November 2020 Updates
Smart business, accounting, tax, and planning ideas from your MMKR CPAs!
Paycheck Protection Program (PPP) expenses deemed nondeductible by IRS
On November 18th, the IRS issued Revenue Ruling 2020-27 that addresses the deductibility of expenses paid for using PPP funds. The ruling made it clear that the IRS is not changing its position on the issue. Any expenses paid for using PPP funds will not be deductible as long as the taxpayer reasonably expects to receive forgiveness of their PPP loan. This applies to all expenses, including payroll expenses, but can be limited if the taxpayer does not reasonably expect to receive full forgiveness.

The timing of the forgiveness, or application for forgiveness, does not factor in here. This means that most taxpayers will have nondeductible expenses incurred in 2020 and nontaxable loan forgiveness income hitting in 2021. In the event that a taxpayer does not receive forgiveness for their full loan despite expecting to, the taxpayer will be able to amend the 2020 tax return to deduct the portion of expenses that were not forgiven, or simply deduct the expenses on the 2021 tax return. 

The PPP program has seen a number of changes since its implementation back in April and there is the possibility this is not the last change. As it stands, the loan forgiveness application will be due 10 months after the end of the taxpayer's covered period, which is when payments are set to begin. However, the sooner the application is filed and reviewed, the sooner the loan forgiveness amount can be finalized and everything reconciled for book and tax purposes.  

Contact us for more information.
New IRS Notice Opens Up Deduction Opportunities for High Tax States
In Notice 2020-75, the IRS has stated that it will be issuing proposed regulations to clarify that pass-through entities (S-corporations and partnerships) will be allowed to deduct state and local income taxes imposed on and paid by the pass-through entity. This could be a much needed windfall for pass-through entities operating in high tax states that see their owners' taxes capped at $10,000 on individual tax returns. Of course, there are a few caveats with this. 

For starters, the notice allows for this deduction only on "Specified Income Tax Payments" which means that simply withholding state income tax payments for the owners will not qualify for a deduction. This means that the states will need to pass bills allowing for the pass-through entities to pay income taxes at the entity level. As of this moment, the following states have enacted bills allowing for this election:

  • Connecticut
  • Louisiana
  • Maryland
  • New Jersey
  • Oklahoma
  • Rhode Island
  • Wisconsin

The notice was released on November 9th, we will see if more states join this now that it's known the IRS supports the position. The notice retroactively applies to years ending after December 31, 2017, however this may vary state to state depending on their own statutes.
What's New at MMKR?
MMKR welcomed our newest and youngest additions to the family this last month:
Baby Andrew and Baby Josie.
Congratulations to Jennifer Dickman and Spencer Langer!
We wish you both the best!
Jennifer & Baby Andrew Dickman
Spencer & Baby Josie Langer
In Case You Missed It...
The coming audit season might be much different than seasons of yore. As many companies continue to operate remotely during the COVID-19 pandemic, audit procedures are being adjusted accordingly.
Outstanding invoices can wreak havoc on your business's cash flow. To encourage prompt customer payment, try these tips.
Cash flow is a top concern for most businesses today. To keep your company’s cash flow positive, consider applying these four best practices.
Do you have questions about your specific goals or strategies?

Each of our clients is unique; therefore, we provide solid, forward-thinking business strategies, expertise, and advice along with traditional accounting, audit, and tax consulting services tailored to their needs.