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.
Darryl Wegner is a managing director in PKF O'Connor Davies' Forensic, Litigation and Valuation practice. Prior to joining PKF O'Connor Davies, he served as a special agent with the Federal Bureau of Investigation for 21 years where he conducted and led complex, multi-jurisdictional investigations involving anti-money laundering, financial and accounting fraud, securities fraud, insider trading, health care fraud, anti-bribery and anti-corruption, criminal antitrust, national security, counter threat finance and sanctions. He has extensive experience working with federal, state, local and international law enforcement and regulatory agencies. He began his FBI career in the Boston Field Office, investigating terrorism and white-collar crime while also serving as a crisis negotiator. He held several positions at FBI headquarters in Washington, D.C., including as the national leader of the bureau's Foreign Corrupt Practices Act, kleptocracy and antitrust programs, as one of the FBI's deputy chief human capital officers and led efforts to stand up a multidisciplinary nation state focused mission center. In addition to Boston and D.C., he was assigned to the FBI's Houston Field Office where he directed all white-collar crime investigations in southeast Texas. He started his professional career as an engineer in the automotive industry. After attending law school, he practiced as a corporate attorney for an international law firm in New York.
Gerald McMahon is a principal at W1 Global Inc. He has over 20 years of experience in the intelligence, national security and law enforcement communities. As the senior supervisory intelligence analyst for FBI Boston, he led one of the FBI's largest field intelligence programs comprising analysts, linguists and data specialists. He led teams, and interagency task forces covering the criminal, counterterrorism, counterintelligence and cyber programs. He has extensive experience managing crises and special events. In the FBI's Counterterrorism Division, McMahon advanced international terrorism investigations as an operations specialist, collaborating with domestic and international partners. As a tactical specialist on FBI Boston's Joint Terrorism Task Force, he conducted communications, network, and threat analysis. As a strategic analyst, McMahon authored analyses of current and emerging trends, with a focus on emerging technologies. McMahon is the recipient of two Office of the Director of National Intelligence Meritorious Unit Citation awards for his contributions to the 2006 US/UK Aviation Threat Task Force, and the 2013 Boston Marathon Bombing team. He was a Recanati-Kaplan Fellow with the Harvard Kennedy School of Government's Intelligence Project, where his research focused on the use of AI in intelligence analysis.
“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.”
