Tag Archives: restaurant

COVID-19 Financial Relief, Education, Tips

Restaurant Revitalization Fund: 4/13 SBA + IRC Webinar

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Today’s excellent Restaurant Relief Town Hall was recorded and released later in the day for all to enjoy.

Erika Polmar, of the Independent Restaurant Coalition, was joined this time by two representatives of the SBA: Patrick Kelley and Julie Verratti. These two were not just talking heads who simply touted how great the program is — instead they gave real guidance, solid explanations, and answered many questions from the IRC and attendees.

I was encouraged in part because Patrick and Julie are actually crafting the program, refining it, and working with groups such as IRC to make it happen. They showed an eagerness to make this program a success, and the skills to back it up. Julie Verratti in particular was a welcome change to what we’ve seen at the SBA over the past year — she was articulate, knowledgeable, humble, and seemed to have a real comprehension of the issues at hand and what is at stake; she gets why it’s so important to get this program right. She also has a good handle on what elements of the program come from statute and where the SBA has authority to interpret and administrate. Patrick indicated appropriate deference to her knowledge, and to the process of getting the program designed and tested properly — before opening the floodgates to applications. Let’s hope these two keep up the good work and have what they need to roll this out effectively.

As usual, I took notes — they did a full overview plus deep dives into certain areas and it’s worth your hour of time to watch. These notes are just the noteworthy new items from my own perspective.

The biggest news is that the SBA Administrator has chosen to preemptively extend the final date for expending the funds all the way to 3/11/2023 — the maximum allowed by statute.

Debt service will be considered a covered expense — both principal and interest payments count! (Clarification: no debt prepayments allowed, but regular debt service of all types is permitted.)

Also on the list of covered expenses is depreciation — but not “bonus or accelerated”.

Related follow-up question: does that mean we have to recalculate depreciation from the usual MACRS to straight-line? That doesn’t seem like what he meant, but we’ll need clarification. I suspect he was only referring to bonus depreciation and Section 179 expensing.

Women-owned, veteran-owned, socially/economically disadvantaged individuals – if anyone owns 20% or more and qualifies in one of these groups, add them together, to see if they reach 51%. If so, they can use the 21-day priority period.

Related follow-up question: to clarify — a 50/50 husband-wife owned company would NOT qualify as women-owned?

They said numerous times that everybody should apply on Day One.

Related follow-up question: How will the SBA avoid the system going down if everyone is applying on Day One, like what happened with the SVOG?

Related follow-up question: is this the case even if they’re not qualified to apply during the 21-day priority period? So a white-cis-male-owned restaurant under $500k revenue should still apply on Day One?

Timing of opening the program: SBA will have a 7-day pilot period to test their system (with people randomly selected from self-identifying as veteran, women-owned from PPP applications), and only then will go live with the 21-day advance application period for those who qualify.

Related follow-up question: How much notice will we have that the RRF is opening? Do we know when it is going live? As a CPA firm we are scrambling to calculate PPP1 Forgiveness and 2020 ERC so we can get the amount of ERC-eligible wages pulled off the 2020 returns before filing them. But we don’t have IRS guidance about whether 50%+ owners are allowed to take ERC… so all those returns are on extension right now. We want to make sure we wait as long as possible to get them all filed (in case IRS comes out with guidance), but that they are all submitted before this program goes live.

They will be working on allowing many different forms of documentation to prove the revenue decline, but tax returns, as they said last time, will be the easiest, most streamlined and efficient approach. Form 4506-T will be submitted through the docusign e-signature portion of the application, which allows SBA to confirm tax information with the IRS.

That’s it for now — I encourage you to watch the webinar and to start planning for an opening that’s more likely going to be a week or two away, rather than between now and the 19th (as was suggested last week). For planning purposes we at least know we’ll have a full week from when they start testing the application portal (though I’m not sure how we’ll know when that will begin).

