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In light of the COVID-19 pandemic, the IRS expanded its electronic signatures program to include many more forms that historically needed a wet signature. The expansion is intended to make things easier for tax professionals and their clients, while in-person interactions may cause unnecessary risk.  

The IRS has recently extended the ability to accept e-signatures on many documents through December 2021, simplifying the process for tax professionals.  

What types of signatures are accepted? 

The IRS has provided the following acceptable types of electronic signatures: 

While there are additional ways to provide an e-signature, taxpayers are advised to stick to the outlined methods to prevent the possibility of the forms being returned or delayed during processing.  

What forms are included in the recent extension? 

While some forms can be electronically filed, others must be sent by mail and manually processed by the IRS. The forms in this electronic signature program all require the latter – a hardcopy sent to the IRS for processing. This includes: 

Our firm continues to monitor the ability to electronically sign and submit IRS forms. If you have any questions about tax filings, please reach out to our team of tax professionals for help.  

Note: We are closely monitoring H.R. 3684, known as the Infrastructure Investment and Jobs Act. The Senate has approved the infrastructure bill and now goes to the House of Representatives for consideration as of the publication. The infrastructure bill would terminate the employee retention credit early, making wages paid after September 30, 2021, ineligible for the credit. 

The Employee Retention Credit (ERC) was introduced in 2020 to help businesses that have been affected by the COVID-19 pandemic. Since its release, it has been expanded and modified to help more businesses. Despite all of this, many businesses that are eligible for the credit haven’t filed for it. Did the pandemic impact your business? Don’t assume your business is ineligible. Keep reading to learn more.  

What is the Employee Retention Credit? 

The ERC allows businesses to claim a refundable credit for qualified employee wages and related expenses if there was a significant disruption to business because of the pandemic. That disruption is measured in a quarterly reduction of gross revenues – 50% reduction in 2020 vs. 2019; and only 20% reduction in 2021 vs. 2019. In addition, there is a “safe harbor” test that allows you to look back a quarter. For example, if your 4th quarter 2020 revenues were down 20% compared to the 4th quarter 2019, you are eligible for the first quarter of 2021, regardless of the first quarter test outcome. 

The second disruption is a government shutdown – complete or temporary. For example, a restaurant limited to 75% seating capacity by the governor’s mandate has experienced a partial shutdown.  

If you experienced EITHER one of these disruptions, you might be eligible for the employee retention credit.  

Eligibility for 2020 includes businesses with 100 or fewer full-time equivalent employees in 2019, in which all wages qualify whether the business was open or (partially) closed because of governmental orders. For businesses with more than 100 employees, only wages paid to employees when they weren’t providing services because the pandemic are eligible.  

For 2021 the full-time equivalent threshold increased to 500 employees in 2019.  

For 2020 the credit is 50% of the first $10,000 of eligible employees’ earnings for the year – up to $5,000 per employee for the year.  

For 2021 the credit is 70% of the first $10,000 of eligible employee earnings per QUARTER – up to $28,000 per employee for the year. 

What new guidance was released? 

The IRS released Notice 2021-49  on August 4, 2021, which provided additional ERC guidance. 

Keep in mind, the ERC is a complex tax credit with ever-changing guidelines and requires interpretation. Reach out to our professional tax team, who are familiar with the credit and most up-to-date guidelines.  

What if I missed filing for the ERC? 

While some of the newer guidelines are retroactive, others only apply to wages paid more recently. In most cases, employers can file a correction to their quarterly tax documents to receive appropriate credit for qualified wages paid. Keep in mind that wages included in Payroll Protection Plan (PPP) forgiveness are not qualified (no double-dipping).  

We have noted a longer processing time for amended returns. This means you’ll see benefits of the credit faster by filing for it with your quarterly returns; however, it could take 90 to 120 days for amended returns.  

How can my business receive help? 

If you’re like many businesses and need help understanding the ERC and the recent changes, reach out to our team of qualified professionals for help! We can help you: 

 

We look forward to helping you! 

 

Did your company receive funds from the Human Health Services (HHS) Cares Act stimulus? If so, you may be required to submit supporting documentation for how the funds were used.

The Human Health Services department calculated relief payments based on 2019 Fee for Services (FFS) Medicare payments and direct deposited them into hospital and medical provider accounts. Any payments of more than $10,000 require additional reporting by the deadline specified in the chart below, per the Terms and Conditions of the payments.

