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  • 11/11/2020 1:59 PM | Anonymous member (Administrator)

    November 1, 2020

    By Cheryl Meyer

    Years ago the small firm of DeLeon & Stang, based in Gaithersburg, Md., took a halfhearted approach to continuing professional education (CPE). "We'd figure out what class was out there, and try to go to it in the least expensive way possible," Richard Stang, CPA/ABV/PFS, one of the firm's founding partners, acknowledged.

    Today, though, Stang's firm, now with 45 employees and growing, is more proactive in its approach to CPE. Firm leaders realized that its staff is its greatest asset and that, in the current environment of rapid change and new information, learning is all-important. DeLeon & Stang now offers staff educational opportunities that include lunch-and-learn training, in-person webinars, and self-study choices, along with CPE options.

    The firm also creates work plans for employees, assessing their goals, strengths, and weaknesses, before it determines the best CPE options.

    "We are trying to make our work plans custom for each staff member," Stang said. "For instance, one member of our tax team may need specific technical training, while another member may need more training on soft skills to help them be better with client interviews."

    CPE training has taken a drastic shift recently due to the COVID-19 pandemic. Most opportunities for in-person CPE no longer exist, and firms have had to "pivot to virtual and online training," said Tom Hood, CPA/CITP, CGMA, the CEO of the Maryland Association of CPAs (MACPA) and the Business Learning Institute. CPE providers and firms have had to experiment and try new approaches, he said. For instance, the AICPA converted many conferences, including the multi-track ENGAGE conference, to an online-only format. “We had to move quickly to transition our conferences to virtual-only events,” said Todd Helton, senior director for meetings and conferences at AICPA. “Similarly, firms and individuals have adapted quickly to maximize the education and networking opportunities still available with virtual events and have embraced them as their primary learning options this year.”

    The shift to online professional education is why, Hood said, it's important for firms to make formal plans for directing staff to the most appropriate CPE. "The need for new skills and the advent of new ways they are available online make CPE easier to incorporate into staff development plans for busy professionals," he noted. "This increases the likelihood that staff will take the courses and offers the ability to 'rewind and review' key concepts for deeper learning."

    "Smart firms," he said, "are working on a structured curriculum and learning approach to accommodate the upskilling and reskilling necessary" for success.


    Many firms don't have set processes in place to address CPE, said Edward Mendlowitz, CPA/ABV/PFS, an emeritus partner at WithumSmith+Brown PC in East Brunswick, N.J., and an active CPE instructor.

    This lack of structure can mean firms aren't getting the full benefit of CPE. Without formal programs or processes to lead staff to the right CPE, firms may end up "not sending people to the right programs," Mendlowitz said, and employees may not put what they've learned into practice in the workplace. Firms also don't get a clear picture of how their CPE money is being spent, said Tracy White, chief human resources officer at Clark Nuber PS, a 220-person firm in Bellevue, Wash.

    Many firms allow employees to determine which CPE they take and how much. Though this approach gives staff greater freedom, it can also lead to missed opportunities. When staff aren't given any guidance as to what CPE they should take, they may fail to challenge themselves enough, wait until the last minute to take CPE and, as a result, limit their choices, or choose CPE options that don't necessarily align with the firm's needs, Stang said.

    What's more, most people don't know what their "blind spots" are and, thus, might not know what CPE can be of most use to them, said Melisa Galasso, CPA, founder and CEO of Galasso Learning Solutions LLC, a CPE training firm in Charlotte, N.C.


    Creating a process or plan to get staff the right CPE can benefit both them and the firm. Here are steps firm leaders can take to do so:

    Outline your firm's vision and strategy

    Each firm has a different mission, so it's imperative to determine where you want to go before creating a CPE plan. "Start with your goals," advised J. Michael Inzina, CPA, CGMA, founder and CEO of Audit, Litigation, Training and Efficiency Consulting Inc., a Monroe, La., consulting firm that serves public accounting firms in the areas of CPE, ethics, and more. "Think about where you want to be five to 10 years from now," he said.

    Then, brainstorm about the competencies, knowledge, and skills it will take to help you reach those goals. Ask yourself what clients need from you as a firm and which "knowledge capabilities you need to serve them and help them to grow their businesses," said CPE trainer Jon Lokhorst, CPA, founder of Lokhorst Consulting LLC in Andover, Minn. Then, you'll be in a better position to know what CPE your staff needs.

    Specify what skills are needed at each stage of an employee's career path

    To pair CPE to the needs of staff members at different stages in their careers, White suggested creating an "expectations grid": a listing of core competencies for each employee level in the firm and which skills are expected at each level. Define key job functions, such as associate, senior, supervisor, and partner, and outline what employees at each level need to know and when.

    One way to start creating an expectations grid is by modeling it after the PCPS Firm Competency Model or the AICPA Core Competency Frameworks in areas such as tax and audit, she said, then "aligning it to your mission and needs." Some state societies also offer sample curricula for staff at different levels and areas such as audit and tax.

    Map specific CPE to skills gaps or areas where staff want to grow

    Ask yourself these questions: What does each employee need to not only meet their CPE requirements but to also grow professionally? Where are the skills gaps? What type of training will help each employee and your firm? "Prioritize the skills you need that will make the most difference," Hood said. Then, research where each person can get the best CPE training to enhance those skills and knowledge. In addition, said Galasso, include some customized training for the specific industry or industries you serve.

    Create personalized plans for each staff member

    Employees should be involved in planning their CPE but should do so "collaboratively with firm leadership," Lokhorst said. "That ensures a balance between the employees' interest and the business needs of the firm."

    Give each staff member some "measure of choice" regarding their CPE training, he said. Ask them about their interests, aspirations, and preferred learning styles, and whether they prefer daylong training or shorter increments such as webinars and nano-learning.

    Not all staff members will aspire to become partners, Lokhorst said, but they should all have access to training. "The same planning and effort should be made to set all staff up for success at whatever level they desire," he said.

    Create an annual growth plan for each person, with their help, and then meet with them about it quarterly, Stang said. The PCPS Firm inMotion Staff Assessment and Career Development Plan (AICPA Private Companies Practice Section (PCPS) member login required) outlines a process and guidelines for creating employee development plans.

    Integrate CPE with career and performance management systems

    When creating annual growth plans for employees, make sure you tie any plans in with your firm's career and performance management systems. "It's always important to provide education and specialized training based on employees' career goals as part of their annual review," White said. "This supports employees to enhance their skill sets and improve their technical or soft skills." It can also help firms create budgets for continuing education, she said.

    Incorporate nontechnical skills

    Alongside technical skills, CPAs need leadership, communication, strategic, and critical-thinking skills. The MACPA calls these "success skills" rather than soft skills "because there is nothing soft about them," Hood said. "CPE has to incorporate all of those things. If you don't invest in some of these higher-level skills, when you need them, it will be too late."

