PPP Loans- Part 1

As changed in the recent legislation, PPP loan funds received in 2020 under the PPP program will likely be treated “from a tax standpoint, as though they were never received”. We are still awaiting technical guidance from the IRS to comply with any reporting requirements, and we believe there still may be some technical issues that will affect business tax reporting for PPP loan funds received in 2020. However, we are hopeful that this will effectively eliminate the dispute between Congress and the IRS as to whether PPP loan funds, once forgiven, should be treated as income or an impairment of an expense on your business tax return for 2020 or 2021.

This bill also may provide your business with much needed funding in the form of another round of PPP loan money available (calling this program PPP2). Under the PPP2 program your business may be eligible for a potentially forgivable loan under the following circumstances:

1.       Your business did not receive PPP loan funds last year OR

2.       Your business did already receive PPP funds AND has all the following characteristics:

a.        Have fewer than 300 employees

b.       Have used or will use the full amount of the PPP loan (per forgiveness testing)

c.       Can show a 25% gross revenue decline in any quarter comparing 2020 to 2019.

We help many other individuals and businesses with tax reporting, general tax compliance and advice. If you do not feel comfortable taking care of these filings, reach out to us at [email protected]

Anthony Momany, Managing Member, Capstone CPA Group PLLC

New 1099 form – 1099-NEC

Unless you are certified tax nerds like us you may have missed a new and (not so) exciting change to the world of 1099 filing. The federal government has created a new form, called form 1099- NEC. This form was created specifically to report payments made for Non-Employee Compensation (hence 1099-NEC).

What is NEC?

  • Payments for compensation, commissions, fees, prizes and awards for services performed. Commonly known as payments to subcontractors or contractor payments.
    • Reimbursements or payments for goods does not count for these tests
  • The payments must be $600 or more for an annual period, not including amounts not considered (see above).
  • Paid by a business (individuals are not required to issue a 1099’s in most cases)
  • The individual or business receiving the 1099 has not already been paid as an employee for these payments
  • The business whom would receive the 1099 is not incorporated. Corporations and S Corporations do not need to receive 1099’s annually.

You will notice, however that there is still something called a 1099-MISC form. On the 1099-MISC form you would report other payments as per prior filing requirements, just not for form 1099-NEC recipients.


We help many other individuals and businesses with tax reporting, general tax compliance and advice. If you do not feel comfortable taking care of these filings, reach out to us at [email protected]

Anthony Momany, Managing Member, Capstone CPA Group PLLC

Becca’s blog

Starting next week Capstone CPA Group is proud to present Becca’s blog. Every other week our own Becca Geeting will be sharing her thoughts, insights and accounting and tax knowledge. We encourage you to check it out!

Becca Getting
Becca Getting

Wayfair decision on sales tax

In case you did not hear, the supreme court handed down a very pro-state decision regarding sales tax today. The Wayfair decision as it will be know gives states a very broad ability to determine nexus for sales tax.
As you may already know many states including Michigan have been stepping up enforcement of sales tax collection.
The supreme court decision today (Wayfair decision) is a watershed moment for anyone selling goods online. No longer will you be required to have a physical presence in a state before the state can enforce sales tax collection. The State would only need to determine that a business has a substantial amount of product sales, as the state is able to determine. Every state on a state by state basis can determine how they will choose to impose sales tax collection activity moving forward. This is obviously important for online sellers, but also service providers should be cautious.
Some states also impose taxes on services. While they have not mentioned this in the decision, many states may be able to use this decision to extend their service taxes to include out of state vendors whom provide services within states. We know that many states used the “old” Quill decision to determine nexus and applied those rules to service taxes. Now with the new Wayfair decision we believe that states should be able to update their own Nexus standards relating to service providers.
If you would like to read a more in depth article on the matter, we have attached a link to a good one here:
Also, if you have any questions about Sales taxes, service taxes or want to talk about the best dish to bring to your fourth of July party, reach out to us.

Michigan minimum wage increase January 1, 2018

Calling all employers, if you have low income workers or tipped employees, they may be getting a raise. On January 1st, 2018, Michigan’s minimum wage increases from $8.90 to $9.25 for hourly employees and from $3.38 to $3.52 for tipped employees. Please remember if you have tipped employees they must make at least minimum wage during their shift or you have to compensate them to the level of minimum wage. If you have any questions about these changes, or would like to talk about payroll, or credits available to employers with tipped employees. Reach out to us. We have resources available for employers to make sure you comply with the Michigan minimum wage increases January 1, 2018, including compliance for tipped employee increases.

 

Minimum wage- ballot petition

Keep an eye out for rising Michigan minimum wage. What is interesting about this ballot petition is that it includes language that will make ALL jobs increased to a new minimum wage level by 2022 of $12 per hour, including tipped employees. If you own a restaurant or bar, you need to keep this on your radar. Current minimum wage for tipped employees in Michigan is only $3.38 per hour! Huge changes may be coming…. See more details at this link.