Julie Verratti used the phrase “working in the world of reality and not in a vacuum” to describe their relationship with IRC and why they are doing this kind of outreach — some of the most encouraging words the SBA could possibly offer to us after the past year of jumping through hoops for financial relief.

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

COVID-19 Financial Relief, Education, Tips

Restaurant Revitalization Fund: Free Webinar from Rep. Lee & New NRA FAQ

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Still no word on the SBA guidance we had hoped for this past Friday, but the end of the week did bring us some new info about the Restaurant Revitalization Fund.

On April 8th, Congresswoman Barbara Lee hosted a free informational webinar that was chock-full of excellent info. If you don’t have time to watch the full 41-minutes, then take a look at her twitter thread to see excerpts of the most frequently-asked questions.

Then on the following day, the National Restaurant Association released an informative updated FAQ about the RRF program. There are 39 questions in the FAQ and every one is worth reading. Please — whether you are a restaurant owner or you work with them… do your homework! I know we’re all exhausted, but this is too important not to: check it out. If you absolutely must read a summary for now, this “Nation’s Restaurant News” article does a nice job.

There were only two new pieces of info on the FAQ since the notes I took at the IRC webinar, as far as I could tell:
1) PPP loans are deducted from total eligible funds, but EIDLs and ERTCs will likely not be. This makes sense, since an Employee Retention Credit does not show up as income on a tax return, but it’s nice to know NRA doesn’t expect it to count as income, either.
2) The minimum grant award may be set at $1,000. This is apparently to address the effort that goes into applying — so many got paltry PPP loans unexpectedly and were frustrated at so little reward after so much effort.

It also reiterates the following details:
– The covered period may extend through March 2023
– Permanently closed and bankrupt businesses without reorganization plans are ineligible
– Businesses owned by women, veterans and socially/economically disadvantaged individuals will require self-certification
– Eligible expenses include maintenance and construction
– RRF grants will not be taxed as income, but are eligible for federal tax deductions

Cross your fingers for upcoming guidance from the SBA, a draft application, and a date for the program opening. We are hoping for at least a week’s notice between the draft being released and the program going live, so that small business owners and their accountants have sufficient time to prepare.

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

COVID-19 Financial Relief, Education, IRS, Site News, Tips

Restaurant Revitalization Fund: Client Options for Tax & ERC Filings

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Cafe Mustache, Logan Square, Chicago, IL

The Restaurant Revitalization Fund (RRF) is a grant calculated by subtracting 2020 revenue from 2019 revenue to calculate the total drop between the two years — presumably caused by the Covid-19 pandemic. To substantiate the amount of the revenue decrease between 2019 and 2020, the SBA will be requesting tax returns for both years. There are other documents that will be acceptable, but the way to get the application through the system as quickly as possible – processed by computers rather than slowed down by human review – is to use tax returns.

The issue is that many restaurants are also eligible retroactively for the 2020 Employee Retention Credit (ERC), and the IRS has recently ordered that the corresponding reduction in wages for that credit needs to be on the 2020 tax return. However, the Paycheck Protection Program (PPP) Forgiveness applications need to be prepared before calculating the amount of the ERC, in order to maximize the amount of financial relief the client receives between the two programs. Therefore, at our firm, these returns are all on extension while we run these calculations.

Now that the RRF is about to open – possibly as soon as the third week of April – we would like to finalize those calculations and returns, but the catch is that the IRS has still not released guidance on whether or not 50%+ owners of a business are eligible for the credit. Accountants are split down the middle on what the existing legislation, which is extremely unclear, tells us on the topic. As such, we either need to take a position or wait for IRS guidance.

(In the past two days, both the AICPA and Tony Nitti, two of my most trusted sources, have weighed in on this with a big “why is the IRS dragging their heels on this” reaction. Nitti went as far as to say, “Are wages paid to greater than 50% owners eligible for the credit? If I had a nickel for every time someone emailed me this question, I could afford to stop shamelessly and relentlessly shilling this newsletter. It is absolutely amazing that a full year after the ERC was created, we still don’t have a definitive answer.”)

