The COVID-19 crisis has taken a toll on many small businesses. But some winners are expected to emerge from the wreckage. Unprecedented steps will be taken to guard against health risks from COVID-19 and whatever might come along next. The new normal will create new opportunities. Small businesses that can respond to those opportunities will survive and thrive. ​ Here is why operating as a tax-favored qualified small business corporation (QSBC) can be a smart move for eligible small businesses. ​ Tax Basics ​ QSBCs are a special breed of the C corporation species. The difference between QSBCs and garden-variety C corporations is that QSBC stock is potentially eligible for: A 100% federal income tax gain exclusion break, and A tax-free gain rollover break. ​ The 100% gain exclusion break translates into a 0% federal income tax rate on capital gains from eligible sales of QSBC stock. ​ You also benefit from the flat 21% federal income tax rate that C corporations pay, thanks to the Tax Cuts and Jobs Act (TCJA). ​ The gain exclusion and gain rollover breaks are available to individual taxpayers who own QSBC stock. However, these breaks are not available to QSBC shareholders that are themselves C corporations. Gains from sales of QSBC stock that individuals own indirectly through "pass-through" entities (partnerships, limited liability companies (LLCs), and S corporations) are eligible, because the gain exclusion and gain rollover breaks are effectively passed through to individual owners. ​ The current 100% gain exclusion deal was made permanent for sales of QSBC shares that are acquired after September 27, 2010. So, shares issued recently, semi-recently or after you read this can potentially be classified as tax-favored QSBC stock. However, several rules and restrictions apply. Notably, you must hold the stock for more than five years to claim the gain exclusion. ​ Assuming your business is eligible for QSBC status, the following types of businesses will first need to be incorporated: Sole proprietorships, Single-member LLCs treated as sole proprietorships for tax purposes, Partnerships, and Multi-member LLCs treated as partnerships for tax purposes. Important: The act of incorporating a business should not be taken lightly. Please discuss with your tax and legal advisors before taking that step. ​ In general, QSBCs are treated the same as regular C corporations for all other legal and federal tax purposes. In other words, beyond the federal income tax gain exclusion and gain rollover breaks, the standard advantages and disadvantages of C corporation status apply equally to QSBCs. ​ Limitations on Excludable Gains ​ Congress imposed limits on the amount of gain that can be excluded from selling shares in a particular QSBC. For purposes of this article, we'll refer to the amount of gain that qualifies for the gain exclusion break as the "eligible gain." In any taxable year, a taxpayer's eligible gain is limited to the greater of: 10 times the taxpayer's basis in the QSBC stock that's sold, or $10 million reduced by the amount of eligible gain already taken into account in prior tax years for dispositions of stock issued by the same QSBC (or $5 million if the taxpayer uses married filing separate status). In effect, the $10 million (or $5 million) eligible gain limitation is a lifetime limitation for stock in a particular QSBC. ​ For example, Jo is unmarried. In 2026, she sells QSBC stock that she acquired in 2020. The stock has basis of $2 million. Jo sells the stock for $24 million, resulting in a gain of $22 million. She has never before excluded any gain from selling shares in this QSBC. Her eligible gain is limited to the greater of: $20 million (10 × $2 million basis of the stock), or $10 million reduced by eligible gains taken into account in prior tax years (if any). ​ In this case, Jo's eligible gain limitation is $20 million, because that's the greater of the two limitations. The remaining $2 million of gain is taxed as a garden-variety long-term capital gain that's potentially subject to the 3.8% net investment income tax (NIIT) on top of the capital gains tax. Here's another example: Mark is unmarried. In 2026, he sells QSBC stock that he acquired in 2020. The stock has basis of $500,000. Mark sells the stock for $14.5 million, resulting in a gain of $14 million. His eligible gain is limited to the greater of: $5 million (10 × $500,000 basis of the stock), or $10 million reduced by eligible gains taken into account in prior tax years (if any). ​ In this case, Mark's eligible gain limitation is $10 million, because that's the greater of the two limitations. The remaining $4 million of gain is taxed as a garden-variety long-term capital gain that's potentially subject to the 3.8% NIIT on top of the capital gains tax. ​ Gain Rollover Privilege ​ There is also a tax-free gain rollover privilege for eligible QSBC shares. This privilege applies to gains recognized by an individual taxpayer, if the taxpayer elects gain rollover treatment. ​ Under the rollover rule, the amount of gain recognized is limited to the excess of QSBC stock sales proceeds over the amount reinvested to purchase other QSBC shares (replacement stock) during a 60-day period beginning on the date of the original sale. The rolled-over gain reduces the basis of the replacement