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This page was created to keep our clients and friends of the firm updated on relevant news and information as it becomes available.  Please note that the information provided is for the date specified and subject to change in the ever-changing world of accounting.  We also invite you to follow us on social media for additional information from other sources such as the IRS.  Simply click on the links at the bottom of our homepage to like us Facebook and LinkedIn.

8/27/2021

JUST RELEASED:  NEW GUIDANCE ON OPTIONAL PASS-THROUGH ENTITY TAX

A growing trend in state taxation is the implementation of a Pass-Through-Entity Tax (PTET) which is a work-around to the maximum deduction of $10,000 in personal and local taxes including state income taxes, real estate property and auto excise tax. Currently, New York State along with sixteen other states (AL, AR, AZ, CA, CO, CT, GA, ID, LA, MD, MN, NJ, OK, RI, SC & WI) have enacted PTE level tax which can be extremely advantageous to Partnerships and S Corporations. We are also closely monitoring the other states that are proposing PTET including IL, MA, MI, PA, NC and OR.

Under PTE tax, the state and local income taxes paid by a partnership or S Corporation (this does not apply to C Corporations) are allowed as a deduction in the calculation of the entity’s net income or loss for the year, thereby not requiring individual partners or shareholders to add this back to their reported income. Ultimately, the PTE tax shifts the burden of taxation from the business owners to the entity. 

In the state of New York, PTET is elective, which means that business owners (together with their tax advisors) will need to perform an analysis on whether or not the election is beneficial to the owners.  New York, along with many of the other states that have implemented PTET, requires electing PTEs to calculate taxable income and pay the state income tax. Then, the state taxable income and potential state tax credits would flow to the owners and be reported on their personal income tax returns. 

If an eligible electing entity (Partnership or S Corporation) chooses to pay the optional PTE tax, they will need to opt in to PTET via an annual election through the entity’s online services account by clicking here. For the 2021 tax year, this election must be made by October 15, 2021.

For more information about Pass-through entity tax in New York State including calculations, filing forms and how to claim PTET, click here to visit the NYS Department of Taxation and Finance website. 

8/10/2021

JUST RELEASED:  NEW GUIDANCE ON EMPLOYEE RETENTION TAX CREDITS

The Internal Revenue Service (IRS), together with the U.S. Department of the Treasury, recently released additional guidance (Notice 2021-49) on employee retention tax credits (ERTC) which includes changes made by the American Rescue Plan Act of 2021 that are applicable to the third and fourth quarters of 2021. The changes include, among other items, (1) making the credit available to eligible employers that pay qualified wages after June 30, 2021, and before Jan. 1, 2022, (2) expanding the definition of eligible employer to include “recovery startup businesses,” (3) modifying the definition of qualified wages for “severely financially distressed employers,” and (4) providing that the employee retention credit does not apply to qualified wages taken into account as payroll costs in connection with a shuttered venue grant under section 324 of the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act, or a restaurant revitalization grant under section 5003 of the ARP.

The IRS and Treasury Department also addressed various questions they have been asked about ERTC, including:

  • The definition of full-time employee and whether that definition includes full-time equivalents;
  • The treatment of tips as qualified wages and the interaction with the section 45B credit;
  • The timing of the qualified wages deduction disallowance and whether taxpayers that already filed an income tax return must amend that return after claiming the credit on an adjusted employment tax return; and
  • Whether wages paid to majority owners and their spouses may be treated as qualified wages.

Of primary importance to McDonald’s Owner Operators was the definition of “full-time employee” for the purpose of the ERTC. The term “full-time employee” means an employee who, with respect to any calendar month in 2019, had an average of at least 30 hours of service per week or 130 hours of service in the month. The notice states that full-time equivalents need not be included when determining whether an employer is large or small (for eligibility purposes) stating that full-time status is irrelevant to identifying qualifying wages. 

In summary, claiming the employee retention tax credit, worth up to $28,000 per employee kept on payroll in 2021, is a smart decision for many businesses. While the additional guidance from the IRS brings added clarity to the tax break, there is a chance that the credit which is slated to expire at the end of the year may end early (September 30) as Congress weighs a proposal to end the tax break to help pay for the bipartisan infrastructure bill. 

7/30/2021

PPP LOAN FORGIVENESS JUST GOT A LITTLE EASIER!

Two weeks ago, we informed you that the Small Business Association (SBA) officially eliminated the loan necessity questionnaire requirement for PPP loans of $2 million or greater for both for-profit and not-for-profit borrowers. This was good news for PPP loan recipients as it made the loan forgiveness process a little easier for those receiving sizeable loans.

In recent news, the SBA published new guidance designed to simplify and expedite the forgiveness process for PPP loans of $150,000 or less which account for 93% of outstanding PPP loans. The new interim final rule (IFR) introduced a COVID Revenue Reduction Score that can be used at the time of forgiveness to document the required revenue reduction for second-draw PPP loans. It also established a direct borrower forgiveness process for lenders as well as a new application portal that will launch on August 4th allowing borrowers to apply for forgiveness directly with the SBA instead of having to go through their lender. In addition, the IFR extends the loan deferment period for PPP loans in cases when the borrower files a timely appeal of a final SBA loan review decision.

This news stems from the forgiveness bottleneck that is occurring from the PPP providing more than 11.7 million forgivable loans totaling nearly $800 billion to eligible entities, and the struggles that many of the smaller PPP lenders are experiencing due to a lack of technology and manpower.

COVID Revenue Reduction Score

To streamline forgiveness of second-draw PPP Loans of $150,000 or less where the borrower did not submit documentation of revenue reduction at the time of the loan application, the SBA will offer an alternative form of revenue reduction confirmation.

Each second-draw PPP loan of $150,000 or less will be assigned a COVID Revenue Reduction Score created by an independent, third-party SBA contractor, based on a variety of inputs, including industry, geography, and business size, and current economic data on the economic recovery and return of businesses to operational status.

The score will be maintained in the SBA’s loan forgiveness platform and will be visible to lenders to use as an alternative to document revenue reduction. Additionally, the score will be visible to those borrowers that submit their loan forgiveness applications through the platform using the direct borrower forgiveness process described in the next section.

When the score meets or exceeds the value required for validation of the borrower’s revenue reduction, use of the score will satisfy the requirement for the borrower to document revenue reduction. When the score does not meet the value required for validation of the borrower’s revenue reduction, and if the borrower has not already provided documentation to the lender that validates the borrower’s revenue reduction, the borrower must provide documentation either directly to the lender (for those lenders that do not opt into the direct borrower forgiveness process) or provide documentation to the lender by uploading it to the platform.

SBA-Direct Forgiveness Process

The SBA is launching a new direct forgiveness process that provides PPP lenders with an optional technology solution that essentially will allow their borrowers to apply for loan forgiveness directly to the SBA through the new portal that will launch on August 4th.

When a PPP lender opts into the direct borrower forgiveness process, the new portal will provide a single secure location that integrates with the SBA’s PPP platform and allows borrowers with loans of $150,000 or less to apply for loan forgiveness using an electronic equivalent of SBA Form 3508S. Upon receipt of notice that a borrower has applied for forgiveness through the platform, lenders will review the loan forgiveness application and issue a forgiveness decision to the SBA inside the platform.

The SBA said the new forgiveness process will provide lenders with reduced costs, increased efficiency, and more timely remittance of forgiveness payments from the SBA, while borrowers will benefit from the ability to submit loan forgiveness applications directly through the platform and reduce the wait time and uncertainty associated with submission through their lender.

After the launch of the direct borrower forgiveness process, borrowers should continue to submit loan forgiveness applications to their lenders, rather than through the platform, under the following circumstances:

  • The PPP lender does not opt in to use the direct borrower forgiveness process;
  • The borrower’s PPP loan amount is greater than $150,000;
  • The borrower does not agree with the data as provided by the SBA system of record, or cannot validate their identity in the platform (for example, if there is an unreported change of ownership); or
  • For any other reason where the platform rejects the borrower’s submission.

Extension of Loan Deferment Period for Appeals of SBA Review Decisions

The current rule for appeals of final SBA loan review decisions on PPP loans provided that because a PPP borrower must begin making payments of principal and interest on the remaining balance of its PPP loan when the SBA remits the loan forgiveness amount to the PPP lender (or notifies the lender that no loan forgiveness is allowed), an appeal by a PPP borrower of any final SBA loan review decision does not extend the deferment period of the PPP loan. The IFR amends the appeals rule to provide that a borrower’s timely appeal of a final SBA loan review decision will extend the deferment period for the PPP loan until the SBA’s Office of Hearings and Appeals (OHA) issues a final decision on the appeal. The revised OHA rule will provide that the borrower should notify the lender of the appeal so that the lender can extend the deferment period. Under the revised OHA rule, an appeal petition must be filed with OHA within 30 calendar days after the appellant’s receipt of the final SBA loan review decision.

In summary, this is all good news for PPP loan borrowers as it makes the loan forgiveness a little easier. As always, we will continue to monitor the status of PPP loan forgiveness and keep you apprised of any significant developments that occur in the future. 

Source:  Journal of Accountancy

7/28/2021

THE LAUFER365 TECHNOLOGY GROUP IS GROWING!

Have you heard of Laufer365 - the latest and greatest in restaurant technology designed to transform your back office into a profit center? We have had the pleasure of implementing this powerful back office solution platform, designed specifically for McDonald's Owner Operators, all across the country and couldn't do it successfully without our amazing technology team.  Introducing....

Tamara Crawford, Director of Digital Workplace Experience

In today’s rapidly changing business world, a robust and comprehensive restaurant management software system is essential for running a great business. As Director of Digital Workplace Experience, Tamara helps lead the Laufer365 technology group, managing the software support for both clients who adopt the powerful Laufer365 software platform and team members assisting in the implementation process.

Many restaurants are held back by outdated (or a lack of) technology, systems that were not implemented correctly or software that was not built specifically for restaurants. The Laufer365 all-in-one cloud-based back-office software solution combines key restaurant modules with integrated accounting systems to help restaurants control food costs, optimize labor and ultimately increase revenue. Proper implementation is crucial for scalable long-term success and that is where Tamara comes in.

Tamara recently joined Laufer LLP and works with clients to ensure that the transition from their existing software to Laufer365 was smooth, secure and accurate. Having implemented customized accounting solutions for numerous organizations, Tamara understands our clients’ goals and works hard to achieve them expeditiously and with great client care.  Once the integration to Laufer365 is completed, Tamara steps in to make sure the deployment of the new system is delivering results, exceeding expectations and clients are completely satisfied with their digital experience. Tamara makes any necessary adjustments, provides technical support and ultimately guarantees Laufer365 clients are fully benefiting from a software platform that provides them with the cutting-edge technology they need to run a productive and profitable business.

Tamara’s background in accounting, coupled with her experience in the restaurant industry, is of great benefit to clients as she fully understands how all restaurant systems should work synergistically and how technology can drive organizational transformations.

Prior to joining Laufer LLP, Tamara was the Head of Partner Onboarding & Customer Success at Restaurant365 where she managed over 400 restaurant clients after holding finance and client advisory positions at several prominent companies in the private sector. She received her Bachelor of Business Administration in Accounting from Texas A&M University.

When Tamara is not implementing technology to help our clients grow, evolve and transform their businesses for sustainable business growth, she enjoys practicing yoga and training for triathlons.  

Jennifer Kinzel, CPA, CMA, MBA, Director of Cloud Accounting Implementations

If you have implemented Laufer365 or are currently in the design phase or onboarding process, then you have probably had the privilege of working with Jennifer Kinzel.

With over 20 years of experience helping businesses work smarter and more efficiently, Jennifer Kinzel excels at helping businesses achieve profitable growth. As Director of Cloud Accounting Implementations in our Laufer365 Technology Group, Jennifer works closely with clients to understand their goals, identify their specific needs and then strategically craft business workflow and technology-based solutions to help launch their organization forward. 

As a CPA and CMA, Jennifer’s deep understanding of accounting and vast experience providing high level accounting and advisory services to businesses in a multitude of industries has afforded her the experience to easily design, build and implement processes and technology that better support the client’s business, methodology, and approach. Jennifer then takes it one step further by leading the way through the implementation process which is often the stage where businesses get most frustrated. By working hand in hand with clients from strategy through execution, Jennifer prides herself in helping clients implement technology that ultimately transforms their business. 

Prior to joining Laufer LLP, Jennifer was a Senior Manager in the Consulting Department of William Vaughan Company for over 20 years where she performed accounting operations reviews, product cost and profitability analyses, interim CFO services and financial modelling before becoming the firm’s Director of Cloud Accounting Services. She received her Bachelor of Science in Accounting and Master’s degree in Human Resource Management from The University of Toledo and is a member of the American Institute of Certified Public Accountants (AICPA), Ohio Society of Certified Public Accountants (OSCPA) and the Institute of Management Accountants (IMA).

When Jennifer is not helping clients overcome challenges and solve puzzles, you will find her excelling at her most important job – raising 4 children to be amazing human beings. During the winter, she enjoys watching her son wrestle and during the summer she cultivates her very large perennial garden. Year-round Jennifer loves being in the kitchen baking desserts and decorating cakes.

The Story Behind Laufer365

When you work with Laufer LLP, you quickly realize that while we are big enough to offer a full menu of services that you would normally only find at a much larger accounting firm, our size allows us to know the McDonald’s industry inside and out. As such, we are actively involved in the McDonald’s community. From presenting seminars at national conventions and sharing our knowledge on regional webinars, to advocating for Owner Operators with the company, we couldn't be more committed to the success of McDonald’s Owner Operators. 

