Time For An Update!

We have a variety of updates for you today. 

First but not last, we truly appreciate your continued patience with us. We are trying to take vacations and spend some quality time with our families. We will continue to push tax returns out the door in the next months. Please look for emails from us with open items and questions in the next few weeks as we work on your returns.

PPP Second Draw Forgiveness (will it never end?)

Some Johnny-on-the-spot banks are opening the 2nd PPP forgiveness this week. We recommend that you wait to file until your 24-week spending period has ended. 

As was true for the first PPP loan, you do not have to rush to file unless you are selling your practice. You will have up to 10 months after the end of your spending period to apply.

As a reminder, please apply for forgiveness for PPP #1. Most applications are due either this month or next.

Second Draw PPP Forgiveness Details

Here is what you need to know for full forgiveness.

1.      At least 60% of the funds must be spent on payroll. This is defined the same as for the first: wages, state unemployment tax, retirement match and health insurance (paid by the practice).

2.      Owners are again limited to $20,833.00 for the 24-week period.

3.      Employees are limited to $46,154.00 in gross wages over the time period.

4.      If you had any tax credits you received as “free” wages, you must remove these from your wage calculation.

5.      The bank will ask for your Profit and Loss Statement to prove that you had a 25% reduction in Collections for one Quarter, 2020 compared to the same Quarter, 2019.

6.      If your loan was greater than $150,000 then the bank will ask for additional information. 

7.      Keep the application simple by using all eligible wage expenses first.

Advance Child Tax Credit

Next on our list is the Advance Child Tax Credit. For those who are eligible, the IRS is prefunding half of your child tax credit from August through December. 

This is a new program for families who need the cash before they file their 2021 tax returns next year. This will reduce the tax credit available when your tax returns are filed. If you receive the funds and aren’t eligible, they will have to be repaid on your 2021 tax return, be aware. If you are eligible and do not receive the credit, you will receive it with your 2021 tax return filing.

The credit has increased for 2021 to $3,600 per child (under the age of 6), $3,000 per child (for children between ages 6 and 17). As stated above, 50% of the credit will be sent as an advance payment – either by check or direct deposit. 

Please keep track of the payments as we will need to know the amounts sent to you when we prepare your 2021 tax returns.

You can elect out of the advance payments but as of last week the IRS was having problems with the election. More information is available on the IRS website.

COVID-19 Funeral Assistance

We sincerely hope you and your staff do not need assistance for this reason but we wanted to bring it to your attention. FEMA is reimbursing funds used for funeral expenses related to COVID. The link below shows the details of the program.  Please pass this information on to any in need.

COVID-19 Funeral Assistance | FEMA.gov

Tax Projections for 2021

Please remember, if you you have not sent your monthly accounting, please do so now. To prepare a June tax projection, we will need your practice financials prepared by our hardworking bookkeepers to process the projection. 

New South Carolina Catastrophe Savings Accounts

This year a new account for SC residents has been established. This allows an income tax deduction to individuals for certain contributions to a Catastrophe Savings Account (CSA) to cover an insurance deductible or self-insured losses for the taxpayer’s legal residence from certain hurricanes, rising floodwaters or other catastrophic windstorm event damage.

This account does not apply for those individuals who have second homes in South Carolina. It is tied to the taxpayer’s legal residence which allows only one CSA (if jointly owned). The amount that may be contributed depends on the taxpayer’s deductible amount (if any) for the homeowner’s policy. 

The limits are as follows –

1.      The qualified deductible is $1,000 or less.           

The total contribution is up to $2,000.

2.      The qualified deductible is over $1,000.

The lesser of $15,000 or twice the qualified deductible.

3.      No insurance deductible – the taxpayer is “self-insured.”

The lesser of $250,000 or the value of the legal residence. 

Qualified catastrophe expenses are defined as expenses paid or incurred by reason of a major disaster that has been declared by the Governor to be an emergency by executive order. The CSA must be established prior to a catastrophic event.

This is a short version of the notice establishing the CSA accounts so please let us know if you need more information. And yet again, we ask you to let us know if you set up an account so that we may take the proper deduction on your SC tax return for 2021.

That's it for today. Stay safe, healthy and enjoy your summer!!