COVID-10 Tax Relief

Cannabis Businesses Kept Out Of COVID-19 Stimulus Package

On March 27, 2020 President Trump signed the $2 trillion Stimulus Bill formally known as the Coronavirus Aid, Relief and Economic Security [CARES] Act (the “CARES Act”) to provide assistance to workplaces and employees. The CARES Act provides many benefits intended to deliver cash into the hands of individuals and businesses, as well as many other tax provisions … but if you are in the cannabis business, you need to look elsewhere for relief.

CARES Act Relief For Businesses

 The CARES Act offers the following two major “stimulus” provisions for businesses: the Employee Retention Credit and the Paycheck Participation Program.

Employee Retention Credit

Eligible employers are allowed a credit against employment taxes for each calendar quarter equal to 50% of qualified wage (including health benefits) paid to employees.  This amount is limited to $10,000 of wages paid to an employee for all calendar quarters.

An eligible employer is one which is in a trade or business:

  1. Whose operation is fully or partially suspended due to orders from an appropriate governmental authority limiting commerce, travel or group meetings due to COVID-19; or
  2. Who has a “significant decline” in gross receipts (i.e., there is a decrease to less than 50% of the gross receipts for the same quarter in the prior year).

Different rules apply as to the covered wages depending upon the number of employees the employer had in 2019. Tax exempt entities are also able to take advantage of this credit.  However, this credit is not available to employers receiving a Small Business Interruption Loan under section 1102 of the Act or if a Work Opportunity Tax Credit is allowed for the employee.

Unfortunately, this credit is not be available for state-licensed cannabis businesses as cannabis is a Schedule I controlled substance under Federal law.

Paycheck Participation Program (“PPP”)

Under this program, small businesses with 500 or fewer employees including not-for-profits, veterans’ organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors are eligible for loans to pay up to eight weeks of payroll costs including benefits as well as other costs.

PPP funds can be used to pay payroll costs including benefits (with salaries being under $100,000 per employee), interest on mortgages, rent payments, and utility bills; however, no more than 25% of the funds can be used for non-payroll costs.

The loan of the PPP funds will be forgiven if you maintain your pre-existing employees at their pre-existing salary levels.  Also, that you do not pay out more than 25% of the PPP funds for non-payroll costs specifically limited to: interest on mortgages, rent, and utilities.

The application can be found here on the United States Treasury website, along with details for borrowers and lenders.  After completing the application you would then go to any existing SBA lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating. Visit www.sba.gov for a list of Small Business Administration (SBA) lenders.

Unfortunately, the SBA is prohibited from administering any loans to cannabis businesses as cannabis is a Schedule I controlled substance under Federal law.

U.S. Senators Urging Change

A coalition of U.S. Senators are urging leadership to permit licensed cannabis operators to qualify for loans and other forms economic assistance available from the SBA.  In a March 26, 2020 letter addressed to the Chairman and Vice-Chair of the Senate Committee on Appropriations, the senators urge “the Subcommittee on Financial Services and General Government to include language in … forthcoming legislation to help extend SBA loan programs to legal cannabis businesses.”

Senators Michael Bennett (), Cory Booker (D-NJ), Tammy Duckworth (D-IL), Kirsten Gillibrand (D-NY), Kamala Harris (D-CA), Edward Markey (D-MA), Robert Menendez (D-NJ), Jeffrey Merkley (D-OR), Jacky Rosen (D-NV), Bernie Sanders (D-VT) and Ron Wyden (D-OR) signed on to the letter.

But until Federal law changes, the cannabis industry will still have to bear the followings risks and challenges:

Higher Taxes Still Remain

It still remains to be seen when favorable changes will be made to the Internal Revenue Code which treats businesses in the marijuana industry differently resulting in such business paying at least 3-times as much in taxes as ordinary businesses.

Generally, businesses can deduct ordinary and necessary business expenses under I.R.C. §162. This includes wages, rent, supplies, etc. However, in 1982 Congress added I.R.C. §280E. Under §280E, taxpayers cannot deduct any amount for a trade or business where the trade or business consists of trafficking in controlled substances…which is prohibited by Federal law. Marijuana, including medical marijuana, is a controlled substance. What this means is that dispensaries and other businesses trafficking in marijuana have to report all of their income and cannot deduct rent, wages, and other expenses, making their marginal tax rate substantially higher than most other businesses.

Reporting Of Cash Payments Still Remain

The Bank Secrecy Act of 1970 (“BSA”) requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering. Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments, and file reports of cash purchases of these negotiable instruments of more than $10,000 (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities. The BSA requires any business receiving one or more related cash payments totaling more than $10,000 to file

IRS Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business.

The minimum penalty for failing to file EACH Form 8300 is $25,000 if the failure is due to an intentional or willful disregard of the cash reporting requirements. Penalties may also be imposed for causing, or attempting to cause, a trade or business to fail to file a required report; for causing, or attempting to cause, a trade or business to file a required report containing a material omission or misstatement of fact; or for structuring, or attempting to structure, transactions to avoid the reporting requirements. These violations may also be subject to criminal prosecution which, upon conviction, may result in imprisonment of up to 5 years or fines of up to $250,000 for individuals and $500,000 for corporations or both.

Marijuana-related businesses operate in an environment of cash transactions as many banks remain reluctant to do business with many in the marijuana industry. Like any cash-based business the IRS scrutinizes the amount of gross receipts to report and it is harder to prove to the IRS expenses paid in cash. So it is of most importance that the proper facilities and procedures be set up to maintain an adequate system of books and records.

How Do You Know Which Cannabis Tax Attorney Is Best For You?