stock. QSBC stock must have been held for more than six months to take advantage of gain rollover provision. ​ If the replacement stock is still QSBC stock when it's sold, the gain exclusion break is available if the more-than-five-year holding period requirement is met. The holding period of the stock sold in the rollover transaction is added to the holding period of the replacement stock. ​ Important: The rollover provision allows a QSBC shareholder to sell shares on a tax-deferred basis without losing eligibility for the gain exclusion break when the replacement stock is eventually sold. ​ Right for Your Business? ​ You may think that conventional wisdom dictates that it is best to operate privately owned businesses as pass-through entities. But that may not be the optimal choice if your venture would meet the definition of a QSBC if it was incorporated. The QSBC alternative offers three major upsides: 1) the potential for the 100% gain exclusion break when you sell your shares, 2) a tax-free stock sale gain rollover privilege, and 3) a flat 21% corporate federal income tax rate. ​ Beware: This may be a limited time opportunity. Depending on the results of the November elections, today's tax rules — including those that allow favorable tax treatment for QSBCs — may change or be eliminated. Please give us a call if you would like more information related to this topic or for any tax questions. We are committed to being your most trusted Business Advisor. We view every client like a partnership, and truly believe our success is a result of your success! We assist clients with accounting, tax preparation and financial advising in the Bryan and Navasota, Texas, area. Interested in working with us? Fill out a new client inquiry here.

Economic fallout from the COVID-19 crisis will cause many rental real estate properties to run up tax losses in 2020 — and possibly beyond. Here's a summary of important federal income tax rules for such losses. ​ What You Can Write Off ​ Rental property owners can deduct mortgage interest and real estate taxes. They can also write off all standard operating expenses that go along with owning rental property. Examples include: Utilities, Insurance, Repairs and maintenance, and Care and maintenance of outdoor areas. For many rental property owners, the tax kicker is the depreciation deduction. That is, the cost of a rental building (not the land) can be depreciated over 27.5 years for a residential building and over 39 years for a commercial building — even while the property increases in value over time. Depreciation write-offs can deliver significant tax savings, especially if you own several properties. ​ For example, Ann owns an apartment building that cost $750,000, not including the land. Her annual depreciation deduction is $27,273 ($750,000 divided by 27.5 years). Each year, that deduction can be used to shelter up to $27,273 of positive cash flow from income taxes. ​ QIP Correction for Commercial Property Owners ​ The Coronavirus Aid, Relief, and Economic Security (CARES) Act includes a retroactive correction to the statutory language of the Tax Cuts and Jobs Act (TCJA). The correction allows much faster depreciation for commercial real estate qualified improvement property (QIP) that's placed in service in 2018 through 2022. ​ QIP is defined as an improvement to an interior portion of a nonresidential building that's placed in service after the building was placed in service. However, it doesn't include any expenditures attributable to: Enlarging the building, Any elevator or escalator, or The building's internal structural framework. Thanks to the CARES Act correction, you can write off the entire cost of QIP in the first year it's placed in service, because it now qualifies for 100% first-year bonus depreciation. Alternatively, you can depreciate QIP over 15 years using the straight-line method. Important: The CARES Act correction retroactively applies to QIP placed in service in 2018 and 2019. Before the correction, QIP placed in service in those years generally had to be depreciated over 39 years. ​ Expanded Section 179 Deductions ​ For eligible property placed in service in tax years beginning after 2017, the TCJA increases the maximum Section 179 deduction to $1 million, with annual inflation adjustments. The inflation-adjusted maximum for tax years beginning in 2020 is $1.04 million. The Sec. 179 deduction privilege allows you to write off the entire cost of eligible property in the first year it's placed in service. ​ The TCJA also expanded the definition of eligible property to include expenditures for: Nonresidential building roofs, HVAC equipment, Fire protection and alarm systems, and Security systems. Finally, the TCJA further expands the definition of eligible property to include depreciable tangible personal property used predominantly to furnish lodging. Examples of such property include beds, other furniture and appliances used in the living quarters of a lodging facility (such as an apartment building). ​ Complicated PAL Rules ​ Most new properties operate at a loss while they're trying to find tenants. Losses are also common when the economy falters, causing tenants to miss rent payments and vacancy rates to increase. Rental losses can complicate your tax situation, especially if the