NJ, NY, PA Now Following Federal Tax Day Deadline Extension, Now May 17th

NJ, NY, PA Now Following Federal Tax Day Deadline Extension, Now May 17th

By Gregory Bilecki, Senior Accountant

In welcome news for the state’s taxpayers, New Jersey has decided to follow the IRS’s decision to extend the federal April 15th tax reporting deadline again for individual filers for one month, with that day now May 17th. 

Other states have since responded or are in the process of following suit. See below for the list of all states which have since adopted the federal extended filing due date. Note that Louisiana, Oklahoma, and Texas residents have been granted additional time due to the impact of recent weather events with those dates now June 15th. Keep checking this post as we will be updating as more states respond and confirm, and make sure to always refer back to your state’s jurisdictions in which you file for the most current information.

What states have extended their tax filing deadlines for tax year 2020?

Updated March 20, 2021

Alabama May 17
Arizona May 17 (pending) 
Arkansas May 17
California May 17
Colorado May 17
Connecticut May 17
Delaware May 17
Georgia May 17
Hawaii TBA
Idaho April 15
Illinois May 17
Indiana TBA
Iowa TBA
Kansas TBA
Kentucky May 17
Louisiana June 15 
Maine May 17
Maryland July 15
Massachusetts May 17 
Michigan May 17
Minnesota May 17
Mississippi TBA
Missouri May 17
Montana May 17
Nebraska May 17
New Jersey May 17
New Mexico May 17
New York May 17
North Carolina May 17 
North Dakota May 17 
Ohio TBA
Oklahoma June 15
Oregon May 17
Pennsylvania May 17 
Rhode Island TBA
South Carolina May 17 
Tennessee May 17 (Hall income tax)
Utah May 17
Vermont May 17
Virginia May 17
Washington, D.C. July 15 
West Virginia May 17 
Wisconsin May 17 

State not listed due to no state individual income tax requirements: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Please visit our client center for additional client resources

IRS Extends Federal Tax Day Filing Deadline for One Month

IRS-Extends-Federal-Tax-Day-Filing-Deadline-for-One-Month

By Gregory Bilecki, Senior Accountant

On Wednesday, March 17th, the IRS pushed back the tax filing deadline for individuals in a nationwide extension, an effort to further drive pandemic related relief. This means that for those individual taxpayers who file tax returns to the federal government on or by April 15th have all been granted an automatic one-month extension of the filing deadline, with the ability to now file and pay their federal taxes one month later, May 17th.

As of the date of this article, states have largely not responded to this decision by the IRS yet. Thus, taxpayers should monitor all applicable state and local filing deadlines and due dates over the next week to verify these jurisdictions have been extended as well, and always consider filing as soon as possible.

What’s included with the New Federal Tax Deadline?

  • Additional guidance has not been provided yet on federal quarterly estimated payment due dates past Q1, due on April 15th. This means that as of now, Q1 federal estimates which were traditionally due on April 15th are still due on this day. Until federal guidance is released for the remaining quarters, it’s best to assume original due dates are in place as well for now.
  • As the new federal “Tax Day” (April 15th) due date is now May 17th, this means that the related late filing and non/late payment penalties and interest that normally begins to accrue after April 15th will now begin to accrue these related charges after May 17th.
  • For those filing federal 4868 extensions due on April 15th, keep in mind that this does not change the due date for the 6-month extension itself. This means that if your original filing due date was April 15th for example, your extended due date will remain October 15th. 

Please be sure to check our website for additional details as they are released, as well as IRS.gov for all up-to-date reporting information.

Please contact our team as soon as possible to ensure timely filing of your return

$29B Stimulus Creates the Restaurant Revitalization Fund

Restaurant-Revitalization-Fund

By Gregory Bilecki, Senior Accountant

As part of the stimulus package signed by President Biden on March 11th, 2021, additional stimulus money was set aside in the amount of $29 billion for Section 5003 within the American Rescue Act, also known as the “Restaurant Revitalization Fund”. This amount comes designated within the bill particularly in the form of grants, and is available for “eligible entities” as mentioned within Section 5003 of the bill which are defined as:

“A restaurant, food stand, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brewpub, tasting room, taproom, licensed facility or premise of a beverage alcohol producer where the public may taste, sample, or purchase products, or other similar place of business in which the public or patrons assemble for the primary purpose of being served food or drink”

Restaurant Revitalization Fund Amounts Will Not be Available For:

  • Publicly traded companies
  • State or local government-operated businesses 
  • Locations with more than 20 locations regardless of whether those locations do business under the same or multiple names
  • Entities that have a pending application for or have received a grant under section 324 of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act

In addition, and only during the the first 21 days of the program, priority access to the money will be given to women, veterans, as well as socially and economically disadvantaged groups. 

My Restaurant Needs Money Now – How Can I Obtain Grant Funds? 