Given that cannabis is still illegal under existing Federal law you need to protect yourself and your marijuana business from all challenges created by the U.S. government.  While cannabis is legal in California, that is not enough to protect you.  It’s coming down that the biggest risk is TAXES.  Be proactive and engage an experienced Cannabis Tax Attorney in your area. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County, Metropolitan Los Angeles (including Long Beach and Ontario) and other California locations protect you and maximize your net profits. And if you are involved in crypto currency, check out what a Bitcoin Tax Attorney can do for you.

State Of California Responding To COVID-19 With Tax Relief

FTB Coronavirus Tax Relief

The California Franchise Tax Board (“FTB”) has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus and as information becomes available, the FTB will be updating this special page on its website.

In line with Governor Newsom’s March 12 Executive Order, FTB initially extended the due dates for State Of California filing and payment for affected taxpayers until June 15, 2020, with the qualification that the deadlines may be extended further if the IRS grants a longer relief period.  As the IRS extended filing and payment deadlines to July 15, 2020, the FTB is following the same treatment.

Extension Of Filing And Payment Deadlines

FTB is postponing until July 15, 2020 the filing and payment deadlines for all individuals and business entities for:

  • 2019 tax returns
  • 2019 tax return payments
  • 2020 1st and 2nd quarter estimate payments
  • 2020 LLC taxes and fees
  • 2020 Non-wage withholding payments

“The COVID-19 pandemic is disrupting life for people and businesses statewide,” said State Controller Betty T. Yee, who serves as chair of FTB. “We are further extending tax filing deadlines for all Californians to July 15. Hopefully, this small measure of relief will help allow people to focus on their health and safety during these challenging times.”

To give taxpayers a deadline consistent with that of the IRS without the federal dollar limitations, FTB is following the federal relief described in Notice 2020-17

Since California conforms to the underlying code sections that grant tax postponements for emergencies, FTB is extending the relief to all California taxpayers. Taxpayers do not need to claim any special treatment or call FTB to qualify for this relief.

But if you are due a refund you should file as soon as possible.

Extension Of Deadlines For Filing Tax Protests, Appeals, and Refund Claims

FTB is postponing until July 15, 2020 the pending filing deadlines for:

 

  • Claims for refunds with FTB
  • Protests of proposed tax assessments with FTB
  • Appeals to the Office of Tax Appeals of Notices of Action denying claims for refund or affirming tax assessments

 

Furthermore, the FTB has until July 15, 2020, to issue a proposed tax assessment for years where the statute of limitations expires during the March 12 to July 15, 2020, postponement period.

An Opportunity For Taxpayers Who Owe The FTB

Do not think that if you owe the FTB your tax problem will disappear because of the measures being considered by the government. Instead you should be utilizing this valuable time to get yourself prepared so that when activity in this State regains momentum, you are ready to make the best offer or proposal to take control of your outstanding tax debts.

As a prerequisite to any proposal to the FTB, you must be in current compliance. That means if you have any outstanding income tax returns, they must be completed and submitted to FTB.

Also, if you are required to make estimated tax payments, you must be current in making those payments. Fortunately, as we are now in 2020, taxpayers who expect to owe for 2019 should have their 2019 income tax returns done now so that the 2019 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2020.

Remember that COVID-19 does not alter the tax laws, so all taxpayers should continue to meet their tax obligations as normal. Individuals and businesses should keep filing their tax returns and making payments and deposits with the FTB, as they are required to do.

The take away from this – use the California government’s downtime to your advantage to prepare for the future.

Click here for COVID-19 Tax Relief measures instituted by the IRS in “The IRS People First Initiative” that can benefit you.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles (including Long Beach and Ontario) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

Does Smoking Cannabis Put You at Higher Risk for the Coronavirus?

Does Smoking Cannabis Put You at Higher Risk for the Coronavirus?

A report issued by the World Health Organization states that tobacco and waterpipe could increase the risk of suffering from COVID-19.

The report recognizes that tobacco use is the most important risk-factor for chronic obstructive pulmonary disease (COPD), causing the swelling and rupturing of the air sacs in the lungs, which reduces the lung’s capacity to take in oxygen and expel carbon dioxide, and the build-up of mucus, which results in painful coughing and breathing difficulties. This may have implications for smokers, given that smoking is considered to be a risk factor for any lower respiratory tract infection and the virus that causes COVID-19 primarily affects the respiratory system, often causing mild to severe respiratory damage. Clearly for cannabis edibles this is not an issue.  However, given that COVID-19 is a novel virus, the link between tobacco smoking or even smoking cannabis and the virus has yet to be established so more research will be necessary.

DEA Taking Action To Improve Access To Cannabis Research

The Drug Enforcement Administration (“DEA”) announced on August 26, 2019 that it is moving forward to facilitate and expand scientific and medical research for marijuana in the United States. The DEA is providing notice of pending applications from entities applying to be registered to manufacture marijuana for researchers.

DEA Acting Administrator Uttam Dhillon stated: “the DEA is making progress in the program to register additional marijuana growers for federally authorized research, and will work with other relevant federal agencies to expedite the necessary next steps. We support additional research into marijuana and its components, and we believe registering more growers will result in researchers having access to a wider variety for study.”

Since 1968, only the University of Mississippi has been allowed to cultivate and provide cannabis to medical researchers across the country. The DEA anticipates that registering additional qualified marijuana growers will increase the variety of marijuana available for these purposes.

