2020 New Rule Net Operating Loss Carryback

The CARES Act (“the Act”) was passed in late March 2020, in an effort to provide relief to the many businesses and individuals affected by the COVID -19 pandemic. Many of the new provisions include tax benefits for taxpayers, most of which have the effect of placing much-needed cash back into the hands of businesses and families in the form of deductions, refunds or tax credits.

Therefore, under the CARES Act, businesses and individuals with federal Net Operating Losses (“NOLs”) originating in years ending in 2018, 2019 or 2020 are permitted to carry back those losses for five years. This temporarily eliminates the tax law provision created under the Tax Cuts and Jobs Act (“TCJA”) of 2017, which eliminated carryback and limited the use of carryforward NOLs to 80% of taxable income.

Corporate taxpayers who are able to take advantage of the NOL carryback provision create additional liquidity for their companies, as the current corporate tax rate, which was lowered under the TCJA, is 21%. Prior to January 1, 2018, was 35%. Given this significant change, corporate taxpayers should carefully analyze the timing of NOL tax attribute utilization to maximize their potential benefit under the Act. This provision allows taxpayers in a loss situation to monetize their loss position and take advantage of a rate arbitrage.

Most C Corporation filers will be able to apply for refunds by filing Form 1139 Corporation Application for Tentative Refund. Individual filers should use Form 1045, Application for Tentative Refund. (The IRS recently released specific filing instructions related to filing forms by fax as well).

What does Rink & Robinson, PLLC recommend?

Moreover to take advantage of these provisions, taxpayers should review their 2018 tax return filings to determine if they reflect a loss. If so, and the business or individual filer will likely be eligible to consider a carryback claim. In many cases, we also suggest reviewing 2019 projections or financials.

*If the projections anticipate a loss, 2019 tax return preparation should be accelerated so that the refund from a carryback might be claimed more timely.

While the NOL carryback rule is a taxpayer-friendly provision in the CARES Act (one of several), taxpayers must be careful when considering this opportunity. Some situations where NOL carrybacks may need special consideration include the following:

  • A carryback year in which a corporation was not classified as a corporation.
  • A carryback year where the corporation was a member of a consolidated group.
  • A carryback year in which a corporation acquired or was acquired by another corporation.
  • A carryback to years subject to the Transition tax pursuant to Section 965.

Additionally, carrying back an NOL may also create changes in financial statement disclosures.


PPP Loan Forgiveness Application

The Paycheck Protection Program (PPP) enables eligible entities to qualify for a loan of up to $10 million to keep their workers employed. The best part is the loan is subject to forgiveness if approved borrowers meet certain requirements as defined in SBA regarding the disbursement of the funds including expenditures for maintaining payroll and other permitted uses, such as mortgage interest, rent and utilities.

The regulations contain very specific spending and documentation requirements that are essential for achieving debt forgiveness under the program. Rink & Robinson, PLLC  encourages businesses to be proactive with their lenders and work quickly to apply and understand the requirements for loan forgiveness benefits.

How Rink & Robinson, PLLC helps maximize PPP loan forgiveness

  • We will assist both borrowers and lenders with the necessary verification for PPP loan forgiveness. Our advisors will work closely with borrowers to assist them to maximize their loan forgiveness benefits.
  • PPP Loan Funds Planning – R&R CPA’s assist you in the documentation of need relative to loan application, as well as the requirements for spending and proper allocation and timing of funds to maximize forgiveness.
  • Loan Forgiveness Forecasting and Tracking – We work closely with borrowers to monitor and provide the accountability to ensure spending is appropriate for receiving loan forgiveness.
  • Concluding Documentation – Your  CPA advisory team will assist you in assembling the required borrower documentation and assist you in completing any necessary compliance reporting for your lending institution.

Below is a copy of the Application. A link below is provide for you convenience.  Call us for help!

Printable PDF Form 3508ez

PPP Loan Forgiveness


Frequently Asked Questions (FAQs) on PPP Loan Forgiveness
The Small Business Administration (SBA), in consultation with the Department of the Treasury,
is providing this guidance to address borrower and lender questions concerning forgiveness of
Paycheck Protection Program (PPP) loans, as provided for under section 1106 of the Coronavirus
Aid, Relief, and Economic Security Act (CARES Act), as amended by the Paycheck Protection
Program Flexibility Act (Flexibility Act).


