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On October 13, the U.S. Small Business Administration (SBA) released clarifying guidance regarding the due date of forgiveness applications for loans issued via the Paycheck Protection Program (PPP). A recent article from the Journal of Accountancy offers an overview of the controversy surrounding the issue.

Many borrowers were surprised to find that the PPP loan forgiveness application forms listed “10/31/2020” as an expiration date. This elicited fears that any applications for PPP loan forgiveness were due by the end of October 2020.

The SBA updated its PPP forgiveness FAQ page to clarify that loan forgiveness applications for the PPP are not due by the expiration date listed on the forms. Rather, as previously announced, a loan recipient’s forgiveness application is due any time prior to the maturity date of their loan.

The expiration date listed on the loan forgiveness applications forms was included in order for the forms to comply with the requirements of the Paperwork Reduction Act. “The date represents the temporary expiration date for approved use of the forms, the SBA said, adding that once a new expiration date is approved, it will be posted on the forms,” clarifies the author.

For further details, click here to read the article in full at the Journal of Accountancy.

On October 8, the U.S. Small Business Administration (SBA) and the Treasury announced the release of a simplified forgiveness process for Paycheck Protection Program (PPP) participants that received loans of $50,000 or less.

The agencies published a new interim final rule offering guidance for recipients of PPP loans equal to or less than $50,000 (“eligible borrowers”). Details of the rule include:

• Eligible borrowers are exempt from reductions in forgiveness based on reductions in full-time-equivalent (FTE) employees and reductions in employee salaries or wages.
• SBA Form 3508S is now available for eligible borrowers. Click here to view the instructions for the form.
• PPP borrowers should note that if a borrower and his or her affiliates received loans totaling $2 million or more, individual borrowers who received less than $50,000 lose their eligibility for the simplified forgiveness process.

The new interim final rule also includes additional guidance for PPP lenders. Details include the following:

• Upon submission of Form 3508S by a borrower, the lender must confirm receipt of the borrower certifications and any supplementary documentation (e.g., verification of payroll and nonpayroll costs).
• The borrower is responsible for accurately calculating their PPP loan forgiveness amount; lenders may rely upon the borrowers’ calculations.
• In the event that a lender receives documentation of eligible costs that exceed a borrower’s total PPP loan amount, the forgiveness amount may not exceed the total principal amount of the PPP loan.

For further details, click here to read the interim final rule in its entirety or click here for a detailed article from the Journal of Accountancy.

On Friday, August 28, the Internal Revenue Service (IRS) released Notice 2020-65, which offers guidance regarding the implementation of the Presidential Memorandum on the deferment of some payroll taxes.

The memorandum, which was released by the President on August 8^th, called for a deferral of the employee share of social security tax (or the railroad retirement tax equivalent) due between September 1, 2020 and the end of the year. The deferral applies to employees who earn less than $4,000 (pre-tax) on a bi-weekly basis, with each pay period to be considered separately.

The IRS notice seeks to guide employers in implementing the tax deferral. In Notice 2020-65, the tax agency explains that applicable taxes not withheld during the deferment period must be paid between January 1, 2021 and April 30, 2021. After May 1, 2021, interest and penalties will begin to accrue on any unpaid amounts.

For further details, click here to read the IRS release in full.

On August 24, the Small Business Administration and Treasury made available a new set of guidance regarding Paycheck Protection Program (PPP) forgiveness issues. The new interim final rule covers two areas: owner-employee compensation and the eligibility of non-payroll costs. A recent article from the Journal of Accountancy offers a concise summation of the new regulations.

Owner-employee compensation – For the purposes of calculating loan forgiveness, C-corporation and S-corporation owners who hold less than a 5% stake qualify as exempt from the PPP rule regarding owner-employee compensation. This is because they are deemed to not have a meaningful ability to influence the allocation of PPP loan proceeds.

Eligibility of non-payroll costs – The new interim rule addresses situations where a business owner holds property in a separate entity and where a business owner holds property in the same entity as its business operations. The goal of the guidance is to establish equitable treatment for these situations.

For further details, including a number of hypothetical scenarios illustrating various non-payroll cost situations, click here to read the article in full at the Journal of Accountancy.

Jeff Bleacher has been with Ross Buehler Falk (RBF) since day one—January 1, 1985, to be exact. He started in the accounting field in 1983, shortly after graduating from college. Jeff has a wide range of experience that includes counseling organizations in a broad range of industries and sizes, from small businesses to organizations with well over $100 million in sales volume. He specializes in providing accounting, auditing, agribusiness services, manufacturing services, and management counseling.