 Period  Payment Received Period (Payments Exceeding $10,000 in Aggregate Received)  Deadline to Use Funds  Reporting Time Period 
     1  From April 10, 2020 to June 30, 2020  June 30, 2021  July 1 to Sept. 30, 2021 
     2  From July 1, 2020 to Dec. 31, 2020  Dec. 31, 2021  Jan. 1 to March 31, 2022 
     3  From Jan. 1, 2021 to June 30, 2021  June 30, 2022  July 1 to Sept. 30, 2022 
     4  From July 1, 2021 to Dec. 31, 2021  Dec. 31, 2022  Jan. 1 to March 31, 2023 

Source: hhs.gov

These funds provided by the stimulus payments must be used for eligible expenses and lost revenues to allow hospitals and medical practices to prevent, prepare for, and respond to COVID-19. To provide the necessary reports, Health and Human Services has launched a Provider Relief Fund (PRF) reporting portal.

Before getting started, you may want to gather the following types of information:

You can learn more about the system and reporting requirements here. Our team of professionals is also available to help you sort through the necessary reporting requirements.

The Employee Retention Tax Credit (ERTC) is a valuable tax break that was extended and modified by the American Rescue Plan Act (ARPA), enacted in March of 2021. Here’s a rundown of the rules.

Background

Back in March of 2020, Congress originally enacted the ERTC in the CARES Act to encourage employers to hire and retain employees during the pandemic. At that time, the ERTC applied to wages paid after March 12, 2020, and before January 1, 2021. However, Congress later modified and extended the ERTC to apply to wages paid before July 1, 2021.

The ARPA again extended and modified the ERTC to apply to wages paid after June 30, 2021, and before January 1, 2022. Thus, an eligible employer can claim the refundable ERTC against “applicable employment taxes” equal to 70% of the qualified wages it pays to employees in the third and fourth quarters of 2021. Except as discussed below, qualified wages are generally limited to $10,000 per employee per 2021 calendar quarter. Thus, the maximum ERTC amount available is generally $7,000 per employee per calendar quarter or $28,000 per employee in 2021.

For purposes of the ERTC, a qualified employer is eligible if it experiences a significant decline in gross receipts or a full or partial suspension of business due to a government order. Employers with up to 500 full-time employees can claim the credit without regard to whether the employees for whom the credit is claimed actually perform services. But, except as explained below, employers with more than 500 full-time employees can only claim the ERTC with respect to employees that don’t perform services.

Employers who got a Payroll Protection Program loan in 2020 can still claim the ERTC. But the same wages can’t be used both for seeking loan forgiveness or satisfying conditions of other COVID relief programs (such as the Restaurant Revitalization Fund program) in calculating the ERTC.

Modifications

Beginning in the third quarter of 2021, the following modifications apply to the ERTC:

Contact us if you have any questions related to your business claiming the ERTC.

© 2021

Earlier this year, the American Rescue Plan (ARP) was announced, including some temporary updates to the child tax credits available for many parents. Under the ARP, eligible parents of dependent children can take a tax deduction of up to $3,600 per child, depending on the child’s age and household income.  

Part of this tax deduction is currently planned to be distributed to parents in the form of monthly payments from the IRS. For every child under the age of 6, parents will receive $300 per month starting on July 15 and ending on December 15. For children age 6 to 17, parents will receive $250 per month. Any remaining amount on the child tax credits will be eligible to be taken during the regular tax filing season.  

The child tax credit update portal 

The IRS has released a website where parents, including eligible non-filer parents, may make their designations concerning the child tax credits and scheduled deposits. This includes updating bank account information for direct deposits, even if previous economic stimulus payments were sent via check.  

For parents that want to forego the advance payments and take their child tax credit in one lump sum during their tax filings, you may opt-out using this portal. The deadline to opt-out for the first payment was June 28. If you opt-out after that deadline, you will still receive the first payment if you qualify. In addition to personal preference, filers may want to opt-out of these payments because: 

Now would be a good time to discuss with a tax professional any benefits or drawbacks to accepting the monthly advance payments to the child tax credit.  

Note: Parents who are married couples filing jointly must BOTH opt-out of receiving the payments, or you may still receive a partial payment.  

Who will receive monthly payments? 

Payments will be received by eligible parties starting around July 15, 2021. You can check your eligibility using this tool created by the IRS. Currently, the IRS is using 2019 and 2020 tax filings to decide who may be eligible. If you are a non-filer and have registered for the Economic Impact Payments online previously, you should not need to register for the child tax credit advance payments at this time. If you have not previously registered, you may do so at the Non-filer Sign Up Tool here.  