We’ve Got You Covered

We’ve Got You Covered!

We have you covered during this pandemic!
COVID-19 protocol for protecting our staff and clients:
We want to make certain our clients and staff are protected to the best of our ability. We wear masks in our office and sanitize after each client meeting. We also sanitize throughout the day to ensure the safety and well being of everyone in our office.
  1. Upon arrival – our phone number is posted on the front door.
  2. Call the number 828-322-5813 and a staff member will come to your vehicle for curbside pickup or drop-off.
  3. If you request an in person meeting, then we will allow you to enter the building directly into our conference room…provided your answers meet the COVID-19 criteria: Have you traveled, been in contact with someone with the virus, have symptoms like fever, cough, loss of taste, etc.? If any of your answers are yes, you will be declined entry and kindly asked to reschedule.
Please note:
We have clients in all age categories. Some clients have underlying health conditions which warrant extra safety precautions. We want all of our customers to feel comfortable in our space. Please know we can not guarantee your protection against COVID-19, but we can do our best to follow the CDC guidelines.
Please be safe from
all of us at
Rink & Robinson, PLLC
Certified Public Accountant and Consultants


Depreciation Deductions for Owners of Passenger Vehicles

Rev. Proc. 2020-37


This revenue procedure provides: (1) tables of limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2020; and (2) a table of amounts that must be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2020. The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7). For purposes of this revenue procedure, the term “passenger automobiles” includes trucks and vans.


.01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service and for each succeeding year. For passenger automobiles placed in service after 2018, § 280F(d)(7) requires the Internal Revenue Service to increase the amounts allowable as depreciation deductions by a price inflation adjustment amount that is determined using the automobile component of the Chained Consumer Price Index forall Urban Consumers published by the Department of Labor.

.02 Section 168(k)(1) provides that, in the case of qualified property, the depreciation deduction allowed under § 167(a) for the taxable year in which the property is placed in service includes an allowance equal to the applicable percentage of the property’s adjusted basis (hereinafter, referred to as “§ 168(k) additional first year depreciation deduction”). Pursuant to § 168(k)(6)(A), the applicable percentage is 100 percent for qualified property acquired and placed in service after September 27, 2017, and placed in service before January 1, 2023, and is phased down 20 percent each year for property placed in service through December 31, 2026. Pursuant to § 168(k)(8)(D)(i), no § 168(k) additional first year depreciation deduction is allowed or allowable for qualified property acquired by the taxpayer before September 28, 2017, and placed in service by the taxpayer after 2019. For qualified property acquired and placed in service after September 27, 2017, § 168(k)(2)(F)(i) increases the first-year depreciation allowed under § 280F(a)(1)(A)(i) by $8,000.

.03 Tables 1 and 2 of this revenue procedure provide depreciation limitations for passenger automobiles placed in service during calendar year 2020. Table 1 provides depreciation limitations for passenger automobiles acquired by the taxpayer after September 27, 2017, and placed in service by the taxpayer during calendar year 2020, for which the § 168(k) additional first year depreciation deduction applies. Table 2 provides depreciation limitations for passenger automobiles placed in service during calendar year 2020 for which no § 168(k) additional first year depreciation deduction applies. The § 168(k) additional first year depreciation deduction does not apply for 2020 if the taxpayer: (1) did not use the passenger automobile during 2020 more than

50 percent for business purposes; (2) elected out of the § 168(k) additional first year depreciation deduction pursuant to § 168(k)(7) for the class of property that includes passenger automobiles; (3) acquired the passenger automobile used and the acquisition of such property did not meet the acquisition requirements in

  • 168(k)(2)(E)(ii); or (4) acquired the passenger automobile before September 28, 2017, and placed it in service after 2019.

