Tax Resorces

​​​​​​​​​​​​Russell W. James, CPA, pc 

Business Start-up Forms

​​​​​​​​​Simple Accounting

PPP Round 2 loan eligibility


The PPP is a loan program managed by the Small Business Administration (SBA) and enables certain lenders (including banks, FinTech companies, and community lenders like CDFIs and MDIs) to distribute PPP loans on behalf of the SBA to small businesses. 

Want a quick look at everything that’s changed under the new bill? Here’s PPP under the Consolidated Appropriations Act, 2021 at-a-glance:

  • $284 billion has been allocated to PPP (including $138 billion of unspent loans from the first round that were reinvested) and the program has been extended to March 31, 2021
  • Second-draw loans are available for businesses with under 300 employees
  • Businesses eligible for PPP loans has been expanded
  • Loan limitations have been expanded for certain businesses
  • Forgiveness for loans under $150K have a new, simplified one-page application
  • Eligible expenses for forgiveness have been expanded (for first-draw loans that have not yet been forgiven and for second-draw loans) 
  • While expenses eligible for forgiveness still require a 60/40 split of payroll costs/other eligible expenses, group health insurance benefits are now included in payroll costs (and these entail life insurance, disability benefits, vision, and dental insurance) 
  • Borrowers are allowed to choose a covered period that is any period of time between eight and 24 weeks
  • PPP funding includes dedicated set-asides for community lenders (CDFIs and MDIs) and business that operate in low-income areas 
  • A clarification has been made indicating that interest rates on PPP loans are non-compounding and non-adjustable 
  • A clarification has been made indicating that forgiven PPP loans are not taxable and forgiven expenses are tax-deductibleOnly certain businesses are eligible to receive a PPP loan, and these specifications are different for first-time loan recipients and second-draw recipients. 


Ready to get into it?  For all the details about PPP Round 2, read on.


To be eligible for a first-draw PPP loan:

  • Your business has less than 500 full-time, part-time, or seasonal employees.
  • Your business was operational before February 15, 2020 and remains operational.


To be eligible for a second-draw PPP loan:

  • Your business has less than 300 full-time, part-time, or seasonal  employees; if you have multiple locations, you may not have more than 300 employees per location.
  • You are able to demonstrate a revenue reduction of at least 25% in the first, second, or third quarter of 2020 (when compared with the same quarter in 2019). 
  • You have used or will use the full amount of the first-draw PPP.
  • Your business was operational before February 15, 2020 and remains operational.


 Businesses eligible for first- and second-draw PPP loans include: 

  • Sole proprietors
  • Independent contractors
  • Self-employed individuals
  • Certain non-profits (the new bill has expanded eligible businesses to include certain 501(c)(6) non-profit organizations)
  • Seasonal employers; the new bill has clarified the definition of these to be businesses that operate no more than seven months within a year or earn no more than a third of gross receipts within a six-month period
  • Faith-based organizations that have less than 150 employees
  • Housing cooperatives that employ less than 300 people 


The following businesses remain ineligible for PPP loans: 

  • Lobbying organizations 
  • Organizations involved in political activities or public policy 
  • Lenders or financial services businesses 
  • Cannabis businesses (or any other businesses that deal with products that are illegal at the federal level)
  • Household employers (such as those who employ housekeepers or nannies) 
  • Businesses that have defaulted on SBA or federal loans
  • Any business that is at least 20% owned by someone who is currently incarcerated, on probation, on parole, or subject to an indictment
  • Any business that is at least 20% owned by someone who has been convicted of a felony within the last five years
  • Entities affiliated with the People’s Republic of China or Hong Kong or that have a member on their board of directors that is a resident of the People’s Republic of China
  • Registrants under the Foreign Agents Registration Act
  • Entities that have received or will receive a grant under the Shuttered Venue Operator Grant program


We will post more information as it comes available

THE IRS HAS RELEASED A NEW 1099-NEC FORM FOR 2020


The IRS has released a new form for the tax year 2020 – Form 1099-NEC – which you will need to become familiar with. This Client Alert will provide you with some general guidelines and resources to help you determine which form you need to file. It will also address questions that we often receive from clients.

REPORTABLE PAYMENTS

You will still be required to file Form 1099-MISC for payments in the amount of $600 or more (unless otherwise noted) made in the course of your trade or business (including not-for-profit organizations) that are related to the following items:

  • Prizes and awards (does not include amounts paid to employees);
  • Rents;
  • Royalties ($10 or more);
  • Legal services performed; and
  • Any person from whom you have withheld any federal income tax under the backup withholding rules (regardless of the amount of the payment).


Form 1099-NEC is used to report non-employee compensation. This new form replaces form 1099-MISC, Box 7, for reporting non-employee compensation only. You will need to file Form 1099-NEC, Nonemployee Compensation (NEC), for each person to whom you have made payments during the year when the following four conditions are met:

  1. You made the payment to someone who is not your employee;
  2. You made the payment for rendered services in the course of your trade or business;
  3. You made the payment to an individual, a partnership, an estate or, in some cases, a corporation; and
  4. You made payments to the payee of at least $600 during the year.


RECIPIENTS

Generally, amounts paid to individuals, sole proprietors and partnerships for the items above should be reported.  Payments to tax-exempt organizations and corporations (C or S Corporations) are exempt.

Whether or not a 1099 should be issued to a limited liability company (LLC) will depend on how that company is classified for tax purposes. If treated as a single member LLC that is disregarded or as a partnership, payments are reportable. If treated as a C or S Corporation, payments are exempt.


EXCEPTIONS

All payments of at least $600 to attorneys should be reported, even if the attorney is a professional corporation.

INFORMATION NEEDED TO FILE

Recipient information (i.e., name, address and tax identification number), the amount paid during the calendar year and type of payment are required information.

To assist with procurement of the proper information required to file (i.e., missing taxpayer identification number, current address or tax classification status), you should obtain Form W-9, Request for Taxpayer Identification Number and Certification, from vendors as soon as possible.

DUE DATES

Forms must be transmitted to the IRS before the deadline of January 31.  However, when the due date falls on a weekend or holiday, it will be due on the next business day.  Additionally, other important due dates are as follows:

  • File Form-NEC with the IRS on or before February 1, 2021, using either paper or electronic filing procedures.
  • A recipient copy of Form 1099-NEC and 1099-MISC is due to be distributed by February 1, 2021.
  • File Form 1099-MISC by March 1, 2021 (if filing on paper) or March 31, 2021 (if filing electronically).


RESOURCES AND LINKS

For additional information, visit the following links:

2020 Instructions for Forms 1099-MISC and 1099-NEC
The IRS Guide to Information Returns
Form W-9, Request for Taxpayer Identification Number and Certification


If you need help filing your 1099NEC or 1099misc we would be happy to help or if you have any questions contact us at simpleacctg@gmail.com or 801-409-1309