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paycheck protection program

BREAKING NEWS: Significant Taxpayer Friendly Changes to the Paycheck Protection Program.

Richard A. Huffman, CPA, MST

Wright Ford Young & Co., CPAs

The Senate just passed the House bill, called the Paycheck Protection Flexibility Act which is expected to be signed into law by the president.  The law will extend the Paycheck Protection Program (PPP) loan forgiveness period from eight weeks to twenty four weeks and reduce the payroll forgiveness spend requirement from 75% to 60%.  Loan recipients now have until December 31, 2020 to complete their twenty four week spend period and to meet the restoration of workforce and pay requirements.

However, if at least 60% of the loan is not spent on payroll, there is a cliff effect where none of the loan will be forgiven.  Certain Senators and members of Congress have stated this was not the intent and they are working on a technical correction to allow the bill to restore the previous sliding scale of only partial loss of loan forgiveness if the 60% threshold is not met.

The law provides exceptions for the restoration of workforce requirements to achieve full PPP loan forgiveness if can document a good faith effort for the following:

  1. The inability to rehire individuals who were employees on February 15th
  2. The inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020
  3. The inability to restore business operations to Feb. 15, 2020 levels due to COVID-19 related operating restrictions

For any remaining amount of the loan that is not forgiven, the payback period maybe extended from two years to five years.

Additional guidance is needed from the SBA to clarify certain items in the law, for example, whether the limit of cash compensation per employee would increase in proportion to the increase in the covered period, from $15,385 to $46,153.

PPP funds are still available for eligible businesses who have not yet taken advantage of this program.

Another significant benefit is that the law allows businesses that intend to have a PPP loan forgiven to now qualify to delay payment of their payroll taxes, which was prohibited under the CARES Act.  Businesses should immediately consider deferring payment of the employer’s 6.2% share of 2020 Social Security tax until the end of 2021 (50%) and 2022 (50%).

For additional information or guidance regarding the Paycheck Protection Program or payroll tax deferral, please contact your WFY advisor or contact us here.

© Copyright 2020.  All rights reserved.

two new hires

WFY Welcomes Two New Hires to Audit Department

This month, Wright Ford Young & Co. is pleased to announce we have two new hires joining our team. Mimi Duong will be joining as an Audit Staff and Lauren Gilmour will be joining as an Audit Intern in our audit department. WFY is pleased to welcome these new hires to our team.

Mimi Duong

At the end of May, Mimi Duong started a position with WFY as Audit Staff.  She will be graduating CSUF later this year with a Business Administration degree with a concentration in Accounting.  In her spare time, she enjoys spending time with friends and family, experimenting with makeup, and trying new foods.

Lauren Gilmour

Lauren Gilmour joined WFY as an Audit Intern in May. She is currently attending USC as a Junior, and this will be her first experience working at a CPA firm.  Other than attending her classes, she loves to hike, go to the beach, and be outdoors.

 

Interested in joining WFY in one of our departments? Please email your resumes careers@cpa-wfy.com or go to our Careers page.

 

gifting

Why Gifting During an Economic Downturn May Be Right for You

Janelle Tokunaga, CPA, MST

Wright Ford Young & Co., CPAs

 

While it may seem like there has been a shortage of good news lately, we wanted to bring your attention to a few bright spots that have come about during our current economic downturn.  With the extra time you have at  sheltering in place, it may be a good time to revisit your current estate and gift plan.

To recap: the 2020 Federal lifetime exemption is $11.58 million per person, including inflation, and the 2020 annual Federal gift exclusion is $15,000 per donee and donor.  The current economic market is showing decreased values in the public securities arena and lower overall real estate values in light of the COVID-19 environment.

The current lifetime exemption gives you the opportunity to make larger gifts of assets. But when combined with lower current asset values you can gift now with less exemption utilization, it leaves more exemption available for future gifts.  So, now, may be a good time to think about gifting those depressed value assets that are expected to increase considerably in the future. Then, when the markets eventually recovers and your gifted asset values increase, they will already be outside of your taxable estate.

If you aren’t ready to gift assets directly, setting up and transferring ownership of real estate and marketable securities into closely held entities (such as FLPs and LLCs) may be a good option as well.

We encourage you to use this unique time to reflect on your current estate plan. Considering whether gifting is something for you may benefit you and your loved ones now and in the future.  WFY advisors are available to discuss the tax benefits of gifting during our economic downturn and look forward to hearing from you. If you’d like to contact us, click here.

