Faw Casson

Accounting and Accountability: Episode 3

October 9, 2020

Delaware Relief Grant

Brian:  We’ve talked about this on some previous occasions but the Delaware Grant Relief just a real quick reminder is a $100 million dollars that’s been allocated for Delaware businesses to apply for a grant to use for COVID related expenses which is things like PPE, equipment that you may need to buy to help you through this time frame, advertising, so there’s a lot to it, paying off some debt, so round one was in September and that was done, Round 2 started October 1st and that has been closed.  And there will be a third round of this funding and that will be in November.  We are thinking November 1st will be the date but the state has not announced that.  So if you didn’t get in first or second round get ready for the third round, it’s a fairly simple application, you need to supply your 2019 tax return and you need to supply your business license and there’s a section where you tell the state what your spending the money on if you spent it and or plan to spend it by the end of the year.  Just one more reminder that the biggest thing is you do not have to pay this back you have to show a 7 ½% reduction in gross revenue from 2020 to 2019.  So just FYI.
Tammy:  I did see the first round 25.7 million dollars were awarded to 741 small businesses.  I like that, I like that it’s really helped small businesses with that 51% or greater presence in the state of Delaware.  So primarily the state of Delaware but we still want to bring it up because a lot of our listeners are in our area. 
Brian:  Yeah, just another tit bit we’ve been hearing from the state, is if you do need to apply in the third round make sure you attach your entire tax return and an updated business license and be very descriptive on the expense explanation.  Because if you don’t have the entire tax return they are rejecting it.  They are not even going back to you to ask for the rest of it. 
Tammy:  Like you had to do in second grade “follow instructions”.

Payroll Protection Program

Tammy: Okay so what I’m seeing is that some banks are ready and they have a portal, it’s fairly easy to apply, you just need to get your payroll reports for your covered period and also from what I understand it’s ok to apply before your covered period ends. 
Brian:  Ok, so the covered period was either eight weeks which was the original or they extended it to 24 weeks, probably 95% of the folks are going to use the 24 weeks and the covered period means that was the time that you had to use the PPP money for the different in expenses.
Tammy:  Right so the 8 week is a special election and you had to have gotten your funds before June 5th to qualify for the 8 week.  Some institutions have given us information letting us know that their portals going to be available around the 14th so hang tight.  I know everyone is anxious we’ve got a couple of clients we’ve taken through this process you do have time though so it’s ok just probably you know maybe we will help you get through it sometime in quarter 4 and as we reported last time we are still waiting for Congress to reconvene on two important issues, One is Automatic Forgiveness on under $150,000 and the Second one is to allow the expense deduction for what you used the PPP funds for which basically makes the PPP taxable unfortunately so I know Brian and I and the rest of the staff here at Faw Casson are working really hard on Tax Planners for Q4 because we have to give you the scenario that it will basically be taxable.
Brian:  I know and it can effect some of you, like for example a farmer they are on the cash basis, allowed to prebuy expenses to reduce their income to zero.  Well if this is taxable obviously we are going to spend the money to reduce their income to zero and let’s say we do it then the problem is there’s talk that we might not know definitely until after the election and possibly not until next year.  As a tax planner you go out and spend all this money to reduce your income to zero and now you have a big loss that ends up being not taxable.
Tammy:  Yeah I mean and you don’t lose that but it is timing and your cash is gone like you said. Not the best position. 
Brian:  I’ve got some news for you. 
Tammy:  Oh you do!
Brian:  So I heard today the SBA is going to have a new form for under $50,000. There is still talk that its’ going to be the $150 but they are issuing a form for under $50,000 where even if you dropped employees it doesn’t matter.  So I haven’t seen the form I’ve literally saw this this morning so I haven’t seen the actual final form but there is something coming out for under $50,000. 
Tammy:  Yeah and I like that though because I feel like small retailers really could benefit from that because they did have a legitimate drop in employees, not really due to their fault and there is that exemption where is that if your not returning to full capacity due to governors mandate. But I like that because a lot of people did get under $50,000.

1099 NEC

Tammy: Yeah so this is big! The 1099 form I believe has been the same for the entire 30 years I’ve been in business and so traditionally when you file 1099 Miscellaneous MISC you would include any payments to non-employee compensation NEC and that like most like your subcontractors.  Well the IRS has decided to change it up and a 1099 NEC will now be a separate form from the 1099 MISC same filing deadlines you use a separate 1096 transmittal so everything is virtually the same except for now we have a different form for reporting any NEC payment, but it’s kind of interesting because, the miscellaneous will be still reserved for common payments like rent, royalties those kind of things and then the NEC is going to be predominately for non-employee compensation. 
Brian:  That’s good to know, that just one more thing we have to remember. 
Tammy:  Exactly  so we are on top of it of course. We’ve already had training, a brief with our staff here that does those forms and we are ready to Rock and Roll as usual.  As always we keep on top of these topics for our clients.
Tammy/Brian:  Because this is how we do it!
Brian:  I just want to throw out some statistics that just came out, you know how we had the new tax law issue at the end of 2017 and 2018, there was a lot of new things that came out of that so there was a nice little thing I read the other day about kind of somethings that came out. So alternative on tax was an additional tax we had for it was originally started for higher income individuals well over the years with inflation and tax rates a lot of middle income folks were paying AMT this is an additional tax that was a burden.  So they came out with this higher exemptions essentially for corporate and got rid of AMT for personal it was really much harder for you to get kicked into AMT starting in 2018.  So only 244,000 filers owed AMT on their 2018 return totaling about $4 billion in tax.  Compare this to $36.4 billion in AMT reported on 5.07 million on 2017 returns. They went from 5 million people paying AMT in 2017 to only 244,000.  That’s huge! The dollar went from $36 billion to $4 billion less tax revenue to the government. 

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