so-called passive activity loss (PAL) rules come into play. ​ Losses from rental properties will usually be classified as passive losses. In general, the PAL rules allow you to deduct passive losses only to the extent that you have passive income from other sources, such as positive income from other rental properties or gains from selling them. Passive losses in excess of passive income are suspended until you either 1) have more passive income, or 2) sell the property that produced the losses. ​ As a result, the PAL rules can postpone any tax benefit from rental property losses, sometimes for many years. Fortunately, there are several exceptions that can allow you to deduct rental property losses sooner rather than later. Your tax pro can explain the exceptions and help you plan to become eligible, if possible. ​ Another Loss Disallowance Rule ​ The TCJA established another hurdle to clear to currently deduct your rental property losses: For tax years beginning in 2018 through 2025, you can't deduct an "excess business loss" in the current year. This term refers to a loss that exceeds $250,000 or $500,000 for a married joint-filing couple. ​ Under the TCJA, any excess business loss is carried over to the following tax year and can be deducted under the rules for net operating loss (NOL) carryforwards. This loss disallowance rule applies after applying the PAL rules. So, if the PAL rules disallow your rental losses, this rule doesn't matter. ​ Important: The CARES Act suspends the excess business loss disallowance rule for losses that arise in tax years beginning in 2018 through 2020. ​ Net Operating Loss Deductions ​ If your rental property losses clear both the PAL and excess business loss hurdles, those losses can be used to offset taxable income from other sources. If losses for the year exceed income from other sources, you may have an NOL for the year. ​ Important: The CARES Act allows a five-year carryback privilege for an NOL that arises in a tax year beginning in 2018 through 2020. So, you can carry an NOL from one of those years back to an earlier year, deduct it, and recover some or all the federal income tax paid for the carryback year. Because federal income tax rates were generally higher in years before the TCJA took effect, NOLs carried back to those years can be especially beneficial. Rental Properties with Positive Taxable Income ​ Despite the COVID-19 crisis, some properties will generate positive taxable income, instead of losses, in 2020 and beyond. This happens when rents surpass deductible expenses. (See main article.) Of course, you must report those profits as passive taxable income. But, if you've accumulated suspended passive losses from earlier years, you now get to use them to offset your passive income. Another upside is that taxable income from rental real estate isn't subject to self-employment (SE) tax. The SE tax, which can be up to 15.3%, applies to most other unincorporated profit-making ventures. However, passive income from rental real estate owned by higher-income individuals may be hit with the 3.8% net investment income tax (NIIT). Gains from selling properties also may be subject to the NIIT. For More Information ​ The economic fallout from the COVID-19 crisis increases the odds that your rental properties will incur losses in 2020, but special tax relief provisions may soften the blow. If you have questions or want more information, please give us a call . We are committed to being your most trusted Business Advisor. We view every client like a partnership, and truly believe our success is a result of your success! We assist clients with accounting, tax preparation and financial advising in the Bryan and Navasota, Texas, area. Interested in working with us? Fill out a new client inquiry here. ​

Congress just passed the PPP Flexibility Act which modifies some of the original terms of the PPP loan. Click on the link below to see the provisions of that Act: ​ https://www.congress.gov/bill/116th-congress/house-bill/7010 ​ In summary, the Act: Makes PPP loans available through December 31, 2020 Extends the period during which PPP loan amounts may be forgiven from eight weeks to 24 weeks (but no later than December 31, 2020) Broadens safe harbors to avoid reductions in PPP loan forgiveness on account of reductions in workforce or pay Permits up to 40% of a borrower’s PPP loan forgiveness amount to be due to non-payroll costs, overriding an earlier administrative rule restricting non-payroll costs to, at most, 25% of a PPP loan forgiveness amount Extends the term to maturity for PPP loans to 5 years for those loans issued on or after the date the Flexibility Act is enacted Extends the deferral period from 6 months to a period ending on the date on which a borrower’s PPP loan lender is remitted the forgiveness amount associated with that loan Permits a PPP loan borrower to defer payment of employer payroll taxes. If you have question, please contact us for further information. We are committed to being your most trusted Business Advisor. We view every client like a partnership, and truly believe our success is a result of your success! We assist clients with accounting, tax preparation and financial advising in the Bryan and Navasota, Texas, area. Interested in working with us? Fill out a new client inquiry here.

