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Businesses can now deduct expenses paid for with the proceeds of a forgiven Paycheck Protection Program (PPP) loan. The IRS, in Revenue Ruling 2021-2 issued today, reversed its original position that prohibited businesses with PPP loans from “double-dipping” by paying expenses with a forgivable loan, then writing off those expenses. Congress, in the latest COVID-19 relief bill, as we explained further here, explicitly stated that such expenses were deductible, forcing the IRS to reverse course. This ruling is sure to provide a significant tax benefit and relief for many small business owners who had availed themselves of the PPP…
Are you are a Wisconsin taxpayer who has objected to the payment of property taxes at the local Board of Review this year? If so, and you received a full hearing deciding the merits of your objection, then it is time to consider filing an excessive assessment claim if you have not already done so. If you find yourself in this position, this is yet another procedural step you must take if you wish to further contest your claim in Wisconsin Circuit Court. Filing and Serving an Excessive Assessment Claim Pursuant to section 74.37, Stats., you need to file a…
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The Internal Revenue Service has announced the optional standard mileage rates for computing the deductible cost of operating an automobile for business, medical, and moving expenses for 2021, and the decrease in rates reflect the decrease in the fixed and variable costs of operating a vehicle.  Effective January 1, 2021, the optional standard mileage rates will decrease to 56 cents per mile for business transportation, and decrease to 16 cents per mile for travel relating to medical transportation expenses. These mileage rates apply only to those expenses incurred or paid by a taxpayer on or after January 1, 2021 (and…
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If 2020 has given us anything, it is the opportunity to become more flexible. Flexibility is key to any good wealth transfer plan. Below is a review of a few significant transfer tax planning considerations to keep in mind: 1. Gift and Estate Tax Exemption. The gift and estate tax exemption amount will increase from $11.58 million per person to $11.7 million in 2021. For married couples, each spouse can use the exemption, resulting in a combined 2021 exemption amount of$23.4 million (assuming proper planning and elections are made). Note: Per the 2017 Tax Cuts and Jobs Act, on January…
It is becoming increasingly common for people to get divorced and then remarried. In these situations, one or both spouses entering into a new marriage usually has children from a prior relationship. Anyone who has children from a prior relationship and remarries should review their estate plan and make any necessary updates to ensure their assets are distributed according to their wishes. Under Wisconsin law, the assets of a deceased spouse who dies intestate will automatically pass to the surviving spouse. When there is a second marriage and children from a prior relationship, however, the assets of a deceased spouse…
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The holiday season is a time of giving! With Christmas arriving next week, you might be rushing to find last minute gifts for the special people in your life. Have you considered potential tax consequences of those gifts? The annual gift exclusion for 2020 is $15,000. This means that an individual donor may gift $15,000 to any one recipient during the year without incurring federal gift tax or using the donor’s gift and estate tax exemption. A married couple may gift $30,000 to any one recipient without incurring gift tax or using their exemptions. For example, if a donor has…
During the estate planning process, it is important to consider what types of assets make up your estate. Specifically, you should understand the difference between your “probate” and “non-probate” assets. As you might imagine, your probate assets are the ones that must go through probate, a time-consuming and costly process which we previously discussed here. Contrary to popular belief, a Last Will and Testament will not, on its own, help your estate avoid probate. Whether or not your estate is subject to probate depends on whether your estate consists of probate assets. Probate assets are those that are owned…
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Through the release of a Revenue Ruling and a Revenue Procedure, the IRS re-affirmed its stance that taxpayers may not deduct payments for otherwise deductible business expenses (i.e., payroll, rent, covered utility payments, etc.) if those payments are made using Paycheck Protection Program (PPP) funds and the company “reasonably expects” to have their PPP loan forgiven.  See IRS Rev. Rul. 2020-27.  Notably, the IRS clarified that, for purposes of the 2020 taxable year, a taxpayer can have a reasonable expectation of PPP loan forgiveness even if they do not intend to apply for forgiveness until 2021.  As long as…