DEA’s Position Runs Against The General Anti-Federal U.S. Climate

The Federal Controlled Substances Act (“CSA”) 21 U.S.C. § 812 classifies marijuana as a Schedule 1 substance with a high potential for abuse, no currently accepted medical use in treatment, and lack of accepted safety for use under medical supervision. Although you can still face federal criminal charges for using, growing, or selling weed in a manner that is completely lawful under California law, the federal authorities in the past have pulled back from targeting individuals and businesses engaged in medical marijuana activities. This pull back came from Department of Justice (“DOJ”) Safe Harbor Guidelines issued in 2013 under what is known as the “Cole Memo”.

The Cole Memo included eight factors for prosecutors to look at in deciding whether to charge a medical marijuana business with violating the Federal law:

  • Does the business allow minors to gain access to marijuana?
  • Is revenue from the business funding criminal activities or gangs?
  • Is the marijuana being diverted to other states?
  • Is the legitimate medical marijuana business being used as a cover or pretext for the traffic of other drugs or other criminal enterprises?
  • Are violence or firearms being used in the cultivation and distribution of marijuana?
  • Does the business contribute to drugged driving or other adverse public health issues?
  • Is marijuana being grown on public lands or in a way that jeopardizes the environment or public safety?
  • Is marijuana being used on federal property?

Since 2013, these guidelines provided a level of certainty to the marijuana industry as to what point could you be crossing the line with the Federal government.  But on January 4, 2018, former Attorney General Jeff Sessions revoked the Cole Memo.  Now U.S. Attorneys in the local offices throughout the country retain broad prosecutorial discretion as to whether to prosecute cannabis businesses under federal law even though the state that these businesses operate in have legalized some form of marijuana.

House Appropriations Bill Amendment

The Blumenauer McClintock Amendment sponsored by Reps. Earl Blumenauer (D-OR), Eleanor Holmes Norton (D-DC) and Tom McClintock (R-CA) that was included in the appropriations bill to fund parts of the federal government for Fiscal Year 2020, states that:

“None of the funds made available under this House Appropriations Bill to the Department of Justice may be used to prevent to any State, territory or D.C. from implementing their own laws that authorize the use, distribution, possession, or cultivation of marijuana.”

In the past such amendment (starting in 2014) was limited to medical marijuana state-licensed business but this expansion is huge given that nearly one in four Americans reside in a jurisdiction where the adult use of cannabis is legal under state statute.

Medical marijuana is legal in 33 states.

The medical use of cannabis is legal (with a doctor’s recommendation) in 33 states and Washington DC. Those 33 states being Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Maine, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Utah, Vermont, Washington and West Virginia. The medical use of cannabis is also legal in the territories of the Northern Mariana Islands, Guam and Puerto Rico.

Recreational marijuana is legal in 11 states.

Eleven states and Washington DC, have legalized marijuana for recreational use — no doctor’s letter required — for adults over the age of 21. Those ten states being Alaska, California, Colorado, Illinois, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont and Washington and the territory of Guam.

Building on the DOJ’s issuance of the Cole Memo, in 2014 the House passed an amendment to the yearly federal appropriations bill that effectively shields medical marijuana businesses from federal prosecution. Proposed by Representatives Rohrabacher and Farr, the amendment forbids federal agencies to spend money on investigating and prosecuting medical marijuana-related activities in states where such activities are legal.

This action by the House is not impacted by former Attorney General Sessions’ change of position with the DOJ. This means that the DOJ is precluded from spending funds to circumvent any of the foregoing states from implementing their medical cannabis laws.

Clearly, to avail yourself of the historical protections of the amendment, you must be on the medical cannabis side and you must be in complete compliance with your State’s medical cannabis laws and regulations. You may not be covered under the amendment if you are involved in the recreational cannabis side even if legal in the State you are operating.

How Do You Know Which Cannabis Tax Attorney Is Best For You?

Given that cannabis is still illegal under existing Federal law you need to protect yourself and your marijuana business from all challenges created by the U.S. government.  While cannabis is legal in California, that is not enough to protect you.  It’s coming down that the biggest risk is TAXES.  Be proactive and engage an experienced Cannabis Tax Attorney in your area. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Metropolitan Los Angeles (including Long Beach and Ontario) and other California locations protect you and maximize your net profits. By the way – if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

How A Business Impacted By COVID-19 Claims The IRS Employee Retention Credit

How A Business Impacted By COVID-19 Claims The IRS Employee Retention Credit

On March 27, 2020 President Trump signed the $2 trillion Stimulus Bill formally known as the Coronavirus Aid, Relief and Economic Security [CARES] Act (the “CARES Act”) to provide assistance to workplaces and employees. The CARES Act provides many benefits intended to deliver cash into the hands of individuals and businesses, as well as many other tax provisions.  One of the most publicized provisions is the launching of the Employee Retention Credit which is designed to encourage businesses to keep employees on their payroll. The refundable tax credit is 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19.

Does my business qualify to receive the Employee Retention Credit?

The credit is available to all employers regardless of size, including tax-exempt organizations. There are only two exceptions: State and local governments and their instrumentalities and small businesses who take small business loans.

Qualifying employers must fall into one of two categories:

  1. The employer’s business is fully or partially suspended by government order due to COVID-19 during the calendar quarter.
  2. The employer’s gross receipts are below 50% of the comparable quarter in 2019. Once the employer’s gross receipts go above 80% of a comparable quarter in 2019, they no longer qualify after the end of that quarter.

These measures are calculated each calendar quarter.

How is the credit calculated?

The amount of the credit is 50% of qualifying wages paid up to $10,000 in total. Wages paid after March 12, 2020, and before Jan. 1, 2021, are eligible for the credit. Wages taken into account are not limited to cash payments, but also include a portion of the cost of employer provided health care.

How do I know which wages qualify?