Ballot petition- minimum wage increase

Jobs Bill- State of Michigan

Yesterday Governor Snyder signed into law the Jobs Bill. A tax break for businesses that create a large number of jobs in Michigan.

The Jobs Bill will offer incentives in the following manner. Any business that creates at least:

  • 250 jobs would qualify for a 100% credit of the Michigan tax withheld from employees for up to 10 years.
  • 500 jobs would qualify for a 50% credit of the Michigan tax withheld from employees for up to 5 years.
  • 3,000 or more jobs would qualify for a 100% credit of the Michigan tax withheld from employees for up to 10 years.

In order to qualify for the Jobs Bill not only do the businesses have to create the jobs within a certain time frame, they may also have to create the jobs at or above the average regional wage (except those employers that create at least 3,000 jobs). They would also have to apply with the State of Michigan and have their application accepted prior to 12/31/2019 (when the program is set to end, unless it is extended). This credit is available for up to 19 businesses annually, so if you are thinking about applying, you will want to make sure you do so as soon as possible.

Bill makers have supported this bill due to the fact that unlike other job creation bills, if the employer does not create the jobs, they do not receive the credit. We hope the State continues to support these types of bills which not only support job creation, but also hold the applicants accountable to create the jobs in order to qualify.

For more information about the Jobs Bill check out this great article on MLive:

http://www.mlive.com/news/index.ssf/2017/07/gov_rick_snyder_signs_incentiv.html#incart_river_home

Happy Thanksgiving!

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From our family to yours. Happy Thanksgiving from your friends at Capstone CPA Group!

New overtime rules- blocked by federal judge

A federal judge on Tuesday blocked a Department of Labor administrative ruling. Commonly known as the new mandatory overtime pay law, the Department of Labor in conjunction with the Obama administration changed the rules relating to overtime pay for certain workers making less than $47,500. This rule was set to take effect on December 1, 2016. However, this injunction and case will determine whether the change to the overtime rules is enforceable by the Department of Labor.

The federal judge presiding over this case issued an injunction, of the new policy. This injunction stops the Department of Labor from being able to enforce this new law (temporarily), while they hash out whether the Department of Labor has the authority to classify workers by annual pay. As more information is available, we will try to provide you with updates.

For more information about the injunction and what it may mean for your business, reach out to us and check out this article .

Later this month we will cover the new overtime rules and help you determine whether you would be covered by these changes, and some measures to take to make sure you can comply with these changes (if they are to take effect).

Trump tax – Business

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We hope you enjoyed our initial installment last week, where we covered the likely changes associated with the Trump tax plan. Specifically, we covered how the Trump tax plan may impact individuals. In the second part of our examination of the Trump tax plan we reviewed proposed changes in tax policy for business taxes.

Some of the largest cuts in the Trump tax plan are reserved for business taxes.

The top corporate tax rate would fall from 35% to 15%.  This lowering of the corporate tax structure would make corporate taxes much more attractive under certain circumstances by reducing the effect of double-taxation of corporate profits.  This is especially true when you consider that the current capital gains and dividends rates are much lower than historical rates.

In a major shift of tax policy, the owners of pass-through entities, such as sole proprietorships, DBA’s, partnerships, and S-corporations, could elect to be taxed at a flat rate of 15% on their business income rather than “regular” individual income tax rates. This change could make a big difference. We will use one example. Let’s say you have the option to go to your employer and ask to be treated as a subcontractor going forward. If your normal “highest” tax rate is 33%, if you elected to pay the flat 15% rate, you might be able to save up to 18% in federal taxes by changing the structure of your income. While it is too soon to know if this change will go through, it will be important to keep an eye on this tax change alone!

The Trump tax plan also contains a strategy to decrease the incentive for a US company to “move” its tax residence overseas.  Currently a 35% tax rate is applied to companies that wish to repatriate cash held overseas. The Trump tax plan would impose a one-time tax of 10% on the repatriation of cash to the US. This shift in tax policy should increase cash available for reinvestment and dividends in the US.

Businesses engaged in manufacturing could also elect to expense investment in equipment rather than depreciating the cost over time.  If this election is made, the business would not be allowed to deduct interest expenses on their business return.

Available documents describing the Trump tax plan also imply many business credits would be repealed.  Specifically, the research and development credit would be retained and the credit for employer-provided child and dependent care may be expanded. Other credits may be on the table. But, the language is too vague at this point to help provide further guidance one way or the other.

Thank you for allowing us to nerd out on tax policy. Overall we see some benefits and detractions relating to the proposed changes. So, if you would like more information about how these changes may affect you and your business, feel free to reach out to us by email at [email protected] or 616-822-2981.