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Keeping owners, managers, and stakeholders up to date on issues affecting their businesses.

Viewing posts in "Taxation".

Timing Isn’t Everything: PPP-Funded Expenses Remain Non-Deductible Whether or Not Loans are Forgiven by Year-End

On November 18, 2020, the IRS released Revenue Ruling 2020-27 and Revenue Procedure 2020-51, both of which provide guidance on the treatment of expenses paid with PPP loan proceeds. While this guidance is consistent with the IRS’s previous guidance prohibiting the deduction of expenses paid using Payroll Protection Program (“PPP”) loan proceeds that are subsequently forgiven, it does provide taxpayers with clarification on the treatment of PPP-funded expenses incurred in the tax year prior to the year in which the SBA confirms whether their loan will be forgiven.

1099-NEC Replaces 1099-MISC for Independent Contractor Payments

Beginning in tax year 2020, the Internal Revenue Service (IRS) requires current and deferred nonemployee compensation payments to be reported using the (previously retired) Form 1099-NEC. The Form 1099-NEC replaces the Form 1099-MISC for nonemployee compensation payments and generally must be filed with the IRS by the following January 31. However, for 2020 tax year, the filing deadline for the Form 1099-NEC is February 1, 2021, the first business day after January 31, 2021.

New IRS Guidance on Payroll Deferrals Confirms that the Buck Stops with the Employer

On August 28, 2020, the IRS issued Notice 2020-65, which provided much-needed guidance related to the payroll tax deferrals enacted by President Trump’s August 8, 2020 Executive Order (the “Order”). As discussed in my prior post (available here), the language of the Order stated that payroll tax deferrals “shall be made available with respect to any employee the amount of whose wages or compensation, as applicable, payable during any bi-weekly pay period generally is less than $4,000, calculated on a pre-tax basis, or the equivalent amount with respect to other pay periods.” As explained in my prior post, an employee’s exercise of this deferral right now may result in him or her paying a larger tax bill in April 2021; therefore, we encourage employees to consult with their tax advisors before making the decision to defer.

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