The U.S. Congress recently approved $900 billion in financial relief for families and businesses who have been adversely affected by the coronavirus pandemic. The relief package includes direct checks for individuals, funding for distribution of the coronavirus
vaccine, and a second round of the Paycheck Protection Program. To walk us through this vital piece of legislation, we sat down with Julio Gonzalez, chief executive officer of Engineered Tax Services Inc. in West Palm Beach, Fla., and a national authority
on taxes and tax reform.
Don't miss PICPA's PPP 2 town hall - free for members - on Jan. 13 at 8:00 a.m. and the upcoming New 2020 Stimulus Bill: Tax Provisions You Need to Know Now webinars. Continue to check out our coronavirus page for the latest resources on COVID-19 relief for businesses.
By: Bill Hayes, Pennsylvania CPA Journal Managing Editor
The United States Congress recently approved $900 billion in financial relief for families and businesses adversely affected by coronavirus. This includes direct checks to individuals, funding for distribution of the coronavirus vaccine, and the second round of the Paycheck Protection Program. To walk us through more details of what is inside this new funding package as well as what it will mean for CPAs, we're with Julio Gonzalez, chief executive officer of Engineered Tax Services Inc. in West Palm Beach, Fla., and a national authority on taxes and tax reform.
With this package, can you give us a little bit on what individuals can expect to receive?
[Gonzalez] Clearly, the key here with this package was the $600 stimulus check per individual, $1,200 per family, limitations to $150,000 in income for a family, $75,000 on the individual side. I think other individual items that will help in this program are the $25 billion they passed in rental assistance and the $45 billion they passed in rental aid. Those are some of the things on the individual side that are front-and-center.
What's happening in the area of unemployment benefits as a result of this?
[Gonzalez] Well, the good news here is that they extended unemployment benefits an additional $300 per week for the next 11 weeks. I know that was important to both sides to come up with a compromise there and certainly that's in place as well.
Are state and local governments receiving aid and, if so, what should CPAs need to be aware of in that area?
[Gonzalez] The states are not receiving any aid to do any bailout. Certainly, the aid will come to the state level for programs for small businesses, programs for the pandemic, the vaccine, and getting schools open and so those are good things but no tax incentives at a state level or funding to them directly.
What does the new stimulus package mean for CPAs as we head into new year and a new tax season? As you said earlier, so much going on in the area for CPAs, but what's going to be the direct impact of this package?
[Gonzalez] Well, CPA/consultant. I think we should say that because now for the CPA firms they have to fill out and educate the audience. The big thing here for the small businesses that they work with is that the PPP now is tax-deductible. That's a big change from what Treasury had said in June, that we weren't going to be able to take those expenses as tax deductions. Now we have to go back and make sure that everyone understands that because I'm sure a lot of the clients already received their estimates for year-end and those year-end estimates are going to change quite a bit because of these PPP changes.
On the consulting side, we extended a second round of PPP programs and they're going to have to make sure to educate their clients on what that can mean for them. And the PPP loans you can go for a second time so you can get a second balance. There's more inclusion in terms of direct expenses that qualify for forgiveness. So those are getting out.
Also real important, the enhanced employment tax credits, and the thing here is that you're now allowed to do the enhanced employment tax credits and the PPP program. Remember before you had to do one or the other. And the employment tax credits were very difficult to understand but now you get to do both. So, now you're really going to have to scramble to understand all these employment tax credit rules especially for the clients that did the PPP. And we just enhanced the employment tax credit rules and extended them and made it more beneficial. A lot of education there that I think the CPA firms are going to have to want to understand to make sure that they're educating their clients and consulting them on these things because this changes the whole thing.
One thing that also happened I thought was interesting was that for 2021 going forward we go back to a 100% expensing for meals. I think that's going to be big for businesses to understand. We also extended the deferred payroll tax payment program there as well. You have big things there. Then, we passed or extended several tax extenders that were set to expire. Almost half of them were set to expire and were either made permanent or extended for one to five years. All that's going to play into the planning for small businesses, and for 2020 or 2021. Again, CPAs are digesting a million new tax pages from an additional 10,000 from the CARES Act. Now we have much more tax law coming. There's a lot there to be reviewed. Again, five thousand pages that we have to get through but we're talking about some of the highlights.
You gave us some interesting insight earlier about some of the real estate impact. So, what are a few of the “reading between the lines” points that CPAs should be aware of, in your opinion, that won't make the headlines, but affect how they work with clients. Are there any other major impact points?
[Gonzalez] In the CARES Act and the 2017 tax reform, we took residential real estate and took that depreciation up to 40 years on the ADS rules. Now this new bill takes it back to 30 as a technical correction. I think that's something that's going to be really important for all the CPA firms to go back and change that for their clients. We just did another change to the charitable tax rules as well, so that's going to apply to all individuals and businesses. We just changed the rules for healthcare and flexible spending and enhanced those. Those are changes not necessarily making the headlines, but little items that they should be aware of. Believe me, there's a lot of little items in there. They have a lot of reading. Hopefully, some of that reading through the holidays.
Speaking of making the headlines, there's been some talk that President Trump may not sign the relief package into law as he's looking to get more funds per person. What do you think the chances are that this current version of the bill does not go through and it has to have some adjustments? What do you think the outlook is?
[Gonzalez] Well, let's talk about that question because clearly when they were getting the bill ready between the House and the Senate, the administration was well involved in this bill. So, it was probably President Trump going out and doing a little bit of grandstanding to make sure that he was telling the individual that, "Hey, we should have got more of a bigger stimulus check out to the individuals." But there's no doubt that the administration, Senate, and House agreed to this.
So, my guess is that it's just a little bit of news for the media, but let's play this through. Maybe he changes his mind and vetoes it. What happens then? Can you override a veto? Certainly, you can for two-thirds vote in Congress. I think that would happen immediately. I think Congress would overrule that veto with two-thirds vote. You have also the pocket veto which is if the president doesn't act in 10 days it becomes law. So we have a lot of avenues to get there and clearly if all of those avenues didn't work I would imagine Biden would sign it on the 21st of January. I think it gets done right away but I do think there was a little bit of a message there.