Our Services

The world is changing where your only income is no longer from a W-2.  Whether you have a primary or second job as an independent contractor, work in the sharing economy, or have started a business, Clear Portal Accounting & Tax can help.  We specialize with micro small businesses (generally $1 million in revenue or less) with their tax preparation needs.  Whether you are a sole proprietorship, a limited liability company (LLC), a partnership, or S-Corporation, we can assist you.  Further, if you receive a K-1 from your business or investment interest, we can help you incorporate that statement into your individual taxes.  

If you currently own rental property or are thinking about renting an owned property, we can help you with the tax preparation and planning.  Please contact us if you are thinking about renting out your vacation home, setting up an AirBnb, or want to rent a property full-time.

Contact us to see if our firm is a right fit for you,  We specialize in the following business tax forms:

• IRS 1040, Schedule C - Income or Loss from Business
• IRS 1040, Schedule E - Income or Loss from Rental Real Estate and Other Entities
• IRS Form 1065 - Partnerships
• IRS Form 1120S - S-Corporation
• K-1 - Share of Income, Deductions, and Credits

 

If your small business has employees, you know payroll can be a time-consuming and expensive effort. Even the most conscientious small business owner can make mistakes processing payroll. One mishap in calculating taxes or paying different types of employees could land your business in trouble with compounding tax penalties and interest. Clear Portal Tax & Accounting can provide you with either preferred pricing for self-service payroll processing or outsourced payroll services customized to your needs. 

Self-Service Payroll

As a self-service customer, we will provide you with the software and tools necessary to process your own payroll at preferred pricing; often less than you could receive by going directly to the vendor. We bill you a monthly flat fee for the platform.  We can customize a training and on-call fee schedule if you need assistance with the process. We can support your self-service payroll needs in all 50 states. 

Out-Sourced Payroll

Our outsourced payroll services for small businesses are accurate, convenient, and provide peace of mind. When we take over your payroll you won't have to worry about confusing tax filings, IRS penalties, or unhappy employees. We'll skillfully process your payroll, pay your employees correctly, and handle all your payroll tax filings while you spend your time running your business. From your first hire to a full staff of employees, our support can be adjusted as your operation grows. We offer competitive rates combined with the opportunity to reduce back office costs which translates to a truly economical service.  We perform the following duties:

• Weekly, bi-weekly, monthly, or quarterly payroll processing
• Direct deposits
• Federal and state payroll tax filings
• Payroll reports
• Weekly or monthly accounting summaries
• Preparation of W-2's and W-3's
• Preparation of 1099's

In addition, with the Clear Portal Accounting and Tax operational and income tax experience, our firm is able to review your small business financial and business operation to assist you that may lead to better efficiencies and profitability. Currently, the out-sourced service is only offered in Delaware and Virginia.  

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The IRS has extended the filing deadline date to May 17, 2021. This extension does not apply to business, trust, or estate returns.

Almost all states have also extended their individual tax filing deadline to May 17, including Virginia, Delaware, California, Pennsylvania, West Virginia, and New Jersey has extended their state filing deadline date to May 17th. Most states are not granting an extension or relief from penalty on paying 2021 estimated tax payments per their normal due dates.

Maryland has extended their state filing deadline date to July 15th. 

President Biden signed the American Rescue Act on March 11, 2021.

The signed bill has the following benefits:

• Extends through Sept. 6 a $300-per-week supplement to federal unemployment benefits that would have expired March 14. The House version of the bill had boosted the supplement to $400 per week through Aug. 29, but the Senate kept the payment at $300, extended the program an extra week, and also made the first $10,200 in unemployment benefits tax-free in 2020 for taxpayers making less than $150,000 per year.
• Allocates $50 billion in funding to benefit small businesses through a variety of programs, including $25 billion for restaurants and bars, $15 billion for targeted Economic Injury Disaster Loan (EIDL) advance payments, and an additional $7.25 billion for the PPP.
• Includes money for health care entities, vaccine distribution, and testing related to the COVID-19 pandemic.
• Provides assistance for K-12 education and colleges and universities.
• Includes funding for state and local governments.
• Does not raise the federal minimum wage, which the original House bill would have increased to $15 per hour.

The Act has the following tax components.

Unemployment benefits

The act makes the first $10,200 in unemployment benefits tax-free in 2020 for taxpayers making less than $150,000 per year.