Our commitment and understanding of the world in which you operate has allowed us to accomplish some amazing feats. We listened to our clients who were frustrated with the large payroll service providers and partnered with a payroll company who now excels at helping McDonald’s Owner OperatorsAs part of our efforts to make sure franchise owners keep the money they work so hard to earn, we proactively stay up to date on all the ways to minimize tax burdens. One significant area is tax credits (i.e. WOTC, ERTC, etc.) and we work hard to help McDonald’s Owner Operators save MILLIONS of dollars in tax credits each and every year.   In 2019, we partnered with Restaurant365 to develop Laufer365 - an all-in-one restaurant software package to help McDonald’s Owner Operators control food costs, optimize labor, and ultimately increase revenue. Most recently, we were one of the few accounting firms to proactively work with the U.S. Department of the Treasury and Small Business Administration to fully understand PPP loans and Restaurant Revitalization Fund grants so McDonald’s Owner Operators could remain financially viable during the COVID-19 pandemic.

Therefore, Laufer 365 was born out of our commitment to McDonald's Owner Operators. We knew they needed a powerful software platform, designed specifically for restaurant franchises, in order to save time, money and run better businesses. So, we helped to create one!

7/12/2021

ARE ADVANCE PAYMENTS OF CHILD TAX CREDITS CAUSING A STAFFING CRISIS IN YOUR RESTAURANTS?

The advance payments of child tax credits are set to begin next week, on July 15th and a lack of employee understanding is negatively impacting some restaurants. Unfortunately, it appears some restaurant workers believe that these payments are free money from the federal government, much like the stimulus checks they may have received during the pandemic. This perceived injection of cash is causing some employees to reduce their work hours or even cease working altogether.

This article is written to share with your employees to help educate them on the advance payments of child tax credits and avoid making the costly mistake of discontinuing their employment or significantly cutting back on their schedules.

Child Tax Credit - ADVANCE Payments

As you may have heard, the IRS will be sending advance monthly payments of child tax credits starting in July. The key word is “advance” as the payments received now are the credits you would have received next year when you file your 2021 individual income tax return. These payments are NOT similar to any economic stimulus checks you may have received during the COVID-19 pandemic as they are not free money from the government. Instead, it is an advance of the money you would have received at tax time.

The IRS will pay half of the total credit amount in advance monthly payments and you will claim the other half when you file your 2021 income tax return in 2022. Here is an overview of the child tax credit and how it will work:

ELIGIBILITY

Eligibility for the child tax credit is subject to income limitations and determines how much you will receive.  Single taxpayers earning $75,000 or less, heads of household earning $112,500 or less per year and married couples earning less than $150,000 per year all qualify for the full credit. For people with higher incomes, payment amounts phase out at a rate of $50 for every $1,000 over each of the aforementioned thresholds.  While there are income limitations to determine eligibility, there is no limitation on the number of children claimed as dependents.

CREDIT AMOUNTS

36 million US households qualify for the child tax credit payment which amounts to: up to $3,600 for children ages 5 and younger, up to $3,000 for each child who is between the ages of 6 and 17, $500 for each dependent who is 18 years old, and $500 for full-time students between the ages of 19 and 24. If you had a baby in 2021, your newborn qualifies for the child tax credit payment of $3,600.

TIMING

Most taxpayers will receive half of the total child tax credit amount monthly for 6 months, starting July 15, 2021. Then, in 2022, the second half of the credit will be applied to the amount you owe on your 2021 taxes (which you file in 2022). Hence, the reason it is called a “child tax credit.” Your tax liability for tax year 2021 will be reduced by the “credit” you gain from your eligible dependents which will either decrease the amount you owe to the IRS or increase your tax refund.

PAYMENTS

The IRS is targeting automatic payment dates of July 15, August 13, September 15, October 15, November 15, December 15 and April 2022 for those who filed their 2020 tax returns by the extended tax deadline of May 17, 2021.

If you didn’t file taxes in 2020, share custody of your children, would prefer to opt for one big payment or opt out of the program entirely, click here to visit the IRS website as it contains several helpful links.  

We hope this information helps your employees to understand that while the these tax credits provide some welcome relief to individuals starting this month, it also means they will receive less of a tax refund when they file their tax return in 2022. Therefore, we would strongly caution individual taxpayers against ceasing employment due to a temporary advance payment of a tax credit.

6/23/2021

SHARON CAVE, CPA EARNS CERTIFIED VALUATION ANALYST DESIGNATION

Sharon Cave, CPA, CVA, a manager in our McDonald’s Practice Group, has earned the designation of Certified Valuation Analyst (CVA) from the National Association of Certified Valuators and Analysts (NACVA). Sharon joined Laufer LLP in 2010 and is proficient at preparing monthly financial statements for McDonald’s Owner Operators and other small businesses as well as performing audits and tax returns for non-profit and cooperative organizations. She takes great pride in the relationships she has forged with the clients she serves and is fully committed to helping them be successful by achieving their business and personal goals.

As part of that commitment, Sharon recognized the importance of being able to offer business valuation services to the clients at Laufer LLP. “At some point in time, a value will need to be placed on nearly every business, whether for a merger or sale of the company, estate taxes, lender financing, employee stock ownership plans, divorce, or a number of other reasons,” said Sharon Cave. “Laufer LLP now has an additional member of the team qualified to perform both business calculations and business valuations for our current and future clients.”

In making the announcement, Laufer LLP’s Managing Partner, Andrew Laufer, CPA said “One of the most exciting things about our firm growth is the opportunity for our team members to grow and develop simultaneously. Sharon truly understands our clients’ businesses and went above and beyond to obtain her CVA in order to widen the array of services we can provide. This is consistent with the fabric of our firm Laufer as clients come to us for comprehensive accounting, tax and advisory services. We are extremely proud of her accomplishment.” 

Please join us in congratulating Sharon on obtaining her Certified Valuation Analyst designation and we welcome your inquiries about business valuation services. 

5/13/2021

IMPORTANT TAX CREDITS FOR ELIGIBLE EMPLOYERS THAT PROVIDE PAID LEAVE TO EMPLOYEES RECEIVING COVID-19 VACCINATIONS

The Internal Revenue Service and the Treasury Department recently announced that eligible employers, can receive a tax credit for providing paid time off for each employee receiving the COVID-19 vaccine and for any time needed to recover from the vaccine.  For example, if an eligible employer offers employees a paid day off in order to get vaccinated, the employer can receive a tax credit equal to the wages paid to employees for that day (limits apply).

As part of the credits available under the American Rescue Plan (ARP), these tax credits are part of a larger effort by the IRS to assist the nation in recovering from the COVID-19 pandemic.  Here are the details about the tax credits and how employers can claim them.

Eligible Employers

An eligible employer is any business, including a tax-exempt organization, with fewer than 500 employees. An eligible employer also includes a governmental employer, other than the federal government and any agency or instrumentality of the federal government that is not an organization described in section 501(c)(1) of the Internal Revenue Code. Self-employed individuals are eligible for similar tax credits.

Paid Sick and Family Leave Tax Credits

Eligible employers are entitled to tax credits for wages paid for leave taken by employees who are not able to work or telework due to reasons related to COVID-19, including leave taken to receive COVID–19 vaccinations or to recover from any injury, disability, illness or condition related to the vaccinations.

Covered Period

The tax credits are available to eligible employers for wages paid for leave taken to receive or recover from COVID-19 vaccinations from April 1, 2021 through September 30, 2021.

Tax Credit Amounts & Calculation

The paid leave credits under the ARP are tax credits against the employer's share of the Medicare tax. The tax credits are refundable, which means that the employer is entitled to payment of the full amount of the credits if it exceeds the employer's share of the Medicare tax.

The tax credit for paid sick leave wages is equal to the sick leave wages paid for COVID-19 related reasons for up to two weeks (80 hours), limited to $511 per day and $5,110 in the aggregate, at 100 percent of the employee's regular rate of pay. The tax credit for paid family leave wages is equal to the family leave wages paid for up to twelve weeks, limited to $200 per day and $12,000 in the aggregate, at 2/3rds of the employee's regular rate of pay. The amount of these tax credits is increased by allocable health plan expenses and contributions for certain collectively bargained benefits, as well as the employer's share of social security and Medicare taxes paid on the wages (up to the respective daily and total caps).

How to Claim the Credit

Eligible employers report their total paid sick and family leave wages (plus the eligible health plan expenses and collectively bargained contributions and the eligible employer's share of social security and Medicare taxes on the paid leave wages) for each quarter on their federal employment tax return, usually Form 941, Employer's Quarterly Federal Tax Return PDF. Form 941 is used by most employers to report income tax and social security and Medicare taxes withheld from employee wages, as well as the employer's own share of social security and Medicare taxes.

In anticipation of claiming the credits on the Form 941 PDF, eligible employers can keep the federal employment taxes that they otherwise would have deposited, including federal income tax withheld from employees, the employees' share of social security and Medicare taxes and the eligible employer's share of social security and Medicare taxes with respect to all employees up to the amount of credit for which they are eligible. The Form 941 instructions PDF explain how to reflect the reduced liabilities for the quarter related to the deposit schedule.

If an eligible employer does not have enough federal employment taxes set aside for deposit to cover amounts provided as paid sick and family leave wages (plus the eligible health plan expenses and collectively bargained contributions and the eligible employer's share of social security and Medicare taxes on the paid leave wages), the eligible employer may request an advance of the credits by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19. The eligible employer will account for the amounts received as an advance when it files its Form 941, Employer's Quarterly Federal Tax Return, for the relevant quarter.

Self-employed individuals may claim comparable tax credits on their individual tax return using the updated forms when they become available.

These tax credits provide more welcome relief to small business employers so we wanted to share the good news with you, particularly as COVID-19 vaccines become more readily available.  

5/5/2021

IF YOUR PPP LOAN ISN'T FORGIVEN, THERE IS ACTION YOU CAN TAKE

If you are a small business owner who took advantage of the first round of Paycheck Protection Program (PPP) loans as part of the CARES Act passed back in March 2020 and administered by the Small Business Administration (SBA), you have probably applied or started to apply for forgiveness.  Unfortunately, many of the PPP borrowers do not know if their loans will be forgiven and what they should do if they are not.

Currently, the SBA is reviewing nearly 200,000 applications for forgiveness and expect another 2.3 applications in the coming months.  The uncertainty confronting borrowers as to whether their loans will be forgiven, and if so, in what amount is clearly unsettling.  Fortunately, there are things borrowers can do now to prepare for the SBA’s forgiveness decision, including not accepting an adverse decision from the SBA that denies forgiveness.

During the SBA’s review of the millions of loan forgiveness applications, there may be some adverse decisions for borrowers.  Referred to as “a final SBA loan review decision,” these adverse decisions generally find that a borrower was ineligible for a PPP loan in whole or in part and/or spent the loan proceeds on unqualified expenses.  To further complicate matters, these adverse decisions may be made after the lender has issued a full or partial approval decision to the SBA, meaning the SBA may disagree with the borrower’s lender.  

As you wait for the “final SBA loan review decision,” be sure you are in communication with your organization’s contact for its PPP loan(s) which in many cases may be your accountant.  If this point of contact is not your accountant, be sure to get your accountant involved as well as the others from your team of trusted advisors such as your banking representative and outside counsel.  They will all need to be ready to assist with an analysis of the SBA’s decision in the event it is unfavorable and requires a response.

If you should receive an adverse decision from the SBA, a PPP loan borrower can appeal the decision, as allowed in the SBA regulations.  The process starts through the filing of a “petition” with the SBA’s Office of Hearing and Appeals (OHA) within 30 calendar days after the borrower’s receipt of the SBA loan review decision by the SBA or their lender.  Failure to meet this deadline will immediately cease a borrower’s attempt to reverse the SBA’s decision, therefore, borrowers must be prepared to act quickly.

The appeal petition must include the following information:

  • The basis for OHA’s jurisdiction, including, but not limited to, evidence that the appeal is timely filed.
  • A copy of the SBA loan review decision that is being appealed, or a description of that decision if a copy is unavailable.
  • A full and specific statement as to why the SBA loan review decision is alleged to be erroneous, together with all factual information and legal arguments supporting the allegations.
  • The relief being sought.
  • Signed copies of payroll tax filings actually filed with the Internal Revenue Service, and state quarterly business and individual employee wage reporting and unemployment insurance tax filings actually reported to the relevant state, for the relevant periods of time, if not provided with the PPP Loan Forgiveness Application (SBA Form 3508, SBA Form 3508EZ or lender’s equivalent), or an explanation as to why they are not relevant or not available.
  • Signed copies of applicable federal tax returns actually filed with the IRS with appropriate schedules (e.g., IRS Form 1040 with Schedule C/F) documenting income for self-employed individuals or partners in a partnership, if not provided with the PPP Borrower Application Form (SBA Form 2483 or lender’s equivalent), or an explanation as to why they are not relevant or not available.
  • The name, address, telephone number, email address and signature of the appellant or its attorney.

The goal of the appeal petition is to convince an administrative law judge (ALJ) that “the SBA loan review decision was based on a clear error of fact or law.”  While difficult to prove, it is required to obtain a reversal of the denial of loan forgiveness by the SBA so you will want to make sure you are prepared to appeal.  The good news is that the appeal process is intended to be fairly quick as the ALJ must review the appeal within 45 days of filing.  However, the ALJ’s final decision may take longer.

If the ALJ does not find in your favor, the last option is to appeal to the federal court to review the ALJ’s decision.  The federal court will review the same information that was reviewed by the ALJ.  If the court finds the ALJ’s decision was made in error, the decision can be reversed, ultimately bringing the relief sought by the borrower.

In summary, while everyone is hoping for a low percentage of adverse decisions by the SBA, preparation will be the key to your success.  Since we do not have a history of litigation of PPP litigation to help organize an appeal, it is important to have a team in place that can assist you.  

