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  • 02/19/2021 9:00 AM | Anonymous member (Administrator)

    FEBRUARY 17, 2021 

    MATTHEW ERSKINE

    When I help settle an estate the most challenging task is mediating what is the “best” way to divide the jewelry, art, furniture and other tangible personal property of the deceased among their heirs. People behave irrationally when they feel that they were promised something under the will. They already feel that the item is theirs.  This is compounded by the friction between and among family members that existed during the decedent’s lifetime. 

    So, what is the best way to divide your assets? The fact is that there is no “best” way to divide assets, but there are some things you can do, or refrain from doing, to help avoid a family fight.

    First, do not tell someone that you will give them something in your will. If you want to give them something, give it to them today; otherwise, if you sell or give the item away to someone else, or even if it gets lost, the person you promised the item to will be disappointed. In the worst case, they may even be mad enough to sue the estate for the value of the item, especially when they have done work for you before your death with the expectation that they will get the item in return. I have had one client who promised a family necklace to a daughter who later forgot and gave it to a daughter-in-law. It was not so much that the mother had given the necklace away that hurt, it was that she had forgotten that she had promised it to her daughter. Fortunately, the daughter-in-law was gracious enough to give the necklace to her sister-in-law, and bad feelings where averted, but it could have been a very bad situation.

    Second, ask your heirs if they want it. Tastes change from generation to generation and things like formal china and silver sets for 28 is not something a 25-year-old single grandchild living in a studio apartment in LA is going to be able to take, even if they wanted it. Sometimes children and other heirs are very forthright in expressing their interest in certain things. Others may feel awkward about coming out and asking. My recommendation is to ask them what they would like. Sometimes they will surprise you with what they would like to have as a remembrance of you. Conversely, if you are gifting the item to another, or to charity, tell those who want it that they are not getting it and why. 

    Third, write out how you want to have things divided after your death, but keep it confidential.  If you have specific things you wish to go to specific people, write it down, and put it with your original will. Such a memorandum may not always be as binding as a trust, but it has great moral, and some legal force. You can also provide a method, or person, to break any stalemates. If there is no resolution, you can instruct that the items be sold. 

    Fourth, if you have artwork or collectibles, consider appointing someone who is knowledgeable about the items as a special personal representative to handle the division and possible sale of the collection. Your heirs probably do not have the same experience and knowledge you have about your collection, and too often heirs become overwhelmed by the sheer volume of stuff and end up selling, or giving away, very valuable items for a song. 

    Fifth, if you have things of local, social or historical interest, donate them to a local historical society. Many times, people keep the newsletters and other materials of the clubs and papers from their schools that are of not monetary value, but are not something that the local historical society or school alumni association has, and they value the item even if no one else does. I once had a client who came across a catalog of one of the first coin auctions held in Boston in the 1840s. It had notes as to who bought what, and for how much, written on the margins. According to an ephemera expert, it was not worth anything, but a local research library that had a collection of auction catalogs going back into the 19th century was delighted to get the piece.

    Finally, try to organize what you have. By this, I mean go through and inventory what you own as well as you can. Tell the history of the items, where you acquired it, with whom and why. Further, tell what items you consider good, which are better, and which are the best, and why.  Do not be afraid of getting some professional help. I have at times worked with local colleges to get help cataloging the papers of a writer or composer and allowing them to use the materials in their research. Getting access to this expertise is not always easy, but it is possible.

    There are a number of online services that provide a way to designate assets, though I have not tried any. I do feel, however, that these suggestions are relevant whether you use one of those services or not. These steps do not guarantee a conflict-free settlement of your estate, as there are some people who just want to have a fight, no matter what the excuse. In most cases, these suggestions, will help to minimize bad feelings all around.     

    Matthew Erskine is managing partner of Erskine & Erskine in Worcester, Mass., which provides legal and fiduciary services for unique assets.


  • 02/16/2021 9:08 AM | Anonymous member (Administrator)

    February 10, 2021

    By Cheryl Meyer

    Chad Davis, CPA (Canada), had been successfully working remotely for years when the coronavirus pandemic forced many accounting firms to go fully remote. He and Josh Zweig, CPA (Canada), founded LiveCA, a fully virtual accounting firm in Canada in 2013. Zweig was focused on tax and Davis on technology, so the two meshed well, especially since neither of them wanted to work from a brick-and-mortar office.

    “We spent two days in the woods, camped, and emerged with a handshake and a new company,” Davis said.

    Eight years later, LiveCA is thriving, employing about 80 people, and handling both Canadian and American clients. Adventurous Zweig, originally from Toronto, travels the world and works from various posts. Davis, from Nova Scotia, works full time from his large RV, which he shares with his wife, two children, and two dogs.

    In January 2021, Davis was sitting in his RV office in a beautiful part of Canada. “I’m in a campground on Vancouver Island in British Columbia and came here to isolate for the winter,” he said. Meanwhile, Zweig was caught in a lockdown in Argentina.

    Davis and Zweig have been at the forefront of a trend the pandemic accelerated.