Qualifying wages are based on the average number of a business’s employees in 2019.

  • Employers with less than 100 employees:If the employer had 100 or fewer employees on average in 2019, the credit is based on wages paid to all employees, regardless if they worked or not. If the employees worked full time and were paid for full time work, the employer still receives the credit.
  • Employers with more than 100 employees:If the employer had more than 100 employees on average in 2019, then the credit is allowed only for wages paid to employees who did not work during the calendar quarter.

I am an eligible employer. How do I receive my credit?

Employers can be immediately reimbursed for the credit by reducing their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit.

Eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their quarterly employment tax returns or Form 941 beginning with the second quarter. If the employer’s employment tax deposits are not sufficient to cover the credit, the employer may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.

Eligible employers can also request an advance of the Employee Retention Credit by submitting Form 7200.

Can I still claim the Employee Retention Tax Credit if I received funding from the Paycheck Protection Program?

No. An employer who receives a loan under the Paycheck Protection Program is not eligible to also claim an employee retention tax credit under the CARES Act.

Where can I get more information?

The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus and as information becomes available, the IRS will be updating this special page on its website.  You can also check out the KahnTaxLaw Coronavirus Resource Center.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles (including Long Beach and Ontario) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

How To Secure Funds In The Paycheck Protection Program Under The Coronavirus Aid, Relief and Economic Security Act

How To Secure Funds In The Paycheck Protection Program Under The Coronavirus Aid, Relief and Economic Security Act

On March 27, 2020 President Trump signed the $2 trillion Stimulus Bill formally known as the Coronavirus Aid, Relief and Economic Security [CARES] Act (the “CARES Act”) to provide assistance to workplaces and employees. The CARES Act provides many benefits intended to deliver cash into the hands of individuals and businesses, as well as many other tax provisions.  One of the most publicized provisions is the access of funds through banks to qualifying businesses and self-employed taxpayers to pay for payroll, insurance premiums and mortgage, rent and utility payments.  This is known as the “Paycheck Protection Program”.

What is the Paycheck Protection Program (“PPP”)?

Under this program, small businesses with 500 or fewer employees including not-for-profits, veterans’ organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors are eligible for loans to pay up to eight weeks of payroll costs including benefits as well as other costs.

What can PPP funds be used to pay?

PPP funds can be used to pay payroll costs including benefits (with salaries being under $100,000 per employee), interest on mortgages, rent payments, and utility bills; however, no more than 25% of the funds can be used for non-payroll costs.

What counts as payroll costs?

  • Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
  • Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit;
  • State and local taxes assessed on compensation; and
  • For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.

What counts as non-payroll costs?

  • Interest on mortgage obligations, incurred before February 15, 2020;
  • Rent, under lease agreements in force before February 15, 2020; and
  • Utilities, for which service began before February 15, 2020.

Under what circumstances do I have to repay these PPP funds received?

The loan of the PPP funds will be forgiven if you maintain your pre-existing employees at their pre-existing salary levels.  Also, that you do not pay out more than 25% of the PPP funds for non-payroll costs specifically limited to: interest on mortgages, rent, and utilities.

How soon can one apply?

Starting April 3, 2020, small businesses and sole proprietorships affected by the coronavirus pandemic can apply for loans under the PPP.  Independent contractors and self-employed individuals can apply starting April 10, 2020.  The application period ends June 30, 2020.

Where do I apply?

The application can be found here on the United States Treasury website, along with details for borrowers and lenders.  After completing the application you would then go to any existing SBA lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating. Visit www.sba.gov for a list of SBA lenders.

How large can my loan be?

Loans can be for up to two months of your average monthly payroll costs from the last year plus an additional 25% of that amount. That amount is subject to a $10 million cap. If you are a seasonal or new business, you will use different applicable time periods for your calculation. Payroll costs will be capped at $100,000 annualized for each employee.

How many loans can I take out under PPP?  

Only one.

Are there any charges or requirements for collateral or personal guarantees?

No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.

What if I do not spend all the funds or make non-qualifying expenditures?

The amount of loan forgiveness will be reduced including if full-time headcount declines or if salaries and wages decrease.  Also, if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan.

How can I request loan forgiveness?

You can submit a request to the lender that is servicing the loan. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments. The lender must make a decision on the forgiveness within 60 days.

What is my interest rate?

1% fixed rate (was initially 0.5%).

When do I need to start paying interest on my loan?

All payments are deferred for 6 months; however, interest will continue to accrue over this period.

When is my loan due?

In 2 years.

Can I pay my loan earlier than 2 years?

Yes. There are no prepayment penalties or fees.

Can I still claim the Employee Retention Tax Credit?

No. An employer who receives a loan under the PPP is not eligible to also claim an employee retention tax credit under the CARES Act. The employee retention tax credit gives eligible employers whose business operations are fully or partially suspended due to the COVID-19 pandemic a credit against employment taxes equal to 50% of qualified wages (up to $10,000 in wages) for each employee.

Where can I get more information?

The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus and as information becomes available, the IRS will be updating this special page on its website.  You can also check out the KahnTaxLaw Coronavirus Resource Center.

What Should You Do?

Don’t delay in applying as the Payroll Protection Program has a cap and demand is likely to be high.

