Talking with TaxSpeaker (Video 113 8.25.20)
1. My question is related to strategies to avoid the tax on PPP loan proceeds. It is my understanding that although the Cares Act stipulated that forgiven amounts would not be forgiven, the IRS is taking the position that the expenses used to allow forgiveness would be disallowed thus effectively making it taxable. I heard of a preparer saying that if the client would wait until after the first of the year to apply for forgiveness they would not have to disallow any of the expenses since they occurred in a different calendar year than the non-taxable income (forgiven PPP loan proceeds). Is there any merit to this argument?
2. Under the CARES Act, if the SBA pays a taxpayer’s monthly payment on a SBA 7A loan for six months, will the full amount of the payment be reported as other income (or negative expense) on the tax return because the taxpayer is receiving an economic benefit of principal reduction or only the interest portion?
3. I am developing a problem that I would like your input. I have several older people for which I have prepared taxes for 10-20 years, that no longer need file because of the higher standard deduction. These folks WERE great clients. The problem is that they now want me to certify that they do not need to file every year. They want this for free. Do you do this? How much do you charge? It seems that I am taking on a lot of liability for no $. I have been taking your classes for years and would love you input.
4. We have a Fiscal Year Ending 6/30/2020 client that received a PPP loan in April. They have spent at least half of it before the end of their fiscal year on payroll, rent, and utilities. We are currently preparing their Form 1120. We are trying to decide if we should reduce the amount of the PPP Loan Payable and the reduce the corresponding expenses since this would be the amount forgiven. Or we leave the PPP Loan Payable alone since the forgiveness requirements and procedures are not set in stone yet and deduct the expenses as we normally would. Essentially, we don’t want to prepare the return, and then as soon as everything is finalize we have to go back and amend it.
5. Due to the COVID 19 I am basically virtual. Do you have a sample letter you sent to your clients that basically told them you are no longer seeing people in person and changing to phone consultations you can make available to us?
6. You mentioned last week about IRS sending out bills to clients when payments were mailed by the client and gave the explanation of unopened mail. I have been receiving IRS notices from clients showing balances due dated in August and they have cancelled checks that cleared in mid to late July. Have you experienced this with your clients? Should I ignore the notices for now? Do you have any idea how IRS processes payments that they are cashing checks but not posting payments to the taxpayer?
7. Client is a sole proprietor and received PPP loan proceeds on August 7, 2020. If the client elects the 24 week period, what are the mechanics of the forgiveness given that there aren’t 24 weeks left in calendar 2020? How much can be forgiven and when is the loan forgiveness form due? Client had $180,000 of Schedule C income in 2019.
8. Would a copy of the 1099-R from SSA work as proof for SS Number verification in addition to their DL? It seems a lot of older customers can’t locate their SS Card and the wait to get help from the local SS Office is 4+ hours.
9. If an employee was hired part-time in April, after the Cares Act for Covid 19, and had to take off due to family member having covid and then the employee gets covid (was off a total of 4 weeks) and was paid for time off, can the employer let the employee go due to lack of business income?
10. I am wondering what part of the bonus depreciation for qualified improvement properties could be related to residential rentals - i.e. interior improvements, landscaping, appliances, etc.
11. how does tax preparer file POA with IRS for decedent wage & income info?
12. I have a client (partnership) who was on the cash basis for several years and in 2019 had to file form 3115 to convert to accrual because sales were over $25M for last three years. I was talking to him about possibly switching to S-corp but did not know and cannot find guidance on whether we can make this change in the middle of the 3 year 481a adjustment period. Can we make this change?