    Only 4% of 223 CPA firms polled in the summer of 2020 said they were fully virtual heading into the pandemic, according to research by ConvergenceCoaching, a U.S. company offering training services to the public accounting profession. About three-fifths (61%) of the firms said they had some remote talent, and 27% said they had been strictly in-office pre-coronavirus.

    Once the pandemic ends, 81% of firms expected an increase or a significant increase in remote working among their employees, the survey said. Nearly one-third (30%) projected reducing their office footprint post-pandemic.

    The coronavirus has changed the business landscape significantly. Many accounting firm leaders, who were once reluctant to allow employees to work from home or other locations, now realize the value of a remote workforce, especially when it comes to recruiting and retaining talent. But working remotely can also create challenges, such as communicating with and managing employees, setting up necessary technology, and establishing and enforcing processes and policies for a virtual working environment.

    9 ways to make remote working successful

    What does it take for accountants to thrive when working virtually? Does it require changing interaction styles with clients or prospective employees?

    “Networking is about building relationships, and whether this is face-to-face or online, it’s about getting people to connect with you, and we do this through our personality, our behavior, and our communication,” said Sue Tonks, a UK-based leadership coach and entrepreneur, at the online 2020 AICPA & CIMA Women’s Global Leadership Summit in November.

    However, people only have three seconds to create an effective first impression when communicating with others online, Tonks said. “All people can see of you is a rectangular box,” she said about Zoom and other online platforms. “This is our stage.”

    Other challenges include feeling isolated, tired, or lonely; lacking motivation; dealing with distractions, often from children or barking dogs; and cohabitating with family, all day, every day.

    “The dynamic of being together 24/7 is a big shift for a lot of people and has caused a lot of struggles,” said Rohit Bhargava, founder of the Non-Obvious Company and author of seven books, including The Non-Obvious Guide to Virtual Meetings and Remote Work, published in 2020 (second edition coming in March 2021). Bhargava has shared his insights with organizations such as Microsoft, the World Bank, and JPMorgan Chase & Co.

    The future of work, he predicts, will be a hybrid of remote and in-office work, and thus it’s imperative that people know what it takes to flourish in a remote environment. Bhargava, Tonks, and Davis offered the following tips for prospering in a virtual world:

    Take up technology. “Embrace technology and learn how to be effective,” Bhargava said. When the pandemic started, he watched YouTube videos about lighting and setting up a professional home studio and soon after upped his video quality, which helped his business tremendously.

    Also, use video and invest in a good microphone and internet package, Davis said. “There’s nothing worse than slow internet or low-quality sound,” he said.

    It’s also important for organizations to set up policies that govern in-home technology setups. Davis suggests focusing first on tasks such as “password management, VPN usage, encryption, and what can and can’t be on your personal devices.” From there, move on to more firm-specific policies that address equipment ownership, internet speed requirements, and minimum-security practices. “Then move on to education and safe usage practices with every employee,” he said.

    Refine your routine. Don’t start your day reading email for hours, because your day can quickly unravel. “When you wake up, center yourself, do deep breathing, and think about what your priorities for the day are going to be,” Bhargava advised. If you still want to check email first thing during your morning cup of coffee, then cap it to an hour. “Literally set yourself an alarm,” he said. Then, move on.

    Be candid. Expect that noises — children, dogs, or the weed-whacking gardener — can occur when you’re working remotely, but be truthful about other things that could impact a video or phone chat. “If I had bad Wi-Fi, I will tell [clients] what I’m doing and not try to hide it, and normally it creates a more positive spin on the conversation,” Davis said.

    In addition, spell out your weaknesses to customers or others, which can naturally build trust. “That realism and truth helps speed up the relationship-building portion of an online relationship,” he noted.

    Be flexible and cognizant of communication styles. To build rapport, adapt your communication style to the person you are connecting to, Bhargava said. Determine which method garners the quickest response, and use that mode for that specific person. However, be cognizant that misinterpretation can occur if you send something off too quickly without much thought. “Be aware of the potential for misunderstanding in digital communications, and address them through a personal conversation instead of solely relying on email,” he advised.

    Davis’s firm has dealt with “communication sensitivity” for years, and this issue is a continual work in progress. “Sometimes communication issues can be avoided with more effective incentive structures and procedures that tend to be the source of communication breakdowns,” he said. “So, we’ve taken a more ‘root-cause’ approach to communication over the years.”

    Be punctual. LiveCA started using Zoom in 2015, and the cameras have always been on, Davis said. But building relationships virtually differs from doing so face to face. “Meetings start on time and end on time, and that has taught me to be a more functional communicator and to make sure we address the issues early and set expectations,” he noted.

    According to Davis, being a functional communicator “means that you’re more aware of the outcome that’s required for that meeting, and if you don’t get to address something, you effectively communicate the repercussions towards the end of the call to get back on track,” he said. “This is the opposite of intuitive communication that’s more free-flowing and may not get to a resolution within that scheduled time frame.

    “I’ve found working remotely emphasizes more respect for people’s time and, without the functional side of communication, it's really hard to replicate and delegate processes as you grow,” Davis added.