4/30/2021

Today is the day restaurant operators can begin the registration process for Restaurant Revitalization Fund grants in preparation for applications opening at noon time EST on Monday, May 3rd. Here is a step-by-step guide from the National Restaurant Association to help you with the application process:

https://restaurant.org/downloads/pdfs/business/applying-for-rrf  

 

4/27/2021

RESTAURANT REVITALIZATION FUND GRANTS TO OPEN ON MAY 3RD

The  Small Business Administration (SBA) has announced that the Restaurant Revitalization Fund (RRF) will open on Monday, May 3rd at noon EST. Restaurant operators can begin the registration process starting on Friday, April 30th at 9:00 am EST by utilizing the SBA RRF portal which you can access by clicking here. Applications will remain open until funding is depleted.

As we previously communicated to you, now is the time to start preparing for your application. Here is what you should do prior to May 3rd:

  • Register for an account on restaurants.sba.gov starting April 30.
  • Review the program guide and sample application.
  • Prepare the required documents, including tax identification numbers and banking information, ownership information, how much you received for first and second-draw PPP loans, and gross receipts. You can read more about acceptable forms of gross receipts here.
  • Work with your POS vendor or submit the application directly through the portal when it opens on Monday.

Please remember that there is a priority period at the time of roll-out whereby the SBA will prioritize businesses owned and controlled by women, veterans and socially/economically disadvantaged individuals. However, all eligible applicants can (and should) apply on day 1. The SBA will only process and fund priority group applications for the first 21 days. On day 22 and until the RRF funds are exhausted, the SBA will accept applications from all eligible applicants and process applications in the order in which they were approved by the SBA. 

4/21/2021

THE TOP 3 THINGS YOU SHOULD DO TODAY TO PREPARE FOR RRF GRANTS

While there is still no specified release date for Restaurant Revitalization Fund (RRF) grant applications, the Small Business Administration recently provided some helpful details. Since we fully expect the phased rollout of grant applications to occur in the very near future, we wanted to share this information to help you prepare as the SBA is strongly recommending operators to apply on the first day applications open due to the forecasted high demand of these grants. Here are the top 3 things you can do now to get yourself ready to apply for an RRF grant.

First, if you haven’t been to the Small Business Administration’s website for RRF grant applications, you’ll want to familiarize yourself with it since that is where you will need to apply. The website went live over the weekend in preparation for the first round of funding and includes a sample application and program guide so operators can begin to prepare for application submission. Click here to visit the SBA website or go to restaurants.sba.gov.

Second, you’ll want to review the information you have received to date, including emails you have received from Laufer LLP regarding program eligibility, funding amounts and allowable use of funds. As you know, the RRF is designed to provide restaurants with funding equal to their pandemic-related revenue loss of up to $5 million per physical location, not to exceed $10 million in total for the applicant and any affiliated businesses, with the minimum award being $1,000. Recipients of RRF grants are not required to repay the funding as long as the money is used for eligible expenses no later than March 11, 2023. If you have any questions about whether or not you should apply for an RRF grant, please contact your team at Laufer ASAP.

Third, be sure to review the sample application on the website which you can review by clicking here. While this is just a sample and applications cannot be submitted to the SBA at this time, you can familiarize yourself with the questions and review the additional documentation that will be required at the time of application including verification for tax information and gross receipts documentation.

If you have already taken the three steps above, you may be wondering when you should apply, particularly since the SBA has indicated there will be a phased roll-out of applications giving certain groups priority over funding. Currently, the priority period for small businesses owned by women, veterans or socially and economically disadvantaged individuals is day 1 through 21 after the opening of RRF grant applications. Keep in mind that all eligible applicants can (and should) apply on day 1; however, the SBA will only process and fund priority group applications for the first 21 days. On day 22 and until the RRF funds are exhausted, the SBA will accept applications from all eligible applicants and process applications in the order in which they were approved by the SBA.

4/19/2021

BEWARE OF TOP 6 COVID-19 VACCINATION SCAMS

As millions of people sign up for COVID-19 vaccines across the United States, dishonest people see yet another opportunity to defraud, cheat or steal from unsuspecting victims. Don't let yourself be swept up in these types of scams. Too often, these con artists make promises that they can't keep, including offers of faster access to vaccine shots or even personalized delivery.

If you fall for one of these bogus claims, you could pay for services or products you'll never receive, and your personal information might be compromised, leading to undesirable financial consequences. Plus, you could miss out on available appointments to receive a legitimate vaccine.

6 COMMON SCAMS

The Federal Trade Commission (FTC), the Federal Bureau of Investigation (FBI) and the U.S. Department of Health and Human Services (HHS) have identified six fraudulent claims that are being made about COVID-19 vaccines.

  1. You must pay up front to receive the vaccine. You do not have to pay anything to get your shot. It's free if administered at an authorized location, including a participating hospital, pharmacy or mass vaccination site (such as a sports stadium, arena or amusement park). To find the list of authorized COVID-19 vaccination locations for your state, visit the Centers for Disease Control and Prevention. Important: In some limited instances, a vaccine provider may charge an administrative fee for which you may be reimbursed through your insurance or, if you're uninsured, the Health Resources and Services Administration. But you won't be turned away at the door. If a provider insists on payment, it's a scam.
  2. You can pay to have your name put on a waiting list. The COVID-19 vaccination process isn't uniform throughout the United States. So, there are no clear rules for how vaccinations are being handled, or should be handled, in your area. In many parts of the country, you'll be contacted to go on a waiting list or to register for a vaccination appointment. Take advantage of these opportunities, but don't be fooled into thinking that you must pay for the privilege.
  3. You can pay a fee to get your vaccine sooner. Each authorized location has a vaccine waiting list. But vaccine administrators are not allowed to accept a payment to move your name higher on the list. If you receive an offer to be vaccinated early in exchange for a payment, report it to the FTC. Note that a fraudster is likely working from a random list that isn't based on your existing vaccination date. So, you may be contacted by these scammers, even if you don't have any appointment yet.
  4. You're asked to schedule an appointment on a suspicious platform. It's hard to keep up with the various entities offering vaccination appointments — and the list seems to grow every day. In general, it's best to stick with scheduling offers being made through state and local agencies, hospitals and approved pharmacies. If you're asked to register on an unfamiliar site or one that closely resembles a familiar one, don't click on any links. The scammer could use your personal information for illegal means.
  5. You can pay to have a vaccine sent to you. Another scam exploits the desire of some Americans to avoid physically visiting vaccination sites where they might come in close contact with someone who has COVID-19 or has been exposed to someone with the virus. Instead, the scammer offers to have the vaccine shipped to your personal residence for a fee. However, state and local authorities and pharmacies aren't shipping out any vaccines. They're only administered at approved sites by personnel who have been specifically trained. Don't pay to have a vaccine shipped to your house. It's unlikely to show up.
  6. You can pay to take tests to obtain a vaccine. Some con artists offer to provide a vaccine appointment only if you submit to additional COVID-19 testing. This scam may include offers through emails, texts or phone contacts, encouraging you to pay for test products and services. Beware: No authorized vaccination providers require this type of testing.

WAYS TO AVOID VACCINATION SCAMS

The FTC recommends checking with state and local health departments for details on the vaccination programs in your area. You also may want to consult with your personal physician, pharmacist or health insurance provider before scheduling an appointment.

Other practical suggestions listed on the FTC website include the following:

  • Don't pay to sign up for the vaccine. There are no charges for making an appointment or getting in line.
  • Rely strictly on approved vaccination providers. Ignore ads to buy the vaccine from other sources.
  • Watch out for suspicious texts. If you're asked to click on a link in a text, verify its legitimacy first. Call someone you trust — perhaps your physician or pharmacist — if you're unsure about the nature of a text.
  • Delete emails and attachments from unknown sources. The scammer could infect your device with malware if you click on a link.

SUMMARY

It's imperative to protect your private information from unscrupulous third parties. No one — not the vaccine distribution site, health care provider, pharmacy, health insurance company or Medicare — will contact you to get your Social Security number or banking information to sign up for your vaccine appointment. Follow the procedures established by your state and local authorities.

4/1/2021

GOOD NEWS FOR RESTAURANTS PLANNING TO APPLY FOR RRF GRANTS!

As we previously communicated to you, the American Rescue Plan Act of 2021 (ARPA) established the Restaurant Revitalization Fund (RRF) within the U.S. Small Business Administration (SBA) allocating over $28 billion in debt-free relief for small and mid-sized restaurants by providing up to $5 million in grants (not loans) for individual restaurants, bars, caterers, breweries and tasting rooms or up to $10 million for restaurant groups. Signed into law on March 12th, we are still unsure of exactly when the SBA will open up the RRF grant applications but we are hearing it will be in early April. 

As we eagerly await the phased opening of grant applications, many restaurant owners have already evaluated their eligibility and are now preparing to apply. The good news is the application process just got a little easier! 

When initially announced, we knew the SBA wanted to help expedite the application process by simply requiring a good faith certification that verifies the uncertainty of current economic conditions makes the grant request necessary to support ongoing operations AND the entity has not applied for, nor has received, a “Shuttered Venue Operators” grant which typically applies to performing arts, live venues, theaters, etc.  Just recently, the SBA also announced that in an effort to simplify the application process, they have eliminated the System for Award Management (SAM) registration process. Therefore, restaurants who seek to participate in the RRF do not need to acquire a DUNS number or register for a SAM.gov account. 

This is good news for restaurant owners planning to apply for an RRF grant as it streamlines the application process by eliminating a major barrier to small businesses pursuing the financial relief they need. If you have already started or finished the process of obtaining these business identifiers, please know it will not impact the grant funds awarded once the program goes live.

For more information about the Restaurant Revitalization Fund including eligibility, distribution and prioritization, we invite you to read our previous article by clicking here.

3/24/2021

EMPLOYEE RETENTION TAX CREDITS PROVIDE HUGE TAX INCENTIVES FOR SMALL BUSINESSES

As you may have heard, the Consolidated Appropriation Act (COVID Relief Bill) passed back in December presents significant benefits for small businesses. One area in particular, Employee Retention Tax Credits (ERTC), provides a huge tax incentive opportunity if properly leveraged. These tax incentives may result in credits of $5,000 per employee in calendar year 2020 and up to $28,000 per employee for 2021.

You will want to work with your trusted advisor to ensure you are taking full advantage of this provision. In the meantime, you may have some questions about ERTC so we wanted to provide you with an overview of the program. There are differing criteria for the years 2020 and 2021 which we have outlined below. While you may not qualify for the ERTC credit in 2020 based on the coverage period, calculations and number of employees, you may be eligible in 2021. It is important to carefully examine the criteria to evaluate all eligibility opportunities.

Am I Eligible?

To receive the ERTC, an employer must qualify as an “eligible employer” which is defined as:

For 2020, am employer that:

  1. Fully or partially suspended its operations due to a governmental order limiting commerce, travel, or group meetings due to COVID-19, or
  2. Had gross receipts for such quarter that were less than 50% of its gross receipts for the same quarter in 2019.

For 2021, am employer that:

  1. Fully or partially suspended its operations due to a governmental order limiting commerce, travel, or group meetings due to COVID-19, or
  2. Had gross receipts for such quarter that were less than 80% of its gross receipts for the same quarter in 2019.

What is the amount ERTC I can receive?

For the year 2020, the employee retention tax credit can be claimed by eligible employers that paid qualified wages after March 12, 2020, and before January 1, 2021. The credit is equal to 50% percent of qualified wages paid, including qualified health plan expenses, for up to $10,000 per employee in 2020, making the maximum credit available for each employee $5,000.

For 2021, the American Rescue Plan Act of 2021 extended ERTC from July 1, 2021 to the end of the year making the credit available for all four quarters of 2021 (January 1 – December 31). The credit is increased from 50% of qualified wages paid to 70%, and qualified wages are increased from $10,000 in total per employee to $10,000 per quarter, per employee. The maximum credit available for 2021 would be $28,000 per employee receiving qualified wages. 

What counts as "Qualified Wages"?

What counts as “Qualified Wages” is different for small and large employers. For small employers, all wages paid to and Qualified Health Plan Expenses paid for all employees for the applicable quarter are considered qualified wages. For large employers, qualified wages are only the wages paid to and Qualified Health Plan Expenses paid for employees for a period or periods that the employees did not perform services for the employer. 

“Qualified Health Plan Expenses” are amounts paid or incurred by an employer to maintain a group health plan that are allocable to Qualified Wages. (This amount includes employer payments plus employee contributions made on a pre-tax basis.) Even if no wages are paid but health plan coverage is provided (e.g., coverage is continued for furloughed employees), the expenses constitute Qualified Health Plan Expenses and as such, are Qualified Wages.

The definitions for “small” and “large” employer are also different for 2020 and 2021:

Small Employer:

For 2020 Q2, Q3 and/or Q4 (for Q2, including March 13 - March 31, 2020): For 2019, averaged 100 or fewer full-time employees (30 hours per week or 130 hours per month).

For 2021: For 2019, averaged 500 or fewer full-time employees.

Large Employer:

For 2020 Q2, Q3 and/or Q4 (for Q2, including March 13 - March 31, 2020): For 2019, averaged more than 100 full-time employees.

For 2021: For 2019, averaged more than 500 full-time employees.

The IRS confirmed in early March that the “full-time employee” test does not take part-time employees into consideration, such that the only employees that will be counted are the ones who, with respect to any calendar month in 2019, had an average of at least 30 hours of service per week or 130 hours of service in the month (130 hours of service in a month is treated as the monthly equivalent of at least 30 hours of service per week). Thus, employers with many part-time employees that would have been “large employers” if they were counted, but are “small employers” without them, will be able to claim far greater ERCs as “small employers.”