Let the attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles (including Long Beach and Ontario) and elsewhere in California assist you in securing the maximum amount of financing allowed and to maximize the amount of loan forgiveness.  Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

How Scammers Are Looking To Steal Your Economic Impact Payment Under The Coronavirus Aid, Relief and Economic Security Act

How Scammers Are Looking To Steal Your Economic Impact Payment Under The Coronavirus Aid, Relief and Economic Security Act

On March 27, 2020 President Trump signed the $2 trillion Stimulus Bill formally known as the Coronavirus Aid, Relief and Economic Security [CARES] Act (the “CARES Act”) to provide assistance to workplaces and employees. The CARES Act provides many benefits intended to deliver cash into the hands of individuals and businesses, as well as many other tax provisions.  One of the most publicized provisions is the immediate cash payments by the Federal government to qualifying taxpayers.

Who is eligible for the economic impact payment?

To get cash assistance promptly delivered to individual taxpayers, qualifying taxpayers will receive one-time cash payments of $1,200 for individual taxpayers or if married, $2,400 for married couples.  An additional $500 may be paid for each qualifying child.

These amounts are subject to reduction if the individual’s Adjusted Gross Income (AGI) exceeds $75,000 for an individual taxpayer; $112,500 for head of household; or $150,000 for a married couple. Nonresident alien individuals and a person who is the dependent of another are ineligible to receive the payment.

For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds. Single filers with income exceeding $99,000 and $198,000 for joint filers with no children are not eligible.

Beware Of New IRS Scam!

You get a call from someone claiming to be working for the IRS claiming:

 “We need your personal information in order for you to claim the coronavirus stimulus money.”

This appears to be an identity theft scheme to obtain recipients’ personal and financial information so the scammers can provide the IRS with their banking information to get your economic impact payment deposited into their account.  In reality, the IRS WILL NOT CALL YOU! Federal aid will either be deposited via account information the IRS already has from your tax filings or they will send you a check.

If you get such a call from someone claiming to be from the IRS and asking for your identification, you should report the incident to the Treasury Inspector General for Tax Administration at 1-800-366-4484.

Other tips that the communication you receive is a scam is that scammers may:

  • Emphasize the words “Stimulus Check” or “Stimulus Payment”. The official term is economic impact payment.
  • Ask you to sign over their economic impact payment check to them.
  • Ask by phone, email, text or social media for verification of personal and/or banking information saying that the information is needed to receive or speed up their economic impact payment.
  • Suggest that you can get a tax refund or economic impact payment faster by working on your behalf. This scam could be conducted by social media or even in person.
  • Mail you a bogus check, perhaps in an odd amount, then tell you to call a number or verify information online in order to cash it.

How will the IRS know where to send my payment?

The vast majority of people do not need to take any action. The IRS will calculate and automatically send the economic impact payment to those eligible.

The cash payments will be based on the most recent tax information available to the IRS looking at a taxpayer’s 2019 tax return filed and if it has not yet been filed, then the taxpayer’s 2018 tax return filed.

The economic impact payment will be deposited directly into the same banking account reflected on the return filed.

So if you haven’t filed taxes yet for one of those years, now is a good time.

The IRS does not have my direct deposit information. What can I do?

The IRS plans to develop a web-based portal for individuals to provide their banking information to the IRS online, so that individuals can receive payments immediately as opposed to checks in the mail.  Waiting for a check to be issued could take as long as two months.

I am not typically required to file a tax return. Can I still receive my payment?

The IRS plans to develop a web-based portal for individuals to provide their income information and banking information to receive an economic impact payment. The income information will include their filing status and number of dependents.

Low-income taxpayers, senior citizens, Social Security recipients, some veterans and individuals with disabilities who are otherwise not required to file a tax return will not owe tax.

I have not filed my tax return for 2018 or 2019. Can I still receive an economic impact payment?

Yes. Anyone with a tax filing obligation who has not yet filed a tax return for 2018 or 2019 to file as soon as they can to receive an economic impact payment. Taxpayers should include direct deposit banking information on the return.

When should I expect to receive my economic impact payment?

The Treasury Department is expecting to get these checks out to qualifying taxpayers around the third week of April 2020.

I need to file a tax return. How long are the economic impact payments available?

For those concerned about visiting a tax professional in person to get help with a tax return, these economic impact payments will be available throughout the rest of 2020.

What happens when I file a 2020 tax return next year?

 Keep in mind that if your 2020 tax return will reflect an AGI higher than the above applicable threshold, you should expect to pay back at least some or perhaps all of the cash payments you received under the CARES Act.

Where can I get more information?

The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus and as information becomes available, the IRS will be updating this special page on its website.  You can also check out the KahnTaxLaw Coronavirus Resource Center.

An Opportunity For Taxpayers Who Owe The IRS

Do not think that if you owe the IRS your tax problem will disappear because of the measures being considered by the government. Instead you should be utilizing this valuable time to get yourself prepared so that when activity in this nation regains momentum, you are ready to make the best offer or proposal to take control of your outstanding tax debts.

As a prerequisite to any proposal to the IRS, you must be in current compliance. That means if you have any outstanding income tax returns, they must be completed and submitted to IRS.

Also, if you are required to make estimated tax payments, you must be current in making those payments. Fortunately, as we are now in 2020, taxpayers who expect to owe for 2019 should have their 2019 income tax returns done now so that the 2019 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2020.

Remember that COVID-19 does not alter the tax laws, so all taxpayers should continue to meet their tax obligations as normal. Individuals and businesses should keep filing their tax returns and making payments and deposits with the IRS, as they are required to do.

Also, the IRS will continue to take steps where necessary to protect all applicable statutes of limitations. In instances where statute expirations might be jeopardized during this period and a taxpayer is not agreeing to extend such, the IRS will issue Notices of Deficiency and pursue other similar actions to protect the interests of the government in preserving such statute.

 The take away from this – use the Federal government’s downtime to your advantage to prepare for the future.

 Click here for COVID-19 Tax Relief measures instituted by the IRS in “The IRS People First Initiative” that can benefit you.

