.com . As always, you can also reply to this email if you have any questions.
We are still accepting new clients for the 2020 tax seasons and we love your referrals so please reach out if you have any questions about our services or if you know someone who would like to become a client of the Firm this year.
Thank you,
Kim Hitchcock
The owner of McNurlin, Hitchcock & Associates, PC a certified public accounting firm located in Lakewood, Colorado. Kim specializes in all areas of accounting, tax strategy planning, business management, and financial statement reporting. Kim can be reached directly at kim@mcnurlincpa.com.