If you sustain a casualty loss due to a federally declared disaster under Section 165(i), you may elect to deduct a casualty loss in the tax year before the casualty actually occurred. Taxpayers have the option of claiming a deduction for the casualty loss either in the year the loss occurred or the prior year. To claim the deduction in the prior year, an election may be made to accelerate this loss. In 2019, the IRS finalized a proposed regulation it had issued in 2016 that states this election must be made 6 months after the original due date of the current year return. Under the prior rules, the election had to be made by the unextended due date of the current return.
Who Can Benefit?
Any taxpayer that has suffered a disaster-related loss as defined in Sec. 165 (h)(5) can benefit from this election. This is specifically beneficial for taxpayers who have income to take the loss against on prior year returns and are expecting to have a loss in the current year.
Additional Considerations
The election can be revoked for up to 90 days after the due date of the election. This may be a beneficial election particularly during the 2020 tax year where many businesses may be experiencing losses due to the pandemic.
If you have any questions regarding the tax implications of electing to accelerate disaster losses, please reach out via email, give us a call at (401) 921-2000, or fill out our online contact us form.
With nearly 700,000 businesses having applied for the Paycheck Protection Program (PPP), many are unaware that the forgiven portion of the loan for Federal purposes may actually be taxable as gross income in some states.
Will Federally Forgiven PPP Debt be Taxable by States?
The answer to the questions is possibly. Under normal circumstances, cancellation of debt would be includable in your gross income. An example would be if you and your credit card company discussed your balance, and the credit card company forgave a portion of your balance due. The balance of the forgiven portion would then be included as income. Businesses that meet the qualifications for their PPP loans to be fully or partially forgiven at the Federal level will need to determine if the states they have nexus in will follow the Federal guidelines.
Will Expenses Paid with PPP Funds Be Deductible?
In the normal course of business, ordinary and necessary expenses are deductible. However, if you received a loan to pay your expenses, and then the debt was forgiven and not taxed, did you pay those expenses? The IRS believes that expenses paid with forgiven funds should not be deductible from a company’s gross income. The exclusion of forgiven expenses in calculating taxable income will increase the company’s tax liability and the amount due to the IRS. Ruling for this topic is not final, although some states have issued guidance.
Disagreement Among States
Each state has the power to regulate the laws within their respective state borders. There are twenty-one rolling conformity states, which means they conform with the Internal Revenue Code (IRC) whenever there are changes. Nineteen states are static conformity. This means their tax laws are based on the IRC as of a specific date. As new federal tax laws are enacted, their legislative body must vote to either adopt any federal changes or change their state’s IRC conformity date. These static conformity states may operate under the pre-TCJA code (Tax Cuts & Jobs Act) due to their outdated conformity of the IRC. The other states either do not have an income tax or have selective conformity between individual and corporate taxation. Significant tax issues may arise for businesses that operate or have nexus in multiple state jurisdictions.
If you have any questions regarding federal PPP loan forgiveness and how it could affect your business, please reach out to us via email, give us a call at (401) 921-2000, or fill out our online contact us form. For further information regarding COVID-19 assistance programs, please visit our COVID-19 Resources page.
As every student with loans probably knows, the Coronavirus Aid, Relief, and Economic Security (CARES) Act that President Trump signed into law on March 27, 2020, provides some assistance for borrowers of federal student loans (private loans may or may not have special treatment depending on the lender). The Act suspends all payments from March 13, 2020 through September 30, 2020. During this period, interest will not accrue and collections and garnishments will not be pursued. Additionally, the missed months of payments will still count toward the 120 payments required for those borrowers working toward public service loan forgiveness. This is great news for about 9 million student loan borrowers.
On August 9, 2020, the President signed an Executive Order to extend student loan relief through the end of the year. More specific information on the changes, if any, will be forthcoming.
But what happens when 2021 rolls around, especially if you’re out of work due to the widespread impact of the coronavirus, lack of work or any other circumstances? There are still options to continue deferring or reducing the payments on your student loans. Ideally, the time to look into these options is now, and not when the relief has expired.
Student Loan Options
For reducing or deferring your student loan payments, here are a few options:
- Refinance at a lower interest rate.
- Consolidate several loans into one loan with a fixed interest rate that is based on the average interest rate of all loans being consolidated.
