Your McCarthy Update 

Marty McCarthy, CPA, CCIFP
Focused on You. Dedicated to Your Success.
April 26, 2021

Accounting & Tax News
(New York State Senate) Governor Cuomo signed the New York State Fiscal Year 2021-2022 budget bill on April 19, 2021. Included in this bill is New York State’s version of a pass-through entity (PTE) tax. For tax years beginning on or after January 1, 2021, the new election is in line with IRS Notice 2020-75 which permits such elective PTE mechanisms to help individual taxpayers avoid the $10,000 SALT cap on itemized deductions.
 
Any eligible partnership or S corporation in New York may make an annual election for the PTE tax. The annual election must be made by the due date of the first estimated tax payment and will take effect for the current tax year. Only one election may be made during each calendar year and once made, the election is irrevocable. Elections for calendar year 2021 must be made by October 15, 2021 and electing entities are not required to make estimated tax payments for the 2021 tax year. Elections for 2022 and beyond must be made by the date of the first estimated tax payment. The applicable tax rates for the PTE tax are graduated based on the PTE’s taxable income. The rates are as follows:
 
  • Not over $2 million: 6.85%
  • $2 million but not over $5 million: $137,000 plus 9.65% (over $2 million)
  • $5 million but not over $25 million: $426,500 plus 10.30% (over $5 million)
  • Over $25 million: $2,486,500 plus 10.90% (over $25 million)

Individual taxpayers will be allowed to take a credit equal to the partner’s, member’s, or shareholder’s direct share of the pass-through entity tax. A credit may only be claimed if the electing partnership or S corporation paid the PTE tax and provides adequate information on its return to identify the taxpayer who will be claiming the credit. In addition to New York States PTE tax, the budget bill also allows New York State resident taxpayers a credit for substantially similar PTE taxes enacted by other states like New Jersey. Read more.
 
(Office of Governor Cuomo) Governor Cuomo signs FY 2022 budget and announces continuation of middle-class tax cuts to help New Yorkers recover from economic hardship during the COVID-19 pandemic. The cuts are expected to save 4.8 million New Yorkers more than $2.2 billion this year. Middle class taxpayers will receive an income tax rate cut up to 20%. The projected annual savings is $4.2 billion for six million filers by 2025. This legislation enacts a middle-class property tax credit for New York resident homeowners with incomes up to $250,000. It targets New York families with highest property tax to income burden. Learn more and read the FY 2022 Enacted Budget Highlights (ny.gov).
 
Podcast: (Journal of Accountancy) Employee retention credit updates and a delegation taboo. The IRS has issued updated guidance on several aspects of the employee retention credit. April Walker, CPA, CGMA, lead manager on the Tax Practice & Ethics team at the AICPA, touches on the highlights, including filing options for claiming the credit, an extension of penalty relief, and several key questions that have yet to be resolved. Listen to the Podcast.
 
(Accounting Today) FASB change to rules for sales-type leases would cut losses. The change applies to sales-type leases with variable lease payments. The leases standard, also known as ASC 842 under FASB’s Accounting Standards Codification, requires lessors to determine whether a lease should be classified as a sales-type lease at the commencement of a lease based on specific classification criteria. A lessor would be prohibited from including most variable payments in measuring its lease receivable, aside from payments that depend on a reference index or a rate. Subsequently, those excluded variable payments would be recognized entirely as lease income when the changes in facts and circumstances on which those variable payments are based occur. Learn more.
 
(Financial Planning) IRS gives taxpayers a break on repaying extra Obamacare tax credits. The IRS is suspending a requirement for taxpayers who received too much on their advance payments for the Premium Tax Credit last year to repay the excess amount. Read more.
 
Construction and Real Estate News
(GlobalSt) Office is on a slow slog to recovery. The office market is showing renewed signs of life as firms evaluate and implement return-to-work strategies, with average leasing rates inching up 1.4% year-over-year to an average of $38.67 per square foot. Read more.
 
(NAHB Now) How builders are dealing with rising lumber prices. The National Association of Home Builders (NAHB) asked builders about their reactions to the rising and volatile lumber prices in its April 2021 survey for the NAHB/Wells Fargo Housing Market Index (HMI). Nearly half (47%) of single-family builders in the HMI panel indicated that they were including price escalation clauses in their sales contracts as their primary mitigation effort. Read more.
 
