Harless Tax Blog

Harless Tax Blog

Economic Impact Payments being sent by prepaid debit cards, arrive in plain envelope; IRS.gov answers frequently asked questions

Friday, May 29, 2020

IR-2020-105, May 27, 2020 Article from IRS.gov >

WASHINGTON – As Economic Impact Payments continue to be successfully delivered, the Internal Revenue Service today reminds taxpayers that some payments are being sent by prepaid debit card. The debit cards arrive in a plain envelope from "Money Network Cardholder Services."

Nearly 4 million people are being sent their Economic Impact Payment by prepaid debit card, instead of paper check. The determination of which taxpayers received a debit card was made by the Bureau of the Fiscal Service, a part of the Treasury Department that works with the IRS to handle distribution of the payments.

Those who receive their Economic Impact Payment by prepaid debit card can do the following without any fees.

  • Make purchases online and at any retail location where Visa is accepted
  • Get cash from in-network ATMs
  • Transfer funds to their personal bank account
  • Check their card balance online, by mobile app or by phone

This free, prepaid card also provides consumer protections available to traditional bank account owners, including protection against fraud, loss and other errors.

Frequently asked questions continually updated on IRS.gov

The IRS has two sets of frequently asked questions to help Americans get answers about their Economic Impact Payments, including those arriving on prepaid debit card. These FAQs include answers to eligibility and other many common questions, including help to use two Economic Impact Payment tools.

Get My Payment, an IRS online tool, shows the projected date when a direct deposit has been scheduled or date when the payment will be mailed by check or prepaid debit card. The Non-Filers Enter Payment Info Here tool helps taxpayers successfully submit basic information to receive Economic Impact Payments quickly.

The IRS regularly updates the Economic Impact Payment and the Get My Payment frequently asked questions pages on IRS.gov as more information becomes available. Taxpayers should check the FAQs often for the latest additions.

Here are answers to some of the top questions people are asking about the prepaid debit cards:

Can I have my economic impact payment sent to my prepaid debit card?

Maybe. It depends on your prepaid card and whether your payment has already been scheduled. Many reloadable prepaid cards have account and routing numbers that you could provide to the IRS through the Get My Payment application or Non-Filers: Enter Payment Info Here tool. You would need to check with the financial institution to ensure your card can be re-used and to obtain the routing number and account number, which may be different from the card number. If you obtained your prepaid debit card through the filing of a federal tax return, you must contact the financial institution that issued your prepaid debit card to get the correct routing number and account number. Do not use the routing number and account number shown on your copy of the tax return filed. When providing this information to the IRS, you should indicate that the account and routing number provided are for a checking account unless your financial institution indicates otherwise.

Will IRS be sending prepaid debit cards?

Some payments may be sent on a prepaid debit card known as The Economic Impact Payment Card The Economic Impact Payment Card is sponsored by the Treasury Department's Bureau of the Fiscal Service, managed by Money Network Financial, LLC and issued by Treasury's financial agent, MetaBank®, N.A.

If you receive an Economic Impact Payment Card, it will arrive in a plain envelope from "Money Network Cardholder Services." The Visa name will appear on the front of the Card; the back of the Card has the name of the issuing bank, MetaBank®, N.A. Information included with the Card will explain that the card is your Economic Impact Payment Card. Please go to EIPcard.com for more information.

Can I specifically ask the IRS to send the Economic Impact Payment to me as a debit card?

Not at this time. For those who don't receive their Economic Impact Payment by direct deposit, they will receive their payment by paper check, and, in a few cases, by debit card. The determination of which taxpayers receive a debit card will be made by the Bureau of the Fiscal Service (BFS), another part of the Treasury Department that works with the IRS to handle distribution of the payments. BFS is sending nearly 4 million debit cards to taxpayers starting in mid-May. At this time, taxpayers cannot make a selection to receive a debit card. Please go to EIPcard.com for more information.

Watch out for scams related to Economic Impact Payments

The IRS urges taxpayers to be on the lookout for scams related to the Economic Impact Payments. To use the new app or get information, taxpayers should visit IRS.gov. People should watch out for scams using email, phone calls or texts related to the payments. Be careful and cautious: The IRS will not send unsolicited electronic communications asking people to open attachments, visit a website or share personal or financial information. Remember, go directly and solely to IRS.gov for official information.

Quick links to the Frequently Asked Questions on IRS.gov:

Forgiven PPP Loans and the Deductibility of Expenses Paid

Friday, May 29, 2020

Article provided by Armanino.com >

Summary

  • While most states have yet to comment on whether taxpayers can deduct ordinary business expenses paid with Paycheck Protection Program (PPP) loan proceeds that are forgiven by the IRS, taxpayers should monitor state conformity to the CARES Act (P.L. 116-136) and the Internal Revenue Code.
  • Rolling conformity states that conform to the CARES Act will not tax or include as gross income any forgiveness amount associated with the PPP. As such, it is likely that these states will also follow the federal treatment that disallows expense deductions associated with any forgiven PPP loan amount.
  • Taxpayers should also be aware of the introduction of measure S.3612, which seeks to establish that coronavirus assistance, whether forgiven or repayable, will not affect the treatment of ordinary business expenses.