So the options are:

  • #1 Calculate ERC as if owners are eligible and file 2020 income tax returns accordingly. This would result in a higher tax for clients (because more wages are disallowed as deductions). Submit PPP Forgiveness applications, but hold off on submitting ERC claims (941-Xs) until guidance is released. If guidance indicates that owners are eligible, file the ERC claims accordingly. If guidance says owners are not eligible, then amend the income tax returns and file the ERC claims accordingly.

This approach may make the most sense when there are two 50%-owners on payroll, and not many other other staff — as the increased credit would be worth the wait, compared to the total credit without owners.

  • #2 Calculate ERC as if owners are not eligible and file 2020 income tax returns accordingly. This would result in a lower tax for clients (because fewer wages are disallowed as deductions). Submit PPP Forgiveness applications, and submit ERC claims (941-Xs) — rather than holding off on these as in the above option. If guidance is eventually released that indicates owners are not eligible, then no action is needed. If guidance indicates that owners are eligible, then decide whether it is worth amending the income tax returns and ERC claims to get the additional funds.

This approach may make the most sense with only one 50%+ owner and many employees, as the cost to amend all returns and claims will probably not be worth the additional credit.

To clarify, neither approach will hold up the RRF or cause a smaller amount to be awarded, because ERC is not considered income (that’s why the wages they pay for cannot be deducted). The goal with both approaches is to get tax returns ready for the RRF application as soon as possible, with the best balance between wage deductions and potential wage credits.

While I was tempted to pick one of these two approaches and inform all clients of our choice, I decided — especially with advice from the AICPA Town Hall yesterday — that this is a decision that each client needs to make for themselves. We’re happy to explain the potential costs and benefits of each approach and make a personal recommendation for each client’s individual situation, but the decision should be theirs. We recommend other CPA firms take a similar approach.

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

COVID-19 Financial Relief, Education, POS - Point of Sale, QuickBooks Software, Tips

Important Updates On Restaurant Revitalization Fund From 4/6/21 IRC Webinar

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Spinning J Bakery & Soda Fountain, Chicago, IL – photo credit Clayton Hauck

(For an overview of the new Restaurant Revitalization Fund (RRF), please see my recent blog post.)

Today I attended an excellent zoom “roundtable” hosted by the Independent Restaurant Coalition.  Erika Polmar did a great job presenting, and Devita Davison monitored chat — they covered a lot of ground and answered many questions.

It was not recorded, as it was designed for participants to ask specific questions that may have revealed personal info. But there is a second session happening tomorrow (Wednesday 4/7) that I strongly encourage you to attend. Type your question in the chat and they will address it, or email questions@restaurantcoalition.com — they also have an FAQ at saverestaurants.com/resources that you can also download here.

There are still outstanding questions — see my notes below — but my main takeaway is that as a CPA firm, we are going to be pivoting to try to prepare draft 2020 tax returns for all restaurant clients before the program opens in the next two weeks. This will be a challenge, as we are simultaneously working on Employee Retention Credit calculations, 1Q 2021 estimates, and corporate tax returns; but we’re doing everything we can to make sure our clients have both 2019 & 2020 tax returns — at least in draft format — in time to apply for this grant the day it opens.

Please remember to sign up for the session tomorrow. It will be worth your hour of attendance.

