Lee B

The IRS will begin accepting business returns on Friday, January 8, 2021. Forms 1120, 1120S, and 1065 can be transmitted to Drake after installing the Drake Tax 2020 January release. E-File for form 990 will be enabled as soon as development and testing is complet

I pay $ 340 a year for $ 250,000 of coverage thru Hiscox.

I have a refurbished Acer Laptop and a refurbished Dell Optiplex Desktop and I haven't had any problems. From what I have read, most refurbished items are subject to fairly extensive testing before they're sold.

Copied from the CPA Practice Advisor( includes a bit of helpful commentary ): "The Coronavirus Response and Relief Supplemental Appropriations Act of 2021 is a $900B relief package to deliver a second round of economic stimulus for individuals, families, and businesses. The package provides relief through multiple measures and expands many of the provisions already put into place under the CARES Act. Below are some of the higher-impact items, more important elements of each provision and key callouts critical to tax professionals. Additional Round of Economic Impact Payments (EIP) Direct payments $600 per eligible family member $1,200 for married filing joint returns $600 per dependent child under 17 years’ old Credit phase-out starting at $75,000 of modified adjusted gross income ($112,500 for head of household and $150,000 for married filing joint). Advance payments are based on information on 2019 tax returns. Taxpayers without a social security number are not eligible. If the credit determined on the taxpayer’s 2020 tax return exceeds the amount of the advance payment, the taxpayer will receive the difference as a refundable tax credit. Taxpayers who receive an advance payment that exceeds the credit do not need to repay the amount. Key takeaway: This measure provides additional, much needed financial assistance for Americans impacted by the global pandemic. Unemployment Insurance Additional $300 per week for all workers receiving unemployment benefits, from December 26, 2020 to March 14, 2021. Extends and phases out PUA, a temporary federal program covering self-employed and gig workers, to March 14 (after which no new applicants) through April 5, 2021. Provides additional weeks for those who would otherwise exhaust benefits by extending PUA from 39 to 50 weeks — with all benefits ending April 5, 2021. The bill also provides an extra benefit of $100 per week for certain workers who have both wage and self-employment income but whose base UI benefit calculation doesn’t take their self-employment into account. Key takeaways: The extension was critical in preventing as many as 14 million Americans from losing this economic lifeline at the end of the year. Tax professionals can help their clients stay up to date on state’s guidelines. Paycheck Protection Program Loans Businesses are now allowed to deduct expenses associated with their forgiven PPP loans. The new law provides $284.45 billion to reopen and strengthen PPP for first and second time borrowers and reauthorizes the program through March 31, 2021. Develops a process for a small business to receive a second PPP if the small business has less than 300 employees and can demonstrate a revenue reduction of 25 percent. Creates a simplified PPP loan forgiveness application for loans under $150,000 whereby the borrower signs and submits a one-page certification that requires the borrower to list the loan amount, the number of employees retained, and the estimated total amount of the loan spent on payroll costs. Expands the list of eligible expenses to include covered operations (software, cloud computing and other human resources and accounting needs), PPE, covered supplier costs and damage costs due to public disturbances. Repeals the CARES Act provision that requires borrowers to deduct their EIDL Advance from their PPP loan forgiveness amount. Key takeaways: Tax professionals can help their clients to determine PPP loan and forgiveness eligibility and with applications. Tax professionals can encourage their clients to keep all PPP funds separate and to keep important records. Economic Injury Disaster Loan (EIDL) Advance Program The new law provides $25 billion to restart and extend the EIDL Advance Grant for small businesses in low income communities. Creates a process for existing EIDL Advance grantees that received less than $10,000 to reapply for the difference between what they received and the maximum EIDL Advance Grant of $10,000. Extension of the Employee Retention Credit Beginning on January 1, 2021 and through June 30, 2021, the provision: Increases the payroll tax credit rate from 50 percent to 70 percent of qualified wages. Expands eligibility for the credit by reducing the required year-over-year gross receipts decline from 50% to 20% and provides a safe harbor allowing employers to use prior quarter gross receipts to determine eligibility. Increases the limit on per-employee creditable wages from $10,000 for the year to $10,000 for each quarter. Increases the 100-employee delineation for determining the relevant qualified wage base to employers with 500 or fewer employees. Employers who receive Paycheck Protection Program (PPP) loans may still qualify for the ERTC with respect to wages that are not paid for with forgiven PPP proceeds. Key takeaways: The extension of this tax credit will help keep additional U.S. workers on payroll and more small businesses and nonprofits across the country afloat. Tax professionals can help their clients determine whether to take the Employee Retention Credit or a Paycheck Protection Program loan. Special lookback for Earned Income Credit and Child Tax Credit Special temporary rule allowing lower-income individuals to use their earned income from tax year 2019 to determine the Earned Income Tax Credit and the refundable portion of the Child Tax Credit (i.e., the Additional Child Tax Credit) in the 2020 tax year. Key takeaway: This will help workers who experienced lower wages this year, due to the pandemic, to get a larger refund that is consistent with their earnings from prior filing seasons. Eviction Moratorium and Rental Assistance The bill extends the moratorium on evictions under the CARES Act, designed to protect renters from eviction, until January 31, 2021. Families struggling to pay rent or with past due rent will be able to get assistance with paying past due rent, future rent payments, as well as utility bills. Miscellaneous provisions A 100% deduction for business meal food and beverage expenses provided by a restaurant that are paid or incurred in 2021 and 2022. Currently, the deduction is available for only 50% of such expenses. Extends the non-itemizer charitable deduction for 2021 and increases the maximum amount that may be deducted to $600 for married couples filing a joint return (while non-married filers or married filers who file separately are limited to $300). For 2020 and 2021, the percentage limit rules for individuals making cash charitable contributions do not apply. (i.e. you don’t need to apply the 60% AGI limitation) Further flexibility for taxpayers to rollover unused amounts in their health and dependent care flexible spending arrangements from 2020 to 2021 and from 2021 to 2022. Permits employers to allow employees to make a 2021 mid-year prospective change in contribution amounts. College students and parents with federal student loans will receive an additional extension on student loan payments, and will not be required to make payments on Federal Student loans until April 1, 2021. This includes both principal and interest payments. Contractors who were temporarily unable to work due to facility closures and other restrictions will be able to receive reimbursement for paid leave from federal agencies. Extender provisions The 7.5% adjusted gross income limit (instead of 10%) pertaining to the medical expense deduction has been made permanent. The higher learning tuition deduction is made permanent by increasing the phase-out limits in the permanent lifetime learning credit. The exclusion from gross income of discharge of qualified principal residence debt has been extended through 2025 (was due to expire at the end of 2020). The maximum acquisition debt limits are reduced from $2 million to $750,000 (from $1 million to $375,000 for married filing separate returns). The treatment of mortgage insurance premiums as qualified residence interest has been extended for one year through 2021 (was due to expire at the end of 2020). The nonbusiness energy property credit for qualified energy improvements to a principal residence has been extended for one year through 2021 (was due to expire at the end of 2020). Conclusion This $900B relief package delivers a second round of economic stimulus, expands on CARES Act provisions, and provides additional relief through multiple different measures. To help your clients stay on top of these changes, and to take advantage of the right provisions offered, set up a meeting to formulate a plan soon. It is essential to communicate the applicable changes to your clients at the right level."