 What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), San Diego County (Carlsbad) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

How To Claim Your Economic Impact Payment Under The Coronavirus Aid, Relief and Economic Security Act

How To Claim Your Economic Impact Payment Under The Coronavirus Aid, Relief and Economic Security Act

On March 27, 2020 President Trump signed the $2 trillion Stimulus Bill formally known as the Coronavirus Aid, Relief and Economic Security [CARES] Act (the “CARES Act”) to provide assistance to workplaces and employees. The CARES Act provides many benefits intended to deliver cash into the hands of individuals and businesses, as well as many other tax provisions.  One of the most publicized provisions is the immediate cash payments by the Federal government to qualifying taxpayers.

Who is eligible for the economic impact payment?

To get cash assistance promptly delivered to individual taxpayers, qualifying taxpayers will receive one-time cash payments of $1,200 for individual taxpayers or if married, $2,400 for married couples.  An additional $500 may be paid for each qualifying child.

These amounts are subject to reduction if the individual’s Adjusted Gross Income (AGI) exceeds $75,000 for an individual taxpayer; $112,500 for head of household; or $150,000 for a married couple. Nonresident alien individuals and a person who is the dependent of another are ineligible to receive the payment.

For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds. Single filers with income exceeding $99,000 and $198,000 for joint filers with no children are not eligible.

How will the IRS know where to send my payment?

The vast majority of people do not need to take any action. The IRS will calculate and automatically send the economic impact payment to those eligible.

The cash payments will be based on the most recent tax information available to the IRS looking at a taxpayer’s 2019 tax return filed and if it has not yet been filed, then the taxpayer’s 2018 tax return filed.

The economic impact payment will be deposited directly into the same banking account reflected on the return filed.

So if you haven’t filed taxes yet for one of those years, now is a good time.

The IRS does not have my direct deposit information. What can I do?

The IRS plans to develop a web-based portal for individuals to provide their banking information to the IRS online, so that individuals can receive payments immediately as opposed to checks in the mail.  Waiting for a check to be issued could take as long as two months.

I am not typically required to file a tax return. Can I still receive my payment?

The IRS plans to develop a web-based portal for individuals to provide their income information and banking information to receive an economic impact payment. The income information will include their filing status and number of dependents.

Low-income taxpayers, senior citizens, Social Security recipients, some veterans and individuals with disabilities who are otherwise not required to file a tax return will not owe tax.

I have not filed my tax return for 2018 or 2019. Can I still receive an economic impact payment?

Yes. Anyone with a tax filing obligation who has not yet filed a tax return for 2018 or 2019 to file as soon as they can to receive an economic impact payment. Taxpayers should include direct deposit banking information on the return.

When should I expect to receive my economic impact payment?

The Treasury Department is expecting to get these checks out to qualifying taxpayers around the third week of April 2020.

I need to file a tax return. How long are the economic impact payments available?

For those concerned about visiting a tax professional in person to get help with a tax return, these economic impact payments will be available throughout the rest of 2020.

What happens when I file a 2020 tax return next year?

Keep in mind that if your 2020 tax return will reflect an AGI higher than the above applicable threshold, you should expect to pay back at least some or perhaps all of the cash payments you received under the CARES Act.

Where can I get more information?

The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus and as information becomes available, the IRS will be updating this special page on its website.  You can also check out the KahnTaxLaw Coronavirus Resource Center.

An Opportunity For Taxpayers Who Owe The IRS

Do not think that if you owe the IRS your tax problem will disappear because of the measures being considered by the government. Instead you should be utilizing this valuable time to get yourself prepared so that when activity in this nation regains momentum, you are ready to make the best offer or proposal to take control of your outstanding tax debts.

As a prerequisite to any proposal to the IRS, you must be in current compliance. That means if you have any outstanding income tax returns, they must be completed and submitted to IRS.

Also, if you are required to make estimated tax payments, you must be current in making those payments. Fortunately, as we are now in 2020, taxpayers who expect to owe for 2019 should have their 2019 income tax returns done now so that the 2019 liability can be rolled over into any proposal and the requirement to make estimated tax payments will now start for 2020.

Remember that COVID-19 does not alter the tax laws, so all taxpayers should continue to meet their tax obligations as normal. Individuals and businesses should keep filing their tax returns and making payments and deposits with the IRS, as they are required to do.

Also, the IRS will continue to take steps where necessary to protect all applicable statutes of limitations. In instances where statute expirations might be jeopardized during this period and a taxpayer is not agreeing to extend such, the IRS will issue Notices of Deficiency and pursue other similar actions to protect the interests of the government in preserving such statute.

The take away from this – use the Federal government’s downtime to your advantage to prepare for the future.

Click here for COVID-19 Tax Relief measures instituted by the IRS in “The IRS People First Initiative” that can benefit you.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles (including Long Beach and Ontario) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

Cannabis Businesses Deemed “Essential” in California Under COVID-19 Orders

Cannabis Businesses Deemed “Essential” in California Under COVID-19 Orders

In an effort to “flatten the curve” of this coronavirus pandemic, state & local governments are taking unprecedented measures to stop dine-in restaurant service, close gyms and movie theaters, and ban or limit all gatherings to fight the spread of the coronavirus.  What remains open are those establishments that are considered to be “essential businesses”.

What Are “Essential Businesses”?

