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Last year, following the passage of the federal CARES Act, the Washington State Department of Revenue (DOR) published guidance regarding its view on whether federal COVID-19 related financial assistance is subject to the Business & Occupation (B&O) tax (including loan forgiveness under the Paycheck Protection Program [PPP]).

At that time, the DOR indicated its belief that the financial assistance should not be reportable for B&O tax purposes. Since then, the Legislature has enacted a specific exemption from the B&O tax for qualifying grants received on or after February 29, 2020 (the date the Governor issued a COVID-19 emergency proclamation).

The new law (SHB 1095),

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When the Cat’s Away, Should You Play?

The chances of an IRS examination of a tax-exempt entity is one in 742, reported the Treasury Inspector General For Tax Administration (TIGTA) in February. For-profit businesses are five times as likely to be examined (one in 156) and individuals are three times as likely to be examined (one in 226). The rate for churches is about one in 5,000.

To better show you how many this is, during FY 2019, there were almost 1.5 million Form 990 series returns and notices filed; however, the EO function examined approximately 2,000 (0.13 percent) Form 990 series returns during the same year.

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3/29/2021 Update: The Internal Revenue Service and the Treasury Department have provided additional details around the tax deadline extension.

As reported earlier, the April 15 deadline for filing and paying individual income tax has been extended until May 17, 2021. This week, the IRS announced they are also automatically extending the deadline for individuals to make 2020 contributions to their individual retirement accounts and health savings accounts. The deadline for doing so is automatically postponed until May 17.

In the press release, the IRS also doubled down on the condition that 2021 Q1 payments are still due on April 15,

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Charitable Contribution Changes for 2021

The Taxpayer Certainty and Disaster Tax Relief Act of 2020 (TCDTR) signed into law in December 2020, extends certain favorable CARES Act provisions regarding charitable deductions and provides for disaster relief deductions. Here are the highlights.

Individual Charitable Contribution Deduction for Non-Itemizers

Individuals that do not itemize deductions on their tax returns may take a charitable deduction for 2020 up to $300 per return for cash contributions to an organization exempt under Code Section 501(c)(3), except for contributions to supporting organizations and donor advised funds. This deduction will also be available for 2021, up to $300 (and, added by TCDTR, $600 on a joint return).

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The Consolidated Appropriations Act, 2021 made a second draw of Paycheck Protection Program (PPP) loans available to qualifying organizations. Here is an overview of the entities eligible for first and second draw PPP loans:

Eligible for First Draw PPP Loans

  • Small entities that, together with their affiliates, have 500 or less employees. This includes nonprofits, veterans’ organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors.
  • Certain entities with more than 500 employees in certain industries can also apply. This includes businesses with a NAICS Code that begins with 72 (The Accommodation and Food Services sector) or eligible news organizations with no more than 500 employees per physical locations,

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Business Meal Expense Update

Introduction

Starting in 2018, under the Tax Cuts & Jobs Act (TCJA), all business meals were made 50% deductible. This included all employee, business, travel, and per diem meals, unless separately billed to a client. It also included meals incurred during entertainment (i.e. football games) if the meals were separately stated from the entertainment expense. The 50% meals limitation does not apply to employee parties. It was unclear whether employee office snacks (de minimis) and office meals were subject to the 50% limitation.

On October 9, 2020, the IRS issued final regulations that clarified the employee office snacks (de minimis) and office meals are subject to the 50% limitation.

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If you have ever been advised or tempted to convert your traditional IRA to a Roth, 2020 may finally be the year to make that move.

There are two factors that could make the conversion more attractive this year: the challenging economic environment, and a 2020 change in tax law that may work in your favor. We’ll cover both below.

Lower Tax Brackets

First, for many high net worth individuals, 2020 will be a challenging year with a much lower taxable income compared to prior and (hopefully) future years.

While this current situation is certainly painful, it does mean that lower IRS income tax brackets could apply for the 2020 tax year. 

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