This is the most current IRS update, dated 12/1/20: "The IRS has made significant progress opening backlogged mail. While, as of November 24, 2020, we had 7.1 million unprocessed individual tax returns and 2.3 million unprocessed business returns, the IRS expects to issue all refunds for 2019 individual tax returns in 2020 where there are no issues with the return. For refunds that cannot be issued in 2020 because the tax return is being corrected, reviewed or awaiting correspondence from a taxpayer, the refund will be issued as a paper check in 2021 per our normal processes. Taxpayers are encouraged to continue to check Where’s My Refund for their personalized refund status. How long you may have to wait: It depends on where you sent your tax return and where it is in the process. In some locations, we are caught up or almost caught up. In other locations we are processing returns we received over the summer due to the extended July 15 tax filing due date and, in some cases, are processing tax returns dated as early as April 15, 2020. However, we are rerouting tax returns and taxpayer correspondence from locations that are behind to locations where more staff is available, and we are taking other actions to reduce this backlog. Tax returns are opened in the order it is received. As the return is processed, it may be delayed because it has a mistake, is missing information, or there is suspected identity theft or fraud. If we can fix it without contacting you, we will. If we need more information or need you to verify that it was you who sent the tax return, we will write you a letter. The resolution of these issues depends on how quickly and accurately you respond, and the IRS staff trained and working under social distancing requirements to complete the processing of your return. What you should do: Unfortunately, other than responding to any requests for information promptly, there’s no action you can take. We’re working hard to get through the backlog. Please don’t file a second tax return or contact the IRS about the status of your return."

Don't know if this still applies, but I remember when I was still using ATX, that sometimes I had to go back to the prior year and update forms on returns in order for the rollover to come across correctly.