    Sparkle. Since you only have three seconds to make an impression online, make it count. “Just smile,” said Tonks in her presentation. “It’s warm, friendly, open, approachable.” Also, make eye contact as if you were face-to-face, pay attention to what others are saying, and don’t fidget, she said.

    Introduce yourself effectively. Tonks uses a technique, the “pause and effect,” which works especially well when you’re on a conference call with multiple people and want to be noted. State your first name, then pause, then state your first name again, and “then with effect and gusto and confidence, your surname,” she said. “So, my name is Sue [pause], Sue Tonks.”

    In addition, she stated, be specific when telling people what you do for a living. Don’t just say you’re a mergers-and-acquisitions consultant. Instead, she advised, say, “You know when major organizations want to buy out the other organizations? I help major international companies find the right partners, and as a result, they merge seamlessly.”

    Ask questions and follow up. When speaking with others online, ask questions. “Be visible. Don’t be invisible,” Tonks said. To stand out, she advised, take notes and mention people’s names on the chat. Say something like, “Oh, that was a really good point, Joe.”

    Also, realize your commonalities to kick off a conversation: You all live somewhere and have traveled; you’ve all been invited to an online event by the same person or organization; you’re all headed into the weekend or a holiday break; and you all have to deal with the weather, she said. And once you meet someone who can help your business or career, follow up. Ask if you can email them or connect on LinkedIn. “If you ask permission, you will never be a pest,” she noted.

    Be yourself. We’ve all been taught to act certain ways in professional environments, but the pandemic has changed the landscape, allowing people to be more individualistic in their approach to business communication and to work from almost any locale. The pandemic has had a life-altering effect on everyone, Davis said.

    “The things that make you unique will attract the right customers to you,” he said, adding, “embrace your homeschooling kids who barge into your call, pet the dog that wants attention, and don’t be afraid to sneak a quick snack. The pandemic has had a life-altering effect on everyone, and we’re all human at the end of day.”

    — Cheryl Meyer is a freelance writer based in California. To comment on this article or to suggest an idea for another article, contact Sabine Vollmer, a JofA senior editor, at Sabine.Vollmer@aicpa-cima.com.


  • 02/11/2021 9:07 AM | Anonymous member (Administrator)

    February 10, 2021

    By Jeff Drew

    The U.S. Small Business Administration (SBA) announced changes Wednesday designed to reduce delays in the Paycheck Protection Program (PPP) approval process.

    Millions of small businesses have applied for PPP forgivable loans since it reopened Jan. 11 with $284 billion in fresh funding. A significant percentage of those applications has been held up by process and system issues stemming from additional validation checks put in place to flag potential fraudulent applicants.

    The AICPA sent a letter Feb. 3 urging the SBA to address the problems, which were causing the SBA’s E-Tran and PPP Loan Processing system to either reject or require more documentation for around 30% of PPP applications. Often the system didn’t allow lenders to submit the documentation or directly address other errors, such as data mismatches, that were preventing otherwise acceptable applications from being approved. The AICPA also called on the SBA to provide more frequent and clear communications to lenders and small businesses about the PPP issues.

    To address the concerns raised about the PPP process, the SBA said it would allow lenders to directly certify the eligibility of borrowers for first- and second-draw loans and would not require lenders to submit supporting documentation of borrowers with validation errors until they apply for loan forgiveness. The changes are designed to speed up the flow of funds to PPP applicants while “maintaining the integrity” of the program, according to the SBA.

    The SBA also said it would create additional communication channels with lenders, including an immediate call with national lenders to brief them on the PPP platform’s added capabilities.

    How much the SBA changes will smooth out the application process will be revealed as the platform tweaks are implemented with lenders. Accounting firms with small business clients whose applications are on hold may want to continue to preach patience as the SBA works to improve its platform and procedures.

    Despite the system and process issues, the SBA approved almost 1.3 million PPP loans totaling $101 billion from Jan. 11 through Feb. 7. The program is scheduled to continue accepting applications through March 31.

    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 and $39.99 for nonmembers. 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.

    Accounting firms can prepare and process applications for the PPP on the CPA Business Funding Portal, created by the AICPA, CPA.com, and fintech partner Biz2Credit.

    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.

    — Jeff Drew (Jeff.Drew@aicpa-cima.com) is a JofA senior editor.


  • 02/10/2021 10:05 AM | Anonymous member (Administrator)

    February 1, 2021

    By Susan C. Allen, CPA/CITP, CGMA

    The COVID-19 pandemic caused 2020 to shape up as one of the most difficult years ever for taxpayers and tax practitioners alike. Taxes and other financial matters have also been significantly complicated by new relief provisions, both for tax professionals to interpret and advise clients on and for the IRS to execute and enforce. Nationwide shutdowns and a historic volume of unopened IRS mail add to these complexities as the IRS's automatic notice stream continues to churn out notices and its services continue to be limited.

    These extenuating circumstances likely mean that practitioners will need to help more clients than usual with IRS penalty and collection issues. Here are some strategies and best practices that practitioners should keep in mind when requesting penalty abatement from the IRS on behalf of clients.