Recovery rebates

The act creates a new round of economic impact payments to be sent to qualifying individuals. The same as last year’s two rounds of stimulus payments, the economic impact payments are set up as advance payments of a recovery rebate credit. The act creates a new Sec. 6428B that provides individuals with a $1,400 recovery rebate credit ($2,800 for married taxpayers filing jointly) plus $1,400 for each dependent (as defined in Sec. 152) for 2021, including college students and qualifying relatives who are claimed as dependents. As with last year’s economic impact payments, the IRS will send out the advance payments of the credit.

For single taxpayers, the credit and corresponding payment will begin to phase out at an adjusted gross income (AGI) of $75,000, and the credit will be completely phased out for single taxpayers with an AGI over $80,000. For married taxpayers who file jointly, the phaseout will begin at an AGI of $150,000 and end at AGI of $160,000. And for heads of household, the phaseout will begin at an AGI of $112,500 and be complete at AGI of $120,000.

The act uses 2019 AGI to determine eligibility, unless the taxpayer has already filed a 2020 return.

COBRA continuation coverage

The act provides COBRA continuation coverage premium assistance for individuals who are eligible for COBRA continuation coverage between the date of enactment and Sept. 30, 2021. The act creates a new Sec. 6432, which allows a COBRA continuation coverage premium assistance credit to taxpayers. The credit is allowed against the Sec. 3111(b) Medicare tax. The credit is refundable, and the IRS may make advance payments to taxpayers of the credit amount.

The credit applies to premiums and wages paid after April 1, 2021, and through Sept. 30.

Under new Sec. 6720C, a penalty is imposed for failure to notify a health plan of cessation of eligibility for the continuation coverage premium assistance.

Taxpayers who receive the COBRA continuation coverage premium assistance credit are not also eligible for the Sec. 35 health coverage tax credit.

Under new Sec. 139I, continuation coverage premium assistance is not includible in the recipient’s gross income.

Child tax credit

The act expands the Sec. 24 child tax credit in several ways and provides that taxpayers can receive the credit in advance of filing a return. The act makes the credit fully refundable for 2021 and makes 17-year-olds eligible as qualifying children.

The act increases the amount of the credit to $3,000 per child ($3,600 for children under 6). The increased credit amount phases out for taxpayers with incomes over $150,000 for married taxpayers filing jointly, $112,500 for heads of household, and $75,000 for others, reducing the expanded portion of the credit by $50 for each $1,000 of income over those limits.

The IRS is directed to estimate taxpayers’ child tax credit amounts and pay monthly in advance one-twelfth of the annual estimated amount. Payments will run from July through December 2021.

The IRS must set up an online portal to allow taxpayers to opt out of advance payments or provide information that would be relevant to modifying the amount.

The taxpayer in general will have to reconcile the advance payment amount with the actual credit amount on next year’s return and increase taxable income by the excess of the advance payment amount over the actual credit allowed. But taxpayers whose modified AGI for the tax year does not exceed 200% of the applicable income threshold ($60,000 for married taxpayers filing jointly) will have the increase for an excess advance payment reduced by a safe harbor amount of $2,000 per child.

Earned income tax credit

The act also makes several changes to the Sec. 32 earned income tax credit. It introduces special rules for individuals with no children: For 2021, the applicable minimum age is decreased to 19, except for students (24) and qualified former foster youth or homeless youth (18). The maximum age is eliminated.

The credit’s phaseout percentage is increased to 15.3%, and the phaseout amounts are increased.

The credit would be allowed for certain separated spouses.

The threshold for disqualifying investment income would be raised from $2,200 to $10,000.

Temporarily, taxpayers would be allowed to use their 2019 income instead of 2021 income in figuring the credit amount.

Child and dependent care credit

The act makes various changes to the Sec. 21 child and dependent care credit, effective for 2021 only, including making it refundable. The credit will be worth 50% of eligible expenses, up to a limit based on income, making the credit worth up to $4,000 for one qualifying individual and up to $8,000 for two or more. Credit reduction will start at household income levels over $125,000. For households with income over $400,000, the credit can be reduced below 20%.

The act also increases the exclusion for employer-provided dependent care assistance to $10,500 for 2021.