An Economic Impact Payment made to someone who died, before the Payment was received, should be returned to the IRS. Return the entire Payment unless the Payment was made to joint filers and one spouse had not died before receipt of the Payment, in which case, you only need to return the portion of the Payment made on account of the decedent. This amount will be $1,200 unless adjusted gross income exceeded $150,000. Click here for information from the Economic Impact Payment Information Center on the IRS website. Q41. What should I do to return an Economic Impact Payment (EIP)? A41. You should return the payment as described below. ​ If the payment was a paper check: Write "Void" in the endorsement section on the back of the check. Mail the voided Treasury check immediately to the appropriate IRS location listed below. Do not staple, bend, or paper clip the check. Include a note stating the reason for returning the check. If the payment was a paper check and you have cashed it, or if the payment was a direct deposit: Submit a personal check, money order, etc., immediately to the appropriate IRS location listed below. Write on the check/money order made payable to “U.S. Treasury” and write 2020EIP, and the taxpayer identification number (social security number, or individual taxpayer identification number) of the recipient of the check. Include a brief explanation of the reason for returning the EIP. For your paper check, here are the IRS mailing addresses to use based on the state:

The $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act delivers good news to individuals and businesses, including valuable tax-relief measures. Some of that tax relief is retroactive. These provisions can affect 2018 and 2019 returns that have already been filed. One retroactive provision can, in some cases, go all the way back to 2013. Some taxpayers that file amended returns may receive a tax refund from prior years. ​ Here's a summary of four retroactive CARES Act provisions that can potentially benefit you or your business entity after amended prior-year returns have been prepared and filed. 1. Liberalized Rules for Deducting NOLs ​ Business activities that generate tax losses can cause you or your business entity to have a net operating loss (NOL) for the year. Many businesses are currently operating at a loss. But there's a bright side: The CARES Act significantly liberalizes the NOL deduction rules and allows NOLs that arise from 2018 to 2020 to be carried back five years. ​ That means an NOL that arises this year can be carried back to 2015. In addition, an NOL that arose in 2018 can be carried back to 2013. Such NOL carry-backs allow you to claim refunds for taxes paid in the carry-back years. Because tax rates were higher in pre-2018 years, NOLs carried back to those years can be especially beneficial. ​ 2. Better Depreciation Rules for Real Estate QIP ​ The CARES Act includes a retroactive correction to the 2017 Tax Cuts and Jobs Act (TCJA) that allows much faster depreciation for real estate qualified improvement property (QIP) that's placed in service after 2017. ​ QIP is defined as an improvement to an interior portion of a nonresidential building that's placed in service after the date the building was first placed in service. However, QIP doesn't include any improvement for which the expenditure is attributable to the enlargement of the building, any elevator or escalator, or the internal structural framework of the building. ​ The retroactive correction allows you to claim 100% first-year bonus depreciation for QIP expenditures placed in service in 2018 through 2022. Alternatively, you can depreciate QIP placed in service in 2018 and beyond over 15 years using the straight-line method. ​ Amending a 2018 or 2019 return to claim 100% first-year bonus depreciation for QIP placed in service in those years may result in a lower bill for the tax year the QIP was placed in service. It may even generate an NOL that can be carried back to a prior tax year to recover taxes paid in that prior year. ​ You could also amend a 2018 or 2019 return to claim 15-year straight-line depreciation for QIP placed in service in those years. That might not create an NOL for 2018 or 2019, but it would still lower your tax bill for those years. 3. Suspended Excess Business Loss Disallowance Rule for Non corporate Taxpayers ​ An unfavorable TCJA provision disallowed current deductions for so-called "excess business losses" incurred by individuals and other non corporate taxpayers in tax years beginning in 2018 through 2025. An excess business loss is one that exceeds $250,000 or $500,000 for a married joint-filing couple. The $250,000 and $500,000 limits are adjusted annually for inflation. ​ The CARES Act suspends the excess business loss disallowance rule for losses that arise in tax years beginning in 2018 through 2020. Amending a 2018 or 2019 return to reflect the suspension of the excess business loss disallowance rule could result in a 2018 or 2019 NOL that could then be carried back to a prior tax year to recover taxes paid in that prior year. Or it could just lower the 2018 or 2019 tax bill. Either way, you'll come out ahead. ​ 4. Liberalized Limit on Business Interest Expense Deductions ​ Another unfavorable TCJA provision generally limited a taxpayer's deduction for business interest expense to 30% of adjusted taxable income (ATI) for tax years beginning in 2018 and beyond. Business interest expense