COVID-19 Update: Beginning May 18, we will begin cautiously reopening Beaird Harris. Read More.
If you have any questions, please reach out to your primary Beaird Harris contact or call (972) 503-1040.

Beaird Harris will be closed on Friday, July 3rd in observance of the Independence Day holiday.

COVID & Taxes, Where Are We Now?

August 31, 2020

It is hard to believe that it is almost September!  With the constant flow of news and updates, we thought a quick summary of key issues and resources related to COVID would be helpful.  As always, please let us know if you have any questions and if we can be of assistance!  

PPP Forgiveness – Apply Now or Wait?  

This is the #1 question our clients have.  There is broad support in Congress to simplify the forgiveness application for smaller loans.  Congress reconvenes in September and there is pressure to pass another COVID relief package, which could include simplification of the Paycheck Protection Program (“PPP”) forgiveness process.  Other factors to consider in this decision include:

  • Banks and the Small Business Association (“SBA”) are new to the forgiveness process and are working through their own logistics.  Do you want to be at the front of the line as more of a “guinea pig” or wait until the process is streamlined and both have experience in this process?  
  • Does your business have other loans or business arrangements that make the PPP loan a problem for you (i.e. existing debt ratios with other lenders)?  
  • The SBA is still issuing clarification on PPP loan issues, including three updates this month on August 4th, 11th and 24th.  
    1. See our post for full details on the August 4th update.
    2. On August 11th, the SBA updated its PPP FAQs to add three Q&A that address the interaction between Economic Injury Disaster Loans (“EIDL”) advances and PPP loan forgiveness.   
    3. On August 24th, the SBA issued its latest Interim Final Rule (“IFR”), which addressed three issues:
      • When shareholders of an S or C corporation are subject to the owner-employee compensation limitations,
      • Related party rent limitation; and
      • The treatment of expenses when a portion of a borrower’s leased premises are sublet.

Because of these factors, many small businesses may hold off on applying for loan forgiveness for the time being; especially if your loan is less than $150,000.  

End-of-Year Tax Planning
Many business owners have reduced profits, have skipped payrolls, and are being very conservative with spending cash reserves.  We will be reaching out to our business clients in the upcoming months to assist with year-end tax planning.  Steps to think about now:

  • Make sure your books are up to date in order to have the best possible data for year-end planning.
  • If your family had any other changes in 2019 we want to know about it.  For example, job change of your spouse, 401K distributions, large sale of stock or property, or unemployment income will all factor into tax planning.
  • Remember that cash profits in the bank as of December 31st, but not yet paid out are still taxable to the owners of the business.  

Local Grants/Relief Programs

Many local cities and counties are still creating grant programs to provide relief related to COVID.  We encourage you to monitor your county and city websites on a regular basis for programs that could help your business.  As an example, Collin County just approved a new program last week.  

Employee & Labor Law and COVID

This is a tough area for small businesses.  As tax professionals, we are not experts in labor law.  You should consult with your attorney on any HR, employee and labor law questions.  Be wary of online advice that may not apply to you.  Labor law can vary greatly by state and this is a volatile area.  Here are a few resources that we have found helpful with common questions related to employees and COVID from the Department of Labor (“DOL”). 

  • Q&A page that has lots of specific information on employee matters as they relate to COVID.  
  • Definition of health care provider for purposes of the Family and Medical Leave Act (“FMLA”).  

Payroll Tax Breaks Related to COVID 

There are three key components to this:

  1. Who is eligible?  Credits are available to employers with less than 500 employees who provide emergency paid sick leave or emergency paid family and medical leave under the Families First Coronavirus Response Act (“FFCRA”). 
  2. What tax credits am I eligible for?  Refer to our most recent post on FFCRA credits.
  3. How do I handle the mechanics of this? You will need to coordinate with your payroll company BEFORE the wages are paid.  

Health and Human Services (“HHS”) Phase II Funding for Dentists
See our post for detailed information on this.  This deadline has been extended to September 13th.  If you have not applied, there is still time to do so. 

We hope that you have found this information helpful.  As always, please reach out to us if you have specific questions so we can help.  We are in this together!

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