COVID-19 Related News
(Accounting Today) IRS sees delays in tax refunds and quarterly payments. Millions of tax refunds are being held up for manual processing. The IRS’ systems were unable to process many of the quarterly payments that needed to be sent by April 15. Approximately 29 million tax refunds need to be processed manually because of the complexities of some of the recent tax laws passed by Congress.  Learn more.
 
(SBA) SBA launches supplemental targeted advance for small businesses hardest hit by COVID-19. The SBA opened a new round of Economic Injury Disaster Loan assistance, known as “Supplemental Targeted Advances,” to provide $5 billion in extra help to a million small businesses and nonprofits that have been the most severely affected by the economic impact of the pandemic. The Supplemental Targeted Advance program is a new SBA relief program that offers an extra $5,000 that does not need to be repaid by hard-hit businesses. It was included as part of the American Rescue Plan Act that President Biden signed into law last month. Learn more.
 
(CNBC) How the IRS will determine advance child tax credit payments. The IRS is using 2020 tax returns (or, if unavailable, 2019 returns) to determine taxpayers’ eligibility for the child tax credit and the amount of the advance payments. Learn more.
 
(IRS.gov) American Rescue Plan tax credits available to small employers to provide paid leave to employees receiving COVID-19 vaccines; new fact sheet outlines the details. The Internal Revenue Service and the Treasury Department announced today details of tax credits available under the American Rescue Plan to help small businesses, including providing paid leave for employees receiving COVID-19 vaccinations. The additional details in the fact sheet spell out some basic facts about the employers eligible for the tax credits. It also provides information on how these employers may claim the credit for leave paid to employees related to COVID-19 vaccinations. Learn more.

(Journal of Accountancy) Expenses paid with 2020 PPP loans can be deducted on 2021 tax returns. The IRS has issued guidance on a safe harbor permitting qualifying taxpayers who have Paycheck Protection Program (PPP) loans who have not deducted expenses related to those loans paid or incurred in 2020 on 2020 tax returns to deduct the expenses on returns for the immediate subsequent tax year, instead of on an amended return or an administrative adjustment request for the 2020 tax year. The new safe harbor in Rev. Proc. 2021-20 allows taxpayers who filed a tax year 2020 return on or before Dec. 27, 2020, to deduct those expenses on their 2021 tax return rather than file amended returns or administrative adjustment requests. Read more.
 
(Philadelphia Business Journal) Small businesses can now get thousands in tax credits for vaccine PTO. Many businesses now have another reason to encourage employees to get vaccinated for Covid-19: thousands of dollars in potential tax credits per employee. Learn more.
 
(Philadelphia Business Journal) SBA offers new details on its $28.6B Restaurant Revitalization Fund. Eligible businesses can apply through the agency's portal, over the phone or through various SBA “restaurant partners” that will include services vendors and payroll processors. The SBA also said it will establish a seven-day pilot period ahead of the launch of its portal where it will randomly select from among existing Paycheck Protection Program loan recipients to test the system. Read more.
 
(SBA) SBA reopened the shuttered venue operators grants for applications on April 24 at 12:30 p.m. The program is for operators of live venues, live performing arts organizations, museums, and movie theatres, as well as live venue promoters, theatrical producers, and talent representatives to apply for critical economic relief. Read more.
 
(SBA) SBA announces official Restaurant Revitalization Fund application and guidelines. Under this announcement, details on application requirements, eligibility, and a program guide are now available in English at www.sba.gov/restaurants or in Spanish at www.sba.gov/restaurantes.  Read more.
 
Please visit our COVID-19 Resource Page for more alerts. Learn about our COVID-19 Recovery Services.

Feel free to contact any member of our team at (610) 828-1900 (PA) or (732) 341-3893 (NJ) with questions. Rich Higgins, CPA, managing principal – New Jersey office can be contacted at Richard.Higgins@McCarthy.CPA. I can be reached at Marty.McCarthy@McCarthy.CPA As always, we are happy to help.

Stay safe,

Marty McCarthy, CPA, CCIFP
Managing Partner
McCarthy & Company

Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).