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EIDL Borrowers Receive Additional Six-Month Deferment

March 17, 2022 by David Moseman CPA

EIDL Loan deferment

On March 15, 2022, Administrator Isabella Casillas Guzman, head of the U.S. Small Business Administration directed the U.S. Small Business Administration (SBA) to provide additional deferment of principal and interest payments for existing COVID Economic Injury Disaster Loan (EIDL) program borrowers. This will provide a total of 30 months deferment from inception on all approved COVID EIDL loans.

This is the third time in the past 12 months that the SBA has extended the deferment period for the COVID EIDL loans.

The SBA intends this deferment period to provide additional flexibility to small business owners impacted by the pandemic, especially those in hard-hit sectors managing disruption with recent variants, as well as recent supply chain and inflation challenges amid a growing economic recovery.

Read the SBA press release for more information.

 

Filed Under: Not-for-Profit, Pandemic, Small Business

IRS Adjusts HSA Limits for 2022

September 6, 2021 by Teri Pough

HSA-CFCPA-for-Insights

As it does each year, the IRS has announced changes for health savings accounts, which are associated with high-deductible health plans.

The figures for 2022:

  • Self-only: $3,650 (a $50 increase from 2021).
  • Family: $7,300 (a $100 increase from 2021).

According to the Society for Human Resource Management, the government bases its decision on the Consumer Price Index for All Urban Consumers for the 12-month period ending on March 31.

The IRS has made a similar adjustment to maximum out-of-pocket amounts:

  • Self-only: $7,050 (a $50 increase from 2021).
  • Family: $14,100 (a $100 increase from 2021).

The catch-up contribution amount for those 55 and older is not automatically adjusted and remains at $1,000.

Also remaining the same are minimum deductibles:

  • Self-only: $1,400.
  • Family: $2,800.

More information is available in IRS Rev. Proc. 2021-25.

If you need assistance or have any questions on the information in this article, please call your CironeFriedberg professional.  You can reach us by phone at (203) 798-2721 (Bethel) or (203) 366-5876 (Shelton) or email us at info@cironefriedberg.com.

Filed Under: IRS, Tax Changes

The American Families Plan, Carried Interest, and Potential Financial Impacts

June 20, 2021 by Teri Pough

The American Families Plan, Carried Interest, and Potential Financial Impacts

Author: Adam O’Feeney, Tax Manager, CironeFriedberg, LLP

President Joe Biden has already announced the American Rescue Plan in early March 2021 followed by the American Jobs Plan (AJP) later that month.  The third leg of Biden’s road to recovery is the American Families Plan (AFP), announced on April 28, 2021, at an estimated cost of $1.8 trillion.             

Part of the Build Back Better initiative, the AFP aims to boost the U.S. economy by investing heavily in infrastructure, jobs, education, healthcare and other programs for millions of Americans and would be funded through a number of tax hikes including the elimination of long-standing tax breaks such as the carried interest preferential tax treatment.

The White House breaks down the $1.8 trillion AFP into three main parts:

  • Add at least four years of free public education through quality universal pre-kindergarten and free community college; close equity gaps by training teachers and making college more affordable for low- and middle-income students.
  • Provide direct support to children and low- and middle-income families by increasing access to quality child care; create a national paid family and medical leave program; and provide nutritional assistance and health programs aimed at reducing childhood hunger.
  • Extend tax cuts for low- and middle-income families with children and American workers through the child tax credit, the earned income credit, and the child and dependent care tax credit.

President Biden describes his Build Back Better plans as “fiscally responsible”, because they rely on tax revenue to pay for spending programs and credits.  While the AJP plans to be funded by corporate tax increases, the AFP will be paid for by higher individual taxes on the wealthy. 

The White House breaks down the major individual tax impacts as follows:

  • An increase to the top individual federal income tax bracket from 37% to 39.6% for income $509,300 (married joint) and $452,700 (single).
  • To the extent their income exceeds $1 million, taxpayers would see their capital gains taxed at a rate of 39.6% (nearly double the current capital gains tax rate of 20%).
  • Consistent application of the 3.8% Medicare tax on earnings over $400,000.
  • An investment in IRS enforcement through increased funding for IRS audits. A White House representative estimates that the top 1% of individual taxpayers failed to report 20% of their income, resulting in $175 billion owed in taxes.