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As the end of the year nears, a U.S. subsidiary may try to repatriate cash to its foreign parent. Repatriation may occur in several different methods with each having advantages and disadvantages. Most methods to repatriate will incur a 30 percent withholding tax, unless reduced by an applicable treaty. Dividends are the simplest way to repatriate, but are usually tax inefficient. A U.S. subsidiary cannot deduct a dividend from taxable income. Moreover, a dividend will typically incur the highest withholding taxes under tax treaties. Repatriating via interest payments is tax efficient – the U.S. subsidiary can deduct the interest, which…
The IRS has reminded taxpayers who filed an extension that the October 15, 2020 due date to file their 2019 tax return is near. Taxpayers should file their tax returns on or before the October 15, 2020 deadline. Moreover, taxpayers with tax due should pay as soon as possible to reduce any penalties and interest. However, certain taxpayers may have more time to file and pay. Taxpayers with more time to file or pay include the following: service members and others serving in a combat zone who typically have 180 days after they leave the combat zone to file returns…
With the economy still struggling, one bright spot remains for those who are willing to make an investment of time and money in estate planning. The combination of lowered asset values, reduced interest rates, and historically high estate and gift tax exemptions present a unique opportunity to implement estate planning techniques that will yield significant tax savings. But those looking to take advantage of this unique opportunity should act now, because a rebound in asset values and the outcome of the November 2020 election may make this unique opportunity go away. The Gift, Estate, and GST Tax Exemptions for 2020…
Some of your most significant assets, like your life insurance and retirement accounts, ask you to make beneficiary designations. If you make valid beneficiary designations on these assets, then upon your death they will pass directly to your named beneficiaries without being subject to the probate process. Click here to view our article on probate and why you might want to avoid it. Many people overlook the importance of beneficiary designations and neglect to name beneficiaries because they think their other estate planning documents will cover those assets. However, beneficiary designations operate independently from other estate planning documents, like a…
On August 8, 2020, President Trump issued an Executive Memorandum directing the Secretary of the Treasury to defer the withholding, deposit, and payment of the employee portion of the Social Security tax (6.2% of wages) for the period beginning on September 1 and ending on December 31, 2020. The deferral applies for employees whose pre-tax bi-weekly wages or compensation is less than $4,000. On an annualized basis, this equates to a salary not exceeding $104,000. The IRS recently issued limited guidance on the implementation of the deferral. Open issues and takeaways are summarized below. Additional Detail In addition to calling…
On August 8, 2020, President Trump signed an executive order in the form of a memorandum directing the Secretary of the Treasury to allow employers to defer the withholding, deposit and payment of a certain portion of social security taxes in light of the ongoing COVID-19 pandemic. Notice 2020-26 permits employers to implement the president’s order. Notably, the IRS guidance still leaves employers responsible for collecting the tax from employees and for interest and penalties if the employers are unable to collect the tax after the deferral period. In a time of economic and political uncertainty, employers should carefully weigh…
The coronavirus pandemic has forced most of us to stay home, and as a result, we are all looking for hobbies to pick up while we are social distancing. For some, quarantine hobbies have become Netflix binge watching or mastering bread baking. For others, creative passions and hobbies such as selling handmade crafts on Etsy or unwanted junk on eBay have become sources of income. If you are dabbling in a quarantine hobby that produces income, this article describes some good business practices that are important for every business. Be sure to also check out Part 1 of our series…
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Although the November 3rd general election is months away, the ballot for the presidential race has essentially been set for some time, with former Vice President Joe Biden and President Donald Trump each poised to become the official nominee of his respective party this August. While the economic impact of the COVID-19 pandemic is the major focus of fiscal conversation, a potential Biden administration could also result in sweeping changes to the existing income and transfer tax landscapes. While tax legislation necessarily originates in Congress, Biden has laid out a number of tax reforms that he would make a priority…