that's disallowed under this limitation is carried over to the following tax year. ​ In general, the CARES Act temporarily and retroactively increases the taxable income limitation from 30% of ATI to 50% of ATI for tax years beginning in 2019 and 2020. There's no change for tax years beginning in 2018. Amending a 2019 return to reflect the liberalized taxable income limitation rule could result in a 2019 NOL that can be carried back to a prior tax year to recover taxes paid in that prior year. Or it could just lower the 2019 tax bill. Either way, you'll come out ahead. ​ Special complicated rules apply to partnerships and LLCs that are treated as partnerships for tax purposes. ​ Important: Taxpayers with average annual gross receipts of $25 million or less for the three previous tax years are exempt from the business interest expense deduction limitation. Certain real property businesses and farming businesses are also exempt if they choose to use slower depreciation methods for specified types of assets. ​ To Amend or Not to Amend? ​ The four retroactive tax-relief measures provided by the CARES Act can impact prior tax years for which returns have already been filed. Amended returns can allow you or your business to benefit from these changes and recover taxes paid in prior years. Contact us if you have questions, need more information or want to discuss whether or not you should amend a prior return for you or your business. We are committed to being your most trusted Business Advisor. We view every client like a partnership, and truly believe our success is a result of your success! We assist clients with accounting, tax preparation and financial advising in the Bryan and Navasota, Texas, area. Interested in working with us? Fill out a new client inquiry here.

With much of the country currently on lockdown due to the novel coronavirus (COVID-19) crisis, many nonessential businesses have been shuttered. As a result, millions of small business owners find themselves on the brink of financial disaster. For those with business interruption insurance policies in place, now may seem like the ideal time to submit a claim. However, as it stands currently, there is much disagreement regarding whether business interruption insurance policies should cover loss of income triggered by the pandemic. ​ How Insurance Companies View the Pandemic ​ Some insurance companies are claiming the legal defense of "force majeure." This refers to a situation where unexpected external circumstances prevent a party to a contract, in this case, the insurance company from meeting their obligations. ​ In addition, many insurance companies note that business interruption policies provide coverage when a policyholder suffers a loss of income as a result of physical loss or damage to covered property. According to their interpretation, COVID-19 doesn't qualify as a physical loss. ​ Insurers also highlight the fact that policies don't cover loss of income due to market conditions, an economic slowdown or concerns regarding contamination. They claim that policies don't provide coverage for government actions designed to limit the spread of COVID-19. ​ On April 6, the American Property Casualty Insurance Association (APCIA), the primary national trade association for home, auto and business insurers, issued a statement. It says, "Many commercial insurance policies, including those that have business interruption coverage, do not provide coverage for communicable diseases or viruses such as COVID-19. Pandemic outbreaks are uninsured because they are uninsurable." ​ The APCIA concludes, "Any action to fundamentally alter business interruption provisions specifically, or property insurance generally, to retroactively mandate insurance coverage for viruses by voiding those exclusions, would immediately subject insurers to claim payment liability that threatens solvency and the ability to make good on the actual promises made in existing insurance policies." Policyholders Object ​ On the flipside, attorneys representing business owners in a growing number of lawsuits against insurance companies state that the existence of SARS, MERS and the Avian flu have given insurance companies ample opportunity to predict a subsequent global pandemic involving another virus. As it relates to need for a physical loss to occur to trigger payments under the policy, plaintiffs note that the virus can attach itself to physical surfaces. Therefore, viruses cause physical loss that would require cleaning to remove. ​ To complicate matters further, lawmakers in several jurisdictions are considering passing bills to force insurance companies to pay for COVID-19-related losses under business interruption insurance policies. ​ Proactive Measures ​ While courts and lawmakers are addressing these issues, companies that have a business interruption policy in place should consider taking the following steps: ​ Review your policy in detail. Contact your insurance company and ask for a complete copy of your policy if you don't have one. Pay close attention to the type of losses covered, as well as the policy's exclusions and limitations. Also consider asking your attorney to review the policy, because the language and structure can often create confusion. ​ Determine the notification period. To ensure timely claims submission, many policies require policyholders to notify their insurance company of a loss within a certain time period. Make sure you