© Copyright 2020. All rights reserved.

ppp

Non-Deductibility of PPP Related Expenses to the Extent of Forgiven PPP Funds (IRS Notice 2020-32)

Janet Kim, CPA, MST

Wright Ford Young & Co., CPAs

 

The IRS released Notice 2020-32 on April 30, 2020, which provides guidance on the deductibility of expenses paid with Paycheck Protection Program (PPP) loan proceeds that are forgiven and excluded from the borrower’s income. The IRS has determined otherwise deductible expenses that are paid with PPP funds may not be deductible for federal income tax purposes to the extent the expenses were reimbursed by a PPP loan that was then forgiven.

The PPP was created by Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Under the PPP, the borrower can receive forgiveness of indebtedness in the amount equal to the sum of payments made for the following expenses during the 8-week “covered period” beginning on the covered loan’s origination date: payroll costs, mortgage interest, rent, and utilities during the COVID-19 crisis. The forgiven amount is excluded from gross income under the PPP. The IRS notice explains that to the extent that Sec 1106 excludes from gross income the amount of a covered loan forgiven, this results in a “class of exempt income” under Sec. 265 which disallows otherwise allowable deduction for the amount of covered loan forgiveness because such payment is allowable to tax-exempt income. This treatment prevents a double tax benefit.

The CARES Act did not address whether deductions otherwise allowable under the Code for payments of eligible Section 1106 expenses paid by the PPP borrowers are allowable if the covered loan is subsequently forgiven as a result of the payment of those expenses. According to Senate Finance Committee Chairman Chuck Grassley “the intent was to maximize small businesses’ ability to maintain liquidity, retain their employees and recover from this health crisis as quickly as possible, this notice is contrary to that intent.” It may take clarification in a future bill if the original intent of Congress is that these expenses remain tax deductible.

We continue to monitor all newly issued legislation and guidance to assist you in making informed decisions.  If you have any questions or concerns regarding this latest guidance, please contact your WFY advisor or contact us here.

coronavirus

Avoid Phishing in the Time of COVID-19

As the uncertainty of the coronavirus pandemic continues, scammers are using different ways to gather your information and use it for ransom.

Some websites are offering information on COVID-19 relief programs in exchange for signing up through them as a subscription or requesting a fee. With this, the websites hold your basic information ransom and could possibly cause you problems in the near future.

WFY wants to make sure there aren’t any more problems for our clients who are already going through an ambiguous period of time. Fraud will only increase as the coronavirus pandemic goes on. Therefore, we advise you to only work with sources you know are safe and whom you’ve worked with before. On our WFY website, we have provided a COVID-19 relief page with safe links that can help you with any questions on resource programs at https://www.cpa-wfy.com/covid-19-resources/

If you have any questions or concerns on a COVID-19 relief program, please contact your WFY tax advisor.

coronavirus enacted laws

Summary Analysis of Coronavirus Enacted Laws

By Richard A. Huffman, CPA, MST

With the recently enacted laws to help companies with the current Coronavirus pandemic, there has been confusion regarding which benefit programs will apply to what companies.

In our efforts to assist you in which benefits can help you and your company, WFY has created a breakdown summary spreadsheet and flowchart below.

 

 

The Senate and House Passes CARES Act of 2020

Richard A. Huffman, CPA, MST

Wright Ford Young & Co, CPAs

On March 27th, 2020, the House passed an amended version of the Senate’s Coronavirus Aid, Relief, and Economic Security (CARES) Act sending to the President to sign into law.

The Act provides a wide sweeping infusion of cash into the economy helping individuals and businesses during these extraordinary times.  Below is a summarized version of the Act explaining all the key details for individuals and businesses including the various loan programs.

Direct financial help to individuals:

  • Rebates of up to $1,200 for individuals and $2,400 for married couples.  People with children can receive $500 per child.  Amounts start to phase out for individuals with more than $75,000 adjusted gross income (AGI) and $150,000 for joint filers based on the taxpayer’s 2019 tax returns or 2018 if 2019 not yet filed.  The amount is completely phased-out for single taxpayers with AGI exceeding $99,000 and $198,000 for joint filers.
  • Waive the 10% early withdrawal penalty for distributions up to $100,000 from qualified retirement accounts for Coronavirus-related purposes.  In addition, income attributable to such distributions would be subject to tax over three years, and the taxpayer may recontribute the funds to an eligible retirement plan within three years without regard to that year’s cap on contributions.  Further, the provision provides flexibility for loans from certain retirement plans for Coronavirus-related relief.
  • Waive the required minimum distribution rules for certain defined contribution plans and individual retirement accounts in calendar year 2020.
  • Encourages Americans to contribute to churches and charitable organizations in 2020 by permitting them to deduct up to $300 of cash contributions, whether they itemize their deductions or not.
  • Increases the limitations on deductions for charitable contributions by individuals who itemize, as well as corporations.  For individuals, the 50-percent of adjusted gross income limitation is suspended for 2020.  For corporations, the 10-percent limitation is increased to 25 percent of taxable income.
  • Permit employers in 2020 to provide a student loan repayment benefit to employees on a tax-free basis.  An employer may contribute up to $5,250 annually toward an employee’s student loans and the payment would be excluded from the employee’s income.  The $5,250 cap applies to both the new student loan repayment benefit as well as other educational assistance (for example, tuition, fees, books) provided by the employer under current law.
  • Separately with the IRS announced postponement of April 15, 2020 tax payments now being owed July 15, 2020 individual 2019 IRA contribution deadlines are now extended until July 15, 2020 as well.

