Tag Archives: ppp

35 Million Unprocessed Tax Returns Due To IRS Delays

The various pandemic-era programs introduced by the federal government have increased the tax authority’s workload and caused delays in the tax refund process.
The IRS has been under extreme pressure since the start of the pandemic, tasked with implementing a range of federal relief programs designed to support individuals, families and businesses affected by covid-19.
“The IRS and its employees deserve tremendous credit for what they have accomplished under very difficult circumstances, but there is always room for improvement.” Taxpayer Advocate Erin Collins wrote in her report. “This year, the IRS is dealing with an unprecedented number of returns requiring manual review, slowing the issuance of refunds,” Collins continued. “These processing backlogs matter greatly because most taxpayers overpay their tax during the year by way of wage withholding or estimated tax payments and are entitled to receive refunds when they file their returns. Moreover, the government uses the tax system to distribute other financial benefits.”
The 35 million pending returns account for 20 percent of the total returns submitted. And with the May 17 federal tax deadline almost two months in the past, the IRS is well beyond the 21-day processing time it typically strives for. Myriad reasons account for the delay.

The 2021 tax filing season started late and was extended an extra month due to the coronavirus pandemic. To make matters worse, the agency was inundated with phone calls and unable to keep up. During the 2021 filing period, the IRS received 167 million phone calls, four times more than during the 2019 season. As a result, only 9% of calls were answered by a live customer service representative.The popular “1040” line, the most frequently dialed IRS toll-free number, received 85 million calls during the 2021 filing season, with only 3% of callers reaching a live person.

Since the start of 2021, the IRS has issued the second and third economic impact payments, better known as stimulus checks. The second, for up to $600, started going out at the end of December 2020, as part of the Coronavirus Response and Relief Supplemental Appropriations Act. The third, for up to $1,400, started going out in the middle of March, as part of the American Rescue Plan Act. The IRS began accepting tax returns on February 12. So the latest check was processed during tax season, its busiest time of the year.

Another key component of the American Rescue Plan is the updated Child Tax Credit. Starting July 15, the IRS will pay $3,600 per child to parents of children up to age five. Half will come as six monthly payments, and half as a 2021 tax credit. That comes out to $300 per month and another $1,800 at tax time. The total amount changes to $3,000 per child for parents of six to 17 year olds, or $250 per month and $1,500 at tax time. The IRS has also been standing up this new program of monthly Child Tax Credit payments during tax season. While the agency has now sent out three stimulus checks, it has no experience sending out millions of periodic payments. Resources dedicated to setting up this program are resources not dedicated to its core mission, which is to “provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.”

Erin Collins’s report also cites limited resources and technology issues as reasons for delays in processing tax returns. The agency operated under many of the same limitations that have affected office workers the world over during the pandemic. That included remote work, which can affect efficiency. The IRS is also understaffed and underfunded. Congress has continually reduced the agency’s budget over the last decade. Funding and total employment are both down by about 20 percent.

Beginning the tax season at a disadvantage contributed to the 35 million-return backlog. Tasking the IRS with stimulus checks and the updated Child Tax Credit at the same time drew resources away from processing tax returns. And a history of understaffing and underfunding set them up for failure. All of this put a strain on Americans who were counting on timely refunds.

New York Forward Loan Fund accepting Pre-Applications

New York Forward Loan Fund (NYFLF) is a new economic recovery loan program aimed at supporting New York State small businesses, nonprofits and small landlords as they reopen after the COVID-19 outbreak and NYS on PAUSE.
Pre-applications for the New York Forward Loan Fund are now open. This is not a first-come, first-served loan program. Applications will be reviewed on a rolling basis.  For small businesses and nonprofits, you are encouraged to prepare your pre-application in advance by taking advantage of the application preparation resources available here.

SVOG application portal reopens today at 12pm ET

The U.S. Small Business Administration, citing negative feedback to previously announced plans to reopen the Shuttered Venue Operators Grant (SVOG) application portal on Saturday, announced Friday night that it was rescheduling the reopening for today at noon EDT.

