Talking with TaxSpeaker Video 119
1. I was wondering what you are recommending to clients that have a PPP loan in excess of $150,000. In general, I know that you are recommending waiting to apply for forgiveness. My understanding is that you feel that the rules are going to change more. I am concerned for the timing of forgiveness. All of my clients with PPP loans in excess of $150,000 are having bad years. I would like to make sure that the forgiveness of the PPP loan reduces expenses in 2020. If the bank takes a long time to process the forgiveness application, the PPP loan may not be forgiven until 2021. Do you think it is a good idea for clients with PPP loans in excess of $150,000 apply for PPP loan forgiveness now?
2. Our client is purchasing stock in a New subsidiary company. The purchase price (stock purchase not assets) to the previous owners will be $7 Million. Client fronting $1 M and obtaining $6 M SBA loan. At closing Client will be required to pay $ 180,000 in loan fees (SBA charges, stamps, judgment searches, etc.) and $320,000 working capital cash contribution. The items are specifically broken down this way on the closing statement for another $500,000. The $ 180,000 loan fees will be amortizable over the life of the SBA loan. May we take the same position with the $320,000? Would the answer be different if the $500,000 was able to be included in the SBA loan making it $6.5 M?
3. When a person goes on Medicare they can no longer make a contribution to a health savings account. Social Security publication 05-10077 says on page 23 that you should not apply for Medicare, Social Security, or Railroad Retirement Benefits if you want to continue making an HSA contribution. If someone takes social security at age 62, does that mean they can no longer make an HSA contribution? The publication seems to also say that Medicare part A starts 6 months before you apply for Medicare and you should stop contributing to an HSA six months before you apply for Medicare to avoid the penalty. What is this 6 months thing?
4. I know another PPP question. This one is for self-employed individuals. Assume the self-employed individual has no employees and received a PPP loan based on their 2019 tax return. We know the IRS is saying taxpayers can’t deduct the expenses associated with the PPP loan, however, self-employed can’t deduct their owner draws. It would appear if we have a self-employed individual with no employees, they would no tax issues with the PPP forgiveness as it relates to expenses. What I’m I missing?
5. I was just starting some year end tax planning for a contractor that does rather well. They are taxed as an S-Corp and would need to compute wages in determining their limit on QBI deduction. If we apply for their PPP Forgiveness and base the forgiveness 100% on wages would that forgiveness then impact their wage deduction for purposes of computing the QBI deduction limit? Or should I instead consider using the other expenses to limit the impact of the wages reduction?
6. I have a client that runs a popular crabhouse in our small town in MD. They were hit hard during the early months of Covid. He applied for, received and used all of his PPP loan by the end of July. He found out today an employee has tested positive for Covid and he will he shut down for the next several days. Would he still qualify for ERTC for the employees he pays while the restaurant is shut? I don’t think he will, however, it can almost be thought of as 2 separate events in my mind. Almost like a 2nd round of Covid. He will pay his employees either way but hoping he can get some credit for paying his folks this next week.
7. Client had a RMD in 2019 that was not taken because of an oversight on the part of the trustee. Since RMD requirements for 2020 have been lifted, does the client still have to remedy the oversight of 2019 in 2020?
8. How do I handle passive loss carryover for a couple filing “married filing separate’, do they each get 50%?
9. I thought I read somewhere that businesses such as Mary Kay consultants etc, can deduct expenses up to their profits, but not beyond (no losses allowed). Is this correct?
10. Are you aware of any tax court cases or regs that support taking college tuition expense as a 2% itemized deduction. This is for a 2017 tax return.
11. Previously, I think that Bob mentioned that the IRS is now considering Health Care Sharing Ministries the equivalent to qualified health insurance. I think that he also said that it will qualify for the self-employed health insurance deduction. If I am correct, is the allowed deduction starting in 2020 or can you go back and amend returns to take the self-employed health insurance deduction?
12. Looking at some clients which did not get a PPP loan for a possible Retention Credit. The CARES Act slides show that the Retention Credit is not available if taking the Family First credits for 80 hrs sick leave. How will we know if the employee is going to use the Families First credits unless we wait until after 12/31/2020?