Under current law, private equity money managers and others can lower their tax bills by paying as low as 20% on carried interest profits. President Biden and his administration are pushing to eliminate this preferential treatment, and are proposing the income be subject to the same rates as their other income (up to 39.6% as outlined above).

Whatever your current family and/or financial situation may be, it is important to understand how these changes can impact you. With such a large amount of sweeping changes being proposed in a relatively short amount of time, it goes without saying that the money has to come from somewhere.

Adam O’Feeney, CPA, is a Tax Manager serving high-net-worth individuals and privately held family owned businesses in the manufacturing, distribution, hospitality, and construction/real estate industries. Contact Adam at aofeeney@cironefriedberg.com, and connect with him on LinkedIn.

If you need assistance or have any questions related to the American Families Plan, or any other potential tax law changes, please call your CironeFriedberg professional. You can reach us by phone at 203-798-2721 (Bethel), 203-366-5876 (Shelton), or 203-359-1100 (Stamford), or email us at info@cironefriedberg.com.

Filed Under: Business Taxes, Tax Changes

Guidance for Temporary Full Deduction Business Meals

May 24, 2021 by Teri Pough

business lunch

The IRS has provided guidance related to the temporary 100% deduction for business meals provided by a restaurant. The Consolidated Appropriations Act, 2021 (the Act) temporarily increased the deduction from 50% to 100% for a business’s restaurant food and beverage expenses for 2021 and 2022. All other food and beverage expenses are still subject to the 50% deduction limitation unless some other exception applies. The content of this article is curated by Holly Hobson Travis, C.P.A., Senior Content Management Analyst, Wolters Kluwer.

Restaurants Defined

According to the IRS’s guidance, a restaurant is a business that prepares and sells food or beverages to retail customers for immediate consumption. Note that the food and beverages do not need to be consumed on the premises for the 100 percent deduction to apply.

Restaurants are not businesses that predominantly sell pre-packaged food or beverages that are intended for later consumption. Food or beverages purchased from such businesses are still subject to the 50% deduction limitation. Examples of businesses that are not restaurants include grocery stores, specialty food stores, liquor stores, drug stores, convenience stores, newsstands, vending machines, or kiosks.

Restaurants are also not eating facilities located at an employer’s business that provide meals that are excluded from the employees’ gross income or are considered a de minimis fringe. This also applies to eating facilities on the employer’s premises that are operated by a third party with regards to Reg. §1.132-7(a)(3).

Background

IRC §274 generally limits or disallows deductions for certain meal and entertainment expenses that otherwise would be allowable. IRC §274(a)(1) generally disallows deductions for expenses for entertainment, amusement, or recreation. The regulations provide that the disallowance under section IRC 274(a)(1) does not apply to food or beverages provided at an entertainment activity if the food or beverages are separately purchased from the entertainment activity or the cost of the food or beverages is separately stated from the cost of the entertainment in an invoice, bill, or receipt.

IRC §274(k) generally provides that no deduction is allowed for the expense of any food or beverage unless:

Such expense is not lavish or extravagant under the circumstances; and
The taxpayer (or an employee of the taxpayer) is present at the furnishing of such food or beverages.
IRC §274 provides additional rules that may apply to the deduction of food or beverage expenses, depending on the circumstances.

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If you need assistance or have any questions on the information in this article, please call your CironeFriedberg professional. You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Stamford), or email us at info@cironefriedberg.com.

Filed Under: Business Taxes, IRS, Tax Changes

Reporting Virtual Currency to the IRS in 2020

March 15, 2021 by Teri Pough

cryptocurrency

If you have interacted with bitcoin or other forms of cryptocurrencies during 2020, you should be prepared to report the information to the IRS on your 2020 tax return. Virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value. In some environments, it operates like “real” currency (i.e., coin or paper money), but it does not have legal tender status in any jurisdiction. Cryptocurrency is a type of virtual currency that utilizes cryptography to validate and secure transactions that are digitally recorded on a distributed ledger, such as a blockchain.

Virtual currency that has an equivalent value in real currency, or that acts as a substitute for real currency is referred to as “convertible” virtual currency. Bitcoin is one example of a convertible virtual currency that can be traded between users and purchased for, or exchanged into, real or other virtual currencies.