“We heard you and we are taking action,” the SBA said in an emailed statement. “It is our top priority to deliver on the promise and commitment to provide economic lifelines to you ASAP. Yet, we understand the challenges a weekend opening would bring and to ensure the greatest number of businesses can apply for these funds, we decided to reschedule.”

The Friday announcement came less than 24 hours after the SBA had announced the Saturday reopening. In a brief statement issued late Thursday night, the agency said it had completed rigorous testing on the portal, which was forced to shut down due to technical issues only hours after it opened on April 8. The SBA also provided updated documents and guidance Friday. The agency said that interested applicants should register for an account in advance through the portal.

In addition, the SBA released updated FAQ guidance related to the SVOG program. The FAQs are reorganized for clarity, and content that is new or substantially changed is marked with an asterisk. Among the new information included is a Question 31 in the Application section that provides a sample statement that applicants can use for their Certification of Need. Also, a clarification in Question 11 in the Revenue section indicates that the SBA will look to the entity’s calendar year 2019 earned revenues as the basis for determining the award amount.

The application portal for the SVOG program ran into technical difficulties almost immediately on April 8, with venue owners and other eligible businesses saying on social media that they could not upload supporting documents for their applications. The SBA then shut down the portal for repairs.

The SBA said last week that its vendors had fixed the root cause of the initial problems but that more in-depth risk analysis and stress tests identified other issues.

Here is what you need to do:

5 Ways to Stay off The IRS Audit Radar

Millions of Americans filed their 2020 taxes and a handful of some will be picked out to be audited by the Internal Revenue Service.

In 2019,  0.45% of the individual tax returns were audited, according to agency data. The rate of audits per year has significantly dropped in the last decade due to staff and budget cuts. But certain red flags may make you more likely to fall into that unfortunate group, experts said.

If the IRS sends you an adjustment letter when you made a miscalculation or underreported small amounts of your income, this is not an audit. A correspondence audit — the lowest form of an audit and not a full examination — is performed via mail and may require you to provide additional information. But a correspondence audit can turn into an in-person audit if the issues become more complex.

Here are five ways to avoid tax scenarios that catch the IRS’s attention in the first place.

  1. Underreporting income – Underreporting income would be the first red flag. Unintentionally leaving out a small portion of your income may not get you audited. But if there’s a bigger discrepancy between the income you actually earned and what you reported on your return — and if it’s intentional — chances are higher that you may get audited.
  2. Overstating your tax deductions – Whether you’re claiming business tax deductions like meal and entertainment expenses or personal ones like charitable donations, you may hear from the IRS if the claimed amount seems off based on your income. The IRS system that roots out suspicious tax returns may flag a return that has deductions that are too high for the reported income level. Additionally, mixing business and personal expenses can be a red flag for the IRS. Some small business tax deductions that could pose a problem if disproportionate to your income are expenses for vehicles, home office, meals, and entertainment, among others.
  3. High-income earner – if you are in a higher income bracket, your chances of being audited increase. While the overall audit rate for 2018 was 0.6%, the chances of being audited was much higher for high-income earners. Taxpayers reporting income from $500,000 to $1,000,000 were almost twice as likely to be audited at 1.1%. That rate went up to 2.2% for taxpayers making from $1,000,000 to $5,000,000. Those earning $5,000,000 to $10,000,000 saw an audit rate of 4.2%, while those making above that threshold saw the highest rate of 6.7%.
  4. Claiming a dependent – Only one parent is allowed to claim a child on their taxes, even if the parents are filing their taxes separately. The IRS may send an audit letter to determine which taxpayer is entitled to claim the child as a dependent. A child can be claimed as a dependent if the child is under the age of 19 or is a full-time student under the age of 24 and lives with you for more than six months of the calendar year.
  5. Foreign accounts and income – Failing to report a foreign financial asset like a bank account, brokerage, or mutual fund may also bring the IRS knocking. If you hold foreign assets worth over $50,000 for a single filer and $100,000 for joint filers, you must fill out Form 8938, identifying the institution where the assets are held and the highest value of those assets in the last year. Additionally, if you take the Foreign Earned Income Exclusion break, the IRS may carefully review your return for any discrepancies. U.S. citizens who are bona fide residents of a foreign country can exclude up to $107,600 of their 2020 income if they were in that country for at least 330 full days during any period of 12 consecutive months.