State & local governments designate as “essential businesses” those businesses or firms that perform an essential government function. While the list may vary between different jurisdictions, they typically include:

  • Healthcare operations, including home health workers.
  • Essential infrastructure, including construction of housing and operation of public transportation and utilities.
  • Grocery stores, farmers markets, food banks, convenience stores.
  • Businesses that provide necessities of life for economically disadvantaged individuals and shelter facilities.
  • Pharmacies, healthcare supply stores and healthcare facilities.
  • Gas stations and auto repair facilities.
  • Garbage collection.
  • Hardware stores, plumbers, electricians, pool service, landscape maintenance, exterminators and other service providers necessary to maintain the safety, sanitation and essential operation of residences and other essential businesses.
  • Educational institutions, for the purposes of facilitating distance learning.
  • Laundromats, dry cleaners and laundry service providers.
  • Businesses that ship or deliver groceries, food and goods directly to residences.
  • Businesses that supply products needed for people to work from home, including electronic stores, mobile phone stores and office supply stores.
  • Airlines, taxis and other transportation providers offering services needed for essential activities.
  • Home-based care for seniors, adults or children.
  • Childcare facilities providing services that enable essential employees to go to work.
  • Roles required for any essential business to “maintain basic operations,” which include security, payroll and similar activities.
  • Hotels, motels and lawfully permitted vacation rentals and homesharing.

Are Cannabis Businesses “Essential Businesses”?

Again you need to check with your local jurisdiction but at the State level in California the California Department Of Health (CDPH) and the Bureau Of Cannabis Control (BCC) have issued orders making all cannabis retailers and the businesses that support them in the cannabis industry “essential” during the COVID-19 pandemic, allowing retailers, cultivators, and manufacturers to stay in operation. However, California cities and counties are able to enact their own rules regarding how patients and others may purchase cannabis so you should still check with your local government to see if any local rules apply.

All licensed cannabis businesses in good standing are included as “Essential Businesses” and must follow the existing terms of any local Order as written. Click here for the Order issued by the CDPH. Such Order typically requires that they, like all other Essential Businesses, establish practices that includes 6-foot distances between individuals, frequent 20-second hand-washing or hand-sanitizing, cough and sneeze covering, regularly cleaning high-touch surfaces, and avoiding all social greetings involving contact (handshaking, etc.). These best practices of authorized curbside pickup and contact-less delivery are expected to protect customers and employees by reducing contact.

Tax Relief For All Businesses And Individuals

President Donald Trump declared the coronavirus pandemic a national emergency. Therefore, under Sec. 7508A, the declaration of an emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, P.L. 100-707, the IRS is allowed to delay certain tax filing and payment deadlines.

The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus and as information becomes available, the IRS will be updating this special page on its website.

On March 18, 2020 the Treasury Department and the IRS issued the first formal guidance.  The Treasury Department and IRS are extending the due date for Federal income tax payments and Federal income tax returns due April 15, 2020, to July 15, 2020, for payments due of up to $10 million for corporations and up to $1 million (now unlimited) for individuals – regardless of filing status – and other unincorporated entities. Associated interest, additions to tax, and penalties for late payment will also be suspended until July 15, 2020.

Click here for the press release issued by the Treasury Department.

Click here for Notice 2020-17 issued by the IRS.

Click here for the March 21, 2020 press release issued by the IRS.

This relief is available solely with respect to:

  • Federal income tax payments (including payments of tax on self-employment income) due on April 15, 2020, in respect of an affected taxpayer’s 2019 taxable year, and
  • Federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020, for an affected taxpayer’s 2020 taxable year.

Taxpayers do not need to file any additional forms or call the IRS to qualify for this automatic federal tax filing and payment relief. Taxpayers who need additional time to file beyond the July 15 deadline, can request a filing extension by filing Form 4868 for individuals and Form 7004 for corporations.

But if you are due a refund you should file as soon as possible. The IRS states that most tax refunds are still being issued within 21 days.

Remember that COVID-19 does not alter the tax laws, so all taxpayers should continue to meet their tax obligations as normal. Individuals and businesses should keep filing their tax returns and making payments and deposits with the IRS, as they are required to do.

The take away from this – use the Federal government’s downtime to your advantage to prepare for the future.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The cannabis tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), San Francisco Bay Area (including Walnut Creek and San Jose) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

 

Coronavirus Aid, Relief and Economic Security Act – Part 1: Individuals

Coronavirus Aid, Relief and Economic Security Act – Part 1: Individuals

On March 27, 2020 President Trump signed the $2 trillion Stimulus Bill formally known as the Coronavirus Aid, Relief and Economic Security [CARES] Act (the “CARES Act”) to provide assistance to workplaces and employees. The CARES Act provides many benefits intended to deliver cash into the hands of individuals and businesses, as well as many other tax provisions.

In this blog we will highlight the major provisions applying to individuals.  Click here for our blog on provisions for businesses.

Immediate Cash Payments To Individuals

To get cash assistance promptly delivered to individual taxpayers, qualifying taxpayers will receive one-time cash payments of $1,200 for individual taxpayers or if married, $2,400 for married couples.  An additional $500 may be paid for each qualifying child.

These amounts are subject to reduction if the individual’s Adjusted Gross Income (AGI) exceeds $75,000 for an individual taxpayer; $112,500 for head of household; or $150,000 for a married couple. Nonresident alien individuals and a person who is the dependent of another are ineligible to receive the payment.

The cash payments will be based on the most recent tax information available to the IRS looking at a taxpayer’s 2019 tax return filed and if it has not yet been filed, then the taxpayer’s 2018 tax return filed.  So if you haven’t filed taxes yet for one of those years, now is a good time.

The Treasury Department is expecting to get these checks out to qualifying taxpayers around the third week of April 2020.

Keep in mind that if your 2020 tax return will reflect an AGI higher than the above applicable threshold, you should expect to pay back at least some or perhaps all of the cash payments you received under the CARES Act.

