Month: October 2021

The U.S. Small Business Administration (SBA) announced major modifications to the COVID-19 Economic Injury Disaster Loans (EIDL) program, including raising the loan cap from $500,000 to $2 million and adding business debt payments to the list of ways businesses can use the loan proceeds.

In a news release issued on September 9, 2021, the SBA said it was implementing the changes to make it easier for the small business communities still feeling the effects of the pandemic, especially hard-hit sectors such as restaurants, gyms, and hotels, to access the more than $150 billion in funding available for loans.

The following key changes were announced. All are effective immediately:

• Increasing the COVID-19 EIDL cap from $500,000 to $2 million. Loan proceeds can be used for any normal operating expenses and working capital, including meeting payroll, purchasing equipment, and paying debt. COVID-19 EIDL funds are now also eligible to prepay commercial debt and make payments on federal business debt.
• Implementation of a deferred payment period. The SBA said small business owners will not have to begin COVID-19 EIDL repayments until two years after loan origination. Payments are deferred for the first two years (during which interest will accrue), and payments of principal and interest are made over the remaining 28 years. The agency previously had implemented an 18-month deferment period for loans made during 2021.
• Establishment of a 30-day exclusivity window. To ensure “main street” businesses have additional time to access these funds, the SBA said it is implementing a 30-day exclusivity window of approving and disbursing funds for loans of $500,000 or less. Approval and disbursement of loans over $500,000 will begin after the 30-day period.
• Simplification of affiliation requirements. To ease the COVID-19 EIDL application process for small businesses, the SBA established more simplified affiliation requirements to mimic those of the Restaurant Revitalization Fund.

The COVID-19 EIDL program, which runs through December 31, offers 30-year loans with fixed interest rates of 3.75% for small businesses, including sole proprietors and independent contractors, and 2.75% for not-for-profits. If you would like more information about this program, including determining if it might benefit your business, please contact our office.

The IRS recently issued its annual update of special per-diem rates for substantiating ordinary and necessary business expenses incurred while traveling away from home. The new rates are in effect from October 1, 2021, to September 30, 2022. Specifically, the per-diem rates issued include the transportation industry meal and incidental expenses rates; the rate for the incidental-expenses-only deduction; and the rates and list of high-cost localities for purposes of the high-low substantiation method.

High-low substantiation method

For purposes of the high-low substantiation method, the per-diem rates are $296 for travel to any high-cost locality and $202 for travel to any other locality within the continental United States, both slightly higher than last year.

The amount of these rates that is treated as paid for meals is $74 for travel to a high-cost locality and $64 for travel to any other locality within continental United States, both also slightly higher than last year.

The notice contains a list of the localities that are high-cost localities (localities that have a federal per-diem rate of $249 or more, $4 higher than last year) for all or part of the calendar year.

Incidental expenses

Since 2012, incidental expenses have included only fees and tips given to porters, baggage carriers, hotel staff, and staff on ships. The per-diem rate for the incidental-expenses-only deduction remains unchanged at $5 per day for any locality of travel.

Transportation industry

The special meals and incidental expenses rates for taxpayers in the transportation industry are $69 for any locality of travel within continental United States and $74 for any locality of travel outside continental United States, both $3 more than last year.

Recent legislation includes several provisions to help individuals and businesses who give to charity. The new law generally extends four temporary tax changes through the end of 2021. Here’s an overview of these changes.

Deduction for individuals who don’t itemize

Taxpayers who take the standard deduction usually can’t deduct their charitable contributions. The law now permits taxpayers to claim a limited deduction on their 2021 federal income tax returns for cash contributions they made to certain qualifying charitable organizations.

These taxpayers, including married individuals filing separate returns, can claim a deduction of up to $300 for cash contributions to qualifying charities during 2021. The maximum deduction is $600 for married individuals filing joint returns.

100% limit on eligible cash contributions made by taxpayers who itemize deductions in 2021

Taxpayers who itemize can generally claim a deduction for charitable contributions to qualifying organizations. The deduction is typically limited to 20% to 60% of their adjusted gross income and varies depending on the type of contribution and the type of charity.

The law now allows taxpayers to apply up to 100% of their AGI, for calendar-year 2021 qualified contributions. Qualified contributions are cash contributions to qualifying charitable organizations.

The 100% limit is not automatic, however. The taxpayer must choose to take the new limit for any qualified cash contribution. Otherwise, the usual limit applies. The taxpayer’s other allowed charitable contribution deductions reduce the maximum amount allowed under this election.

Corporate limit increased to 25% of taxable income

The law now permits C corporations to apply an increased corporate limit of 25% of taxable income for charitable cash contributions made to eligible charities during calendar year 2021. The increased limit is not automatic. C corporations must the choose the increased corporate limit on a contribution-by-contribution basis.

Increased limits on amounts deductible by businesses for certain donated food inventory

Businesses donating food inventory that are eligible for the existing enhanced deduction may qualify for increased deduction limits. For contributions made in 2021, the limit is increased to 25%. For C corporations, the 25% limit is based on their taxable income. For other businesses, including sole proprietorships, partnerships, and S corporations, the limit is based on their total net income for the year. A special method for computing the enhanced deduction continues to apply, as do food quality standards and other requirements.