    TALKING THE 'IRM' TALK

    It's important to understand and refer to the IRS's Internal Revenue Manual (IRM). This administrative handbook explains the procedures IRS employees should follow in the course of their work. Part 20 of the IRM discusses penalties and interest. Specifically, IRM Section 20.1.1.3 (10/19/20), Criteria for Relief From Penalties, spells out the four categories of penalty relief:

    • Correction of IRS error;
    • Statutory and regulatory exceptions;
    • Administrative waivers (e.g., first-time penalty abatement); and
    • Reasonable cause.

    The underlying guidance for each category in the IRM gives practitioners the criteria they need to fight penalties effectively for their clients. And quoting IRS language (and providing the IRM citation) in a penalty abatement request can often help the IRS process the request more quickly and improve the taxpayer's odds for a successful penalty abatement.

    FIRST-TIME ABATEMENT AND REASONABLE-CAUSE DEFENSES

    Though corrections of errors and statutory/regulatory exceptions are certainly viable options in certain circumstances, practitioners are likely finding their go-to penalty abatement defenses are either the first-time penalty abatement waiver (an administrative waiver) or reasonable cause.

    As a refresher, first-time penalty abatement is based on a clean compliance history and can be applied only against failure-to-file, failure-to-pay, and failure-to-deposit penalties. It does not apply to other types of penalties, such as the accuracy-related penalty. Essentially, it helps taxpayers who have an isolated, rare filing/payment compliance issue. But it is only available to use once every three years, meaning taxpayers should use it conservatively and weigh the dollar amount of the penalty carefully so as to potentially preserve this option. See the AICPA Tax Section's IRS First-Time Penalty Abatement page for more guidance.

    Reasonable cause is a facts-and-circumstances test where taxpayers spell out their situation and try to prove how they exercised ordinary business care and prudence. Many types of penalties allow for reasonable-cause defenses (and a reasonable-cause defense can be applied to multiple tax years/periods). The IRM describes categories of reasonable cause, several of which may be invoked for COVID-19—related issues and complications:

    • Death, serious illness, or unavoidable absence (IRM §20.1.1.3.2.2.1): For example, the taxpayer could have been sick or caring for a loved one with COVID-19.
    • Fire, casualty, natural disaster, or disturbance (IRM §20.1.1.3.2.2.2): COVID-19 was declared a natural disaster.
    • Unable to obtain records (IRM §20.1.1.3.2.2.3): Office closures and shutdowns may have prevented taxpayers from obtaining their records on time.
    • Erroneous advice or reliance (IRM §20.1.1.3.2.2.5): Tax legislation came out quickly, yet guidance sometimes lagged, making it hard to effectively advise clients.

    It's noteworthy that COVID-19's having been declared a natural disaster may help with proving reasonable cause. On March 13, 2020, President Donald Trump declared a nationwide emergency pursuant to Section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, P.L. 100-707, to avoid governors' having to request individual emergency declarations. All 50 states, the District of Columbia, and four territories have been approved for major disaster declarations to assist with additional needs related to COVID-19.

    Often, a compelling reasonable-cause defense may argue multiple categories in the IRM to showcase how the taxpayer's circumstances were complicated but the taxpayer nonetheless exercised ordinary business care and prudence.

    TAXPAYER RELIEF INITIATIVE

    The IRS in November announced a new program, the Taxpayer Relief Initiative, to help taxpayers who are unable to pay their taxes because of the pandemic (News Release IR-2020-248). Taxpayers who can't pay their tax debt have always had options such as short-term extensions, installment agreements, and offers in compromise, but now they have more flexibility with these agreements. The initiative also highlights reasonable-cause and first-time penalty abatement options to help with penalties.

    Tip: For clients who need a payment arrangement, it's wise to wait until the tax is paid in full before requesting penalty abatement. The failure-to-pay penalty will continue to accrue until the tax is paid in full. Thus, to help clients get the entire penalty removed (and not just a piece of it), wait until the balance is paid off to request abatement of the full penalty.

    A COLLABORATIVE PROCESS

    Remember that those who don't request penalty abatement won't receive it. Many penalty issues can be resolved fairly quickly over the phone with the IRS; other issues may require a straightforward letter to the IRS.

    And don't forget that the IRS's Independent Office of Appeals is always a viable option if the issue can't be resolved through normal channels. Appeals employees have more flexibility with penalty abatement, as they are instructed to apply the "hazards of litigation" standard. Also, for special circumstances that can't be resolved with the IRS, the Taxpayer Advocate Service is there to help (see "Tax Practice Corner: Enlist an Ally in TAS," JofA, Jan. 2021).

    As we navigate this unprecedented time, the AICPA continues to advocate for streamlined and improved penalty abatement procedures, and the IRS continues to work collaboratively with tax practitioners and taxpayers. Fortunately, the IRS has now expanded the avenues by which taxpayers may defend against or seek abatement of tax penalties. Tax practitioners who understand how to conduct their clients along these routes to obtain penalty waivers will be performing a much-appreciated service.

    Susan C. Allen, CPA/CITP, CGMA, is an AICPA senior manager—Tax Practice & Ethics. To comment on this article or to suggest an idea for another article, contact Paul Bonner, a JofA senior editor, at Paul.Bonner@aicpa-cima.com or 919-402-4434.

