New legislation from the Consolidated Appropriations Act, 2021 creates a chance for some of your clients to take advantage of both Paycheck Protection Program (PPP) loans and the Employee Retention Credit (ERC). Several changes specific to the ERC can ...

 

Plan for your clients to get both PPP loans and the ERC and more...




Plan for your clients to get both PPP loans and the ERC

Many-coins-are-stacked-in-a-graph-shape-for-financial-planning-concepts-1186701116New legislation from the Consolidated Appropriations Act, 2021 creates a chance for some of your clients to take advantage of both Paycheck Protection Program (PPP) loans and the Employee Retention Credit (ERC).

Several changes specific to the ERC can provide an opportunity for additional relief for your clients. The significant changes that affect small businesses include:

  • Extension of the ERC through June 30, 2021
  • Increased credit rate from 50% to 70% of qualified wages
  • Increased the limit on per-employee qualified wages from $10,000 for the year to $10,000 for each quarter
  • Reduced year-over-year gross receipts decline from 50% to 20% and
  • Created a safe harbor to allow employers to use prior-quarter gross receipts to determine eligibility

The legislation means that employers who receive PPP loans may still qualify for the ERC retroactive to March 13, 2020.

Previously, clients receiving a PPP loan during the first round of relief couldn’t take advantage of the ERC. However, with the new legislation, a business can take the ERC even if they received PPP funding and loan forgiveness as long as the payroll identified for the ERC was not paid out of PPP funds. As noted above, this change is retroactive to March 13, 2020.

Your clients may not be aware of this planning opportunity. It’s also a chance for you to bring more value to your clients by helping them take full advantage of relief options. And the time to do so is now — before completing your clients’ year-end payroll filings, especially if your clients haven’t applied for PPP debt forgiveness. Your clients can still claim the ERC if they’ve received forgiveness, but planning will be simpler if your clients haven’t applied yet. While waiting for specific IRS guidance needed to implement these provisions, you can begin discussing the opportunity with your clients.

Specifically, the bill allows eligible entities to claim the prior quarter’s credits from 2020 in the quarter in which the bill was signed: the fourth quarter of 2020.  

The ERC is a fully refundable payroll tax credit for employers that, for 2020, is equal to 50% of qualified wages employers paid beginning March 13, 2020. Businesses are eligible if:

  • They were fully or partially suspended due to an order from a governmental authority limiting travel, business and meetings during the quarter of payroll not paid out of PPP funds, or:
  • The business had a reduction in gross receipts of 50% or more during a calendar quarter compared to the same calendar quarter in 2019.

When the covered period for PPP loans was extended to 24 weeks, many clients’ applications for debt forgiveness qualified for 100% forgiveness on payroll alone without considering the other eligible nonpayroll costs. However, those other costs now may play a big role in receiving the ERC benefit. In assisting your clients with their forgiveness calculations, analyzing the ratio of payroll and nonpayroll costs is a critical step. If sufficient nonpayroll costs are available, limiting payroll costs to the 60% threshold required for full forgiveness may allow the remaining payroll to be eligible for the ERC-provided relief.

For your clients with fewer than 100 employees, the credit applies to all employee wages paid. For clients with more than 100 employees, there are further restrictions in analyzing the ERC opportunity. The ERC requirements for qualified wages and business activity for 2020 are different than for the ERC on wages paid in 2021. Make sure you understand the specifics and how they affect your clients.

Now is the time to plan how to help your clients maximize both PPP loans and the ERC, as this expansion also applies to round two of the PPP. A Jan. 22 webcast will review ERC changes and how PPP borrowers can use these credits. We’ll also provide updates during our AICPA Town Hall Series, in which Erik Asgeirsson, President and CEO, CPA.com; Lisa Simpson, VP — Firm Services; and leading subject-matter experts share the latest news and updates on pressing issues affecting the accounting profession. Additionally, you can find more information and resources at our Coronavirus Resource Center, which is continuously updated with news and tools to help you navigate the COVID-19 pandemic.

Carl Peterson, CPA, CGMA, Vice President — Small Firm Interests, Association of International Certified Professional Accountants

 

Taxpayers are unaware of remote worker state tax liabilities

Shutterstock_1072365962During the COVID-19 pandemic, remote work has become common for many companies. What once was a relatively small percentage of remote workers has drastically increased. A recent survey found that many new remote workers are unaware of the potential state tax implications of working in a state or states different from where their company is located.