PPP Expense Deductions

Federal Treatment

As a part of the CARES Act (Sec. 1102), the Small Business Administration (SBA) made available PPP loans, for the purpose of helping businesses keep their workforce employed during the COVID-19 pandemic. The SBA would not require repayment of the loan if a business kept employees on its payroll for eight weeks and used the loan money for payroll, rent, mortgage interest, or utilities, with 75% of the loan amount forgiven being used for payroll. While loans that are forgiven would normally be considered cancellation of debt income, the CARES Act specifically states in Sec. 1106(i) that any forgiven loan amount will be excluded from gross income.

The IRS has issued Notice 2020-32 to provide guidance regarding the deductibility for federal income tax purposes of certain otherwise deductible expenses incurred in a taxpayer’s business when the taxpayer receives a PPP loan. Notice 2020-32 states 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 pursuant to section 1106(b) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Public Law 116-136, 134 Stat. 281, 286-93 (March 27, 2020) and the income associated with the forgiveness is excluded from gross income for purposes of the Code pursuant to section 1106(i) of the CARES Act.”

Therefore, currently, to the extent that any PPP loan is forgiven and excluded from a taxpayer’s gross income, the taxpayer will not be entitled to deduct ordinary and business expenses that were paid by the forgiven loan proceeds.

State Treatment

Most states have been silent in regards to whether they conform to the CARES Act and follow the federal treatment of excluding forgiven loan proceeds as gross income and disallowing expense deductions associated with PPP loan proceeds. However, it is likely that rolling conformity states that automatically conform to the IRC, such as Massachusetts or New Jersey, will conform to the CARES Act and will also follow the federal treatment of excluding forgiven PPP loans from gross income and disallowing expense deductions associated with any forgiven PPP loan amount.

However, states that have static conformity provisions that do not conform to the CARES Act, such as California (conforms to the IRC as of January 1, 2015), will likely not follow the federal treatment regarding forgiven PPP loan proceeds and related expenses. In these non-conforming states, any forgiven loan proceeds will likely be included as income for state purposes. States that do include forgiven PPP loan proceeds as income will likely allow expense deductions for ordinary expenses funded by the PPP loans.

Small Business Expense Protection Act of 2020 (S. 3612)

On May 5, 2020, the Small Business Expense Protection Act of 2020 (S. 3612) was introduced to the Senate. This bipartisan legislation clarifies that ordinary expenses that are backed by PPP loan proceeds will be deductible as normal ordinary expenses. This bill, if passed, will reverse the federal treatment of disallowing ordinary expense deductions that are funded by PPP amounts as stated in Notice 2020-32.

The lawmakers that introduced S.3612 believe its passage is necessary to achieve the PPP’s true goal of providing relief to small businesses affected by the COVID-19 pandemic. Specifically, the lawmakers stated that, “Providing assistance to small businesses, only to disallow their business deductions as provided in Notice 2020-32, reverses the benefit that Congress specifically granted by exempting PPP loan forgiveness from income.”

If S.3612 is to become law, a rolling conformity analysis will likely not need to be conducted in order to determine if states will allow expense deductions funded by PPP loan proceeds, as federal preemption will require states to allow for the deduction. Currently S.3612 has been introduced to the Senate and assigned to the Senate Committee on Finance. The next step is for the Committee to send the bill to the Senate floor for debate or a subcommittee for further research. If it does go to the Senate floor and receives a majority vote, the bill will move to the House of Representatives for a similar process of committees, debate and voting. Once both houses approve the final bill, it will go to the President for signature or veto.

For specific guidance regarding state-specific treatment pertaining to the PPP and related expenses, see Armanino’s COVID-19 Relief Matrix.

Insights

Taxpayers who have received PPP loans and satisfied the conditions necessary to result in partial or full forgiveness of the loan amount must determine whether they are able to deduct the ordinary business expenses that they paid with their PPP loan proceeds. Absent any specific comment from the states regarding these expense deductions, a conformity analysis should be done to determine whether a state conforms to the CARES Act and the IRC generally.

If a state conforms to the CARES Act, the states will follow the current federal treatment to exclude any forgiven PPP amount from gross income and disallow any deduction for any associated expenses. While the federal treatment currently disallows PPP expense deductions associated with forgiven loan amounts, new measures and proposals will likely result in expense deductions associated with PPP being allowed at a later time.

