Senate Relief Package Expands PPP, Extends Tax Credits - Jad Chamseddine and Alexis Gravely, Tax Notes ($):
The bill includes a second round of economic impact payments structured largely the same as in the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136): $1,200 for individuals and $2,400 for couples, which starts phasing out at incomes of $75,000 and $150,000, respectively.
Like the CARES Act, taxpayers would receive $500 for each dependent. But the second round, unlike the first, wouldn’t be limited to dependents under the age of 17, meaning college students and adult dependents would be included.
Other provisions in the bill include:
- An expanded employer retention credit
- An expansion of the Work Opportunity Credit
- Protection of employees working remotely or volunteering in other states from out-of-state taxes, along with protection of employers from being taxed in other states as a result of such employees.
- Additional PPP loans and streamlined forgiveness provisions.
- Reduction of the $600 weekly enhanced unemployment payments from the CARES Act.
One surprise provision is a repeal of the 1986 and 2017 restrictions on deductibility of meal and entertainment expenses. Items left out include a payroll tax cut and "back to work" payments for returning employees.
Eide Bailly Legislative Affairs Director Mel Schwarz says passage of a relief package may not be imminent:
Previously, many observers in Washington were optimistic that an agreement could be struck and in place before supplemental unemployment assistance expires at the end of this week. That no longer appears possible and Senate Majority Leader McConnell has stated that he believes it will take weeks just to move the legislation through the Senate. This raises the possibility that a short-term extension of unemployment assistance (at a rate lower than the existing $600 per week) could be enacted and discussion of the remaining issues tabled until September.
Senate Republicans Introduce the HEALS Act for Coronavirus Pandemic Relief - Garrett Watson, Tax Policy Blog:
The HEALS Act will require Democratic support in both chambers to be passed, and negotiations with Democrats are expected to begin over what a final deal may look like. This bill looks very different when compared to the House Democratic HEROES Act introduced in May. Notable omitted items include proposed expansions to the Child Tax Credit (CTC) and Earned Income Tax Credit (EITC), additional federal aid to states and localities, and an extension of the full $600/week FPUC benefit.
As both the HEALS Act and the HEROES Act contain significant policy differences, Congress will need to find a compromise to finalize a deal and jettison less compelling aspects of both proposals, such as expanding a deduction for business meals during a pandemic or repealing the state and local tax (SALT) deduction limitation for higher earners.
Paycheck Protection Moving In The Senate - Peter Reilly, Forbes. "The bill includes improvements to the CARES Act relative to the use and forgivability of Paycheck Protection loans. There is a clarification that group insurance benefits qualify as payroll costs and the covered period can now be between 8 weeks after loan origination and December 31, 2020."
Congress Has Many Ways To Boost The Economy By Getting Cash Into People’s Pockets. Which One Is Best? - Howard Gleckman, TaxVox. "The three leading choices appear to be: extending enhanced federal unemployment benefits, expanding refundable tax credits, or another round of direct economic impact payments."
IRS Explains COVID-19 Relief Options Under Cafeteria Plans - Thomson Reuters Tax & Accounting Blog. "This IRS information letter does not break new ground or include any surprises. However, it is a useful reminder that employers wishing to take advantage of the cafeteria plan relief that the IRS has provided in response to the COVID-19 health crisis must amend their plans to do so."
IRS Claim and Updated Campaigns - Ben Peeler, Eide Bailly. "As of July 1, 2020, the IRS closed several business payment P.O. Boxes (or Lockbox addresses) in Cincinnati and Hartford. Any payments mailed to these closed payment locations will be returned to sender, as there is no forwarding service available."
This is only an issue for non-1040 filers.
New Law Modifies Many Iowa Tax Provisions - Kristine Tidgren, Ag Docket. Among other provisions:
The law decouples Iowa from the federal business interest deduction limit imposed by IRC § 163(j). This limit will not apply in Iowa beginning with tax year 2020.
The law decouples Iowa from the federal Global Intangible Low-Taxed Income (GILTI) tax provisions, allowing Iowa businesses to exclude GILTI from Iowa business taxable income beginning with 2019 tax years. The law correspondingly repeals Department rules related to GILTI.
