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.
Keith is a principal analyst in Celent's North American insurance practice. He has extensive industry experience and is a seasoned expert in process automation, business transformation, back-office operations, and mergers and acquisitions for both property/casualty and life/health/annuities. His previous roles also include Vice President of Research and Consulting at Novarica, Practice Partner–Digital Success at MVP Advisory, CIO/COO of Futurity First Insurance Group; AVP of Distribution Systems and Field Technology for Mass Mutual; CIO of Trumbull Services, a wholly owned subsidiary of The Hartford Insurance Group; Head Principal Consultant for Life and Annuities in North America at HCL Technologies; and CIO of FPI, a software development and service company.
Keith most recently has focused his authoring on the topic of process automation including robotic process automation (RPA) and artifical intelligence (AI). He has assisted a number of insurance organizations with strategic technology roadmap development, go-to-market strategy, core platform replacement selection and IT and operational due diligence on acquisition opportunities. Keith has authored a number of industry artifacts and blogged on a number of industry topics with focus on innovation and digital transformation. Keith speaks annually at insurance industry events, such as Insurtech Connect and DIGIN.
Jetpack Workflow CEO and business evangelist David Cristello founded Jetpack in 2016 with the vision to help customers deliver their best work— from developing software solutions that help professionals solve their painful workflow problems, to personalized and fun onboarding and training, to curating helpful and informative resources through the company's podcast and blog. The company now serves over 7,000 customers in more than 18 countries, which collectively completed over 5 million client projects on time.
Gil Bean is a partner at ExitSmarts, Inc. Reach him at gil@exitsmarts.com or (484) 431-3181.
“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.”