Retirement Funds

Be aware of the following significant changes to retirement plan payments and loan rules:

  • Required Minimum Distribution rules for qualified plans and individual retirement accounts are suspended for 2020. This avoids taxpayers having to sell retirement plan assets when they are likely at depressed values.
  • Coronavirus-related distributions of up to $100,000 can be made with the related income tax payable over a three-year period. Additionally, the amount can be recontributed back to plan over a three-year period without affecting that year’s contribution limits.
  • Loans can be taken from a qualified plan for coronavirus-related purposes up to the lesser of $100,000 or 100% of the individual’s accrued benefit.

Incentive For 2020 Charitable Contributions

Be aware of new provisions encouraging charitable contributions:

  • Up to $300 of charitable contributions can be taken as a deduction in calculating AGI for the 2020 tax year. As this is an “above the line” deduction, even those taxpayers who do not itemize will receive a tax benefit.
  • For the 2020 tax year, a taxpayer can elect to disregard the 50% AGI limitation on deductible contributions.

Employer Payment of Student Loans

Certain employer payments of employee student loan amounts made before January 1, 2021, whether paid to the employee or the lender, can be excluded from income as an Educational Assistance Benefit.

Click here for COVID-19 Tax Relief measures instituted by the IRS in “The IRS People First Initiative” that can benefit you.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles (including Long Beach and Ontario) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

Coronavirus Aid, Relief and Economic Security Act – Part 2: Businesses

Coronavirus Aid, Relief and Economic Security Act – Part 2: Businesses

On March 27, 2020 President Trump signed the $2 trillion Stimulus Bill formally known as the Coronavirus Aid, Relief and Economic Security [CARES] Act (the “CARES Act”) to provide assistance to workplaces and employees. The CARES Act provides many benefits intended to deliver cash into the hands of individuals and businesses, as well as many other tax provisions.

In this blog we will highlight the major provisions applying to businesses.  Click here for our blog on provisions for individuals.

Employee Retention Credit

Eligible employers are allowed a credit against employment taxes for each calendar quarter equal to 50% of qualified wage (including health benefits) paid to employees.  This amount is limited to $10,000 of wages paid to an employee for all calendar quarters.

An eligible employer is one which is in a trade or business:

  1. Whose operation is fully or partially suspended due to orders from an appropriate governmental authority limiting commerce, travel or group meetings due to COVID-19; or
  2. Who has a “significant decline” in gross receipts (i.e., there is a decrease to less than 50% of the gross receipts for the same quarter in the prior year).

Different rules apply as to the covered wages depending upon the number of employees the employer had in 2019. Tax exempt entities are also able to take advantage of this credit.  However, this credit is not available to employers receiving a Small Business Interruption Loan under section 1102 of the Act or if a Work Opportunity Tax Credit is allowed for the employee.  Additionally, this credit may not be available for state-licensed cannabis businesses as cannabis is a Class I controlled substance under Federal law.

Payroll Tax Holiday

There is a deferral of the employer’s share of payroll taxes for the period beginning on March 27, 2020 to January 1, 2021 pursuant to an SBA loan 7A or under Act section 1109.

Business Interest Expense Limit Increased

The TCJA generally provided that net business interest is deductible only to the extent of 30% of Adjusted Taxable Income.  The CARES Act increases this limit to 50% for 2019 and 2020. Additionally, since the current economic problems cause by COVID-19 are expected to produce lower income in 2020 than in 2019, the CARES Act provides that a taxpayer can elect to use the 2019 Adjusted Taxable Income in place of 2020.

Incentive For 2020 Charitable Contributions

Be aware of new provisions encouraging charitable contributions:

  • The limit on deductible charitable contributions by a C corporation (normally 10% of Taxable Income) is increased to 25%.
  • Additionally, for a business making a contribution of food inventory, the limitation is increased from 15% to 25%.

The following provisions have retroactive effect that business may be able to claim refunds of previously paid taxes by filing amended tax returns for 2018:

Suspension Of Restrictions On The Use Of Net Operating Losses

Under the 2017 Tax Cuts And Jobs Act (TCJA), net operating losses were no longer eligible to be carried back, and their usage, when carried forward, was limited to 80% of taxable income. Under the CARES Act, net operating losses created in the 2018, 2019 and 2020 tax years can be carried back five years with no limitation on their usage.

Suspension Of Prior Business Loss Limitations

Under the TCJA, taxpayers (other than C corporations) were limited in utilizing net business losses (i.e., business losses in excess of business income). These taxpayers were limited to using only $250,000 ($500,000 on a married joint return) of net business losses against non-business income. The CARES Act suspends this rule so that net business losses for 2018, 2019 and 2020 can be used without limit.

Immediate Refund Of Corporate AMT Credit

The TCJA provided that the alternative minimum tax no longer applied to C corporations.  Those corporations with AMT credits were given the ability to recover these amounts as tax reductions and refunds over a four-year period (2018 to 2021.) The CARES Act cuts this refund period in half (2018 to 2019) and corporations can make an election to recover the AMT credit entirely in 2018.

Reformation Of Bonus Depreciation for Qualified Improvement Property (QIP)

The CARES Act cures a legislative error under the TCJA and provides that the costs for Qualified Improvement Property are eligible for bonus depreciation. This provision is retroactive for 2018 QIP costs.

Click here for COVID-19 Tax Relief measures instituted by the IRS in “The IRS People First Initiative” that can benefit you.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes and with these tax law changes it is possible that business can claim refunds now by filing an amended return.  If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles (including Long Beach and Ontario) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.