Don't think that will be a problem, since for some unknown reason the last day the IRS will be mailing checks and initiating direct deposits will be January 15th. Everyone else who qualifies will have to claim it on their 2021 tax return.

Yes, this is new and also I believe temporary for tax year 2020 only. I haven't seen any additional commentary on this.

Well on a more upbeat note, I feel prepared and ready to go

Tom, hopefully, this is one of those times that will open the doors to other opportunities.

Excerpted from the Journal of Accountancy: https://www.journalofaccountancy.com/news/2020/dec/tax-provisions-in-covid-19-relief-bill-ppp-and-business-meal-deductibility.html?utm_source=mnl:alerts&utm_medium=email&utm_campaign=22Dec2020&utm_content=button Many tax provisions appear in year-end coronavirus relief bill By Alistair M. Nevius, J.D. December 27, 2020 CARES Act extensions and pandemic provisions Educator expenses for protective equipment: The bill requires Treasury to issue regulations or other guidance providing that the cost of personal protective equipment and other supplies used for the prevention of the spread of COVID-19 is treated as an eligible expense for purposes of the Sec. 62(a)(2)(D)(ii) educator expense deduction. The regulations or guidance will apply retroactively to March 12, 2020. Payroll tax credits: The bill extends the refundable payroll tax credits for paid sick and family leave, enacted in the Families First Coronavirus Response Act, P.L. 116-127, through the end of March 2021. It also modifies the payroll tax credits so that they apply as if the corresponding employer mandates were extended through March 31, 2021. The bill also allows individuals to elect to use their average daily self-employment income from 2019 rather than 2020 to compute the credit. Deferral of employees’ portion of payroll tax: In August, Under the memorandum, employers are required to increase withholding and pay the deferred amounts ratably from wages and compensation paid between Jan. 1, 2021, and April 30, 2021. The bill extends the repayment period through Dec. 31, 2021. Miscellaneous tax provisions Temporary allowance of full deduction for business meals: The bill temporarily allows a 100% business expense deduction for meals (rather than the current 50%) as long as the expense is for food or beverages provided by a restaurant. This provision is effective for expenses incurred after Dec. 31, 2020, and expires at the end of 2022. Certain charitable contributions deductible by nonitemizers: The bill extends and modifies the $300 charitable deduction for nonitemizers for 2021 and increases the maximum amount that may be deducted to $600 for married couples filing jointly. However, the Sec. 6662 penalty is increased from 20% to 50% of the underpayment for taxpayers who overstate this deduction. Education expenses: The bill repeals the Sec. 222 deduction for qualified tuition and related expenses but in its place increases the phaseout limits on the lifetime learning credit (so they match the phaseout limits for the American opportunity credit), effective for tax years beginning after Dec. 31, 2020. Depreciation of certain residential rental property over 30-year period: The bill provides that the recovery period applicable to residential rental property place in service before Jan. 1, 2018, and held by an electing real property trade or business is 30 years. Temporary special rule for determination of earned income: The bill allows taxpayers to refer to earned income from the immediately preceding tax year for purposes of determining the Sec. 32 earned income tax credit and the Sec. 24(d) additional child tax credit for tax year 2020. Modification of limitations on charitable contributions: This bill extends for one year (through 2021) the increased limit from the CARES Act on deductible charitable contributions for corporations and taxpayers who itemize. Disaster tax relief Qualified disaster-related personal casualty losses: The bill permits individuals who have a net disaster loss (as modified by the bill) to increase their standard deduction amount by the amount of the net disaster loss. Tax extenders The bill makes permanent the following provisions: Sec. 213(f) reduction in medical expense deduction floor, which allows individuals to deduct unreimbursed medical expenses that exceed 7.5% of adjusted gross income instead of 10%. The complete article is about 6 pages long, so I have excerpted the most common provisions. As usual their is very long list of tax extenders! Please copy and paste the above link for the complete article

"Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019" If you qualify you can double up.

Tom, does California have a rolling connect like Oregon? From time to time Oregon will affirmatively disconnect on a particular deduction like bonus depreciation.