    Require follow-up

    Once a CPE program is completed, ask attendees: "What were your top three takeaways, and how do you plan to integrate what you learned into your daily work?" White suggested. You can also stipulate that employees present a short summary on what they learned, often to a small group over lunch. This also enhances their presentation skills.

  • 11/03/2020 10:54 AM | Anonymous member (Administrator)
    November 1, 2020
    By Ken Tysiac

    The coronavirus pandemic has led to numerous financial reporting challenges for CPAs that didn't seem to have easy answers in U.S. GAAP.

    Although the foundational rules for U.S. financial reporting were designed to be applied across a wide range of occurrences, it would have been difficult for any standard setter to envision the number of lease concessions caused by the pandemic or the intricacies and often-changing rules associated with Paycheck Protection Program (PPP) loans.

    Through various means that have included FASB staff Q&As, AICPA Technical Questions and Answers, and a GASB technical bulletin, standard setters and experts have developed guidance designed to help CPAs and others navigate the accounting challenges posed by the pandemic. In some cases, effective dates were changed as well (see the sidebar, "Virus Leads to Effective Date Changes").

    As the fiscal year end approaches for companies that are on a calendar-year reporting schedule, here are answers to some of the year's most challenging pandemic-related financial reporting questions. (Unless otherwise noted, the text refers to for-profit and not-for-profit entities.)


    A FASB staff Q&A stated that for lease concessions related to the effects of the pandemic, it is not necessary for a lessor or lessee to analyze each contract to determine whether enforceable rights and obligations exist in the contract. Therefore, the lessor or lessee can elect to apply or not to apply the lease modification guidance in FASB ASC Topic 842, Leases, and Topic 840, Leases, to those contracts. This election is available for pandemic-related concessions that don't result in a substantial increase in the rights of the lessor or the obligations of the lessee.

    When a deferral affects the timing of the contract but the amount of the consideration is substantially the same, FASB's staff expects there will be multiple ways to account for those deferrals, none of which the staff believes are preferable to the others. Those methods include:

    • Accounting for the concessions as if no changes to the lease contract were made. In that case, a lessor would increase its lease receivable, and a lessee would increase its accounts payable as receivables/payments accrue. In its income statement, a lessor would continue to recognize income, and a lessee would continue to recognize expense during the deferral period.
    • Accounting for the deferred payments as variable lease payments.

    FASB's staff explained that an entity is not required to choose the same election for all of its lease concessions related to the effects of the pandemic. In other words, some lease concessions may be accounted for as if the enforceable rights and obligations to those concessions existed in the original contract, while other lease concessions may be accounted for in accordance with the lease modification guidance in Topics 842 and 840. But the staff cautioned that Topic 842 should be applied consistently to leases with similar characteristics and in similar circumstances, in accordance with Paragraph 842-10-10-1.

    The FASB staff also stated that lessors should provide disclosures about material concessions granted and that lessees should disclose material concessions received. The accounting effects of those disclosures should also be disclosed, FASB's staff said. More information is available at


    Nongovernmental entities may account for a PPP loan as a financial liability in accordance with Topic 470, Debt, and accrue interest in accordance with the interest method under Subtopic 835-30, according to AICPA Technical Question and Answer Section 3200.18.

    The TQA addresses accounting for nongovernmental entities only, which include business entities and not-for-profit entities (NFPs).

    The TQA explains that an entity accounting for the PPP loan under Topic 470:

    • Would initially record the cash inflow from the PPP loan as a financial liability and would accrue interest in accordance with the interest method under Subtopic 835-30.
    • Would not impute additional interest at a market rate.
    • Would continue to record the proceeds from the loan as a liability until either (1) the loan is partly or wholly forgiven and the debtor has been legally released or (2) the debtor pays off the loan.
    • Would reduce the liability by the amount forgiven and record a gain on extinguishment once the loan is partly or wholly forgiven and legal release is received.

    According to the TQA, if a nongovernmental entity that is not an NFP (that is, it is a business entity) expects to meet the PPP's eligibility criteria and concludes that the PPP loan represents, in substance, a grant that is expected to be forgiven, it may analogize to International Accounting Standard (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance, to account for the PPP loan. An entity accounting by analogy to IAS 20 would not be able to recognize government assistance until there is reasonable assurance that any conditions attached to the assistance will be met and the assistance will be received.

    Once there is reasonable assurance that the conditions will be met, the earnings impact of the government grants would be recorded on a systematic basis over the periods in which the entity recognizes as expenses the related costs for which the grants are intended to compensate.

    The TQA also states that in situations in which the PPP's eligibility and loan forgiveness criteria are expected to be met:

    • A business entity can also analogize to the guidance in Subtopic 958-605 or Subtopic 450-30.
    • An NFP should account for such PPP loans in accordance with Subtopic 958-605 as a conditional contribution.

    More information is available at


    Lenders have encountered numerous issues as a result of the financial upheaval caused by the pandemic. In a series of TQAs, the AICPA provided advice on the following issues:

    Loan restructurings resulting in periods with reduced payments

    When a loan is restructured by a creditor, and the restructured loan is neither a troubled debt restructuring nor required to be accounted for as a new loan, a creditor should determine a new effective interest rate in accordance with the interest method, as described in Subtopic 310-20. More information is available at

    Accounting for the forgivable portion of a PPP loan

    The AICPA believes that payments received from the U.S. Small Business Administration (SBA) should be accounted for similarly to payments received from the borrower. When full or partial payment is received from the borrower or the SBA before the loan matures, amounts received should be accounted for as a prepayment. More information is available at

    Classification of advances under the PPP

    An advance under the PPP should be accounted for as a loan. More information is available for this topic and the next two at

    Consideration of SBA guarantee under the PPP

    SBA guarantees would be considered as embedded guarantees for all lenders. For lenders that have adopted FASB's new credit losses standard, ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, the guarantee from the SBA would not meet the definition of a freestanding contract and therefore would be considered to be embedded.

    Accounting for the loan origination fee received from the SBA

    The AICPA believes the clawback provisions related to PPP loans would not cause this fee to be considered refundable. As a result, the fee would be subject to Subtopic 310-20.

    Troubled debt restructuring suspension

    Meanwhile, banks may elect to account and report for loans modified under Section 4013 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136, according to a statement released by a consortium of regulators in April. Section 4013 permits banks to suspend U.S. GAAP troubled debt restructuring accounting requirements for loans restructured as a result of the pandemic between March 1 and Dec. 31 of this year. More information is available at and


    GASB addressed a number of important state and local government accounting issues in Technical Bulletin 2020-1:

    Coronavirus Relief Fund payments

    Recipients should recognize resources received from the Coronavirus Relief Fund as liabilities until the applicable eligibility requirements are met, including the incurrence of eligible expenditures. When the recipient government has met the eligibility requirements established in the CARES Act, that government should recognize revenue for Coronavirus Relief Fund resources received.

