Leyla Hanson, CPA Sunnyvale

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What are some of the key components of the Biden Tax Plan?

Per the Tax Foundation, some of the key components of this plan include the following:

Biden's plan also includes the following proposed business tax changes:

I heard that the IRS plans to disallow the deduction for expenses incurred in 2020 which were paid and funded through a PPP loan. Is this true?

Yes, it is true. The IRS has issued Revenue Ruling 2020-27.

In a nutshell, the IRS holds the following:

A taxpayer that received a covered loan guaranteed under the PPP and paid or incurred certain otherwise deductible expenses listed in section 1106(b) of the CARES Act may not deduct those expenses in the taxable year in which the expenses were paid or incurred if, at the end of such taxable year, the taxpayer reasonably expects to receive forgiveness of the covered loan on the basis of the expenses it paid or accrued during the covered period, even if the taxpayer has not submitted an application for forgiveness of the covered loan by the end of such taxable year.

The AICPA and many other Groups are urging Congress to fix this by allowing for a tax deduction related to the payment of allowable PPP expenses. To date, however, this seems to be the law. Non-deductible.

If I incorporate in California during the last 15 days of the year, am I required to pay the $800 minimum tax and file a tax return for that short period year?

Taxpayers must be careful if incorporating in CA close to the end of the year. California allows the first year to be free of the minimum tax and also would not be required to file a tax return for that short period IF they do no business in that short taxable year. The problem is that if the CA Secretary of State ("SOS")receives your filing documents prior to December 17, the date of receipt is the date which is used to determined whether or not you get the 1st year exemption from paying the $800 and filing a return.

If you are planning to incorporate close to year end without conducting business in that short period, you should indicate on your application that you want to treat the filings as filed at a future date. The SOS has created a new online portal for filing the articles of incorporation for general stock corporations that specifically provides a box for companies to check to specify a future filing date, for example, January 1 of the following year.



Income Taxes for Individuals, Start-ups & Small Businesses
leyla@leylahansoncpa.com  ::  408.732.9205
located in Sunnyvale, California

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