Family and sick leave credits

The act codifies the credits for sick and family leave originally enacted by the Families First Coronavirus Response Act (FFCRA), P.L. 116-127, as Secs. 3131 (credit for paid sick leave), 3132 (credit for paid family leave), and 3133 (special rule related to tax on employers). The credits are extended to Sept. 30, 2021. These fully refundable credits against payroll taxes compensate employers and self-employed people for coronavirus-related paid sick leave and family and medical leave.

The act increases the limit on the credit for paid family leave to $12,000.

The number of days a self-employed individual can take into account in calculating the qualified family leave equivalent amount for self-employed individuals increases from 50 to 60.

The paid leave credits will be allowed for leave that is due to a COVID-19 vaccination.

The limitation on the overall number of days taken into account for paid sick leave will reset after March 31, 2021.

The credits are expanded to allow 501(c)(1) governmental organizations to take them.

Employee retention credit

The act codifies the employee retention credit in new Sec. 3134 and extends it through the end of 2021. The employee retention credit was originally enacted in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136, and it allows eligible employers to claim a credit for paying qualified wages to employees.

Under the act, the employee retention credit would be allowed against the Sec. 3111(b) Medicare tax.

Premium tax credit

The act expands the Sec. 36B premium tax credit for 2021 and 2022 by changing the applicable percentage amounts in Sec. 36B(b)(3)(A). Taxpayers who received too much in advance premium tax credits in 2020 will not have to repay the excess amount. A special rule is added that treats a taxpayer who has received, or has been approved to receive, unemployment compensation for any week beginning during 2021 as an applicable taxpayer.

Student loans

The act amends Sec. 108(f) to specify that gross income does not include any amount that would otherwise be included in income due to the discharge of any student loan after Dec. 31, 2020, and before Jan. 1, 2026.

Miscellaneous tax provisions

The act amends Sec. 162(m), for years after 2026, to add a corporation’s five highest-compensated employees (besides the employees already covered by Sec. 162(m)) to the list of individuals subject to the $1 million cap on deductible compensation.

The act extends the Sec. 461(l) limitation on excess business losses of noncorporate taxpayers for one year, through 2027.

The act also repeals Sec. 864(f), which allows affiliated groups to elect to allocate interest on a worldwide basis.

The act provides that targeted Economic Injury Disaster Loan (EIDL) grants received from the U.S. Small Business Administration (SBA) are not included in gross income and that this exclusion from gross income will not result in a denial of a deduction, reduction of tax attributes, or denial of basis increase. Similar treatment is afforded SBA restaurant revitalization grants.

The act temporarily delays the designation of multiemployer pension plans as in endangered, critical, or critical and declining status and makes other changes for multiemployer plans in critical or endangered status.

 

 

Consolidated Appropriations Act Provides Relief to Individuals and Businesses

On Sunday, December 27, 2020, the Consolidated Appropriations Act, 2021 (CAA 2021) was signed into law. A $900 billion emergency relief package is included as part of this omnibus spending bill. It is intended to assist individuals and businesses during the ongoing coronavirus pandemic and accompanying economic crisis. Major relief provisions are summarized here, as well as some additional tax provisions.

Unemployment provisions

The legislation provides an extension to expanded unemployment benefit assistance (although at a lower amount):

• An additional $300 weekly benefit to those collecting unemployment benefits, through March 14, 2021
• An additional 11-week extension of federally funded unemployment benefits for individuals who exhaust their state unemployment benefits
• Targeted federal reimbursement of state unemployment compensation designed to eliminate state one-week delays in providing benefits (allowing individuals to receive a maximum 50 weeks of benefits)
• Unemployment benefits through March 14, 2021, for many who would not otherwise qualify, including independent contractors and part-time workers

Recovery rebates

Most individuals will receive another direct payment from the federal government. Technically a 2020 refundable income tax credit, the rebate amount will be calculated based on 2019 tax returns filed and sent automatically via check or direct deposit to qualifying individuals. To qualify for a payment, individuals generally must have a Social Security number and must not qualify as the dependent of another individual.

The amount of the recovery rebate is $600 ($1,200 if married filing a joint return) plus $600 for each qualifying child under age 17. Recovery rebates are phased out for those with an adjusted gross income (AGI) exceeding $75,000 ($150,000 if married filing a joint return, $112,500 for those filing as head of household). For those with AGIs exceeding the threshold amount, the allowable rebate is reduced by $5 for every $100 in income over the threshold.

