Tax Incentives Blog

Since the beginning of the pandemic it has been a whirlwind of unprecedented economic impacts. With that came the Coronavirus Aid, Relief, and Economic Security (CARES) Act and a curtailment of enforcement actions by the Internal Revenue Service (IRS), including audits. Per the People First Initiative the IRS generally avoided launching new audits from April 1^st through July 15^th. This did not prevent the IRS from opening audits to protect the government’s interest in preserving statute of limitations. (See IRS, IR-2020-59) In a report released June 29^th, National Taxpayer Advocate Erin Collins said that the IRS launched substantially fewer audits from April 1^st to June 1^st compared to the same period in 2019. The IRS launched 71% fewer Corporate audits, 79% fewer Partnership audits, and 65% fewer individual audits. In total across all types of examinations there was a 65% decrease during this time period. With July 15^th approaching the assumption is that there will be an increase in audits launched. However, with the pandemic still in a critical state as numbers of COVID-19 cases rise it remains to be seen what will happen as things are more fluid and the rules of the game are constantly changing.

During this time of unprecedented economic challenges faced by small businesses during COVID-19, rare glimpses of bipartisanship are encountered to assist small business with economic relief. Due to the economic challenges faced by small businesses the economic relief provided is in a constant state of fluidity. This has been the status quo for the Paycheck Protection Program (PPP). The President signed into law the Paycheck Protection Program Flexibility Act (PPPFA) to address the concerns voiced by the small businesses utilizing the program. The Congressional intent of the new law is to allow greater flexibility for business to use the PPP loans that was not provided by the initial short-term fix of the PPP set up under the CARES Act. This new law provides the following expansions and flexibility to address the issues created by the CARES Act – PPP, that was a band aid and not a comprehensive bandage when it was enacted.

Life is in a constant state of flux right now with the COVID-19 virus. It has affected daily life and the economy. Congress has worked to provide economic stimulus programs such as loans and credits. The intent of Congress was to stimulate the economy and help employers maintain business and retain employees to alleviate the economic hardship caused by COVID-19. However, as is typical when trying to quickly stop the negative impact of a disaster, details get omitted from the legislation and key areas need clarification as we have seen recently with the Paycheck Protection Program (PPP) and the Employee Retention Credit. More specifically, with the PPP concerning the deductibility of expenses when payments were made with debt forgiven funds and with the Employee Retention Credit in determining whether employers could claim the Employee Retention Credit when the only payments made to furloughed employees was for their health care benefits.

What do a farm and a software company have in common?

Think about it.

“Nothing,” you say?

Think again.

You are a savvy business owner. Part of your business acumen includes knowledge of potential tax credits that can benefit your bottom line. However, the words “potential for audit” linger in the back of your mind.

What does it mean to be prepared? Googling it, you’ll find the word ‘prepared’ defined as ‘ready to do or deal with something,’ but the relevance of this definition has a lot to do with what that ‘something’ is.

When President Trump signed the Tax Cuts and Jobs Act (“TCJA”) into law a little over a year ago, he enacted the most sweeping update to the U.S. tax code since the 1986 tax reform enacted under President Reagan.