A new yes or no question is located on the 2020 Form 1040 just below the taxpayers’ name. “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?” No matter how you may have come into possession of said virtual currency, you are expected to let the IRS know about it. In 2019, the IRS sent letters to more than 10,000 taxpayers with cryptocurrency transactions who may have failed to report income and pay taxes owed. It is important to remember that a “yes” to this question does not necessarily mean paying additional tax, but it is alerting the IRS as to your involvement with virtual currency in some level. Giving the virtual currency such a prominent place on the 1040 could be an indication that the IRS will begin tracking this more going forward.

If you received any virtual currency as pay for work performed, the income is subject to ordinary income taxes, as well as self-employment taxes if paid as nonemployee compensation. Even if you did not receive a 1099-NEC or other form reporting the pay, it is still your responsibility to report the income and pay the taxes owed. Alternatively, if you did not get paid cryptocurrency for work performed, the IRS generally views bitcoin and other forms of virtual currency as property, subject to capital gain treatment. In this scenario, the taxable transaction can occur when you convert the cryptocurrency to currency and when you sell or exchange it in the future.

As the IRS gets more serious about cryptocurrency transactions, a shift will be made toward compliance and enforcement. Failing to report income can carry hefty penalties, interest and even prison time. Keeping careful records of your transactions is critical to helping with tax reporting requirements especially as the world of virtual currency continues to evolve and become more prevalent in our everyday lives.

If you need assistance or have any questions related to bitcoin or other virtual currencies, and the related reporting requirements, please call your CironeFriedberg professional. You can reach us by phone at 203-798-2721 (Bethel), 203-366-5876 (Shelton), or 203-359-1100 (Stamford), or email us at info@cironefriedberg.com.

Filed Under: IRS, Tax Changes

President Biden Signs American Rescue Plan Act of 2021

March 11, 2021 by Teri Pough

President Biden Signs American Rescue Plan Act of 2021

Today President Biden signed the $1.9 Trillion “American Rescue Plan Act of 2021” into law. The bill contains relief for both individual taxpayers and businesses. To help sift through the information most pertinent to you, we have separated the following into two sections — Individual Relief and Employer Tax Relief.

Individual Relief

Please note some of the provisions will impact taxpayers’ 2020 tax return filings.


Stimulus Payment

  • 3rd round of stimulus payment in the amount of $1,400 for single taxpayers and $2,800 for married filing jointly, plus $1,400 for each dependent for 2021.
  • The payment is a credit against 2021 taxes.
  • Subject to adjusted gross income limitations with an ultimate phase out. Phase out begins:
    • Single at $75,000 to full phase out at $80,000.
    • Head of household at $112,500 to full phase out at $120,000.
    • Joint filers at $150,000 to full phase out at $160,000.

2020 adjusted gross income amounts are used when determining the phase out. For taxpayers who have not yet filed their 2020 return, 2019 will be used. Similar to prior stimulus checks, if the 2019 return resulted in a lower credit than what the taxpayer was entitled to once the 2020 return was filed, the amount not received will be a credit on the taxpayer’s 2021 return. In contrast, if the taxpayer received more than they were entitled to by using the 2019 return, they will not be required to repay the excess.

Unemployment Relief

  • Enhanced $300 weekly unemployment that was scheduled to expire in March will extend through September 6, 2021.
  • For tax year 2020, the first $10,200 of unemployment relief is tax exempt for households up to $150,000 of income.

Child Tax Credit

  • The child tax credit will increase in the 2021 tax year from $2,000 to $3,000 per child, $3,600 under the age of 6, and the maximum age of a qualifying child increases to include 17-year old children.
  • The eligible credit above $2,000 will begin to be phased out by $50 for every $1,000 of adjusted gross income in excess of $75,000 for single filers, $112,500 for head of household, and $150,000 for joint filers. Once the excess is totally phased out, the credit remains at $2,000 until adjusted gross income reaches $400,000 for joint filers and $200,000 for all other filers.
    • An advance equal to the taxpayer’s estimated child tax credit for 2021 will be paid one-twelfth of the annual estimate amount from July 1, 2021 to December 31, 2021. The total payments by the end of the year will equal half of the estimated 2021 credit.
    • The remainder of the credit will be received when the 2021 tax return is filed. The full credit will be claimed on the 2021 return but reduced by the aggregate amount received in advance.
    • Taxable income will be increased by any credit received in excess of the eligible credit claimed for 2021.