Rebate Amounts and Phaseout Ranges

Filing Status	Payment Amount	Phaseout Threshold	Phaseout Completed
Married Filing Jointly	$1,200	$150,000	$174,000
+ 1 Child	$1,800	$150,000	$186,000
+ 2 Children	$2,400	$150,000	$198,000
Head of Household	$600	$112,500	$124,500
+ 1 Child	$1,200	$112,500	$136,500
+ 2 Children	$1,800	$112,500	$148,500
All Others	$600	$75,000	$87,000

Business relief

• The employee retention tax credit has been extended through June 30, 2021. It is available to employers that were significantly impacted by the crisis and is applied to offset Social Security payroll taxes. As extended, the credit is increased to 70% of qualified wages, up to a certain maximum per quarter.
• Paycheck protection program (PPP) loans have been extended and the allowable uses (eligible expenses) of the loan expanded. A PPP loan amount can be forgiven for paying certain expenses, and such amount is not included in income. It is clarified that no deduction will be denied, no tax attribute reduced, and no basis increase denied by reason of the exclusion from gross income.
• Repayment of employee payroll taxes deferred in 2020 was originally scheduled for the period January 1, 2021, through April 30, 2021. The period for repayment has been expanded to January 1, 2021, through December 31, 2021.
• The employer tax credit for providing emergency sick and family leave has been extended through March 31, 2021.
• A full deduction is now allowed for business meals provided by a restaurant for expenses paid or incurred in 2021 and 2022.

Rent relief

• The legislation allocates funds to state and local governments to provide emergency rental assistance through December 31, 2021.
• The legislation extends an eviction moratorium originally issued by the Centers for Disease Control and Prevention, but only through January 31, 2021.

Charitable giving

Enhancements to the normal charitable gifts deduction rules in 2020 have been extended through 2021.

• For those who itemize deductions, the limit on the charitable gifts deduction has been increased to 100% of AGI for direct cash gifts to public charities.
• For nonitemizers, a $300 (increased to $600 in 2021 for joint returns) charitable deduction for direct cash gifts to public charities is available (in addition to the standard deduction).

Other tax provisions

The floor for deducting medical expenses has been permanently lowered to 7.5% of AGI (it was scheduled to increase to 10% in 2021).

Starting in 2021, the deduction for qualified tuition and related expenses has been repealed. To make up for it, the modified adjusted gross income (MAGI) phaseout range for the Lifetime Learning Credit has been increased to be the same as the phaseout range for the American Opportunity Tax Credit.

A number of provisions that are periodically extended (often a year at a time) have been extended through 2025, including:

• The exclusion from gross income of discharge of qualified principal residence indebtedness
• The employer credit for paid family and medical leave
• The exclusion from income for certain employer payments of student loans

A number of other provisions have been extended (generally through 2021), including:

• The treatment of mortgage insurance premiums as qualified residence interest for purposes of the interest deduction
• The energy efficient home credit

CARES Act

Tax Provisions Applicable to Individuals

Federal Recovery Rebates ("Stimulus Check") Information

The IRS has implemented a website to check if you are eligible for the recovery rebate, to check status, and add your direct deposit information  https://www.irs.gov/coronavirus/economic-impact-payments Ensure that you put your information in as capital letters since IRS maintains your personal information in that format.

Individual US taxpayers received “recovery rebates” of up to $1,200 for single filers ($2,400 for joint filers), increased by $500 for each qualifying child. For single filers, this payment begins phasing out by $5 for every $100 over $75,000 of income ($150,000 for joint filers, and $112,500 for heads of household). The payment would be completely eliminated for single filers with incomes of more than $99,000 ($198,000 for joint filers).

The income will be based on your 2019 income if you have already filed your taxes.  If not, it will be based on your 2018 income.  Kiplinger has a stimulus calculator that you use at this link. https://www.kiplinger.com/tool/taxes/T023-S001-stimulus-check-calculator-2020/index.php . If you receive social security, you are eligible to receive the stimulus check. 

All US individuals were eligible for these payments except (1) nonresident aliens; (2) individuals who can be claimed as a dependent by another taxpayer; and (3) an estate or trust. Eligible individuals are required to provide a Social Security number for themselves, their spouse (if filing jointly), and any child for whom the additional $500 credit is claimed. Taxpayers with ITINs are not eligible for the credit. Also, those individuals that are behind on their child support payments are not eligible to receive payment.

