News Updates

The IRS has updated FAQs on the paid sick and family leave tax credits under the American Rescue Plan Act of 2021 (ARP). The updates clarify that eligible employers can claim the credits for providing leave to employees to accompany a family or household member or certain other individuals to obtain immunization relating to COVID-19 or to care for a family or household member or certain other individuals recovering from the immunization.

The U.S. Small Business Administration (SBA) has published new guidance designed to simplify and speed up the forgiveness process for businesses and not-for-profits with Paycheck Protection Program (PPP) loans of $150,000 or less. The new COVID Revenue Reduction Score can be used at the time of forgiveness to document the required revenue reduction for second-draw PPP loans. The new IFR also establishes a direct borrower forgiveness process for lenders that choose to opt in as an alternative method of processing loan forgiveness applications. In addition, the IFR extends the loan deferment period for PPP loans in cases when the borrower files a timely appeal of a final SBA loan review decision. The SBA also announced it will launch a new application portal Aug. 4, allowing borrowers to apply for forgiveness directly with the agency instead of having to go through their lender. More than 600 banks have agreed to allow access to the portal for more than 2.17M borrowers.

A New Hampshire man is suing the IRS, claiming the agency violated his constitutional rights by obtaining his financial information from cryptocurrency databases. James Harper received a letter from the IRS in 2019 suggesting one or more of his virtual currency accounts may not have properly been reported for tax purposes. He accuses the IRS of violating his contracts between him and at least one of his digital currency accounts. The contracts guarantee the companies will “provide robust protections” to private financial data, according to the complaint. Adi Dynar, a lawyer litigating Mr. Harper’s case, said what the IRS did to his client was “unprecedented.” “It apparently obtained the private financial information of 10,000-odd digital currency users, not from the users themselves, but by strongarming at least one digital-currency exchange. Tellingly, IRS is now asking for Congressional authorization after the fact, which implies that permission was lacking when IRS intruded on taxpayers’ privacy,” he said. A spokesperson from the IRS said the agency will not comment on pending litigation.

The IRS is providing guidance on a provision of the American Rescue Plan Act that provides temporary assistance with COBRA premiums to people who have lost their jobs. The notice that the IRS posted Monday answers questions including the availability of premium assistance for individuals who are eligible for an extension but who hadn’t elected it, as well as whether premium assistance for vision or dental-only coverage would end due to eligibility for other health coverage that doesn’t include vision or dental benefits. The guidance aims to help people who are still out of work due to the economic fallout from the COVID-19 pandemic or had their work hours reduced.

More employers could have to electronically file information returns such as W-2 and 1099 forms, under new regulations proposed by the IRS. Businesses have been e-filing various kinds of information return forms with the IRS since the 1980s, including Forms 1042-S, 1098, 1099 series, 5498, 6248, 8027, W-2G, W-2 and W-2P unless they were granted a waiver or were considered to be a “low-volume filer,” meaning they filed less than 250 information returns per year. The agency plans to gradually lower the threshold from 250 to 100 for information returns required to be filed during calendar year 2022, and then from 100 to 10 for information returns required to be filed after 2022. That would allow the IRS adequate time to ensure it has enough resources and updated programming to seamlessly handle and process the increased number of electronically filed information returns and the applications required to e-file those information returns.

The FASB's proposed update to its hedge accounting standard aims to help companies with their risk management. The organization issued the proposed accounting standards update in May to align a company’s hedge accounting more closely with its risk management strategies. They build on the hedging standard that FASB issued in 2017, increasing transparency around how the results of hedging activities are presented, on the face of the financial statements as well as in the footnotes, for investors and analysts when hedge accounting is applied. “I think some may use it, but I don’t think organizations will use it as widely as the FASB intended,” said Tim Kviz, national assurance managing partner in the SEC services practice at BDO USA. “You’re not going to see a lot of people scrambling to try to use this strategy. It’s a pretty sophisticated strategy, and it requires a pretty sophisticated hedging desk.”

CNN looks at how monthly child tax credit payments could lead to some unwelcome surprises at tax time in the spring, particularly for parents in certain situations. Many parents saw hundreds of dollars suddenly land in their bank accounts last week, as the IRS distributed the first of six monthly child tax credit payments - the first time the child tax credit is being paid out on a monthly basis. However, CNN suggests that some parents may be better off opting out of this year's income stream via an IRS portal and receiving the credit as a lump sum when they file their 2021 taxes, which is how it's usually paid. Unlike the three rounds of stimulus checks that many Americans received during the pandemic, the monthly deposits are actually early payments of families' estimated child tax credits for 2021. But the payments are based on 2020 or 2019 income and household size. So if either of those change, parents could wind up receiving much smaller refunds than they expected - or even owing taxes - when they complete their 2021 returns next spring. That's when they have to reconcile the monthly payments they already received with the actual amount of child tax credit they qualify for. However, lawmakers protected lower-income parents from potential overpayments. Heads of households making $50,000 or less and joint filers with incomes of $60,000 or less will not need to repay any excess credits. Parents will also be able to update their incomes, number of dependents, and marital status via the portal later this summer. The IRS should then adjust subsequent monthly payments.

The U.S. Department of Health and Human Services (HHS) has clarified rules for single audits of nonfederal entities that received pandemic-related assistance from the Provider Relief Fund (PRF). Over the last several weeks, HHS has established in its PRF FAQs that the reporting in the PRF Reporting Portal will be based on when PRF payments were received. HHS also has clarified that PRF recipients must only use payments for eligible expenses including services rendered, and lost revenues during the period of availability, also known as the period of performance. Information included in the newly released HHS FAQs states that nonfederal entities will include PRF expenditures and/or lost revenues in the schedule of expenditures for federal awards (SEFA) for fiscal years ending on or after June 30, 2021. The AICPA Governmental Audit Quality Center (GAQC) has confirmed with HHS that the new guidance supersedes previous guidance in the 2020 OMB Compliance Supplement Addendum that indicated PRF reporting was to begin for fiscal years ending December 31, 2020, and later.

A report from the Pandemic Response Accountability Committee shows the government has forgiven nearly $400 billion in Paycheck Protection Program loans. Single-employee companies account for more than 1 million of the 4.1 million loans forgiven. The PPP issued 11.77 million loans totaling $798.7 billion, according to the report.

Some states have passed legislation supporting a workaround for owners of pass-through businesses for the $10,000 cap on deductions for state and local taxes. Legislation is pending in certain other states.

Legislation has been introduced by Senate Finance Committee chairman Ron Wyden, D-Oregon, which would allow accountants, lawyers, doctors and others to qualify under the section 199A deduction for qualified business income for pass-through entities.

Some lawmakers, in the name of economic revival, are advocating measures that would force states to grant professional licenses to license holders from other states. However, the truth is that rigorous standards are important, and these universal-licensing initiatives overlook the critical concept of substantial equivalence, writes Marta Zaniewski, vice president for state regulatory and legislative affairs at the AICPA.