    Federal assistance and revenue recognition

    CARES Act resources, such as Provider Relief Fund payments, that were provided to address a government's loss of revenue due to the pandemic are contingent upon an eligibility requirement, as provided in Paragraph 20d of GASB Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions. Resources received from CARES Act programs that specifically include an eligibility requirement for loss of revenue should be recognized as revenue when the government meets the action-based eligibility requirement.

    Treatment of forgivable PPP loans

    If a not-for-profit entity that meets the definition of a government determines that its PPP loan will be forgiven in a subsequent reporting period, Paragraph 12 of GASB Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees, still requires the governmental entity to continue to report the loan as a liability until that entity is legally released from the debt.

    CARES Act resources and nonoperating revenues

    CARES Act resources provided through the Provider Relief Fund, the Higher Education Emergency Relief Fund, the CARES Act Airport Grants, the Formula Grants for Rural Areas, and Urbanized Area Formula Grants to a business-type activity or enterprise fund are considered subsidies and, except for resources provided to governments through the Provider Relief Fund's Uninsured Program, should be reported as nonoperating revenue.

    No extraordinary or special items

    Outflows of resources incurred in response to the pandemic, such as actions taken to slow the spread of the virus or implementation of stay-at-home orders, should not be reported as extraordinary or special items.

    More information on GASB Technical Bulletin No. 2020-1 is available at


    The effects of the pandemic may be considered rare cases caused by extenuating circumstances outside the control of an entity, according to a FASB staff Q&A. Therefore, the staff believes that an entity may apply the exception in Paragraph 815-30-40-4 for such rare cases. The determination will require judgment based on facts and circumstances.

    FASB's staff says that when applying the exception, an entity should consider whether the forecasted transaction remains probable over a period that is reasonable given the nature of the entity's business, the nature of the forecasted transaction, and the magnitude of the disruption to the entity's business related to the effects of the pandemic. If an entity determines that it is no longer probable that the forecasted transaction will occur within that reasonable period beyond the additional two-month period, that exception would not apply.

    FASB's staff also believes that it would be acceptable for an entity to determine that missed forecasts related to the effects of the pandemic need not be considered when determining whether the entity has exhibited a pattern of missing forecasts.

    More information is available at


    Provider Relief Fund payments to not-for-profit health care entities would be accounted for as nonexchange transactions in accordance with Subtopic 958-605, according to an AICPA TQA issued for health care entities.

    Contribution revenue would be recognized only to the extent that health-care-related expenses or lost revenues have been incurred at that date that will not be reimbursed from other sources. NFP health care entities will need to evaluate their individual facts and circumstances to determine the extent to which conditions have been met at a given reporting date. Payment amounts received that exceed recognizable contribution revenue are reported as a refundable advance (i.e., a liability).

    Because the general distribution payments can be used only for pandemic-related expenses, they would be considered donor-restricted.

    For-profit health care entities also would account for Provider Relief Fund payments as nonexchange transactions, the TQA states. But U.S. GAAP doesn't contain explicit guidance on the accounting for government grants to business entities. Therefore, for-profit health care entities may consider analogizing to guidance in IAS 20, Subtopic 958-605, or Subtopic 450-30.

    More information is available at


    As the pandemic continues, additional financial reporting challenges seem likely to arise. It's possible that new government aid programs with new mechanisms and rules will need to be deciphered from an accounting standpoint, and organizations may have to adopt new strategies to protect their cash flows.

    Keeping a watchful eye for additional guidance on common accounting issues can help financial statement preparers continue to arrive at the right answers as they strive to accurately tell their organizations' stories during these difficult times.

    Virus leads to effective date changes

    As the pandemic caused a need for new accounting treatments, standard setters recognized a need for the effective dates of new standards to be delayed.

    FASB delayed the effective dates for the new revenue recognition and lease accounting standards for certain preparers that haven't yet adopted them. The board also proposed delaying the effective date for its long-duration insurance contract standard.

    For more information, visit

    GASB postponed the effective dates for numerous new standards and implementation guides, including high-profile standards on fiduciary activities (Statement No. 84) and lease accounting (Statement No. 87). For more information, visit

  • 10/27/2020 2:35 PM | Anonymous member (Administrator)

    October 26, 2020

    By Sally P. Schreiber, J.D.

    The IRS on Monday issued the 2021 annual inflation adjustments for many tax provisions, as well as the 2021 tax rate tables for individuals and estates and trusts (Rev. Proc. 2020-45). These adjusted amounts will be used to prepare tax year 2021 returns in 2022.

    Many amounts will increase for inflation in 2021. The standard deduction will increase to $25,100 for married individuals filing joint returns or surviving spouses, $18,800 for heads of household, and $12,550 for unmarried individuals (other than surviving spouses) and married individuals filing separate returns.

    The maximum amount of the earned income tax credit (for taxpayers with three or more children) will increase to $6,728, up from $6,660 for 2020.

    The maximum amount of the adoption credit will increase to $14,440, up from $14,300 for 2020. That is also the maximum amount that will be excludable from an employee’s gross income for qualified amounts paid or expenses incurred by an employer under an adoption-assistance program.

    The 2021 exemption amounts for the alternative minimum tax will be $114,600 for married individuals filing joint returns and surviving spouses, $73,600 for unmarried individuals (other than surviving spouses), $57,300 for married individuals filing separate returns, and $25,700 for estates and trusts, all increased from 2020.

    The Sec. 179 amount for tax years beginning in 2021 will be $1,050,000 with a phaseout threshold of $2,620,000, slight increases from 2020.

    The qualified business income threshold under Sec. 199A(e)(2) will increase to $329,800 for married individuals filing joint returns and to $164,925 for married individuals filing separate returns, and to $164,900 for single individuals and heads of household, all increased from 2020.

    The Sec. 911 foreign earned income exclusion amount will increase to $108,700, up from $107,600 in 2020.

    The basic exclusion amount for determining the unified credit against the estate tax will be $11,700,000, up from $11,580,000, for decedents dying in calendar year 2021. The annual gift tax exclusion amount remains $15,000.

    — Sally P. Schreiber, J.D., ( is a JofA senior editor.

  • 10/23/2020 11:40 AM | Anonymous member (Administrator)

    By Erik Asgeirsson, President and CEO of

    This past year has further emphasized the importance of thinking strategically about your online presence, and it’s clear this will become even more critical in the future as digital inevitably becomes the dominant business channel.

    The AICPA and have long recognized this trend and it’s the reason why we were compelled to secure .cpa, the new restricted Internet domain, on behalf of the profession. .CPA is what’s known as a top-level domain, which refers to the letters to the right of the dot on a website URL or email address. The most common of these are .com, .org, .edu and the like.

    Restricted or protected domains such as .cpa are part of the next, more secure, generation of the Internet. Internet crime is rising, according to the latest FBI statistics, and many instances of phishing or other fraud are tied to look-alike or spoofed domain addresses. To combat this, the use of restricted domains has grown dramatically in recent years as businesses and organizations seek to promote visibility and authenticity in their digital operations. (You may have noticed, for example, such recent restricted domains as .bank and .pharmacy.)

    Only licensed CPA firms and – starting next year – individually licensed CPAs can sign up for .cpa. The new restricted domain offers several advantages:

    • It allows better, more focused branding
    • It provides better security and resistance to Internet fraud
    • It promotes greater trust in firms’ online interactions with clients and the public
    • It demonstrates that firms are progressive and professional in the digital sphere

    .CPA is currently in its initial rollout phase, which is designed to permit all firms to claim their existing online branding under the new domain. This early application phase ends Oct. 31, after which the remaining domain names can be applied for by licensed firms on a rolling basis. Individually licensed CPAs can apply for their preferred names starting in January 2021, when general availability begins.

    If you have additional questions, we have a wealth of resources at, including a white paper, FAQs and sign-up information for the new service. We live in a digital age, and CPAs can improve the trust and security in their online calling cards with this new restricted domain.  Be sure to reserve your .cpa domain name before the Early Application phase expires on Oct. 31.

  • 10/06/2020 9:43 AM | Anonymous member (Administrator)

    October 5, 2020

    New guidance issued by the U.S. Small Business Administration (SBA) describes the procedures required for changes of ownership of an entity that has received Paycheck Protection Program (PPP) funds.

    Addressed to SBA employees and PPP lenders, the SBA procedural notice describes when a change of ownership is considered to have occurred and the responsibilities a PPP borrower continues to hold regardless of any change in ownership.

    The guidance clarifies requirements and may help businesses that have been trying to go through the forgiveness process quickly because of an impending transfer of ownership. Lenders that have been assisting these businesses also may benefit from this guidance.

    According to the notice, a “change of ownership” occurs for PPP purposes when at least one of the following is true:

    • At least 20% of the common stock or other ownership interest of a PPP borrower (including a publicly traded entity) is sold or otherwise transferred, whether in one or more transactions, including to an affiliate or an existing owner of the entity;
    • The PPP borrower sells or otherwise transfers at least 50% of its assets (measured by fair market value), whether in one or more transactions; or
    • A PPP borrower is merged with or into another entity.

    Note that all sales or transfers that have occurred since the date of the approval of the PPP loan must be aggregated. For publicly traded borrowers, only sales or other transfers that result in one person or entity holding or owning at least 20% of the common stock or other ownership interest of the borrower must be aggregated.

    Regardless of a change in ownership, the PPP borrower remains responsible for all of the following:

    • Performance of all obligations under the PPP loan;
    • The certifications made in connection with the PPP loan application, including the certification of economic necessity;
    • Compliance with all other applicable PPP requirements;
    • Obtaining, preparing, and retaining all required PPP forms and supporting documentation; and
    • Providing the required forms and supporting documentation to the PPP lender or lender servicing the PPP loan, or to the SBA upon request.

    Before closing any change-of-ownership transaction, a PPP borrower is required to notify the PPP lender in writing of the contemplated transaction and provide the PPP lender a copy of the documentation underpinning the proposed transaction. Additionally, some changes in ownership may require SBA approval, with the SBA having 60 calendar days to review and provide a determination of its approval.

    The PPP lender must notify the SBA within five business days of the completion of a transaction and is required to continue submitting the monthly 1502 reports until the PPP loan is fully satisfied.

    The SBA notice provides different procedures to be followed depending on whether or not the PPP note has been fully satisfied. If a PPP note has not yet been fully forgiven or paid, one of the requirements is that the PPP borrower establish an escrow account controlled by the PPP lender in the amount of the outstanding PPP loan balance. The escrow funds must first be used to repay any remaining PPP loan balance after forgiveness has been processed plus interest.

    The procedural notice also addresses situations where the new owners or successors arising from a transaction have a separate PPP loan. Requirements are outlined for segregating and delineating PPP funds and expenses, along with documentation and compliance by PPP borrowers.

    AICPA experts discuss the latest on the PPP and other small business aid programs during a biweekly virtual town hall. The webcasts, which provide CPE credit, are free to AICPA members. Go to the AICPA Town Hall Series webpage for more information and to register.

    The AICPA’s Paycheck Protection Program Resources page houses resources and tools produced by the AICPA to help address the economic impact of the coronavirus.

    For more news and reporting on the coronavirus and how CPAs can handle challenges related to the outbreak, visit the JofA’s coronavirus resources page or subscribe to our email alerts for breaking PPP news.

    — Ken Tysiac ( is the JofA’s editorial director.

  • 09/08/2020 8:16 AM | Anonymous member (Administrator)

    By Paul Bonner
    September 1, 2020

    Hardly anything about 2020 could be considered normal, and the annual tax software survey of AICPA member tax preparers by the JofA and The Tax Adviser is no exception. For perhaps the first time ever, the survey had to couch its questions about tax season in the present tense, for the simple reason that, with the IRS's postponement until July 15 of the April 15 return due date, tax season was not yet over, as it usually is when the survey is deployed. The COVID-19 pandemic and federal disaster declaration that resulted in that postponement and many other legislative and administrative relief measures affected CPA tax preparers' tax season as well (see the sidebar, "Amid a 'Brutal' Tax Season").

    The survey also for a fifth year asked about respondents' experience with clients whose tax-related identities were stolen, indicating that this issue, once in the forefront among those disrupting tax season, has continued to recede.


    The survey invited respondents to select their software from among 13 products and write in others not mentioned; of these, the same seven products as in past years accounted for most of the responses, led by:

    • UltraTax CS with 20.7% of respondents;
    • Lacerte with 16%;
    • Drake Tax with 15.1%;
    • CCH ProSystem fx with 12.4%;
    • ProSeries with 11.4%;
    • CCH Axcess Tax with 7.3%;
    • ATX with 6.4%.

    The remaining 10.7% was divided among Intuit ProConnect Tax Online, TurboTax, GoSystem Tax RS, TaxAct, TaxWise, TaxSlayer Pro, and others. CCH ProSystem fx's representation was three percentage points below that in the 2019 survey, and Lacerte slipped by 1.4 points. ATX and Drake Tax both gained 1.2 points from 2019. However, the ranking order by usage of all seven "major" products was unchanged.

    Some products are favored by smaller firms, others by larger ones, and the sample's overall profile of respondents by firm size can affect relative representation of each product. The 2020 survey sample featured a higher percentage of single-member practices (37.2%) than in 2019 (32.7%), which could account for the greater number of users of ATX and Drake Tax, both associated with smaller firms. Correspondingly, 2020 responses from members in medium to large firms, generally the province of CCH ProSystem fx users, were slightly fewer: 9.4% in firms of 21 or more, compared with 11.4% in 2019.

    Lacerte and ProSeries are Intuit Inc. products, while ATX, CCH Axcess Tax, and CCH ProSystem fx are Wolters Kluwer products. UltraTax CS is a Thomson Reuters product. For more information on correlation of product with number of preparers in a firm, see the table "Favorites by Firm Size." More information on all 13 products is available here.

    Favorites by firm size

    The chart shows that Drake Tax is the leading product among sole practitioners, used by nearly 28% of respondents in single-preparer firms. Nearly the same percentage of respondents in firms of the next tier, two to five preparers, used UltraTax CS, and among those in the next tier, six to 20 preparers, UltraTax CS was used by one-third of respondents. But by far the highest representation of any product in any of the firm-size cohorts was the nearly 73% of respondents in the largest firms, those numbering more than 500 preparers, who used CCH Axcess Tax, which correspondingly predominated in the largest firms as measured by number of clients: 62% of respondents with over 5,000 clients used it.

    Overall, respondents for whom a majority of the returns they prepared were for individuals rather than businesses were nearly 76% of users of the major products, and those for whom business returns were less than half were nearly 90%, ratios that remain relatively consistent over the years. Respondents for whom a majority of returns were for businesses were most likely to have used CCH Axcess Tax (23.4%) or CCH ProSystem fx (17.5%).

    Being personally responsible for choosing the software can affect how an individual perceives and rates it and also correlates to firm size. Some confirmation or sunk-cost bias is probably latent in the survey results, since respondents often report using a particular software mostly because they have done so for a long time and are used to it. Nearly 95% of ATX users made the decision to use it, followed by ProSeries (91.3%) and Drake Tax (89%). Only 30% of CCH Axcess Tax users made the choice, although another 30.5% had input into the decision. Overall, only 10.6% of all respondents reported a lack of any involvement in deciding on their software. But among respondents in firms of 501 or more preparers, that percentage rose to 85%.


    The overall rating users gave their software (on a scale of 1 to 5, with 5 being the highest) averaged 4.4 for all seven major products (see the table "Overall Ratings"). Drake Tax users gave it an average rating of 4.6; the lowest was 4.0 for CCH Axcess Tax, which also rated significantly lower than others on ease of use (3.6, against an average 4.3 for all seven products). CCH Axcess Tax did edge above the average for ease of importing data, however (3.6; average 3.5). UltraTax CS also ranked above average for data importation (3.7), and ATX and Drake Tax below it (3.0 and 3.3, respectively).

    Overall ratings

    The table also provides assessments of ease of updating and installing the software, how well the software handled updates during tax season, transferring data within returns, e-filing, multistate business returns, and integrating with accounting and other software. UltraTax CS stood out in responses to the question of how well the product integrated with other software with 3.7, while ATX lagged with 2.8, against all products' average 3.4. While, as noted above, users of CCH Axcess Tax on average prepared more business returns than others, they were not particularly enamored of its capabilities for preparing multistate business returns, ranking it a 4.0, below the other six major products.

    Asked if they would recommend their software to someone starting a tax practice, Drake Tax users were the most sanguine, with 98% saying "yes." Only 63% of CCH Axcess Tax users, on the other hand, endorsed that product for startup firms.


    As in past surveys, this year's survey asked respondents to pick their top three likes and dislikes about their software from among 11 choices, plus "other," with a chance to write in something else. However, this article begins a change in how the results are reported. Previously, we gave the answers for each attribute as a percentage of the total number of responses for that product; this year, we are showing each attribute choice as a percentage of the number of users of that product. With a smaller denominator, these percentages are generally higher than in previous years and can add up to more than 100% for each product. We did this to make it easier and more natural to discuss the results as a percentage of users than as a percentage of those users' total choices. That said, the relative rankings and trends remain consistent with those of previous years, most prominently showing strong attitudes toward the products' prices.

    Nearly 89% of Drake Tax users picked price as one of the three things they liked best about it; the next highest was ATX at 61.5% of users (the average for all seven was 27.3%; see the table "Top Likes"). Drake Tax users also were the most likely to approve of its support (74%, compared with an average of 32%). However, relatively few Drake Tax users liked its number of forms and comprehensiveness (21.6%), as was the case with ProSeries users (38.4%). CCH Axcess Tax users were the most likely to see number of forms and comprehensiveness as a primary merit (78.4%), followed closely by CCH ProSystem fx (74%).

    Top likes

    Asked separately whether their software contained all the forms they needed, however, Drake Tax users said "yes" 89.3% of the time. Leading in answers to this question were UltraTax CS (92.9%) and ATX (90.7%). Users of CCH Axcess Tax and CCH ProSystem fx answered "yes" to having all needed forms at 86.6% and 89.4%, respectively.

    Two other favored traits besides forms/comprehensiveness were the most likely to be chosen for all products on average: accuracy and ease of use. CCH ProSystem fx predominated for accuracy (72%), followed by CCH Axcess Tax (nearly 66%) and UltraTax CS (61.4%). Only 22.4% of Drake Tax users picked accuracy as a top like. For ease of use, ProSeries users were the most likely to pick this as a like (73.4%), followed by Lacerte (70.1%) and ATX (62.4%). Consistent with the numerical rating for ease of use discussed above, CCH Axcess Tax users generally found other things to like than ease of use, with only 25.1% picking that attribute.

    Price headed the top dislikes for more than a majority of users of all seven products combined, as mentioned above, with 78% of Lacerte users disfavoring that product's price tag (see the table "Top Dislikes"). Close behind was CCH ProSystem fx at one-tenth of a point lower. Over three-quarters, 76%, of UltraTax CS users disliked its price, as did nearly 60% of CCH Axcess Tax users.

    Top dislikes

    Only 1.4% of Drake Tax users disliked its price, but 45.2% of them registered disapproval for "tax research included in package" (against an average of 24%), and nearly 37% found its integration with other software wanting. While only a small portion of users of ProSeries picked number of forms/comprehensiveness as a top dislike (21.1%), when asked directly in another question if that software contained all the forms they needed, they were the least likely of users of all the seven products to say "yes" (68.2%).

    While write-in "other" dislikes ran the gamut of reasons, nearly one-tenth of the 330 entries mentioned updates: their frequency, their slowness, their timeliness, updating for state returns, and a lack of information about their reason or what they covered. These complaints were not concentrated on any single product. General performance issues were also frequent complaints.


    Some respondents commented favorably in "other" likes about cloud deployment of their tax software, but those using it still are a small minority. This year, when asked where their software resides, 82.1% of major product users said it was on their own hard drive or network — for five of the seven products, the percentage was over 90% — and only 17.9% said it lived on the vendor's server. This ratio was nearly exactly the same last year, with only slightly more cloud computing users than in 2018. CCH Axcess Tax, which Wolters Kluwer characterizes as cloud-based, was the only product for which most users reported accessing it on the vendor's server (84.1%).

    A majority of users of the seven products said they received no formal training in the software from the provider (62.9%). Users of CCH Axcess Tax were the most likely to have received training (57.3%), followed by Drake Tax (44.2%) and UltraTax CS (42.7%). CCH Axcess Tax users, however, did not rate that training particularly highly (3.7 out of 5, with an average rating for all seven products of 4.1). The only major products to rate higher than that average were Drake Tax and ProSeries, at 4.5 and 4.2, respectively.

    As noted above, Drake Tax users were prone to pick support as a top like; they were also the most prone to say they needed technical support during tax season (86.6%), and, consistent with the "Top Likes" table, they rated the tech support highest in quality and ease of obtaining it, 4.6 and 4.8, respectively, compared with an average rating of 4.0 and 3.9 for all seven products (see the table "Technical Support"). ProSeries and ATX users reported needing support less often than most (62.8% and 67.8%, respectively).

    CPAs continued to receive their technical support predominantly by telephone (nearly 92%), followed by live chat or messaging (31.8%) and email (26.7%). Notably, live chat/messaging edged out email for the first time this year. In 2019, email was used by 28.3% and live chat/messaging by 27.1% of major product users.

    Technical support


    For a fifth year, the tax software survey also asked about CPAs' experience during the current tax season of having clients victimized by tax identity theft, and for a fourth year, the reported incidence declined. From a high of 59.3% in 2016, the percentage of respondents saying any clients were victims declined to 17.4% in 2020, down from 20.7% in 2019 (see the graph, "Identity Theft"). Most who did report ID theft said few clients were affected; for nearly 97%, less than 5% of their clients were affected. Correcting the resultant problems remained relatively onerous, however, with a rating of 3.0 out of 5 (with 1 being the most difficult and 5 the easiest), about the same as previously.

    Identity theft


    The COVID-19 pandemic has led to many unforeseen circumstances and unintended side effects, notably, the delay of return due dates until July 15, coupled with taxpayer relief measures that increased the number and types of calculations CPAs were called upon to implement. Despite those uncertainties, CPAs' perceptions about their tax software programs appear to have changed little from the more settled recent past — fortunately for anyone seeking fixed expectations amid a sea of change.

    Results and methodology

    This year's survey was conducted June 1—12 and received 3,210 responses from CPAs who indicated that they prepared tax year 2019 returns for a fee. The survey asked about 13 software products by name; respondents could also provide information about other products. Most of the discussion and data in the tables accompanying this article concern the seven most commonly used software products, for which 2,866 users gave answers. For more information about the responses and company information on basic features and options for the seven major products, click here.

    Amid a 'brutal' tax season

    CPA tax preparers were also polled separately during tax season for their views on the July 15 delayed filing and payment date and whether they thought it should be postponed further. This poll was carried out by the AICPA Tax Executive Committee (TEC) in May, surveying members of the AICPA Tax Section. The questions were: "Based on the current COVID-19 environment and the impact on your tax practice, do you anticipate being able to file returns or extensions for your clients by the July 15 deadline?" and "Do you believe the IRS should automatically extend the July 15 filing and payment deadline?" Edward Karl, CPA, CGMA, the AICPA vice president—Taxation, and Chris Hesse, CPA, the TEC's chair and a tax principal of CliftonLarsonAllen LLP's National Tax Office, related the results in a blog post and a JofA podcast. The upshot was that a majority of members said they could meet the July 15 deadline, but a plurality said they preferred a further postponement to Oct. 15, with others favoring other dates. The IRS soon after made the issue moot by announcing the July 15 date would stand.

    Few respondents mentioned tax software in either case, but many of the nearly 1,000 written reasons they submitted for their answers revealed the stresses they and their clients faced. Many who favored no further postponement sent comments along the lines of this one: "Let's get this brutal tax season over sooner than later!!!" Scores of comments said further delay would only invite more procrastination on the part of clients.

    Some CPAs reflected, though, on the toll the tax season was taking on themselves and their staffs. They lamented the productivity hurdles and extra work of learning and advising on the details of new tax provisions and Paycheck Protection Program loans, loan forgiveness, and tax effects. Plus, in their personal lives, disease prevention and family care while staying at home required more of their time and attention.

    And many worried about their clients who were beset by financial dislocations. One compared the situation to medical triage. "I am already anticipating who will need help with offers in compromise or CNC [currently not collectible] status. I have had to make judgment calls based on who needs my time the most."

    Partly because of the client financial concerns expressed in the survey, the AICPA is advocating for tax administrative and penalty relief with the IRS (see the TEC's comment letter).

  • 08/23/2020 5:39 PM | Anonymous member (Administrator)

    August 21, 2020

    The IRS has suspended the mailing of three notices – the CP501, the CP503 and the CP504 – that go to taxpayers who have a balance due on their taxes. Although the IRS continues to make significant reductions in the backlog of unopened mail that developed while most IRS operations were closed due to COVID-19, this temporary adjustment to processing is intended to lessen any possible confusion that might be associated with delays in processing correspondence received from taxpayers.

    The IRS is taking the step to avoid confusion for taxpayers who previously received a balance due notice (CP14) and mailed a payment to the IRS; however, that payment may still be unopened. The CP501, the CP503 and the CP504 are follow-up notices are typically automatically sent to taxpayers who do not respond to the CP14. These automatic follow-up notices will be temporarily stopped until the backlog of mail is reduced. The IRS will continue to assess the mail inventory to determine the appropriate time to resume the follow-up notices. However, taxpayers who have received but not yet responded to a CP14 balance due notice are encouraged to promptly respond.

    In addition, the IRS has previously announced that these payments in the unopened mail will be posted and credited on the date the IRS received them – rather than the date the agency opened and processed them. The IRS reminds taxpayers in this situation they should not cancel their checks and should ensure funds continue to be available so the IRS can process them to avoid potential penalties and interest. To provide fair and equitable treatment, the IRS is also providing relief from bad check penalties for dishonored checks the agency received between March 1 and July 15 due to delays in this IRS processing.

    As the IRS works to stop these mailings at our processing centers, some taxpayers and tax professionals may still receive these notices during the next few weeks due to delivery of existing mailings.

    Due to high call volumes, the IRS suggests waiting to contact the agency about any unprocessed paper payments still pending. See for options to make payments other than by mail.

  • 08/19/2020 4:47 PM | Anonymous member (Administrator)

    IR-2020-185, Aug. 19, 2020

    WASHINGTON – With millions of Americans now receiving taxable unemployment compensation, many of them for the first time, the Internal Revenue Service today reminded people receiving unemployment compensation (beneficiaries) that they can have tax withheld from their benefits now to help avoid owing taxes on this income when they file their federal income tax return next year.

    By law, unemployment compensation is taxable and must be reported on a 2020 federal income tax return. Taxable benefits include any of the special unemployment compensation authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted this spring.

    Withholding is voluntary. Federal law allows any beneficiary to choose to have a flat 10% withheld from their benefits to cover part or all of their tax liability. To do that, fill out  Form W-4V, Voluntary Withholding Request (PDF), and give it to the agency paying the benefits. Don’t send it to the IRS. If the payor has its own withholding request form, use it instead.

    If a beneficiary doesn’t choose withholding, or if withholding is not enough, they can make quarterly estimated tax payments instead. The payment for the first two quarters of 2020 was due on July 15. Third and fourth quarter payments are due on Sept. 15, 2020, and Jan. 15, 2021, respectively. For more information, including some helpful worksheets, see Form 1040-ES and Publication 505, available on

    Here are some types of payments taxpayers should check their withholding on:     

    • Unemployment compensation includes: Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund
    •   Railroad unemployment compensation benefits
    •  Disability benefits paid as a substitute for unemployment compensation
    • Trade readjustment allowances under the Trade Act of 1974
    • Unemployment assistance under the Disaster Relief and Emergency Assistance Act of 1974, and
    • Unemployment assistance under the Airline Deregulation Act of 1978 Program

    Beneficiaries who return to work before the end of the year can use the IRS Tax Withholding Estimator to make sure they are having enough tax taken out of their pay. Available only on, this online tool can help any worker or pension recipient avoid or lessen their year-end tax bill or estimate the refund they want.

    In January 2021, beneficiaries should receive a Form 1099-G, Certain Government Payments (PDF) from the agency paying the benefits. The form will show the amount of unemployment compensation they received during 2020 in Box 1, and any federal income tax withheld in Box 4. Taxpayers report this information, along with their W-2 income, on their 2020 federal tax return. For more information on unemployment, see Unemployment Benefits in Publication 525.

  • 08/13/2020 4:01 PM | Anonymous member (Administrator)

    Washington, D.C. (August 13, 2020) – A memorandum issued this week by President Trump mandating the Treasury Department defer the collection and payment of employee payroll taxes has caused confusion and concern among accountants and businesses. The American Institute of CPAs (AICPA) submitted a letter to Treasury and the Internal Revenue Service (IRS) in response, requesting additional guidance and clarification and providing specific recommendations.

    In the letter, the AICPA requests that Treasury and the IRS provide guidance to address a number of concerns precipitated by the memorandum, including:

    1.    Guidance stating that the deferral is voluntary and that an “eligible employee” is responsible for making an affirmative election to defer the payroll taxes.

    2.    Guidance stating that an “eligible employee” is an employee whose wages are less than $4,000 per bi-weekly pay period.

    3.    Guidance stating that the $4,000 limit should apply separately to each employer of an employee.

    4.    Guidance stating a payment due date(s) for the deferred taxes and a mechanism for employees to pay the deferred taxes.

    A subsequent announcement by Treasury Secretary Steven Mnuchin indicated that the payroll tax deferral would not be mandatory for employers to implement. “Since the taxes being discussed are those ‘imposed on the income of each employee,’ a big question we have is whether or not employees will have the option to opt in or out of the program,” said AICPA Vice President of Taxation, Edward Karl, CPA, CGMA. “Employees should make the deferral decision and should also be responsible for repayment, however, there are certain questions that need to be considered that taxpayers and businesses need guidance on. For example, what if an employee works more than one job? What if the company goes out of business? What if the employee changes jobs? Employers still have to figure out how to implement this policy, but right now, there are too many unknowns.”

  • 06/30/2020 10:55 AM | Anonymous member (Administrator)

    Section 2202 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted on March 27, 2020, provides for special distribution options and rollover rules for retirement plans and IRAs and expands permissible loans from certain retirement plans.

    Q1. What are the special rules for retirement plans and IRAs in section 2202 of the CARES Act?

    A1. In general, section 2202 of the CARES Act provides for expanded distribution options and favorable tax treatment for up to $100,000 of coronavirus-related distributions from eligible retirement plans (certain employer retirement plans, such as section 401(k) and 403(b) plans, and IRAs) to qualified individuals, as well as special rollover rules with respect to such distributions. It also increases the limit on the amount a qualified individual may borrow from an eligible retirement plan (not including an IRA) and permits a plan sponsor to provide qualified individuals up to an additional year to repay their plan loans. See the FAQs below for more details.

    Q2. Does the IRS intend to issue guidance on section 2202 of the CARES Act?

    A2. The Treasury Department and the IRS are formulating guidance on section 2202 of the CARES Act and anticipate releasing that guidance in the near future. IRS Notice 2005-92 (PDF), issued on November 30, 2005, provided guidance on the tax-favored treatment of distributions and plan loans under sections 101 and 103 of the Katrina Emergency Tax Relief Act of 2005 (KETRA) as those provisions applied to victims of Hurricane Katrina. The Treasury Department and the IRS anticipate that the guidance on the CARES Act will apply the principles of Notice 2005-92 to the extent the provisions of section 2202 of the CARES Act are substantially similar to the provisions of KETRA that are addressed in that notice.

    Q3. Am I a qualified individual for purposes of section 2202 of the CARES Act?

    A3. You are a qualified individual if –

    You are diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention;

    Your spouse or dependent is diagnosed with SARS-CoV-2 or with COVID-19 by a test approved by the Centers for Disease Control and Prevention;

    You experience adverse financial consequences as a result of being quarantined, being furloughed or laid off, or having work hours reduced due to SARS-CoV-2 or COVID-19;

    You experience adverse financial consequences as a result of being unable to work due to lack of child care due to SARS-CoV-2 or COVID-19; or

    You experience adverse financial consequences as a result of closing or reducing hours of a business that you own or operate due to SARS-CoV-2 or COVID-19.

    Under section 2202 of the CARES Act, the Treasury Department and the IRS may issue guidance that expands the list of factors taken into account to determine whether an individual is a qualified individual as a result of experiencing adverse financial consequences. The Treasury Department and the IRS have received and are reviewing comments from the public requesting that the list of factors be expanded.