Cultural Venues’ Quest for Billions in Federal Aid Is Halted by Glitch

The Small Business Administration launched with great fanfare a long awaited portal for that would allow arts venues closed down by pandemic to apply for grant money to cover rent, utilities, insurance and other accumulated expenses. Unfortunately, the site was shut down due to technical difficulties on its first day of launching.

In a statement, the SBA explained that the agency “temporarily suspended the portal and will re-open it as soon as possible to ensure all applicants have fair and equal access.” The SBA said it would share advance notice of the time and date before the reopening so that all applicants can be prepared and have equitable access to the program, which will award grants on a first-come, first-serve basis within different areas of priority.

After opening the application window Thursday, the agency made it clear in a news release issued late Wednesday night that the grants won’t start going out until later this month.“The SBA is accepting SVOG applications on a first-in, first-out basis and allocating applicants to respective priority periods as it receives applications,” the release said. “The first 14 days of SVOG awards, which are expected to begin in late April, will be dedicated to entities that suffered a 90% or greater revenue loss between April and December 2020 due to the COVID-19 pandemic. The second 14 days (days 15–28) will include entities that suffered a 70% or greater revenue loss between April and December 2020. Following those periods, SVOG awards will include entities that suffered a 25% or greater revenue loss between one quarter of 2019 and the corresponding quarter of 2020.”

The technology issues weren’t the only concern. The Office of Inspector General (OIG) for the SBA expressed “serious concerns” with the control environment and tracking of performance results with the SVOG program, which is designed to provide eligible applicants with grants equal to 45% of their gross earned revenue, up to a maximum of $10 million. The report criticizes the audit plan established by the SBA’s Office of Disaster Assistance (ODA).

The ODA’s plan allows for a total of no more than 10 audits across all of the low-risk loans but this limitation is problematic because program officials estimate that the majority of SVOG grants will be characterized as low-risk, meaning that most grants will “be disbursed in sweeping lump sum payments with minimal requirements and expectations for post-award accountability,” the report said.

Noting that the ODA estimates the SBA will receive 15,000 applications and that the average SVOG size will be $1 million, the inspector general said that the low level of auditing and spending reviews for low-risk grants means that “the bulk of grant funds will not be subject to a reasonable degree of scrutiny.”

The Shuttered Venue Operators Grant program (SVOG) is a $16 billion grant program that was set up to help qualifying live music venues, independent theaters, museums and other live-event spaces hit hard by pandemic-prompted shutdowns. It was passed with a bipartisan effort as a part of the coronavirus relief package signed into law by President Trump in December. But it’s taken a long time to arrive: the agency has said that it’s a first-of-a-kind program for them, and they had to build it from the ground up.

