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IRS Extends Tax Day to May 17

By: Amanda Wilson

The Internal Revenue Service provided individual taxpayers with a nice St. Patrick’s Day surprise by announcing that the tax deadline for individuals had automatically been extended from April 15, 2021 to May 17, 2021, due to the coronavirus pandemic.

Individuals will automatically receive the federal income tax extension and do not need to make any extension filings. No interest or penalties will accrue on amounts that taxpayers extend from April 15, 2021 to May 17, 2021.

It should be noted that this extension only applies to federal income tax returns, and individuals should check their state and local tax authorities to see if an extension is necessary.

New COVID-19 Relief Bill Allows Deductibility of Expenses Paid with Forgiven PPP Loans

By: Amanda Wilson

As I previously reported in an article published earlier this month, the IRS has repeatedly taken the position that businesses cannot deduct otherwise deductible expenses (such as payroll or rent) if the business used Paycheck Protection Program (“PPP”) loan proceeds to pay those expenses if the PPP loan is later forgiven. I’m happy to share that Congress is rejecting the IRS’s position.

The new COVID-19 relief package announced by Congress yesterday will include a provision that allows businesses to take tax deductions for expenses paid with forgiven PPP loans. The specifics of this provision are not yet known, but it is expected that this will provide a significant tax benefit to businesses that incurred PPP loans.

Be sure to visit our COVID-19 Resource Center page to keep up to date on the latest news.

New Treasury and IRS Regulations Bless SALT Deductions for Pass-through Entities

By: Amanda Wilson and Andrew Kelly

Yesterday, the U.S. Department of the Treasury and Internal Revenue Service (IRS) issued a press release and related notice regarding proposed regulations which clarify that the $10,000 cap on state and local tax (SALT) deductions imposed by the Tax Cuts and Jobs Act of 2017 does not apply to pass-through entities (PTEs).

While the primary purpose of a PTE is to allow income to “flow through” the entity to its respective owners (thus being taxed only at the individual level), several states have now passed laws which allow PTEs to pay state income taxes at the entity level. These state laws, which have now essentially been blessed by the Treasury and IRS, provide a way for PTE owners to avoid the $10,000 cap on SALT deductions as the Tax Cuts and Jobs Act of 2017 only applies this cap to individuals.

In addition to stating that “State and local income taxes imposed on and paid by a pass-through entity are allowed as a deduction by [pass-through entities] in computing [their] non-separately stated taxable income or loss for the taxable year of payment,” the press release explains that the proposed regulations will be effective as of November 9, 2020, and will also allow taxpayers to elect to apply the rules described in the notice to specified income taxes paid in a taxable year of a [PTE] ending after December 31, 2017, and before the date the forthcoming proposed regulations are published in the Federal Register.

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