Right now, the IRS has only addressed the full-time employee rules applicable to 2020. For more information and to read the full IRS notice, please click here.  We will continue to keep you informed when the IRS releases more guidance to discuss any updates/changes for 2021.

What if I received a PPP loan?

The Consolidated Appropriations Act retroactively expands ERTC to include Paycheck Protection Program (PPP) borrowers among the businesses that can claim the credit between March 12, 2020 and December 31, 2020. This means that all of those PPP borrowers who, in 2020, thought they would not benefit from, or did not have the time to learn the nuances of ERTC, now have the opportunity to do both. If you received a PPP loan in 2020, claiming the credit for 2020 can be a bit tricky as the computations are not easy to do and you will need to prove that the wages were not paid for with forgiven PPP funds.

How do I apply?

There is no application process. Once a business determines they are eligible, they can get immediate access to the credit by reducing employment tax deposits they are otherwise required to make. If the employer’s employment tax deposits are not sufficient to cover the credit, the employer may get an advance payment from the IRS.

Summary

While this email is not comprehensive, you can see there are plenty of ERTC requirements that must be complied with along with many computational rules that must be followed precisely. You will want to know how to determine eligibility, calculate accurate qualified wage and evaluate the impact of other credit and relief provisions. So, while ERTC is a great opportunity for small businesses, there is a level of complexity to the incentives that require assistance from your team of trusted advisors.

3/18/2021

IRS POSTPONES APRIL 15th TAX DEADLINE TO MAY 17th

The IRS has postponed the April 15th individual tax filing deadline to May 17, 2021, giving taxpayers and preparers additional time to file returns during what has become one of the most complicated tax seasons in decades; particularly with the recent passing of the American Rescue Plan Act of 2021. 

The extended deadline does NOT apply to estimated tax payments that are due on April 15, 2021. Typically, estimated tax payments are made quarterly to the IRS by people whose income is not subject to income tax withholding, including self-employment income, interest, dividends, alimony or rental income. These payments are still due on April 15th as taxes must be paid on income received or earned during the first quarter of 2021.

The automatic extension applies only to individual federal income tax returns and payments for 2020 that are due on April 15th; they will be extended to May 17th without penalties and interest. It does not apply state taxes, meaning that we will need to monitor the due dates for individual states as not all states follow the same filing deadline as the federal government.

While the extra month provides us all with a bit of breathing room during an unusually complex tax season, your team from Laufer will be working hard to expedite all tax returns as we receive them, particularly since first quarter estimated tax payments for 2021 are still due on April 15th.

3/11/2021

THE AMERICAN RESCUE PLAN BRINGS OVER $28 BILLION IN RELIEF TO SMALL RESTAURANTS

The American Rescue Plan established the Restaurant Revitalization Fund (RRF) within the U.S. Small Business Administration (SBA) allocating over $28 billion in debt-free relief for small and mid-sized restaurants by providing grants (not loans) to individual restaurants, bars, caterers, breweries, tasting rooms and restaurant groups. Here is an overview of the grant process including eligibility, distribution and prioritization.

GRANT AMOUNT

An eligible business may receive a tax-free federal grant equal to the amount of its pandemic-related revenue loss which is calculated by subtracting its 2020 gross receipts from its 2019 gross receipts.

  • If the business is not in operation for the entirety of 2019, the total grant amount is the difference between 12 times the average monthly gross receipts for 2019 and the average monthly gross receipts in 2020 (or a formula from the SBA).
  • If the business is not in operation until 2020, it can receive a grant equal to the amount of “eligible expenses” subtracted by its gross receipts received (or a formula from the SBA).
  • If the business is not yet in operation as of the application date, but it has made “eligible expenses,” the grant would be made equal to those expenses (or a formula from the SBA).

It is important to note that the calculation of a business’s pandemic-related revenue loss must be reduced by any amounts received from the Paycheck Protection Program (PPP) including the first draw in 2020 and the second draw in 2021. Finally, the total grant amount for an eligible business and any affiliated business is capped at $10 million and is limited to $5 million per physical location of the business.

GRANT ELIGIBILITY

An eligible entity owns or operates 20 or fewer establishments (together with any affiliated business), regardless of ownership type of the locations and whether those locations do business under the same or multiple names, as of March 13, 2020. An affiliated business has an equity or right to profit distribution of 50 percent or more; or has contractual authority to control the direction of the business, provided that such affiliation “shall be determined as of any arrangements or agreements in existence as of March 13, 2020.” Publicly-traded companies are not eligible for RRF grants.

Eligible entities include places of business in which the public or patrons assemble for the primary purpose of being served food or drink and include, but are not limited to: restaurants (full-service and quick-service), food stands, food trucks, food carts, caterers, saloons, inns, taverns, bars, lounges, brewpubs, tasting rooms, tap rooms, etc.

To help expedite the application process, entities can apply using their existing business identifiers, as the SBA will avoid imposing additional burdens on applicants. Entities will need to submit a good faith certification that verifies the uncertainty of current economic conditions makes the grant request necessary to support ongoing operations AND the entity has not applied for, nor has received, a “Shuttered Venue Operators” grant which typically applies to performing arts, live venues, theaters, etc. 

ELIGIBLE EXPENSES & COVERED PERIOD

Similar to PPP loans, grant funds must be spent on payroll, principal or interest on mortgage obligations, rent, utilities, maintenance including construction to accommodate outdoor seating, supplies such as personal protective equipment and cleaning materials, normal food and beverage inventory, certain covered supplier costs, operational expenses, paid sick leave and any other expenses that the SBA determines to be essential to maintaining operations.

Eligible expenses are those incurred from February 15, 2020 to December 31, 2021, or a date determined by the SBA. If all grant funds are not spent by the business, or the business permanently closes before the end of the covered period, the business must return unused funds to the U.S. Department of the Treasury.

RRF DISTRIBUTION & PRIORITIZATION

While the SBA can make adjustments based on demand, currently $23.6 billion is available for the SBA to award in an equitable manner to businesses of different sizes based on annual gross receipts. Another $5 billion is available to businesses with gross receipts of $500,000 or less during 2019.

For the initial 21-day period following enactment, the SBA will prioritize awarding grants to restaurants that are owned and controlled by women, veterans or socially and economically disadvantaged small business concerns.

Currently, we are unsure of exactly when the SBA will open up Restaurant Revitalization Fund grant applications however, in a recent press conference with the Independent Restaurant Coalition, it was stated that the SBA will open the application process “within weeks, not months” of the American Rescue Plan Act of 2021 becoming law. 

As always, your team at Laufer will continue to keep you updated once further guidance from the SBA is released. 

3/11/2021

CONGRESS PASSES AMERICAN RESCUE PLAN ACT OF 2021

The American Rescue Plan Act of 2021 has been passed by the U.S. Senate and House of Representatives, and the President of the United States is expected to signed it into law very soon. The latest stimulus package succeeds the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 and the Consolidated Appropriations Act of 2021, recently passed in December 2020. The Act extends some aspects of the previous bills while also creating new recovery plans and direct aid to restaurants.

At almost two trillion dollars, the plan is designed to facilitate the United States’ recovery from the economic fallout and health effects of the COVID-19 pandemic by mitigating the economic effects of the pandemic with strategies to fight the virus itself. It provides for direct financial payments to individuals (up to $1,400 per individual and dependent), extends unemployment compensation, continues eviction and foreclosure moratoriums and provides funds for state and local governments to help schools re-open and subsidizes COVID-19 testing and vaccination programs.

The new bill is nearly 600 pages long and includes many provisions. For your convenience, this email is to provide you with a high-level summary of the key highlights that have the greatest impact on individuals, businesses and specifically, restaurants.  

  • Direct Financial Payments: The legislation provides for a third economic impact payment to qualifying Americans. Individuals with adjusted gross incomes (AGIs) up to $75,000 and couples with AGIs up to $150,000 per year will receive direct payments of $1,400 per person.  So will each of their dependents regardless of age. Payments to individuals with AGIs over $75,000 will be reduced until they phase out entirely at $80,000 ($160,000 for couples). Eligibility and benefit levels are based on the income reported on 2019 or 2020 income tax filings. It is important to note that restaurants are poised to indirectly benefit from direct payment to US households as restaurants saw an increase in sales following the two stimulus payments distributed in 2020.
  • Extended Unemployment Benefits: The American Rescue Plan extends the current $300 per week supplement from March 14, 2021 to September 6, 2021. In addition, the first $10,200 in 2020 benefits is tax-free for families making less than $150,000 in adjusted gross income, thereby waiving taxes on up to $20,400 of unemployment benefits for married couples. Taxpayers who had taxes withheld from unemployment benefits in 2020 will be able to recover them when they file their 2020 taxes or through an amended tax return if they have already filed. The Act also provides a 100% subsidy of COBRA health insurance premiums so unemployed workers can remain on their employer healthcare plans through the end of September.
  • Moratorium on Foreclosure and Eviction Filings: The national eviction moratorium which ends March 31, 2021 will not change under the plan but additional funding will provide relief to those behind on mortgages, rent and utility bills. The legislation includes $25 billion in emergency rental assistance and $10 billion for mortgage assistance.
  • Expanded Child Tax Credit: The act provides monthly direct deposit payments totaling $3,000 a year for each child ages 6 to 17, and $3,600 for each child under age 6 for couples who make $150,000 or less and single parents who make $112,500 or less. For example, a family with one child under the age of 6 would receive $300 per month and $250 per month for children ages 6 to 17. As written, the bill provides for one year of credit payments.
  • Tax-Free Student Loans: While the plan does not include student loan forgiveness, it does include a provision that any student loan forgiveness passed between December 30, 2020 and January 1, 2026 will be tax free as normally, loan forgiveness would count as taxable income.
  • School Grants: The American Rescue Plan sets aside $130 billion for K-12 education. The money is allocated to assist schools in helping students return to the classroom safely by implementing measures such as reduced class sizes, improved ventilation, and the purchase of personal protective equipment.
  • Pandemic Response: Approximately $50 billion will pay for continuing COVID-19 testing and contact tracing, $19 billion will help increase the size of the public health workforce and $16 billion will fund vaccination programs (vaccine distribution and supply chains).
  • State and Local Government: The American Rescue Plan includes $350 billion in aid to state and local governments to help replace lost tax revenue due to the pandemic.
  • Business Assistance: The Paycheck Protection Program (PPP) will receive an additional $7.25 billion and more non-profit organizations are now allowed to apply for forgivable loans to help cover payroll and other operating expenses. Additionally, the Small Business Administration (SBA) gets $28 billion for a new, pandemic assistance grant program specifically for restaurants and bars (see #10 below).
  • Restaurant Relief Fund: The COVID-relief bill earmarks $28.6 billion in direct aid to restaurants and calls for distributing the money in grants of up to $10 million per entity with a limit of $5 million per physical location (maximum of 20 locations) to be used to cover payroll, rent, utilities and other expenses. The eligibility amount will be determined by subtracting an applicant’s 2020 sales from their 2019 revenues, with the aim of compensating them for what was lost while businesses were closed and the population was advised to stay at home.
  • No Change to Minimum Wage: Over the past several weeks there has been much debate over the gradual minimum wage increase to $15 per hour by the year 2025 that was included in the initial draft of the legislation. This measure has been removed from the final bill and the current federal minimum wage remains at $7.25 per hour.

In summary, the American Rescue Plan stimulus package provides welcome assistance to facilitate the country’s recovery from the devastating economic and health effects of the COVID-19 pandemic. While the bill has been passed by Congress and is waiting to be signed into law by the President, there may be additional informational information and analysis on the legislation. As always, we will keep you updated along the way. 

3/3/2021

IRS PROVIDES NEW GUIDANCE ON EMPLOYEE RETENTION TAX CREDIT AND
PPP FOR 2020

Earlier this week, the IRS released IRS Notice 2021-20 to provide additional guidance for employers claiming the Employee Retention Tax Credit (ERTC) under the CARES Act, as modified by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act). The new guidance addresses ERTC as it applies to qualified wages paid in 2020 (after March 12, 2020 and before January 1, 2021) and is referred to as section 206. Additional information about section 207 of the Relief Act that applies to 2021 qualified wages paid after December 31, 2020 is forthcoming.

As you know, the employee retention tax credit can be claimed by employers that paid qualified wages after March 12, 2020, and before January 1, 2021, and that experienced a full or partial suspension of their operations or a significant decline in gross receipts. The credit is equal to 50% percent of qualified wages paid, including qualified health plan expenses, for up to $10,000 per employee in 2020. The maximum credit available for each employee is $5,000 in 2020.

The Consolidated Appropriations Act (CAA), part of the COVID relief package enacted in December, allowed eligible employers that received a Paycheck Protection Program (PPP) loan to claim the ERTC, though the same wages couldn’t be counted both for seeking forgiveness of the PPP loan and calculating the employee retention tax credit. 

The Laufer team has been helping McDonald’s Owner Operators navigate the complexities of the PPP and ERTC programs but we still had some unanswered questions. One of the most critical questions clarified in IRS Notice 2021-20 is how eligible employers should identify the average number of full-time employees employed during 2019. This information is critical when calculating PPP and ERTC in order to leverage both programs for eligible employers.

IRS Notice 2021-20, pages 56-57 reads:

“The term “full-time employee” means an employee who, with respect to any calendar month in 2019, had an average of at least 30 hours of service per week or 130 hours of service in the month (130 hours of service in a month is treated as the monthly equivalent of at least 30 hours of service per week), as determined in accordance with section 4980H of the Code.

An employer that operated its business for the entire 2019 calendar year determines the number of its full-time employees by taking the sum of the number of full-time employees in each calendar month in 2019 and dividing that number by 12. An employer that started its business operations during 2019 determines the number of its full-time employees by taking the sum of the number of full-time employees in each full calendar month in 2019 in which the employer operated its business and dividing that sum by the number of full calendar months in 2019 in which the employer operated its business.