As an accounting professional, Jeff is very devoted to serving in the community. He is a member of the American Institute of Certified Public Accountants (AICPA), and the Pennsylvania Institute of Certified Public Accountants (PICPA). He is Vice-chair of the EDC Finance Corporation. And it doesn’t end there, Jeff also serves on the boards of both the Lancaster Health Center, the East Hempfield Water Authority, and is a member of the Lancaster Rotary Club.

A longtime Pennsylvania resident, Jeff attended Elizabethtown College from 1979 to 1983. He earned a Bachelor of Science in Accounting. Jeff went on to study for his Certified Public Accountant (CPA) license and also earn the designation of Chartered Global Management Accountant (CGMA).

Jeff celebrated his 30^th wedding anniversary with his wife Cindy in August. When asked what the best compliment he ever received was, Jeff simply responded, “My wife marrying me.” Jeff and Cindy have three children, Jason, Dylan, and Abigail. Jeff loves spending time with his family and always wishes that they could have more time together.

Want to get to know Jeff even better? We asked a variety of silly questions, and here’s what we learned:

• If Jeff could visit any fictional place, he would take a trip to Jurassic Park.
• Jeff’s very first job was working in a garage.
• If he could pick one thing to know more about, Jeff would choose to gain better mechanical skills—to know how to build things.
• Hawaii is the farthest from home that Jeff has ever traveled.
• It has been far too long for Jeff to remember when the last time was that he climbed a tree.

When asked one of the classic get-to-know-you questions—”If you could have any superpower, what would you choose?”—Jeff gave a cheeky response: “Don’t you mean which one I don’t already have?”  

The CARES Act waived required minimum distributions (RMDs) from IRAs and employer plans such as 401(k)s for 2020. However, the CARES Act was not passed until March 27, 2020, and after many individuals had already taken their RMD for 2020. Some of these retirees would not have taken the distributions if they would have known about the waiver.

That issue was originally alleviated when the federal government declared a coronavirus-related disaster that then enabled the IRS to extend numerous deadlines and due dates, including the rollover period for traditional IRAs and qualified employer plans such as 401(k)s. Accordingly, the IRS said that any 60-day rollover period that ended on or after April 1, 2020, and before July 15, 2020, was extended through July 15, 2020. This meant that distributions taken in January of 2020 weren’t covered by this extended rollover period.

Normally, RMDs are not allowed to be rolled over, but because the CARES Act waives the requirement to take a 2020 distribution, these distributions are not treated as RMDs for 2020 but are considered distributions that are eligible to be rolled over.

The IRS in Notice 2020-51 has now provided additional relief, including for those who took their RMD in January, by extending the normal 60-day rollover requirement and allowing individuals who took an RMD in 2020 to roll the RMD back into their IRA or retirement plan by no later than August 31, 2020. This means that if you took a distribution in 2020, you can roll it back (redeposit it) into the IRA or retirement plan and avoid being taxed on it in 2020, if you do so by August 31, 2020.

RMDs are required distributions from qualified retirement plans and are commonly associated with traditional IRAs, but they also apply to 401(k)s and SEP IRAs. The tax code does not allow taxpayers to indefinitely keep funds in their qualified retirement plans. Eventually, these assets must be distributed, and taxes must be paid on those distributions. If a retirement plan owner takes no distributions, or if the distributions are not large enough, then he or she may have to pay a 50% penalty on the amount that is not distributed.

The CARES Act RMD waiver applies to:

• The 2020 RMD for taxpayers who turned 70½ before 2020.
• The 2019 RMD for taxpayers who turned 70½ in 2019 and chose to defer their first distribution to 2020.
• The 2020 RMD for taxpayers who turned 72 in 2020.
• The RMDs for beneficiaries.

Be aware, however, that any part of the distribution from a traditional IRA or qualified retirement plan that you don’t roll over will be taxed. This means that if federal and/or state income tax was withheld from the distribution and you want to roll over the gross amount of the distribution so none of it is taxable in 2020, you will need to use funds other than those from the distribution in order to fully roll it over. Regrettably, the withholding can’t be refunded when you make the rollover. Instead, the withheld tax will be claimed as a credit on your 2020 return. In this case, your 2020 estimated tax installments and/or withholding on other income can be adjusted.

The recent Notice also says that the IRS won’t treat recontributing an RMD to an IRA as a rollover for purposes of the rule that only one IRA rollover per 12-month period is permitted.

Please call our office if you have any questions about RMDs and how rolling over an RMD you’ve already taken will impact your tax return.

If you missed the opportunity to apply for a Paycheck Protection Program (PPP) loan before the program expired at the end of June, Congress extended the application period for a PPP loan through August 8, 2020. Although time is short, you still have time to apply.