.04 Section 280F(c)(2) requires a reduction to the amount of deduction allowed to the lessee of a leased passenger automobile. Pursuant to § 280F(c)(3), the reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. Under § 1.280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an amount determined by applying a formula to the amount obtained from a table. Table 3 applies to lessees of passenger automobiles. This table shows income inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased.


.01 The limitations on depreciation deductions in section 4.01(2) of this revenue procedure apply to passenger automobiles, other than leased passenger automobiles, that are placed in service by the taxpayer in calendar year 2020, and continue to apply for each taxable year that the passenger automobile remains in service.

.02 The table in section 4.02 of this revenue procedure applies to leased passenger automobiles for which the lease term begins during calendar year 2020. Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. See Rev. Proc. 2015-19, 2015-8 I.R.B. 656, as amplified and modified by section 4.03 of Rev. Proc. 2016-23, 2016-16 I.R.B. 581, for passenger automobiles first leased during calendar year 2015, Rev. Proc. 2016-23 for passenger automobiles first leased during calendar year 2016, Rev. Proc. 2017-29, 2017-14 I.R.B. 1065, for passenger automobiles first leased during calendar year 2017, Rev. Proc. 2018-25, 2018-18 I.R.B. 543, for passenger automobiles first leased during calendar year 2018, and Rev. Proc. 2019-26, 2019-24 I.R.B. 1323, for passenger automobiles first leased during calendar year 2019. SECTION 4. APPLICATION

.01 Limitations on Depreciation Deductions for Certain Automobiles.

(1) Amount of the inflation adjustment. Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the C-CPI-U automobile component for October of the preceding calendar year exceeds the automobile component of the CPI (as defined in § 1(f)(4)) for October of 2017, multiplied by the amount determined under § 1(f)(3)(B). The amount determined under § 1(f)(3)(B) is the amount obtained by dividing the new vehicle component of the C-CPI-U for calendar year 2016 by the new vehicle component of the CPI for calendar year 2016, where the C-CPI-U and the CPI for calendar year 2016 means the average of such amounts as of the close of the 12-month period ending on August 31, 2016. Section 280F(d)(7)(B)(ii) defines the term “C-CPI-U automobile component” as the automobile component of the Chained Consumer Price Index for All Urban Consumers as described in § 1(f)(6). The product of the October 2017 CPI new vehicle component (144.868) and the amount determined under § 1(f)(3)(B) (0.694370319) is 100.592.

The new vehicle component of the C-CPI-U released in November 2019 was 101.332 for October 2019. The October 2019 C-CPI-U new vehicle component exceeded the product of the October 2017 CPI new vehicle component and the amount determined under § 1(f)(3)(B) by 0.74 (101.332 – 100.592). The percentage by which the C-CPI-U new vehicle component for October 2019 exceeds the product of the new vehicle component of the CPI for October of 2017 and the amount determined under § 1(f)(3)(B) is 0.736 percent (0.74/100.592 x 100%), the automobile price inflation adjustment for 2020 for passenger automobiles. The dollar limitations in § 280F(a) are therefore multiplied by a factor of 0.00736, and the resulting increases, after rounding to the nearest $100, are added to the 2018 limitations to give the depreciation limitations applicable to passenger automobiles for calendar year 2020. This adjustment applies to all passenger automobiles that are first placed in service in calendar year 2020.

(2) Amount of the limitation. Tables 1 and 2 contain the dollar amount of the depreciation limitation for each taxable year for passenger automobiles a taxpayer places in service during calendar year 2020. Use Table 1 for a passenger automobile to which the § 168(k) additional first year depreciation deduction applies that is acquired by the taxpayer after September 27, 2017, and placed in service by the taxpayer during calendar year 2020; and Table 2 for a passenger automobile for which no § 168(k) additional first year depreciation deduction applies.

REV. PROC. 2020-37 TABLE 1


Tax YearAmount
1st Tax Year$18,100


2nd Tax Year$16,100
3rd Tax Year$9,700
Each Succeeding Year$5,760


REV. PROC. 2020-37 TABLE 2


Tax YearAmount
1st Tax Year$10,100
2nd Tax Year$16,100
3rd Tax Year$9,700
Each Succeeding Year$5,760

.02 Inclusions in Income of Lessees of Passenger Automobiles.