An employer that started its business operations during 2020 determines the number of its full-time employees by taking the sum of the number of full-time employees in each full calendar month in 2020 in which the employer operated its business and dividing by that number of months, consistent with the approach described above for employers that began business operations during 2019.”

For more information and to read the full IRS notice, please click here. As previously mentioned, Notice 2021-20 addresses only the rules applicable to 2020. We will continue to keep you informed when the IRS releases more guidance to discuss any updates/changes for 2021.

3/1/2021

IRS PROVIDES GUIDANCE FOR EMPLOYERS CLAIMING THE EMPLOYEE RETENTION CREDIT FOR 2020

Additional guidance for employers claiming the Employee Retention Tax Credit (ERTC) under the CARES Act, as modified by the Relief Act of 2020, has been issued by the IRS in IRS Notice 2021-20.  The new guidance addresses ERTC as it applies to qualified wages paid in 2020 (after March 12, 2020 and before January 1, 2021) and is referred to as section 206.  Additional information about section 207 of the Relief Act that applies to 2021 qualified wages paid after December 31, 2020 is forthcoming.

The guidance includes clarifications and describes retroactive changes applicable to 2020, primarily relating to the expanded eligibility for the credit.  It also provides answers to questions such as: who are eligible employers; what constitutes full or partial suspension of trade or business operations; what is a significant decline in gross receipts; how much is the maximum amount of an eligible employer’s employee retention credit; what are qualified wages; how are full-time employees defined and what are affiliated groups and affiliated service groups. 

To read the full IRS notice, please click here.  We recommend business owners read the questions and answers section starting on page 17 as it does a great job answering many of the questions we all had. 

1/12/2021

PPP2 APPLICATION FORM RELEASED

The US Small Business Administration and US Department of the Treasury have released borrower application forms for the second round of PPP loans but there are limitations as to who can apply and at what time. Some lenders started accepting applications from first time borrowers on 1/11/21. Second draw applications can be submitted as soon as 1/13/21 but there may be some restrictions. We recommend speaking with your lender to understand the current limitations and establish a timetable for your application.

For additional information, click here to read an article from the Journal of Accountancy that does a great job of outlining the status of the PPP2 program. It also contains links to the application forms that you can review in order to start preparing should you plan on applying for a PPP2 loan prior to the March 31, 2021 deadline. 

12/28/2020

COVID-19 RELIEF BILL HAS PASSED AND IT'S GOOD NEWS FOR RESTAURANTS AND FRANCHISES!

The U.S. Senate and House of Representatives overwhelmingly passed, and the President of the United States signed into law, the COVID-19 relief bill that provides stimulus payments to individuals, extends weekly unemployment benefits and provides more than $300 billion in aid for small businesses. Totaling over $900 billion, it succeeds the Families First Coronavirus Response Act (FFCRA) and Coronavirus Aid, Relief and Economic Security Act (CARES) to provide continued support during the COVID-19 health crisis and associated economic fallout.

The new bill is similar to previously passed legislation however, it includes several key provisions that are of significant benefit to restaurants which of course, we are eager to share with you:

  1. Round 2 of PPP Loans (PPP2): $325 billion in aid has been made available for small businesses struggling after nine months of pandemic-related economic hardships. The bill provides more than $284 billion to the U.S. Small Business Association (SBA) for a second round of PPP loan funding to assist small businesses, self-employed individuals and non-profit organizations during the COVID-19 pandemic (see more information below) and allocates another $20 billion to provide EIDL grants to businesses in low-income communities. Additionally, live venues, independent movie theaters and cultural institutions that have closed will have access to $15 billion in dedicated funding with $12 billion set aside to help businesses in low-income and minority communities. See more information below regarding PPP2 including eligibility and loan amounts.
  2. Tax Deductibility: The new bill specifies that qualified business expenses paid with forgiven PPP loans are tax-deductible. This supersedes IRS guidance that such expenses could not be deducted and brings the policy in line with what the American Institute of Certified Public Accountants (AICPA) and hundreds of other business associations have argued was Congress’s intent when it created the original PPP as part of the $2 trillion CARES Act. The COVID-19 relief bill clarifies that “no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided”. This means that both PPP loans and EIDL grants are not considered taxable income. Additionally, EIDL grants no longer reduce PPP loan forgiveness by the grant amount.
  3. Expanded Business Meal Deduction: The bill temporarily allows a 100% business expense deduction for meals (rather than the current 50%) as long as the expense is for food or beverages provided by a restaurant and is paid or incurred after December 31, 2020 and before January 1, 2023.
  4. Temporary Enhancements to SBA Lending Programs (non-PPP): The bill contains temporary enhancements to SBA loans (not including Paycheck Protection Program) such as no fees for 504 loans, an increase in 7(a) loan guarantee to 90% with no fees, extension of CARES Act principal and interest waiver for new and existing 7(a), 504 and micro-loans; and restaurants are authorized to take an additional 8 months of principal and interest paid by the government for SBA loans taken prior to the enactment of the CARES Act.
  5. Work Opportunity Tax Credit (WOTC): WOTC is extended by five years, granting support for restaurants that hire, train and retain employees from specific target groups who have consistently faced significant barriers to employment.
  6. Employee Retention Tax Credits (ERTC): Significant changes were made to the ERTC in two areas - Section 206 and 207. It is important to distinguish between the two sections as Section 206 changed who may claim the ERTC, but did not change the computation rules. This section is applicable for the period March 12, 2020 through December 31, 2020. Section 207 of the act extends the ERTC to cover the period January 1, 2021 until July 1, 2021. This section substantially changes the computation rules for this period and includes the following changes:
  • The credit percentage is increased from 50% to 70% of qualified wages.
  • Qualified wages are increased from $10,000 in total per employee to $10,000 per quarter, per employee.
  • ERTC cap is increased to $7,000 for each of the first two quarters of 2021 ($10,000 in qualified wages x 70% tax credit rate so that the maximum credit for 2021 will be $14,000 per employee) and is available even if the employer received the $5,000 maximum credit for wages paid to such employee in 2020.
  • Qualified wage restrictions apply at 500 full-time equivalents (FTEs), rather than 100.
  • Drop in gross receipts requirement decreases from 50% to 20% over a prior quarter.

PPP2 LOAN SPECIFICS

ELIGIBILTY

  • First-Time Borrowers: If a small business missed the first round of PPP funding, they will be eligible for a loan under PPP2 if they have 500 or fewer employees and are eligible for other SBA 7(a) loans. This includes sole proprietors, non-profit organizations (including churches) independent contractors and eligible, self-employed individuals. Accommodation and food service operations (those with NAICS codes starting with 72) are eligible as long as they have 300 or fewer employees per physical location.
  • Second-Time Borrowers (“Second Draw Loans”): Businesses who received a PPP loan during the first round of funding (PPP1) are eligible for another loan under PPP2 if they can prove to be “hardest hit” by the COVID-19 pandemic. These businesses must have 300 or fewer employees, be able to show a decrease in revenue of 25% or more in any quarter in 2020 compared to the same quarter in 2019 AND must have used or will use the full amount of their first PPP loan. The borrower can select the most appropriate quarter, and both PPP and EIDL funds from the SBA are not included in the calculation of revenue. Second-time borrowers can expect a tiered system, similar to the first round of funding, whereby certain loan amounts will only require self-certification of loan necessity (i.e. loans under $150,000 could be self-certified) while others will have documentation requirements. All loans will be subject to review by the Small Business Administration.

LOAN OVERVIEW

  • Loan Amount: The maximum loan amount for a PPP2 loan is $2 million and is calculated by multiplying average total monthly payroll costs as an average of either monthly payroll for 2019 or the monthly payroll for the 12-month period before the origination of the second PPP loan by 2.5 for all small business other than restaurants. In other words, the second round of PPP loans is meant to fund 2.5 months of payroll expenses. PPP borrowers with NAICS codes starting with 72 (hotels and restaurants) can get up to 3.5 times their average monthly payroll costs, again subject to a $2 million maximum loan amount.
  • Loan Forgiveness: Qualified business expenses eligible for loan forgiveness are consistent with PPP1 and include payroll costs, covered mortgage interest, rent and utility payments with a 60/40 allocation between payroll and non-payroll expenses. They also include worker protection expenditures and facility modification costs to comply with COVID-19 federal health and safety guidelines, supplier costs essential to the borrower’s current operations and operating costs related to software or cloud computing services. Both first-time and second draw loans are eligible for forgiveness and must be spent within either 8 weeks or 24 weeks of loan origination. The legislation is simplifying and accelerating loan forgiveness for loan amounts of $150,000 or less by requiring borrowers to sign and submit a two-page form that attests to compliance with PPP requirements. The SBA must create the simplified forgiveness application form within 24 days of the bill’s enactment and may not require additional materials unless necessary to substantiate revenue loss requirements or satisfy relevant statutory or regulatory requirements. Borrowers are required to retain relevant records related to employment for four years and other records for three years, as the SBA may review and audit these loans to check for fraud.
  • Tax Deductibility for PPP Expenses: As mentioned above, the new bill specifies that qualified business expenses paid with forgiven PPP loans are tax-deductible which is fantastic news for PPP borrowers.

In summary, the new stimulus bill provides welcome tax relief to both businesses and individuals. While the bill has been passed by Congress and signed into law by the President, the SBA and U.S. Department of the Treasury are now tasked with providing interpretive guidance and forms for the new forgiveness rules, as well as loan applications and guidelines for second draw PPP loan borrowers. They will need time to translate the bill and will release information as they do. We will keep you updated along the way. For more information about what the COVID-19 relief bill means for restaurants, click here to read information recently released by the National Restaurant Association.

12/18/2020

A SNEAK PEEK AT THE SECOND ROUND OF PPP LOAN FUNDING

As you know, Congress continues to deliberate on renewed economic stimulus to assist small businesses whose survival may depend on a second round of funding. Currently, the US Senate is proposing another $748 billion to provide emergency assistance for American families, workers and small businesses. Under the current proposed stimulus package, $300 billion is being allocated to the Small Business Administration (SBA) for a second round of PPP loans (PPP2), the loan forgiveness process is being simplified for borrowers with PPP loan amounts less than $150,000 and qualified business expenses paid for with the proceeds of PPP loans will be tax deductible. This is all good news for businesses and while the legislation is currently in draft form, thereby subject to additional negotiation, there appears to be confidence that a package will be passed before the end of the year, if not in the coming days. We know our clients are eager to learn about the current proposal and wanted to share the framework of what we’ve been hearing about PPP2, particularly since businesses will need to be prepared and ready to go once PPP2 funding is authorized.

ELIGIBILTY

Under the current legislative proposal, round two of Paycheck Protection Program loans has two eligible groups of borrowers:

  1. First-Time Borrowers: If a small business missed the first round of PPP funding, they will be eligible for PPP2 if they have 500 or fewer employees, making them eligible for other SBA loans. This includes sole proprietors, independent contractors and eligible, self-employed individuals. Non-profit organizations, including churches, are also eligible if they have 150 or fewer employees. Lastly, any business that averages less than 500 employees per physical location that has a NAICS code starting with 72 (accommodation and food services) is also eligible.
  2. Second-Time Borrowers: Businesses who did receive a PPP loan during the first round of funding (PPP1) are eligible for another loan under PPP2 if they can prove to be “hardest hit” by the COVID-19 pandemic. These businesses must have 300 or fewer employees AND be able to show a 30% decrease in gross receipts in any quarter in 2020 compared to the same quarter in 2019. The borrower can select the most appropriate quarter, and funds from the SBA’s Economic Injury Disaster Loan (EIDL) and Paycheck Protection Program (PPP) are not included in the calculation of gross receipts. Second-time borrowers can expect a tiered system, similar to the first round of funding, whereby certain loan amounts will only require self-certification of loan necessity (i.e. loans under $150,000 could be self-certified) while others will have documentation requirements. All loans will be subject to review by the Small Business Administration.

LOAN OVERVIEW

  1. Loan Amount: The maximum loan under for a PPP2 loan is $2 million and is calculated by multiplying average total monthly payroll costs by 2.5.
  2. Loan Forgiveness: Qualified business expenses eligible for loan forgiveness is consistent with PPP1 and include payroll costs, covered mortgage interest, rent and utility payments with a 60/40 allocation between payroll and non-payroll expenses. They also include worker protection expenditures and facility modification costs to comply with COVID-19 federal health and safety guidelines, supplier costs essential to the borrower’s current operations and operating costs related to software or cloud computing services. The current legislative proposal aims to simplify and accelerate loan forgiveness for loan amounts of $150,000 or less by requiring borrowers to sign and submit a one-page form that attests to compliance with PPP requirements. For loans between $150,000 and $2,000,000, there are discussions about requiring less documentation (i.e. FTEs, payroll, receipts, etc.) as long as the borrower retains relevant records related to employment for 4 years (some records for 3 years) and forgiveness applications are deemed as complete by the lender.

TIMING

While the proposal has not yet been finalized, if it passes prior to the end of the year or even in the coming days, it will likely be implemented very quickly. Therefore, businesses that believe they may be eligible for a PPP2 loan should begin to prepare and gather their documentation now in order to expedite the application process in this second round.

We will continue to keep you updated as more information about the next round of PPP loans becomes available. In the meantime, we hope this information answers some of the many questions you may have about PPP2. Please keep in mind that this article is based on the current legislative proposal which is presently in draft form and therefore, subject to change.

As always, your Laufer team is here to answer any additional questions you may have. Please call the office at (631) 226-9600 to speak with us about your individual situation. And be sure to follow us on LinkedIn and Facebook; and visit our COVID-19 Update page on our website to stay up-to-date on new information as it becomes available. 