If you are unfamiliar with this program, Congress created the PPP as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and authorized the use of the SBA’s small business lending program to provide forgivable loans of up to $10 million per qualifying business. The loans are to support small businesses in dealing with the economic hardships created by the coronavirus pandemic and primarily to assist them with continuing to pay employee salaries.
Small businesses are those with 500 or fewer employees, including those filing Schedule Cs (self-employed, sole proprietorships, or independent contractors), as well as non-profits and veterans’ organizations.
The loans are forgivable to the extent that the funds are used to pay for certain specified expenses, including payroll, rent, lease payments, mortgage interest, and utilities during the 24-week period following the loan being funded or by December 31, 2020, if earlier. To qualify for full forgiveness, a borrower must use the loan proceeds for eligible expenses and meet certain other criteria. The forgiveness may be reduced if an employer does not maintain their employee headcount or reduces the pay per employee.

There is approximately $130 billion left in the fund, and the loans are doled out on a first-come, first-serve basis. For more information or assistance, or to determine if your business qualifies for a PPP loan, please give our office a call.

The IRS is mailing all recipients of Economic Impact Payments a Notice 1444 that provides information about the amount of their payment, how the payment was made, and how to report any payment that wasn’t received. If you’ve already received your economic impact payment, you’ve probably already received this document too. This notice was issued from The White House and looks more like a letter than a traditional IRS notice, but the notice number is in the upper right of the heading, just below the date.

For security reasons, the IRS mails this notice to each recipient’s last known address within 15 days after the payment goes out. Don’t discard this notice, as you may need it when your 2020 tax return is prepared. The economic impact payment is actually an advance payment of a refundable tax credit based upon your 2020 tax return. In order to get the money into people’s hands during the time of the greatest need, these payments generally were made based upon each individual’s 2019 return, or in some cases their 2018 return.
However, your filing status, income, and dependents may be different in 2020, and if the advance payment was less than what you are entitled to based upon the 2020 return, you will qualify for the difference as a refundable credit on your 2020 return.

Example: Don and Shirley, whose AGI is less than $150,000, are newlyweds with no children and filed a joint return in 2019. They receive an advance economic impact payment of $2,400. In 2020, they have a baby, and when their credit is determined on the 2020 return, it is $2,900 ($1,200 + $1,200 + $500). Since they only received $2,400 as an advance payment, they will be entitled to a $500 refundable credit on their 2020 return. The credit will first be used to reduce their tax, and then any excess credit will be refunded.

As you can see, it is important for you to keep Notice 1444 – Your Economic Impact Payment, with your tax records, since it documents the payment you actually received. You should keep this notice filed with all your other important tax records, including W-2s from employers, 1099s from banks and other payers, other income documents, and records to support tax deductions.

If you have any questions regarding your economic impact payment, please call.

Away from the movies, robots are becoming a reality in everyday life.

Robots have played a major role in manufacturing industries to perform basic tasks that are either dangerous or laborious for humans. As technology becomes relatively cheaper – through the availability of components such as processors, sensors, batteries, and cameras – robots are now making an entrance in industries apart from manufacturing, such as in marketing, inventory, telecommunications, and entertainment.

Why Robotics in Business?

To avoid confusion, it’s important to mention at this point that robotics often refers to software configured to carry out tasks done by humans, so it’s not always about physical robots.

Businesses are under endless pressure to be more efficient and reduce costs. As a result, many are turning to robotic process automation (RPA) to take up repetitive and routine tasks that don’t require frequent updates. RPA has been useful to take care of things such as call center operations, help desks, customer service chatbots, expense management, data entry, onboarding employees, and scheduling systems, among other tasks that are repetitive, rule-based and structured.

This is important for businesses as it frees employees from mundane tasks so they can focus on high-value work.

The unexpected COVID-19 pandemic cannot be ignored as an accelerator for robotics in the business environment. Consider businesses such as restaurants, retail stores, and all others seeking alternatives that will withstand disruptions and at the same time are durable and adhere to hygienic operations.

An Exciting Yet Worrying Phenomena to Some

Many people accept the use of intelligent systems and small robots such as robotic vacuum cleaners. But when it comes to the workplace, employees often don’t accept such systems as they are considered threats to their jobs. However, there is little difference between the robot used for household aid and the intelligent production system.

Financial institutions have been on the frontline in implementing robotic process automation. This has enabled them to automate and build platforms for the front office, back office, and support functions. For a business, this means reduced costs while achieving efficiency and accuracy.

Another interesting concept is robot as a service (RaaS). This is aimed at enabling small- and medium-sized businesses to enjoy the benefits of robotic process automation when they lease the services of a robot rather than incur the cost of purchasing one and handling maintenance for the system. It also helps businesses experiment with different robotic solutions.

With such innovations, businesses have no option but to adapt to technological advances. As a matter of fact, the possibility of robots taking up full process tasks is feasible with big names such as Bill Gates voicing support for a robot tax (a levy on work done by robots in a bid to replace tax that is collected from work done by humans).