A taxpayer must follow the procedures in § 1.280F-7(a) for determining the income inclusion amounts for passenger automobiles first leased in calendar year 2020. In applying these procedures, lessees of passenger automobiles should use Table 3 of this revenue procedure.



REV. PROC. 2020-37 TABLE 3



Fair Market Value of
Passenger AutomobileOver                 Not Over
Tax Year During Lease
1st2nd3rd4th5th & later
240,000and over4731,0401,5441,8522,139


This revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2020.

tax services hickory nc

2020 Tax Filing Season

Here you’ll find items of current interest — new programs, recent guidance or timely reminders.

2020 Tax Filing Season

The Treasury Department and the Internal Revenue Service are providing special tax filing and payment relief to individuals and businesses in response to the COVID-19 Outbreak. The filing deadline for tax returns has been extended from April 15 to July 15, 2020. The IRS urges taxpayers who are owed a refund to file as quickly as possible. For those who can’t file by the July 15, 2020 deadline, the IRS reminds individual taxpayers that everyone is eligible to request an extension to file their return.

The 2019 income tax filing and payment deadlines for all taxpayers who file and pay their Federal income taxes on April 15, 2020, are automatically extended until July 15, 2020. This relief applies to all individual returns, trusts, and corporations. This relief is automatic, taxpayers do not need to file any additional forms or call the IRS to qualify.

This relief also includes estimated tax payments for tax year 2020 that are due on April 15, 2020.

Penalties and interest will begin to accrue on any remaining unpaid balances as of July 16, 2020. You will automatically avoid interest and penalties on the taxes paid by July 15.

Recent tax law changes have extended or changed many expiring tax law provisions, including:
Treatment of mortgage insurance premiums as qualified residence interest
Reduction in medical expense deduction floor
Deduction of qualified tuition and related expenses
Energy efficient homes credit
Employer credit for paid family and medical leave
Work opportunity credit
Special rule for determining earned income
Repeal of maximum age for traditional IRA contributions
Increase in age for required beginning date for mandatory distributions
Expansion of section 529 plans
For a complete list of affected tax law provisions see the Joint Committee on Taxation List of Expiring Tax Provisions 2020.

hickory nc cpa

CARES Act Tax Relief

We hope that you are keeping yourself, your loved ones, and your community safe from COVID-19. Along with those paramount health concerns, you may be wondering about some of the recent tax changes meant to help everyone coping with the Coronavirus fallout.

Update on the tax-related provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, Congress’s gigantic economic stimulus package that the President signed into law on March 27, 2020.

This document is chocked full of information and lenghty!

Recovery rebates for individuals

To help individuals stay afloat during this time of economic uncertainty, the government will send up to $1,200 payments to eligible taxpayers and $2,400 for married couples filing joints returns. An additional $500 additional payment will be sent to taxpayers for each qualifying child dependent under age 17 (using the qualification rules under the Child Tax Credit).

Rebates are gradually phased out, at a rate of 5% of the individual’s adjusted gross income over $75,000 (singles or marrieds filing separately), $112,500 (head of household), and $150,000 (joint). There is no income floor or ”phase-in”-all recipients who are under the phaseout threshold will receive the same amounts. Tax filers must have provided, on the relevant tax returns or other documents (see below), Social Security Numbers (SSNs) for each family member for whom a rebate is claimed. Adoption taxpayer identification numbers will be accepted for adopted children. SSNs are not required for spouses of active military members. The rebates are not available to nonresident aliens, to estates and trusts, or to individuals who themselves could be claimed as dependents.

The rebates will be paid out in the form of checks or direct deposits. Most individuals won’t have to take any action to receive a rebate. IRS will compute the rebate based on a taxpayer’s tax year 2019 return (or tax year 2018, if no 2019 return has yet been filed). If no 2018 return has been filed, IRS will use information for 2019 provided in Form SSA-1099, Social Security Benefit Statement, or Form RRB-1099, Social Security Equivalent Benefit Statement.

