End of Year Summary and Latest Updates – December 31, 2020

PPP #1 Loans

  • Covered Expenses paid with your PPP #1 Loan will now be tax deductible for money already received.
  • PPP #1 funds will not be taxable income; however, the expenses paid with the PPP #1 funds have been determined to still be tax deductible.
  • The New Tax Bill, that President Trump signed on Sunday, December 27, 2020, repeals the requirement of deducting the EIDL advance from the PPP forgiveness amount.
  • The EIDL advance up to $10,000 per Business (of $1,000 per Employee), will not have to be repaid.
    • Additional guidance is expected if you have already completed your filing for forgiveness and the EIDL grant amount was not included in the forgiveness amount.
  • The New Tax Bill simplifies the forgiveness process on PPP loans of $150,000 or less, but additional information is expected as to what that new process or form will be. Many businesses have already filed or are in the process of filing for forgiveness, and we and the Banks are waiting on updated guidance from the SBA and the US Treasury as the law is still new and details are being finalized.
    • Please remember, you MUST file for forgiveness, 10 Months after your 24-week period is up. If you do not file for forgiveness, your PPP Loan, will become a two (2) year loan payable at 1% interest.

PPP #2 – Second Round of Funding

  • The recently signed bill established regulations for the next round of PPP #2 funding. The highlights below are what we have determined, but more guidance is expected from the SBA for the details of applying and information required.
  • $284.5 Billion in funds will be available through the next PPP #2 loans.
  • Paycheck Protection Program (PPP #2) offered through March 31, 2021.
  • Eligibility for the second round of funding (PPP #2) includes:
    • Businesses with less than 300 employees
    • Experienced a 25% or greater reduction in revenue (i.e., gross receipts) in any ONE quarter of 2020, when compared to that same quarter of 2019
      • For example, you collected $300,000 of Q2 of 2019. We will need to compare that to the same quarter of 2020 (April, May & June 2020) to determine if you have a reduction of revenue that are 25% or better.
    • After determining eligibility, we will then need further guidance from both the SBA and the US Treasury, as to what criteria will be needed to be satisfied to meet the new requirements of the PPP #2, and how to properly apply and supply supporting information.

Other Key Tax Provisions

  • Employee Retention Tax Credit: Extended through July 1, 2021: We are waiting on further guidance as to how this work in 2021.
  • COVID-Related Pay Tax Credits: Extended to March 31, 2021. These are the refundable payroll tax credits for Emergency Paid Leave and Emergency Family Medical Leave Pay that were set to expire on December 31, 2020.
  • Charitable Giving Incentive Extended: One-year extension of the $300 “above the line deduction,” meaning you can take this deduction even if you are not itemizing your deductions on your individual income tax return. ($600 if Married Filing Joint (MFJ)).
  • Flexible Spending Arrangement (FSA) Relief: Allows individuals to carry over any unused health and dependent care FSA benefits from 2020 into 2021 plan year.

Department of Health & Human Services (HHS)

Medical and Dental Providers may have been eligible for additional funding from HHS. You may have received Phase 2 funding from the Department of Health & Human Services and may even have received funding recently within their Phase 3 funding. Current guidance requires reporting to the Department of HHS in January 2021 and again in July 2021 as to how you used these proceeds and what expenses were covered. Guidance is expected in January 2021 for the HHS to provide information as to what documents will be needed to gain full forgiveness. As of now, please save all documentation (Invoices, Canceled Checks and Credit Card Receipts) for any items you purchased that would qualify for PPE Equipment & Supplies. We will be sending out an updated e-mail with instructions, as soon as requirements become apparent to us.

2020 4th Quarter Estimated Payments due, January 15, 2021

During the last Quarter 2020, we have worked with many of our clients to determine your 2020 tax situation. At the time, it was not finalized that the PPP Loan Expenses would be deductible. Now that this has been determined, this may affect the 4th quarter estimated income tax payments. If you have any questions, please contact your BWTP Team Member before paying your estimate on January 15, 2021.

2020 has been an unprecedented year, to say the least. BWTP has tried to keep you informed of the multiple tax changes and government loan and funding programs, and we hope you have found this useful. We also want you to know that BWTP is here to assist you, so please contact us if you have questions.

Wishes for a Happy, Safe and Healthy 2021!

Robert (Bob) Schmidt, CPA

Principal at BWTP, P.C. Read Bob’s bio here.

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