Get started with a FREE Consultation

408-942-6888

Your Partners for Success Since 1977

California Introduces the Elective Passthrough Entity Tax as a Workaround for the Federal State and Local Tax Deduction Limitation

By Amber Stevenson

As part of the Tax Cuts and Jobs Act of 2017, the deduction for state and local taxes (SALT) was limited to $10,000 for both single and married taxpayers. This limitation had unfavorable consequences for many taxpayers, including many middle-class taxpayers living in high tax states such as California and New York. As part of the budget deal reached for California, the governor signed AB 150 which includes provisions for the elective passthrough entity tax. For tax years 2021 through 2025, qualified S-corporations, partnerships and LLCs that are required to file a California tax return can elect to pay a passthrough entity tax of 9.3% on qualified net income. Owners will claim a nonrefundable credit for the amount of tax paid on their share of the passthrough income. If not utilized, the credit can be carried forward for up to five years.

(more…)

Recent Changes to the Employee Retention Tax Credit (ERTC)

by Marc Cappelloni

In case you missed it in our February tax newsletter article entitled IRS Turbocharges the Employee Retention Tax Credit

Recent changes to the Employee Retention Tax Credit (ERTC) have the potential for a huge refundable payroll tax credit for your business!

New legislation passed now allows even recipients of PPP loans to take the credit retroactively for 2020 (previously not allowed) and has recently further extended the credit through December 31, 2021.

To be eligible for this credit, the business must either:

  1. Have been fully or partially suspended due to orders from a governmental authority or
  2. Suffer a significant decline in quarterly gross revenue as measured against 2019
  3. 50% decline for 2020
  4. 20% decline for 2021

Below is a summary of the updated payroll tax credit amounts potentially available to your business:

For 2020, there is a maximum credit of $5,000 per eligible employee. The 2020 credit is computed at a rate of 50% of qualified wages paid, up to $10,000 per eligible employee for the year. For Eligible Employers with less than 100 average full-time employees in 2019, the credit is available for all employees receiving wages in 2020.

For 2021, there is a maximum credit of $7,000 per eligible employee, per quarter. The 2021 credit is computed at a rate of 70% of qualified wages paid, up to $10,000 per eligible employee, per quarter. For Eligible Employers with less than 500 average full-time employees in 2019, the credit is available for all employees receiving wages in 2021. Don’t leave money on the table! Please contact us today and we will connect you with a payroll tax credit specialist referral who can review whether you qualify for the Employee Retention Tax Credit and determine the amount of payroll tax credit your business can claim.

Aid Package Signed Into Law – Consolidated Appropriations Act

by Amanda Domitrowich

The much discussed aid package has been signed into law after significant delay and controversy. We’ll be revisiting this topic in the coming days as the details become clearer. Meanwhile, here are the key takeaways:

A $600 check to many Americans. The phase-out begins for those earning $75,000 annually and disappears at $99,000. The amount is reduced by $5 for every $100 in additional income. If your 2019 income makes you ineligible but you made a lot less in 2020, you still may be eligible for the money in the form of a refundable tax credit.

Additional unemployment benefits of $300 a week, lasting through mid-March.

Additional benefits for freelancers and gig workers.

A tax credit for employers offering paid sick leave.

$284 billion for businesses and revival of the Paycheck Protection Program, which ended some months ago.

Businesses that received PPP loans and had them forgiven faced tax confusion. The new bill will make it clear such businesses will be allowed to deduct the costs covered by those loans.

Breaks for renters and homeowners: $25 billion in rental relief and an extension of the eviction moratorium through Jan. 31, 2021.

A ban on surprise medical bills, which sometimes occur when a patient unexpectedly gets care outside of a network. Going forward, insurance companies will have to work these out with providers.

Additional protections and aid for bankruptcy filers.

Mortgage forbearance–temporarily reducing or pausing payments for 180 days.

One of the smallest provisions is also one of the most divisive: the return of the 100% deduction of the so-called three-martini lunch — that is, an increased tax break for business lunches, which are currently at 50%. This applies to restaurant and takeout meals paid for in 2021 and 2022, according to analysis from Forbes, and is not retroactive.

According to the SHRM, key employer provisions include:

  • The ability for workers to roll over unused funds in their health and dependent care flexible spending accounts.
  • The expansion of employer-provided education assistance to include student loan repayment.
  • Employer tax credits for paid family and medical leave.
  • An extension of the employee retention tax credit.
  • Delays in deferred payroll tax payments.

What’s Out

Several heavily debated items are off the table, although they may appear in bills in the near future. Their elimination was part of a series of compromises:

  • No aid for state and local governments, which Democrats had pushed for.
  • No liability protections for businesses, which Republicans had wanted.
  • No checks for adult dependents.
  • No hazard pay for essential workers.

Although the bill is now law, it may take a while before all the details become clear. The IRS and other government departments will likely offer additional guidance, and again, we will have more on the law’s provisions.

