Learning Center for Tax and Financial Insights

Article Highlights: Emergency Coronavirus Relief Act of 2020 Stimulus Payments Unemployment Assistance CDC Eviction Moratorium Paycheck Protection Program Loans Earned Income Tax Credit & Child Tax Credit School Funding Child Care Transportation After months of political bickering, Congress has reached an agreement on an emergency coronavirus relief bill and the President has said he would sign it. Although not all the details are fully available yet, the following provides a good overview of the provisions affecting individual taxpayers and small businesses. Stimulus Payments – Another round is included, but only $600 will be sent to each eligible adult this time, down from the $1,200 per adult authorized by the CARES Act in March. However, this time it also includes $600 per dependent child. Also eligible this time are so-called “mixed-status” households, for example where one of the spouses is a noncitizen, which were previously excluded from getting payments. Maximum Payment Amounts: Each eligible adult: $600 Married couple (both eligible) filing jointly: $1,200 Each dependent child under age 17: $600 Payment Phase-out – The payment is phased out when the taxpayer’s AGI exceeds... CREDIT PHASE OUT THRESHOLD Filing Status Threshold Unmarried Taxpayers (as well as Married Filing Separately) $75,000 Head of Household $112,500 Married Taxpayers Filing Joint $150,000 At the time this article was published there was no specific date for these payments to be made, but since everyone agrees the need is urgent and the IRS has done this once before, it should be sometime in January. Treasury Secretary Mnuchin has indicated some direct deposit payments may be made as early as in the last week of December.Unemployment Assistance – All Federal supplemental unemployment insurance benefits, which had already expired or would end on December 31, will be extended through March 14, 2021. However, the supplemental amount will only be $300 per week instead of the $600 that the CARES Act authorized. Rental Assistance – The legislation establishes the $25 billion first-ever emergency federal rental assistance program to be distributed by state and local governments. These funds will be targeted to families impacted by COVID that are struggling to make the rent and may have past due rent compounding on itself. These families will be able to utilize this assistance for past due rent, future rent payments, as well as to pay utility and energy bills and prevent shutoffs. Each state will need to establish their own system for distributing the funds. Of the $25 billion, $800 million is reserved for Native American housing entities. CDC Eviction Moratorium – The legislation also includes an extension of the existing CDC eviction moratorium through January 31, 2021. Paycheck Protection Program (PPP) Loans & Small Business Support – The legislation includes $284 billion for first and second forgivable PPP loans. Unlike the prior loan program, this round will truly be limited to small businesses that incurred a loss of revenue. Eligibility is expected to be limited to:

After months of political bickering, Congress is finally passing a new COVID relief bill. Watch this video for a summary of what you can expect from this relief package. .embed-container { position: relative; padding-bottom: 56.25%; height: 0; overflow: hidden; max-width: 100%; } .embed-container iframe, .embed-container object, .embed-container embed { position: absolute; top: 0; left: 0; width: 100%; height: 100%; }

Article Highlights Additional 2020 Recovery Rebates Paycheck Protection Program (PPP) Loans & Small Business Support Clarification of Tax Treatment of Covered Loan Forgiveness Expenses Business Meals Educator Expense Unemployment Assistance Earned Income Tax Credit (EITC) & Child Tax Credit (CTC) Cash Charitable Contributions for Non-Itemizers Cash Charitable Contributions for Itemizers Flexible Spending Arrangements Carryover Reduction in Medical Deduction AGI Floor Volunteer Firefighters and Emergency Medical Responders Benefits Education Credits Phaseouts Consolidated Discharge of Qualified Principal Residence Indebtedness Employer-Provided Educational Assistance Mortgage Insurance Premiums Nonbusiness Energy Credit 2-Wheeled Plug-In Electric Vehicle Credit Solar (REEP) Tax Credit Phaseout After several months of the Republicans and Democrats not being able to agree on additional COVID-related tax relief and other matters, as 2020 was coming to an end, horses were traded, and deals were made so that Congress could put together the much-needed legislation. The result is a nearly 5,600-page omnibus bill, the Consolidated Appropriations Act, 2021, Included in that legislation are the “COVID-Related Tax Relief Act of 2020” (COVIDTRA) and the “Taxpayer Certainty and Disaster Tax Relief Act of 2020”. The bill was signed by the President on December 27. This article provides an overview of the many tax provisions included in the legislation, including the 2nd round of economic impact payments, another round of targeted PPP loans for businesses, favorable tax treatment of expenses paid with forgiven loan proceeds, temporary expanded deduction for business meals, and modifications to charitable contributions—along with an excess of 30 new, altered, and extended tax provisions. Additional 2020 Recovery Rebates An additional round of economic impact