Business provisions:

  • Refundable employee retention credit to encourage employers to maintain headcounts computed on a calendar-quarter basis against the 6.2% employer-side social security payroll tax applicable to employers carrying on a trade or business in 2020 which either fully or partially suspend operations due to a government order or which sustain a significant decline in gross receipts (defined as the first calendar quarter after December 31, 2019, for which gross receipts are less than 50% of the amount in the corresponding prior-year quarter and ending with the next quarter in which gross receipts exceed 80% of the corresponding prior year quarter).  The refundable credit is only applicable for wages paid after March 12, 2020, and before January 1, 2021 up to $10,000 in qualifying wages per employee.  The credit is available to certain tax-exempt organizations as well.  If an employer takes out a payroll protection loan under Section 7(a) of the Small Business Act (detailed below) no employee retention credit will be available.
  • Allows employers and self-employed individuals to defer payment of the employer share of the 6.2% Social Security tax on employee wages to be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022.
  • Allows net operating losses incurred in 2018, 2019 or 2020 to be carried back five years without limitation.
  • Excess business loss rules that originally suspended non-corporate taxpayer losses to $250,000 ($500,000 in the case of joint filers) has been suspended through December 31, 2020.
  • Temporarily increases the amount of interest expense businesses are allowed to deduct on their returns, by increasing the 30-percent limitation to 50-percent of taxable income for 2019 and 2020 and allow businesses to use their adjusted taxable income from 2019 in tax year 2020 for the taxable income limitation.
  • Qualified improvement property (facility improvements) tax life will be corrected to 15-year and be eligible for 100% bonus depreciation retroactively starting 9/28/17 allowing for amended returns.

Relief for small businesses:

  • Extends the qualifications for borrowers and the size of loans that are available through the U.S. Small Business Administration (SBA):
    • During the covered period from February 15, 2020 through June 30, 2020 payroll protection loans fully guaranteed by the federal government through December 31, 2020 [SBA 7(a) loans] are available to any business, private nonprofit, or public nonprofit organization with under 500 employees.  Borrowers can receive loans equal to 2.5 times their U.S. monthly payroll (excluding annual compensation greater than $100,000 per employee), mortgage, rent, and debt payment expense, up to $10 million.  Borrowers can use these loans for a broad range of business expenses including payroll, paid sick leave, mortgage, rent, utilities, and payments on existing debts.  No collateral or personal guarantee is required for a loan and the standard fee is waived.  The loans will have a maximum maturity of 10 years and an interest rate not to exceed four percent.  An additional provision in the CARES Act provides for possible deferment of repayment of the loans for a period of at least six months, but not to exceed a year.
    • The requirements to obtain a loan are as follows:
      • The loan is needed to continue operations during the COVID-19 emergency.
      • Funds will be used to retain workers and maintain payroll or make mortgage, lease, and utility payments.
    • There is a special eligibility rule for businesses in the hospitality and dining industries that have more than one physical location, employ 500 or fewer employees per location and are assigned to the accommodation and food services sector 72 under the North American Industry Classification System.
    • Business that were operating on February 15, 2020 and that have a pending or approved loan application under this program are presumed to qualify for complete payment deferment relief (for principal, interest, and fees) for six months to one year.  Lenders are required to provide such relief during the covered period (if secondary market investors decline to approve a lender’s deferral request, the Administration must purchase the loan).
    • Indebtedness is forgiven (and excluded from gross income) in an amount (not to exceed the principal amount of the loan) equal to the following costs incurred and payments made during the eight week period beginning on the date of the loan:
      • U.S. Payroll costs (excluding annual compensation greater than $100,000 per employee)
      • Interest payments on mortgages
      • Rent
      • Utility payments
    • Forgiveness amounts will be reduced for any employee cuts or reductions in wages below the average number of full-time equivalent employees as of February 15, 2019 to June 30, 2019 or January 1, 2020 until February 29, 2020 (at election of borrower) calculated on a monthly basis.
    • There is relief from these forgiveness reduction penalties for employers who rehire employees or make up for wage reductions by June 30, 2020 and will not apply to an employer between February 15, 2020 and 30 days following enactment of the CARES Act.
  • Expands the SBA’s Disaster Loan Program through 2020 for businesses with 500 or fewer employees as follows:
    • Waives rules related to personal guarantees on advances and loans of $200,000 or less for all applicants;
    • Waives the requirement that an applicant be unable to find credit elsewhere
    • Allows lenders to approve applicants based solely on credit scores
    • Applicants can request an emergency advance from the Administrator of up to $10,000, which does not have to be repaid, even if the loan application is later denied.
    • Advances may be used for purposes already authorized under the SBA Disaster Loan Program including:
      • Providing sick leave to employees unable to work due to direct effect of COVID-19
      • Maintaining payroll during business disruptions during slow-downs
      • Meeting increased supply chain costs
      • Making rent or mortgage payments
      • Repaying debts that cannot be paid due to lost revenue
  • The CARES Act also provides benefits to those with loans under Section 7(a) of the Small Business Act OTHER THAN the new paycheck protection loans, in the form of a government subsidy whereby the SBA will pay six months of principal, interest and fees on qualifying loans.

