When we thought times were bad enough with the COVID-19 pandemic and widespread social unrest in our country, the West Coast, including the Pacific Northwest, was struck with unprecedented wildfires and massive windstorms, taking lives, destroying property and rendering the air quality throughout the region unhealthy. On September 16 and 17, the Internal Revenue Service announced good news for many taxpayers residing in Oregon.
In News Release OR-2020-23 and News Release IR-2020-215, the IRS announced that, due to the wildfires and windstorms striking Oregon, the deadline for certain Oregonians to file returns and make tax payments will be extended to January 15, 2021.
More than six months into the coronavirus pandemic, and approximately four months since the IRS issued Notice 2020-32, it is looking increasingly likely that taxpayers will not be permitted to deduct business expenses funded with Paycheck Protection Program (“PPP”) loan proceeds that are ultimately forgiven. It is terribly late in the game not to have finality on the issue, especially with the third quarter 2020 estimated tax payments due on September 15 (next week).
As we previously discussed, PPP loans authorized by the CARES Act may be forgivable, in whole or in part, if taxpayers use the proceeds for qualifying expenses (namely, payroll, benefits, mortgage interest, rent, and utilities). Unlike other debt that is forgiven, PPP loan amounts forgiven pursuant to the CARES Act do not constitute cancellation of debt income.
On August 8, 2020, President Trump issued an executive order, directing the U.S. Treasury to grant employers the ability to defer the withholding, deposit and payment of certain payroll taxes as further COVID-19 tax relief. The deferral applies only to the employee portion of Social Security taxes and Railroad Retirement taxes (i.e., 6.2 percent of wages) required to be withheld and paid under Internal Revenue Code (“Code”) Sections 3101(a) and 3201(a) from September 1, 2020 to December 31, 2020.
PRACTICE ALERT: The deferral does not apply to required employee Medicare tax withholdings under Code Section 3101(b) (either the standard 1.45 percent on all wages or the additional 0.9 percent tax on wages in excess of $200,000). Further, the deferral is not available for the employer’s share of Social Security (6.2 percent) or Medicare (1.45 percent) taxes.
IRS NOTICE 2020-65
On August 28, 2020, the IRS issued Notice 2020-65, providing guidance relative to the president’s executive order. It provides answers to several important questions.
Notice 2020-65 defines employers required to withhold and pay Social Security and Railroad Retirement taxes as “Affected Taxpayers.” It goes on to provide that the due date for withholding and payment of the employee portion of Social Security taxes and Railroad Retirement taxes for the period September 1, 2020 to December 31, 2020 is postponed until the period commencing January 1, 2021 through April 30, 2021.
Larry J. Brant
Larry J. Brant is a Shareholder and the Chair of the Tax & Benefits practice group at Foster Garvey, a law firm based out of the Pacific Northwest, with offices in Seattle, Washington; Portland, Oregon; Washington, D.C.; New York, New York, Spokane, Washington; and Beijing, China. Mr. Brant practices in the Portland office. His practice focuses on tax, tax controversy and transactions. Mr. Brant is a past Chair of the Oregon State Bar Taxation Section. He was the long-term Chair of the Oregon Tax Institute, and is currently a member of the Board of Directors of the Portland Tax Forum. Mr. Brant has served as an adjunct professor, teaching corporate taxation, at Northwestern School of Law, Lewis and Clark College. He is an Expert Contributor to Thomson Reuters Checkpoint Catalyst. Mr. Brant is a Fellow in the American College of Tax Counsel. He publishes articles on numerous income tax issues, including Taxation of S Corporations, Reasonable Compensation, Circular 230, Worker Classification, IRC § 1031 Exchanges, Choice of Entity, Entity Tax Classification, and State and Local Taxation. Mr. Brant is a frequent lecturer at local, regional and national tax and business conferences for CPAs and attorneys. He was the 2015 Recipient of the Oregon State Bar Tax Section Award of Merit.
Upcoming Speaking Engagements
- "Entity Classification – The Check-The-Box Regulations Revisited," New York University Advanced Conference on Subchapter SNew York, NY, 7.21.22
- "Entity Classification – The Check-The-Box Regulations Revisited," New York University 81st Institute on Federal TaxationNew York, NY, 10.23.22-10.28.22
- "The Intersection of Code Section 1031 and Opportunity Zones," 2022 OSCPA Northwest Federal Tax Conference10.24.22
- "Entity Classification – The Check-The-Box Regulations Revisited," New York University 81st Institute on Federal TaxationSan Diego, CA, 11.13.22-11.18.22