    AICPA member and Tax Section resources


  • 02/09/2021 8:59 AM | Anonymous member (Administrator)

    January 29, 2021

    Hosted by Neil Amato

    Paycheck Protection Program (PPP) loans and the start of tax season are two topics squarely on the minds of CPAs these days. This episode analyzes the Jan. 25 update by the U.S. Small Business Administration (SBA) about processing second-draw loan applications and looks at what recent IRS announcements mean for tax season. Kari Hipsak, CPA, CGMA, a senior manager at the Association of International Certified Professional Accountants, and Alistair Nevius, J.D., the JofA’s editor-in-chief, tax, are the guests for this quick look at recent news that affects the accounting profession.

    What you’ll learn from this episode:

    • Why PPP loan applicants should be patient and vigilant.
    • The practical applications of the SBA’s recent update.
    • A preview of the JofA’s February print issue.
    • What the announced date that the IRS begins accepting tax returns means for practitioners and filers.
    • Effects of the Consolidated Appropriations Act, 2021 (CAA), P.L. 116-260, on tax season.

    Play the episode below:


    Accounting firms can prepare and process applications for the PPP on the CPA Business Funding Portal, created by the AICPA, CPA.com, and fintech partner Biz2Credit.

    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.

    To comment on this episode or to suggest an idea for another episode, contact Neil Amato, an FM magazine senior editor, at Neil.Amato@aicpa-cima.com.

  • 02/04/2021 9:25 AM | Anonymous member (Administrator)

    February 4, 2021

    By Jeff Drew

    The AICPA sent a letter Wednesday urging the US Small Business Administration (SBA) to address problems small businesses are encountering when trying to apply for Paycheck Protection Program (PPP) forgivable loans.

    The letter, which is signed by AICPA President and CEO Barry Melancon, CPA, CGMA, refers to “a number of very significant operational changes to the PPP by the SBA which are not fully understood, as well as some process and system issues which need to be addressed in order to effectively provide critical relief to eligible organizations.”

    Some of the issues could be addressed by more communication from Treasury and the SBA, which oversee the PPP, the letter said. Other items will require SBA system and process improvements related to the E-Tran and PPP Loan Processing system, according to the letter.

    The letter addresses four areas of concern, as follows.

    Challenges with first- and second-draw PPP applications being denied acceptance in the SBA’s E-Tran system

    Additional validation checks put in place to counter potential fraudulent applicants are causing tens of thousands of legitimate applications to be denied acceptance by the SBA, the AICPA letter said, adding that “Lenders and loan applicants do not understand the process to resolve these declines, creating great anxiety and confusion for small business owners.”

    The letter describes some system/software issues that are causing declined applications, giving the example of many instances in which the small business owner is being incorrectly informed that they have a criminal record. Even after redoing this certification, borrowers may then still be declined on the same application due to another incorrect validation rule (for instance, an Applicant Tax ID issue).

    The AICPA requests that the SBA provide more information on the validation process and correct some of these system issues as an urgent priority. In addition, to reduce anxiety and confusion, small businesses would benefit greatly by being more clearly informed that their initial acceptance in the SBA E-Tran system could take more than a week via broad communications about the program. Because these validation checks are new, many applicants do not understand the potential change in the timeline for funding, particularly if their application encounters processing errors, the letter said.

    SBA processing and resolution delays for applications successfully submitted into the E-Tran system

    The SBA E-Tran system is flagging 20% to 30% of all first- and second-draw PPP applications for additional review based on validation checks, the AICPA letter said, noting that there are more than 40 different “error codes” related to these additional information requests.

    The letter outlines the following example: “One of the new requirements for second-draw sole proprietor applications is to use an EIN number instead of their SSN, even though many used their SSN with their original PPP application. This new requirement is causing the application to be declined, since one of the acceptance validation checks is to confirm the same number as the original PPP application. The overall top reason for decline is discrepancy with Applicant Tax ID, and the steps to correct this issue do not seem to be working in most cases. For instance, the system appears to report errors even in cases where the borrower used the same EIN on both applications and can demonstrate this fact to the lender.”

    The process for resolving the “error codes” is unclear and small business owners are being surprised by them, the letter said. The AICPA requests that the SBA provide further clarity and, even more importantly, communicate publicly that nearly one-third of all applications are receiving these requests for further review, which could delay processing by a week or more.

    SBA capping of first- and second-draw PPP loan amount

    SBA’s loan processing system has put in place a loan eligibility amount cap of $35,000 per employee for both first- and second-draw applications, the AICPA letter says, adding that the cap results in the SBA E-Tran system reducing the approved loan amounts. The AICPA asks the SBA to provide clear guidance related to these PPP loan caps because small businesses are confused when their loan amount is reduced with no explanation.

    Broad communication on available funding, overall processing and timing

    The letter recommends broader communication from the SBA confirming that there is sufficient funding to support all first- and second-draw PPP loan requests. The SBA also is urged to provide clear communication that processing time could be one to two weeks due to the increased validation checks and reviews.  