Earned Income Credit

For 2021:

  • The credit is increased for taxpayers without children from $543 to $1,502.
  • Income at which the credit is maximized increased from $7,100 to $9,820.
  • Increased the threshold for the phase-out of the credit for non-joint filers from $8,880 to $11,610.
  • The minimum age for childless claimants is reduced from 25 to 19.
  • A taxpayer can substitute 2019 earned income for 2021 earned income when claiming the credit.

Permanent Changes:

  • Elimination to prohibit filers for claiming the credit due to lack of identification requirements.
  • Married and separated individuals can claim the earned income credit as an unmarried person as long as certain requirements relating to children are satisfied.
  • The amount of disqualifying investment income is increased to $10,000.

Dependent Care Assistance (for 2021 only)

  • The bill increases the credit for qualified expenses from 35% of expenses to 50%.
  • The amount of eligible expenses increases from $3,000 for one individual and $6,000 for two or more qualifying individuals to $8,000 for one individual and $16,000 for two or more individuals.
  • 50% of the qualifying expenses would be a credit of $4,000 for one child and $8,000 for two or more children.
  • The credit is reduced by one percentage point for each $2,000 over $125,000 to a floor of 20% until the adjusted gross income reaches $400,000. At that point, the reduction of credit percentages continues until reaching zero.
  • Maximum exclusion of employer-provided dependent care assistance increased to $10,500 or $5,250 for married filing separately.

Exclusion for Forgiven Student Loans

  • Income exclusion for student loans forgiven after 2020 but before 2026 is no longer limited to death or disability, but can be for any reason.
  • The exclusion is not applicable for loan discharged by private lenders.

COBRA Continuation Coverage

  • COBRA continuation coverage through September 30, 2021; not included in recipient’s gross income.
  • Credit is allowed against Medicare tax.
  • Credit is refundable and the IRS may make advance payments to taxpayers of the credit.
  • Credit applies to premiums paid after April 1, 2021, through September 30, 2021.

Employer Tax Relief

Paid Sick and Family Leave Credits

  • Extended to September 30, 2021.
  • The limit for applicable wages is increased from $10,000 to $12,000 effective March 31, 2021.
  • Credit is expanded to include time off to receive COVID-19 vaccine or recover from a vaccine-related illness or injury.
  • Effective March 31, 2021, a new ten-day period for each eligible employee begins. Therefore, if an employer has taken credit for ten sick and family leave days for an employee prior to March 31, 2021 and after March 31, 2021, the same employee is out two days for the COVID-19 vaccine and to recover, those two days are eligible for the credit.
  • For self-employed individuals the number of days the credit can be claimed is increased from 50 days to 60 days.
    • This change will be retroactive to December 31, 2020.

Employee Retention Credit

  • Extended to December 31, 2021.

Retirement Plan Funding

Multi-employer plans:

  • Effective for plan years ending on or after February 29, 2020, plans will have a longer investment loss amortization period.
  • Delays in having to apply changes to funding plans or schedules.
  • Extended improvement and rehabilitation periods for plans that entered critical or endangered status in 2020 or 2021.

Single-employer plan:

  • Effective for plan years beginning after December 31, 2019, plans will have 15 years as opposed to 7 years to amortize funding shortfalls.
  • Annual contribution, annual defined benefit, and maximum compensation limits will be frozen until 2030 at $58,000, $230,000, and $290,000, respectively.

Paycheck Protection Program

  • $7.25B in new funding to allow more nonprofits to apply as well as allow larger nonprofits to be eligible.


EIDL

  • Will not be subject to income tax.


Industry Relief

  • $25B will be set aside for a new grant program for “restaurants and other food and drinking establishments”.
  • Grants will be up to $10M per entity and $5M per physical location with a maximum of 20 locations.
  • $30B is set aside for transit costs; $8B for airports; $3B for temporary help to support the aerospace manufacturing industry, and $1.5B to recall and pay Amtrak employees who were furloughed because of the pandemic and to restore various daily routes.

If you have any questions about the American Rescue Plan Act, please call your CironeFriedberg professional. You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Stamford), or email us at info@cironefriedberg.com.

Filed Under: Business Taxes, Tax Changes

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