12/3/2020

PPP DEDUCTIBILITY ACTION ALERT

As a follow up to our message on 11/30/2020, “AICPA Urges Congress to Allow PPP Expense Deductibility” below is a letter McDonald’s Owner Operators can use to reach out to their federal legislators and join in the national effort.

https://mcdonalds.quorum.us/campaign/28207/

11/30/2020

AICPA URGES CONGRESS TO ALLOW PPP EXPENSE DEDUCTIBILITY

The American Institute of Certified Public Accountants (AICPA) has joined more than 170 other organizations in urging Congress to allow businesses that received Paycheck Protection Program (PPP) loans to deduct their business expenses, even if their loans are forgiven.  This effort began in August and now the AICPA is urging CPAs to contact their representatives in Congress to support their effort.

Rest assured Laufer LLP will be taking action to advocate for our clients as we find the current ruling to be counterintuitive to the goals and benefits of the Paycheck Protection Program (PPP) particularly since it was initially stated that forgiven loan proceeds would be tax-free and expenses such as wages, rent, etc. are typically fully deductible. 

For more details about the mobilization of this national effort, click here.  We are encouraging business owners to reach out to their federal legislators and get involved. We are also working on a sample letter for clients to utilize and will post it to our website in the coming days.  As always, we will continue to monitor the situation and keep you informed along the way.

11/19/2020

SENATE FINANCE COMMITTEE SAYS TREASURY HAS "MISSED THE MARK" ON LATEST DEDUCTIBILITY GUIDANCE (FOLLOW UP TO ARTICLE BELOW)

As you may have heard, the IRS, together with the U.S. Treasury, released two Revenue Procedures on 11/18 reinforcing their initial guidance in April and confirming expenses paid with PPP loan funds are not deductible subject to the amount of PPP loan proceeds forgiven. The IRS went on to state that even if PPP loan forgiveness had not happened yet in 2020, but forgiveness is “reasonably expected to occur," then the disallowance of expenses happens in the year borrowed which would be tax year 2020. Ultimately, the result is that the borrower's taxable income would increase by the PPP loan amount.

Shortly thereafter, Senate Finance Committee Chairman Chuck Grassley and Ranking Member Ron Wyden released the following joint statement regarding the Department of the Treasury’s PPP loan expense deductibility guidance:

“Since the CARES Act, we’ve stressed that our intent was for small businesses receiving Paycheck Protection Program loans to receive the benefit of their deductions for ordinary and necessary business expenses. We explicitly included language in the CARES Act to ensure that PPP loan recipients whose loans are forgiven are not required to treat the loan proceeds as taxable income. As we’ve stated previously, Treasury’s approach in Notice 2020-32 effectively renders that provision meaningless.

“Regrettably, Treasury has now doubled down on its position in new guidance that increases the tax burden on small businesses by accelerating their tax liability, all at a time when many businesses continue to struggle and some are again beginning to close. Small businesses need help maintaining their cash flow, not more strains on it.

“While we continue our efforts to clarify in any end-of-year legislation the intended relief in the CARES Act, we have an opportunity to provide meaningful relief to small businesses at this critical time. We encourage Treasury to reconsider its position on the deductibility of these expenses, and the timing of those deductions, to provide relief to the small businesses that need it most.”

This is good news for small business owners as we were hoping Congress would intervene to correct the taxability issue on PPP funds. As always, we will continue to monitor the situation and keep you informed along the way, particularly as this becomes critically important in year-end tax planning.

11/19/2020

U.S. TREASURY AND IRS ISSUE GUIDANCE CLARIFYING THE DEDUCTIBILITY OF EXPENSES WHERE A BUSINESS RECEIVED A PPP LOAN THAT HAS NOT BEEN FORGIVEN BY 12/31/2020

Back in April, we informed you that the IRS had provided guidance related to the deductibility for Federal income tax purposes on covered expenses paid with PPP loans that are subsequently forgiven.  The disallowance of expenses creates taxable income and the IRS position was that forgiven proceeds of PPP loans are not taxable, but the expenses paid by the Company using these funds are not deductible.

At the time, we found this ruling to be counterintuitive to the goals and benefits of the Paycheck Protection Program (PPP) particularly since it was initially stated that forgiven loan proceeds would be tax-free and expenses such as wages, rent, etc. are typically fully deductible.  Our thought was that Congress may intervene to correct the taxability issue on PPP funds, but we wanted our clients to plan accordingly in the event that did not happen. We are still hopeful this will happen.

Unfortunately, the IRS released two Revenue Procedures last night reinforcing the initial guidance received in the spring and confirming expenses paid with PPP loan funds are not deductible subject to the amount of PPP loan proceeds forgiven.  Additionally, even if loan forgiveness hasn’t happened yet, borrowers cannot deduct expenses paid for with PPP funds if they reasonably believe the loan will be forgiven.    If loan forgiveness is “reasonably expected to occur” then the disallowance of expenses happens in the year borrowed, this would be tax year 2020. 

While there is still an opportunity for Congress to override this decision, small businesses should anticipate the current Rev. Proc. 2020-27 and 2020-51 as they engage in year-end tax planning.  We will continue to monitor the situation and keep you informed along the way.

10/30/2020

SBA ISSUES LOAN NECESSITY QUESTIONNAIRE TO BORROWERS WITH PPP LOANS OF $2M OR MORE

The Small Business Administration (SBA) has started sending Loan Necessity Questionnaires to borrowers with Paycheck Protection Program (PPP) loans totaling $2 million or more.  The questionnaire is designed to assist the SBA in evaluating the borrower’s good-faith certification of the economic need for their loan.  The SBA has developed two different version of the loan necessity questionnaire: one for for-profit borrowers, and the other for non-profit borrowers.  The questionnaires can be found here:

For-Profit Loan Necessity Questionnaire

Non-Profit Loan Necessity Questionnaire

PPP lenders who have submitted decisions on loan forgiveness for PPP borrowers will receive notifications through the SBA Forgiveness Platform requesting the completion of the questionnaire.  SBA has noted that lenders are not required to verify or validate the borrowers’ responses or any required supporting documentation.

9/15/2020

MEET NEW FORM 1099-NEC

The IRS has moved 1099-MISC Box 7, “Non-Employee Compensation” to a new form, the 1099-NEC.  This form is effective starting tax year 2020 so please be sure to read the following article published by AccountingToday so you are prepared to file your 1099s correctly in January 2021.

https://www.accountingtoday.com/opinion/meet-the-1099-nec

8/31/2020

IRS STATES COMPANIES ARE REQUIRED TO WITHHOLD AND PAY DEFERRED PAYROLL TAXES

On August 8th, President Donald Trump ordered a payroll tax deferral for the employee portion of the old-age, survivors and disability insurance (OASDI) tax . This deferral requires  employers to stop withholding the OASDI taxes for workers who earn less than $4,000 every two weeks or approximately $104,000 annually.  On Friday, August 28th the IRS issued guidance on President Trump’s order stating that employers will be responsible for collecting and paying back any payroll taxes that were deferred from September 1st through December 31st of this year to ensure they are paid by April 30th of next year.  This means that the payroll taxes deferred in 2020 will need to be withheld from employees from January 1, 2021 through April 30th, 2021 so workers potentially will have double the deduction taken from their paychecks next year to pay back the deferred payroll taxes from this year.

This is the current guidance unless Congress votes to forgive the liability and as you can imagine, it leaves us with numerous questions.  Do employers have to participate in the payroll deferral?  If they do, what happens if an employee quits before the end of the year?  With the payroll tax deferral set to  begin on September 1st there is little time to decide whether to proceed as usual or reprogram payroll systems to accommodate the deferral.  We recommend companies with employees read the article below that contains information from the IRS as well as a copy of the letter written by the AICPA that outlines open issues regarding the implementation of the presidential memorandum.   As always, we will continue to keep you updated as new information is released. 

https://www.journalofaccountancy.com/news/2020/aug/irs-payroll-tax-deferral-guidance.html

8/14/2020

SBA OFFERS GUIDANCE ON APPEALING REJECTIONS OF PPP LOAN FORGIVENESS

The U.S. Small Business Administration has posted rules about how businesses who have been turned down for forgiveness of their Paycheck Protection Program loans can appeal the decision, and about how forgivable PPP loans interact with the SBA’s Economic Injury Disaster Loans.  A recent article published by AccountingToday does a great job of summarizing the interim final rule.  Click here to read.

8/10/2020

PPP LOAN FORGIVENESS APPLICATION *UPDATE*

Last week the Small Business Administration (SBA), in consultation with the U.S. Department of the Treasury, released their updated Paycheck Protection Program (PPP) Frequently Asked Questions document to provide additional guidance on PPP loan forgiveness. While the updated document does provide us with some supplemental information including caps on owner compensation, the treatment of health insurance and retirement expenses and timing of payroll cycles, there are still areas of the loan forgiveness application process that lack clarity and leave us with many unanswered questions.  We will continue to monitor the situation and keep you updated as additional guidance is released.

7/23/2020

CARES ACT PAYROLL TAX DEFERRAL *UPDATE*

The Coronavirus, Aid, Relief and Economic Security Act (CARES Act) permits employers to defer the deposit and payment of the employer's portion of Social Security taxes (6.2% of wages up to $137,700 for 2020) with 50% of the tax payable by December 31, 2021 and the remaining 50% payable by December 31, 2022. The IRS recently updated its frequently asked questions (FAQs) following the enactment of the Paycheck Protection Program Flexibility Act of 2020. Here is an overview of the most notable changes, as previously not all employers were able to participate in this deferral program:

  • All employers may defer the deposit and payment of the employer’s share of Social Security tax.
  • Employers can begin deferring deposit and payment of the employer’s share of Social Security tax without incurring failure to deposit and failure to pay penalties during the period beginning on March 27, 2020 and ending December 31, 2020 (this is known as the "payroll tax deferral period").
  • Small businesses that received a fully or partially forgiven PPP loan can now defer the deposit and payment of the employer’s share of Social Security tax. (Initially, the CARES Act, enacted into law on March 27, 2020, excluded employers with forgiven PPP loans from deferring the deposit of their Social Security taxes. However, when the PPP Flexibility Act was enacted into law on June 5, 2020, the CARES Act was amended to remove this exclusion.)
  • Self-employed individuals are eligible to defer payment of self-employment tax on net earnings from self-employment income.
  • Employers that take the FFCRA paid leave or the Employee Retention Credit are not disqualified from making the payroll tax deferral.
  • Employers that made payroll tax deposits before learning they were eligible for the deferral and filed their 941s due April 30, 2020 may consider whether they should file amended returns for the first quarter to retroactively treat first quarter deposits as deposits of taxes other than the employer’s share of Social Security taxes, thereby benefiting from the deferral for that period as well.
  • The IRS released a final Form 941 (the employment tax return to be used by employers for the second, third and fourth quarters of 2020) which has been updated to reflect the most recent changes and can be accessed by clicking here.

In summary, the payroll tax deferral under the CARES Act is helpful to employers who are facing a decrease in cash flow, reduced liquidity or simply want to manage their cash utilizing all available programs from the CARES Act. As with other provisions in the CARES Act, the intention is to incentivize employers to continue to keep their employees on payroll by postponing the payment of tax expenditures, as this can be a tool to help you manage your liquidity. Please note this is simply a deferral and you should discuss this with your advisor to determine if it is right for you. 

6/12/2020

PPP FORGIVENESS UPDATE

On June 5, 2020 the Paycheck Protection Program Flexibility Act (PPPFA) of 2020 was signed into law, amending the CARES Act to loosen restrictions on PPP loans, making loan terms more favorable for borrowers.  Last night (6/11), the Small Business Administration (SBA) announced an update to their interim final rule by clarifying key provisions such as loan maturity, deferral of loan payments and forgiveness provisions to conform with the Flexibility Act.  To read the all of the guidance in the SBA’s interim final rule click here.

When the PPPFA was signed into law, we were concerned about a possible stipulation in the Act whereby in order to qualify for ANY forgiveness, a minimum of 60% of the loan proceeds must be spent on payroll costs.  The SBA’s interim final rule clarifies that the 60% requirement is not a threshold for receiving any loan forgiveness, but instead is “a proportional limit on payroll costs as a share of the borrower’s loan forgiveness amount.”  This means that partial forgiveness is still available for borrowers who do not meet this threshold.

Now that we have guidance from the SBA that is consistent with the PPFA, we continue to consider the new legislation as good news for PPP loan borrowers as it provides them with more time and flexibility to make qualifying expenditures for loan forgiveness under the Paycheck Protection Program.

6/6/2020

PAYCHECK PROTECTION PROGRAM FLEXIBILITY ACT OF 2020 HAS BEEN PASSED

The Paycheck Protection Program Flexibility Act of 2020 (PPPFA) was signed into law on June 5, 2020 providing more expansive support to small businesses impacted by COVID-19. The PPPFA amends the original CARES Act to loosen restrictions on PPP loans, making loan terms more favorable for borrowers.