On behalf of the American Institute of CPAs® (AICPA®), The Harris Poll surveyed 2,053 U.S. adults in October. Among the 58% of Americans employed, 42% have worked remotely during the COVID-19 pandemic and 25% were currently working remotely. More than half (55%) of those working remotely during the pandemic were unaware that failing to change their state tax withholding to reflect their remote work situation could have tax consequences.

The AICPA survey found that of those who have worked remotely during the COVID-19 pandemic,

  • 47% were unaware that each state has its own tax laws related to remote working;
  • 71% were unaware that working from a different state than their employer’s physical location can affect the amount of state taxes owed; and
  • 54% were unaware that the number of days worked out of the state where their physical workplace is located may also affect the amount of state taxes owed.

When asked if their state has state income tax reciprocity with any other state, 42% were unsure.

Among those working remotely who have worked in a state other than their pre-pandemic physical workplace, many have done so across multiple states (on average three) for relatively short periods. Most of these remote workers (75%) have worked out of state for 60 days or fewer and 51% have worked out of state for fewer than 30 days total.

The survey also provided some optimistic results. It noted that 67% of those who have worked out of state notified their employer of the state where they were working, 51% have tracked the number of days worked in each state and 41% have changed their state income tax withholding.

The AICPA recommends remote workers take six steps to prepare for the 2021 tax filing season:

  1. Compile a list of any states where you have worked remotely during 2020.
  2. If you didn’t track the number of days worked in other states, try to approximate the number of days worked in each state.
  3. Cities, counties, municipalities, school districts or other jurisdictions may also levy income taxes, depending on the state. Make sure you also track this level of detail.
  4. Consult a CPA. You will likely have questions about how and where to file state taxes. A licensed CPA can help navigate those questions and effectively manage your state tax liability.
  5. Check your state tax withholding and make any needed adjustments. If you don’t have the correct state tax withholding, you may owe state taxes, interest and penalties when you file your taxes.
  6. Continue to keep a record of all jurisdictions where you have worked remotely.

It’s important to look back and ensure that you take the necessary steps to avoid a surprise tax bill in the 2021 filing season.

Association Staff

 

2021 busy season due dates can’t come soon enough

Shutterstock_139682299“There is no terror in the bang, only in the anticipation of it.”– Alfred Hitchcock

In a good year, CPAs fret over due dates. I’m a glass half-full type of guy, but there aren’t too many measures that could be used to call 2020 a good year. (I digress for one moment and thank my wonderful colleagues at the AICPA and the many CPAs who volunteer to assist the profession, with whom I’ve shared the 2020 journey of achievement.)

Although we’re not finished with 2020, we’re already hearing from members about March and April 15, 2021.

Will the IRS postpone those dates much like they postponed the April 15 date in 2020? What is the AICPA’s position? Now I know what Hitchcock meant — the anticipation of March and April 15 is causing “terror!”

Last spring, when the AICPA heavily advocated for a change in the April 15, 2020, due date, I heard from several members who wanted to hold fast. When the AICPA did not advocate for systemic extension beyond July 15, I heard from several more members who wanted automatic extensions until Oct. 15. I even heard from members who wanted automatic extensions until Jan. 15 or April 15, 2021.

Our members are incredibly diverse and equally passionate in their opinions. We are fortunate that our Tax Executive Committee helps us decipher often dissimilar data points and determines the best course of action for the profession.

As you can imagine, moving the filing deadline is highly controversial.

Many members feel that a deadline change is necessary to meet the compressed workload, while others think it is dragging the workload further out, which makes for a more strenuous filing season. Additionally, there will be pressure to hold to April 15 as Tax Day because of federal revenue considerations. From a state conformity perspective, states will also be under pressure to keep to original due dates because of revenue shortfalls.

The IRS has not spoken publicly about possible changes to filing or payment dates for the upcoming tax filing season. Regardless, taxpayers and their advisers should presume that it will be “business as usual” and engage in their customary busy season readiness activities to gear up for the March 15, April 15 and other due dates that we all face. You can track IRS COVID-related impacts at IRS Operations During COVID-19: Mission-critical functions continue.