- Sign up for income-driven repayment.
- Apply for loan forgiveness programs; there are several, including ones available to teachers, nurses, military personnel, and those in public service. You may also qualify for income-driven repayment forgiveness, which allows you to base your payments on your monthly income. After 20 or 25 years (the plans have different time frames), your balance may be forgiven.
If you’re interested in learning more about these options, an excellent resource is the Federal Student Aid website, studentaid.gov. You will also be able to find updates on new legislation related to student loans due to COVID-19, as the administrators update the website frequently.
Finances During COVID-19
We would be remiss if we didn’t also touch upon what to do with the funds you would have used for student loan debt had there been no forbearance. Assuming you have income, whether from working or unemployment, and you have cash remaining after covering your necessities (housing, utilities, food, etc.), here are some financial tips we would recommend:
- Establish, or add to, your emergency fund. As the pandemic has so clearly illustrated, bad things can happen. Aim for at least three months of living expenses; six to twelve months (or even more) is ideal.
- Once you are comfortable with the level of your emergency funds, concentrate on paying down debt, beginning with the highest interest rate balances.
- Add to retirement savings.
- After you’ve taken these steps, you can look at other goals, such as a home improvement or vacation fund, or saving for your children’s education.
No one expected a global pandemic this year and all that has followed, but if it has shown that we need to be ready for the unexpected. We can take the lessons learned from this pandemic to prepare for the next bump in the road.
If you have any questions regarding federal student loans and the relief provided by the CARES Act, please reach out via email, give us a call at (401) 921-2000, or fill out our online contact us form. For further information regarding COVID-19 assistance programs, please visit our COVID-19 Resources page.
Experience & Education
- Undergraduate degree from Bryant University with a concentration in Accounting.
Professional
- Chair of the Board of Directors of the American Institute of Certified Public Accountants (AICPA) from 2021-2022.
- Vice Chair of the Board of Directors of the American Institute of Certified Public Accountants (AICPA) from 2020-2021.
- Member of the Rhode Island Society of Certified Public Accountants (RISCPA).
- Currently a member of the Board of Directors of the Association of International Certified Professional Accountants and a member of the Public Accounting (AICPA) Board.
- Served on the AICPA MAP Committee.
- Served on the AICPA Small Firm Advocacy Committee, AICPA Council.
- Served on the AICPA Nominating committee.
- Served on the AICPA Relations with the Bar Association Committee.
- Past Chair of The AICPA/PCPS Executive Committee, serving that committee for nine years.
Community
- Member of DiSanto Priest Charitable Foundation‘s Advisory Board.
- Past President of the RISCPA.
- Past President of the Central Rhode Island Chamber of Commerce.
Years of Experience
- 40+
Do you, as an employer, have parking available at your office or place of work? If the answer is yes, there are some things you will need to consider. The Tax Cuts and Jobs Act (TCJA) generally disallows the employer deduction for expenses regarding the cost of qualified transportation fringes for employees. When TCJA was first enacted, there was not much guidance in this section, that is until Notice 2018-99 was issued.
Notice 2018-99
This notice provided the guidance people had been asking for for over a year. All in all, parking that is taxable to the employee of the business can be deducted by the employer, only if it is on an after-tax basis. Different factors come into play whether an employer pays a third party for parking, or if the employer owns/leases their own parking facility. The notice guides the employer in determining what is and is not deductible through both instances.
Third-Party Parking
For employers who pay a third party, the deduction to be taken is fairly simple. Everything is disallowed except for the amount paid in excess of the monthly limitation. A reminder that any parking expense paid for employees in excess of the IRS prescribed monthly qualified parking exclusion can be included in the employee’s W2 income, and therefore would be deductible by the employer as part of the parking expense.
Owned or Leased Parking
As for those employers who own or lease their parking lot, the following is a brief explanation of how the calculation for disallowed expenses would work. This is a four-step calculation where the cost would include maintenance, repairs, snow removal, landscaping, insurance, taxes, security, and parking attendants. The notice specifically states that depreciation and expenses paid for items not located in or on the parking facility, for example lighting, are not included in the cost. Once that cost is figured, one can begin the process of calculating.