comply within the prescribed time frame. Document compliance in your business records and send an email or letter to your insurance company. ​ Build your case. The success of a business interruption claim depends on your ability to document the impact of COVID-19 on your business. Prepare a file that documents the financial impact of the pandemic. Be sure to include the loss of income (as defined by your policy), customer attrition rates and incremental expenses incurred (such as site security or cleaning services). ​ As litigation winds its way through the court system and legislators consider steps to compel insurance companies to honor claims, your insurance company will probably deny your COVID-19-related claim. But filing it now establishes your company's rights to contest the claim as the legal landscape evolves. President Trump Weighs In ​ On April 10, President Trump addressed the issue of business interruption insurance during his daily coronavirus (COVID-19) task force press conference. Trump made it clear that he expects insurance companies to cover COVID-19-related losses, unless the policy specifically excludes viruses and pandemics. ​ As a former business owner, Trump sided with businesses on the matter of whether insurance companies owe it to their customers to cover losses. He said companies having been paying for business interruption coverage for years and, "then when they finally need it, the insurance company says, 'We're not going to give it.' We can't let that happen … I would like to see the insurance companies pay if they need to pay, if it's fair." ​ However, the final decision regarding what's covered during the pandemic lies with the courts and lawmakers. ​ Need Help? ​ The stress of paying bills and managing daily operations in today's unprecedented market conditions is overwhelming for many business owners. Few have time to pull together a detailed business interruption claim, especially if they have never filed one before. Contact us , we can help provide information that may be needed for a business interruption claim. We are committed to being your most trusted Business Advisor. We view every client like a partnership, and truly believe our success is a result of your success! We assist clients with accounting, tax preparation and financial advising in the Bryan and Navasota, Texas, area. Interested in working with us? Fill out a new client inquiry here.

The coronavirus (COVID-19) pandemic has shut down many sectors of the U.S. economy, causing widespread job losses. Over 10 million Americans applied for unemployment benefits in March, according to the U.S. Department of Labor. And far more claims are expected in April. Some economists predict that the unemployment rate could rise to Depression-era levels of 10% to 15% before the crisis ends (compared to 3.5% in February 2020). ​ To help curb layoffs, Congress has created a new federal income tax credit for employers that keep workers on their payrolls. The credit amount equals 50% of eligible employee wages paid by an eligible employer in a 2020 calendar quarter. It's subject to an overall wage cap of $10,000 per eligible employee. Here are the details. Eligible Employers ​ Eligible employer status for the 50% employee retention credit is determined on a 2020 calendar quarter basis. The credit is available to employers, including nonprofits, whose operations have been fully or partially suspended during a 2020 calendar quarter as a result of an order from an appropriate governmental authority that limits commerce, travel or group meetings due to COVID-19. ​ The credit can also be claimed by employers that have experienced a greater-than-50% decline in gross receipts for a 2020 calendar quarter compared to the corresponding 2019 calendar quarter. However, the credit is disallowed for quarters following the first calendar 2020 quarter during which gross receipts exceed 80% of gross receipts for the corresponding 2019 calendar quarter. ​ To illustrate, suppose ACE, a limited liability company (LLC), reports the following quarterly gross receipts for 2019 and 2020: In this example, ACE had a greater-than-50% decline in gross receipts for the second quarter of 2020. So, ACE is an eligible employer for purposes of the 50% employee retention credit for the second and third quarters of 2020. For the fourth quarter of 2020, ACE is ineligible for the credit because its gross receipts for the third quarter of 2020 exceeded 80% of gross receipts for the third quarter of 2019. ​ Eligible Wages ​ The 50% employee retention credit is available to cover eligible wages paid between March 13, 2020, and December 31, 2020. For an eligible employer that had an average of 100 or fewer full-time employees in 2019, all employee wages are eligible for the credit (subject to the overall $10,000 per-employee wage cap), regardless of whether employees are furloughed due to COVID-19. ​ For an employer that had more than 100 full-time employees in 2019, only wages of employees who are furloughed or given reduced hours due to the employer's closure or reduced gross receipts are eligible for the credit (subject to the overall $10,000 per-employee wage cap). For purposes of the 50% employee retention credit, eligible wages are increased to include qualified health plan expenses allocable to those wages. Important: The amount of wages eligible for the credit is capped at a cumulative total of $10,000 for each eligible employee. The $10,000 