The COVID Relief Bill Summarized

nicholas • December 24, 2020

The “rescue package” has arrived. The COVID Relief bill is a whopping 5,593 pages long. I know you don’t want to sit and read through that novel, so I am here to summarize, in plain English, how this bill is going to effect your taxes.

Have you ever been on a roller coaster before? A lot of twist and turns, up and down, scary for some, exhilarating for others.

I fondly remember going to Six Flags Great America every summer with my family. The roller coaster named, American Eagle, was always the scariest roller coaster for me. Why? The roller coaster is made up of wood and has been there for decades. Who’s to say that the wood doesn’t begin to rot, or is attacked by termites…a lot for a young kid to worry about.

The COVID tax bills have been more stressful than any roller coaster ride of my life. The tax community has been left off on an island in regards to how we are supposed to approach the ramifications of COVID related tax bills. In particular, the Paycheck Protection Program taxability. As a small business consultant, I have felt very vulnerable at times when trying to advise our small business clients. The rules of the PPP have changed monthly, weekly…daily! The original intent of the PPP loan was to provide business owners monies to keep employees on payroll and pay their rents. The intent was for their not to be any tax ramifications involved. However, the IRS interpreted the loan differently. The IRS was prepared to not allow any expenses to be deducted by a business if those expenses were forgiven by the PPP loan. This essentially means that the business would have to report profits equivalent to the amount of their PPP loan that was forgiven. To put it simply, the PPP loan would become taxable. The roller coaster ride is now over. In the bill, we finally get the ruling that expenses forgiven WILL STILL BE TAX DEDUCTIBLE!!!! YAY!

This is great news for small business owners as it will relieve them of potentially large tax burdens when filing their tax return.

Let’s take a look at how some items in the bill may effect small business owners and individual taxpayers.

Individuals

Additional 2020 Recovery Rebates (Stimulus Check)
• $600 per eligible family member – Non-taxable. **This could be $2,000 if they choose to amend this portion of the bill based on the President’s recommendation.

  • Phase outs:
    • MFJ: starts at $150K AGI
    • HOH: starts at $112,500 AGI
    • S or MFS: starts at $75K AGI
  • “eligible individual” does not include nonresident
    aliens, anyone who qualifies as another’s
    dependent and estates or trusts
  • Must have a SSN to be eligible
  • Offsets limited to child support
  • Based off of 2019 tax return income
    • Advanced payments that exceed eligible credits are
    not required to be repaid
  • If stimulus payment is received in 2021, it is still going to be reported on your 2020 income tax return.
    • You will need to report the total amount of stimulus payments you received on your 2020 income tax return. Please provide that to your tax professional when filing your tax return.

PPP Loan Updates

  • PPP Forgiveness and EIDL Advance are tax exempt
  • PPP and EIDL Advance expenses are now tax deductible
  • EIDL Advance is no longer subtracted from the PPP Loan amount eligible for forgiveness
  • Additional eligible expenses for forgiveness:
    • Covered operations expenditures
    • Covered property damage costs
    • Covered supplier costs
    • Covered worker protection expenditures
  • Simplified application for forgiveness for loans up to $150,000

 

 

PPP 2nd Draw

To qualify, a business must have:

  • A 25% reduction in gross receipts (total sales) – In Quarter 1,Quarter 2,Quarter 3, Quarter 4 from 2020 compared to same quarter in 2019.
  • No more than 300 employees
  • Used or will use full amount of first loan AND approve for Forgiveness.

How much of a loan will you get if you qualify?

  • 2.5 times monthly payroll one yr prior to the loan or calendar yr. (Same as Round 1)
  • 3.5 times for restaurants, bars, hospitality industries. (NAICS Code 72)

What if I missed the boat on Round 1 of the PPP Loan?

They will be opening up applications for the original PPP Loan!

 

None of this is final law yet. We are currently in the veto process in which Congress will need to decide if they want to amend the bill or override the veto. Regardless, I am confident the items discussed in this article will stick. When you will receive your stimulus checks and how much will they be, who knows?…but they’re coming! Small business owners, the PPP loan will not effect your taxes…it’s a Christmas miracle.

We will provide updates as they come along. Stay tuned for all your small business accounting needs.

 

Happy Holidays!