As you know, your team from Laufer LLP has been studying the details of the Paycheck Protection Program while proactively seeking guidance on the multiple rounds of guidance issued by the SBA in consultation with the U.S. Department of the Treasury over the past two months. We will continue to do the same when the SBA provides updated information related to the PPPFA and will schedule a webinar to provide all of the details including direction on how to accurately apply for loan forgiveness. In the meantime, here is an overview of the changes we may see to the PPP:

  • Under the PPPFA, the forgiveness period for the use of PPP funds will be extended from eight weeks after the loan is funded to the earlier of 24 weeks after origination or December 31, 2020.
  • PPPFA reduces the amount of loan proceeds to be spent on payroll costs to qualify for forgiveness from 75% of proceeds to 60% of proceeds. The remainder (up to 40%) of the loan proceeds can be used on qualifying expenses such as rent, utilities and interest on other obligations incurred prior to the covered period.
  • Currently, loan forgiveness is based on employers maintaining employment and salary levels and is reduced if they are not maintained/restored by June 30, 2020. The new legislation would extend this date to December 31, 2020 giving businesses an additional six months to rehire employees or restore payroll levels without incurring any reduction in the forgiven amount.
  • PPPFA provides an exception to the requirement that loan forgiveness be reduced if there is a decrease in FTE employees, if the borrower, in good faith, documents (a) its inability to rehire an individual who was an employee of the borrower on or before February 15, 2020; and its inability to hire a similarly qualified FTE employee on or before December 31, 2020 or (b) its inability to return to the same level of business activity at which such business was operating prior to February 15, 2020 due to compliance with government requirements or guidance relating to standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19.
  • Under the PPPFA, small businesses that receive PPP loan forgiveness will be permitted to defer the payment of certain payroll taxes until the end of 2020.
  • For small businesses who receive a PPP loan after the enactment of PPPFA, unforgiven loans (or portions of loans) will be guaranteed by the SBA with an interest rate of 1% and loan term of 5 years. Loan payments will be deferred for 10 months however, interest will accrue during this time period. This would supersede the previous SBA rule that borrowers must repay the loan in two years with a 6 month deferral.

In summary, the passage of the PPP Flexibility Act is good news for PPP loan borrowers as it provides them with more time and flexibility to make qualifying expenditures for loan forgiveness under the Paycheck Protection Program, and allows businesses with forgiven loans to defer payroll taxes.

Stay tuned for additional information and an invitation to our upcoming webinar that will outline all of the details once released by the Small Business Administration (SBA). 

5/24/2020

SBA CLARIFIES "PAID/INCURRED" PAYROLL AND NONPAYROLL COSTS FOR PPP FORGIVENESS

The Small Business Administration (SBA) just released the Interim Final Rule on Loan Forgiveness which provides additional guidance on payroll costs and nonpayroll costs as they apply to PPP Loan Forgiveness. Initially, the loan forgiveness application lacked clarity regarding the timing and payment of payroll and nonpayroll costs making it difficult for borrowers to complete the application accurately and to their benefit. We have now received the guidance we need and the rules are of great benefit to McDonald’s Owner Operators.

Payroll Costs

Payroll costs are generally eligible for forgiveness if they are paid and incurred during the 8-week Covered Period (56 days starting the date loan funds are received by the borrower) or Alternative Payroll Covered Period (56 days starting the first day of the first payroll cycle in the Alternative Payroll Covered Period). As we know, payroll costs are generally incurred on the day the employee’s pay is earned and considered paid on the day that paychecks are distributed or the borrower originates an ACH transaction. So, the question arises "What if payroll costs are incurred during the 8-week (56 day period) but not paid during the Covered or Alternative Payroll Covered Period due to the borrower’s payroll cycle?" 

The SBA’s clarification on the timing and payment of payroll costs, specifically the reference to "paid and incurred", implies there is potential for borrowers to recognize greater than 56 days of payroll costs. Consider the following example from the SBA:

"A borrower has a bi-weekly payroll schedule (every other week). The borrower’s eight-week covered period begins on June 1 and ends on July 26. The first day of the borrower’s first payroll cycle that starts in the covered period is June 7. The borrower may elect an alternative payroll covered period for payroll cost purposes that starts on June 7 and ends 55 days later (for a total of 56 days) on August 1. Payroll costs paid during this alternative payroll covered period are eligible for forgiveness. In addition, payroll costs incurred during this alternative payroll covered period are eligible for forgiveness as long as they are paid on or before the first regular payroll date occurring after August 1. Payroll costs that were both paid and incurred during the covered period (or alternative payroll covered period) may only be counted once."

This is good news for PPP borrowers and provides many Owner Operators with a significant planning opportunity. We recommend speaking with your accountant to determine which method (Covered Period or Alternative Payroll Covered Period) is most advantageous to you.

Nonpayroll Costs

In general, nonpayroll costs are eligible for forgiveness if they were paid during the covered period; or incurred during the covered period and paid on or before the next regular billing date, even if the billing date is after the covered period. This is a huge win for McDonald’s Owner Operators as borrower’s may be able to qualify for more than two payments of mortgage interest, rent and utility payments as long as they do not exceed 25% of the loan amount. Here’s an example provided by the SBA:

“A borrower’s covered period begins on June 1 and ends on July 26. The borrower pays its May and June electricity bill during the covered period and pays its July electricity bill on August 10, which is the next regular billing date. The borrower may seek loan forgiveness for its May and June electricity bills, because they were paid during the covered period. In addition, the borrower may seek loan forgiveness for the portion of its July electricity bill through July 26 (the end of the covered period), because it was incurred during the covered period and paid on the next regular billing date.

The Administrator, in consultation with the Secretary, has determined that this interpretation provides an appropriate degree of borrower flexibility while remaining consistent with the text of section 1106(b). The Administrator believes that this simplified approach to calculation of forgivable nonpayroll costs is also supported by considerations of administrative convenience for borrowers, and the Administrator notes that the 25 percent cap on nonpayroll costs will avoid excessive inclusion of nonpayroll costs.”

Again, the SBA’s clarification on the timing and payment of payroll and nonpayroll costs with regard to PPP loan forgiveness is good news for business owners. We will continue to monitor the situation and keep you apprised of any new or revised guidance on the Paycheck Protection Program. 

5/15/2020

SBA RELEASES PPP LOAN FORGIVENESS APPLICATION

The Small Business Administration and Treasury Department released the application for business owners to complete in order to have their Paycheck Protection Program loans forgiven.  Borrowers should complete the application and submit it to their lender, who will ultimately be responsible for evaluating forgiveness.  Click here for the application.

5/13/2020

SBA ANNOUNCES SAFE HARBOR FOR PPP LOANS LESS THAN $2M

The Small Business Administration (SBA) continues to release additional guidance on Paycheck Protection Program (PPP) loans. The most recent guidance, issued on May 13th, is regarding FAQ #46 in the SBA’s FAQ document:

"How will SBA review borrowers' required good-faith certification concerning the necessity of their loan request?"

As you know, this is the guidance McDonald's Owner Operators have been waiting for after FAQ #37 was announced on April 28th stating that private companies "must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business” and giving borrowers until May 14th to return the funds should they no longer meet the self-certification criteria.

According to today's newly released guidance from the SBA, it appears all PPP loans with an original principal amount of less than $2M will automatically be deemed to have made the required certification concerning the necessity of the loan in good faith:

“SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.

SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees. In addition, given the large volume of PPP loans, this approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns.

Importantly, borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance. SBA has previously stated that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form. If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request. SBA’s determination concerning the certification regarding the necessity of the loan request will not affect SBA’s loan guarantee.”

This is good news for business owners who received PPP loans under $2M and were concerned by the lack of clarity in FAQs #31 and #37. For business owners who received over $2M in funding and are confident they meet the required certification, we encourage you to continue working with your team of professional advisors to ensure you are properly documenting and tracking your PPP loan. The SBA is continuing to produce new and revised guidance on the Paycheck Protection Program and we will continue to keep you updated.

5/6/2020

SAFE HARBOR DEADLINE EXTENDED FOR PPP LOANS

As we previously noted in our alert dated 5/3/2020, the SBA released guidance stating that any borrower who applied for a PPP loan prior to the issuance of FAQ 31 on April 23rd will be deemed to have made the necessity certification in good faith if the loan is repaid in full by May 7, 2020.  On May 5th, the SBA issued new FAQ 43 extending the deadline for the safe harbor until May 14, 2020.  FAQ 43 also states that the SBA intends to provide additional guidance on how it will review the necessity certification prior to May 14, 2020.  Accordingly, borrowers who are considering repaying the loan should strongly consider doing so prior to May 14, 2020, but may wish to wait for additional guidance. 

The FAQs document was released by the SBA in consultation with the U.S. Department of the Treasury on April 3rd due to the lack of clarity surrounding PPP loans.  The document is intended to address borrower and lender questions concerning PPP implementation.  To see the FAQ document in its entirety, click here.

5/4/2020

PPP LOAN FORGIVENESS NOT AFFECTED BY EMPLOYEES DECLINING RETURN TO WORK

If you have applied for a PPP loan, received funding and have started your 8-week forgiveness period then you are working hard to plan and track expenses in order to maximize loan forgiveness.  You also know that several areas of the forgiveness criteria still need clarification and the team at Laufer LLP promised to keep you informed along the way.

The most recent guidance, issued on May 3rd, is regarding FAQ #40 in the SBA’s FAQs document:

“Will a borrower’s PPP loan forgiveness amount (pursuant to section 1106 of the CARES Act and SBA’s implementing rules and guidance) be reduced if the borrower laid off an employee, offered to rehire the same employee, but the employee declined the offer?”

We know the answer to this question is critically important to McDonald’s Owner Operators, particularly due to the $600 per week in federal government unemployment insurance workers are receiving in addition to state benefits.  For some employees, they get paid more by not working and are therefore, less motivated to return to work when the opportunity arises.  On the flip side, employers need to maintain or restore employment levels by June 30th to achieve loan forgiveness.  So, what should businesses do when the employee declines returning to work?  Here is the guidance from the SBA:

“No.  As an exercise of the Administrator’s and the Secretary’s authority under Section 1106(d)(6) of the CARES Act to prescribe regulations granting de minimis exemptions from the Act’s limits on loan forgiveness, SBA and Treasury intend to issue an interim final rule excluding laid-off employees whom the borrower offered to rehire (for the same salary/wages and same number of hours) from the CARES Act’s loan forgiveness reduction calculation. The interim final rule will specify that, to qualify for this exception, the borrower must have made a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented by the borrower. Employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.”

This is good news for business owners who are offering their employees an opportunity to return to work after a lay off or furlough.  The SBA is continuing to produce new and revised guidance on the Paycheck Protection Program and we will continue to keep you updated.

5/3/2020

NEW SBA CERTIFICATION GUIDANCE REQUIRES BORROWERS TO PROVE NECESSITY AND CONSIDER RETURNING PPP FUNDS

Many organizations have applied for a Paycheck Protection Program (PPP) loan with significant uncertainty about the future of their business, minimal available direction from the SBA on forgiveness requirements and now, they are faced with changing qualifications on eligibility. Due to the lack of clarity, the SBA in consultation with the U.S. Department of the Treasury, released an ongoing FAQs document on April 3rd to address borrower and lender questions concerning PPP implementation. Less than one month later, the Small Business Administration (SBA) issued additional legislative guidance (FAQs 31 and 37) stating that Paycheck Protection Program (PPP) applicants (public and private companies) must consider access to alternative sources of liquidity before certifying the “necessity” of the PPP loan. This new guidance is retroactive to the inception of PPP loans causing some loan recipients to consider returning the funds which must be done by May 7, 2020 to avoid penalties.

The new guidance adds an additional layer to PPP loans as initially they were positioned to maintain payroll and salary levels and eligibility was broad-based being available to any small business affected by the COVID-19 pandemic with 500 or fewer employees as long as the forgivable funds were used for payroll costs, interest on mortgages, rent and utilities. Now, the new SBA guidance is specifically addressing the good faith certification and it is important to plan and prepare for this change.

What does this mean and why are they doing this? 

While Congress initially allocated $349 billion to the low-interest, SBA-backed loan program, borrowers exhausted those funds within two weeks. Congress then replenished the program with another $310 billion, and the SBA reopened the program for a second round of lending starting April 27th.

On April 23rd the SBA issued new guidance about which businesses are eligible for a PPP loan, including FAQ 31 which states that before applying for a loan, all businesses "must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business”. The guidance goes on to state “Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith.” At first glance, FAQ 31 appeared to be aimed at large, public companies in response to major controversies over large businesses that received loans in the initial round of lending which precluded smaller businesses from obtaining funds. But, on April 28th, FAQ 37 was announced addressing the same liquidity requirements for private companies and referred the Applicant to the details in FAQ 31.

I worked hard to get a PPP loan. What do I do now?

Understandably, many organizations are nervous because they are just now hearing about this economic component to PPP loan eligibility and, as a result, are concerned about the lack of clarity as well as potential scrutiny. Our advice is simple: try not to panic and proceed cautiously. If you plan to accept or have already received a PPP loan it is critically important to perform a self-assessment and document how the pandemic disrupted your business operations as well as your access to liquidity. Evaluate your comfort level in passing self-certification based upon your business' current liquidity and other sources of liquidity. Then, review your options:

  1. Keep the Loan: If you deem the PPP loan to be necessary, be sure to document your rationale based on facts and circumstances at the time of the application as well as your discovery of subsequent information that aligns with the most recent guidance. You may also choose to work with your accountant to perform some financial analytics to support your findings and seek guidance from your legal counsel to confirm your position. Also, be sure to track expenses to qualify for maximum loan forgiveness. For your convenience, we invite you to download and utilize Laufer LLP’s loan forgiveness tool by clicking here.
  2. Return the Loan: If, on the other hand, you determine you do not meet the self-certification criteria you attested to on the PPP loan application, consult with your lender to determine the method through which the funds may be returned by May 7, 2020.

Will PPP loans be subject to audit?

On April 28th, U.S. Secretary of the Treasury Mnuchin indicated that any PPP loan may be audited prior to any forgiveness determination. The SBA also stated “to further ensure PPP loans are limited to eligible borrowers in need, the SBA has decided, in consultation with the Department of the Treasury, that it will review all loans in excess of $2 million, in addition to other loans as appropriate.” The details of such an audit are still unknown at this time and additional information will be forthcoming.

