IRS Efforts to Destroy Tax Deductions for PPP-paid Expenses

When lawmakers originally passed the Paycheck Protection Program (PPP), they thought that under its provisions:

  • You did not pay taxes on the forgiveness amount, and
  • You could deduct the expenses you paid with the PPP money

In late April, the IRS issued Notice 2020-32, which asserts that PPP loan recipients may not deduct business expenses paid using the PPP monies that gave rise to forgiveness (defined payroll, rent, utilities, and interest).

In a May 5, 2020, letter to Secretary of the Treasury Steve Mnuchin, Senator Chuck Grassley (chair of the Committee on Finance, Senator Ron Wyden (ranking member on the Committee on Finance), and Congressman Richard E. Neal (chair of the Committee on Ways and Means) jointly stated that the IRS got this wrong and that the intent of the CARES Act was for the PPP to be a tax-free grant.

The IRS was unmoved by the lawmakers’ letter. Their position … Read More

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

What you need to know about your W-4 form (even if you aren’t starting a new job)

The W-4 form you fill out when you start a new job lets your employer know how much tax they should withhold from your paycheck. It is important to note that you should also fill out a new W-4 form any time you have changes in your financial or personal circumstances.

Filling out the form correctly is important because if you don’t withhold enough tax, you could end up owing a large sum to the IRS at the end of the year. On the other hand, if you overpay withholding you are temporarily giving money to the government that you could use for things like paying bills or investing.

The IRS issued a new W-4 for 2020. (Note: You do not need to fill out a new W-4 if your employer already has your old form on file.) The new form eliminated the ability to claim personal allowances (with the old … Read More