You can also find more about the temporary increase for the child tax credit and the upcoming advance payments here.  

Be sure to speak with your tax professional to determine the best course of action moving forward with these advance tax credit payments. Our team of experts is available to assist you.  

The IRS and Treasury Department provided new information regarding the tax credits available through the American Rescue Plan (ARP). The ARP was created to help small businesses through the pandemic. This new guidance provides information on how eligible businesses can claim the credit for providing paid time off to employees receiving or recovering from the vaccine. Below, we’ve outlined which employers are eligible for the credits and when and how the credits can be taken. 

Who is eligible? 

Any business with fewer than 500 employees is eligible to take the tax credit. This includes tax-exempt organizations and governmental employers who are not the federal government or not outlined in section 501(c)(1) of the Internal Revenue Code. Self-employed individuals are eligible for similar credits.  

What are the paid leave qualifications? 

In order to qualify for the tax credit, employers/employees must meet the following guidelines: 

For more information on the credits, including how they’re calculated, view the IRS Fact Sheet or reach out to our team of professionals.  

A measure to extend the Paycheck Protection Program (PPP) application deadline from March 31, 2021, to May 31, 2021, has passed the U.S. House of Representatives and the Senate. It now heads to President Biden’s desk for signature which he is expected to do promptly.

Small businesses will have until May 31, 2021, to continue submitting first and second-draw PPP loan applications to the Small Business Administration (SBA). The SBA was also granted an additional 30 days past May 31 to finish processing applications. The measure does not include any funding increases for the program.

Contact us for assistance with your PPP loan or forgiveness applications.

President Biden signed the $1.9 trillion American Rescue Plan Act (ARPA) on March 11. While the new law is best known for the provisions providing relief to individuals, there are also several tax breaks and financial benefits for businesses.

Here are some of the tax highlights of the ARPA.

The Employee Retention Credit (ERC). This valuable tax credit is extended from June 30 until December 31, 2021. The ARPA continues the ERC rate of credit at 70% for this extended period of time. It also continues to allow for up to $10,000 in qualified wages for any calendar quarter. Taking into account the Consolidated Appropriations Act extension and the ARPA extension, this means an employer can potentially have up to $40,000 in qualified wages per employee through 2021.

Employer-Provided Dependent Care Assistance. In general, an eligible employee’s gross income doesn’t include amounts paid or incurred by an employer for dependent care assistance provided to the employee under a qualified dependent care assistance program (DCAP).

Previously, the amount that could be excluded from an employee’s gross income under a DCAP during a tax year wasn’t more than $5,000 ($2,500 for married individuals filing separately), subject to certain limitations. However, any contribution made by an employer to a DCAP can’t exceed the employee’s earned income or, if married, the lesser of employee’s or spouse’s earned income.

Under the ARPA, for 2021 only, the exclusion for employer-provided dependent care assistance is increased from $5,000 to $10,500 (from $2,500 to $5,250 for married individuals filing separately).

This provision is effective for tax years beginning after December 31, 2020.

Paid Sick and Family Leave Credits. Changes under the ARPA apply to amounts paid with respect to calendar quarters beginning after March 31, 2021. Among other changes, the law extends the paid sick time and paid family leave credits under the Families First Coronavirus Response Act from March 31, 2021, through September 30, 2021. It also provides that paid sick and paid family leave credits may each be increased by the employer’s share of Social Security tax (6.2%) and employer’s share of Medicare tax (1.45%) on qualified leave wages.

Grants to restaurants. Under the ARPA, eligible restaurants, food trucks, and similar businesses that provide food and drinks may receive restaurant revitalization grants from the Small Business Administration. For tax purposes, amounts received as restaurant revitalization grants aren’t included in the gross income of the person who receives the money.

Much more

These are only some of the provisions in the ARPA. There are many others that may be beneficial to your business. Contact us for more information about your situation.

© 2021

The American Rescue Plan Act (ARPA) has been signed into law by President Biden and makes significant updates to several tax provisions to alleviate some of the pandemic’s financial burdens for individual taxpayers and businesses. Updates include expansions and extensions of various tax credits such as the employee retention credit (ERC), COBRA continuation coverage, Affordable Care Act (ACA) subsidies, and more. The bill also includes $1.46 billion for the IRS to manage the additional responsibilities on top of the annual tax filing season. Here are the critical tax updates.

Individual tax provisions in ARPA

Significant updates were made for individual taxpayers to deal with the financial ramifications of the pandemic.

COBRA continuation coverage credit expanded – Health care premiums will be subsidized at 100% for those who are eligible for COBRA from the date of enactment to Sep. 21, 2021.

