Last Minute Year-End Retirement Deductions for Small Business Owners

You still have time before December 31 to take steps to help you fund your retirement. Here are four strategies that might help.

Establish Your 2020 Retirement Plan

Do you have your employer’s retirement plan in place? If not, and you have some cash on hand, get that retirement plan in place now so you can obtain a tax deduction for 2020. For most defined contribution plans, you (the owner-employee) are both the employee and the employer, whether you operate as a corporation or a proprietorship. That is a good thing because you can make both the employer and the employee contributions, allowing you to put a good chunk of money away.

Your plan document defines when you can make employee and employer contributions that will result in 2020 tax deductions. Make sure you know exactly when to make those deductions.

Claim the new, improved retirement plan start-up tax credit of Read More

Good News if Your PPP Loan is for $50,000 or Less

You are likely approaching the time when you will need to apply for Paycheck Protection Program (PPP) loan forgiveness. Here is some good news if your PPP loan:

  • Considered your employees
  • Is for $50,000 or less

If you meet those conditions, your loan forgiveness amount may have increased by 100 percent even though you reduced pay or headcount

Before the $50,0000-or-less rule was instituted, you had to suffer a reduction in loan forgiveness or meet one of many exceptions that allowed you to cut annual salaries or hourly wages by more than 25 percent and/or reduce the number of employees or average hours paid.

Now, with a PPP loan of $50,000 or less, you do not have to consider the myriad of rules about employees. Regardless of what you did with your employees, you qualify for full forgiveness if:

  • Your PPP loan is $50,000 or less
  • You spent the PPP money
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PPP Loan Forgiveness Update

The IRS issued information late last Wednesday “clarifying” rules for deducting expenses that are eligible to be paid with Payroll Protection Pram (PPP) funds.

Although Congress clearly intended for the PPP to be tax-free, the IRS did not follow congressional intent. A month after Congress created the PPP last spring and provided that forgiveness of loans under the PPP should not result in taxable cancellation of indebtedness income for the recipients, the IRS ignored congressional intent by issuing a notice saying that the expenses funded by each such a loan should become nondeductible the moment the loan is forgiven — thereby resulting in exactly the same net tax costs for loan recipients as would have been the case if Congress had not exempted the forgiveness of the loans from tax.

Last week the IRS issued Revenue Ruling 2020-27 saying that even if a taxpayer’s PPP loan has not yet been forgiven … Read More