Gross Receipts Safe Harbor for Determining Eligibility for the Employer Retention Credit.

IR-2021-167

The Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) issued a safe harbor allowing employers to exclude certain items from their gross receipts solely for determining eligibility for the Employee Retention Credit (ERC).

Revenue Procedure 2021-33 provides a safe harbor permitting employers to exclude certain amounts from gross receipts solely for determining eligibility for the ERC. These amounts are:

  • The amount of the forgiveness of a Paycheck Protection Program (PPP) Loan;
  • Shuttered Venue Operators Grants under the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act; and
  • Restaurant Revitalization Grants under the American Rescue Plan Act of 2021.

An employer elects to apply the safe harbor by excluding these amounts for determining whether it is an eligible employer for a calendar quarter for purposes of claiming the ERC on its employment tax return.

The employer must exclude the amounts from their gross receipts for each calendar quarter in which gross receipts are relevant to determining eligibility to claim the ERC. The employer claiming the credit must also apply the safe harbor to all employers treated as a single employer under the aggregation rules.

An employer is not required to apply this safe harbor, and the safe harbor does not permit the exclusion of these amounts from gross receipts for any other federal tax purpose.

The full IRS press release can be found here.

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Tax Relief for Severe Storm victims in Michigan (June Storms)

Wayne and Washtenaw County Severe Storm and Flooding Victims will be eligible for relief.
Any filings or payments that were due between June 25, 2021 and November 1, 2021, are now due on November 1, 2021. Please see the link below for the full IRS announcement.

https://www.irs.gov/newsroom/irs-announces-tax-relief-for-victims-of-severe-storms-flooding-and-tornadoes-in-michigan

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Advance Child Tax Credit Payment Portal

The Portal to be unenrolled from the Advance Child Tax Credit payments is active. The deadline to unenroll from the July payment has already passed, but you can make the change for the remaining payments. Use this link to get the the portal, as well as additional information regarding the payments.

Some things to note:

1. You will need an existing IRS username, or an ID.me account (you will have the option to create one if you do not already have one) in order to access the portal.
2. Once you are unenrolled from receiving the advance payments, you can not re-enroll at this time. There may be an option to do so in September.
3. If you filed your most recent return jointly, BOTH SPOUSES MUST UNENROLL. If only one spouse is unenrolled, you will still receive half of the advance payment.

If you have any additional questions, please contact our office.

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Scammers Using Fake Letters in Collections Scam

The Michigan Department of Treasury has issued the following release:

LANSING, Mich. – Michigan taxpayers with past-due tax debts should be aware of an aggressive scam that’s making the rounds through the U.S. Postal Service, according to the Michigan Department of Treasury (Treasury).

In the scheme, taxpayers receive a letter about an overdue tax bill, asking individuals to immediately contact a toll-free number to resolve an outstanding state tax debt. The letter aggressively threatens to seize a taxpayer’s assets ― including property and Social Security benefits ― if the debt is not settled.

“This is a tricky scam that has been reported throughout the state,” said Deputy State Treasurer Ann Good, who oversees Treasury’s Financial and Administrative Services programs. “Taxpayers have rights. If you have questions about an outstanding state tax debt, please contact us through a verified number so we can talk about options.”

The piece of correspondence appears credible to the taxpayer because it uses specific personal facts that’s pulled directly from publicly available information. The scammer’s letter attempts to lure the taxpayer into a situation where they could make a payment to a criminal.

The state Treasury Department corresponds with taxpayers through official letters sent through the U.S. Postal Service, providing several options to resolve an outstanding debt and information outlining taxpayer rights.

Taxpayers who receive a letter from a scammer or have questions about their state debts should call Treasury’s Collections Service Center at 517-636-5265. A customer service representative can log the scam, verify outstanding state debts and provide flexible payment options.

As always, if you have any questions, please contact our office.

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PPP Loan Program may be open for an additional 5 weeks

On Tuesday night, the Senate voted to approve a 5 week extension to the PPP Loan program. The program, which stopped accepting applications on June 30th, could continue to accept applications for an additional 5 weeks (August 8th), if approved by the House and signed by the President.

If you need assistance with the Paycheck Protection Loan program, or would like further information, please contact our office.