The AICPA, too, is not currently advocating a change from the normal filing or payment deadlines.

Importantly, our Tax Section continues to ready members for a strategic advantage — during tax filing season and beyond — in demonstrating CPAs’ value as a trusted provider of professional tax and planning services.

Our Annual Tax Compliance Kit of engagement letters, organizers, checklists and practice guides helps members comply with tax laws and effectively serve your clients.

We are closely monitoring the situation with COVID-19 and the impact on taxpayers, the tax community and tax administration. We will make ongoing assessments in early 2021 so that there will be ample time leading up to the March and April deadlines for all impacted parties to make adjustments.

In addition, the AICPA’s tax advocacy initiatives continue to address the issues taxpayers and tax practitioners are currently struggling with, daily, in their IRS interactions.

They include:

  • Pushing for an expedited and streamlined reasonable cause penalty abatement process for taxpayers affected by the pandemic
  • Protecting taxpayers, their representatives and the IRS, by requesting that the IRS extend the expiration date of the Aug. 28, 2020, memorandum (“Temporary Deviation From Handwritten Signature Requirement for Limited List of Tax Forms”) through Oct. 15, 2021
  • Stopping the rash of collection levy notices that have escalated quickly (sometimes without an initial notice) to actual levies, and partly relate to the significant IRS mail backlog
  • Changing a new IRS power of attorney pilot program that doesn’t facilitate the process, requires more security measures than wet signatures, is time consuming, and doesn’t provide any real benefit to CPAs
  • Facilitating the IRS’s development of a new “Online Tax Pro’s Account” that is workable from a CPA’s perspective

Finally, the Tax Executive Committee has created a task force to consider our COVID-19 tax system experiences in 2020 and 2021 — indeed, we have not yet reached the end of those experiences — and recommend tax practice management and systemic changes. Recommendations, however, are likely not to be made until starting in mid-2021 at the earliest.

One of Alfred Hitchcock’s approaches to moviemaking was to “always make the audience suffer as much as possible.” That’s understandable for a director who was known as the “master of suspense,” but not what CPAs are looking for in tax filing season. We are here to help remove some of the drama from the annual tax show.

Edward S. Karl, CPA, CGMA, Vice President of Taxation, American Institute of CPAs

 

Unwavering in disruption: Reflections on an extraordinary year

In this interview, Barry Melancon, CPA, CGMA, President and CEO of the American Institute of CPAs (AICPA) and CEO of the Association of International Certified Professional Accountants (the Association), reflects on an extraordinary year and the steps we must take to prepare for 2021.

You have described 2020 as a “historic” year for the profession. Can you explain what you mean by that?

We faced a level of disruption none of us had ever experienced before. As a trusted profession, accountants were looked to for guidance and stability. We were on the front line of the pandemic’s economic effects, and our expertise, abilities and the relationships we have built were put to the test. I am especially proud of how the profession rallied to support small businesses during this challenging period.

We could effectively respond to this crisis because of our long history of anticipating change and adapting. The profession is — and has always been — transformative, evolving to meet the demands of a rapidly-changing environment. For more than 133 years, we have grown our services and skills to remain resilient against disruption and turn that resilience into results for our clients, communities and companies.

How is the Association helping members and students navigate the pandemic?

In March, we launched the AICPA coronavirus resource center, and shared tools, resources, and learning to help members stay informed as the pandemic unfolded — the weekly AICPA Town Hall webcast series continues. To make sure members continued to have access to our learning, we converted our in-person training and conferences to online, including our premier ENGAGE conference, held this summer. We also created a dedicated resource center for management accountants and a 5-part Agile Finance webcast and whitepaper series, developed in partnership with Oracle, to address issues specific to those working in business and industry.

The Paycheck Protection Program (PPP) helped many businesses get through the pandemic. CPAs were key to preparing loan applications and navigating businesses through the loan forgiveness process. To help CPAs implement the program, we created a resource page, forgiveness tools, and in September, we launched a next-generation PPP Forgiveness platform for CPAs and businesses. We will continue to help members navigate the confusion around the forgiveness process.

Students were also under enormous stress, particularly when it came to their exams. We worked with the National Association of State Boards of Accountancy (NASBA) and Prometric to evoke an emergency testing window. We accelerated our efforts to move the CGMA exam online, implementing a remote option in May. We also instituted a new hardship grant for accounting students.