payments (EIPs) is included in the legislation but the amount is substantially less than the first round, which was $1,200 per eligible adult and $500 per dependent child under age 17. This new round will be $600 per eligible adult and $600 per dependent child under 17. Also, eligible this time are the so-called mixed-status households, for example where one of the spouses is a noncitizen, which were previously excluded from receiving payments. Maximum Payment Amounts: Each eligible adult: $600 Married couple (both eligible) filing jointly: $1,200 Each dependent child under age 17: $600 Payment Phaseout – The payment is phased out by 5% of the taxpayer’s 2019 AGI that exceeds the filing status threshold. CREDIT PHASEOUT THRESHOLD Filing Status Threshold Unmarried Taxpayers (as well as Married Filing Separately) $75,000 Head of Household $112,500 Married Taxpayers Filing Joint & SS $150,000 Payment Due Date - Although the Act includes a January 15, 2021 deadline for advance payments to be made, President Trump’s delay in signing the bill may delay the payments. No Social Security Number - In general, taxpayers without an eligible Social Security number are not eligible for the payment. However, married taxpayers filing jointly, and otherwise eligible, where one spouse has a Social Security Number and one spouse does not are eligible for a payment of $600, in addition to $600 per child under age 17 with a Social Security Number. Deceased Taxpayers – There was considerable confusion related to the first round when the IRS issued EIPs to deceased individuals. This time around they have specified that anyone that was deceased before January 1, 2020 is not eligible for an EIP. The payments will be treated as a refundable 2020 tax credit and reconciled to the correct amount on the 2020 return. Any excess payment will not be required to be repaid and if the payment was less than qualified for, the difference will be paid as a refundable credit when the 2020 return is filed. Paycheck Protection Program (PPP) Loans & Small Business Support The legislation includes over $300 billion for first and second forgivable PPP loans. Unlike the prior loan program, this round will truly be limited to small businesses that incurred a loss of revenue. Eligibility is limited to: Businesses with 300 or fewer employees that have sustained a 25% revenue loss in any quarter of 2020 as compared with the same period in 2019. Small 501(c)(6) organizations that are not lobbying organizations and that have 150 employees or fewer, such as local chambers of commerce, economic development organizations, and tourism offices. Certain 501(c)(6) nonprofits and Destination Marketing Organizations with 300 or fewer employees that do not receive more than 15 percent of their revenue from lobbying. Local newspapers and T.V. and radio stations previously made ineligible by their affiliation with other stations. Forgivable Expenses – will be expanded to include covered (COVIDTRA Sec 304): Payroll costs – Including additional group insurance payments, including vision, dental, disability and life insurance. Operational Costs Property Damage Costs Supplier costs on existing contracts and purchase orders, including the cost for perishable goods at any time. Investments in facility modifications and personal protective equipment needed to operate safely and technology operations expenditures. The term ‘covered supplier cost’ - Means an expenditure made by an entity to a supplier of goods for the supply of goods that -• Are essential to the operations of the entity at the time at which the expenditure is made; and• Is made pursuant to a contract, order, or purchase order -o In effect at any time before the covered period oro With respect to perishable goods. The term ‘covered worker protection expenditure’— Means an operating or a capital expenditure to facilitate the adaptation of the business activities of an entity to comply with requirements established or guidance issued by Federal, State and local governments during the period beginning on March 1, 2020 and ending the date on which, the national emergency related to COVID-19 declared by the President expires. NOTE: The legislation includes a long list of examples of what does and does not apply. The term ‘covered operations expenditure’ - Means a payment for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses. The term ‘covered property damage cost’ - means a cost related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance or other compensation. Loan Size - Establishes a maximum loan size of 2.5 times the average monthly payroll costs, up to $2 million. Allows small businesses assigned to the industry NAICS code 72 (Accommodation and Food Services) to receive PPP second draw loans equal to 3.5 times their average monthly payroll costs in order to help these businesses combat onerous State and local restrictions. Maintains existing expansions in eligibility for businesses assigned to the industry NAICS code 72 (Accommodation and Food Services). Loan Forgiveness – Full loan forgiveness is available if the borrower spends at least 60% of the second draw on payroll costs over either an 8-week or 24-week period selected by the borrower. Simplified Loan Forgiveness - The loan forgiveness process is simplified for borrowers with PPP loans of $150,000 or less. (This means another version of the SBA’s loan forgiveness application