Recent News

PPP Loans Have Reopened: Let’s Review the Tax Consequences

The Small Business Administration (SBA) announced that the Paycheck Protection Program (PPP) reopened the week of January 11. If you’re fortunate to get a PPP loan to help during the COVID-19 crisis (or you received one last year), you may wonder about the tax consequences. Background on the Loans In March of 2020, the CARES Act became law. It authorized the SBA to make loans to qualified businesses under certain circumstances. The law established the PPP, which provided up to 24 weeks of cash-flow assistance through 100% federally guaranteed loans to eligible recipients. Taxpayers could apply to have the loans...

Assessing and Mitigating Key Person Risks

Auditing standards require a year-end risk assessment. One potential source of risk may be a small business’s reliance on the owner and other critical members of its management team. If a so-called “key person” unexpectedly becomes incapacitated or dies, it could disrupt day-to-day operations, alarm customers, lenders and suppliers, and drain working capital reserves. Common Among Small Businesses No one is indispensable. But filling the shoes of a founder, visionary or rainmaker who unexpectedly leaves a business is sometimes challenging. These risks are usually associated with small businesses, but they can also impact large multinationals.Consider the stock price fluctuations that...

New COVID-19 law makes favorable changes to “qualified improvement property”……

The law providing relief due to the coronavirus (COVID-19) pandemic contains a beneficial change in the tax rules for many improvements to interior parts of nonresidential buildings. This is referred to as qualified improvement property (QIP). You may recall that under the Tax Cuts and Jobs Act (TCJA), any QIP placed in service after December 31, 2017 wasn’t considered to be eligible for 100% bonus depreciation. Therefore, the cost of QIP had to be deducted over a 39-year period rather than entirely in the year the QIP was placed in service. This was due to an inadvertent drafting mistake made...

Adjusting your financial statements for COVID-19 tax relief measures……

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law on March 27, 2020, contains several tax-related provisions for businesses hit by the novel coronavirus (COVID-19) crisis. Those provisions will also have an impact on financial reporting. Companies that issue financial statements under U.S. Generally Accepted Accounting Principles (GAAP) are required to follow Accounting Standards Codification (ASC) Topic 740, Income Taxes. This complicated guidance requires companies to report the effects of new tax laws in the period they’re enacted. As a result, companies — especially those that issue quarterly financial statements or that have fiscal year ends in...

Coronavirus (COVID-19): Tax relief for small businesses

Businesses across the country are being affected by the coronavirus (COVID-19). Fortunately, Congress recently passed a law that provides at least some relief. In a separate development, the IRS has issued guidance allowing taxpayers to defer any amount of federal income tax payments due on April 15, 2020, until July 15, 2020, without penalties or interest. New law On March 18, the Senate passed the House's coronavirus bill, the Families First Coronavirus Response Act. President Trump signed the bill that day. It includes: Paid leave benefits to employees, Tax credits for employers and self-employed taxpayers, and FICA tax relief for...

What type of expenses can’t be written off by your business?

If you read the Internal Revenue Code (and you probably don’t want to!), you may be surprised to find that most business deductions aren’t specifically listed. It doesn’t explicitly state that you can deduct office supplies and certain other expenses.Some expenses are detailed in the tax code, but the general rule is contained in the first sentence of Section 162, which states you can write off “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.” Basic definitions In general, an expense is ordinary if it’s considered common or customary...