Step one of this equation would be to figure out the “reserved employee spots”. All of the costs in relation to their spots will not be deductible. These spots include any areas with specified signage or other ways to designate spots to anyone but the general public. Businesses were granted until March 31, 2019 to remove any signage to eliminate or decrease the amount of reserved parking spots within their lots. The employer should then allocate the percentage of total cost to these spots and deduct them 100% from the allowable expense.
The next step in the process is to determine the principal use of the remaining spots. These are spots not set aside specifically for employees. If 50% or more of the remaining spots are or can be used by the general public, then all of those spots are entirely deductible, and your calculation is complete. There is a guideline on what constitutes these spots as “provided to the general public,” which also needs to be taken into consideration within this calculation.
If the second step above is not the end of the road, then you must next calculate the reserved non-employee parking spots. These spots could be reserved for visitors, partners or 2-percent shareholders and are fully deductible. Again, this step requires you to calculate the percentage of spots reserved for non-employees and then you may deduct that amount in full.
Finally, step four is to determine the remaining allocation of the expenses. This is the part where anything that may not fall specifically into the above three steps would sit. The employer would then need to reasonably determine the use of these spots on a normal business day. This could be based on actual or estimated figures.
More Information
It should be noted that final guidance has not been provided for this issue. The IRS states that these guidelines are to be used in the determination of deductible qualified transportation fringes until the publication of proposed and final regulations. As you can see, the calculation for this deduction is in no way simply done. If you feel this change in law could pertain to you, or have any questions, please reach out via email, give us a call at (401) 921-2000, or fill out our online contact us form.
A “Just In Case” For Those Struggling Financially Due to COVID-19
It would be difficult to find a business or individual in the world that hasn’t been impacted by COVID-19 in some way. Millions of people are either unemployed, struggling to keep their businesses open, or are just trying to maintain the minimum cash flow necessary to provide the essentials needed to live. While unemployment assistance is available and stimulus payments continue to go out, much of the assistance has been slow, or has yet to arrive. Many people are exhausting their savings, if they haven’t already, and are looking for any possible way to survive financially. The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020. It included qualified retirement plan distribution relief that may be an option to help you get through this global pandemic.
Background
Prior to COVID-19, the IRS did allow taxpayers to take retirement distributions early, however doing so would result in a 10% additional tax if you were under age 59 1/2. Considering the economic hardship that most Americans are currently facing, the IRS has provided some much-needed relief to individuals that are adversely affected by this pandemic.
Relief Breakdown
As part of the CARES Act, the 10% early withdrawal penalty is being waived. This applies to coronavirus-related retirement distributions up to an aggregate total of $100,000 from all eligible plans and IRAs to a “qualified individual”. This waiver will apply to all retirement distributions that qualify under the CARES Act between January 1, 2020 and December 31, 2020, even if you are under 59 ½. This waiver applies to eligible retirement plans such as:
- Traditional individual retirement accounts (IRAs)
- 401(k) plans
- Profit-sharing plans
- Stock bonus plans
- Qualified 403(a) annuity plans
- 403(a) annuity contracts
- Custodial accounts
- Governmental section 457 deferred compensation plans
In addition to the 10% waiver, taxpayers can pay the tax associated with the distribution over a three-year period beginning with tax year 2020. Depending on the plan, taxpayers may also recontribute the funds they withdrew in one or more payments over a three-year period.
Eligibility
To be considered a “qualified individual” for this relief, you must have experienced at least one of the following;
- Either you, your spouse, or one of your dependents was diagnosed with COVID-19
- You have experienced financial hardship because you have been quarantined, furloughed, laid off, or had hours reduced due to the pandemic
- You are unable to work due to child care responsibilities
- You own or operate a business and had to close or reduce hours due to the pandemic
- You have experienced an adverse financial consequence due to other factors as provided in guidance issued by the IRS
Withdrawing funds from a qualified retirement plan early should never be a first choice, but under certain circumstances it may be necessary. It’s nice to have the option available without having to take the 10% early withdrawal penalty, while also having the option to pay income taxes on the distribution over a three-year period.
Further Information
If you have any questions regarding the qualified retirement plan distribution relief available though the CARES Act, please reach out via email, give us a call at (401) 921-2000, or fill out our online contact us form. For further information regarding COVID-19 assistance programs, please visit our COVID-19 Resources page.
B Lab is asking socially and environmentally conscious companies to put their money where their mouth is; to draw on their resources and talent to use business as a force for good; and to balance purpose and profit. B Corporation status is a private certification issued to for-profit enterprises by B Lab, a global non-profit organization. B Lab defines certified B Corporations as “businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.” Since its inception in 2006, B Lab has certified over 3,000 for-profit companies in over 50 countries. These B Corporations focus equally on generating profits and fulfilling a purpose.
Impacts of B Corporations
Why would a company want to become a certified B Corporation? Some companies believe in leading by example to show others that a business affects more than just the pocket of their shareholders. These companies identify the importance of taking responsibility for their impact on other stakeholders. Other companies use it to build business relationships and attract talent with those who share these beliefs. Certification allows companies to set standards and goals, as well as track progress toward improving their impact. B Corporations can have influence on market activity by allowing individuals to vote with their dollar. Consumers can choose to support businesses who are certified, which allows individuals to share one voice, which can provide incentive to other businesses to embrace similar values. The legal framework surrounding B Corporations protects the mission through organizational changes.
Pursuing B Corporation Status
How would an entity acquire B Corporation status? The process begins with the completion of a “B Impact Assessment”, an extensive questionnaire that helps assess the positive impact a company makes to its many stakeholders. Applicants must score an 80, or above, (out of 200) to be considered for B Corporation status. Examples of the score’s metrics are governance, workers, community, and environment. Beyond the initial application, there are legal requirements depending on the location of the company, the type of entity (corporation, partnership, sole proprietor), and whether the company is publicly traded or a wholly-owned subsidiary. For example, B Labs may require corporations to elect to become a benefit corporation where applicable, while partnerships may have to amend their partnership agreement. Once accepted as a B Corporation, a company is subject to transparency rules, site reviews, and recertification every three years.
Further Details
If you have any questions about B Corporations or the process for acquiring B Corporation status, please reach out via email, give us a call at (401) 921-2000, or fill out our online contact us form.
Amid the COVID-19 pandemic, many employers have shifted to a remote workforce. This shift has led to questions regarding the impact these remote workers would have on state taxation. In response, Rhode Island, Massachusetts, and Connecticut have all recently released guidance regarding the tax implications of having employees working remotely during the COVID-19 crisis.
Personal Income & Withholding Tax
Each of the referenced states announced that nonresident employees, temporarily working outside of that state, will continue to be treated as that states-source income for personal income tax and personal income tax withholding.
For example, a Massachusetts resident normally works for a Rhode Island employer. They have wages that are subject to Rhode Island income tax withholding. If the employee is temporarily working within Massachusetts due to the pandemic, the employer should continue to withhold Rhode Island income tax.
Additionally, Rhode Island, Massachusetts, and Connecticut will not require employers located outside of their state to withhold additional income taxes. Employees living in one state and working in another will not be required to additional home state withholdings while working remotely.
For example, a Rhode Island resident normally works for an employer in Connecticut. They have wages that are subject to Connecticut income tax withholding. If the employee is temporarily working within Rhode Island solely due to the pandemic, the employer will not be required by Rhode Island to withhold Rhode Island income taxes from that employee’s wages.
Corporate Nexus
Under new COVID-19 emergency regulations, Rhode Island, Massachusetts, and Connecticut have also released new guidance on corporate nexus.
In general, a company may trigger nexus when engaging in business activity outside of their primary state. But, during the COVID-19 pandemic, the existence of one or more employees that previously worked in another state but are working remotely, will not in and of itself trigger nexus for sales tax or corporate income tax purposes. For more detailed information, see the following:
If you have any questions, please reach out via email, give us a call at (401) 921-2000, or fill out our online contact us form.
In March, 2020, Congress appropriated $100 billion to provide “general” and “targeted” relief to healthcare providers financially impacted by the novel coronavirus pandemic. The general relief portion is expected to total $50 billion.
As of April 24, 2020, $30 billion of the general relief funds had been automatically disbursed by Heath and Human Services (HHS) to all healthcare providers that had Medicare Fee-For-Service Payments (Parts A and B) in 2019. No application was required to receive these funds. These funds did not have to be repaid if the provider meets certain terms and conditions, including being able to demonstrate that lost revenues and increased expenses due to the COVID-19 pandemic equaled or exceeded the funds received. However, providers did need to go online within 30 days of receipt and sign an attestation form electing to keep these funds.