form will be forthcoming.) Churches and Religious Organizations – Are eligible for loans and prevents future administrations from making them ineligible. Planned Parenthood – Is ineligible Set-Asides - $41 billion is set aside to ensure that smaller borrowers and under-served communities get the help they need, such as: Small businesses with 10 or fewer employees, Small community lenders, Independent live venue operators, including eligible independent movie theaters and museums, affected by COVID-19 stay-at-home orders. Clarification of Tax Treatment of Covered Loan Forgiveness Expenses The CARES Act provides that a recipient of a PPP loan may use the loan proceeds to pay payroll costs, certain employee benefits relating to healthcare, interest on mortgage obligations, rent, utilities, and interest on any other existing debt obligations. If a PPP loan recipient uses their PPP loan to pay those costs, they can have their loan forgiven in an amount equal to those costs. PPP loan forgiveness doesn't give rise to taxable income and the Code generally doesn't allow a taxpayer to deduct expenses that are paid with tax exempt income. The IRS had issued a ruling essentially saying that since businesses aren’t taxed on the proceeds of a forgiven PPP loan, the expenses aren’t deductible. However, members of Congress have been saying all along that was not the Congressional intent.

Thanks to the significant challenges presented by the ongoing COVID-19 pandemic, more Americans than ever are struggling financially. With a lot of people out of work due to the staggering number of business closers, many are turning to credit cards to help make ends meet. According to one recent study, total credit card balances in the United States ballooned to a massive $893 billion as of the first quarter in 2020. People with average or good credit scores ranging from 670 to 739 tend to carry the most debt, with an average of about $9,712 per card. Thankfully, all hope is not lost. Even if you're currently carrying large balances, there are a number of steps you can take to find the relief that you seek – you just need to keep a few key things in mind along the way. Getting Out of Credit Card Debt: One Step at a Time By far, one of the best moves you can make to get out of credit card debt involves using a balance transfer card as strategically as possible. Yes, at this point you're just moving debt from one card to another - but if that balance transfer card doesn't charge interest for a specific length of time (think: six months to a year), you'll be able to continue making payments and still save a large amount of money every month. Keep in mind, however, that most balance transfer cards charge a fee ranging between 3% and 5% of the total amount that you're transferring. If you're planning on using a balance transfer card to move $2,000, for example, this likely means that you'll have to pay up to $100 for the ability to do so. Be aware of these fees and plan accordingly if this is the move you're going to make. Note, however, that you'll typically need a credit score of at least 670 in order to get approved for one of these cards with a 0% introductory interest rate. If yours isn't quite at that level yet, you'll likely want to explore other options. Along the same lines, you could also look into a debt consolidation loan - which is a bit like a personal loan that you specifically use to pay off your credit card debts. Not only could you easily get a loan for a lower interest rate than you're currently paying with your credit cards, but you can also use the money to consolidate many different cards into a single loan. This means you'll also only have one monthly payment to manage, too. Debt consolidation loans usually have set terms, which can be anywhere from 48 to 60 months. But the major benefit here is that you'll also have a simple, fixed and predictable payment amount that you're responsible for every month - thus making it easier to repay what you owe without stress. Finally, a lot of people don't realize that you can actually try negotiating your credit card debt with a lot of the major financial lenders out there. Look on your latest statement to find the contact information for your credit card issuer and pick up the phone and give them a call. At the very least, you may be able to negotiate a lower interest rate, reduced monthly payments or both depending on your history with that particular company. Depending on the situation, you could also try to negotiate what is called a debt settlement, which is when the credit card issuer accepts a single lump sum payment to settle all debts on the card. Note that this isn't always possible, but it certainly won't hurt to ask. The worst they can say is "no," at which point you're free to explore some of the other options on this list. In the end, it's important to understand that while it is entirely possible to get out of credit card debt, the best thing to do would be to take steps to avoid this situation in the first place. Try to use your credit card the same way you would a debit card - meaning, don't use credit to make purchases that you can't really afford in the first place. If nothing else, try to only make purchases that you know you'll be able to pay off by the time your next statement rolls around. That way, you'll still get all the items you need, and you'll avoid significant interest charges as well.