Rebates are payable whether or not tax is owed. Thus, individuals who had little or no income, such as those who filed returns simply to claim the refundable earned income credit or child tax credit, qualify for a rebate.

Waiver of 10% early distribution penalty. The additional 10% tax on early distributions from IRAs and defined contribution plans (such as 401(k) plans) is waived for distributions made between January 1 and December 31, 2020 by a person who (or whose family) is infected with the Coronavirus or who is economically harmed by the Coronavirus (a qualified individual). Penalty-free distributions are limited to $100,000, and may, subject to guidelines, be re-contributed to the plan or IRA. Income arising from the distributions is spread out over three years unless the employee elects to turn down the spread out. Employers may amend defined contribution plans to provide for these distributions. Additionally, defined contribution plans are permitted additional flexibility in the amount and repayment terms of loans to employees who are qualified individuals.

Waiver of required distribution rules. Required minimum distributions that otherwise would have to be made in 2020 from defined contribution plans (such as 401(k) plans) and IRAs are waived. This includes distributions that would have been required by April 1, 2020, due to the account owner’s having turned age 70 1/2 in 2019.

The CARES Act makes four significant liberalizations to the rules governing charitable deductions:

(1) Individuals will be able to claim a $300 above-the-line deduction for cash contributions made, generally, to public charities in 2020. This rule effectively allows a limited charitable deduction to taxpayers claiming the standard deduction.
(2) The limitation on charitable deductions for individuals that is generally 60% of modified adjusted gross income (the contribution base) doesn’t apply to cash contributions made, generally, to public charities in 2020 (qualifying contributions). Instead, an individual’s qualifying contributions, reduced by other contributions, can be as much as 100% of the contribution base. No connection between the contributions and COVID-19 activities is required.
(3) Similarly, the limitation on charitable deductions for corporations that is generally 10% of (modified) taxable income doesn’t apply to qualifying contributions made in 2020. Instead, a corporation’s qualifying contributions, reduced by other contributions, can be as much as 25% of (modified) taxable income. No connection between the contributions and COVID-19 activities is required.
(4) For contributions of food inventory made in 2020, the deduction limitation increases from 15% to 25% of taxable income for C corporations and, for other taxpayers, from 15% to 25% of the net aggregate income from all businesses from which the contributions were made.

Exclusion for employer payments of student loans.

An employee currently may exclude $5,250 from income for benefits from an employer-sponsored educational assistance program. The CARES Act expands the definition of expenses qualifying for the exclusion to include employer payments of student loan debt made before January 1, 2021.

Break for remote care services provided by high deductible health plans.

For plan years beginning before 2021, the CARES Act allows high deductible health plans to pay for expenses for tele-health and other remote services without regard to the deductible amount for the plan.

Break for nonprescription medical products. For amounts paid after December 31, 2019, the CARES Act allows amounts paid from Health Savings Accounts and Archer Medical Savings Accounts to be treated as paid for medical care even if they aren’t paid under a prescription. And, amounts paid for menstrual care products are treated as amounts paid for medical care. For reimbursements after December 31, 2019, the same rules apply to Flexible Spending Arrangements and Health Reimbursement Arrangements.

Business only provisions

Employee retention credit for employers. Eligible employers can qualify for a refundable credit against, generally, the employer’s 6.2% portion of the Social Security (OASDI) payroll tax (or against the Railroad Retirement tax) for 50% of certain wages (below) paid to employees during the COVID-19 crisis. The credit is available to employers carrying on business during 2020, including non-profits (but not government entities), whose operations for a calendar quarter have been fully or partially suspended as a result of a government order limiting commerce, travel or group meetings. The credit is also available to employers who have experienced a more than 50% reduction in quarterly receipts, measured on a year-over-year basis relative to the corresponding 2019 quarter, with the eligible quarters continuing until the quarter after there is a quarter in which receipts are greater than 80% of the receipts for the corresponding 2019 quarter.

For employers with more than 100 employees in 2019, the eligible wages are wages of employees who aren’t providing services because of the business suspension or reduction in gross receipts described above.

