Author: Leon Clinton

Embedded in the COVID-19 relief law is $900 billion for financial assistance.

As you would expect in these unusual times, some of the relief is in the form of direct government financial assistance and some is from tax benefits that can impact both tax year 2020 and tax year 2021.

Most of the provisions create extra deductions or credits where Uncle Sam puts cash directly into your wallet.

Here are four:

1. Recovery Rebate Payments and Credits

Remember those $1,200 checks many people got earlier in the year? 

Well, there’s another round of $600 payments coming, with rules very similar to the first round.

2. Paid Sick and Family Leave Credits

As you may remember from the March 2020 law, Congress provided two ways to give workers paid sick and family leave:

1. Employers received refundable payroll tax credits to fully offset the cost of the government mandate that employers provide paid sick and family leave to their employees.
2. Self-employed persons also qualify for paid sick and family leave. They claim a refundable tax credit against their 2020 self-employment tax.

The tax credits require that the self-employed person or the employee was unable to work due to a qualifying situation between April 1, 2020, and December 31, 2020. The maximum non-working days eligible for the tax credits are

• 10 days for paid sick leave, and
• 50 days for paid family leave.

Under the new law, you now can claim these tax credits for qualifying days through March 31, 2021. The maximum creditable days did not increase.

3. 100 Percent Business Meal Deduction

The new December 27, 2020, law allows you to deduct 100 percent of your business-related expenses for food and beverages provided by a restaurant for amounts paid or incurred after December 31, 2020, and before January 1, 2023.

4. Charitable Contributions

The CARES Act made three major changes to charitable contribution deductions for tax year 2020:

1. For individuals, there is no adjusted gross income (AGI) limit for contributions normally subject to the 50 percent and 60 percent limitations. The 2020 no-limit rule does not apply to donor-advised funds.
2. For corporations, the 10 percent limitation goes up to 25 percent of taxable income.
3. If you are a non-itemizer, you may now deduct above-the-line up to $300 of cash charitable contributions for tax year 2020 only.

The new law enacted on December 27, 2020, extends the increased charitable contribution deduction limits for individuals and corporations to tax year 2021. In addition, in tax year 2021, non-itemizers can deduct cash charitable contributions up to $600 on a married-filing-joint return ($300 for singles), but it’s below-the-line.

If you would like to discuss any of the changes described above, please contact me on my direct line at 408-778-9651.

• By Leon Clinton
• February 13, 2021

Before the December 27, 2020, enactment of the new COVID-19 relief law, you may have chosen the Paycheck Protection Program (PPP) loan and given no thought to the employee retention credit. 

Remember, under the original law, you had to choose between the retention credit and the PPP loan. Millions chose the PPP loan route.

But now the game has changed. You may, as a PPP recipient, qualify to take the employee retention credit retroactively for tax year 2020 quarters and also going forward in tax year 2021.

Here are the key changes you as a PPP player need to know:

• PPP loan recipients can retroactively claim the 2020 employee retention credit for wages not paid with forgiven PPP loan proceeds.
• Wages paid from March 13, 2020, through December 31, 2020, qualify for the retroactive credit.
• Wages paid from January 1, 2021, through June 30, 2021, can qualify for the more significant 2021 credit.
• For 2021 quarters only, you qualify for the credit if your gross receipts for a calendar quarter are less than 80 percent of gross receipts from the same quarter in tax year 2019. Alternatively, you can elect to qualify for a quarter by comparing the gross receipts of the immediately preceding quarter with the corresponding quarter in 2019.
• For 2021 quarters only, the relaxed requirements for qualifying wages apply to businesses with 500 or fewer full-time employees in 2019.

If you would like my help with the retroactive monies from the employee retention credit, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• February 10, 2021

Two things to know about the Paycheck Protection Program (PPP) first draw enacted on December 27, 2020: 

• The first draw is for those who missed getting in on the original PPP, which expired on August 8, 2020.
• Don’t think of a PPP draw as a loan. It’s not a loan. It’s a cash infusion. You have to repay a loan. You don’t have to repay the PPP funds.

Who qualifies for first-draw PPP money today? You, most likely—if you file a business tax return and have not yet received any PPP monies.

But don’t wait. The money is going to run out fast, and once it’s gone, so is the PPP. And the new PPP ends March 31, even if the money is not gone by then.

You qualify for the PPP if any of the following are true:

• You file your taxes on Schedule C of your tax return. Businesses that file on Schedule C include independent contractors (often called 1099 folks), single-member LLCs, proprietorships, and statutory employees such as life insurance salespeople.
• You file your taxes on Schedule F (ranchers and farmers).
• You are a general partner in a partnership, but the partnership asks for and receives the money based on your and the other partners’ combined self-employment incomes, as adjusted.
• You operate as an S corporation.
• You operate as a C corporation.
• You are the only worker in the business—and if you have employees in the business, you qualify on both your ownership worker status and your employees’ W-2 status.

If you would like to discuss the PPP, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• February 8, 2021