With only a few days to go before the end of a difficult year, some accountants and tax professionals are still hoping to finish up some perplexing issues for their clients before New Year’s Day.
One of those involves the Paycheck Protection Program, which has now been extended by the latest round of coronavirus relief legislation that President Trump signed into law on Sunday. Thanks to the new legislation, businesses will now be able to deduct business expenses for forgiven PPP loans.
“I do a lot with professional services firms — law firms, doctors’ offices — and everybody was really, really nervous about the Paycheck Protection loans, and whether the expenses were going to be deductible,” said Evan Morgan, director of tax services at Kaufman Rossin, a Top 100 Firm based in Miami. “I can tell you that this law uncategorically says that all expenses that were paid to meet the requirements of having the PPP loans forgiven are now deductible. That’s a very big deal, particularly because they weren’t sure how to plan for this. Professional services firms are a little bit different from normal entities in that they like to pay out all of their profits in the form of salaries prior to the end of the year.”
Besides matters pertaining to the PPP and other provisions of the CARES Act, accounting firms and their clients have needed to cope with issues left over from the Families First Coronavirus Response Act and what happens from providing paid leave to employees. Other issues may involve what to do with any payroll taxes that have been deferred under the coronavirus relief laws, as well as issues involving workers who have been furloughed or needed to reduce their hours.
Payroll provider Paychex has posted a 2020 year-end checklist for small businesses and their accountants. It advises, among other matters, for businesses to report all COVID-19 related tax credits with a Dec. 31, 2020, or earlier check date, as well as report Employee Retention Credits under the CARES Act. If a business overlooked reporting this information in previous quarters, it can still be reported in the fourth quarter. They will need to report any qualified wages for the Employee Retention Credit, in addition to qualified health plan expenses on wages reported for the Employee Retention Credit. If a business allowed its employees to defer their payroll taxes, the amounts are due for repayment by Dec. 31, 2021, and employees should be reminded of this.
Bryan Davis serves as Executive Vice President and Head of VIU by HUB, a digital brokerage
platform backed and developed by HUB International, the largest personal lines broker in the U.S. He is
responsible for the vision and strategy, profit & loss, investment priorities and supporting a network of
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With more than 20 years of industry experience, Davis has led transformational projects and driven growth in personal and commercial lines, product management and pricing, sales and business
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An industry leader in product, sales, and digital innovation, Davis previously held leadership positions with USAA, Nationwide, and AIG. Davis is a graduate of Wofford College and also has an MBA. He's also credentialed as a ChFC & CPCU and is also a former Member of the Board of Directors of the American Red Cross of San Antonio.
Evan Daniels serves on the advisory board of Monitaur, an AI/ML governance software company committed to working with the insurance industry and regulators towards the responsible and effective integration of AI/ML. Formerly Director of the Arizona Department of Insurance and Financial Institutions and served as the 2022 Co-Vice Chair of the NAIC Committee on Innovation, Cybersecurity and Technology, which oversees the NAIC's Big Data and Artificial Intelligence workstreams, Evan also is Counsel at Mitchell Sandler LLC, a boutique financial services law firm, where he advises insurance companies, insurtechs, fintechs, and financial institutions on regulatory matters. For more information on Monitaur, please visit www.monitaur.ai, and follow the company on LinkedIn.
Louis Diamond is the CEO of Diamond Consultants, responsible for leading the long-term vision of the firm.
Previously, he worked as a consultant at Ernst & Young, and in wealth management at Morgan Stanley and UBS. He co-hosts the Diamond Podcast for Financial Advisors.
“Keep an eye on the reporting that’s required,” said Michael Savage, senior manager of ENS product operations at Paychex. “That takes on a new tone with COVID-19 and all of the legislation that passed to support small businesses and just support businesses in general. Businesses that took advantage of tax credits or paid sick leave wages, that will have an impact on reporting at this time of year, whether it’s the W-2 or 941. Being conscious of how those will impact reporting is really important.”
The quality of the data is also going to be critical this year for employee reporting, he added, including having the correct addresses, Social Security numbers and wage information. “They’re always important every year, but they definitely take on a new importance this year with COVID-19,” said Savage.
Paychex has created an online Coronavirus (COVID-19) Help Center, which includes a PPP Loan Forgiveness Estimator that accountants can use with their small-business clients to help estimate how much of their PPP loan may be forgiven.
Savage believes that small businesses are going to be relying on their accountants more than ever in the year ahead. “These are challenging times for small businesses,” he said. “They don’t necessarily have the expertise in-house to understand all of these complicated changes in the IRS Code, so they’re leveraging their trusted advisors — whether it’s their CPA, their payroll provider or an attorney — and really taking advantage of those relationships at this critical time. We’re seeing too that the do-it-yourselfers that have been prevalent in the small business space are really starting to shift more to leveraging providers that can really provide that expert counsel and advice in these situations.”