Also keep an eye on S. 3612 to see whether it becomes law and thereby allows taxpayers to take the ordinary expense deductions paid for by PPP loans. This bill is just in the first stage of the legislative process – so stay tuned!

How are unemployment benefits taxed?

Friday, May 15, 2020

Millions of Americans who have filed for unemployment in recent weeks may be wondering if their benefits will be taxed.

The answer is yes.

However, there’s a difference that could cause Americans to pay less tax relative to levies on a typical paycheck.

“Unemployment benefits are taxed just like income,” said Michele Evermore, senior policy analyst at the National Employment Law Project.

Read Original Article on CNBC.com >

Act by Wednesday for chance to get quicker Economic Impact Payment; timeline for payments continues to accelerate

Monday, May 11, 2020

May 8, 2020 From IRS.gov >

WASHINGTON – With a variety of steps underway to speed Economic Impact Payments, the Treasury Department and the Internal Revenue Service urged people to use Get My Payment by noon Wednesday, May 13, for a chance to get a quicker delivery.

The IRS, working in partnership with Treasury Department and the Bureau of Fiscal Services (BFS), continues to accelerate work to get Economic Impact Payments to even more people as soon as possible. Approximately 130 million individuals have already received payments worth more than $200 billion in the program's first four weeks.

Starting later this month, the number of paper checks being delivered to taxpayers will sharply increase. For many taxpayers, the last chance to obtain a direct deposit of their Economic Impact Payment rather than receive a paper check is coming soon. People should visit Get My Payment on IRS.gov by noon Wednesday, May 13, to check on their payment status and, when available, provide their direct deposit information.

"We're working hard to get more payments quickly to taxpayers," said IRS Commissioner Chuck Rettig. "We want people to visit Get My Payment before the noon Wednesday deadline so they can provide their direct deposit information. Time is running out for a chance to get these payments several weeks earlier through direct deposit."

After noon Wednesday, the IRS will begin preparing millions of files to send to BFS for paper checks that will begin arriving through late May and into June. Taxpayers who use Get My Payment before that cut-off can still take advantage of entering direct deposit information.

How Get My Payment works

The Get My Payment tool provides eligible taxpayers with a projected Economic Impact Payment deposit date. The information is updated once daily, usually overnight. There is no need to check more than once a day. Taxpayers who did not choose direct deposit on their last tax return can use this tool to input bank account information to receive their payment by direct deposit, expediting receipt.

Non-Filers portal remains available

For those not required to file a federal tax return, the Non-Filers: Enter Payment Info Here tool helps them submit basic information to receive an Economic Impact Payment quickly to their bank account. Developed in partnership between the IRS and the Free File Alliance, this tool provides a free and easy option for those who don't receive Social Security retirement, survivor or disability benefits (SSDI), Railroad Retirement benefits, Supplemental Security Income (SSI) and VA Compensation and Pension (C&P) benefits. The Non-Filers tool is also available in Spanish.

Eligible taxpayers who filed tax returns for 2019 or 2018 will receive the payments automatically. Automatic payments will also be sent to those receiving Social Security retirement, disability benefits, Railroad Retirement benefits, Veterans Affairs benefits or Supplemental Security Income soon.

Watch out for scams related to Economic Impact Payments

The IRS urges taxpayers to be on the lookout for scams related to the Economic Impact Payments. To use the new app or get information, taxpayers should visit IRS.gov. People should watch out for scams using email, phone calls or texts related to the payments. Be careful and cautious: The IRS will not send unsolicited electronic communications asking people to open attachments, visit a website or share personal or financial information.

Stay informed with Economic Impact Payment FAQs; Social Media platforms

Taxpayers should check the Frequently Asked Questions (FAQs) for more information.

COVID-19 paid leave tax credits for small and midsize businesses

Monday, May 11, 2020

COVID Tax Tip 2020-53, May 7, 2020 From IRS.gov >

Small and midsize employers can claim two new refundable payroll tax credits. The paid sick leave credit and the paid family leave credit are designed to immediately and fully reimburse eligible employers for the cost of providing COVID-19 related leave to their employees.

Here are some key things to know about these credits.

Paid sick and family leave

For COVID-19 related reasons, employees receive up to 80 hours of paid sick leave when they are sick or caring for someone else who is, and up to 10 weeks of paid family leave when their children's schools or place of care are closed, or child care providers are unavailable due to COVID-19.

Coverage

  • Employers receive 100% reimbursement for required paid leave.
  • Health insurance costs are also included in the credit.
  • Employers do not owe their share of social security tax on the paid leave and get a credit for their share of Medicare tax on the paid leave.
  • Self-employed individuals receive an equivalent credit.

Fast funds

  • Reimbursement will be quick and easy.
  • The credit provides a dollar-for-dollar tax offset against the employer's payroll taxes
  • The IRS will send any refunds owed as quickly as possible.

To take immediate advantage of the paid leave credits, businesses should use funds they would otherwise pay to the IRS in payroll taxes. If those amounts are not enough to cover the cost of paid leave, employers can request an expedited advance from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.

For details about these credits and other relief, visit Coronavirus Tax Relief on IRS.gov.

PPP Loan Frequently Asked Questions provided by US Treasury Department

Tuesday, May 05, 2020

PDF download of a comprehensive 15 page FAQ regarding questions about the PPP program. Download the below document to read.

PAYCHECK PROTECTION PROGRAM (PPP) FAQ's - May 3, 2020

Coronavirus (COVID-19) Resources

Friday, April 03, 2020

SMALL BUSINESS PAYCHECK PROTECTION PROGRAM

The Paycheck Protection Program provides small businesses with funds to pay up to 8 weeks of payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities.


PAYCHECK PROTECTION PROGRAM (PPP) INFORMATION SHEET: BORROWERS

The Paycheck Protection Program (“PPP”) authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. All loan terms will be the same for everyone. Download for more information.


PAYCHECK PROTECTION PROGRAM APPLICATION FORM (updated April 3, 2020)


Download PPP Application Form


Important Information from Quickbooks

Filing and Payment Deadline Extended to July 15, 2020 - Updated Statement

Thursday, March 26, 2020

Released: March 21, 2020

The Treasury Department and the Internal Revenue Service are providing special tax filing and payment relief to individuals and businesses in response to the COVID-19 Outbreak. The filing deadline for tax returns has been extended from April 15 to July 15, 2020. The IRS urges taxpayers who are owed a refund to file as quickly as possible. For those who can't file by the July 15, 2020 deadline, the IRS reminds individual taxpayers that everyone is eligible to request an extension to file their return.

This filing and payment relief includes:

The 2019 income tax filing and payment deadlines for all taxpayers who file and pay their Federal income taxes on April 15, 2020, are automatically extended until July 15, 2020. This relief applies to all individual returns, trusts, and corporations. This relief is automatic, taxpayers do not need to file any additional forms or call the IRS to qualify.

This relief also includes estimated tax payments for tax year 2020 that are due on April 15, 2020.

Penalties and interest will begin to accrue on any remaining unpaid balances as of July 16, 2020. You will automatically avoid interest and penalties on the taxes paid by July 15.

Individual taxpayers who need additional time to file beyond the July 15 deadline can request a filing extension by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Businesses who need additional time must file Form 7004.

State tax returns

This relief only applies to federal income returns and tax (including tax on self-employment income) payments otherwise due April 15, 2020, not state tax payments or deposits or payments of any other type of federal tax. Taxpayers also will need to file income tax returns in 42 states plus the District of Columbia. State filing and payment deadlines vary and are not always the same as the federal filing deadline. The IRS urges taxpayers to check with their state tax agencies for those details. More information is available at https://www.taxadmin.org/state-tax-agencies.

Palm Beaches Chamber of Commerce Announcement

Monday, March 23, 2020

The U.S. Small Business Administration South Florida District Office will host virtual office hours to answer questions about the SBA Economic Injury Disaster Loan Program.

In addition to the virtual office hours, the District Office will also be hosting webinars twice daily to help small businesses navigate the disaster loan application. Details about the webinars coming soon!

In the meantime, feel free to contact the staff during the hours listed below.

Virtual Office Hours:
Monday, March 23 - Friday, April 04
11:00 a.m. – 1:00 p.m.
3:00 p.m. – 5:00 p.m

  • Limited to 250 callers at one time.
  • Participants may call at anytime and are welcome to enter and exit at will.
  • Callers will be muted upon entry and will be taken in the order they are received.

How to Participate:
Join Skype Meeting Here
Join by phone
(202) 765-1264; Conference ID - 162817288
Trouble Joining? Try Skype Web App Here

New Coronavirus Info for Small and Medium-size Business

Monday, March 23, 2020

WASHINGTON — Today the U.S. Treasury Department, Internal Revenue Service (IRS), and the U.S. Department of Labor (Labor) announced that small and midsize employers can begin taking advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related leave to their employees. This relief to employees and small and midsize businesses is provided under the Families First Coronavirus Response Act (Act), signed by President Trump on March 18, 2020.

The Act will help the United States combat and defeat COVID-19 by giving all American businesses with fewer than 500 employees funds to provide employees with paid leave, either for the employee's own health needs or to care for family members. The legislation will enable employers to keep their workers on their payrolls, while at the same time ensuring that workers are not forced to choose between their paychecks and the public health measures needed to combat the virus.

Read Remainder of Article at IRS.gov >