MEDIA ALERT — What’s new with business taxes?
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Wolters Kluwer Tax & Accounting looks at various new tax issues facing businesses
Wolters Kluwer Tax & Accounting (AEX: WKL):
What: Businesses have faced many tax challenges over the last year. Efforts to help businesses weather the effects of the COVID-19 pandemic brought about the Paycheck Protection Program (PPP) loans that led to some confusion about whether the expenses associated with forgiven PPP loans would be tax deductible. Several tax breaks were offered to businesses with respect to Social Security and Medicare taxes to help employers retain employees during the pandemic. However, these tax breaks came in several forms, changed with each new tax law, and were impacted by the Internal Revenue Service (IRS) backlog in processing returns and issuing guidance. Businesses were also still dealing with delayed guidance from the tax provisions of the Tax Cuts and Jobs Act and now face the possible reversal or revision of many of those business provisions under the tax proposals of the current Administration.
Why: Businesses and their tax advisors have been challenged in keeping up with the changes over the past few years. Heading into 2022, businesses could see even more significant legislative and regulatory changes that could introduce new challenges for the foreseeable future.
- Income taxes. The Tax Cuts and Jobs Act brought lower corporate tax rates, a new pass-through business deduction, elimination of the corporate alternative minimum tax, and immediate expensing of short-lived capital assets. However, the law also brought limits on the business interest deduction and elimination of the net operating loss carryback, both of which were modified in subsequent COVID-19 legislation. The current Administration is proposing changes to many of these provisions
- PPP expenses. PPP provided important forgivable loans to businesses and the ensuing IRS guidance specified ability to deduct expenses related to those forgiven loans
- Payroll taxes. The response to COVID-19 brought paid sick and family leave credits, an employee retention credit, and a deferral of the employee portion of payroll taxes. These provisions reduced payroll tax obligations but also created administrative burdens and compliance issues with extensions and changing requirements
- Health coverage. Reimbursement of employers for COBRA premiums paid for former employees also is a credit against Medicare taxes, and changes were made to the requirements for health and dependent care flexible spending accounts
- Retirement plan funding. In response to COVID-19, legislation relaxed some of the funding and testing requirements for single-employer and multi-employer retirement plans
- State taxes. States continued to rollout and enforce new economic nexus statutes in response to the Supreme Court of the United States (SCOTUS) decision in Wayfair; some states started to adopt digital asset tax provisions. States are also adopting an IRS sanctioned workaround of the federal limit on the deduction of state taxes through the use of pass-through entities
- Regularly expiring tax provisions. A few of the regularly expiring tax provisions, such as the energy efficient commercial buildings deduction and the railroad track maintenance credit, were finally made permanent. While others were extended through 2025, many related to particular industries or energy were only extended through 2021
- International taxation. Guidance has been finalized on most of the international tax provisions of the Tax Cuts and Jobs Act. However, the current Administration is proposing significant changes to those provisions while concurrently working with the Organization for Economic Cooperation and Development on a global approach to the allocation of business income and minimum corporate taxes
- Court decisions. Recent SCOTUS decisions have addressed issues such as preservation of the Affordable Care Act, pre-enforcement challenges to IRS reporting requirements backed by a tax penalty, and state taxation of remote workers
- Business meals. While the Tax Cuts and Jobs Act ended the business entertainment deduction, subsequent COVID-19 legislation reinstated the 100 percent business meals deduction for 2021 and 2022 if the food and beverages are provided by a restaurant
Who: Tax expert Mark Luscombe, JD, LL.M, CPA, Principal Federal Tax Analyst at Wolters Kluwer Tax & Accounting, can help discuss the current and proposed changes to the tax issues facing businesses.
PLEASE NOTE: The content of this article is designed to provide accurate and authoritative information in regard to the subject matter covered. The information is provided with the understanding that Wolters Kluwer Tax & Accounting is not engaged in rendering legal, accounting, or other professional services.
Contact: To arrange an interview with Mark Luscombe or other federal and state tax experts from Wolters Kluwer Tax & Accounting on this or any other tax-related topics, please contact Bart Lipinski.
Source: Wolters Kluwer Tax & Accounting
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