cap includes allocable health plan expenses. ​ For example, Alpha Co. is an eligible employer that pays $10,000 in eligible wages to an employee (Art) in the second quarter of 2020. The 50% employee retention credit is allowed for the wages. The credit equals $5,000 (50% × $10,000). ​ Alpha pays another employee (Bart) $8,000 in eligible wages in the second quarter of 2020 and another $8,000 in the third quarter of 2020. The 50% employee retention credit for wages paid to Bart in the second quarter is $4,000 (50% x $8,000). The credit for wages paid to Bart in the third quarter is limited to $1,000 (50% x $2,000) due to the $10,000 wage cap. Any additional wages paid to Bart are ineligible for the credit due to the $10,000 wage cap. ​ Additional Rules and Restrictions ​ The 50% employee retention credit is not allowed for: Emergency sick leave wages or emergency family leave wages that small employers (those with fewer than 500 employees) are required to pay under the Families First Coronavirus Response Act (FFCRA). Those mandatory leave payments are covered by federal payroll tax credits granted by the FFCRA. Wages taken into account for purposes of claiming the pre-existing Work Opportunity Credit under Internal Revenue Code (IRC) Section 21. Wages taken into account for purposes of claiming the pre-existing employer credit for paid family and medical leave under IRC Sec. 45S. In addition, the 50% employee retention credit isn't available to a small employer that receives a potentially forgivable Small Business Administration (SBA) guaranteed Small Business Interruption Loan issued pursuant to the Paycheck Protection Program under the CARES Act. That program has been funded with $349 billion, so far. In general, a small employer for purposes of the Paycheck Protection Program is one that has fewer than 500 employees — including a sole proprietorship, self-employed person or private nonprofit organization. Businesses in certain industries can have more than 500 employees if they meet SBA size standards for those industries. For additional information on the Paycheck Protection Program, visit the SBA website or contact us! ​ Need Help? ​ No employer wants to lay off employees during these difficult times, but sometimes it's the only way to stay afloat. The 50% employee retention credit rewards employers that can afford to keep workers on the payroll during the crisis. For more information about this tax saving opportunity, contact us at www.bepcocpa.com or info@bepcocpa.com . We are committed to being your most trusted Business Advisor. We view every client like a partnership, and truly believe our success is a result of your success! We assist clients with accounting, tax preparation and financial advising in the Bryan and Navasota, Texas, area. Interested in working with us? Fill out a new client inquiry here.

The Treasury Department and the Internal Revenue Service today launched a new web tool allowing quick registration for Economic Impact Payments, for those who don’t normally file a tax return. The IRS reminds taxpayers that Economic Impact Payments will be distributed automatically to most people starting next week. Eligible taxpayers who filed tax returns for 2019 or 2018 will receive the payments automatically. Automatic payments will also go in the near future to those receiving Social Security retirement or disability benefits and Railroad Retirement benefits. We are committed to being your most trusted Business Advisor. We view every client like a partnership, and truly believe our success is a result of your success! We assist clients with accounting, tax preparation and financial advising in the Bryan and Navasota, Texas, area. Interested in working with us? Fill out a new client inquiry here.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020. In addition to giving people access to health care treatments, the new law will provide roughly $2 trillion in much-needed financial relief to individuals, businesses, not-for-profit organizations, and state and local governments during the coronavirus (COVID-19) pandemic. Here are some of the key financial relief provisions. ​ Advance Rebate Payments ​ The CARES Act provides one-time direct "rebate" payments to individuals and families. These payments are considered advances for a new federal income tax credit that's subject to phaseout thresholds based on adjusted gross income (AGI). The following table summarizes credit amounts and phaseout thresholds: Families will receive an additional $500 credit — subject to the same phaseout thresholds — for each qualifying child under 17. The credits are phased out by $5 for every $100 of AGI above the thresholds. For example, the credit for a married couple with no children would be completely phased out when AGI reaches $198,000. The credit for a head of household with one child is completely phased out when AGI reaches $146,500. ​ Many individuals won't need to do anything to receive the advance credit payment. If you previously signed up to have your federal income tax refunds deposited into a bank account, your advance credit payment will come to you that way. The allowable credit amount will be based on your 2019 federal income tax return or your 2018 return if you've not yet filed for 2019. Adjustments can be made when you file your 2020 return. You can claim any credit underpayment at that time, but the IRS won't claw back any overpayment. The credit is fully refundable