The recovery rebates are structured as tax credits and will be automatically advanced to eligible individuals in 2020 as a direct deposit or a check by mail. The payment will be based on the taxpayer’s 2019 return or, if the taxpayer did not file, their 2018 return. Individuals who did not file in either 2018 or 2019 may claim the credit on their 2020 income tax return but will not receive a payment in 2020.

Important:  The stimulus amounts are truly free money. If, when preparing their 2020 returns, the taxpayer finds that the advanced credit is greater than the actual credit, they will not be required to repay the excess credit. Further, if the taxpayer finds that the advanced credit is lower than the actual credit, taxpayers may claim the difference on their 2020 income tax return. 

III. Tax Provisions Applicable to Individuals

Recovery Rebates—Individual US taxpayers will receive “recovery rebates” of up to $1,200 for single filers ($2,400 for joint filers), increased by $500 for each qualifying child. For single filers, this payment begins phasing out by $5 for every $100 over $75,000 of income ($150,000 for joint filers, and $112,500 for heads of household). The payment would be completely eliminated for single filers with incomes of more than $99,000 ($198,000 for joint filers).

The income will be based on your 2019 income if you have already filed your taxes.  If not, it will be based on your 2018 income.  Kiplinger has a stimulus calculator that you use at this link. https://www.kiplinger.com/tool/taxes/T023-S001-stimulus-check-calculator-2020/index.php . If you receive social security, you are eligible to receive the stimulus check. 

All US individuals are eligible for these payments except (1) nonresident aliens; (2) individuals who can be claimed as a dependent by another taxpayer; and (3) an estate or trust. Eligible individuals are required to provide a Social Security number for themselves, their spouse (if filing jointly), and any child for whom the additional $500 credit is claimed. Taxpayers with ITINs are not eligible for the credit. Also, those individuals that are behind on their child support payments are not eligible to receive payment.

The recovery rebates are structured as tax credits and will be automatically advanced to eligible individuals in 2020 as a direct deposit or a check by mail. The payment will be based on the taxpayer’s 2019 return or, if the taxpayer did not file, their 2018 return. Individuals who did not file in either 2018 or 2019 may claim the credit on their 2020 income tax return but will not receive a payment in 2020.

Important:  If, when preparing their 2020 returns, the taxpayer finds that the advanced credit is greater than the actual credit, they will not be required to repay the excess credit. Further, if the taxpayer finds that the advanced credit is lower than the actual credit, taxpayers may claim the difference on their 2020 income tax return. 

The IRS has now set up the website for tax return non-filers who do not receive Social Security.  https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here 

Retirement Withdrawals—The 10 percent early withdrawal penalty is waived for retirement plan distributions of up to $100,000 made after January 1, 2020 for fairly broad coronavirus-related purposes. 

To the extent that the distribution is considered income, the income would be recognized over three years, and taxpayers may pay back the funds to the retirement account within three years without regard to that year's cap on contributions.

Additionally, for individuals affected by the coronavirus, loan limits from retirement plans are increased from $50,000 to $100,000. For loans due in 2020, the repayment deadline is delayed. 

Mandatory Retirement Distributions—Generally, taxpayers of a certain age are required to withdraw minimum amounts annually from certain retirement plans on accounts, subject to a 50 percent penalty. The CARES Act waives the minimum distribution requirements for 2020.  

Charitable Contributions—Individuals are permitted up to $300 of above-the-line deductions for charitable contributions made in 2020, regardless of whether the individual itemizes their deductions. For individuals who do itemize, the 50 percent of adjusted gross income limitation is suspended for 2020.

Student Loan Repayment Benefits—Employees who receive employer-sponsored educational assistance may exclude up to $5,250 of this payment from their income. Under current law this generally includes only tuition, fees, and related supplies. This provision temporarily expands the definition of “employer-sponsored education assistance” to include “qualified loan payments” made to a lender by an employer on an employee’s behalf after the date of enactment and before January 1, 2021. 

Qualified loan payments are those that are applied to student loans for which the employee would be eligible for the student loan interest deduction under IRC sec. 221(s)(1). 

Federal Tax Filing and Payment Deadline News

The U.S. Treasury Department and the IRS announced on March 17, 2020 that individuals and businesses could delay 2019 income tax payments due April 15, 2020 90 days until July 15, 2020.  What does this mean for you?

• If you file your taxes and have a balance due on your 2019 U.S. tax return, you can delay and have up to July 15, 2020 to pay that balance.
• If you pay estimated taxes, you may delay your 1st quarter (due April 15) estimated tax payment until July 15, 2020. 
• If you want to make an IRA or HSA contribution for 2019, you have July 15th to make that contribution for 2019.

On March 20, 2020, Treasury Secretary Steven Mnuchin announced the IRS will move back the filing deadline to July 15, 2020.  No extension is necessary for Federal returns.  Most states have adopted the Federal change to the filing and payment deadline, however, read the fine print.  For example, Virginia allows June 1 as the payment deadline, however, the Commonwealth will charge interest (no penalty) for waiting to pay to it until June 1.

State Tax Filing and Payment 2019 Income Tax Deadlines

Mid-Atlantic States

Delaware -  Adopted Federal filing and payment date of July 15, 2020

Maryland - Adopted Federal filing and payment deadline of July 15, 2020

Virginia -  Currently, no change from the May 1, 2020 filing deadline. However, Virginia Department of Taxation announced on April 27, 2020 that Income Tax payments originally due on May 1 can be delayed until June 1, 2020 without penalty or interest charges.  Therefore, taxpayers can file and pay by June 1 for no additional charges.

Pennsylvania - Adopted Federal filing and payment deadline of July 15, 2020

District of Columbia - Adopted Federal filing and payment date of July 15, 2020

New Jersey -  Adopted Federal filing and payment date of July 15, 2020.  Now, no states have a April 15 payment and due date.

Other States with Clear Portal Accounting and Tax Clients:

Minnesota - Adopted Federal filing and payment deadline of July 15, 2020 for individual income tax only

North Dakota - Adopted Federal filing and payment deadline of July 15, 2020.

Tennessee -  Adopted Federal filing and payment deadline of July 15, 2020 for the Hall Income Tax which only taxes dividend and interest income.  The State of Tennessee is offering a July 15, 2020 filing and payment deadline for those counties declared a federal disaster area due to the March 2-3 tornadoes. In addition, franchise and excise taxes filing and payment dates have been extended to July 15, 2020.

Florida - No changes since Florida has no individual state income taxes. 

Nevada - No changes since Nevada has no individual state income taxes.

California - Adopted Federal filing and payment deadline of July 15.  July 15 is also the new deadline to pay LLC fees.

Other Federal Assistance News

CARES Act -  (Thanks to the Kostalanetz Alert for providing the information.) On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which includes tax provisions intended to provide an economic stimulus to both businesses and individuals. The stated policy of the new legislation is to increase cash flow and liquidity and to reduce the cost of capital. 

I. Relief Provisions Available to Businesses

Employee Retention Credit—This new provision allows eligible employers a refundable payroll tax credit for 50 percent of qualified wages paid to employees from March 13, 2020 through December 31, 2020. The credit is provided for the first $10,000 of compensation, including health benefits paid to an eligible employee.

An employer with more than more than 100 full-time employees in 2019 is an “eligible employer” if its operations were fully or partially suspended as a result of a coronavirus-related shut-down order. In this instance, qualified wages are those paid when employee services are not provided, limited to 30 days per employee.

An employer with 100 or fewer full-time employees in 2019 is an eligible employer if its gross receipts declined more than 50 percent as compared to the same quarter in the previous year. In this instance, all employee wages are credit-eligible, and credit is available regardless of whether or not the business was closed.

Employers receiving a covered loan under paragraph (36) of sec. 7(a) of the Small Business Act (discussed below) will not be eligible for this credit. Additionally, the credit does not apply to government employers. 

Payroll Tax Deferment —To provide cash flow relief, a portion of employer payroll taxes are deferred. For employers, all of the payroll tax attributable to Social Security payments (OASDI), or 6.2-percent of wages, is deferred. For self-employed individuals, one-half of the 12.4-percent portion is eligible for deferral. 

The deferred payments would be paid in two installments: half due on December 31, 2021, and half due on December 31, 2022. Social Security trust funds are unaffected. The deferral is not permitted for those businesses who received a small business loan under this Act and subsequently had the debt forgiven. 

Small Business Loans—The Act creates the Paycheck Protection Program (“PPP”), which expands the Small Business Administration 7(a) loan guaranty program, by providing 100 percent federally guaranteed loans that are partially forgivable to qualified small businesses who maintain their payroll. 

The maximum amount of the loan (subject to a $10 million cap) is the sum of (1) 2.5 times the average month payroll prior to the coronavirus pandemic; and (2) the amount of any other debt approved for refinancing. Importantly, a portion of the loan in an amount equal to up to eight weeks of payroll and other qualifying cost can be forgiven so that the recipient never has to pay that money back. 

The amount of loan forgiveness includes the employer’s: (1) Payroll costs; (2) Interest on certain mortgage obligations; (3) certain payments of rent obligations; and certain utility payments.

The amount of loan forgiveness will be reduced based on any reduction in the number of employees during the covered 8-week period (subject to an exemption for rehires by June 30, 2020) as well as for any reduction of wages of more than 25 percent of employees who are making $100,000 or less. Detailed documentation is required in connection for request of forgiveness. Eligible entities are: 

• “Small business concerns” as currently defined under the Small Business Act;
• Any business concern, nonprofit organization (excluding nonprofits receiving Medicaid funds), or veteran’s organization if it employs less than 500 employees;
• For businesses in the accommodation and food services industry (NAICS 72), the 500-employee rule is applied on a per physical location basis; and
• Individuals who operate a sole proprietorship or as an independent contractor and eligible self-employed individuals.

Small businesses and other eligible entities may apply for a loan under the PPP if they were harmed during the coronavirus emergency between February 15, 2020 and June 30, 2020. Such business must have been in operation on February 15, 2020. Additionally, if a small business avails itself of the PPP, it may not also claim the Employee Retention Credit (described above). 

The Act also made several changes to the Economic Injury Disaster Loan (“EIDL”) Program under sec. 7(b) of the Small Business Act. EIDL Loans are available to small businesses in a declared disaster area (all 50 states, Puerto Rico, Guam and the North Mariana Islands) to cover economic injury resulting from the disaster (e.g., loss of revenue). EIDL Loans are available up to $2 million, carry an annual interest rate of 3.75 percent and have a maximum term of 30 years.

Loans up to $200,000 do not require a personally guaranty, and above $200,000 must be guaranteed by any owner having a 20 percent or greater interest in the applicant. 

The Act also removed standard EIDL Program requirements that the borrower not be able to secure credit elsewhere or that the borrower has been in business for at least one year, as long as it was in operation on January 31, 2020.

II. Tax Provisions Applicable to Businesses

Expanded Use of Net Operating Losses—Before enactment of the Tax Cuts and Jobs Act, businesses could carry back their net operating losses (NOLs) and use them to receive a refund for taxes paid in the preceding two years. Businesses could also carry forward NOLs to reduce future taxes by claiming the NOL as a deduction against income in future years. The TCJA eliminated the two-year carryback; under current law, businesses may only carry forward NOLs. Additionally, under the TCJA, businesses may only use an NOL carry forward to offset a maximum of 80 percent of computed taxable income.

This provision expands the use of NOLs by (1) temporarily suspending the 80 percent of taxable income limit for tax years beginning in 2018, 2019, and 2020; and (2) allowing NOLs arising in tax years beginning in 2018, 2019, and 2020 to be carried back up to five years. 

This carryback capability is also provided to taxpayers other than corporations—such as, pass-throughs or sole proprietorships—that incur NOLs. 

Increased Deduction for Business Interest Expense—Under IRC sec. 163(j) of the TCJA, the amount of business interest expense that may be deducted by a taxpayer is limited to the sum of: (1) the taxpayer’s business interest income for the year; (2) 30 percent of the taxpayer’s adjusted taxable income (“ATI”) for the year; and (3) the taxpayer’s floor plan financing interest expense for the year. 

The Act increases the ATI limitation from 30 percent to 50 percent for tax years beginning in 2019 and 2020. Additionally, recognizing that the coronavirus likely will have an adverse effect on a business’ 2020 ATI, taxpayers may to elect to use 2019 ATI for purposes of calculating their 163(j) business interest expense limitation for 2020. 

Refund for Corporate AMT—The TCJA repealed the alternative minimum tax (“AMT”), however, under current law, corporate AMT credits for prior AMT payments are allowed as refundable credits until 2021. The Act accelerates the ability of corporations to recover their AMT credits and makes the credits refundable in tax years 2018 and 2019. 