It’s easy to get distracted when you’re doing dull, repetitive accounting work. That distraction leads to errors sometimes. So, besides the time you’re spending on work that could be automated, you have to tack on additional time to chase down your mistakes. QuickBooks Online already reduces repetitive data entry by saving your lists of customers, vendors, products, etc., and making them accessible when you’re creating transactions. But it does more to save time and minimize errors by allowing you to create recurring transactions. Enter a transaction like an invoice or bill once, and QuickBooks Online memorizes it for future use! Here’s how it works. Let’s say you have a customer who wants to rent a printer from you for one year. You create an invoice for one month’s rental. At the bottom of the screen, click Make recurring. A partial view of the screen that opens is pictured below. QuickBooks Online allows you to set up a transaction to repeat at scheduled intervals. Much of this screen will have already been filled in. You’ll need to enter a name for the template you’re creating at the top of the screen, one that will remind you of its content. In the second field, the drop-down list displays three options for how the recurring transaction will be handled by QuickBooks Online They are: Scheduled. Your invoice will go out automatically at the scheduled interval, with only a change to the date. As with any automated process, you should be very careful when selecting this option. Reminder. You will get a reminder ahead of each occurrence so you can make any necessary changes before sending. Unscheduled. No automation is involved here. The invoice is memorized, but you’ll have to remember when it needs to go out. If you chose Reminder, the next field will read Create (x) days in advance. Enter the number of days here. On the next line, you’ll only have to check or uncheck the Options. Under Interval, you’ll tell QuickBooks Online when the invoice is scheduled to go out. You can choose from Daily, Weekly, Monthly, and Yearly. The invoice in this example should be processed and sent on the first day of every month. The start date is January 1, 2021, and it will end on December 31, 2021. If your recurring transaction should continue to go on indefinitely, you’ll have the option to select

Filing annual wage reports is just one of the many end-of-year responsibilities expected of every business. But the task is not as straightforward as some would think. The reports get sent to the people who have received wages, and at the same time they get filed with the Social Security Administration (SSA) or the Internal Revenue Service (IRS). In some cases, they get filed with both. The question of which is appropriate rests entirely on who is being paid and how the relationship between them and the business is categorized. Wage reports are prepared for employees as well as for independent contractors, but each type of wage earner receives a different form for filing their income tax returns. The information that a business provides to the appropriate government agency needs to match the information submitted by the wage earner, both to ensure accuracy and that they are paying the taxes that they owe. Businesses are expected to use the correct form, and in order to do that they need to be certain as to whether or not the person that they are paying is considered an employee. Getting this right is important, as incorrectly labeling an individual as a non-employee can result in significant penalties. The Difference Between an Employee and an Independent Contractor Though at first glance it may seem obvious whether a wage earner is a nonemployee or an employee, there are a lot of instances where business owners are not certain how an individual’s role is best defined. To clear up confusion, the IRS has identified three specific distinguishing criteria: the relationship between the worker and the employer; whether the business has financial control over the individual’s payment terms; and whether the business has behavioral control over the individual. Let’s take a closer look at each. The Relationship Between the Worker and the Employer Business owners who are not sure whether an individual is an employee should determine the answers to specific questions about their role within the organization – or whether they have one at all. Examples of appropriate questions would be whether the duties that the person is responsible for are integral to the operations of the business and whether the individual receives paid vacation or benefits from the organization. Though some point to the existence of a written contract as evidence supporting an individual being either an independent contractor or an employee, a contract by itself is not enough to support an argument one way or another. Financial Control Another straightforward indication of whether a wage earner is an employee or a contractor is based upon how the individual is paid, and why. A person that charges based on their own fee structure in exchange for a service performed is not an employee. A business owner has the choice of paying or not paying the amount demanded or seeking somebody else to provide the service. That is not the case with an employee, whose pay is determined by the employer from the start. Employers are able to control the work that an employee is assigned to do and the employee is required to perform based upon instructions. The same is not true for an independent contractor. Behavioral Control Finally, an employee’s work is directed by their employer, both in terms of what they do and how, where and when they will do it. The same is not true for an independent nonemployee. These individuals are self directed and create their own terms and conditions for their schedule, their work environment, and more. Though a business may provide specifications for the work product or job, the professional that is being paid is not controlled by the business’ code of conduct, work hours, or any other specifics that an employee is obligated to follow. Using the Correct Forms to Suit the Individual Employees get W-2 Forms - Employees’ wage information gets reported on W-2 forms. These contain the following information: