Tax-Free Employer Contribution to Student Loan Debt Incentive

Mar 23, 2021

Statistics show that a mere 8% of employers offer some kind of student loan repayment option. While this is not a new phenomenon, bigger corporations like Google and Hulu recognize the value-add of such offering to attract and retain top talent. Recent changes to a CARES Act provision providing employers tax incentives if they offer student loan repayments has been making news. Similar to employer-sponsored retirement and health care plans, employers can contribute up to $5,250 toward an employee’s student loan balance (principal or interest) and the payment will be free from payroll and income tax under Section 2206 of the CARES Act. This temporary tax-free provision has now been extended for at least five years, and employers are starting to take notice.

Due to the pandemic, many employers are focusing efforts on employee wellbeing and financial stability. This opportunity benefits both sides: the employee doesn’t have to pay income tax on the $5,250 and the employer gets a tax deduction. Some employers have evaluated the benefit of providing annual raises or offering a contribution to student loan debt. Given the economic impact of the pandemic, some may prefer the latter. Especially with student loan interest suspended until September of this year.

If you are interested in taking advantage of this tax-free provision, employers who already maintain an educational assistance program will need to amend their program, and employers who do not already maintain such a program will need to adopt one. Developing a written plan that outlines: 1) how to notify employees of the program, 2) eligibility and, 3) benefits is a good place to start. If you have questions, please contact your William Vaughan Company advisor today.

Categories: COVID-19, Tax Planning

COVID-Related Fraud Risk on the Rise

Feb 19, 2021

Many small business owners do not believe their businesses can or will fall victim to occupational fraud. Due to this belief and budget restrictions, many small businesses do not make this a priority, which leaves them vulnerable.

According to the Association of Certified Fraud Examiners’ 2020 Report, financial statement fraud is the costliest type of occupational fraud affecting organizations. Financial statement fraud is not only costly from a fiscal standpoint, but it also impacts trust within the organization, the community, and with investors.

The rapid advance of COVID-19 has placed a significant strain on organizations and individuals alike. Donald R. Cressey’s fraud triangle theory includes the three major factors that are commonly present when financial statement fraud occurs: Pressure, Opportunity, and Rationalization.

Here is how COVID-19 has impacted these factors:

Pressure – Organizations are facing challenges never experienced before. COVID-19 has left many facing revenue loss, supply chain disruptions, and employee wellness concerns. All these factors, and more, are causing undue pressure to meet financial expectations.

Opportunity – While organizations are receiving state and federal funding to cope with the financial impact of COVID-19 disruption, there are dramatic shifts in operations with remote working and a reduction of in-office staff. This means internal controls are reduced and accessibility increased. These become prime opportunities for fraud.

Rationalization – Mounting stress impacts individual decision-making skills, leading people to rationalize actions they would otherwise regard unacceptable or illegal. Employees may rationalize they are “owed” financial support because of the work they do.

Some potential areas to consider when thinking about your organization include:

  • Revenue recognition – The timing and amount of revenues recognized.
  • Allowances and reserves – Changes in methodology and unusual adjustments.
  • Valuations – Significant estimates used in projections, declining cash flows, and idle assets.
  • Treatment of expenses – Expenses are recorded in the proper period.
  • Disclosures – The adequacy and sufficiency of disclosures.
  • Margins – Reasonableness of margins given the current year operations.
  • Internal control – Opportunity for control override.

These are just a few of the common ways for financial statement fraud to occur. While we all work diligently to recover from the COVID-19 disruption, we need to be aware of the heightened risks and adjust our processes and tasks to monitor for this risk.

If your company needs assistance, William Vaughan is here to assist you.

Connect With Us.

Juli Seiwert, CPA

419.891.1040 | juli.seiwert@wvco.com

Categories: Audit & Accounting, COVID-19

SBA Unveils New PPP Forgiveness Applications & Guidance

Jan 21, 2021

On Tuesday, the U.S. Small Business Administration (SBA) and Treasury released new PPP loan forgiveness guidance along with new forgiveness applications.

These applications include:

  • PPP Loan Forgiveness Application Form 3508S – this new one-page application is for borrowers who received a PPP loan of $150,000 or less. While no supporting documentation is required to be submitted with the application, borrowers are advised to maintain payroll, nonpayroll, and other documents that could be requested during an SBA loan review or audit.
  • Form 3508EZ – this streamlined application is for borrowers that meet certain safe harbors
  • Form 3508 – the full application is for those who don’t qualify for using either of the previous two forms
  • Form 3508D – this two-page document is to be submitted by certain individuals who are required to disclose a controlling interest in an entity applying for a PPP loan

Borrowers using Forms 3508 and 3508EZ must submit payroll and nonpayroll documentation when applying for loan forgiveness. The instructions included with these forms provide lists of the required documents.

In addition to the new forms, an interim final rule (IFR) was released which simplified previous loan forgiveness rules and integrated changes made by The Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (P.L. 116-260) which provided an additional $248 billion of funding to the PPP and allowed for a second-draw.

The SBA also noted it had approved roughly 60,000 PPP loan applications submitted by nearly 3,000 lenders for over $5 billion from the program’s re-opening through Jan. 17.

As always, we encourage you to connect with your William Vaughan Company advisor with questions on how this may impact your individual circumstances, or check out our COVID-19 Resource Center for additional insights.

Categories: COVID-19

SBA Releases New Forms In Preparation for Paycheck Protection Program Re-Opening

Jan 11, 2021

The U.S. Small Business Administration (SBA), in consultation with the Treasury Department, announced the Paycheck Protection Program (PPP) will reopen today initially for community financial institutions (CFIs) that serve minority- and women-owned businesses to make loans. Specifically, CFIs can begin making loans to first-time PPP borrowers today and second-time PPP borrowers on Wednesday.

The SBA and Treasury said the PPP would open to all lenders a few days after the opening for CFIs, but they did not specify a date. Borrower loan application forms were also released:

Form 2483 is updated from previous iterations starting with the original PPP program. Form 2483-SD is a new form for qualified PPP borrowers to seek a second draw of a forgivable loan as they try to navigate economic seas churning in the throes of the COVID-19 pandemic.

Finally, the SBA released additional guidance outlining top-line summaries of the first-draw and second-draw PPP loans and a pair of procedural notices.

For more information regarding the PPP and second-draw loans under the Consolidated Appropriates Act, 2021, check out our latest webinar here or review our PPP Application Guide here. As always, connect with your William Vaughan Company advisor for questions or concerns.

Categories: COVID-19

Americans Begin to Receive Second Round of COVID-19 Stimulus Checks

Dec 30, 2020

Tuesday afternoon, U.S Treasury Secretary Steven Mnuchin took to social media announcing the disbursement timeline for the second round of stimulus checks. He noted the following:

  • Direct Deposit – Individuals who have direct deposit set up with the IRS can start looking for their second stimulus payments as early as last evening (12/29) and continue into next week.
  • Paper Checks – The IRS will begin sending out paper checks today, Wednesday (12/30/20), which means people should begin receiving those checks within the next two weeks.*
  • Status of Payment – Mnuchin also stated later this week, you can check the status of your payment here

*To speed up delivery, a limited number of people will receive their second stimulus payment by debit card. But the form of payment for your second stimulus check may be different than your first payment. Some people who received a paper check last time might receive a debit card this time, and some people who received a debit card last time could receive a paper check. The pre-paid cards will come in white envelopes that “prominently displays the U.S. Department of the Treasury seal,” the IRS said. The card will bear the Visa name on the front and the name of the issuing bank, MetaBank, will be on the card’s back. The information included with the card will explain that this is your Economic Impact Payment. There’s more information on the pre-paid cards here.

While Congress remains in discussion about an increase to a $2,000 stimulus amount, what we know for now is:

  • As it currently stands, the checks will be for $600 for eligible adults, and $600 per dependent, meaning a family of four could receive $2,400.
  • Individuals who earned less than $75,000 and those married filing jointly who earned less than $150,000 in 2019 are eligible for the full amount.
  • Those who made more are eligible for reduced stimulus checks at a rate of $5 per $100 of additional income.
  • The checks phase out completely for individuals that earned $87,000 and couples that made $174,000 in 2019.

If you have questions regarding your stimulus check, please contact your William Vaughan Company advisor or contact us at 419.891.1040. We’d be happy to help!

Categories: COVID-19

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