My notes from today’s session:

  • They are expecting guidance at the end of this week (4/9) and a draft application at the beginning of next week (4/12).
    – They think the process will open end of next week (4/16) or beginning of the following week (4/19).
  • There are funds set aside for 60 days for businesses with <$500k in receipts.
    – Also funds set aside for women-owned, veteran-owned, and “disadvantaged” groups and first 21 days of the application period are specific for them.
     – We don’t know if they will change the 51% ownership rule to 50% or not yet, but it is under consideration.
  • If you opened before 2019, take 2019 revenue minus 2020 revenue, minus PPP loan. That’s the grant amount.
    – If you opened in 2019, take average monthly revenue from 2019 and divide by 12, then do the same as above.
    – If you opened in 2020, funding amount is equal to eligible costs incurred minus revenue received.
  • You may use the grant for expenses incurred during the period of 2/15/2020-12/31/2021 for: payroll capped at $100k per EE, benefits, mortgage, rent, utilities, maintenance, build-out for outdoor/indoor safe dining, supplies, food & beverage inventory, operating expenses.
    – May be extending it through 12/31/23 soon; hopefully before application goes live.
    – Cannot double-dip and use funds for anything you paid for with PPP, EIDL or other federal funds.
    – Very likely but not confirmed that Owner’s Draw will be considered an eligible operating expense.
  • Documents needed to prove revenue loss — must be able to show revenue loss between the two years (or alternatively as above if opened after 1/1/19):
    – Preferably 2019 & 2020 tax returns – may use certified P/L statement or documentation from Point of Sale system for 2020 instead, if tax return is not done.
    – Acceptable documents would be as follows (keeping in mind that if you use anything other than a tax return, a human being will have to review your application (rather than a computer) and that will slow it down:
     * Business tax returns (IRS Form 1120 or IRS 1120-S);
     * IRS Forms 1040 Schedule C; IRS Forms 1040 Schedule F;
     * For a partnership: partnership’s IRS Form 1065 (including K-1s);
     * Bank statements;
     * Externally or internally prepared financial statements such as Income Statements or Profit and Loss Statements;
     * Point of sale report(s), including IRS Form 1099-K.
  • For hybrid businesses like bowling alleys, RRF revenue replacement will only be for food/beverage portion of business (not wholesale or entertainment). 
    – F+B revenue has to be 33% or greater to qualify as a “restaurant”.
  • You may not use the RRF to pay off any other federal program, like the EIDL or PPP. (This might change.)
    – You CAN use it to pay off other debt, just not federal debt.
  • They are looking into payments to related parties like self-rental to see whether they will qualify or not.
  • If you close your doors temporarily, you can get RRF — if you closed permanently, you are not eligible. If you close permanently while using RRF money, you will have to repay it.
  • This money is very likely to run out quickly. Apply the moment it goes live on Day One.
    – The SBA will then hopefully go back to Congress to say “here’s how many applications for $X we have in the queue; please replenish the fund so we can continue funding the requests.” So even if you apply “too late”, there’s hope.

Questions I still have:

  • Will the Employee Retention Credit (ERC) and FFCRA Emergency Leave Credits count as gross receipts? Or will they be exempted like the PPP funds? If treated like PPP funds, will they have to be subtracted from the RRF grant amount?
  • Is other financial relief — local and industry grants — considered as part of revenue?
  • For a restaurant that has no outdoor space to build out for safe dining; could they use RRF money to buy/outfit a food truck so they could use it in place of outdoor dining?

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

COVID-19 Financial Relief, Education, Tips

Restaurant Revitalization Fund Opens Soon: April 2021

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4/7/2021 UPDATE: I attended yesterday’s Independent Restaurant Coalition zoom call, and wrote up notes here. Please give it a read after you’ve taken a look at the blog post below, as it answers some FAQs.

4/1/2021 UPDATE: the SBA just announced that RRF applicants will not need a DUNS number or SAM account. This is a change from March, when it was expected that applications would require this process as they currently do under the Shuttered Venues Operators (SVO) grant program.  The shift by SBA recognized the significant demand for the program – up to hundreds of thousands of applicants are expected.

From the start of the Paycheck Protection Program (PPP), my small business clients — specifically the restaurants, bars, cafes and caterers — were confused and frustrated. We put so much time and effort into applying for PPP funds, working through the tortuous planning for spending in a way that would lead to 100% forgiveness, and had practically nothing left to show for it. Shuttered or take-out only, there was simply not enough revenue coming in to support the extremely high labor, inventory, and overhead costs typical of the industry. Had it not been for state and local grants, most of them would have had to close their doors permanently.

They weren’t alone — in fact, restaurant lobbyists have been working for many months on crafting financial relief legislation that suits the specific needs of the hospitality industry. And I’m amazed to say — they did a great job, and most of it made it into the final law. Unlike the constantly-changing mess that the PPP has been, this new program is thought-through, carefully-written, and has clearly learned from PPP’s mistakes. (It’s also taken the better part of a year to bring it into existence, so there are two sides to this coin, as is usually the case.) And it will be opening soon.

The Restaurant Revitalization Fund (RRF), as it is now known, was signed into law as part of the recent American Rescue Plan Act. Unlike the PPP, which was based on payroll costs, the RRF is structured to disburse tax-free federal grants in the amount of a restaurant’s “pandemic-related revenue loss“.

Grants are calculated by subtracting 2020 receipts from those of 2019. PPP funds received will offset (reduce) the grant amount, but those funds will not be considered part of gross receipts. The total grant amount for an eligible business and any affiliated businesses is capped at $10 million and is limited to $5 million per physical location of the business.

An example set of calculation scenarios from the National Restaurant Association:

In addition to basing the award amount on revenue loss rather than any other measure, other features of the RRF program that seem a better fit for restaurants are the flexibility on how the funds can be spent and over how long (Feb 15, 2020-Dec 31, 2021). Categories of eligible costs include:

  • payroll;
  • principal or interest on mortgage obligations;
  • rent;
  • utilities;
  • maintenance (including construction to accommodate outdoor seating);
  • supplies such as protective equipment and cleaning materials;
  • normal food and beverage inventory;
  • operational expenses;
  • and many other expenses that the SBA determines to be essential to maintaining operations.

Another area where there is a great deal of flexibility — eligible entities can be “a restaurant, food stand, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brewpub, tasting room, taproom, licensed facility or premise of a beverage alcohol producer where the public may taste, sample, or purchase products, or other similar place of business in which the public or patrons assemble for the primary purpose of being served food or drink.”

There will be an initial 21-day period when the SBA will prioritize awarding grants for businesses owned by women, veterans, or socially and economically disadvantaged individuals.

To learn more, I strongly encourage you to read the Independent Restaurant Coalition’s FAQ, and attend one of their upcoming zoom “round table” webinars. The next ones will be held on Tuesday, April 6th at 12pm ET / 9am PT, and Wednesday, April 7th at 11am ET / 8am PT.

It’s looking like the program will be opening up in the next few weeks, and there are steps you can take now to prepare.

First and foremost: get educated:
– Register for one of the IRC zoom round-table webinars and review their other resources, including an excellent FAQ.
– Watch the most recent National Restaurant Association (NRA) webinar (keeping in mind that the DUNS and SAM are no longer required) and visit RestaurantsAct.com/rrf for more resources, including a fact sheet.
– There are also many articles on the topic, including this extensive one from Forbes.

4/1/2021 UPDATE: In today’s AICPA Town Hall, they shared that the SBA has announced that RRF applicants should prepare with the following next steps —

The “checklist similar to SVOG” refers to another program, the Shuttered Venue Operators Grant — their checklist can be found on a download via the SBA website. We expect a similar one to be released specifically for RRF soon, but this is probably a good guideline.

I’m looking forward to seeing at least one Covid-19 financial relief program play out right and run smoothly — which I recognize may be too much to ask, but for the sake of all our beloved community watering holes, gathering spots, and the places that nourish our bodies and souls, I will keep my fingers crossed. They’ve been through so much already and I would love to see this program help them make it to the finish line.