for individuals and families with low or zero federal income tax liabilities. In fact, you need not have any taxable income to collect the credit. There are still some details about the payments that are unknown at this time. We will keep you updated as information comes out. ​ Modifications of TCJA Provisions ​ The CARES Act rolls back several revenue-generating provisions of the Tax Cuts and Jobs Act (TCJA). This will help free up cash for some individuals and businesses during the COVID-19 crisis. ​ The new law temporarily scales back TCJA deduction limitations on: Net operating losses (NOLs) Business tax losses sustained by individuals, Business interest expense, and Itemized charitable deductions by individuals and charitable deductions for corporations. The new law also accelerates the recovery of credits for prior-year corporate alternative minimum tax (AMT) liability. To encourage charitable giving, individuals who claim the standard deduction (rather than itemizing) can claim an above-the-line deduction of up to $300 for cash contributions to charities for tax years beginning after December 31, 2019. ​ The CARES Act also fixes a TCJA drafting error for real estate qualified improvement property (QIP). Congress originally intended to permanently install a 15-year depreciation period for QIP, making it eligible for first-year bonus depreciation in tax years after the TCJA took effect. Unfortunately, due to a drafting glitch, QIP wasn't added to the list of property with a 15-year depreciation period — instead, it was left subject to a 39-year depreciation period (as under prior law). The CARES Act retroactively corrects this mistake and allows you to choose between first-year bonus depreciation for QIP expenditures or 15-year depreciation. ​ QIP refers to any improvement to an interior portion of a nonresidential building if the improvement is placed in service after the building was first placed in service. But it doesn't include any improvement for which the expenditure is attributable to: Enlargement of the building, Any elevator or escalator, or The internal structural framework of the building. ​ Contact your tax professional for more details and to evaluate whether you should file an amended return to take advantage of the new availability of bonus depreciation or 15-year depreciation for QIP expenditures in prior years. ​ Employee Retention Credit ​ The CARES Act creates a new payroll tax credit for employers that pay wages when: Their operations are partially or fully suspended because of the COVID-19 pandemic, or Their gross receipts decline by 50% or more compared to the same quarter in the prior year. Eligible employers may claim a 50% refundable payroll tax credit on wages (including health insurance benefits) of up to $10,000 that are paid or incurred from March 13, 2020, through December 31, 2020. ​ For employers who had an average number of full-time employees in 2019 of 100 or fewer, all employee wages are eligible, regardless of whether the employee is furloughed. For employers who had a larger average number of full-time employees in 2019, only the wages of employees who are furloughed or face reduced hours as a result of their employers' closure or reduced gross receipts are eligible for the credit. ​ Other rules and restrictions apply. Contact us for more information. ​ So Much More ​ The financial relief package under the CARES Act also includes provisions to: Significantly expand unemployment benefits for workers, Allow IRA owners and qualified retirement plan participants who are adversely affected by the COVID-19 pandemic to withdraw in 2020 up to $100,000 and then recontribute the withdrawn amount within three years with no federal income tax consequences (same as with a withdrawal and a subsequent tax-free rollover), Waive required minimum distributions (RMDs) from IRAs and retirement plans that would otherwise have to be taken in 2020 to avoid an expensive penalty, Allow for a recipient employee, tax-free treatment for up to $5,250 of employer payments made on the employee's student loans, for payments between now and year end, Allow employers to defer their portion of payments of Social Security payroll taxes through the end of 2020 (with similar relief provided to self-employed individuals), and Delay implementation of the current expected credit loss (CECL) standard for large public banks until the earlier of the end of the COVID-19 crisis or December 31, 2020. ​ The CARES Act also expands access to capital for businesses adversely impacted by the COVID-19 crisis. Many of the loan programs will be administered by the Small Business Administration (SBA) and the Federal Reserve. Some loans will be subject to a special oversight board to ensure adherence to the rules — including a ban on stock buybacks — set forth under the new law. ​ Need Help? ​ The COVID-19 pandemic has affected every household and business in some way. If you or your business have suffered financial losses, at least some relief may be on the way. Contact us to discuss resources that may be available to help you weather this unprecedented storm. We are committed to being your most trusted Business Advisor. We view every client like a partnership, and truly believe our success is a result of your success! We assist clients with accounting, tax preparation and financial advising in the Bryan and Navasota, Texas, area. Interested in working with us? Fill out a new client inquiry here.