Be Prepared

So how do businesses handle this trend? Both employees and employers have no option but to be prepared. For an employer considering robotics, this should be done gradually with clear guidelines that the systems are only to assist and not replace the employees. At the same time, employees should be involved in the early stages of developing the new systems so they get accustomed to the format and avoid later resistance.

As businesses seek to improve their processes, employees should be ready to learn new skills as some duties are replaced by robots. It also goes way back to the education system, where students should be encouraged to take up subjects that will help enhance their digital competence. It will also prepare them for new job structures.

A Word of Caution

RPA has enabled business processes to evolve. Its results provide better accuracy, lower cost, efficiency, and high productivity. However, entrepreneurs should not rush to implement the robotic process automation without proper research. Although it is praised to reduce labor costs and other benefits already mentioned, the implementation – if not well done – will fail.

A big mistake would be to assume that the installation of robotic systems is easy. This is especially true when a business concentrates on ROI rather than solving actual problems.

Robotics for businesses involves time, cost, and complexity. It is not about moving processes into RPA as they are; only with lean techniques can this be successful.

It’s been nearly half a year since Americans first became widely aware of the coronavirus contagion within the United States. While for a brief month it looked as if we had the virus in hand, since then it has spread wildly out of control in many areas.

People who did not suffer dramatic financial consequences in the early stages of the pandemic could see some hard days ahead. For this reason, it’s a good idea to become familiar with the new relaxed rules associated with withdrawals from tax-advantaged retirement plans.

In late March, Congress passed the Coronavirus Aid, Relief and Economic Security Act (CARES Act). This bill offered provisions related to distributions from retirement accounts such as an IRA or 401(k). One of the key goals was to enable workers to make penalty-free withdrawals from a retirement plan to help sustain them while out of work due to the coronavirus.

To be eligible to make penalty-free withdrawals, plan participants must meet one of the following criteria:

• The account owner, spouse or a dependent is diagnosed with COVID-19
• The account owner experiences one of the following financial consequences due to the virus:
• Furloughed
• Laid-off
• Work hours reduced or place of business closed (including for self-employed)
• No access to childcare
• Quarantined

The Act stipulates that workers can self-certify that they meet at least one of the criteria. Be aware, however, that if it is later discovered that the account owner did not meet the criteria for a coronavirus-related distribution, he might be required to pay the early withdrawal penalty.

Also note that while this penalty is waived for qualified workers, they must still pay income taxes on the amount withdrawn. However, there are a few ways to mitigate the income tax burden on those withdrawals. The first is through regular distribution. These are the parameters:

• You have up until Dec. 30, 2020, to make a distribution
• The total aggregate limit is $100,000 from all plans and IRAs
• The distribution waives the 20 percent income tax withholding requirement
• Income taxes will be due when filing a 2020 tax return
• Retirement account owners who no longer work for an employer are free to take a distribution
• Current employees may take a distribution only if the employer plan allows for a hardship or in-service distribution (note that the CARES Act permits employers to amend plan documents to allow coronavirus-related distributions)

While a retirement plan distribution does trigger income taxes for the tax year withdrawn, you can spread the tax burden out over three years. For example, let’s say you withdraw $18,000 this year. You may report the full amount as income on your 2020 tax return; or you can claim $6,000 a year on your 2020, 2021, and 2022 returns. This strategy reduces the chances of bumping your income into a higher tax bracket.

The second way is to pay the distributed amount back into your retirement plan. Initially, you will have to pay income taxes on the amount withdrawn. However, if you pay it back within three years, you can file to get the taxes you paid refunded. One caveat with this plan is that eligible retirement plans will treat repayment of this type of distribution as a rollover event for tax purposes. Be aware that if the retirement plan does not accept rollover contributions, it is not required to change its terms for this purpose.

Your third option is to withdraw money as a loan if your employer permits loans from the retirement plan. This is another scenario in which you must repay that money within a specified time period. You do not have to pay income taxes on the loan, but you do have to pay interest on the amount borrowed. The good news is that the interest you pay also goes into your account.

Under normal circumstances, retirement account loans are limited to $50,000 or 50 percent of the account balance, whichever is less. But for a coronavirus loan, you may borrow up to 100 percent of your vested balance or $100,000, whichever is less. You will need to repay that loan within the plan’s stated repayment period, although the CARES Act gives 2020 borrowers an additional year to repay this type of loan from an eligible retirement plan. Be aware though that you’ll owe both income taxes on the outstanding balance and the penalty for withdrawals made before age 59½ if you do not repay that loan in time.

Note that these CARES Act provisions are available only for the first 180 days after the Act was passed, which was on March 27, 2020. As Congress debates new legislation to aid struggling Americans suffering from the pandemic, this provision could be extended.