For employers with 100 or fewer full-time employees in 2019, all employee wages are eligible, even if employees haven’t been prevented from providing services. The credit is provided for wages and compensation, including health benefits, and is provided for the first $10,000 in eligible wages and compensation paid by the employer to an employee. Thus, the credit is a maximum $5,000 per employee.

Wages don’t include (1) wages taken into account for purposes of the payroll credits provided by the earlier Families First Coronavirus Response Act for required paid sick leave or required paid family leave, (2) wages taken into account for the employer income tax credit for paid family and medical leave (under Code Sec. 45S) or (3) wages in a period in which an employer is allowed for an employee a work opportunity credit (under Code Sec. 51). An employer can elect to not have the credit apply on a quarter-by-quarter basis.

The IRS has authority to advance payments to eligible employers and to waive penalties for employers who do not deposit applicable payroll taxes in reasonable anticipation of receiving the credit. The credit is not available to employers receiving Small Business Interruption Loans. The credit is provided for wages paid after March 12, 2020 through December 31, 2020.

Delayed payment of employer payroll taxes. Taxpayers (including self-employeds) will be able to defer paying the employer portion of certain payroll taxes through the end of 2020, with all 2020 deferred amounts due in two equal installments, one at the end of 2021, the other at the end of 2022. Taxes that can be deferred include the 6.2% employer portion of the Social Security (OASDI) payroll tax and the employer and employee representative portion of Railroad Retirement taxes (that are attributable to the employer 6.2% Social Security (OASDI) rate). The relief isn’t available if the taxpayer has had debt forgiveness under the CARES Act for certain loans under the Small Business Act as modified by the CARES Act (see below). For self-employeds, the deferral applies to 50% of the Self-Employment Contributions Act tax liability (including any related estimated tax liability).

Net operating loss liberalizations. The 2017 Tax Cuts and Jobs Act (the 2017 Tax Law) limited NOLs arising after 2017 to 80% of taxable income and eliminated the ability to carry NOLs back to prior tax years. For NOLs arising in tax years beginning before 2021, the CARES Act allows taxpayers to carryback 100% of NOLs to the prior five tax years, effectively delaying for carrybacks the 80% taxable income limitation and carryback prohibition until 2021.

The Act also temporarily liberalizes the treatment of NOL carryforwards. For tax years beginning before 2021, taxpayers can take an NOL deduction equal to 100% of taxable income (rather than the present 80% limit). For tax years beginning after 2021, taxpayers will be eligible for: (1) a 100% deduction of NOLs arising in tax years before 2018, and (2) a deduction limited to 80% of taxable income for NOLs arising in tax years after 2017.

The provision also includes special rules for REITS, life insurance companies, and the Code Sec. 965 transition tax. There are also technical corrections to the 2017 Tax Law effective dates for NOL changes.
Deferral of noncorporate taxpayer loss limits. The CARES Act retroactively turns off the excess active business loss limitation rule of the TCJA in Code Sec. 461(l) by deferring its effective date to tax years beginning after December 31, 2020 (rather than December 31, 2017). (Under the rule, active net business losses in excess of $250,000 ($500,000 for joint filers) are disallowed by the 2017 Tax Law and were treated as NOL carryforwards in the following tax year.)

The CARES Act clarifies, in a technical amendment that is retroactive, that an excess loss is treated as part of any net operating loss for the year, but isn’t automatically carried forward to the next year. Another technical amendment clarifies that excess business losses do not include any deduction under Code Sec. 172 (NOL deduction) or Code Sec. 199A (qualified business income deduction).

Still another technical amendment clarifies that business deductions and income don’t include any deductions, gross income or gain attributable to performing services as an employee. And because capital losses of non-corporations cannot offset ordinary income under the NOL rules, capital loss deductions are not taken into account in computing the Code Sec. 461(l) loss and the amount of capital gain taken into account cannot exceed the lesser of capital gain net income from a trade or business or capital gain net income.

Acceleration of corporate AMT liability credit. The 2017 Tax Law repealed the corporate alternative minimum tax (AMT) and allowed corporations to claim outstanding AMT credits subject to certain limits for tax years before 2021, at which time any remaining AMT credit could be claimed as fully-refundable. The CARES Act allows corporations to claim 100% of AMT credits in 2019 as fully-refundable and further provides an election to accelerate the refund to 2018.