    Q4. What is a coronavirus-related distribution?

    A4. A coronavirus-related distribution is a distribution that is made from an eligible retirement plan to a qualified individual from January 1, 2020, to December 30, 2020, up to an aggregate limit of $100,000 from all plans and IRAs.

    Q5. Do I have to pay the 10% additional tax on a coronavirus-related distribution from my retirement plan or IRA?

    A5. No, the 10% additional tax on early distributions does not apply to any coronavirus-related distribution.

    Q6. When do I have to pay taxes on coronavirus-related distributions?

    A6. The distributions generally are included in income ratably over a three-year period, starting with the year in which you receive your distribution. For example, if you receive a $9,000 coronavirus-related distribution in 2020, you would report $3,000 in income on your federal income tax return for each of 2020, 2021, and 2022. However, you have the option of including the entire distribution in your income for the year of the distribution.

    Q7. May I repay a coronavirus-related distribution?

    A7. In general, yes, you may repay all or part of the amount of a coronavirus-related distribution to an eligible retirement plan, provided that you complete the repayment within three years after the date that the distribution was received. If you repay a coronavirus-related distribution, the distribution will be treated as though it were repaid in a direct trustee-to-trustee transfer so that you do not owe federal income tax on the distribution.

    If, for example, you receive a coronavirus-related distribution in 2020, you choose to include the distribution amount in income over a 3-year period (2020, 2021, and 2022), and you choose to repay the full amount to an eligible retirement plan in 2022, you may file amended federal income tax returns for 2020 and 2021 to claim a refund of the tax attributable to the amount of the distribution that you included in income for those years, and you will not be required to include any amount in income in 2022. See sections 4.D, 4.E, and 4.F of Notice 2005-92 for additional examples.

    Q8. What plan loan relief is provided under section 2202 of the CARES Act?

    A8. Section 2202 of the CARES Act permits an additional year for repayment of loans from eligible retirement plans (not including IRAs) and relaxes limits on loans.

    Certain loan repayments may be delayed for one year: If a loan is outstanding on or after March 27, 2020, and any repayment on the loan is due from March 27, 2020, to December 31, 2020, that due date may be delayed under the plan for up to one year. Any payments after the suspension period will be adjusted to reflect the delay and any interest accruing during the delay. See section 5.B of Notice 2005-92.

    Loan limit may be increased: The CARES Act also permits employers to increase the maximum loan amount available to qualified individuals. For plan loans made to a qualified individual from March 27, 2020, to September 22, 2020, the limit may be increased up to the lesser of: (1) $100,000 (minus outstanding plan loans of the individual), or (2) the individual’s vested benefit under the plan. See section 5.A of Notice 2005-92.

    Q9. Is it optional for employers to adopt the distribution and loan rules of section 2202 of the CARES Act?

    A9. It is optional for employers to adopt the distribution and loan rules of section 2202 of the CARES Act. An employer is permitted to choose whether, and to what extent, to amend its plan to provide for coronavirus-related distributions and/or loans that satisfy the provisions of section 2202 of the CARES Act. Thus, for example, an employer may choose to provide for coronavirus-related distributions but choose not to change its plan loan provisions or loan repayment schedules. Even if an employer does not treat a distribution as coronavirus-related, a qualified individual may treat a distribution that meets the requirements to be a coronavirus-related distribution as coronavirus-related on the individual’s federal income tax return. See section 4.A of Notice 2005-92.

    Q10. Does section 2202 of the CARES Act provide additional distribution rights to participants or otherwise change the rules applicable to plan distributions?

    A10. Under section 2202 of the CARES Act, a coronavirus-related distribution is treated as meeting the distribution restrictions for a section 401(k) plan, section 403(b) plan, or governmental section 457(b) plan. For example, under section 2202 of the CARES Act, a section 401(k) plan may permit a coronavirus-related distribution, even if it would occur before an otherwise permitted distributable event (such as severance from employment, disability, or attainment of age 59½). However, the CARES Act does not otherwise change the limits on when plan distributions are permitted to be made from employer-sponsored retirement plans. For example, a pension plan (such as a money purchase pension plan) is not permitted to make a distribution before an otherwise permitted distributable event merely because the distribution, if made, would qualify as a coronavirus-related distribution. Further, a pension plan is not permitted to make a distribution under a distribution form that is not a qualified joint and survivor annuity without spousal consent merely because the distribution, if made, could be treated as a coronavirus-related distribution. See section 2.A of Notice 2005-92.

    Q11. May an administrator rely on an individual’s certification that the individual is eligible to receive a coronavirus-related distribution?

    A11. The administrator of an eligible retirement plan may rely on an individual’s certification that the individual satisfies the conditions to be a qualified individual in determining whether a distribution is a coronavirus-related distribution, unless the administrator has actual knowledge to the contrary. Although an administrator may rely on an individual’s certification in making and reporting a distribution, the individual is entitled to treat the distribution as a coronavirus-related distribution for purposes of the individual’s federal income tax return only if the individual actually meets the eligibility requirements.

    Q12. Is an eligible retirement plan required to accept repayment of a participant’s coronavirus-related distribution?

    A12. In general, it is anticipated that eligible retirement plans will accept repayments of coronavirus-related distributions, which are to be treated as rollover contributions. However, eligible retirement plans generally are not required to accept rollover contributions. For example, if a plan does not accept any rollover contributions, the plan is not required to change its terms or procedures to accept repayments.

    Q13. How do qualified individuals report coronavirus-related distributions?

    A13. If you are a qualified individual, you may designate any eligible distribution as a coronavirus-related distribution as long as the total amount that you designate as coronavirus-related distributions is not more than $100,000. As noted earlier, a qualified individual may treat a distribution that meets the requirements to be a coronavirus-related distribution as such a distribution, regardless of whether the eligible retirement plan treats the distribution as a coronavirus-related distribution. A coronavirus-related distribution should be reported on your individual federal income tax return for 2020. You must include the taxable portion of the distribution in income ratably over the 3-year period – 2020, 2021, and 2022 – unless you elect to include the entire amount in income in 2020. Whether or not you are required to file a federal income tax return, you would use Form 8915-E (which is expected to be available before the end of 2020) to report any repayment of a coronavirus-related distribution and to determine the amount of any coronavirus-related distribution includible in income for a year. See generally section 4 of Notice 2005-92.

    Q14. How do plans and IRAs report coronavirus-related distributions?

    A14. The payment of a coronavirus-related distribution to a qualified individual must be reported by the eligible retirement plan on Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. This reporting is required even if the qualified individual repays the coronavirus-related distribution in the same year. The IRS expects to provide more information on how to report these distributions later this year. See generally section 3 of Notice 2005-92.


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