News & Tech Tips

Updated Guidance on Food/Beverage Deductions

Kathleen Hargrove on April 9, 2021

The Treasury Department and the IRS have issued Notice 2021-25 providing guidance under the Taxpayer Certainty and Disaster Relief Act of 2020. The Act added a temporary exception to the 50% limit on the amount that businesses may deduct for food or beverages. The temporary exception allows a 100% deduction for food or beverages from restaurants.

Beginning January 1, 2021, through December 31, 2022, businesses can claim 100% of their food or beverage expenses paid to restaurants as long as the business owner (or an employee of the business) is present when food or beverages are provided and the expense is not lavish or extravagant under the circumstances.

 

Where can businesses get food and beverages and claim 100%?

Under the temporary provision, restaurants include businesses that prepare and sell food or beverages to retail customers for immediate on-premises and/or off-premises consumption. However, restaurants do not include businesses that primarily sell pre-packaged goods not for immediate consumption, such as grocery stores and convenience stores.

Additionally, an employer may not treat certain employer-operated eating facilities as restaurants, even if these facilities are operated by a third party under contract with the employer.

If you have any questions on this updated guidance, please contact your Whalen advisor or refer to the IRS Notice containing further details.

Ohio Income Tax Update: Unemployment Benefits

Kathleen Hargrove on April 8, 2021

Last month, Sub. S.B. 18 was signed into law. This incorporates recent federal tax changes into Ohio law effective immediately.

 

Specifically, federal tax changes related to unemployment benefits in the federal American Rescue Plan Act (ARPA) of 2021 will impact some individuals who have already filed or will soon be filing their 2020 Ohio IT 1040 and SD 100 returns (due by May 17, 2021).

 

Ohio taxes unemployment benefits to the extent they are included in federal adjusted gross income (AGI). Due to the ARPA, the IRS is allowing certain taxpayers to deduct up to $10,200 in unemployment benefits. Certain married taxpayers who both received unemployment benefits can each deduct up to $10,200. This deduction is factored into the calculation of a taxpayer’s federal AGI, which is the starting point for Ohio’s income tax computation.

 

Many taxpayers filed their 2020 federal and Ohio income tax returns and reported their unemployment benefits prior to the enactment of this deduction.

 

As such, ODT offers the following guidance related to the unemployment benefits deduction for tax year 2020:

 

  • Taxpayers who previously filed federal and Ohio tax returns and are waiting for IRS to issue a refund based on the unemployment benefits deduction.

 

  • All other taxpayers who previously filed their federal and Ohio returns prior to the enactment of this federal deduction and are waiting for the IRS to issue a refund based on the unemployment benefits deduction do not need to take any additional action on their originally filed Ohio IT 1040 return (and/or SD 100) at this time. The Department will provide further guidance when more details are available from the IRS, please continue to monitor our website.

 

  • Taxpayers who previously filed federal and Ohio tax returns without the unemployment benefits deduction, but who are not entitled to any additional Ohio refund.

 

  • Taxpayers who previously filed their federal and Ohio returns prior to the enactment of this federal deduction and whose Ohio income tax liability amount (IT 1040, line 10) was $0, do not need to take any additional action. Such taxpayers are not entitled to any additional Ohio refund.

 

  • Taxpayers who are amending their federal return to claim the unemployment benefits deduction.

 

  • Taxpayers who file an amended federal return should wait to file their amended Ohio IT 1040 (and an amended SD 100 if applicable) until the IRS has approved the requested changes.

 

  • Please note that the IRS does not recommend filing an amended return for the adjustment at this time.

 

The IRS’s current guidance on the federal taxation of unemployment benefits can be found here and how they will recalculate taxes on unemployment benefits can be found here.

 

If you have additional questions or need assistance, please work with your Whalen Advisor.

 

 

SOURCE: Ohio Department of Taxation

PPP Deadline Extension Signed Into Law

Kathleen Hargrove on April 1, 2021

The Paycheck Protection Program (PPP) application deadline formally changed from March 31 to May 31 this week when President Joe Biden signed the extension into law.

 

The U.S. Senate had voted 92-7 last week to approve the PPP Extension Act of 2021, H.R. 1799, sending the legislation to the president for his signature.

 

The additional 60 days provided by the bill will provide additional time to for businesses to complete existing PPP loan applications and file new ones. The bill also provides the SBA time to address significant loan application process challenges, including validation and error codes, delayed guidance, and changes to the PPP loan amount calculation for self-employed borrowers.

 

Patrick Kelley, associate administrator for the SBA’s Office of Capital Access, testified during a Senate Small Business Committee meeting Wednesday that 190,000 applications were still held up in the SBA’s PPP platform due to unresolved error codes related to validation checks instituted by the SBA to help prevent fraudulent applications from being funded.

