Timely Estate Planning Strategies: Part Three
Nov 01, 2021
Charitable Gift Planning Opportunities
In the third installment to our Timely Estate Planning Strategies Series, we outline how traditional income and estate planning may incorporate an individual’s desire to fulfill philanthropic goals. Giving can be done both while living (receiving current income tax deductions) and through one’s will at the time of death (garnering estate tax deductions). However, given the current ‘perfect storm’ we outlined in the first blog of the series, there is no better time to address your giving strategies.
The estate tax exclusion is currently $ 11.7 million per individual which means persons with an estate less than this will NOT benefit from charitable bequests in their wills. The emphasis for these individuals should be obtaining current income tax deductions while fulfilling their charitable intent. Individuals with taxable estates greater than $ 11.7 million can receive a double tax benefit by making lifetime charitable gifts. The donation is deductible for income tax purposes when the gift is made; the property along with any future appreciation is removed from the taxable estate.
Several opportunities to benefit from current charitable gifts are available. It is important to note, total itemized deductions including charitable deductions must exceed the standard deduction to receive a current income tax benefit. Some of your options include:
- Bunching contributions into one year to make sure you exceed the standard deduction.
- Contributing to Donor-Advised Funds (DAFs). A large contribution to the fund in year one provides the income tax deduction. After which, amounts can be paid from the fund to charities over a designated number of future years.
- Donating to Charitable Remainder Trusts. The remainder interest in a given property is donated to charity, obtaining a current income tax deduction, and retaining an annuity (income) interest in the property during the donor’s lifetime. Or the reverse of this,
- Giving to Charitable Lead Trusts. This provides a charity an annual distribution while the remainder interest passes to a Trust beneficiary in the future.
- Making Qualified Charitable Distributions (QCDs). Taxpayers over the age of 70 1/2 contribute directly from their IRA to a specified charity. The distribution is not taxable and no charitable deduction is taken. Structured properly, this can convert required minimum distributions into nontaxable withdrawals from the retirement account.
Your WVC advisor would love to meet with you and your estate planning team to see how charitable transactions could help you meet your philanthropic goals in a tax-efficient manner.
Connect With Us.
wvco.com | 419.891.1040
Categories: Estate Planning
PPP Forgiveness Simplified
Dec 15, 2020
The plethora of reporting requirements created by the PPP loan forgiveness process has left many pulling their hair out trying to assemble the necessary documentation. For some, this is an unfortunate reality. However, for those with smaller PPP loans or relatively straight-forward qualifying expenses, the extra stress may be avoidable. Before spending hours tearing apart your company records, review the considerations below to identify if you are eligible for a more streamlined application process.
#1. If you obtained a loan of $50,000 or less, you are eligible to use forgiveness application Form 3508S which requires fewer calculations and less documentation for borrowers. Borrowers using this form are exempt from reductions in loan forgiveness due to Full-Time Equivalent (FTE) employee reductions and/or salaries and wages. There is also no requirement to show calculations used to determine loan forgiveness amounts. Please use the following links to access the form and instructions.
*There are currently discussions in Congress to implement a similarly streamlined application process for loans up to $150,000. Until a decision on this is made, we generally advise holding off on submitting forgiveness applications if your loan amount falls between $50,000 and $150,000
#2. See if you qualify for the 3508EZ loan forgiveness application – A brief, high-level summary of qualifications is as follows:
- the borrower is self-employed with no wages at the time of PPP application, OR
- the borrow did not reduce wages more than 25% during the covered period AND did not reduce the number of employees or average paid hours between January 1, 2020, and end of the covered period, OR
- the borrow did not reduce wages more than 25% during the covered period AND was unable to operate during the covered period at pre-COVID levels of business activity due to compliance with established governmental requirements.
Please see the following links for more in-depth detail on these qualifications as well as exceptions.
#3. When gathering supporting documentation for your loan forgiveness application, it may not be necessary to gather ALL of the applicable expense information. For example, for a loan amount of $200,000, compile enough expenses to cover that $200,000 with some cushion to account for any unforeseen disallowance, i.e., submit and document around $220,000-$240,000 of expenses although you may have actually spent $500,000 of eligible expenses during your covered period. Additionally, if loan forgiveness will be covered with entirely payroll expenses, something as simple as a report for the covered period from your third-party payroll provider should be sufficient from a documentation standpoint
#4. Lastly, please keep in mind that if your business qualifies for the §199A qualified business income (QBI) deduction and/or the tax credit for research and development (R&D) expenses, there are certain caveats to consider when using payroll expenses for qualified loan forgiveness. Absent relevant guidance, use of these types of expenses could result in a reduction of said expenses available to be allocated toward QBI and R&D.
Please consult your WVC adviser to further evaluate the most beneficial allocation and use of qualified expenses for PPP loan forgiveness. We also encourage you to check-out our PPP Roadmap here.
By: Jon Floering, CPA
Categories: COVID-19
Update on the State of the PPP
Oct 01, 2020
As the pace of changes to the Paycheck Protection Program (PPP) has relaxed, many are wondering about the current status and potential changes yet to come. We wanted to share with you some of the discussions occurring at the federal level about possible next steps. While there appears to be strong bipartisan support for these additional actions in concept, the specific details will likely change throughout the process.