Relaxation of business interest deduction limit. The 2017 Tax Law generally limited the amount of business interest allowed as a deduction to 30% of adjusted taxable income (ATI). The CARES Act generally allows businesses, unless they elect otherwise, to increase the interest limitation to 50% of ATI for 2019 and 2020, and to elect to use 2019 ATI in calculating their 2020 limitation. For partnerships, the 30% of ATI limit remains in place for 2019 but is 50% for 2020. However, unless a partner elects otherwise, 50% of any business interest allocated to a partner in 2019 is deductible in 2020 and not subject to the 50% (formerly 30%) ATI limitation. The remaining 50% of excess business interest from 2019 allocated to the partner is subject to the ATI limitations. Partnerships, like other businesses, may elect to use 2019 partnership ATI in calculating their 2020 limitation.

Technical correction to restore faster write-offs for interior building improvements. The CARES Act makes a technical correction to the 2017 Tax Law that retroactively treats (1) a wide variety of interior, non-load-bearing building improvements (qualified improvement property (QIP)) as eligible for bonus deprecation (and hence a 100% write-off) or for treatment as 15-year MACRS property or (2) if required to be treated as alternative depreciation system property, as eligible for a write-off over 20 years. The correction of the error in the 2017 Tax Law restores the eligibility of QIP for bonus depreciation, and in giving QIP 15-year MACRS status, restores 15-year MACRS write-offs for many leasehold, restaurant and retail improvements.

Accelerated payment of credits for required paid sick leave and family leave. The CARES Act authorizes IRS broadly to allow employers an accelerated benefit of the paid sick leave and paid family leave credits allowed by the Families First Coronavirus Response Act by, for example, not requiring deposits of payroll taxes in the amount of credits earned.

Pension funding delay. The CARES Act gives single employer pension plan companies more time to meet their funding obligations by delaying the due date for any contribution otherwise due during 2020 until January 1, 2021. At that time, contributions due earlier will be due with interest. Also, a plan can treat its status for benefit restrictions as of December 31, 2019 as applying throughout 2020.

Certain SBA loan debt forgiveness isn’t taxable. Amounts of Small Business Administration Section 7(a)(36) guaranteed loans that are forgiven under the CARES Act aren’t taxable as discharge of indebtedness income if the forgiven amounts are used for one of several permitted purposes. The loans have to be made during the period beginning on February 15, 2020 and ending on June 30, 2020.

Suspension of certain alcohol excise taxes. The CARES Act suspends alcohol taxes on spirits withdrawn during 2020 from a bonded premises for use in or contained in hand sanitizer produced and distributed in a manner consistent with FDA guidance related to the outbreak of virus SARSCoV- 2 or COVID-19.
Suspension of certain aviation taxes. The CARES Act suspends excise taxes on air transportation of persons and of property and on the excise tax imposed on kerosene used in commercial aviation. The suspension runs from March 28, 2020 to December 31, 2020.

IRS information site. Ongoing information on the IRS and tax legislation response to COVID- 19 can be found at https://www.irs.gov/coronavirus.

I will be pleased to hear from you at any time with questions about the above information or any other matters, related to COVID-19 or not.

I wish all of you the very best in a difficult time.
Yours Truly

1099 Deadline Fast Approaching

Specific Instructions for Form 1099-MISC
File Form 1099-MISC, Miscellaneous Income, for each person in the course of your business to whom you have paid the following during the year:

  • At least $10 in royalties (see the instructions for box 2) or broker payments in lieu of dividends or tax-exempt interest (see the instructions for box 8).
  • At least $600 in:
    Rents (box 1);
  • Prizes and awards (box 3);
  • Other income payments (box 3);
  • Generally, the cash paid from a notional principal contract to an individual, partnership, or estate (box 3);
  • Any fishing boat proceeds (box 5);
  • Medical and health care payments (box 6);
  • Crop insurance proceeds (box 9);
  • Payments to an attorney (box 10) (see Payments to attorneys, later);
  • Section 409A deferrals (box 12); or
  • Nonqualified deferred compensation (box 14).