While the fund is official, administration of it is not yet clear and therefore a predominant lack of guidance for this specific measure still exists. Thus, a formal process to receive the benefits outlined above are not currently in place yet. Please pay attention to our website for additional details as they are released, as well as IRS.gov, SBA.gov, and your current banking institutions for all current information on this new initiative.

Key Facts from the March 2021 $1.9 Trillion COVID-19 Stimulus Package

Key-Facts-from-the-March-2021-$1.9-Trillion-COVID-19-Stimulus-Package

By Gregory Bilecki, Senior Accountant

What’s Included in the Third Stimulus Package?

Signed by President Biden Thursday, March 11th, is the next round of COVID-19 relief, H.R. 1319, also known as the American Rescue Plan Act of 2021, which includes $1.9 trillion of additional funding that will provide additional money for:

  • Additional stimulus payments for individual tax filers with amounts up to $1,400 each for those taxpayers whose AGI does not exceed $75,000 and for those married filing jointly whose AGI does not exceed $150,000 
  • A new federal income tax waiver on the first $10,200 of unemployment benefits received for individual filers and $20,400 for those married filing jointly retroactive to 2020 for recipients with less than $150,000 in AGI (individual or married filing jointly) 
  • An expansion of the current weekly $300 provisional Federal unemployment payment through Monday, September 6th, 2021 (Labor Day)
  • The expansion of the earned income credit by three times the amount and the lowering of the age to qualify from 25 to 19 
  • An expansion of the child tax credit for one year for children aged 6-17 up to $3,000 annually per child, as well as $3,600 for children under 6 years old
  • An expansion of the employee retention credit extended through December 31, 2021 with an additional ERC of $50,000 per quarter for certain start-up businesses


In Addition, Other Relief Included in the Package: 

  • $350 billion in aid for state governments to provide support for missed tax revenue collections, keep employees on payroll, and support other state services
  • $120 billion in aid for K-12 schools
  • $86 billion to help multiemployer pension plans continue to pay 
  • $30 billion in grants for restaurants, with preference given to women, veterans, and socially and economically disadvantaged groups only during the first 21 days of the program

A predominant lack of guidance for most of the new measures still exists which means that processes to receive many of the benefits outlined above are not currently in place and may not be by the forthcoming tax deadlines in March and April. Please pay attention to our website for additional details as they are released, as well as IRS.gov for all final federal government tax reporting rules, regulations, and information.  

Does My Business Qualify for the Employee Retention Tax Credit In 2021?

does-my-business-qualify-for-the-employee-retention-tax-credit-in-2021

By Michael Aaron, CPA, Tax Supervisor & Gregory Bilecki, Senior Accountant  

For the 2020 filing year we’ve seen many updates to CARES Act provisions expanded upon by the Consolidated Appropriations Act signed into law on December 27th 2020 and as expected, the refundable Employee Retention Tax Credit (ERTC) was one of them. While there may still be some confusion on what this is and who it applies to, below is a summary which outlines some of the key changes, and how to determine if you qualify. 

What Are the Changes to the Employee Tax Credit in 2021?

  • Legislation changes which now allow Employers to receive the credit through June 30th, 2021
  • Up to $10,000 of qualified wages paid, per employee, per quarter is now in effect for 2021. The credit is equal to 70% of qualified wages which has increased from the prior year. This means the maximum credits allowable per employee for 2021 is $14,000, illustrated as follows: 

$10,000 (qualified wages) x .70 (credit factor) 

= $7,000 (limit, per employee, per quarter, Q1 + Q2 2021) 

$7,000 (first quarter) + $7,000 (second quarter) = $14,000 (total ERTC credit for 2021) 

What Payments Qualify for the ERTC? Only Qualified Wages.

“Qualified wages” are those subject to Social Security taxes and group healthcare benefits. (HSA’s or Qualified Small Employer Health Reimbursement Arrangement’s – QSEHRA’s, are not included). Also, it does NOT include Families First Coronavirus Response Act (FFCRA) paid sick, or FMLA wages.

Regarding Allocable Health Plan Expenses:

Include: Health plan expenses for laid-off employees with no pay where the employer continues to cover health insurance costs

Exclude: Health plan costs during the period of time where the employee is employed and is paying for costs with after-tax dollars

Additional wage exclusions: Pre-existing PTO, severances, wages where FFCRA credits were taken, Work Opportunity Tax Credit wages, and employer payroll taxes.

Does My Business Qualify for the ERTC?

  • Employers who currently have 500 or fewer full-time employees (those working 30 hours per week or 130 hours per month) on their payroll
  • Employers who have had operations fully or partially suspended because of governmental orders limiting commerce, travel, or group meetings due to COVID-19 OR show a 20% or more reduction in gross receipts from the prior year quarter allowed in comparison – here’s a breakdown of how that works:

For Q1 2021, you will compare:

  • 2021 Q1 to 2019 Q1 or
  • 2020 Q4 to 2019 Q4

For Q2 2021, you will compare:

  • 2021 Q2 to 2019 Q2 or
  • 2021 Q1 to 2019 Q1

The credit may only be claimed within the quarter for 2021 where operations were suspended, or over a 20% reduction in gross receipts was recognized. 

  • Employers who have received a PPP loan may now qualify for the ERTC so long as qualified wages used for PPP loan forgiveness are not included in the 941 calculation 
  • Employers who did not commence operations until 2020 also now qualify

How Does My Business Claim the Employee Tax Credit?

On IRS Form 941, reduce payroll tax deposits for federal income taxes withheld from employees, both portions of social security, and Medicare taxes by the amount of the credit. If you have a payroll company, you must inform them that you qualify as well. If the reduction in payroll taxes leaves an excess amount of credit, you may carry it forward to the next quarter or possibly have it refunded (refer to Worksheet 1 on Form 941). You may also file a Form 7200 multiple times throughout the quarter (if you have not filed Form 941) to claim refund. Currently, this credit is only available for wages paid in 2021.

Contact our business advisory team for help determining your maximum credit.

For Main Street Businesses, PPP Relief is Now Within Reach

for-main-street-businesses-ppp-relief-is-now-within-reach

By Gregory Bilecki, Senior Accountant

PPP Relief for Small Businesses

In a recent measure which took effect on February 24th that largely affects small businesses, the Biden Administration announced they are taking large steps to keep local businesses open by offering exclusive access to PPP funds via a special application during a limited offering which runs through March 10th. They plan to do this by offering businesses and nonprofits specifically with 20 employees or less exclusive access to PPP funds over this time. Guidance isn’t specific if it’s for first or second draw loans, however currently it appears to be all encompassing.

Per the SBA’s website, additional upcoming changes which are still being anticipated, involve a modified formula for PPP funding as well to be released soon.

Additional implementations still being worked currently to help underserved businesses and communities are to (from sba.gov):

  • Allow sole proprietors, independent contractors, and self-employed individuals to receive more financial support by revising the PPP’s funding formula for these categories of applicants; 
  • Eliminate an exclusionary restriction on PPP access for small business owners with prior non-fraud felony convictions, consistent with a bipartisan congressional proposal;  
  • Eliminate PPP access restrictions on small business owners who have struggled to make student loan payments by eliminating student loan debt delinquency as a disqualifier to participating in the PPP; and
  • Ensure access for non-citizen small business owners who are lawful U.S. residents by clarifying that they may use their Individual Taxpayer Identification Number (ITIN) to apply for the PPP.

In addition, the SBA also plans to drive efficiency of their website to better help applicants find resources and proper applications, continue to learn about areas of opportunity within current stimulus funding programs, as well as launch a new initiative with lenders specifically so that they can have a better platform to ask questions about PPP and have things clearer for them (the lenders) to understand, and better assist applicants. 

Lear & Pannepacker can help you ensure you receive your maximum PPP loan as part of our business advisory services. For up-to-date information on these changes, please make sure to visit the COVID-19 SMB Loan Resource Page on sba.gov:  

https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources

If you have any questions on this topic, contact the team at Lear & Pannepacker.

An Overview of the New Partnership Tax Basis Capital Reporting Requirements For 2020

new-partnership-tax-basis-capital-reporting-requirements-for-2020

By Dolly Rajani, Tax Supervisor, CPA

On October 22, 2020, the IRS released draft instructions for Form 1065, US Return of Partnership Income that included revised instructions which require partnerships to report their partner’s capital account on Schedule K-1 using the transactional approach for the tax basis method for tax years beginning 2020.

What is the Transactional Approach for the “Tax Basis” Method?

Tax basis capital accounts are determined by adding a partner’s share of all contributions and items of income/gain and subtracting all distributions and items of losses and deductions. Please note that this straightforward approach referred to as the “transactional approach” did not satisfy the reporting requirements per IRS Notice 2020-43. However, the 1065 instructions that were released on October 22, 2020 contradict the notice. 

Prior to this mandate, partnerships could report its partner’s capital accounts determined under multiple methods, e.g., GAAP Basis, Section 704(b) etc. For those partnerships that did not prepare and maintain their Schedule K-1 capital accounts on a tax basis method, may now determine or adjust each partner’s beginning capital account balance for 2020 using any one of the following three methods: 

  1. The modified outside basis is the partner’s adjusted basis in their partnership Interest, determined under the principles of and provisions of Subchapter K and subtracting from that basis the partner’s share of partnership liabilities under S/752 and net tax value of any Section 743(b) basis adjustments. For the purposes of establishing a partner’s beginning capital account, the partnership may rely on the adjusted tax basis provided by the partners.
  1. The modified previously taxed capital method is determined based on the amount of cash a partner would receive in a fully taxable partnership liquidation and adjusting for the amount of tax gain and/or loss that would be allocated to each partner determined without regard to any Section 743(b) basis adjustments, following a hypothetical transaction. 
  1. The Section 704(b) method is equal to the partner’s Section 704(b) capital accounts adjusted by the net of any built-in gain or loss on property contributed by the partner. 

Please note that the partnership must use the same method to determine and adjust the beginning capital accounts for all of its partners as well as attach a statement to each of the partner’s Schedule K-1’s describing the method used to adjust or determine the beginning capital accounts and providing a description of the adjustments made.

Are Penalties Assessed for Incorrect Capital Account Reporting?

To promote compliance with using the tax basis method described in the revised instructions, the Department of the Treasury and the IRS intend to issue a notice providing additional penalty relief for the transition in tax year 2020. The notice intends to provide instructions that solely for tax year 2020 (for partnership returns due in 2021), a penalty will not be assessed for any errors in reporting its partners’ beginning capital account balances on Schedule K-1 if the partnership takes ordinary and prudent business care in following form instructions to calculate and report the beginning capital account balances. This penalty relief will be in addition to the reasonable cause exception to penalties for any incorrect reporting of a beginning capital account balance.  

Partnerships and advisors should carefully consider and review the new mandate to ensure compliance for the 2020 tax season.

Lear & Pannepacker can provide these types of tax services to your business. If you have any questions on this topic, contact the team at today.

Revisiting Form 8829 – Business Use of Home Expenses for 2020

revisiting-form-8829

By Dolly Rajani, Tax Supervisor, CPA

2020 is especially unique with respect to this deduction since COVID-19 has altered employee workspaces forever it seems. The primary office for many employees is now their homes, with many not having even set foot into their regular office since the pandemic was declared. This means that this year, more than ever before, taxpayers need to revisit the rules surrounding Form 8829 (Expenses for Business Use of Your Home) and the related eligibility requirements.

Who Can Claim the Business Use of Home Deduction?

  1. Self-employed individuals/Sole-proprietors (Schedule C filers)
  2. Partners in a partnership

Please note that most W-2 employees can no longer claim this deduction due to the recent TCJA ruling regarding the suspension of the miscellaneous deduction subject to the 2% AGI floor, thus S-corporation (owner) shareholders should establish an effective plan to have home office allocated expenses reimbursed.

How do Taxpayers Qualify for the Business use of Home Deduction?

  1. There must be an “exclusive” use of a portion of the home for conducting business on a regular basis. For example, a taxpayer who uses an extra room to run their business can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business. You cannot deduct expenses for any part of your home that you use for both business and personal use. 
  1. The home must be the taxpayer’s principal place of business. A taxpayer can meet this requirement if administrative or management activities are conducted at the home and there is no other location to perform these specific duties. Therefore, someone who conducts business outside their homes may still qualify for a home office deduction as long as they continue to perform specific duties regularly from home.

What Constitutes as a Home for the Deduction?

  1. House, apartment, condominium, mobile home, boat, or similar property.
  2. Structures on a property such as an unattached garage, studio, barn, etc.

It does not include any part of taxpayer’s property that is used exclusively as a hotel, motel, inn, or similar business.

Form 8829 qualifying expenses include mortgage interest, insurance, utilities, repairs, maintenance, depreciation, and rent. Expenses that relate to a separate structure not attached to home will not qualify for a home deduction unless the structure is used exclusively and regularly for business.

How do you Calculate the Home Office Deduction?

  1. Simplified option – The simplified option uses a rate of $5 per square foot for the area of the home designated for business use. The maximum business use area for this option is 300 square foot and is capped at a maximum deduction of $1,500.  For example, a 200 square foot office would receive a deduction of $5 * 200 = $1,000.
  1. Regular method – Under this method the allowable deduction is based on the percentage of the home used exclusively for business. This percentage is then used to calculate the amount of indirect expenses, while direct expenses are deducted in full. Indirect expenses include mortgage interest, utilities, landscaping, and other expenses related to the entire home – generally these items are shared with the non-business use portions. Direct expenses (those relating to the workspace itself) may include repairs and maintenance to the business area itself, such as painting. For instance, for a taxpayer with a 1,000 square foot home who uses 100 square feet exclusively as his/her home office would generate an indirect expense deduction equal to 10% of the total qualifying indirect expenses. In addition, the taxpayer would also claim a 100% deduction for any applicable direct expenses paid.  

Lear & Pannepacker’s professional tax services can help ensure compliance and maximize your business use of home deduction. For up-to-date forms and information regarding Form 8829 please visit the IRS website:

https://www.irs.gov/forms-pubs/about-form-8829

If you have any questions on this topic, contact the team at Lear & Pannepacker.