Nick Hammernik

 

See More Blog Posts

The Tax Slang Movement

By nicholas • December 4, 2020
This past week, I finally dove into a project that I has been brewing in my mind for a few years. I published my first podcast episode today. Is it any good? I’m not quite sure. To be honest, I’m not too happy with how it turned out. However, I accomplished part of my goal.… The post The Tax Slang Movement appeared first on Talking Tax to Milwaukee.

2020 Year-End Tax Savings Tips

By nicholas • November 13, 2020
Your goal should be to get the IRS to owe you money. Of course, the IRS is not likely to cut you a check for this money (although in the right circumstances, that will happen), but you’ll realize the cash when you pay less in taxes.   Here are seven powerful business tax-deduction strategies that… The post 2020 Year-End Tax Savings Tips appeared first on Talking Tax to Milwaukee.

COVID-19 Tax Updates

By nicholas • July 31, 2020
  With the 2019 Tax Filing Season just behind us, it is difficult to think of the next filing season, however, there are many issues that need to be addressed now, rather than wait. At this most difficult time for our taxpayers, we want to assure you that our firm is here to assist you… The post COVID-19 Tax Updates appeared first on Talking Tax to Milwaukee.

Milwaukee Restart Grant Program

By nicholas • June 5, 2020
The goal of the Milwaukee Restart Program (Restart) is to help local businesses that suffered as a result of the pandemic to reopen and adapt to the “new normal” Eligibility Restart grants will assist for-profit businesses located in the City of Milwaukee that have 20 or fewer full-time or full-time equivalent employees and greater than $0 but less… The post Milwaukee Restart Grant Program appeared first on Talking Tax to Milwaukee.

Additional Grant Becomes Available For Wisconsin Small Businesses

By nicholas • June 5, 2020
Over the past few months COVID-19 has changed the way a lot of small businesses operate. Some have been unable to be open, some have adapted and changed, and some have even thrived. The Government had made a few loans available to try and help small businesses keep their employees employed and to also cover… The post Additional Grant Becomes Available For Wisconsin Small Businesses appeared first on Talking Tax to Milwaukee.

Finding the Right Accountant to Successfully Guide You Through the Tax Maze

By nicholas • June 14, 2019
Choosing an Accountant Who Puts Your Goals First There is an endless supply of do-it-yourself tax preparation tools and websites, and the sheer volume of options can lead you to believe the process of filing your returns is simple. However, a DIY approach only works if you are satisfied with paying more than necessary. Tax… The post Finding the Right Accountant to Successfully Guide You Through the Tax Maze appeared first on Talking Tax to Milwaukee.

Finding the right accountant to successfully guide you through the tax maze

By nicholas • February 15, 2019
  Choosing an Accountant Who Puts Your Goals First There is an endless supply of do-it-yourself tax preparation tools and websites, and the sheer volume of options can lead you to believe the process of filing your returns is simple. However, a DIY approach only works if you are satisfied with paying more than necessary.… The post Finding the right accountant to successfully guide you through the tax maze appeared first on Talking Tax to Milwaukee.

Does my Rental Property Qualify for the New Section 199A Deduction Under Tax Reform?

By nicholas • February 8, 2019
  How do you know if your rental property qualifies for the 20 percent tax deduction under new tax code Section 199A? Just what we need–something else to learn along with all of the other tax code changes this year. Well, maybe not. There is a piece of good news: we won’t be required to… The post Does my Rental Property Qualify for the New Section 199A Deduction Under Tax Reform? appeared first on Talking Tax to Milwaukee.

Do You Truly Know Your Business Costs? You Better!

By nicholas • December 7, 2018
Your company’s profitability depends not only on sales, but also on effective cost management. Are you adequately addressing the cost side of the business equation? Analyze Your Cost Structure You probably can readily identify the products and/or services that are generating your greatest sales volume. But can you identify all the costs associated with providing… The post Do You Truly Know Your Business Costs? You Better! appeared first on Talking Tax to Milwaukee.

2018 Tax Changes: Frequently Asked Questions

By nicholas • November 30, 2018
  As we move closer to the tax filing season, the Tax Cuts and Jobs Act (TCJA) has raised many questions in regards to tax preparation for Milwaukee taxpayers. Below are answers to some of them. Do I need to adjust my withholding allowances, given that tax brackets have changed? You may notice a change… The post 2018 Tax Changes: Frequently Asked Questions appeared first on Talking Tax to Milwaukee.
More Posts