[Article partenaire] Since the 2017 tax reform, the taxation of American companies had already undergone many changes, with various twists and repercussions felt until recent years and which could turn the tax season into a headache.
Since then, many American companies have suffered from the health crisis linked to Covid-19, and several measures have been taken by the American State to help them (in particular the CARES Act and its famous Paycheck Protection Program or “PPP” in March 2020, and the Consolidated Appropriations Act in December 2020), once again changing the rules of the “tax season” for this year 2021.
We will help you find your way with Marc Trost, French chartered accountant and American CPA, co-founder from the accounting firm Orbiss specializing in support companies and entrepreneurs French in the United States.
PPP2: quésaco, and what about my taxes?
The PPP now has a little brother, created by Congress at the end of December 2020: the PPP2. It is also a loan equivalent to 2.5 times the monthly payroll (3.5 for NAICS 72 activities such as hotels and restaurants), which can turn into a subsidy if the funds are used to pay certain types of expenses such as salaries or rents, with the addition of an extension of eligible expenses for the PPP2 compared to the “original” PPP (operational expenses, employee protection).
“ Companies that have benefited from the PPP can also benefit from the PPP2 under specific conditions ”, Explains Marc Trost. Indeed, the PPP2 is reserved for companies employing less than 300 employees and justifying a drop in income of at least 25% over a quarter in 2020 compared to 2019.
“There is also the possibility of revising the PPP1, for example if the maximum amount has not been requested or if there has been no request at all.. ”Good news for struggling businesses.
Tax impact: deductibility of expenses covered by the PPP
But then, if your PPP becomes income, is it taxable? Marc Trost enlightens us: “ The CARES Act provided for the non-taxable nature of this income. In addition, if the deduction of expenses financed by the PPP was initially refused by the IRS, Congress then disavowed it and confirmed by its last text their deduction. ”.
The PPP therefore presents a “double advantage” since it makes it possible to ensure the vital expenses of the company, without having to reimburse, and without taxation thereafter.
The carry-back of deficits, or “carry-back”
Another flagship tax measure announced during the health crisis: the “carry-back”. This measure was abolished by the TCJA (the “Tax Cuts and Jobs Act”, the famous tax reform of 2017), but was reinstated by the CARES Act.
The “carry-back” allows a company making losses in 2018, 2019 or 2020 to recover the taxes paid up to 5 years back, that is to say until 2013. What to do? “This process can be done via the 2020 declaration, or via an amending declaration for 2019 and / or 2018” explains Marc Trost.
A very interesting measure for companies with cash flow needs.
Tax deduction for meal expenses
This is another measure implemented and which concerns the majority of companies: the deduction of meal expenses for your employees will be total (and no longer limited to 50%). This measure is valid for fiscal years 2021 and 2022.
Reimbursement of expenses in the context of a qualified disaster plan“
The declaration of a state of emergency in the United States (or “disaster declaration”) last year had many implications for the taxation of American companies.
“For example, certain expenses advanced by employees and reimbursed by the company, and which should therefore be added to the employee’s payslip and become taxable income, are exceptionally excluded from the payslip and exempt from payment. tax ”, explains Marc Trost.
This little-known measure may relate, by way of illustration, to certain transport costs from home to the workplace of employees.
The “Qualified leasehold improvement”
Historically, when a company makes an investment by purchasing, for example, computer equipment, it will make a tax deduction “over the period of use” of the equipment. It is possible in some cases to deduct the value of an investment entirely over the year of its commissioning: however, certain fixtures were excluded from this regime due to a technical error in the drafting of the TCJA. But since the CARES Act of 2020, these exclusions have been rectified and all companies, especially companies retail for which this measure is very advantageous, can take advantage of it. It is also possible to make corrective declarations for the years 2018 and 2019.
A new ceiling for donations
The limit for donations to be deducted was previously 10% of your company’s taxable income.
For fiscal years 2020 and 2021, the ceiling has been raised to 25%.
And many other new features in 2021 …
Extension of Employee retention credit, paid sick and family leave, etc … new features for companies, but also individuals!
For your taxation, in 2021, get support from a specialized firm
Orbiss is a French and American firm of chartered accountants specializing in the growth of European companies in the United States and in tax support for companies and individuals.
Contact us Marc Trost from today to benefit from support on the taxation of your company in 2021.
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New-York, NY 10018
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