    Despite the system issues, the SBA approved nearly 900,000 loans totaling $72.7 billion from Jan. 11 through Jan. 31, leaving almost $212 billion available. Applications for PPP loans close March 31, 2021.

    AICPA experts discuss the latest on the PPP and other small business aid programs during a virtual town hall held most weeks on Thursday at 3 p.m. ET, including on Feb. 4. The webcasts, which provide CPE credit, are free to AICPA members and $39.99 for nonmembers. 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.

    Accounting firms can prepare and process applications for the PPP on the CPA Business Funding Portal, created by the AICPA, CPA.com, and fintech partner Biz2Credit.

    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.

    — Jeff Drew (Jeff.Drew@aicpa-cima.com) is a JofA senior editor.


  • 01/20/2021 8:58 AM | Anonymous member (Administrator)

    January 20, 2021

    By Jeff Drew

    The US Small Business Administration (SBA) and Treasury on Tuesday published updated Paycheck Protection Program (PPP) loan forgiveness guidance and forms, including a one-page application for borrowers that received a PPP loan of $150,000 or less.

    That form, called the PPP Loan Forgiveness Application Form 3508S, can be used by borrowers that received a PPP loan of $150,000 or less. The form seeks information about the borrower’s loan amount, disbursement date, employee totals, covered period dates, amount of the loan spent on payroll, and the amount of the loan for which forgiveness is being sought. Borrowers are not required to submit any supporting documentation with the application but are mandated to maintain payroll, nonpayroll, and other documents that could be requested during an SBA loan review or audit.

    The SBA and Treasury released two other PPP loan forgiveness applications: Form 3508 and Form 3508EZ. Borrowers must submit payroll and nonpayroll documentation when applying for loan forgiveness with those forms, which provide lists of the required documents. In addition, the SBA and Treasury released Form 3508D, which certain individuals must use to disclose controlling interest in an entity applying for a PPP loans.

    Also released Tuesday night was an interim final rule (IFR) consolidating prior PPP loan forgiveness rules and incorporating changes made by The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, P.L. 116-260, which revived the PPP with $284 billion in fresh funding and created second-draw loans, which allow borrowers that received PPP loans during the first iteration of the program last year to seek a second loan of up to $2 million provided they meet tightened size requirements and can document a year-over-year revenue decrease of at least 25% for one reporting period in 2020.

    The IFR and all four of the forms released Tuesday night apply to first-draw or second-draw PPP loans.

    The relaunched PPP began accepting applications Jan. 11 from community financial institutions that loan primarily to underserved businesses. The application window opened Jan. 14 for lenders with $1 billion or less in assets and for all lenders on Tuesday.

    The SBA announced Tuesday that that it approved about 60,000 PPP loan applications submitted by nearly  3,000 lenders, for over $5 billion from the program’s re-opening through Jan. 17.

    AICPA experts will provide a summary of the latest PPP forms and guidance during an online Town Hall on Thursday at 3 p.m. ET. The event is free for AICPA members and $39.99 for nonmembers.

    Accounting firms can prepare and process applications for the PPP on the CPA Business Funding Portal, created by the AICPA, CPA.com, and fintech partner Biz2Credit.

    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.

    — Jeff Drew (Jeff.Drew@aicpa-cima.com) is a JofA senior editor.


  • 01/15/2021 8:37 AM | Anonymous member (Administrator)

    January 14, 2021

    By Jeff Drew

    The .cpa domain application window will open Friday for licensed CPAs to apply for on an individual basis, the AICPA announced.

    Beginning at 10 a.m. ET Friday, individual CPAs can request their preferred branding using .cpa, which is the restricted internet domain for the accounting profession. Thousands of licensed CPA firms and approved organizations, such as state CPA societies, submitted applications for .cpa domains from the program’s launch on Sept. 1 through 6 p.m. ET on Thursday.

    The AICPA was awarded ownership and management of .cpa in 2019 by the Internet Corporation for Assigned Names and Numbers. CPA.com, the AICPA’s business subsidiary, administers and manages the .cpa domain.

    Top-level domains are the handful of letters at the end of an email or website address, such as .com or .org. Use of a .cpa domain allows practitioners to strengthen their brand identity in online communications and provides better security and resistance to internet fraud schemes such as phishing and spoofing, the AICPA said. And because the domain is available only to licensed CPAs and licensed CPA firms, it promotes greater trust with clients and the general public.

    To learn more about .cpa or to apply for the new service, visit register.domains.cpa.

    — Jeff Drew (Jeff.Drew@aicpa-cima.com) is a JofA senior editor.


  • 01/14/2021 10:29 AM | Deleted user

    By Rick Meyer, CPA, MBA, MST

    As we start the New Year, hopefully fresh from all the tax drama, we

    can at least take a deep breath and rejoice about some Covid-19 tax relief. On

    Sunday, December 27, 2020, the President signed into law, what is called, the

    Consolidated Appropriations Act (CAA), a combination of Covid-19 relief

    along with many other provisions amongst the 5,593 pages.