Technical Amendment Regarding Qualified Improvement Property (“QIP”)—A technical error in the TCJA increased the period for deducting the cost of QIP from 15 years to 39 years. The Act corrects this glitch, reducing the recovery period to 15 years once more, and making the relevant costs eligible for bonus depreciation under IRC sec. 168(k). This provision is effective for property placed in service after December 31, 2017. Taxpayers that placed such property in service in 2018 should consider amending their 2018 income tax return to treat the property as eligible for bonus depreciation. 

Excise Tax Exemption for Hand Sanitizer—Distilled spirits are generally subject to a federal excise tax. For the 2020 taxable year, the Act exempts distilled spirits used in hand sanitizer that is produced and distributed in a manner that is consistent with FDA guidelines.

The CARES Act is the third piece of legislation in response to the outbreak. Earlier this month, the Coronavirus Preparedness and Response Supplemental Appropriations Act provided health related funding and the Families First Coronavirus Response Act added special tax credits for some businesses with employees impacted. Even as the CARES Act passed through Congress, there has already been discussion of additional action as the situation evolves.

SBA Small Business Loans - On March 18, 2020, the Small Business Administration (SBA) announced Disaster Loan Assistance to small businesses.  Small businesses may borrow up to $2 million at low interest.  Apply online at the following website: https://www.sba.gov/disaster-assistance/coronavirus-covid-19

Emergency Sick Leave (H.R. 6201) - Enacted into law. Payroll tax credits for paid sick and family and medical leave. Provides a refundable tax credit equal to 100 percent of qualified sick leave wages paid by an employer. The credit is a payroll tax credit applied against the employer portion of social security taxes. Qualified wages are capped at $511/day for employees self-isolating and $200/day for those caring for a family member or child. • Tax credit for sick leave for certain self-employed individuals with the same limits as above. • Tax credit for required paid family leave. 100 percent of qualified wages. Limited to $200/day per employee and a $10,000 overall maximum per employee. A similar credit is available for the self employed. • The tax credits are only available for the period beginning within 15 days from the date of enactment (as determined by the IRS) and ending on December 31, 2020. The IRS is granted broad authority to issue regulations and guidance. For small businesses who pay payroll taxes, this benefit is immediate when you pay your payroll taxes.  Self-employed individuals will need to wait until they complete their taxes at the end of the year.  However, if you pay estimated taxes, you may be able to reduce the estimated amount paid during 2020.

Student Loan Relief - Student loan borrowers adversely affected by the coronavirus, or COVID-19, can officially get some relief on their debt if they request it, according to new details announced on Friday, March 20 by the Education Department (ED). Education Secretary Betsy DeVos directed all federal student loan servicers to grant “administrative forbearance” to any borrower with federal loans for at least two months, if they request one. Forbearance will be in effect for “at least 60 days” starting March 13. Documentation is not required.

Mortgage Forclosure and Eviction Moratorium - U.S. Department of Housing and Urban Development (HUD) Secretary Ben Carson, in consultation with the Trump Administration and the Coronavirus Task Force, authorized on March 18, 2020 the Federal Housing Administration (FHA) to implement an immediate foreclosure and eviction moratorium for single family homeowners with FHA-insured mortgages for the next 60 days. Freddie Mac and Fannie Mae followed with the same procedures as FHA for their insurance backed mortgage loans.

Other State Assistance News

Delaware

For the latest Delaware small business updates, check out https://coronavirus.delaware.gov/resources-for-businesses/

The Delaware Justice of the Peace has postponed all landlord/tenant proceedings until after May 1. 

To assist hospitality-related businesses in Delaware that have been economically impacted by Coronavirus (COVID-19), the Division of Small Business is launching the Hospitality Emergency Loan Program (HELP). The state will be making available no-interest loans of up to $10,000 per business per month to help the estimated 2,700 affected Delaware businesses in the hospitality industry cover immediate, unavoidable expenses over the next few months.

Maryland

Maryland Governor Larry Hogan banned evictions for the duration of the state of emergency.  Additional small business information can be found at the following Maryland website:  https://coronavirus.maryland.gov/pages/business-resources

Virginia

Updates can be found at the following website: https://www.virginia.gov/coronavirus-updates/

As always, we at Clear Portal Accounting and Tax are here to help you with your administrative, accounting, and tax needs to navigate you during this unprecedented time.