What is the status of PPP and forgiveness?
- $525 billion was lent to 5.2 million businesses.
- Most lenders are now accepting forgiveness applications.
- As of 9/24, the SBA had received 96k forgiveness applications but had not completed the processing of any of them.
What is the latest guidance related to PPP forgiveness?
On 8/24, additional guidance was released regarding the following:
- C or S Corporation owners with less than 5% ownership are not subject to the compensation caps
- Expenses attributable to a tenant are not eligible for forgiveness.
- Rent payments to a related party are capped at the amount of mortgage interest owed on the property.
- Related party mortgage interest is not eligible for forgiveness.
What changes might still be coming to the PPP?
- There continues to be bipartisan support in Congress for blanket forgiveness of “small” loans – typically discussed as $150,000. The exact terms and dollar amount still need to be negotiated.
- There continues to be some bipartisan support for tax-deductibility of expenses related to forgiveness.
- Congress has been slow to act, and it is likely we will not see movement on these items until after the election.
Will there be a second PPP?
Maybe. Again, this is a topic that Congress continues to discuss. Eligible businesses would likely be much more targeted in this round. We are likely to see a lower cap on the size of business (as measured by the number of employees) and it is likely that businesses will need to demonstrate they have been significantly negatively impacted.
What should I be doing now?
- Continue to monitor our WVC COVID-19 Resource Center.
- Calculate your loan forgiveness amount using a tool such as our forgiveness calculator.
- Understand your lender’s process and timeline for forgiveness applications.
- In most cases, it makes sense to sit tight and wait for the final changes to work their way through Congress. Your forgiveness application is due 10 months after the end of your Covered Period, so you have time.
- Reach out to your WVC Advisor or our WVC PPP Loan Task Force leader, Kate Matz to discuss the above and plan for your specific situation.
Connect with the author:
Kate Matz, CPA, CEPA, CVGA, CGMA
Value Growth Practice Leader, William Vaughan Company
kate.matz@wvco.com | 419.891.1040
Categories: COVID-19, Other Resources
IRS Modifies 1099 Forms & (Re) Introduces 1099-NEC
Sep 01, 2020
The IRS is making some significant changes to the 1099 process. Beginning with the 2020 tax year, a new 1099-NEC form will be used for reporting non employee compensation (NEC) payments. Previously NEC was reported in Box 7 of the 1099-MISC form. These payments will now be reported in Box 1 of the new 1099-NEC form. The 1099-NEC made an appearance in the 1980’s and is now making a comeback to alleviate deadline confusion caused by separate deadlines for Form 1099-MISC that report NEC in box 7 and all other Form 1099-MISC for paper filers and electronic filers. Companies will start reporting on the new Form 1099-NEC in January 2021.
There are several parts of the new 1099-NEC form worth noting:
- Box 1 is where you key in the dollar amount of non employee compensation.
- Box 4 is used for any amount you held back to comply with backup withholding requirements.
- Boxes 5-7 are used to report any state withholding.
In addition, the removal of NEC payments on the 1099-MISC form has resulted in a reordering of information and corresponding boxes. These changes are listed below:
- Box 7 is where you will now key in payer-made direct sales of $5000 or more
- Box 9 is where you will report crop insurance proceeds
- Box 10 is used for gross proceeds to an attorney
- Box 12 is for Section 409A deferrals
- Box 14 is for reporting non qualified deferred compensation income
- Boxes 15, 16, and 17 is where you will report state taxes withheld, the state identification number, and the amount of income earned in the state.
The deadline for both paper and electronic filing of the 1099-NEC form for 2020 is February 1 for both the recipient and the IRS. The 1099-MISC is due to recipients by February 1 while they are due to the IRS by March 1 for paper filing and March 31st for electronic filing.
For up-to-date information on these changes, you can visit the IRS website or connect with us at 419.891.1040.
By: Aaron Gray, Accountant
Categories: Tax Compliance
SBA Data Exposure Highlights the Need for Cybersecurity Programs
Apr 23, 2020
On April 21, 2020, news sources* revealed the Small Business Administration (SBA) notified 8,000 applicants of the Economic Injury Disaster Loan (EIDL) program of a data exposure on the application website. The exposure, which occurred briefly on March 25, may have permitted applicants to view Personally Identifiable Information (PII) of other applicants. Current reports reveal the disclosure included names, Social Security numbers, tax identification numbers, addresses, dates of birth, emails, phone numbers, marital and citizenship statuses, household sizes, incomes, financial and insurance information.
If you learn you have been impacted by the data exposure, the Federal Trade Commission has provided specific guidance with checklists on their website for Identity Theft. The actions described in their checklists are based on the type of data loss. Please refer to this website on how to protect yourself.
It is unfortunate to have a data exposure during an already stressful time, but it further demonstrates the continued need for cybersecurity programs. WVC Technologies is here to assist you in making sure your company is operating securely whether it be updating your remote working policies, implementing a security practice, or preparing a business continuity plan.
*CNBC was the first to report on the data exposure from the SBA. For a full report, please see this article.
Connect With Us.
Tiffany Pollard, CISA
Risk Services Practice Leader
Categories: Risk Services