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Rollover relief for RMD’s from retirement accounts that were waived under the CARES Act

IR-2020-127, June 23, 2020

WASHINGTON — The Internal Revenue Service today announced that anyone who already took a required minimum distribution (RMD) in 2020 from certain retirement accounts now has the opportunity to roll those funds back into a retirement account following the CARES Act RMD waiver for 2020.

The 60-day rollover period for any RMDs already taken this year has been extended to August 31, 2020, to give taxpayers time to take advantage of this opportunity.

The IRS described this change in Notice 2020-51 (PDF), released today. The Notice also answers questions regarding the waiver of RMDs for 2020 under the Coronavirus Aid, Relief, and Economic Security Act, known as the CARES Act.

The CARES Act enabled any taxpayer with an RMD due in 2020 from a defined-contribution retirement plan, including a 401(k) or 403(b) plan, or an IRA, to skip those RMDs this year. This includes anyone who turned age 70 1/2 in 2019 and would have had to take the first RMD by April 1, 2020. This waiver does not apply to defined-benefit plans.

In addition to the rollover opportunity, an IRA owner or beneficiary who has already received a distribution from an IRA of an amount that would have been an RMD in 2020 can repay the distribution to the IRA by August 31, 2020. The notice provides that this repayment is not subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs.

The notice provides two sample amendments that employers may adopt to give plan participants and beneficiaries whose RMDs are waived a choice as to whether or not to receive the waived RMD.

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PPP Reforms pass the House and Senate, President signs bill into law

The U.S. House of Representatives and Senate passed a bill that changes the forgiveness requirements for PPP loans.  Today, President Trump signed the bill into law.

The reforms include:

  • Extending the 8 week forgiveness period to 24 weeks
  • Reducing the payroll expense requirement to 60% from 75%
  • Extending the loan repayment period from 2 years to 5 years for any portion not forgiven

For more details, please see this article.

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PPP Loan and Business Deductions

The IRS has issued a ruling (Notice 2020-32) stating that normal business expenses paid with funds from a Paycheck Protection Program loan (PPP) are not deductible business expenses on a federal tax return.

Congress has issued a statement responding to IRS Notice 2020-32, reflecting that Congress intends expenses paid with Paycheck Protection Program (PPP) funds to be deductible for federal tax purposes. We will update as further guidance is issued.

IRS guidance may limit deductions for PPP expenses

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Update for CARES Act – Actions to Take

The CARES Act was signed into law by President Trump on March 27, 2020, containing several provisions to aid small businesses during the COVID-19 crisisAt this time, we are still waiting for guidance and clarification of many items in the law 

 We recommend the following actions at this time: 

1. Apply for an Economic Injury Disaster Loan (EIDL) at the SBA website. You will need to provide information for your gross receipts and cost of goods sold for the period 2/1/19 – 1/31/20. The SBA will use this information to compute your loan amount. Be sure to check the box to receive an advance of up to $10,000. The $10,000 advance is a grant which will not have to be repaid. 

Apply at https://covid19relief.sba.gov/#/. Please contact our office if you would like assistance in completing the initial loan application process. 

Once the initial application process is complete, the SBA will likely need additional information to determine your eligibility and to calculate your total loan amount. 

2. Begin gathering information to apply for a Paycheck Protection Program (PPP) loan. These loans will be administered by banks and credit unions. The PPP funds may be used for payroll costs, rent, utilities, and interest expense. The loan will be forgiven to the extent the funds are used for qualified funds during an eightweek period. The Treasury is expected to release additional information by Friday, April 3, 2020. If you have worked with an SBA lender in the past, be sure to contact your lender to let them know of your interest in the program. Many lenders are creating mailing lists to disseminate information as quickly as possible once additional rules and regulations have been released. 

Note that the loans/grants are intended to assist in paying operating expenses that are impacted by the COVID-19 pandemic. The PPP funds cannot be used to pay the same funds as the EIDL funds, but it is important to start with the EIDL application in order to receive the emergency grant as soon as possible. 

Our office is working hard to learn about these new laws and are staying updated as additional guidance is issued. We are available to assist wherever needed. Please contact us for additional information. 

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