You must also file Form 1099-MISC for each person from whom you have withheld any federal income tax (report in box 4) under the backup withholding rules regardless of the amount of the payment.

For COMPLETE  IRS details

Visit the IRS


For additional help with 1099 preparation….Call our office


Tax Savings for Business Owners

Very Important information
regarding Tax Savings for Business Owners

Dear Client:

As a business owner, you should be aware that you can save family income and payroll taxes by putting junior family members on the payroll. You may be able to turn high-taxed income into tax-free or low-taxed income, achieve social security tax savings (depending on how your business is organized), and even make retirement plan contributions for your child.

Here are the key considerations:

Turning high-taxed income into tax-free or low-taxed income. You can turn some of your high-taxed income into tax-free or low-taxed income by shifting some of your business earnings to a child as wages for services performed by him or her. In order for your business to deduct the wages as a business expense, the work done by the child must be legitimate and the child’s salary must be reasonable.

For example: Suppose a business owner operating as a sole proprietor is in the 37% tax bracket. He hires his 17-year-old daughter to help with office work full-time during the summer and part-time into the fall. She earns $10,000 during the year (and doesn’t have any other earnings). The business owner saves $3,700 (37% of $10,000) in income taxes at no tax cost to his daughter, who can use her $12,400 standard deduction for 2020 to completely shelter her earnings. Family taxes are cut even if the child’s earnings exceed his or her standard deduction. That’s because the unsheltered earnings will be taxed to the child beginning at a rate of 10%, instead of being taxed at the parent’s higher rate.

What about income tax withholding?

Your business probably will have to withhold federal income taxes on your child’s wages. Usually, an employee can claim exempt status if he or she had no federal income tax liability for last year, and expects to have none for this year. However, exemption from withholding can’t be claimed if (1) the employee’s income exceeds $1,100 for 2020 (and includes more than $350 of unearned income (such as dividends) for 2020), and (2) the employee can be claimed as a dependent on someone else’s return. Keep in mind that your child probably will get a refund for part or all of the withheld tax when he or she files a return for the year.

Social security tax savings, too.

If your business isn’t incorporated, you can also save some self-employment (i.e., social security) tax dollars by shifting some of your earnings to a child. That’s because services performed by a child under the age of 18 while employed by a parent isn’t considered employment for FICA tax purposes.

For example: Let’s say a sole proprietor who usually takes $120,000 of earnings from the business pays $5,700 to her 17-year-old child. The sole proprietor’s self-employment income would be reduced by $5,700, saving her $165.30 (the 2.9% HI portion of the self-employment tax she would have paid on the $5,700 shifted to her daughter). This doesn’t take into account a sole proprietor’s income tax deduction for one-half of his or her own social security taxes.

A similar but more liberal exemption applies for FUTA (unemployment) tax, which exempts earnings paid to a child under age 21 while employed by his or her parent. The FICA and FUTA exemptions also apply if a child is employed by a partnership consisting solely of his parents.

Note that there’s no FICA or FUTA exemption for employing a child if your business is incorporated or a partnership that includes non-parent partners. However, there’s no extra cost to your business if you’re paying a child for work you’d pay someone else to do, anyway.

Retirement benefits. Your business also may be able to provide your child with retirement benefits, depending on the type of plan it has and how it defines qualifying employees.

For example: If it has a simplified employee pension (SEP), a contribution can be made for the child up to 25% of his or her earnings but the contribution can’t exceed $57,000 for 2020. The child’s participation in the SEP won’t prevent the child from making tax-deductible IRA contributions as long as adjusted gross income (computed in a special way) is below the level at which deductions for IRA contributions begin to be disallowed. For 2020, that figure is $65,000 for a single individual.

If you have any questions about how these rules apply to your particular situation, please don’t hesitate to call. Also keep in mind that some of the rules about employing children (such as the maximum amount they can earn tax-free) change from year to year, and may require your income-shifting strategy to change, too.

Very truly yours,
Michael E. Rink

Business Succession Planning