Hi There!
PPP Update
The IRS recently came out with Rev. Rule 2020-27, which states eligible business expense deductions (i.e., payroll costs, mortgage interest, utilities, rents) paid or incurred with PPP loans are not deductible in 2020 if the borrower “reasonably expects” to have the loan forgiven even though forgiveness, if achieved at all, may not be received until 2021. This rule includes borrowers who have not applied for forgiveness by the end of the year, or if they expect to apply for forgiveness in 2021.
The loss of deductible expenses will create additional tax liability in 2020. We will review this with you in your year-end tax planning. There are some rumors that Congress is being asked to change this but, as of now, they are just rumors.
If you have a PPP loan under $50,000, many banks are still not ready to handle this particular forgiveness application.
Bruny Marrero and Bob Bria from our office have probably already contacted you in regard to assistance with the forgiveness application. If you receive any emails from your PPP bank, please forward them to our office so we can keep track of your status. brunym@smithpavanocpa.com or robertb@smithpavanocpa.com
Charitable Contributions
In the past, charitable contributions have only been deductible by those who itemize. To spur charitable giving during this tumultuous year, the IRS will allow a tax deduction of up to $300 on all tax returns filed for tax year 2020. Anything over $300 can still be deducted by those who itemize. The caveats are: (a) the donation must be made in cash, and (b) it must be made directly to a designated charity.
IRAs
In the past, if you were over age 70, you were not allowed to make a traditional or Roth IRA contribution. For 2020, the age requirement has been eliminated. If you have wages or self-employment income and are over 70, you can contribute to either IRA. It is still subject to income limitations and amounts must be contributed by April 15, so ask your tax preparer if you are eligible and if it will help.
**SCAM** LLC Business Annual Reports with the Secretary of State
A fake letter has gone out to most LLC owners to file your annual report with a $120 payment to a fictitious company. Please ignore; it is a scam. The only place to file your annual report is online with the SOTS Concord website.
Potential Identity Theft
For those who have taken a PPP or EIDL loan out with the SBA, you have started receiving invoices with the monthly payment and a note saying that it is in deferred status. Please look at them carefully. One of our clients received an invoice for their PPP loan, an invoice for their EIDL loan, and a third invoice for a loan they knew nothing about. They called the SBA with the third loan # and found out it was another loan applied for in their name by some third party. The SBA never issued the funds to the illegal party. However, the loan remains in the system under their name while an investigation takes place. If you are unsure of invoices you’ve received, call the SBA phone number on the invoice and inquire. If there is an issue, the SBA will explain what to do.
Thank you and be well!
Rich Pavano, CPA
203.933.1679