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

Cooperatives, COVID-19 Financial Relief, Education, IRS, Tips

FREE Webinar Series For Small Biz Owners – Making Sense of Financial Relief Programs

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My trusted colleagues over at Wegner CPAs are putting on a two-week series of FREE webinars geared toward small business owners. They will go through each of the following current Federal relief programs designed to help small businesses make it through to a brighter day:

  1. Employee Retention Credit 2021
  2. Employee Retention Credit 2020
  3. Shuttered Venue Operator Grants
  4. Paycheck Protection Program
  5. Restaurant Revitalization Fund
  6. Economic Injury Disaster Loans

All of these programs have been changed over the past month to make them more useful to small business owners — often with the effect that multiple programs are available simultaneously. The resulting complexity is a real challenge, but the amount of financial relief available makes it worth learning what you can (and potentially working with a professional to make it happen).

We have been reaching out directly to clients who we believe qualify for each of these programs — but if you work with us and think you are eligible, yet haven’t been contacted, please let me know.

Webinar Series: Making Cent$$ of Stimulus Money

You can view Wegner CPAs’ Covid-19 Resources and click “webinars”, or see a calendar of all their upcoming webinars and view a selection of previously recorded webinars.

Employee Retention Credit 2021
Tuesday, March 30, 2021
10:00 am – 10:30 am CDT (8:00 am PT / 11:00 pm ET)
ERC in 2021 can result in big dollars for your organization. We will discuss how to determine if you’re eligible and how to be sure you file for the credit timely.
Register

Employee Retention Credit 2020
Wednesday, March 31, 2021
10:00 am – 10:30 am CDT (8:00 am PT / 11:00 pm ET)
Were you eligible for ERC in 2020? Find out as we take a deeper dive into the credit eligibility requirements and rules for last year. We’ll also review what you need to do to claim the credit for 2020.
Register

Shuttered Venue Operator Grants
Thursday, April 1, 2021
10:00 am – 10:30 am CDT (8:00 am PT / 11:00 pm ET)
The SVOG portal opens on April 8th. Are you eligible and ready to apply? Join us to learn more about the program and what you need to be doing now to prepare.
Register

Paycheck Protection Program
Tuesday, April 6, 2021
10:00 am – 10:30 am CDT (8:00 am PT / 11:00 pm ET)
Updates continue to roll out for PPP. We’ll discuss what the soon to be signed extension means for applicants and tips on getting through the application process. We’ll also review the updated loan calculation for Schedule C filers. Don’t forget about PPP loan forgiveness!
Register

Restaurant Revitalization Fund
Wednesday, April 7, 2021
10:00 am – 10:30 am CDT (8:00 am PT / 11:00 pm ET)
The SBA announced that they hope to have RRF up and running by early April. We will review timely released guidance and how to prepare for applying to the program.
Register

Economic Injury Disaster Loans
Thursday, April 8, 2021
10:00 am – 10:30 am CDT (8:00 am PT / 11:00 pm ET)
The EIDL program has continued to evolve over this last year. There are EIDL loans and EIDL grant advances. Are you eligible for either? Learn more about this program and the changes that have come from the last two stimulus bills.
Register

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

COVID-19 Financial Relief, Education, Illinois, IRS, Site News, Tips

What The ARPA, ERC, PPP And Other Laws Mean For Your 2020 Taxes

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Recent new legislation from Congress and the White House, as well as guidance from the IRS and DOL, has caused sweeping changes for small business owners and individuals, and we tax preparers are still trying to wrap our heads around it — during what was already the most complex and demanding tax season on record.

Specifically, the American Rescue Plan Act (ARPA) included a few provisions that are retroactive to 2020 — and the IRS, various state Departments of Revenue, Department of Labor, and tax software programs are trying to figure out how best to implement these changes as efficiently as possible. (For a breakdown of key provisions in the Act, see this excellent summary.)

These changes include:

1) The first $10,200 per person of 2020 unemployment benefits will no longer be taxable at the federal level, though certain states will continue to tax the full amount (Illinois has asked all taxpayers with unemployment income to hold off on filing returns until the Dept of Revenue has addressed the situation). The IRS will be releasing a worksheet that the tax software companies then need to incorporate into the 1040 returns.