We take our responsibility to members and students very seriously and are committed to providing the tools they need to be successful — no matter the environment.

The Association is key to sound policymaking around the world. Can you tell us about some of the U.S. efforts from 2020?

With help from our members and CPA State Societies, we successfully advocated for many key relief programs and efforts throughout 2020. Highlights include:

  • Successfully advocated for the extension of the April 15 tax filing and payment deadline to July 15
  • Urged the Internal Revenue Service (IRS) to update and modernize e-filing signature requirements on key forms — specifically requesting e-signatures during the coronavirus pandemic — with the goal of making this temporary relief permanent
  • Successfully advocated for public accounting to be designated as an essential service
  • Created an AICPA PPP Coalition of small business payroll providers to facilitate information sharing and ease-of-access for loan funding
  • Urged the IRS and Treasury to issue guidance on the employer retention credit, sick leave and medical leave credits and PPP loan forgiveness
  • Mobilized members and state CPA societies to push for deductibility of PPP-funded expenses
  • Supported state-level activities, including the Alliance for Responsible Professional Licensing‘s interstate practice report and development of state-level coalitions to address local threats to licensure

We have always had a strong voice in advocacy, but this year, we have been more essential to public policy changes in the U.S. and beyond than ever before. The level of activity is historic for the profession, and it will continue well beyond the end of the health crisis.

The Association did not just focus on COVID-19 in 2020. What are some of the key initiatives we made progress on in 2020?

The pandemic did not disrupt our efforts to reimagine the profession. 

We made significant progress on CPA Evolution, a joint effort with NASBA to reimagine CPA licensure. This year, both the AICPA Governing Council and the NASBA Board of Directors voted to support advancing the initiative. We are moving forward with implementing the core plus discipline licensure model.

The AICPA, CPA.com and CaseWare International have developed the Dynamic Audit Solution. This year, we delivered a minimally viable product to participating firms, and we plan to deliver our first end-to-end commercial release in mid-2021.

Through CPA.com, we also launched the .cpa domain, a new secure domain exclusive to CPA firms. It signals a clear connection to the profession, driving trust in an increasingly uncertain online environment.

In January, we created a Global Career Hub for both management and public accounting. Since launch, we posted more than one million jobs and developed career resources to help members and students navigate COVID-19.

As a digital-first organization, we continue to reimagine how we deliver insights, tools and services online. We created a new streamlined digital experience, so members and students can get information quickly and customize it based on their preferences and needs.

We expanded on our Future of Finance series with the Finance transformation: the human perspective report published in partnership with KPMG, examining the impact of digital technology on the finance function and its people. We recently released an update to the report focusing on the pandemic’s effect on digital transformation.

This year, I signed a call to action in response to climate change on behalf of the Association, demonstrating our profession’s commitment to combating climate change and our support of members working to address climate risk.

What is your advice to members and students as they prepare for 2021?

Focus on people.

The strength of the profession depends on our people. So, we must continue building the human resilience needed to navigate through — and beyond — the disruption facing us. Wellbeing and mental health should be top of mind for firms and businesses, particularly as the crisis drags on into the new year.

2020 has reminded us of the importance of our commitment to diversity, equity and inclusion. By tapping into different cultures and perspectives, our profession is positioned to solve even the most complex and challenging issues. The Association is committed to fostering a culture of belonging, and we offer resources, tools and training to help firms recruit, retain and advance diverse talent in the profession.

Adapt and expand your services and focus on value.

Once this crisis has passed, the world will need new and different things from us. The profession is positioned to embrace new and emerging opportunities to deliver value.

We saw tax CPAs take on more planning and advisory services during the start of the pandemic. Formalizing these services can lead to new revenue streams, reduced workload compression and stronger client relationships.

Technology has been transforming our profession for years, and even more so during this crisis. There are opportunities for CPAs to serve clients and businesses through assurance and advisory services in areas such as information privacy, blockchain and cybersecurity.

COVID-19 also heightened awareness for supply chain risk management. CPAs can provide advisory and assurance services on organizations’ systems and controls and help companies assess and mitigate supply chain risks.

