SIDNEY — “2020 has presented many challenges for both businesses and individuals. We certainly have had to adjust our way of doing business as well as our day-to-day lifestyle. Most businesses, including ours, have adapted their operation to try to minimize the impact of COVID 19. From wearing masks and sanitizing our workplace to extending the workplace into our homes, we have all had to make adjustments. To some the impact has been moderate, others have not been so lucky. 2021 will continue to present challenges. New laws and regulations came at us quickly. Our goal is to help our clients navigate these new rules,” according to John Boeckman, president and managing partner of Monnier & Co., CPA’s.
His report continues:
The new laws that were passed were primarily contained in two acts, the Coronavirus Aid, Relief and Economic Relief (CARES) Act and the Consolidated Appropriations Act, 2021. The changes for businesses were significant. The CARES Act allowed many businesses to apply for Paycheck Protection Program Loans which eventually could become forgivable. These loans were designed to assist businesses through the expected slow time and closures due to the virus and provide the funds necessary to prevent layoffs. The forgiveness process for these loans just recently began. Many of them have already been forgiven, and Congress recently changed the impact of these loans by making the forgiveness non-taxable. The Consolidated Appropriations Act, 2021 introduced a second round of these loans with different requirements to qualify. Careful analysis is necessary in order to achieve the best result from this process.
Businesses are also permitted to carry back net operating losses five years and get back significant taxes paid in those years. Credits are also available for employee retention and paid sick leave for those employees that must be off due to the virus. Many other provisions of these new laws are available to help taxpayers keep their businesses up and running.
The new laws also provide relief to individuals in the form of stimulus payments and other rule changes designed to provide cash flow. Initially stimulus payments were sent out to individuals ($1,200) and married couples ($2,400) to provide much needed funds for those that qualify. An additional ($500) was also provided for each qualifying child. Expanded unemployment benefits and a second round of stimulus payments for those that qualify has been approved, and Congress is considering even more stimulus.
For individuals, the tax law changes include a $300 charitable deduction regardless if you itemize and an increase in the percentage (from 50% to 100% of adjusted gross income) of allowable charitable itemized deductions. Retirement planning has also been affected since taxpayers could forgo the required distribution from their retirement accounts in 2020. Also, qualified coronavirus related distributions could be made without incurring a 10% penalty for early distribution and the taxpayer can report the income over a three year period or alternatively pay the distribution back over a three year period. Also, a permanent extension of the 7.5% of adjusted gross income floor for the phase out of medical deductions is included.
A full-service accounting firm, Monnier & Co. offers traditional audit, accounting and tax services as well as estate planning, merger and acquisition planning, business and individual tax consulting, business succession planning, financial reporting services, business valuations, and technology consulting. The staff at Monnier & Co. is dedicated to providing quality service. We invite you to consult with any of our professionals regarding these or any other accounting or tax issues. Feel free to call us at 937-492-6101 or visit our website at monniercpa.com.