2) A 2020 “Repayment Holiday” for the Marketplace Health Insurance Advance Premium Tax Credit was issued, but implementation questions remain; IRS guidance is expected soon.

3) Another economic impact payment (stimulus check) is on its way. You do not need to file your 2020 tax return right now to claim your check, as the law allows for an additional payment in a few months if your 2020 tax return shows you are entitled to more (vs your 2019 tax return). Conversely, if your income went up in 2020 and you are now ineligible for the full benefit, you’ll want to wait to file your 2020 taxes until after your payment arrives, since you won’t have to pay back the overage on your 2021 tax return.

In addition to the above legislative shifts, the IRS recently released guidance concerning the Employee Retention Credit (ERC) that changed our expectation of how it would be handled on business tax returns for cash-basis business tax filers. Previously we had expected that those who received PPP funds in 2020 and can now (as of the Dec 21 Consolidated Appropriations Act) retroactively claim ERC would adjust for the related deductions on their 2021 tax returns. Not so. These adjustments will have to be made on the 2020 tax returns. As a result, we have had to put approximately 75% of our client business returns on extension.

(Technical note: keep in mind if you are doing tax returns for a client that claimed ERC, not only do you have to reduce deductible wages by the amount of the credit, but also recognize this reduction may impact Section 199A eligible wages for purposes of the 20% qualified business income deduction.)

And yet we are still awaiting essential guidance on whether or not the Employee Retention Credit can be taken on wages paid to >50% owners of a company. Interpretations by tax analysts so far are pretty much split evenly between whether the law as [sloppily] written provides reasonable basis in this area.

I’m guessing you see the challenge here: we don’t yet know the rules for claiming the ERC, and yet we have to report related adjustments (as a direct result of the credit calculation) on the 2020 business tax returns. Most of these returns have a flow-through relationship with the business owners’ personal tax returns — so those may have to be placed on extension as well if we do not get guidance soon.

(Related blog post: please call your representatives and ask for all taxes — estimated quarterly as well as corporate — to be extended; not just the Form 1040.)

We are also expecting guidance about how the IRS wants business owners to treat basis reporting for owners where PPP forgiveness causes issues.

Yet another example of a forced need to wait on certain returns: using tax filing software, we can e-file a return today, but set the payment direct-debit date to a future date — not later than the return due-date. This date has not yet been updated in most tax prep systems to go beyond April 15th to the new due date of May 17th.

It’s particularly frustrating for us as small business advocates, because filing a tax return is the only way to get a refund if you’re owed one, and many of our clients may be more in need this year than usual. And yet, for a large number of taxpayers right now, holding off on filing is the recommended approach.

All the while we are trying to help our small business clients respond to 2021 changes, such as important employment law updates; alterations to COBRA and Marketplace subsidies; major modifications to the current round of the Paycheck Protection Program (PPP); new relief programs such as the Shuttered Venue Operators Grant (SVOG) and the Restaurant Revitalization Fund (RRF); the aforementioned ERC/PPP maximization… and so much more.

The provisions noted above — and others — may affect your return. Tax professionals everywhere need some time and space to learn about these changes, analyze their impact, and develop personalized recommendations to maximize your COVID-19 tax benefits. Please be patient with us during this extremely stressful time.

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

COVID-19 Financial Relief, Education, Illinois, Tips

Chicago Phase 4 Reopening Guidelines By Industry – FREE Webinar Recordings

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Recorded webinars for Phase 4 reopening guidance are available online now.

Chicago has moved forward, along with the rest of Illinois, into Phase 4 of reopening.

According to ABC News: Illinois has made progress through its plan for having tiered mitigation for the 11 regions in the state with the potential for increasing mitigation measures based on local resurgences. Regions are currently at the Tier 4 level, with some having additional measures.