Round Two Funding Requirements
Any provider that received a payment from HHS during the first round is now eligible to apply for additional funds from the remaining $20 billion of general relief funding. Unlike the first round of disbursements, healthcare providers will have to apply for round two funds, and provide data on their annual revenues and estimated COVID-related expenses on or before June 3, 2020. To be eligible for round two funding you must meet the following requirements:
- You must have already received a payment during round one.
- You must have billed and received Medicare Fee-For-Service Payments in 2019 and not are not currently terminated from participation in Medicare, or precluded from receiving payments from Medicare Advantage or Part D; and you are not currently excluded from participating in Medicare, Medicaid, and other Federal health care programs and your Medicare billing privileges are not currently revoked.
- You must attest to having received that payment via the Provider Attestation Portal, and agree to the Terms and Conditions on the attestation portal.
- You must have filed tax returns for the years 2017 and 2018, if one was required.
Round Two Funding Application
You will need to have the following ready to submit as part of the application process:
- The Taxpayer Identification Number of the entity applying for relief funds;
- Your estimated revenue losses in March and April 2020 due to COVID-19;
- A copy of your most recently filed federal income tax return, either 2017, 2018 or 2019;
- A listing of the taxpayer identification numbers of any subsidiary organizations, if applicable, that have received Provider Relief Funds but that do not file separate tax returns.
Lost revenue can be estimated by comparing the organization’s March 2020 and April 2020 revenue to your March and April 2019 revenue. You can also use budgeted revenue figures for March and April 2020 that would have been expected had the pandemic not happened, and compare that to your actual figures for those months. The only requirement is that a reasonable method of estimation is used.
Other Resources
If you did not receive a payment from the general relief distribution in round one, you may still be eligible to receive assistance through “targeted” relief distributions. The eligibility requirements for the receipt of targeted funds, and a comprehensive description of the CARES Act Provider Relief Program can be found here.
If you have any questions regarding the CARES Act Provider Relief Funds, please reach out via email, give us a call at (401) 921-2000, or fill out our online contact us form. For further information regarding COVID-19 assistance programs, please visit our COVID-19 Resources page.
Supply chains around the world continue to be affected by the COVID-19 crisis; some countries have been shut down entirely. However, outside of this pandemic, minor short-term supply chain disruptions occur for a variety of reasons—natural disasters, raw material shortages, factory fires, and more. Manufacturers with concentrated supply chains experience the highest level of risk for compromised operations because their ability to procure raw materials or manufactured goods can be directly impacted by uncontrollable factors. Mitigating this risk should be a key consideration when making decisions on where to source materials or products from in the marketplace.
Why Diversifying Suppliers is Key
Diversification of a supplier portfolio can protect a company from supply line shutdowns. The simplest form of diversification is finding at least two suppliers that can provide the same, or similar, product and keeping working relationships with both to prepare the additional sellers to ramp up production in case of increased need. Beyond supplier diversification, some manufacturers benefit from sourcing production supplies from a variety of geographic areas, given the potential environmental risks, including winter storms, wildfires, and earthquakes, that can interrupt transportation routes and facility operations.
Geographic concentration can pose more than just environmental threats. Manufacturers attracted to the cheap cost of labor overseas often utilize vendors in areas where foreign governments, or other relevant parties, have significant influence over industry supply chains, which may expose production to significant, unexpected delays. While these are the more common examples that indicate the importance of diversification, there are many instances, specific to certain industries, where supply chains can be put at risk without a broad supplier pool.
Additional Considerations
Spreading supply resources mitigates risk, but there are also potential costs to consider. A company may not reach the thresholds required to receive quantity discounts if it parcels out orders from multiple suppliers. Additionally, ordering a manufacturing module from multiple suppliers may result in varying quality standards. A cheaper vendor is good, unless it costs more in manufacturing errors, spoilage, or additional wear on equipment. These common factors must be weighed against expanding the supplier mix. Successful company managers will strive to achieve a balance between supply chain risks and keeping production up to the required standards.
If you have any questions regarding diversifying your supply chain, please reach out via email, give us a call at (401) 921-2000, or fill out our online contact us form. For further information regarding COVID-19 assistance programs, please visit our COVID-19 Resources page.