    It seems that with all new tax law, it boils down to some basic chunks of

    data:

    1. The Headliner (we’ve all heard and read about) provisions,

    2. The Extenders,

    3. The Esoteric provisions, and

    4. Everything Else

    This last “everything else” category is where all the fun begins...the never

    ending search to find those buried treasures in the new law. Let’s briefly

    discuss the first three categories and then spend most of our time discovering

    some of those “everything else” hidden gems!

    The Headliner Provisions – The $600 payment per person, expansion of the

    PPP loans, and unemployment benefits,

    The Extender Provisions – 5 year extensions for the Work Opportunity, New

    Markets and Empowerment Zone credits, and the exclusion of income for the

    employee on up to $5,250 of student loans paid by the employer,

    The Esoteric Provisions – Tax reductions for wine, liquor, spirits and beer,

    and of course, we can’t forget about the three-year recovery period for race

    horses.

    The EVERYTHING ELSE Provisions:

    Let’s jump into a few that I would consider to be gems, worthy of discovery:

    Employee Retention Credit

    This is huge! Previously in the original CARES ACT, the employee retention

    credit was the lost sheep. With some new changes, employers could get a big

    payroll tax credit for keeping their employees on the payroll!

    This is now a 70% credit on up to $10,000 of qualified wages per employee,

    PER QUARTER, for the first two quarters in 2021, through June 30, 2021.

    Thus, if employers qualify, they can claim up to $14,000 credit per employee

    in 2021.

    Plus, this even works with employers with up to 500 employees! Note, that

    this is a refundable payroll tax credit offsetting the employer’s portion of

    payroll taxes. So, if these credits exceed payroll taxes, you could get a refund!

    To qualify, the employer’s gross receipts for the first two 2021 calendar

    quarters must be at least 20% less than the 2019 quarter. Alternatively,

    employers can elect to use the prior quarter’s gross receipts to qualify.

    There are various complexities and unanswered questions about how the

    Employee Retention Credit will impact other wage based credits in the tax law

    and how to best optimize utilization of all available credits. A detailed and

    thorough analysis needs to be done with each taxpayer’s facts and

    circumstances. Also, there will need to be further guidance from the IRS and

    Treasury. We continue to be in discussions with current and former members

    of Congress and high level IRS Officials to gain clarity, insight, and

    Congressional intent on this very special and potentially valuable credit.

    PPP (Payroll Protection Program) Loans and Expense Deduction

    The new law clarifies that business expenses paid with forgiven PPP loans are

    tax deductible.

    Section 179D Made Permanent

    If you are an architect, engineer, or contractor, or a CPA with any of these

    clients, this is a huge opportunity for them to claim this, now permanent

    deduction. This deduction applies if they are encouraging green, energy

    efficient design of public buildings. This would include improvements to the

    building envelope, lighting, heating, cooling, ventilation, and hot water

    systems.

    The deduction could be up to $1.80 per square foot. Although the architect,

    engineer, or contractor doesn’t own the public building, they could be

    allocated this deduction from the government entity. It’s like a free deduction!

    Since it is calculated based on square footage, a large high school, elementary

    school, or public library could yield a sizable deduction to the architect,

    engineer or contractor. This concept also applies to owners of commercial

    buildings.

    Section 179D encourages energy efficient designs while reducing energy costs

    for all. It’s a win-win for architects, engineers, contractors, the government,

    taxpayers, and commercial building owners!

    Meal Deduction

    For 2021 and 2022, the 100% deduction for business meal food and beverage

    is back! This includes carry-out and delivery meals.

    Charitable Contributions

    The non-itemizer, above-the-line deduction for cash charitable contributions

    increases to $600 for married taxpayers filing jointly (non-married filers or

    married filing separately are limited to $300).

    Relief for FSA (Flexible Spending Account)

    Remember the “use it or lose it” rule requiring employees to spend money in

    their FSA account for health or dependent care by year end, or lose this

    money? The old rules did allow a carryover of unused funds of $560 to 2021.

    Well, my daughter has been frantically calling me since June of 2020. She had

    over $2,000 contributed to her dependent care FSA. Then, her daycare center

    closed in June, 2020 due to Covid. How could she get this money back? She

    had no other daycare expenses since the family was volunteering to watch the

    kids for free. Would she lose over $2,000 of her hard earned money?

    Well, this little gem of a law eliminates the health and dependent care

    carryover limit. Now, employees could carryover any unused amount from

    either the 2020 or 2021 plan year to the next year.

    What’s Next?

    Buried within the 5,593 pages are many other provisions and hidden gems

    that will need to be discovered, understood, and put to use. We teased you

    here with just a few. Be prepared to read and find more buried treasures that

    could help you or your clients. Whoever said that Congress is trying to simplify

    the Tax Code? Hang in there, get your fingernails dirty and get digging!

    Rick Meyer, CPA, MBA, MST is a long time member of the Illinois CPA Society and has served on various tax committees over the past 40+ years. He is a Director for alliant group, a national firm that works with businesses and their CPAs to identify powerful government sponsored tax credits and incentives. He could be contacted at rick.meyer@alliantgroup.com.