Please contact us today to discuss how this will affect you and your tax situation.

©2020

Special $300 Tax Deduction Helps More People Give To Charity This Year – Even If They Don’t Itemize

by Amanda Domitrowich

Individuals will be able to claim a $300 above-the-line deduction for cash contributions to qualified public charities in 2020. This rule effectively allows a limited charitable deduction to taxpayers claiming the standard deduction.

This new deduction is a COVID-related change for 2020 and an effort on the IRS part to reward those who contribute:

“Our nation’s charities are struggling to help those suffering from COVID-19, and many deserving organizations can use all the help they can get,” said IRS Commissioner Chuck Rettig. “The IRS reminds people there’s a new provision that allows for up to $300 in cash donations to qualifying organizations to be deducted from income. We encourage people to explore this option to help deserving tax-exempt organizations – and the people and causes they serve.”

In addition, the percentage limit on charitable contributions has been raised from 60% of modified adjusted gross income (MAGI) to 100% for those itemizing.

Give us a call today to discuss how this will affect your and your family’s tax returns!

PPP Loan Forgiveness Form and Information

by Kassandra Cristobal

One of the most significant features of the SBA’s Paycheck Protection Program is the forgiveness provision—the loans become grants for companies that use the loans to maintain their workforce levels. Companies that have met the stringent requirements need to fill out a form and follow instructions carefully—they include several measures to reduce compliance burdens and simplify the process for borrowers, including:

  • Options for borrowers to calculate payroll costs using an “alternative payroll covered period” that aligns with borrowers’ regular payroll cycles.
  • Flexibility to include eligible payroll and non-payroll expenses paid or incurred during the eight-week period after receiving their PPP loan.
  • Step-by-step instructions on how to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness.
  • Borrower-friendly implementation of statutory exemptions from loan forgiveness reduction based on rehiring by June 30.
  • Addition of a new exemption from the loan forgiveness reduction for borrowers who have made a good-faith, written offer to rehire workers that was declined.

The application requires extensive information about your business and the loan, so be sure to have your paperwork ready as you begin.

©2020

Guidance on NOL Carryback

by Amber Stevenson

The IRS has provided guidance for taxpayers who wish to waive or reduce the amount of net operating loss (NOL) that must be carried back related to NOLs arising in tax years beginning in 2018, 2019 and 2020 (Rev. Proc. 2020-24).  It has also extended the deadline for filing an application for tentative carryback adjustment under Section 6411. This extension applies to NOLs that arose during a tax year beginning in 2018 and ending on or before June 30, 2019.

(more…)

IRS FAQs on Employee Tax Credits Related to Coronavirus

By Amber Stevenson

The Families First Coronavirus Response Act (FFCRA) signed into law by President Trump on March 18, 2020 provides family and medical leave, and sick leave, to employees and provides credits to employers who provide such leave. On its website, the IRS has released a series of frequently asked questions regarding credits for wages paid for family and medical leave and for emergency paid sick time.  These FAQs include important information regarding what employers are eligible for the credits, when they can claim the credits and what amount of credit employers are eligible to receive. 

(more…)

Business and Individual Tax Relief Measures Addressing the Coronavirus

By Karen Rockwell

During these challenging and unprecedented times, your highest priority is certainly the health of yourself and your loved ones.

However, to assist taxpayers with the economic pains caused by COVID-19 (commonly referred to as Coronavirus), the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed on March 27th. This Act contains a massive amount of relief and with it, a complexity that may be difficult to unravel. We have included the most salient points for each aspect of the law and separated them into categories (business and individuals) to assist with categorization. Please note there is some overlap of these provisions, therefore you might want to read each section below to determine what might apply to you. This tax legislation is very complicated, therefore you should contact our office to discuss how any particular provision will impact your specific situation.

(more…)

SBA Loans and the new Paycheck Protection Program

By Amber Stevenson

The U.S. Small Business Administration (SBA) is offering low-interest federal disaster loans to small businesses (including sole proprietors, independent contractors, gig economy workers and other self-employed individuals) that are suffering economic hardship due to the COVID-19 crisis. If eligible, your business may be able to borrow 250% of your average monthly payroll

(more…)

Well being and tax deadlines

by Amber Stevenson

Right now, your highest priority is the health of those you love and yourself. But if you have time to read about some non-medical but important matters related to the health crisis, here is a summary of IRS action already taken and federal tax legislation already enacted to ease tax compliance burdens and economic pain caused by COVID-19 (commonly referred to as Coronavirus).

(more…)

    START YOUR FREE

    CONSULTATION

    Office Location

    Crawford Pimentel
    Certified Public Accountants
    2150 Trade Zone Blvd. #299
    San Jose, CA 95131
    Phone: (408) 942-6888
    Fax: (408) 942-0194
    Contact Us
    Google Analytics Alternative