HOW TO REQUEST A LOAN INCREASE THROUGH SBA’S WEBSITE

If you have previously received a COVID-19 Economic Injury Disaster Loan (EIDL) from the U.S. Small Business Administration (SBA) the agency’s new increased loan limits for the COVID-19 EIDL program are now in effect and you may be eligible to receive additional loan funds.These loans were previously limited to six months of economic injury up to a maximum of $150,000. The SBA recently announced a policy change that significantly increases loan limits up to 24 months of economic injury with a maximum loan amount of $500,000.
Please be advised that for loan amounts over $25,000, SBA will continue to take a security interest in business assets evidenced by a general security agreement and UCC filing. SBA will also require an unsecured personal guarantee for loan amounts over $200,000 from any individual with 20 percent or more ownership. Real estate collateral will not be required for any loans of $500,000 or less.
Last month the SBA announced that they are extending the first payment due date for all loans until 2022. For COVID-19 EIDL loans made in calendar year 2020, the first payment due date is extended until 24 months from the date of the note, and for loans made in calendar year 2021 the first payment due date is extended until 18 months from the date of the note. Loan interest continues to accrue during the deferment period, and a loan increase will not further extend your first payment due date.
Please follow the below instructions if you would to request a loan increase:
  • Send email to CovidEIDLIncreaseRequests@sba.gov
  • Use subject line “EIDL Increase Request for [insert your 10-digit application number]”
  • Be sure to include in the body of your email identifying information for your current loan including application number, loan number, business name, business address, business owner name(s), and phone number.
  • Important: Do not include any financial documents or tax records with your initial request. You will receive a follow up email notification if we need additional documents.
Be advised that the SBA is receiving extremely large amounts of requests and will process the requests in order they are received. It may be several weeks before you receive a response from SBA on next steps to follow. Please do not resend multiple requests if you do not hear back right away as the extra emails could slow down the overall response time.
If you have any questions regarding the COVID-19 EIDL program, or SBA’s other COVID relief program, please visit SBA’s website at SBA.gov/relief for the most current updates.

The smallest businesses are getting extra PPP help

The smallest businesses that have had the most trouble accessing forgivable loans from the Paycheck Protection Program will soon get extra help.

The new Biden administration on Monday announced changes for the pandemic aid program focused on helping small and minority owned firms as well as sole proprietors.

Starting Wednesday, the Small Business Administration will only accept applications for PPP loans from firms with fewer than 20 employees.

The administration is also making several changes to the program, including increasing loan amounts for sole proprietors and individual contractors, eliminating restrictions around delinquent student loan debt and non-fraud felony convictions as well as allowing some non-citizen business owners to apply.

Goal is to expand access

The changes will help even the playing field for firms that make up most of the small business community – 98% of small businesses employ fewer than 20 people but have received only 45% of PPP funding thus far, according to the SBA. They also aim to address racial disparities that have been seen in loans as earlier iterations of the program left out many minority-owned businesses.

Supporting these firms is extremely important to the U.S. economic recovery, as small businesses employ nearly half of all working Americans, according to the SBA.

Here’s what small business owners need to know before the application window opens on Wednesday.

1. Businesses can apply for either a first or second draw of funds

If you are self-employed or own a business with fewer than 20 employees, lenders will prioritize your PPP loan applications starting Wednesday.

Eligible businesses can apply for either a first or second draw PPP loan, depending on their individual circumstances. To qualify for the second round of forgivable loans from the SBA, businesses must have spent or plan to spend all of their first loan and show they had a 25% or more drop in revenue in any quarter of 2020.

2. The self-employed can now get more forgivable funding

One of the biggest changes to PPP is how lenders will calculate loans for millions of self-employed workers, including sole proprietors and independent contractors.

For businesses with employees, PPP loans are generally 2.5 times payroll costs. But for one-person firms that don’t have a payroll, lenders used the net profit number from the IRS 1040 Schedule C, which includes deductions. Because of this, some workers saw very low loan amounts in previous rounds of the program.

To fix the issue, the SBA is revising the formula to match what it uses for farmers. This basically means that they will instead calculate loan amounts from gross income instead of net profit, said Chris Hurn, chief executive of Fountainhead Commercial Capital.

3. Apply as soon as possible

Experts aren’t sure if two weeks will be enough for all the smallest businesses that need help to apply for PPP loans, and since there is a limited amount of funding available, businesses should apply as soon as possible.

If you’d like to apply, this means that you should gather your tax documents including Schedule C – either from 2019 or 2020 – and have them ready to submit on Wednesday. It may also be a good idea to get in touch with a lender in your community or one that you have an existing relationship with to submit your paperwork.

In addition, if you’re able to apply for a first round PPP loan right away, there’s possibly time to allocate the money and apply for a second draw, according to Hurn.

What may be next

To be sure, these changes are late in the game for the program, which was first established by the CARES Act in response to the coronavirus pandemic and is currently set to expire at the end of March. That gives only a few weeks with the changes in place before the program ends.

And, it’s not year clear if some of the changes made will be retroactive. This would be especially important for the sole proprietors that got small first draw loans.