     


  • 01/14/2021 10:28 AM | Anonymous member (Administrator)

    January 13, 2021

    By Jeff Drew

    The application window for Paycheck Protection Program (PPP) forgivable loans will open Friday for lenders with $1 billion or less in assets, the US Small Business Administration and Treasury announced.

    The opening, which will take place at 9 a.m. ET, applies for both first- and second-draw PPP loans.

    The program will begin accepting applications for first- and second-draw loans from large lenders on Tuesday, Jan. 19.

    PPP reopened Monday initially for community financial institutions (CFIs) to make loans to first-time PPP borrowers. CFIs were allowed to make second-draw loans to previous PPP recipients starting Wednesday.

    CFIs typically work with underserved small businesses. SBA and Treasury granted the initial early access to PPP so these small businesses, which include many minority- and women-owned concerns, could get first crack at accessing the $284.5 billion in PPP funding approved in the part of the $900 billion COVID-19 relief bill that was signed into law on Dec. 27.

    The AICPA issued a news release earlier Wednesday encouraging accounting firms to aggressively advance PPP applications for small businesses in anticipation of the SBA beginning to accept applications from all lenders.

    “We believe the full program needs to go live as soon as possible and we fully support the Treasury Department and SBA reopening the program for all lenders,” said AICPA President and CEO Barry Melancon, CPA, CGMA, in the news release. “What we’ve been telling CPA firms is be prepared and get to work. All indications, based on input from the Treasury and SBA, is there will be enough funding to meet all of the ‘first draw’ and ‘second draw’ PPP applications, so firms can help alleviate concerns their clients may have.”

    The AICPA has been advising firms to collect key information from their clients such as average monthly payroll amounts, quarterly revenue for second-draw borrowers, and other required documentation to speed the process.

    AICPA executives will discuss the latest PPP developments and their implications for CPAs and their small business clients at this week’s AICPA Town Hall at 3 p.m. ET on Thursday.

    PPP funding, forms and guidance

    Accountants played a key role in helping small businesses secure needed funding during the first iteration of PPP, which provided $525 billion in forgivable loans over five months before it stopped accepting applications in August. The $284.5 billion in fresh PPP funding includes set-asides of $35 billion for first-time loans and $15 billion set aside for CFIs.

    The SBA and Treasury issued guidance Jan. 6 for the new PPP, which shares many of the same rules as the old PPP but also has some significant differences. Application forms for first- and second-draw loans were released a couple of days later.  

    Quick overview of the new PPP

    In general, first- and second-time PPP borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs (with a cap per employee of $100,000 annualized) in 2019, 2020, or the year prior to the loan. PPP borrowers with North American Industry Classification System (NAICS) codes starting with 72 (such as hotels and restaurants) can receive up to 3.5 times their average monthly payroll costs on second-draw loans.

    The loans are capped at $10 million for first-time borrowers and $2 million for second-time PPP borrowers.

    PPP first- and second-draw loans may qualify for forgiveness if the funds are used on the following eligible costs: payroll, rent, covered mortgage interest, and utilities, covered worker protection and facility modification expenditures, covered property damage costs, covered payments to suppliers and payments for business software or cloud computing services that facilitate business operations, product or service delivery, and a number of back-office functions, including accounting.

    To be eligible for full loan forgiveness, PPP borrowers must spend no less than 60% of the funds on payroll over a covered period of their choice between eight and 24 weeks.

    Borrowers are eligible for a second-draw PPP loan of up to $2 million, provided they have:

    • 300 or fewer employees.
    • Used or will use the full amount of their first PPP loan on or before the expected date for the second PPP loan to be disbursed to the borrower. The IFR also clarifies that the borrower must have spent the full amount of the first PPP loan on eligible expenses.
    • Experienced a revenue reduction of 25% or more in all or part of 2020 compared with all or part of 2019. This is calculated by comparing gross receipts in any 2020 quarter with an applicable quarter in 2019, or, in a provision added in the IFR, a borrower that was in operation for all four quarters of 2019 can submit copies of its annual tax forms that show a reduction in annual receipts of 25% or greater in 2020 compared with 2019.

    First time PPP loans are available to borrowers that were in operations on Feb. 15, 2020 and are from one of the following groups:

    • Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.
    • Sole proprietors, independent contractors, and eligible self-employed individuals.
    • Not-for-profits, including churches.
    • Accommodation and food services operations with NAICS codes starting with 72 that have fewer than 500 employees per physical location.
    • Sec. 501(c)(6) business leagues, such as chambers of commerce, visitors’ bureaus, etc., and “destination marketing organizations” that have 300 or fewer employees and do not receive more than 15% of receipts from lobbying. The lobbying activities must comprise no more than 15% of the organization’s total activities and have cost no more than $1 million during the most recent tax year that ended prior to Feb. 15. 2020. Sports leagues are not eligible.
    • News organizations that are majority-owned or controlled by an NAICS code 511110 or 5151 business or not-for-profit public broadcasting entities with a trade or business under NAICS code 511110 or 5151. The size limit for this category is no more than 500 employees per location.

    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.

    — Jeff Drew (Jeff.Drew@aicpa-cima.com) is a JofA senior editor.



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