Former Office Manager for the Rapid City Rush Hockey Team Pleads Guilty to Wire Fraud and Tax Evasion - Department of Justice (defendant name omitted):
Between February 2010 and June 2019, Defendant, while employed as the office manager for Rapid City Professional Hockey, LLC (RCPH), stole $700,000.00 from RCPH. Defendant used the stolen money for her own personal expenses and also transferred money to bank accounts she controlled. In order to cover up her theft, Defendant made false entries into the RCPH accounting records to give the illusion the money she was stealing was spent on legitimate business expenses.
During the same time period, Defendant also willfully attempted to evade or defeat taxes imposed under the Internal Revenue Code. Defendant accomplished this by underreporting her income from tax years 2010 through 2018 by a total of $688,867.67, resulting in a tax loss of $186,277.00.
An all-too-common story for small businesses that struggle to implement proper financial controls. Eide Bailly can help.
Word factory: Meredith wins $12.2 million deduction in tax case that establishes it's a manufacturer - Tyler Jett, Des Moines Register. "At issue was whether Meredith is technically a manufacturer, which would qualify the company for the tax break, which is designed to keep production jobs in the U.S. Although it does not print its magazines, Meredith argued it broadly fits the description of a manufacturer because of all the other work it does to make the product."
The tax break is the now-expired "Domestic Production Activity Deduction," which reduced taxable income for "manufacturers" by up to 9%. Meredith outsourced the actual printing process, but successfully claimed that its overall direction of the process qualified it as the manufacturer for purposes of the deduction.
IRS Position Taken in Case of Unrelated Taxpayer Does Not Bind Agency in Other Cases - Ed Zollars, Current Federal Tax Developments. "In this case the taxpayer was not asserting the IRS had previously taken an inconsistent position with this taxpayer, but rather had accepted that such deed terms were acceptable via a stipulation in another unrelated taxpayer’s case"
Bill collector ordered to pay NY man for unwarranted tax collection efforts - Kay Bell, Don't Mess With Taxes:
The man, whom I won't name in this post even though his name is in the publicly filed court record, in 2016 had all is personal liability on certain debts discharged by a bankruptcy ruling.
That bankruptcy discharge included certain federal tax debts.
However, notes the U.S. District Court document, years later the IRS private debt collection contractor Continental Service Group, Inc., doing business as ConServe, served the man two notices over the no-longer-valid tax bill from the 2002 tax year.
The Unspotted Issue in an Audit; Ethics and Crimes - Jack Townsend, Federal Tax Crimes. "Question: What if the IRS sets up only one issue in the notice of deficiency and the IRS never spotted a big issue involving omitted income... After filing the petition, IRS Counsel offers to concede that one issue (the spotted issue in the NOD) and sends a stipulated decision document saying that the deficiency is $0. Because the taxpayers' counsel knows that stipulation that there is no deficiency is not true, can the taxpayers' counsel sign the stipulated decision?"
Estate and Business Planning for the Farm and Ranch Family – Use of the LLC (Part 1) - Roger McEowen, Agricultural Law and Taxation Blog. "A single-member LLC can also be a “disregarded” entity? What does that mean? Is the entity simply disregarded for tax purposes, or is the entity respected in ways that make a big difference from a tax and estate planning perspective? How does it all fit together for a farming operation?"
Taking Some Bites Out of Tax Crime - Russ Fox, Taxable Talk. "As I’ve mentioned in the past, if you want to head to ClubFed one of the easiest methods is to deliberately defraud the US on payroll taxes."
Garmin Hack’s $10M Ransom Payment, $10M Tax Deduction - Robert W. Wood, Forbes. "For businesses, paying ransom or blackmail is likely to fall into the wide category of business expenses."
Feds Make Another PPP Fraud Arrest, Alleging Proceeds Used To Buy A Lamborghini - Kelly Phillips Erb, Forbes:
The bank approved three applications for Hines, and he was paid $3,984,557.00. For those three applications, Hines claimed that he supported 70 employees, with monthly payroll expenses totaling $4 million... Records indicate that Hines didn’t file any payroll information returns with Florida officials from 2015 to 2020.
According to the feds, Hines spent the money on personal expenses, including dating websites, luxury jewelry, clothing retailers (including Saks Fifth Avenue), and Miami Beach resorts like the Fontainebleau. And within days of getting the PPP funds, he purchased a Lamborghini, which he registered jointly in his name and the name of one of his companies.
Many people would find a new Lamborghini stimulating, but that may not be what Congress had in mind.