The Laufer team understands how complicated (and incredibly frustrating) this constantly changing and sometimes ambiguous environment is. We know that McDonald’s Owner Operators turn to us for clear and concise guidance and actionable advice. It is what separates our firm from others and we are honored to work alongside you every day - especially during your times of need. Please know that we are frustrated for you. When the CARES Act was released and PPP loans rolled out we knew they were rushing the legislation to help businesses because of the worldwide COVID-19 pandemic. Because of this, the additional guidance from the SBA and the U.S. Department of the Treasury is being communicated after the fact and continues to lack the clarity we need to advise our clients properly. Our team will continue to do what we always do…monitor the situation, stay in front of all issues impacting McDonald’s Owner Operators and keep you informed every step of the way as new information becomes available. It's important to note that as an essential business, your business was exactly the type of business the Paycheck Protection Program was designed for. Remember...the purpose and intent was paycheck protection.

4/30/2020

IRS: COVERED EXPENSES PAID WITH FORGIVABLE PPP LOANS WON'T BE TAX-DEDUCTIBLE

The IRS recently announced that covered expenses paid with forgivable loans through the Paycheck Protection Program (PPP) will not be tax-deductible.  On April 30th, the IRS released guidance stating that “no deduction is allowed under the Internal Revenue Code (Code) for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a covered loan.”  We understand that this is counterintuitive to the goals and benefits of PPP loans particularly since it was initially stated that forgiven loan proceeds would be tax-free and expenses such as wages, rent, etc. are typically fully deductible.  While there is still an opportunity for Congress to override this decision, as of this writing small businesses should plan accordingly.  For more information, click here: https://www.irs.gov/pub/irs-drop/n-20-32.pdf

4/27/2020

MORE HELP FOR SMALL BUSINESSES

As you know, the initial $349 billion Paycheck Protection Program (PPP) passed on March 27th was depleted in just 12 days causing the Small Business Administration (SBA) to stop accepting loan applications from lenders on April 16th.  Last week, Congress approved a second round of funding adding $310 billion to replenish the PPP pot.

The Small Business Administration (SBA) will resume taking applications for PPP loans on Monday, April 27th. The SBA noted that hedge fund and private equity firms are not eligible to receive a PPP loan as these government loans are aimed at providing relief to small business and nonprofit employers with fewer than 500 employees.

In an effort to make PPP loans more accessible, the new relief package guarantees that at least $60 billion of the new funds will be designated for community banks and smaller credit unions so they don’t have to compete with larger institutions.  The new measure also includes an additional $75 billion for reimbursements to hospital and health care providers, and $25 billion for expanded coronavirus testing.

4/16/2020

THE PAYCHECK PROTECTION PROGRAM HAS RUN OUT OF MONEY

The Paycheck Protection Program (PPP) which had $349 billion in loans aimed at helping small businesses weather the economic fallout from the coronavirus pandemic has run out of money, according to the Small Business Administration.  Here is a great article that sheds some light on how this happened: https://theweek.com/articles/907108/what-went-wrong-coronavirus-aid-small-businesses

4/16/2020

IRS ANNOUNCES ECONOMIC IMPACT PAYMENT TRACKING TOOL

Eligible taxpayers have begun to receive their eagerly awaiting Economic Impact Payments from the federal government.  For your convenience the IRS, along with the Treasury Department, announced a new tool called “Get My Payment” which enables taxpayers to check the status of their Economic Impact Payment, including the payment amount, scheduled delivery date and form of payment.  Additionally, it gives taxpayers who did not use direct deposit on their latest tax return the ability to input their information to receive this payment as a direct deposit.

For more information and to access the Get My Payment tool, please click here.

3/30/2020

HOW TO APPLY FOR A LOAN UNDER THE PAYCHECK PROTECTION PROGRAM

Most of us have been eagerly awaiting guidance on how to apply for a small business loan under the Paycheck Protection Program (PPP) and we are happy to report that the guidance is here.

The first day to apply for a loan under the PPP from an existing SBA lender is Friday, April 3, 2020 for qualified small businesses and Friday, April 10, 2020 for independent contractors and self-employed individuals. The loan program is available until June 30, 2020.

For more information about the Paycheck Protection Program including eligibility requirements and information on loan forgiveness, please click here. If you wish to begin preparing your application, click here to view a sample application form to see the information that will be requested.

3/24/2020

CORONAVIRUS-RELATED SCAMS ON THE RISE

Law enforcement agencies are warning Americans of increasing scams during the coronavirus pandemic. Criminals love times of chaos to target victims as these are the times when people tend to be less alert to scams and less diligent about following security protocols. The coronavirus pandemic is one of these times.

Here are several examples we have heard about and want to share with you to raise your awareness now, and over the next few months:

1.  Cybercriminals are spreading malware through fictitious applications and websites. Please remember to practice safe internet browsing habits and only access information from trusted sources. Continue to be skeptical of all hyperlinks you receive, particularly “breaking news” types of articles regarding the coronavirus. There have been many reports of malicious email campaigns that mimic reputable organizations such as the World Health Organization. A good rule of thumb is to verify the link from the sender before clicking.

2. Be careful when shopping online. We know that consumers are struggling to find high demand items in the stores and opted to shop online. Or, many folks have strictly followed stay at home orders and are utilizing online shopping with delivery services. Please be sure to buy from reputable, secure sites in order to safeguard your personal information. Just this week, the President spoke of a website that was selling coronavirus vaccine kits. According to the World Health Organization, there are currently no legitimate COVID-19 vaccines. Thankfully, the government was able to shut down the website upon learning of its existence however, there are many others other there designed to steal your personal information.

3.  In addition to websites, beware of telemarketing calls offering free grocery shopping services for senior citizens (credit card information will be requested), home cleaning services proven to kill the coronavirus and a variety of other coronavirus-related products and services that are fake. As a reminder, never give your credit card information over the telephone.

4.  Cybercriminals are reaching out to taxpayers stating that their government relief checks, to offset lost income from the coronavirus crisis, are ready and all the taxpayer needs to do is provide personal information or click on a link to agree to receiving the check. Remember that the IRS will never contact you through telephone, email or text messaging. Additionally, the proposed federal stimulus package has not yet been approved by the government.

5.  Some cities are reporting that vans with people dressed in hazmat suits are going house to house, knocking on doors saying that they need to check every home for the coronavirus, taking fake vitals and stealing from residents. Please be advised that this is a scam and you should never allow strangers into your home.

It is difficult to comprehend crimes like these occurring during a time when people should be coming together to help each other overcome difficulties, Instead, criminals are preying on the fear and confusion caused by the coronavirus and exploiting the pandemic for their own financial gain.

Please remain on high alert during the current health emergency to avoid falling victim to scams such as these. With the rapidly changing environment we are living in, we fully expect fraudsters to continue to find new ways to target their victims. 

3/20/2020

On March 17th the IRS announced the extension of the April 15th taxpayer payment deadline would be extended by 90 days to help businesses and individuals with their cash flow during the coronavirus pandemic.

On March 20th, the President announced and Treasury Secretary Mnuchin confirmed, that the April 15th tax filing deadline would also be extended. The new date for filing and making federal tax payments which were originally due April 15, 2020 is now July 15, 2020. This delay applies to taxes due of up to $1 million. This relief applies to all taxpayers, including trusts and estates. Corporations may also delay paying taxes of up to $10 million. 

3/19/2020

On March 14, 2020 the House of Representatives voted to pass H.R. 6201: Families First Coronavirus Response Act and on March 18, 2020 the Senate followed suit.  The act has been signed by the president and will sunset on December 31, 2020.

H.R. 6201 is the second of three relief packages to assist individuals impacted by COVID-19 and contains several provisions affecting employers.  Below is a summary of the key employment-related aspects of the bill.  Please note that the bill only applies to private employers with fewer than 500 employees and can also be affected by specific state and local laws.  Small businesses with fewer than 50 employees are exempt from coverage if the obligations would jeopardize the future viability of the business.

  • Expanded food assistance and unemployment benefits through supplemental appropriations for health programs.
  • Paid Sick Leave Act would require Small Employers to provide
    • 80 hours of paid sick leave to full-time employees
    • Two weeks of paid sick leave to part-time employees, based on the average hours

This paid leave requirement would be triggered if an employee is unable to work (or telework) for one of the following six reasons:

(Reasons 1 – 3 below are categorized as Self-Care and 4-6 as Family Care)

1.       To self-isolate or quarantine due to a federal, state, or local quarantine or isolation order related to COVID-19

2.       To quarantine due to COVID-19 concerns on the advice of a health care provider

3.       To obtain a medical diagnosis or care if the employee has COVID-19 symptoms

4.       To care for someone (not limited to family) experiencing one of the first two situations listed

5.       To care for the employee's son or daughter if the school or place of care has been closed, or the child care provider is unavailable, due to COVID-19 (the Secretary of Labor could exempt businesses with fewer than 50 employees from this requirement if it would jeopardize the viability of a business as a going concern)

6.       The employee is experiencing another substantially similar condition to those above if specified by the Secretary of Health and Human Services in consultation with the Secretaries of Labor and the Treasury

Self-Care Leave (first three categories above) is paid at the employee's regular rate of pay as determined under the Fair Labor Standards Act and no less than minimum wage, capped at $511 per day and $5,100 in the aggregate;

Family Care Leave (last three categories listed above) is paid at two-thirds of the employee’s regular rate of pay, capped at $200 per day and $2,000 in the aggregate.

  • Payroll and Income Tax Credits for Paid FMLA

For the FMLA Expansion Act, the Families First Act provides a credit on wages up to $200 per individual per day, up to a cumulative $10,000 for all calendar quarters. For self-employed individuals, the credit would also be capped at $200 per day for up to an aggregate 50 days during the tax year. That is, for each employee or self-employed individual, a credit of up to $10,000 would apply for qualified wages.

For the Paid Sick Leave Act, up to $200 per day for Family Care Leave wages, and up to $511 per day for Self-Care Leave wages would be taken into account. A total of 10 days could be taken into account per employee over all calendar quarters. For self-employed individuals, the Paid Sick Leave Act credit would be subject to corresponding caps. Accordingly, a maximum Paid Sick Leave Act credit of $2,000 or $5,110 for qualified leave wages, depending on the type of leave, could be claimed per employee or self-employed individual.

In the aggregate, an employer might claim up to $15,100 in credit for a single employee for qualified leave wages. Given that an employer's maximum Social Security Tax or Tier 1 RRTA Tax liability per employee for 2020 is only $8,537.40 ($137,700 x 6.2%), the refundability of the tax credits is meaningful.

While we are not attorneys, the team at Laufer LLP prides ourselves on educating the McDonald’s Owner Operator community on everything required to be successful business owners. We have been in close discussions with our network of attorneys as we know this significantly impacts our clients and will continue to gather information to keep you updated.  As always, we are here to answer any questions you may have. Feel free to reach out to any member of the Laufer team by calling (631) 226-5151.

3/17/2020

Treasury Secretary Steven Mnuchin announced that his department is pushing back the April 15 deadline to pay taxes owed, giving individuals and many businesses 90 extra days to send checks to the government.  The postponement on payments applies to federal returns, please contact us for information regarding your state tax deadline(s).

Individuals and businesses still have to file their taxes by April 15 but the delayed payments are designed to help businesses and individuals with their cash flow during the coronavirus pandemic.  For more information, click here.

3/16/2020

Due to the quickly evolving coronavirus pandemic and corresponding CDC recommendations, Laufer LLP has implemented stricter guidelines in our office to limit the spread of COVID-19:

  1. All in-person meetings with clients, suppliers and vendors have been cancelled to ensure everyone’s safety.  While this decision was difficult due to the time of year and our strong desire to visit with our valued clients, this policy is consistent with the Center for Disease Control’s suggested protocols.
  2. Increased sanitation procedures have been implemented, including the way we receive and process mail.
  3. Flexible working arrangements are in place to reduce the number of team members being present in the office at any given time with some team members working remotely until further notice.

The team from Laufer LLP is working diligently to keep everyone safe while also maintaining our trusted relationships with our clients at a time when they need us the most.

3/12/2020

As the coronavirus (Covid-19) continues to spread in the U.S. and around the world, many are becoming increasingly concerned. During this unsettling time, we want to make you aware of the steps Laufer LLP is taking to ensure the safety of our employees and clients and provide you with the assurance of knowing that the financial aspects of your business will continue to be covered during this public health emergency.

Our primary concern has always been and will continue to be the safety and well-being of our team members, clients, families and the communities in which we live and work. We understand that you place your trust and confidence in us each and every day and we are committed to making sure you are glad you did.

Over the years, Laufer LLP has taken proactive steps to create a strong infrastructure that can overcome catastrophic times such as power failures, weather-related emergencies and shut downs. The investments we have made in technology enables us to implement flexible working arrangement plans whereby our team members can work remotely and business can continue as usual. This allows us to safeguard the health and safety of our professionals while also continuing our service to clients.

Currently, our office remains opens and we continue to assess the coronavirus situation daily. We have put policies in place to ensure everyone’s safety. From thorough cleanings, bacteria fighting agents in our air filtration systems, personal contact measures and encouraging self-quarantines, we are doing everything we can to create a safe working environment for our team members and clients. We are asking all clients, vendors and friends of the firm who have a meeting scheduled with us at our office to evaluate whether they pose a risk (according to CDC guidelines) to those they come in contact with. If so, we ask that you notify us so we can make alternate arrangements. We are happy to meet with you virtually via a variety of technological options.

In summary, please be assured we are prepared for the coronavirus and will continue to service our clients with the high level of quality, excellence and timeliness you have come to expect. As we navigate this time of uncertainty together, we want to provide you with the peace of mind in knowing that your bookkeeping, accounting and tax needs are being taken care of. We hope that you and your loved ones are well and know that we are here if you need us.

Andrew Laufer, CPA
Managing Partner
Laufer LLP

 

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