There is an increasing demand for companies to demonstrate their commitment to people, community and the environment. CPAs can provide sustainability reporting and assurance, and through integrated reporting, help organizations articulate their value beyond profit.

Commit to learn, unlearn, relearn.

As we learned this year, we must be willing to adapt. That means recognizing the skills we have today may not be enough for the future. In fact, according to the most recent World Economic Forum Future of Jobs report, 44 percent of the skills employees will need to perform their jobs effectively will change by 2025. To reskill and upskill, we must commit to a cycle of learning, unlearning and relearning. We saw through the pandemic the value of being a nimble profession, and this adaptability will continue to be important.

We help equip members and students with the technological and people skills needed for the future through our Go beyond disruption professional development series. In addition, the Digital Mindset Pack, Powered by AICPA and CIMA research, can help members leverage the technologies that are rapidly transforming finance, accounting and tax functions.

Do you have any final thoughts for our members before we close out a truly extraordinary year?

This year was tough for everyone, but it has also provided the profession opportunities to support our clients, businesses and communities in new ways. Accountants are leading in economic recovery efforts, and our ability to do so is because of your hard work. As trusted advisers, you restore confidence amid disruption. Thank you for all you do.

None of us could have fully prepared for 2020, and the path ahead is unclear. While we may not know what is in store for 2021, that does not mean we can stop where we are now. Together, we must reimagine the world we want to create, then build that future.

Barry Melancon, CPA, CGMA, President and CEO of the AICPA and CEO of the Association of International Certified Professional Accountants

 

5 free resources to help market your services

Cpa-logo-no-tagline-low-resolutionYour to-do list likely includes items such as scheduling next year’s engagements, sending client information requests, preparing for year-end client accounting services processes, gathering and reviewing documents needed for early 2021 and contacting clients to plan for the year ahead. Taking time to market your services to prospects and clients might be missing from your list. We understand that. With so much else going on, this task often isn’t a priority. But we’d like to help you showcase your expertise and the value you provide with our new CPA Marketing Toolkit. Check out the following five marketing resources, included as part of your AICPA membership.

  1. Showcase your CPA designation.

These prestigious three letters tell others that you are knowledgeable and experienced in your profession. Did you know that you can use CPA logos in your marketing materials? Why not add a CPA logo to your email signature or feature one prominently on your website or online professional profile? You’ll find several variations to choose from, along with guidance on logo usage.

  1. Articulate the value of hiring a CPA.

Use this PowerPoint presentation as you meet with prospective clients. It explains the advantages of working with a CPA and highlights the types of year-round services you provide. 

  1. Highlight your offerings during year-end planning conversations.

We’ve developed year-end planning letters to help you start conversations with individual and small business tax clients. These letters feature a list of key considerations for this year that your clients will need to factor in for next year. The letters also lead to more extensive conversations about how you can support your clients.

  1. Start strongly during the proposal meeting.

Making a good first impression is important. Use this checklist to make sure you prepare for your next prospective client proposal meeting. Taking time for this pre-meeting activity will help you build strong relationships and help expand your service opportunities.  

  1. Talk with small business clients about the benefits of working with a CPA.

Your small business clients will appreciate you sharing this guide that outlines the services you can offer to help them plan, run and grow their business. Plus, there’s a space on the first page of the document for you to add your firm’s logo.

In addition to using the above resources, take your practice to the next level by incorporating the CPA brand into your website URL. Apply for a .CPA domain, exclusively available to CPA firms, and distinguish your services from those of non-CPAs. .CPA is a secure, restricted web domain, making it a harder-to-spoof online identity, allowing you to protect your firm’s data and your clients’ personal information from phishing and other security threats.

Another way to differentiate yourself from others is to strengthen your advisory services offerings by pursuing a credential. This year, you’ve witnessed firsthand how the COVID-19 pandemic paved the way for CPAs to be the trusted adviser for matters other than just tax or audit. Clients wanted CPAs to guide them in areas such as business continuity, economic relief, loan applications, cybersecurity consultations and retirement planning. Why not go further and harness that momentum to display your expertise in a specialty area such as valuation, forensics, financial planning or technology with a credential

We hope you find these resources helpful as you communicate with prospects and clients about the value you provide and the opportunities available to expand upon the services you offer.   

Association Staff