Copied from the Journal of Accountancy "Breaking down the PPP provisions The return of the PPP is of particular interest to accountants, who played a significant role in helping millions of small businesses acquire $525 billion in forgivable loans during the five months the program was accepting applications, according to SBA reporting. The new round of PPP, or PPP2 as some are calling it, contains many similarities to the first round of the PPP but also has several important differences. The following is a high-level view of the PPP provisions. Who is eligible to apply PPP2 loans will be available to first-time qualified borrowers and, for the first time, to businesses that previously received a PPP loan. Specifically, previous PPP recipients may apply for another loan of up to $2 million, provided they: Have 300 or fewer employees. Have used or will use the full amount of their first PPP loan. Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019. PPP2 also makes the forgivable loans available to Sec. 501(c)(6) business leagues, such as chambers of commerce, visitors’ bureaus, etc., and “destination marketing organizations” (as defined in the act), provided they have 300 or fewer employees and do not receive more than 15% of receipts from lobbying. The lobbying activities must comprise no more than 15% of the organization’s total activities and have cost no more than $1 million during the most recent tax year that ended prior to Feb. 15, 2020. PPP2 will also permit first-time borrowers from the following groups: Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans. Sole proprietors, independent contractors, and eligible self-employed individuals. Not-for-profits, including churches. Accommodation and food services operations (those with North American Industry Classification System (NAICS) codes starting with 72) with fewer than 300 employees per physical location. The bill allows borrowers that returned all or part of a previous PPP loan to reapply for the maximum amount available to them. PPP loan terms As with PPP1, the costs eligible for loan forgiveness in PPP2 include payroll, rent, covered mortgage interest, and utilities. PPP2 also makes the following potentially forgivable: Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines. Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations. Covered operating costs such as software and cloud computing services and accounting needs. To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over a covered period of either eight or 24 weeks — the same parameters PPP1 had when it stopped accepting applications in August. PPP borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs in the year prior to the loan or the calendar year, the same as with PPP1, but the maximum loan amount has been cut from $10 million in the first round to the previously mentioned $2 million maximum. PPP borrowers with NAICS codes starting with 72 (hotels and restaurants) can get up to 3.5 times their average monthly payroll costs, again subject to a $2 million maximum. Simplified application and other terms of note The new COVID-19 relief bill also: Creates a simplified forgiveness application process for loans of $150,000 or less. Specifically, a borrower shall receive forgiveness if a borrower signs and submits to the lender a certification that is not more than one page in length, includes a description of the number of employees the borrower was able to retain because of the loan, the estimated total amount of the loan spent on payroll costs, and the total loan amount. The SBA must create the simplified application form within 24 days of the bill’s enactment and may not require additional materials unless necessary to substantiate revenue loss requirements or satisfy relevant statutory or regulatory requirements. Borrowers are required to retain relevant records related to employment for four years and other records for three years, as the SBA may review and audit these loans to check for fraud. Repeals the requirement that PPP borrowers deduct the amount of any EIDL advance from their PPP forgiveness amount. Includes set-asides to support first- and second-time PPP borrowers with 10 or fewer employees, first-time PPP borrowers that have recently been made eligible, and for loans made by community lenders. Tax deductibility for PPP expenses The bill also specifies that business expenses paid with forgiven PPP loans are tax-deductible. This supersedes IRS guidance that such expenses could not be deducted and brings the policy in line with what the AICPA and hundreds of other business associations have argued was Congress’s intent when it created the original PPP as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136 (see the Dec. 3 letter from the AICPA and state societies to congressional leaders). The COVID-19 relief bill clarifies that “no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided” by Section 1106 of the CARES Act (which has been redesignated as Section 7A of the Small Business Act). This provision applies to loans under both the original PPP and subsequent PPP loans. While the CARES Act excluded PPP loan forgiveness from gross income, it did not specifically address whether the expenses used to achieve that loan forgiveness would continue to be deductible, even though they would otherwise be deductible. In April, the IRS issued Notice 2020-32, which stated that no deduction would be allowed under the Internal Revenue Code for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a PPP loan because the income associated with the forgiveness is excluded from gross income for purposes of the Code under CARES Act Section 1106(i). In November, the IRS then expanded on this position by issuing Rev. Rul. 2020-27, which held that a taxpayer computing taxable income on the basis of a calendar year could not deduct eligible expenses in its 2020 tax year if, at the end of the tax year, the taxpayer had a reasonable expectation of reimbursement in the form of loan forgiveness on the basis of eligible expenses paid or incurred during the covered period. Treasury Secretary Steven Mnuchin also argued against businesses being able to deduct business expenses paid with forgiven, tax-free PPP funds, calling it an unwarranted double benefit for businesses. The AICPA disputed this interpretation of the CARES Act loan forgiveness rules, arguing that it was not Congress’s intent to disallow the deduction of otherwise deductible expenses. Congress has now agreed with that position."