Phase 4 of reopening allows for gatherings of 50 people or fewer, restaurants and bars can reopen with limited capacity and restrictions, travel resumes, and child care and schools can reopen under guidance from the Illinois Department of Public Health. Face coverings are required and social distancing is the norm. The Illinois Department of Commerce has issued a pdf of guidelines.

Chicago has a slightly more cautious roll-out of Phase 4 based on a higher concentration of population, risk factors, and cases. The mayor recently announced the next phase of reopening for all businesses, including Retail, Food Service & Bars, Personal Services, and Health & Fitness Centers. The city’s Department of Business Affairs & Consumer Protection has once again held free webinars on the topics and made the recordings available on their site and YouTube.

Recorded Reopening Webinars:

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COVID-19 Financial Relief, Illinois

Illinois Deferred Sales Taxes From Feb-Apr: Reminder Of Due Dates

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I attended the Crain’s Chicago Business Webcast the other day featuring “State of the Illinois Budget with Comptroller Mendoza“, and although I was generally pleased with her handle on the state’s financial situation and her ability to explain it to the audience, I was disappointed that the mediator did not take my question, which was: what are small businesses supposed to do without more state support, especially where tax payments are concerned?

We all understand that Illinois governor has inherited a major fiscal problem — and how it got this way is a complex matter outside the scope of this blog post. But despite this, in my opinion, there simply need to be more forgiveness and deferral options for state sales and income taxes due from small businesses.

For example, the federal government moved the deadline for both first- and second-quarter estimated quarterly taxes to July 15th; but the state of Illinois left them on their original dates (April 15 and June 15). As a result, many self-employed taxpayers and small business owners ended up accidentally paying them late.

And in March, the Illinois Department of Revenue offered short-term relief for late sales tax payments to all registered Illinois retailers operating eating and drinking establishments. But the problem was that the February, March and April sales taxes that were deferred were due in May, June, July and August (along with the sales taxes from the current month). In case you hadn’t noticed… those businesses are in more dire financial straits now than they were back in March.

So let this post serve as a reminder that Payment #3 (of four) of the February-April 2020 deferred sales taxes is due on July 20th. But also let it be encouragement to contact your Illinois state senators and representatives, the Department of Revenue, Governor Pritzker’s office, and Comptroller Mendoza’s office to request leniency where penalties and interest are concerned, and to ask that they consider changing the due dates and waiving all related fees for businesses with balances due of less than $10,000. Small restaurants and bars are no better off now than they were before this pandemic began, and if we want to help them weather the storm, we need the state to help.

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

Illinois, Tips

Why Aren’t Insurance Companies Paying Business Interruption Claims?

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According to Antonio Romanucci, a speaker on today’s Crain’s “Crisis Relief for Businesses” webcast, he has yet to see a single insurance company honor a business interruption claim due to COVID-19 and the resulting stay-at-home orders.

As he points out in this article:

The devil is in the details here, and there are several parts of insurance policies that are at the heart of the discussions:

  • Does a policy cover “All Risks” against loss or physical damage or is there “Stated Peril” for loss or damage to policies based on certain, covered causes?
  • Is there coverage for losses due to decisions or directions by a Civil Authority, like the government directed shutdown of non-essential businesses?
  • Is there a Virus Exclusion that does not cover losses due to viruses or bacteria, which could be general or name specific viruses or bacteria?

Regardless of the language in their policy, business owners should file a claim in writing to determine their insurance company’s response and, if the claim is denied, consider a conversation with a legal expert to have their policy reviewed and consider possible next steps, which could include the filing of a legal complaint to bring in the judicial system to review the insurance contract and declare whether or not coverage is deserved.

Insurance companies have collected billions of dollars in premiums that should first be paid to policyholders to keep those smaller businesses from going bankrupt.  If the pandemic leads to critical financial strain on the insurance industry, then those enormous corporations should turn to the federal government for a bailout, very much like what is being given to the airline industry.

Read the full article here:
https://rblaw.net/covid-19-has-devastated-the-restaurant-industry-why-arent-their-insurance-companies-helping/

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.