If you have any questions about how you or your business can obtain the many benefits of the CARES Act, contact your WFY tax specialist or email us at info@cpa-wfy.com.

© Copyright 2020. All rights reserved.

six new hires

Six New Hires Join WFY Team

Wright Ford Young & Co. is proud to announce we are adding six new hires to our team. We have Cheryl Shelton joining our estates & trusts department, and Brody Alcanter, Marzeh Khanjari, Rajbir Singh, Linh Trinh and Diane Waxler-Milne joining our tax department. WFY is pleased to welcome these new hires to our team.

Cheryl Shelton

In January, Cheryl Shelton started with WFY as an Estates & Trusts Supervisor in our estates & trusts department. She graduated from Cal State Fullerton and continued her education at Western State Law School. Cheryl has worked in accounting for over 15 years. In her spare time, she volunteers with a local dog resue doing adoption events and fostering dogs.

Brody Alcanter

Brody Alcanter joined WFY in January as a Tax Senior. He graduated from Northwood University with a Bachelor’s degree for Business Administration, Accounting, and moved to Orange County shortly after graduating. In his spare time, he enjoys playing golf.

Marzeh Khanjari

In January, Marzeh Khanjari started with WFY as a Tax Senior.  She received her degree in Business Administration with emphasis in Accounting, and has been working as a tax professional for almost 15 years. While she’s away from the office, she likes to travel, watch movies, and play ping pong.

Rajbir Singh

Rajbir Singh joined WFY as a Tax Staff in January.  He graduated from University of California, Riverside, with a degree in Business Administration and Psychology. Rajbir’s hobbies are working out and traveling with his family.

Linh Trinh

Joining us again at WFY as a tax intern is Linh Trin.  She is graduating from Cal State Fullerton this Spring and will become a full-time Tax Staff at WFY after she graduates.  During her free time, she likes to play the piano.

Diane Waxler-Milne

Diane Waxler-Milne joins WFY for this upcoming tax season as a tax intern.  She is currently attending Cal State Fullerton as a senior and will graduate with a Bachelor’s degree in Accounting and Finance. When she’s out of the office and away from school, Diane enjoys time with her husband and three daughters.

 

Interested in joining WFY in one of our departments? f you are interested and qualified for the position above, please email your resumes careers@cpa-wfy.com or go to our Careers page.

 

bruin professionals

Tax Director Melodie Reguero on Tax Planning at Bruin Professionals

On Wednesday, November 20th, our WFY Tax Director Melodie Reguero presented at the Orange County Bruin Professionals meeting.

Ms. Melodie Reguero spoke on tips about year-end tax planning along with Cheryl Gee from UBS. Year-end tax planning is especially critical this time of year to proactively reduce a taxpayer’s risk exposure and tax liability before the new year. If you are interested in tips about year-end tax planning, read our article on Year-End Tax Saving Moves for Individuals.

Reguero regularly attends Bruin Professionals meetings, which is diverse group of UCLA alumni who are established in business. The group focuses on commerce, camaraderie, and community. They have several chapters spread all over California. If you are interested in learning more about Bruin Professionals, click here.