Over 20 years ago, my client who was an irrigation contractor was audited. One issue that arose was that he hadn't paid some employment taxes for several years. The auditor proposed an audit adjustment for the unpaid employment taxes saying that they shouldn't be deductible. Since my client was on accrual basis accounting, I pushed back hard. After discussing the issue the auditor backed down and removed the adjustment.

Yea ,the Omnibus Spending Bill due to be passed tomorrow or Tuesday includes the authorization to deduct the qualifying allowable expenses funded by PPP Loans which have been forgiven. It will also authorize a second round of PPP Loans with more restrictive qualifying parameters.

The current bill under consideration in Congress includes a second round of Stimulus Payments, $ 600 Single and $1,200 for a married couple and if the qualifying parameters get changed, the start of tax season will probably will be delayed. For the IRS, this comes at the absolute worst possible time!

Copied from IRS eNews: "New and draft forms, instructions and publications on IRS.gov New forms Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return Form 940 (Schedule A), Multi-State Employer and Credit Reduction Information Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund Form 943, Employer's Annual Federal Tax Return for Agricultural Employees Form 944, Employer's Annual Federal Tax Return Draft forms Form W-4P, Withholding Certificate for Pension or Annuity Payments Form 941, Employer's Quarterly Federal Tax Return Form 941-SS, Employer's Quarterly Federal Tax Return - American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands New instructions Inst 940, Instructions for Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return Inst 941-X, Instructions for Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund Inst 943, Instructions for Form 943, Employer's Annual Federal Tax Return for Agricultural Employees Inst 944, Instructions for Form 944, Employer's Annual Federal Tax Return New publications Pub 1220, Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G Pub 5165, Guide for Electronically Filing Affordable Care Act (ACA) Information Returns for Software Developers and Transmitters Pub 5258, Affordable Care Act (ACA) Information Returns (AIR) Submission Composition and Reference Guide Draft Publications Pub 15, Circular E, Employer's Tax Guide Pub 15-T, Federal Income Tax Withholding Methods Pub 51, Circular A, Agricultural Employer's Tax Guide"

There was also a similar announcement earlier this month specifically related to Forms 2848 and 8821. The IRS news release said the they wanted practitioners to be aware that this would not speed up the processing time for these forms.

The email that I received from Drake says as follows: "You will be able to transmit returns to Drake up until 11:59 am ET on Saturday, December 26, 2020. We strongly suggest you attempt your final transmissions at least one hour before the cutoff time."

I would write across the top in red ink, "Resubmitted With Requested Forms"

"The IRS recommended that any electronic return originators who hear from individuals posing as the IRS should contact the Treasury Inspector General for Tax Administration at www.tigta.gov to file a complaint. In addition, EROs who have been contacted by the scammers and were tricked into disclosing their acceptance letter should contact the IRS’s e-Services help desk immediatel"

In that case be aware that this might be a scam!

My thoughts are, first who was the executor for the estate, because this looks like a big mess with one legal misfire after another. Your client needs competent legal advice,because whoever the executor was sure didn't have any!

Copied from the SBA Website: Loan Forgiveness Payroll Costs FAQs 1. Question: Are payroll costs that were incurred during the Covered Period2 or the Alternative Payroll Covered Period3 but paid after the Covered Period or the Alternative Payroll Covered Period eligible for Loan Foregiveness? Answer: Yes, if the payroll costs are paid on or before the next regular payroll date after the Covered Period or Alternative Payroll Covered Period. Example: A borrower received its loan before June 5, 2020 and elects to use a 24-week Covered Period. The borrower’s Covered Period runs from Monday, April 20 through Sunday, October 4. The borrower has a biweekly payroll cycle, with a pay period ending on Sunday, October 4. However, the borrower will not make the corresponding payroll payment until the next regular payroll date of Friday, October 9. Under these circumstances, the borrower incurred payroll costs during the Covered Period and may seek loan forgiveness for the payroll costs paid on October 9 because the cost was incurred during the Covered Period and payment was made on the first regular payroll date after the Covered Period. 2. Question: Are payroll costs that were incurred before the Covered Period but paid during the Covered Period eligible for loan forgiveness? Answer: Yes. Example: A borrower received its loan before June 5, 2020 and elects to use a 24-week Covered Period. The borrower’s Covered Period runs from Monday, April 20 through Sunday, October 4. The borrower has a biweekly payroll cycle, with a payroll cycle ending on Saturday, April 18. The borrower will not make the corresponding payroll payment until Friday, April 24. While these payroll costs were not incurred during the Covered Period, they were paid during the Covered Period and are therefore eligible for loan forgiveness.