ACA marketplace subsidies expanded – Health insurance premium cost savings for all marketplace exchange users are included in the bill.

Applicable extra subsidies can be claimed immediately or on the 2021 tax return. A special enrollment period is available until May 15, 2021, for most states.

Child tax credit increased – The child tax credit can now be claimed in advance of filing your return and increases to $3,000 per child (now including 17-year-olds) and $3,600 for children under six years of age. It phases out for married-filing-joint taxpayers with incomes over $150,000, $112,500 for heads of household, and $75,000 for all others. The credit will be paid monthly in cash up to $300 per month by the IRS from July through December.

Earned income credit expanded – The bill introduces rules for individual taxpayers with no children for 2021:

Student loan forgiveness – Any student loan forgiveness passed between Dec. 31, 2020, and Jan. 1, 2026, would be tax-free rather than the forgiven debt treated as taxable income.

Business tax provisions in ARPA

Business tax provisions were also extended and expanded to help businesses with the financial challenges of the pandemic.

ERC extended – The ERC is extended through Dec. 31, 2021, and expands the eligibility to new startups established after Feb. 15, 2020 (capped at $50,000 per calendar quarter), and companies with a 90% revenue decline compared to the same calendar quarter of the previous year.

Child and dependent care credit expanded – The credit is refundable for 2021. It increases the employer-provided dependent care assistance exclusion to $10,500. The maximum allowable expenses increase to $8,000 (from $3,000) for one dependent and $16,000 (from $6,000) for two or more and allow the credit to cover 50% of expenses.

Family and sick leave credit extended – The Families First Coronavirus Response Act (FFCRA) credits are extended to Sept. 30, 2021, and include:

Executive compensation deduction expanded – The executive compensation deduction for publicly traded employers expands to include the 8 highest compensated employees other than the CEO and CFO by 2027. Currently, a deduction is available on the first $1 million paid to the CEO, CFO, and next three highest compensated officers.

For questions and assistance with any of the programs related to ARPA, contact us.

The American Rescue Plan Act (ARPA) of 2021 passed Congress and President Biden signed the bill into law on March 12, 2021. The ARPA approves $1.9 trillion in spending for individuals, businesses, governments, and certain industries impacted by the COVID-19 pandemic. The third Act in a year, the ARPA approves additional economic impact payments for individuals; the extension of federal unemployment benefits; additional funds for Paycheck Protection Program (PPP) Loans, and Economic Injury Disaster Loans (EIDL) for hard-hit small businesses; and grants for food and beverage establishments. Here are the key individual and business provisions in the bill.

Individual provisions in ARPA

The bill extends and slightly alters two key benefits many individuals have been relying upon through the pandemic.

Unemployment – Federal benefits of $300 per week (in addition to state benefits) are extended through Sep. 6, 2021. The first $10,200 in federal unemployment benefits is tax-free for households making less than $150,000 per year in 2020. Taxpayers who received unemployment income may need to update 2020 tax returns if already filed.

Economic impact (stimulus) payments (EIPs) – The IRS will issue another round of EIPs at $1,400 per individual, $2,800 per married filing joint (MFJ), plus $1,400 per dependent. Income phase-out limits reduce from previous EIPs to $80,000 for individuals and $150,000 for MFJ. Full-time students under the age of 24 are now eligible for economic impact payments (EIP), unlike previous rounds. Your 2019 or 2020 adjusted gross income (AGI) is the basis for EIPs, so taxpayers will want to consider when to file their 2020 tax return to ensure a maximum EIP benefit.

Small business funding provisions in ARPA

The bill includes additional funding for small business relief programs, including the PPP, EIDLs, and industry-specific relief.

PPP – The Act allocates an additional 7.25 billion in additional funds, and the eligibility expands to include:

The deadline is still Mar. 31, 2021, to apply, so don’t delay.

EIDL advance payments – The Act allocates $15 billion for EIDL advance payments, and eligibility requirements state:

Restaurants, bars, and other eligible food and beverage providers – The Act allocates $28.6 billion for grants, and $5 billion is set aside for applicants with 2019 gross receipts of $500,000 or less.

Shuttered venue operators – The program is extended from the Consolidated Appropriations Act (CAA) with $1.25 billion allocated.

Community navigator pilot programs – $175 million is allocated for programs that increase awareness of and participation in COVID-19 relief programs for socially and economically disadvantaged business owners.

Other provisions of ARPA

For assistance with any of these provisions, please contact us.