 

The PPP Extension Act does not provide any additional funding for the current round of the PPP, which Congress provided with more than $290 billion to make forgivable loans to small businesses and not-for-profits. From the program’s opening on Jan. 11 through March 21, the SBA has approved more than 3.1 million loans totaling nearly $196 billion.

 

If you have any questions or need assistance with this, please contact your Whalen advisor.

 

 

SOURCE: Journal of Accountancy

Ohio Postpones Tax Filing Deadline to 5/17, Tax Conformity Passes

Kathleen Hargrove on March 25, 2021

OHIO TAX DEADLINE EXTENDED

 

Ohio Tax Commissioner Jeff McClain announced Wednesday that Ohio will be following the federal government and the IRS in extending the deadline to file and pay Ohio individual income and school district income taxes for tax year 2020.

 

The new deadline is May 17, an extension of approximately one month from the original deadline of April 15. The extension is intended to provide some relief to individuals impacted by the public safety measures adopted to contain the spread of the coronavirus.

 

As with the IRS extension, Ohio will be waiving penalty on tax due payments made during the extension. Also, as part of legislation passed addressing the continuing emergency, there will be no interest charges on payments made during the extension.

 

The filing extension, and waiver of penalty and interest, will be available to those filing Ohio individual income tax, and the school district income tax for tax year 2020.

 

In addition, the city of Columbus has also announced that they have extended their deadline to May 17 to align with the Federal and Ohio deadlines. It is expected that many cities and local jurisdictions will follow suit.

 

Please note that the first quarter estimated income tax payment for tax year 2021 is not impacted by this extension and must still be made by April 15.

 

 

TAX CONFORMITY PASSES

 

The final version of Senate Bill 18 has been passed by the Ohio House and Senate and now awaits Governor DeWine’s signature. It would conform Ohio with recent changes to federal tax law, including deductibility of expenses from the Paycheck Protection Program and excluding $10,200 in unemployment compensation from income tax.

 

Ohio-specific provisions in S.B. 18 will exclude the 2020 Ohio Bureau of Workers’ Compensation refunds/dividends from CAT; reduce pass-through entity withholding rates and exclude PPP second-draw loans from CAT.

 

The Ohio Legislative Service Commission published this analysis of the bill.

 

Because S.B. 18 is emergency legislation, the changes will be enacted into law immediately upon the Governor’s signature.

 

 

SOURCES: Ohio Department of Taxation, Ohio Society of CPAs

Considering an SBA Loan? Act Now.

Kathleen Hargrove on March 22, 2021

If you have been considering an SBA loan (other than PPP) for your business, this is an ideal time to apply.

 

We have compiled some key SBA loan related provisions included in the Economic Aid Act to further assist you with making this decision:

 

 

Extension of the Debt Relief Program established under the CARES Act

 

  • All borrowers with qualifying loans approved by the SBA prior to the CARES Act will receive an additional three months of P&I, starting in February 2021. Going forward, those payments will be capped at $9,000 per borrower per month.

 

  • After the three-month period described above, borrowers considered to be underserved—namely the smallest or hardest-hit by the pandemic—will receive an additional five months of P&I payments, also capped at $9,000 per borrower per month. They include:

 

  • Borrowers with SBA microloans or 7(a) Community Advantage loans

 

  • Borrowers with any 7(a) or 504 loan in the hardest-hit sectors, as measured by the severity of sector-wide job losses since the start of the pandemic. They include food service and accommodation; arts, entertainment and recreation; education; and laundry and personal care services.

 

 

  • SBA payments of P&I on the first 6 months of newly approved loans will resume for all loans approved between February 1 and September 30, 2021, also capped at $9,000 per month.

 

 

Modifications to 7(a) Loan Programs

 

  • Increases to 90 percent the loan guarantee amount on 7(a) loans, including for Community Advantage loans, until October 1, 2021.

 

  • Increases the Express Loan amount from $350,000 to $1 million on January 1, 2021, and then reverts permanently to a lower amount of $500,000 on October 1, 2021.

 

  • The Express Loan guaranty amount for loans of $350,000 and less is temporarily increased from 50 percent to 75 percent, and for loans above $350,000 the guarantee remains at 50 percent. On October 1, 2021, the guarantee reverts to 50 percent for all Express Loans.

 

 

Temporary Fee Reductions

 

  • Waives lender and borrower fees for both the 7(a) and 504 loan programs.

 

 

 

For further assistance with submitting an application or if you have any questions, please work with your Whalen advisor.

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